To our Socialist money changers:
Well, if you told me you were drowning,
I would not lend a hand,
I've seen your face before, my friend,
but I don't know if you know who I am.
Well I was there and I saw what you did,
I saw it with my own two eyes.
So you can wipe off that grin, I know where you've been,
it's all been a pack of lies.
And I can feel it comin' in the air tonight, oh Lord,
I've been waiting for this moment all my life, oh Lord.
And I can feel it comin' in the air tonight, oh Lord,
and I've been waiting for this moment all my life, oh Lord,
Yeah, I saw what you did, Ben.
And you too, Tim.
Glenn Beck talks about the Sprott report on TV today!
Friend of Another
FOA (08/09/01): "Clearly, the coming drastic constriction in dollar financial trade will trigger a super "print press" response from the Fed. They will not be pushing on a string; rather picking up the ball of twine and throwing it! All the while using the old 1980s "monetary control act" that opens their use of monetizing almost anything and everything. They won't be adding reserves to the banking system in the future; rather buying any and all debts from anyone that needs fresh cash. Believe it!"
Costata: FOFOA, isn't this exactly what is happening now? I ask myself, should a simpleton like me bet against someone capable of extrapolating so insightfully?
FOFOA: Yes Costata, it is jaw-dropping to read some of the things he wrote a decade ago. From which mountain top was he viewing the world with such clarity?...
FOA (10/5/01; 10:55:19 MT - usagold.com msg#112)
Discussing the World with Michael Kosares
I wanted to come back to your last stop here on the GoldTrail to address your points and expose myself to the world. (smile)
I bet you and many hikers think I am tagging all Americans and gold thinkers with this "Hard Money Socialist" label. Ha,,,,, let me slowly turn around so everyone can take a good look what a HMS looks like. Yes, that's right,,,,, I fit the definition completely.
[Me: Hard Money Socialist was a term FOA used for those he viewed as typical Western "gold bugs". It referred to people who both promoted the return of gold into the transactional currency realm and also supported the status quo by investing in "leveraged" paper gold and mining stock.]
Most of my life I thought gold should be locked into any official currency system to act as a gauge and controlling factor against socialist tendencies in governments. I studied and in some cases talked to all the prominent thinkers on the subject.
In the late 60s, when Harry Browne was living in LA, his pre-book views took on quite a following. Me included! Oh, it all seemed so natural then; the eventual breakdown of our misguided economic policies had to, one day, kill the whole dollar printing game! We all thought that "the coming big failure" would drive every government back to using gold as money; or at least in some version of another gold exchange standard.
However, even then, I had some serious people pointing me in a different direction. You mentioned how people saw Harry's thoughts ----"considered him the lunatic fringe back then simply because most people never heard of such a thing"---! Ho ho, you should have seen my reaction to these other radical, foreign views I was hearing!
Truly, Harry's stuff seemed so much more real, so much more "The American Way", that it just had to work. Well, it did and we have whole libraries full of historical scrip and economic writer's papers to chronicle his correctness. But you know, I also looked back at these other guys explanation of things and they were every bit correct too,,,,, the effects were the same. Then as the 70s ended and the 80s ran on, their much more longer-term understanding really took hold and left all other gold / currency explanations in the dirt. True, all the rest of the hard money crowd gained a little with each gold cycle high, but were also shot down with each cycle drop. The trouble is that historic process is a time consuming affair (smile) and most of the younger boys and girls that come here don't have a full hands-on perspective of how we got here. Current dogma has a way of leaving out important turning points that are really needed to be factored in. Hell, a few decades of cycles became so regular in our mind-set that a whole industry was born, explaining why cycle investing works (smile). In time I came to understand that there really was a long term, singular move, evolving along as a political play at work here. The last decade only served to underscore it all.
The early 90s Gulf war spike in gold should have been the final revenge for us bugs. Can you imagine?,,,,,, war in the middle eastern oil fields,,,,,,, hundreds of oil wells burning and gold gets shot down?? I was already 80% in my associates camp of thinking by then and that spike down pulled my other 20% right in. I knew then that the whole story was changing on political grounds and was not going to follow the Mises path.
My typical hard money long-held belief, back then, was always:
----"Gold is the only official money of the world and will return to these roots one day"-------- and -----" some world wide financial dislocation will drive all governments back to this position"-----!!!!
It wasn't going to happen, no matter what, short of nuclear war. All we had to do was look around and see how people the world over were attached to using fiat currencies. The economic system itself was morphing into new ground as world trade learned to function very efficiently with fiat digital settlement. And that's something the 70s crowd said could never happen. That was how many years ago?
