Friday, January 1, 2010

Happy New Year!

2010
Year of the Buck


Last year I proclaimed 2009 The Year of the Wheelbarrow, but it appears I was wrong (or at least premature). So this year I am trying a different approach. This year I would like to dedicate 2010 to the first-ever pure king-daddy globalized fiat currency that is capable of debauchery, dilution, delusion, deception, degradation, defalcation, degeneration, defecation and debasement all while rising in value!

Between consumer electronic price deflation, the housing price collapse, the loss of Dow 14,000 and 78ish on the USDX, ol' Buck buys more of just about everything (except gold) today than it did two years ago! All while multiplying its monetary base, exploding USG expenditures, and hyperinflating UST debt issuance at Guinness World Record-breaking speeds during the same two years!

And we should not forget the Maestros that make it all possible! To Ben "POTY" Bernanke (Person Of The Year), and to the very young tender Timmy Geithhhner, master blaster of the bills and bonds, this (green) Bud's for you! Cheers.

(Photo by Jesse)




Happy New Year to you all!

Sincerely,
FOFOA

37 comments:

Larry said...

Yeah, pass the BUCK.

Ishkabibble said...

The only thing preventing heavy inflation is monetary contraction due to the collapse of lending. If the lending resumes, the inflation will follow.

On a side-note, the CDs and other explosive investment packages aren't looking any better managed these days. Tax receipts are worse than sad, and the post-Christmas layoffs are soon due.

POTY Ben isn't even a third of the way into the minefield. I wonder how much longer he can dance within it.



Gold positive note: Vietnam has ended it's participation in the paper gold trade.

costata said...

raptor,

I responded to your comment in the previous thread.

Ishkabibble,

Have you read some of Karl Denninger's work at market-ticker.org?

He maintains that the lending cannot resume. We have hit debt saturation.

BTW that doesn't mean gold falls. Jim Sinclair has repeatedly said that hyper-inflation is a currency event not a monetary event.

Also (FOFOA correct me if I am wrong) Freegold is not predicated on either inflation or deflation per se.

Freegold flows from the "retirement" of a system based on a bastardised single international fiat reserve currency. A true paradigm shift.

Ishkabibble said...

Denninger's points seem valid from a trajectory perspective and within a range of time. He may or may not have correctly identified the time period; I think he is close.

The lack of lending at this point is shifting wealth out of the middle and into the top. It is intentional, and fulfilling a purpose. Once all of that wealth is captured, TPTB will face a choice to force a global currency OR to stabilize the currency, restart lending and resell the wealth (land etc) back at inflated amounts. Either choice will destroy the middle class, only the depth and duration of pain will change. If the choice is a global currency (which today seems a certainty), lending will not resume until restabilization is reached and the dream of restored wealth can again drive productivity.

If the top captures ownership of a significant enough percentage of assets, neither current debts nor currency will matter. They can blow the curency up and still have the same percentage of total wealth. This is a hard reset or teotwawki, the onset of the K-wave winter. We will not face this reality until enough wealth is transferred to the top.

I believe what we see as extreme today is actually just the lead-up to the final wealth transfer. I expect another play while TPTB await the pop of CDs and option Arm bubbles. There is considerable pressure for banks to resume lending. They could 'succumb' by opening up the lending to those that still have free title security. The premise would be recovery and a chance to leverage and buy assets on the cheap, a strategy people are vulnerable to. 'Tis ruthless, but they are. It would capture the assets of those smarter than today's indebted.

Regardless how stability is achieved, lending will resume for a purpose. With the dream to own restored, people will step back onto the wheel and power the next 70 year K-wave cycle. The game continues with the assets harvested and the middle poor again. Those crushed will again be clawing again to the middle, renewed slaves of a system they don't even see.

In reflection, I find my position interesting. I'm not HyperTiger, but all my analysis is guiding me to see through his eyes. I do see one considerable difference though. HT presents the biblical prophesy that people will 'throw their gold and silver into the streets.' He points out you can't eat or live in it, etcetera and he doesn't advocate holding it. I couldn't disagree more. Physical gold is precisely what one should be capturing today.

There will be an price explosion in gold such that people cannot even imagine. As currency dissipates, people will seek to hold assets of wealth. Gold has a history of more than 5000 years. It is used for this purpose! Gold will be wealth par excellence and NOTHING else will surpass it. As people seek to preserve their value... with currencies collapsing, factories shuttering, and free title homes beyond the grasp of most, where else will they invest? Gold will shine as the sun. And within this rise, we will have our first reasonable opportunity to resell ours to the masses. Following the collapse, people will realize gold IS par excellence as a store of wealth, but not as a means of survival. They will seek to dump their gold in hopes of a little sustenance, and the trade price in value will plummet (relative to the new price, not today's). A few assets will be transferred back as the gold all moves to the top again, for there will be no reason to pay well for it. Following this collapse in gold price and when only the top owns it, gold will rise again to it's true value, supporting trade between nations. This will be our second opportunity to sell, should we wish to wait that long.

