Gold is no longer held captive by a fixed parity with the dollar. Today it is trapped politically in parity with a price discovery futures market leveraged at 100:1. But free gold is where we are heading, without a doubt. It is where monetary evolution is taking us. It is where debt evolution is taking us. It is where global political evolution is taking us. It is both a market process and a political process, global in scale. And we ask, "how will freegold materialize?" Ask how, not when.
As for when, I already have my answer. It is materializing now, right before my eyes.
Something important has changed. Can you feel it? It started about 12 months ago and has changed more in the last month alone than it did in the previous 12 months, and more in the previous 12 months than in the past 12 years.
Can you figure out what it is?
GO GATA!
Here are two important interviews from Eric King and King World News. The first interview is with Adrian Douglas of GATA and Andrew Maguire, The Whistleblower. And the second interview is with Bill Murphy, Chris Powell and Adrian Douglas of GATA.
Andrew Maguire & Adrian Douglas - Tuesday, March 30, 2010
(37:51)
GATA - Wednesday, March 31, 2010
(29:53)
Partial Transcript from the GATA interview:
Adrian Douglas: ...then I said "this is a Ponzi scheme", selling several times the amount of gold that they actually have...and then at that point, as you say, the oxygen went out of the room, and there was quiet for eight seconds.
I thought that was going to be it, that it would be swept under the lumpy carpet at that point...
But then, amazingly, Jeff Christian of the CPM Group who was coming in by satellite communication said that the previous speaker was absolutely correct, that it was paper hedging paper. You know, so this was an amazing admission.
And he went on several times while he was speaking and reconfirmed it in several different ways. So it wasn't that he just made a mistake, or said something incorrectly. He reconfirmed it several times.
And as Chris pointed out, he actually told us that the CFTC and CPM Group use the term "physical market" in a very loose way. And he said it actually means all the paper and the physical metal is when they refer to the physical market.
And then he gave us the bombshell that it's actually 100 to 1. That they sell 100 times more gold than they actually have as physical metal.
Eric King: Bill, let me ask you, because you were there with Adrian, obviously, at the CFTC meeting... were you shocked when Christian confirmed that?
Bill Murphy: Fell off my chair. Because Adrian's the one who's been saying this for a long time, and I was concerned that well, you know the London Bullion dealers, which is very [?] especially in a public forum. It's not because I didn't believe Adrian, it's just that... way above my paygrade, and I have no way of confirming that, and Adrian and I used to talk about 50 times... and then this goofball comes out and makes our case, and... except that Adrian's too conservative!
And he's supposed to be... his business is dealing with the dealer community! So, they gave the whole joint away. And he gave GATA more credibility than you can imagine!
It's just... I sat there with my mouth open.
Eric King: Chris, let me ask you as you watched this unfold. You've seen the tapes. You know all about this. Is part of it, maybe, that he just didn't know who Adrian Douglas was? And he was giving a tip of the hat to GATA. Can you help me on that?
Chris Powell: I don't know what was going through his head. I know that he has spoken at conferences where GATA has had speakers. So he is certainly aware of our work. I don't think he's been an admirer of our work in any way. But, you know, he was speaking at a public hearing before a United States government agency and you know, and like many people, he felt obliged to tell the truth, and maybe he felt that, well, this is no big deal because this is how the situation has been for many years.
The situation in the futures market... the overwhelming of the real physical market by paper is not peculiar to gold. It is the situation, really, in many futures markets, though perhaps not as much as in gold and silver.
The British economist Peter Warburton wrote, really, the original paper on this as far as I can determine, in 2001. He perceived that governments were encouraging investment banks to get into derivatives because derivatives were proving to be a wonderful way of diverting monetary inflation out of real things. And out of things whose increase in price would show up in consumer price indexes... and into mere financial instruments.
It was even mentioned by other witnesses at the CFTC hearing that this was a wonderful thing. Because if people were trying to hedge their currency holdings by buying real things, and real things were actually taken out of the market and put into storage, we'd have all these price increases in real things.