A lot of the Mises crowd tried to point out that ---- "hey, this is all very good but if you were on a gold system this economic game would be all the more better" ----! Ha, no one cared,,,,,, why risk what was already in process. Even the third world didn't want to hear it. They figured that any return to a hard money system would harken back to a time they remembered all too well. These guys suffered during the early century and no one was going to tell them that the gold standard wasn't to blame. The US is today, and was then, robbing them blind but the situation seemed, to them, that this new dollar standard was building them up. Looking at it all,,,,, we robbed the Japan life style standards the most. All to buy us an almost free standard of living, and they loved it!
When it came to using fiat money in our modern era, it made little difference what various inflation rates were in countries around the world; 50%, 100% 1,000%,,,,,, they went right on playing with the same pesos. There have been countless third world examples of this dynamic, if only we look around. Mike, look at what happened in Russia after they fell,,,, the Ruble stayed in use and function with 6,000% inflation. My god they still use it now.
No,,,,,,, my guys are dead-on-the-money with respect to the political dynamic that's playing out. The world is heading towards a huge financial/currency crack up, but it won't work out with gold coming back into the money game. This very long term transition is playing on a move away from dollar domination with Europe preparing to suffer less than us by pulling in as many other political trading blocks as they can.
When you look at who they are reaching out to; every one of these blocks wants gold moving higher to shelter their dollar trading losses. None of them expects to unload dollar reserves because our end time trade deficit won't permit it. They can't just send the dollars to each other, buying their own goods... that would never exhaust the external dollar float. Hell they now have their own money to do trade with, the Euro.
The game is to let the US economy suffer from its own bloated expansion by moving slowly away from supporting foreign dollar settlement with CB storage (of dollars). This is more than enough to end the dollars timeline as we are already stretched to the leverage limit. They know that Greenspan has but one policy to use and that will be super printing. He is doing it now, right on que!
The ensuing domestic price inflation will waste away all buying power of dollars overseas. This is where they must install a free market in gold that ends international confidence in the current gold fractional reserve game. This is the "what for" of Britain moving itself and its gold operation into the Euro arena. Once safely there, or there in initiative, the ECB and BIS could cash out England's gold liabilities without crashing London's banks.
Mind you, this is all happening while Western style "Hard Money Socialists" are defending their stance by saying the Euro is just another fiat. Ha! These are the same guys that, throughout the 90s, put every dime in expensive gold stocks and watched dollar currency inflation drive the Dow up a trillion points while political actions killed their leveraged gold plays. Now they will refuse to buy physical when political will is about to impact this sector and they will most likely stand by while a Euro-based dynamic starts another economic surge later.
Truly, reasoning and logic is all about your point below: "it is", Mike.
MK, you mentioned:
------ Europe will be no more aggressive than it needs to be. As a casual political observer, I believe that this policy is a mistake that forces Europe to play the inflation game along with the United States, and that is not the way I would have played the game given the opportunity. However, I'm not the one calling the shots in Europe. I am an American businessman and investor and in that capacity I am not so much interested in the world as "I'd like it to be" but as "it is." I'm sure my European counterparts feel the same way.
Right Mike, your last part is like Another said about the forest growing anyway. The fact that it worked with fiat is the way it happened,,,,, "it is"!
To address your point: well, they are awfully doggone aggressive now. Note that they didn't make any attempt to match our post crash rates with a larger drop of their own. That has placed them in a very pro-active dollar warring position now. I'm sure Greenspan is steaming over this break away. It's built a major carry proposition against the dollar and the Euro has to gain on this. Here is an item from your News feed:
10/05 13:06 Dollar May Fall vs Euro, Yen; U.S. Unemployment Seen Rising
By Chris Gothard
London, Oct. 5 (Bloomberg) -- The dollar, little changed, may decline against the euro and the yen on expectations a report will show U.S. unemployment climbed to the highest level in more than four years, more evidence the nation is headed for a recession...
``We expect unemployment to rise,'' said Rod Davidson, who helps oversee about $1 billion as head of fixed-income securities at Murray Johnstone Asset Management in Glasgow. ``Everyone is watching for the slowdown in consumer spending.'' He expects the dollar to decline to 96 cents per
euro by year-end, and recently sold U.S. Treasury bonds in favor of European government debt...
Since Sept. 11, U.S. Treasuries maturing in one year and more returned 2.05 percent in local currency terms, according to Bloomberg indexes that take into account reinvested interest. For a European investor, those returns are reduced to 1.79 percent because of the dollar's drop against the euro in that period.
Add a,,,,,,, solid rate difference on top of these figures,,,,,,,,, factor in a "beggar thy neighbor" who is going to survive this economic war between Japan and US ,,,,,,,,; and europe's thrust is major! I fully well expect Europe to sell [gold] into any dollar gold market spikes,,,, now,,,,, so as to hold the level steady,,,,,,, in an effort to inflate paper and discredit our gold market. Eventually they will move to create a rift between physical dollar gold prices and dollar derivatives prices. The call will go out that American gold does not reflect what's happening to our Greenspan dollar policy,,,,, real US inflation,,,,,,, and is a fraud.