That, my friends, is my view of today's extortion of the middle that removes all wealth including businesses, land, gold, silver, and most everything else of value. The actions we take today and in the near future decide our place in the next society. Pick gold and play it well.

ephemeron said...
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ephemeron said...
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JR said...

FOFOA,

Thanks for taking the time to respond to my question about the pm futures market.

Happy New Year!

floydian slip said...

Happy New Year!

Peace and Prosperity to FOFOA and all who read :)

Thank You for the blog.

I hope they let Martin free in 2010!

costata said...

floydian slip,

Amen on freeing Martin. Regardless of his guilt or innocence the man has suffered outrageously.

Gody said...

Ishkabibble,

I haven't read the work nor do I know who HT is.

But, he is applying the prophecy to the wrong time just as the Jews thought that the Messiah's first coming was His third coming i.e. to establish His reign.

HT is applying Eze 7:19 prematurely. That Prophecy applies to the Messiah's third coming which will be after all this events take place.

There shall be remnant of people left after the battle of Armageddon. This prophecy applies to them. Dovetails with Zech 14:16-21 and Isa 65:18-22.

There will be no need for gold then. And even the prophecy itself tells you in a hidden manner, that gold and silver shall be highly esteemed/ valued before that day, hence the people kept/hoarded them as valuable.

costata said...

IMO this article is worth a read but the comments are even more worthwhile.

One or two of the readers who posted comments observed that zinc has doubled as well in the past year.
zinc + copper = brass = munitions?

I think the title is actually meant to be ironic.

"Is Copper The New Precious Metal?"

http://www.zerohedge.com/article/copper-new-precious-metal

Martijn said...

Are the Fed and the BOE totally insane?

Do you really think you are that smart?

Off course not. They are not insane, but face limited options and perhaps some interests that are not openly stated.

Jimmy said...

Is the Fed Juicing the Stock Market? By Mike Whitney, Globalresearch.ca

raptor said...

http://dollarcollapse.com/articles/one-decision-per-decade-three-choices/

....
So if we follow the logic that the new money is quietly making its way into the money supply, in areas that the Fed and Treasury want them to, then we realize that the increased monetary base has not really been “sterilized” but rather is being slowly leaked out.

The result: stability in the financial sector and a lot of newly created cash chasing houses and stocks. And an economy that appears to be growing but is really just borrowing.
....

Jimmy said...

North Korea's Currency Reform Could End in Chaos...

Pakistan has gold reserves worth trillions of dollars...

Martijn said...

Interesting link on the Pakistani gold.
Here is a similar one for China

raptor said...

http://www.debtorsprisonblog.org/journal/2009/12/30/would-a-single-world-currency-be-good-for-the-world.html

Some thought on single-world-currency ... the conclusion of this guy is that it is better to have many local currencies rather than SWC... sounds familiar ;)

I liked the idea of trade-granularity .. i.e. that nowadays many of the big trade-hubs are bypassed which in itself create more correct exchange rates for the currencies..etc.. and so on

Jimmy said...

@raptor: So I see, you becomes a fan of this site, that you received of me... :-)

I follow it since long time ago, but be aware that the author of this site is really anti-gold...

@Martijn: nice link/site about China's mining... It's added to my favorites. Thank you!

Justin_n_IL said...
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dojufitz said...

Please....no more scripture!

Ender said...

S, You posted a question to our host that may have been lost amongst the holidays. (See http://fofoa.blogspot.com/2009/12/gold-ultimate-wealth-reserve.html?showComment=1262273719489#c5347876506155406703)

If you have the time, it would be nice to see you expand upon the ‘one worlder concept’. I may have overlooked a previous post (or link), that if you could point me that way, I would be gracious. Ultimately, I would hope to understand your references so as to see any glaring flaw too.

If I understand it correctly, one of the key elements of the Freegold Concept is that the individual fiat currencies will function side-by-side with a marked to market physical gold market. The gold provides the ability to settle debt, but does not extinguish it. The currency represents current and future debt - and functions as the form of exchange. If one sees currency as debt, or the promise to pay, it is easier to see that it will continue to exist into the future. Also viewing it as a promise to pay, exposes its function to ‘the ruler’ that taxes through inflation. This functionality is too valuable for any government to part with.