So the futures markets, it was pretty much admitted at the CFTC's hearing last week, are pretty much designed and intended to mask inflation. And to prevent people from actually hedging their currency exposure by buying real things.
The futures markets are an act of fraud!
Bill Murphy: Eric, I can tell you this for a fact, having been around Jeff Christian a lot... he loathes GATA! He has no idea what he was saying... how it was a bonanza for us. I mean, he's one of our biggest critics...
FOA
FOA (10/9/01; 10:05:48MT - usagold.com msg#117)
Lost in all the confusion is the distinction between investing in the price of gold and investing in gold itself. Perhaps 90% of all the investing in today's worldwide, dollar settled, gold market is done in this first way mentioned. Yes, the market is structured, contractually, to settle in gold. However, in practice, in norm, and in past legal precedent, it is accepted that paper gold trading is meant to only capture the price movements in gold while ceding, what could be, controlling physical trades and their price setting function to other market areas.
Obviously, this is the way it all started, years ago, with the physical trading and its fundamentals dominating the lesser paper trading. But the market evolved with the paper contractual trading becoming 100 or more times the size of the physical side. But everyone already knows all this, right?
What doesn't seem to be obvious is the "why" the paper market grew so large. It grew to dominate because world wide dollar expansion reached its "non hedged" peak. In other words, the dollar's timeline was ending as its ability to produce non price inflationary economic gains came into sight.
In order to push dollar holdings further, international players needed and purchased "paper financial hedges" to balance their risk. Within their total mix of derivative hedges were found "paper gold price hedges"; modern gold derivatives. The important thing to remember is that these positions are not and never will be used to demand physical gold. They are held to buffer financial and currency risk associated with holding any form of dollar based asset. To work these items don't need to really perform "dollar price movements" in the holders favor as much as they are present in the portfolio to act as insurance stickers.
In that truth, these paper gold positions act like FDIC insurance at our banks.
FOA (05/06/00; 16:45:21MT - usagold.com msg#20)
For Your Eyes Only!
By holding physical gold you are owning a super leveraged "derivative" that will be exchangeable against the value of real things at a par level lost to the minds of most investors. Today, physical gold purchased in dollar values is discounting its worth by perhaps 100 times. For us PGAs (physical gold advocates), that is a leverage worth "playing the physical game for"! (smile)
As the only real wealth money this earth has ever had, it's unthinkable what value physical gold would have had to attain to denominate our created holdings. This is where so many "gold advocates" completely sell themselves short in projecting gold's future price. They try to somehow reconcile gold's value with its cost of production. In fact, once man's drive to attach his official currency / fiat money to gold is broken (as it is about to be), all the gold "IN" the earth today could not represent human created things at 10 times its current price! Throw in the fact that the earth will not give up all its gold any time soon, present world gold holdings in reserve currency today must rise in value at least 100 times to match what assets now exist. On top of that add in the fact that dollar gold will go sky high just to equal past dollar creation (as the dollar fails) and one can see where physical gold is "the play" in modern times. Forget stocks, business valuations, land or currencies: physical gold is the wealth for the next generation.
LBMA Mystery - circa 1997
From Red Baron's THE GRAND LBMA EXPOSÉ...
Literally at the crack of London dawn on January 30, 1997, the London Financial Times printed the following:
Gold global market revealed
THURSDAY JANUARY 30 1997
By Kenneth Gooding, Mining Correspondent
Deals involving about 30 million troy ounces, or 930 tonnes, of gold valued at more than $10 billion are cleared every working day in London, the international settlement centre for gold bullion.
This is the first authoritative indication of the size of the global gold market, and was revealed yesterday by the London Bullion Market Association.
With the blessing of the Bank of England, the association overturned years of tradition and secrecy to provide statistics illustrating the size and depth of the London market.
The volume of gold cleared every day in London represented nearly twice the production from South African mines in a year, Mr. Alan Baker, chairman of the association, pointed out.
It was also equivalent to the amount of gold held in the reserves of European Union central banks.
The size of the gold market will surprise many observers, but traders insisted the association's statistics were only part of the picture because matched orders are cleared without appearing in the statistics. Mr. Jeffrey Rhodes, of Standard Bank, London, said the 30m ounces should be "multiplied by three, and possibly five, to give the full scope of the global market".