You know, the US wants and needs a higher gold asset price now and I bet they are confounded to find a way to achieve it. We are stuck in a situation where we will ship a good portion at cheap prices first. We spent a decade or so playing this gold game for better oil pricing and economic dominance; now a higher dollar price of gold would hand our banks a trillion dollar derivatives loss if gold rises. It just kills them because the Euro banking establishment would simply cash out all their dollar based gold derivatives into euro settlement and gain as gold spikes and builds an ever larger asset base for all the ECBMBs.
[Me: ECBMB refers to the member banks of the ECB. He is saying that as the paper gold market implodes, they would settle all paper gold with fiat currency... THEIR euro fiat currency even though it was previously priced in dollars. They could simply PRINT the currency to settle the contracts. This would, of course, send gold to the moon and in the process send each ECBMB's asset base to the moon. See: Your Own, Personal, Freegold]
I have to laugh at all these jokers that keep trying to understand the ECB gold policy as some sort of currency backing similar to years past. It just flies right past them that the ECB wants gold as a dollar replacing asset, not local money backing. For your European clients, they would be in the best of all worlds if they buy gold now. Their system is almost making rising gold a law so as to buffer domestic dollar exchange rate loses.
MK, you also wrote:
-------- Of course, this is precisely what happened in the 1970s. Harry Browne made the same argument back then -- that the $35 gold price was both an institutional fixture and institutional fiction. Europe took advantage of that situation by reclaiming a substantial gold reserve. When the London gold pool (both de jure and overt) broke down at the $35 price, the devaluation (both de jure and and overt) quickly followed. Additional formal gold sales proceeded from there from both the International Monetary Fund and the U.S. Treasury.
Since today the gold price is both an institutional fixture and institutional fiction much the same process is in motion at present -- only de facto and covert. Are you suggesting a similar result? And with the euro present and accounted for, will it lead to a new world order? -----------
The difference today is that the whole global financial, economic and currency structure evolved to service a much more fast-paced dynamic. Simply put, we cannot go back to not using digital settlement again. If we are to use our trading efficiencies we must embrace fiat currency use,,,,,,,,, and all its evils. This is what was recognized as we were placed on the road to high priced gold. Kind of like high priced oil has been factored into our equation,,,,,, so too will a rising gold price be seen as the price we pay for modern operation. Of course, just as those that don't have oil must pay to play, and gladly do so,,,,,, those that don't have real gold when the tables turn will have to pay to keep up.
Back when Harry wrote his early views, gold was largely a physical market. Let's see, were there futures in the late 60s? Nope, didn't think so (smile). Gold was largely a government transfer thing with private players outside the US moving a relatively tiny amount of gold around. The real story in the 70s was in how much gold the truly big operators couldn't get, even at those oh-so-high prices. The little American bought his Krugerrands, gold stocks and post-1975 futures and thought he was doing something big. In retrospect, gold was dead in the water compared to where it should have gone. The dollar faction never really stopped controlling it.
Today, it's not the government pricing policy that is in jeopardy, it's the very market itself and this change will break not only the price fiction but the institution also.
Ok, guess I went on enough here. I sure hope everyone can overlook my english mistakes in those last two posts? More so in all my posts? (smile) Talk later my friend
Sir Topaz of ye olde time-currency.blogspot.com
I'm not too clear whether THIS is the "last" year of the decade ('01 thru '10) ...or the "first" Year of the next one ('00 - '09)
What I AM unequivocally sure about is that 2010 will be the LAST Year "we the people" tolerate this unholy contrivance that is the monetary status-quo.
...either way ...Happy New Year!!
MY timeline on a strong Dollar would be (say) until the Ides of March.
One might declare then - 2010 - The WINTER of the Dollar. ...and in that manner being Right ...whatever transpires eh?
At least until March anyways!
Actually, for mine, el-Bucko is coming into 2010 in excellent shape.
All her guns that matter are firing in the right direction and she should keep this momentum going ...right until she runs off the Cliff ...(hopefully on or before mid-March)
Re: Bonds last year - I think the "reversal" ...and consequent run into the 140's, caught Mr Market off-guard to a large extent ...and they tended to accept it as a "normal" reaction.
It "wasn't" then ...and "isn't" NOW FOFOA...
The evidence is in, the Gun has been found ...and the Corpse IS Dead ...so why not call it as such ...eh?
I think if what we were discussing re: Negative Yield is to transpire, a BIG failure (maybe plural?) in the Banking sector will emerge EARLY in the New Year.
Not necessarily in the US either ...but sufficient to herd 'em into the short end of the curve ...at, or above PAR"...and comfortable about being there whatsmore!
The Long end is GONE for all money I think FOFOA!
This is NOT late '08 - early '09 I'm afraid.