Looking at the banks, they function to bring debt into the current – their clients’ barrow currency into existence. The currency is backed by the value of indebted servitude. The relationship that should be watched is the one between the human and how he values his service. Gold does not play into this relationship. Also note that smart banks secure ‘the deal’ with physical assets (rather than paper assets) so as to balance the debt against something real. To the bank, it doesn’t matter what the value of the debt or physical object might be, but rather the fractions that they skim off over time. In the end, the bank is able to nominally balance its books regardless of the ‘value’ of the debt, but all along the way it made a ‘wage’ by really not doing much.

With this in mind, why would a bank have to hedge against the Freegold Concept? How is Freegold part of the bank’s worries? I do not yet see this as a worry for the banks.

Yet, in time, we shell most likely see with our own eyes.

To all advocates, hold strong for the value of gold grows regardless of the charts!

costata said...

dojufitz,

Continuing the biblical theme for a moment. An important question arises.

If Judas was alive today I think we can all agree that he would have been inclined to pursue a career in politics.

Would Judas prefer to receive his campaign donations in silver or gold at the current gold:silver ratio?

dojufitz said...

Judas i think would not care about the ratio but he would prefer Gold as first payment...

then Silver.....

as Silver tends to lag Gold......

he would love Tungstun for the final payment....as it would be useful for the ultimate betrayal.

costata said...

Hi FOFOA,

It would appear from this article by Ambrose Evans Pritchard that the EU and EMU is about to "die" yet again.

How many times has this death been imminent now 10, 20 times?

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/6927923/Global-bear-rally-of-2009-will-end-as-Japans-hyperinflation-rips-economy-to-pieces.html

That said, I think AEP may be right about Japan sailing close to the wind. Their domestic savers must be getting close to being unable to fund any more bond issues. Is this why QE rhymes with Whoopee?

Topaz will surely know (but will he share the deeper mysteries with a mere simpleton like me?).

idi said...

@justin-n-il; JFC, been away for a couple of days. returned to your wholesale and shameless proselytizing. knock it off son. hawk your wares elsewhere. if this trend is allowed to continue, I predict FOFOA credibility/readership suffers. such proseltyzing is offensive and acts as garlic to the vampire of (perhaps) more sentient souls.

FOFOA said...

The currency question (many currencies or a one world currency?) is quite the separate issue from the emergence of Freegold. I realize that this is a nuanced differentiation to our modern mindset that has difficultly imagining the separation of monetary functions, but it really is a fact of our current dilemma.

There are only two kinds of currency relationships that different regions can share. Each has its own flaw. The first is a FIXED exchange rate. And the second is a FLOATING exchange rate. A one world currency is the same thing as a FIXED exchange rate over the whole world. A "peg" is also a FIXED exchange rate. So is a "gold exchange standard".

The PROBLEM with a fixed exchange rate system is that imbalances develop between regions that vary in production and consumption. And the fact of the matter is that ALL regions vary in this way, to one degree or another. The BENEFIT of a fixed exchange rate system is price stability between the regions.

The PROBLEM with a floating exchange rate system is that there is no price stability between regions making international trade difficult and treacherous to the businessman. The BENEFIT of a floating exchange rate system is that imbalances don't build up to the point of systemic threat. They (imbalances) are corrected through time in the value adjustments the market lays on each region's currency.

The Federal Reserve System was initially set up to be a regional system to deal with this issue of regional imbalances. Each of the 12 regional Federal Reserve Banks was supposed to be responsible for monetary policy in its own region. But this didn't last long with the addition of a Presidentially appointed central board. So now we have imbalances even within the United States.

During the Bretton Woods system the entire world was on a fixed exchange rate system, which allowed massive imbalances to accumulate which ultimately ended the gold standard. Since 1971 we have been on a globally floating system of currencies, which has caused price instability between regions and several hyperinflations.

In 1999 Europe adopted a fixed exchange rate system with the introduction of the euro. This stabilized prices between its member nations while destabilizing the natural economic balancing mechanism which we can see is causing big problems today.

The separation of monetary functions will allow Freegold to act as the counterbalance in whatever kind of fiat system we end up with. If we end up with a floating currency system, then Freegold will counterweight the currencies themselves. Corrections will have to be made through currency management as the flow of physical gold will go to regions with stronger currencies.

Cont...

FOFOA said...

...

If it is a fixed rate system we end up with, (a one world currency), then Freegold will counterweight the trade imbalances that will develop between regions. These imbalances will have to be corrected through economic means as the flow of physical gold will go to more productive regions.