Mr. Baker said the association would produce average daily clearance figures every month. "They will provide a useful benchmark for comparison and analysis of trends in the volume of the global bullion business," he predicted.
He denied suggestions that the move might drive business away from London by upsetting clients who preferred secrecy. "These figures do not in any way affect the confidentiality of the market. While discretion and integrity will always be bywords in the London bullion market, the LBMA is nevertheless conscious of the general call for greater transparency in markets.
"The statistics demonstrate the prominence of London in the world of bullion, something we have long been aware of but which until now has been difficult to demonstrate with statistics."
LBMA members were divided over the move. One said he was puzzled. "What will people make of it?" Another said the exercise was "futile" because it did not give a complete picture of bullion market activity.
But Standard Bank's Mr. Rhodes suggested the statistics would "become the key indicator in the world of gold, providing the numbers by which the market can be monitored".
Mr. Martin Stokes, vice-chairman of the association, said: "This shows we have a serious market with a lot of depth and deserving of more attention." The statistics showed, for example, that the 300 tonnes of gold sold recently by the Dutch central bank - a disposal that badly affected bullion market sentiment - was not a large amount by the market's standards. The association was "making a bid to attract investors' interest".
The association also gave details yesterday about the silver market. Roughly 250 million ounces of silver valued at more than $1 billion are cleared daily in London.
It also published the results of a Bank of England survey of turnover that the 14 market-making members of the LBMA in the London bullion market conducted in May last year. This showed about 7 million ounces of gold, worth nearly $3 billion, was traded daily by these market-makers.
Was the news a bureaucratic slip of utmost discreet information - indeed top secret data - or was it a well-timed and methodically planned leak to the press. Or perhaps it was the "whistle-blowing" of an irate employee, who was passed over for promotion? Who really knows? In any case we will provide all the details surrounding this monumental announcement... and allow the reader to draw his own conclusions.
This writer will present the entire situation via a chronicle of all the news publications about the subject, providing dates sources and authors - where possible. Nearly all available information was researched from Internet sources. Most comments are verbatim from respective authors.
To my knowledge it was an esoteric select few at the Kitco Gold Chat group, who really zeroed in on the draconian significance of the news.
Writer's comment: In light of these startling revelations, various observations may be gleaned from this publication by the London Financial Times.
1. In view of the humongous daily trading volume of gold by the LBMA, annual supply/demand dynamics may have little to NO INFLUENCE on the long-term price of the noble metal - albeit can cause short-term ripples one way or the other.
2. The formidable volume of daily trading strongly resembles that of currency trading -- indeed many world experts staunchly proclaim gold to be the universal currency... and history undeniably supports this assertion.
3. Fear of Central Bank sales of gold may be totally exaggerated - and may really have only a minuscule and temporary impact on gold prices.
4. The LBMA is a highly liquid gold environment, conducive for speculative trading - ESPECIALLY NOW THAT THE 'CAT IS OUT OF THE BAG.' Could this be the ulterior motive for breaking the secrecy code of ALMOST TWO CENTURIES?????????????
5. At the current daily trading rate, more than 100 TIMES THE ANNUAL WORLD'S GOLD PRODUCTION RATE IS TRADED ANNUALLY in the LBMA!!! Other than currencies, can anyone mention any commodity experiencing yearly trading volume of 100 times its annual production?! ANYONE?! Does this not pique your curiosity and question the reason or purpose of all this gold trading?!
WHY... AND MOST IMPORTANTLY, W-H-O ARE THE PLAYERS? (...from Part 1)
1. Why is gold so cheap,
2. Who prompted LBMA to go public, and
3. What are the underlying or "real" motivations for their move.
We'll know later - meanwhile we've now got a glimpse of the sunlight outside ... the exit is near! -Orpailleur (...from Part 2)
Volume: COMEX is IRRELEVANT!
The LBMA moves 60 TIMES THE VOLUME!
THEY (whoever they are) say that gold's downtrend was catalyzed by the Dutch CB sale of 300 tons of their gold last year, and further stimulated by further CB rumors of more sales. Holland's measly 300 tons (for 1996) is chicken feed alongside the WORLD gold volume at 3,720 tons PER DAY!
Anyway, it appears that the Euro CB's have banned the selling of their gold to meet the EURO monetary requirements.
??Consider this....Gold prices have dropped roughly 13% in the last 9 months....and daily gold volume on the LBMA has more than tripled in volume in the same period. It appears that, when gold is used as a currency (and not a store of value) it is not important what LEVEL the monetary (i.e. gold price to the dollar ) unit has......only that it maintains a reasonable amount of its value in the short run; long enough to make your next transaction.
Remember, these huge volumes on the LBMA
are NOT from hoarders....these are the
numbers of merchants using gold as a
CURRENCY. Who says gold is not money?
??Consider this: Gold production to demand ratios are no longer important.........the LBMA moves the world's entire yearly production in ONE day.
Is all this a "power play" by the LBMA?? In light of the preceding paragraph.....what would YOU do in their shoes?? The LBMA press release undermines ALL CB's propaganda....they are bitter enemies........... but just don't know it YET. The LBMA is that infamous voice that first screamed in an audible tone the king has no clothes. Period.
The LBMA change to "transparency" is a definite power play. This could be their move to push gold into a de facto currency.
Even SCARIER.... (or maybe exciting?) is that if all U.S. money in circulation was re-monetized (backed by gold) once again......gold would be around $34,000 an ounce! (Gee...did I really say that? There's gonna be hell to pay tomorrow....Maybe I better just hide for a few days)
The LBMA press release.......Pandora's box
just opened.......now HOW LONG????????
It is interesting to speculate who exactly is on the other side of the trades the silly shorts and hedgers are making. John N's comment about rickety trucks going along the silk road may be smack on the money. Doom on them all if someone wants physical delivery of the gold they bought from the shorts..... (...from Part 3)
This 'smokescreen' from the LMBA has obscured what may really be going on now. I can not believe that the amount of bullion changing hands is of this magnitude without price movement. Rather I think you should pay very close attention to the wording of their statements. They say that 'deals' for that amount are transacted on a daily basis, not that actual bullion sales occurred.
No my friends, I think the cupboard is BARE
and we will soon see the results!
As to why the COMEX seemingly has such a large influence on price when considering its relative size to the LBMA, I suppose it is not unlike many other markets which are influenced by the futures markets. A price change, owing to the size and nature of trading would seem to be more easily accomplished on the futures market as opposed to the OTC market. But it may also be because a lot of the trading on the LBMA is done independent of price as above reasoned. In any event, a price change induced by the futures market should hold only if traders on the LBMA accept it, and that is based on the above cumulative trading considerations and others.
The above collage is based primarily on supposition, many parts of which could be in error. Your comments are welcomed, as well as others on this forum who are more knowledgeable. (...from Part 4)
Internet Commentary #26 -
Posted on the Internet September 14, 1997 by "ANOTHER"
(an answer?):
This could be an answer directed to the "Red Baron"?
The CBs are becoming "primary suppliers" to the gold market. Understand that they are not doing this because they want to, they have to. The words are spoken to show a need to raise capital but we knew that was a screen from long ago. You will find the answer to the LBMA problem if you follow a route that connects South Africa, The middle east, India and then into Asia!
Remember this;
the western world uses paper as a real value, but oil and gold will never flow in the same direction. Big Trader (...from Part 5)
THE GRAND LBMA EXPOSÉ: A Collective-Mind Analysis - Part 1
THE GRAND LBMA EXPOSÉ: A Collective-Mind Analysis - Part 2
THE GRAND LBMA EXPOSÉ: A Collective-Mind Analysis - Part 3
THE GRAND LBMA EXPOSÉ: A Collective-Mind Analysis - Part 4
THE GRAND LBMA EXPOSÉ: A Collective-Mind Analysis - Part 5
THE GRAND LBMA EXPOSÉ: A Collective-Mind Analysis - Part 6
THE GRAND LBMA EXPOSÉ: A Collective-Mind Analysis - Part 7
THE GRAND LBMA EXPOSÉ: A Collective-Mind Analysis - Part 8
THE GRAND LBMA EXPOSÉ: A Collective-Mind Analysis - Part 9
THE GRAND LBMA EXPOSÉ: A Collective-Mind Analysis - Part 10
From a Friend
Ref: "In other words, the current price of gold means that you are buying a slice of the world’s gold supply with a proportionately smaller slice of the world’s money. You can currently buy x% of the world’s gold with y% of the world’s money, where x is much bigger than y. When gold will become the unit of account of the world’s wealth, you will find yourself able to claim a much bigger slice of that wealth than you would have been able to do with fiat money before the collapse."