Although it is not a light read, I recommend reading ONE WORLD, ONE MONEY? for more insight on this subject: "Robert Mundell and Milton Friedman debate the virtues—or not—of fixed exchange rates, gold, and a world currency. May, 2001"

Forget the date this next post was written. Read it as if it was written yesterday...

"Date: Sat Feb 14 1998 20:00
WetGold ( to: ANOTHER ) ID#243180:
This appears to be a monumental world crisis much worse than the depression of the early 20th century. Could U expand further ?

Mr. WetGold,
In the past, nations and states have lost all as "the world changed" and these entities lost the ability to trade, at a profit. It is as history, and happened many times. Today, it is not the same. The "wealth of nations" are held as "thoughts of value" not real value! And even these thoughts are "in debt" as they are owed to other nations. As it has always been, time moves the minds of people to change, and with this, the thoughts of value also change. In this day, as not in the past, the loss of paper value as a concept will destroy the very foundation of wealth that this economic system is built on. This drama has started and is well underway!

There are nations that will try to "resource a new currency" as the old financial system implodes. Oil or gold or both may be used. If it is done at the correct time, much will be gained by all! Fail this attempt, and gold will never trade on an open exchange again, in our lifetime! We will see this end in our time."


It is my opinion that we are well beyond the chance they once had "to resource a new currency". We will end up with many struggling currencies and a physical-only gold market as the currency exchange system's counterweight.

Remember this one thing... Currency debasement is not the road to regional economic prosperity, even if all socialists think it is.

Sincerely,
FOFOA

FOFOA said...

Clarification: By imbalances I mean "trade imbalances" in economic goods.

Jimmpy said...

Happy New Year to you FOFOA. Really enjoyed your previous piece "Gold: The Ultimate Wealth Reserve", made me remember another sentence from the Archives :
"A concept cannot replace reality, It can only represent it . . ."
Anyway many thanks for the learning experience

Jessica said...

Fofoa, Thanks for providing so much instruction and information about money and wealth. I was wondering if you hold any positions in equities or debt, and how do you feel in general about investing in areas other than PMs?

Martijn said...

The dollar has been the "Coca-Cola of monetary brands," says James Grant, editor of Grant's Interest Rate Observer. But even the best of brands can be lousy investments.

costata said...

FOFOA,

"The Federal Reserve System was initially set up to be a regional system to deal with this issue of regional imbalances. Each of the 12 regional Federal Reserve Banks was supposed to be responsible for monetary policy in its own region. But this didn't last long with the addition of a Presidentially appointed central board. So now we have imbalances even within the United States."

IMHO it is worth highlighting that under the original Federal Reserve system each region was supposed to be able to set interest rates independently.

I think "setting" interest rates is yet another deeply flawed concept (the free market should do this) but less damaging than having a single rate across regions with different economic cycles and fundamentals.

raptor said...

Just something I wanted to say just in case :

Inflation is increase of the money supply.
Price is the end product of inflation/deflation, supply/demand and others factors during normal times.
Once price shoots up or down fast then the psychological effect of this change may induce self perpetuated change.. until it reaches some peak ... or infinity|0 ;)

Purchasing power of currency is also affected by those some factors.

The difference is that PRICE reflect the current short term situation.
Purchasing power need as reference two or more points in time i.e. comparison between then and now OR then,now and future. So to summarize Purchasing power is the Price level over many concrete point in time.

FOFOA said...

Hello Raptor,

I just watched "The Way of the Gun" on HBO the other night. James Caan had a great line in it:

"Money? Money is what you take to the grocery store. It’s what you get out of an ATM. Fifteen million dollars is not money... It's a motive with a universal adaptor on it."

There's a big difference between someone who has five or ten thousand dollars and someone who has fifteen million. The person with a few thousand dollars will likely spend it in the next 12 months. The person with fifteen million may want it to last for the rest of his life and beyond. The former may worry about the "price" of things he plans to buy. The latter worries about his future purchasing power. This is a huge difference. This "future purchasing power worry" is motive with a universal adaptor on it!

Sincerely,
FOFOA

Ludwig von Mises said...

I have been advised to check Another and Foa some months ago by my virtual friend Martijn. Greatly appreciate your site to.

Ill be posting sometimes here if okay with you.

@ Larry, first posting. Your remark reminds me of the sign Ronny Reagan had on his desk: "the buck stops here".

One tends to see this remark in a different light nowadays...

Martijn said...

@Ludwig

Good to see you around here. I'm sure your comments will add worth to the discussion.

Ludwig von Mises said...
This comment has been removed by the author.

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