This means that CBs and gold-clearinghouse BIS must attach a much higher VALUE to the gold they exchange (redistribute) than the public (visible) goldprice(s).
Note the difference between Value and price. The price is for bookkeeping purposes. The Value is for wealth reserve purposes.
That's why a private person cannot buy goldmetal directly from any CB (or BIS/IMF) ! We are not allowed to know how CB gold " flows " (and is valued in the inner circle). We have no idea how bullion banks intermediaries let goldmetal circulate from goldmine to state and private entities.
We are not allowed to know how the CB/IMF gold auctions really happen. How can we possibly verify the goldprices that are publicised ? Who are the receivers of the WAG gold redistribution ?
So much CB gold-Action and so little transparency. WHY !?
Because of Big difference between price and Value !?
to be continued....
Adrian Douglas
Adrian Douglas: "I think what will come out of this is that people who want to be owners of gold and silver will realize that they have to look very carefully at their investments and make sure that they do have actual physical gold and silver in their possession. And, as Chris pointed out, the only real way to do that is to take possession yourself."
Sincerely,
FOFOA
139 comments:
FOFOA, reveal thyself!!!
Thanks for the article, and Cheers!
I have a question that I think everyone can help answer:
What happens if we wake up tomorrow and physical gold suddenly costs $100,000? I mean the very first thing to change is, poof, the worldwide shortage of physical gold causes the price to rise to it's leveraged ration 100:1?
Cost of a gallon of milk change?
Real estate prices?
Gas?
Is Greece happy?
Can a European swallow carry more weight?
All comments are welcome because I'm really curious as to how our societies would be effected.
Date: Fri Jan 23 1998 19:01
ANOTHER (THOUGHTS!) ID#60253:
No CB holds any currency! They hold the bonds of that currency...
Yes, they hold 100 : 1 to currency, and yes, they hold 100: 1 to gold. But the Actual currency holders also hold a 100 : 1 to the actual currency. So actual currency ( real currency in actual dollars, rather than electronic markers ) also is a 100 : 1 leverage.
So holding actual real currency is similar to holding actual real gold.
"So holding actual real currency is similar to holding actual real gold."
Don't think you can make that statement. One is fiat, produced by a printer with no intrensic value. The other is factual, produced through labor and entirely intrensic value. More than 5000 years have shown that fiat fails while gold holds true. I would not consider them similar, not at all.
ahem...museice...
that would be $111,200...
:)
I also am interested to know the ramifications of instant $100,000US Gold.
Worldwide - virtually no one owns the stuff - what would be the big deal?
99.9% of the world's population only own a little ring on a finger and perhaps a little gold necklace.
99.9% of the worlds population do not own one ounce of Gold.
Why is it so terrifying to have a high price of Gold?
FOFOA,
Great piece.
Museice,
IMHO under Freegold, gold, as an asset class or store of value, can rise to a very high currency price without causing the price of other things priced in that currency to rise along with it. As FOFOA often says Freegold is a (final?) DE-monetization of gold.
This isn't an inflation of currency - defined as a fall in the purchasing power of that currency across the board. It is a fall in currency purchasing power in one asset class/store of value - gold.
It is a revaluation of gold or price discovery of the intrinsic value of gold disguised and confirmed by the 100:1 leverage in paper gold.
This event (Freegold) stands apart from the inevitable hyperinflation in the USA, caused by the $IMFS, as described by A/FOA and FOFOA. The pre-conditions for this hyperinflation have developed over decades. The Euro is the catalyst for the USA/US$ hyperinflation not Freegold.
The pre-conditions for this hyperinflation are:
- The massive amount of US$ (both digital and physical) issued already.
- Reduction (Massive reduction?) in the use of the US$ as the primary reserve currency around the globe.
- Reduction in (not Ending of) the use of the US$ in International trade.
- Surge in the issuance of the US$ to cover the massive debt issued in the US$. (The drop "dollars on your front lawn" stage described by A/FOA.)
The Euro catalyses this reaction by fracturing the US$-Oil bond in providing the Euro-Oil alternative.
There is a strong case provided by A/FOA, FOFOA and others that the US$-Oil nexus was in fact a US$-Oil-(cheap)Gold nexus.
ECB (and BIS?) physical gold provides the asset reserve that makes the Euro strong and appealing to the Oil providers. Freegold provides the true market value for gold that tells the world precisely how strong the Euro really is.
FOFOA,
Apres Portugal, short US$ long Euro?
Greece Plans to Sell Global Dollar Bond by Early May (Update4)
http://www.bloomberg.com/apps/news?pid=20601087&sid=aE9_qNYgbN_M&pos=1
".... It may be between $5 billion and $10 billion, the Wall Street Journal reported, citing a Greek government official it declined to name."
So far so good.
I guess that some big boys have known about the 100:1 figure for a while.
And who would break the comex; why cancel the sale of the century while it lasts?
Publicly imposing the fraud as is happening now to a certain extend is likely to lead to an increased demand for physical and decreased demand for paper, so it helps in driving a wedge between both, but so far we might just go on for a bit longer.
martijn,
"who would break the comex; why cancel the sale of the century while it lasts?"
maybe some of the smaller guys who are now just finding out about it, but have a hankerin' for something hard! (ok...that didn't sound right, but physical didn't begin w/the letter "h").
Yes, they will increasingly start to shift to physical.
Perhaps it will be the small guys that in the end break it and enforce freegold (as FOFOA has also said in the past if I'm not mistaken), but it might not be tomorrow, although I don't think it will last more than five years.
Things can suddenly speed up soon, but also remain somewhat the same for a little while longer I guess.
Sprott is doing a good job. Many small people do not feel comfortable about storing 5-10 kilo gold at home and hence stick to paper as they see little alternative.
Some good, guaranteed paper might help a lot in thinning the physical market.
@dojufitz:
"Worldwide - virtually no one owns the stuff - what would be the big deal?"
This is EXACTLY why it would be a big deal. The greatest wealth transfer in human history - from those who hold paper assets to those who hold real, physical GOLD.
@Museice:
IMHO, $100,000 is just the starting price - with no inflation in the price of anything else. Factoring in the subsequent inflation, well, just use your imagination :-)
More on Brown's bottom.
With regard to public coverage this might become the big topic over the COMEX paper games.
We'll see.
Btw here's a snip: Today the UK Treasury has released long-withheld FOIA documents which disprove this claim, and indicate that in fact the BOE was if not completely against selling the bullion then certainly waiting until the price improved. Furthermore, as the Daily Mail reports, "A source close to the Bank of England said last night: 'It was not our decision. It was their decision and we simply provided technical advice. Then it was up to them.'"
Are they going to let those guys take the fall and let the BOE walk away?
FOFOA,
GATA reports that the King Worl News site was actually attacked by someone:
"The servers are maintained by one of the largest Internet site hosting companies in the world and one of its technicians told King World News proprietor Eric King, "We cannot figure out why this cluster of servers is being attacked." The King World News site host has maintained the site on a "grid" system of servers so that ordinary technical problems with any one server cannot disable the site, but tonight's attack was sophisticated and brought down the entire grid."
http://gata.org/node/8494
They think stuff like this is gonna scare people and prevent the truth from coming out? ROFL! Looks like cheap tactics is all the Gold cartel has left now. This just goes to shoe how weak they are right now.
@All:
In the ZH piece on Browns Bottom that Martijn linked to Tyler points out this in Annex #29:
"The US treasury sold gold in two spells, two auctions of 23 and 15 tonnes in 1975, which were not continued in 1976 as the IMF auctions were announced and the spot price fell; a larger programme of 491 tonnes during 1978-1979 as the gold price rose sharply. Indeed the second programme was extended three times as demand for gold continued to push up the spot price."
My question is: Has anyone read about these sales before? Is this proof, as Tyler asks at the end of his piece "Forget the LBMA and the threat of physical dilution - a much more relevant question is just how much of the alleged US gold holdings of 8133.5 tonnes is actually real?"
My question is: Has anyone read about these sales before?
No, but one could argue that A/FOA mentioned it when they said something like: "in '78 you found out that you can't bid for gold directly".
If they admit to 100:1, the reality is probably 1000:1.
Desperado, Martijn...
Gold War II - The IMF/U.S. Treasury Gold Auctions - 1975 to 1979
On January 1, 1975, after 42 years, it again became "legal" for individual Americans to own Gold. Anticipating the demand, the U.S. Treasury in particular and many other Central Banks sold large quantities of Gold, taking large paper profits in the process. This had two results. It depressed the price of Gold, which fell to $US 103 in eighteen months. More important by far, it "burned" large numbers of small individual investors.
But this "pre-emptive strike" against the Gold price did not solve the imbalances inherent in the floating currency regime. As the Gold price began to recover from its August 1976 low, the (US-controlled) IMF along with the Treasury itself, began a series of Gold auctions in an attempt to hold down the price through official means. But the problem of yet another free fall in the international value of the Dollar got in the way. Between January and October of 1978, the Dollar lost fully 25% of its value against a basket of the currencies of its major trading partners. By early 1979, due to this precipitous fall, the demand for Gold was overwhelming the amount that the IMF/Treasury dared supply, and the Gold auctions came to an end.
Gold regained its ($195) December 1974 level by July 1978. It then pressed on to new highs, hitting $250 in February 1979 and $300 in July. Also in July, Paul Volcker was appointed as Fed Chairman by a desperate Jimmy Carter. Gold continued to surge, hitting $400 in October. While this was happening, Mr Volcker was attending a conference in Belgrade. There the assessment was made that the global financial system was on the verge of collapse. When Mr Volcker returned to the U.S. from Belgrade, he took a momentous step. He announced that the Fed was swiching its policy from controlling interest rates to controlling the money supply.
http://www.the-privateer.com/gold2.html
mysterybox, i was thinking along those same lines. wondering if their admission is actually just creating a nice limited hangout while the reality is much worse or even different than what they're admitting.
@FOFOA
Thanks. The end of the 70s seems to have been a decisive period for the $US and gold.
Here is Max Keiser on Greek television picking up steam against the $IMFS. According to Max's website this interview is going viral in Greece...
"2:13a ET Thursday, April 1, 2010
Dear Friend of GATA and Gold:
The Gold Anti-Trust Action Committee today offered to sell 191.3 tonnes of gold, tonnage equal to that remaining to be sold by the International Monetary Fund, on the same terms offered by the IMF except $100 per ounce below the London PM gold fix price on the day prior to purchase.
GATA Chairman Bill Murphy said his organization could provide a better price for the metal because it recently had received a gift of expensive hundred-year-old certificate paper originally intended for use as Chinese railroad bonds and because, in selling the gold, the organization, unlike the IMF, would not employ a large staff of publicists to tout the sale to news media throughout the world every day for months in advance.
Except for the discounted price, GATA's gold sale terms will match the IMF's:
-- After selling the gold, GATA will present the buyers with certificates of ownership while continuing to store the gold using vaults in the United States, Britain, France, or India whose locations are known only to GATA.
-- The gold will be audited by auditors chosen by GATA whose reports will be available only to GATA.
-- The gold may be resold through GATA as long as it does not leave GATA's vaults.
-- GATA will use some of the gold sale proceeds to assist developing or financially troubled nations but exactly how much is used for that purpose and what's done with the remainder will be nobody's business.
-- GATA's sales will be structured to minimize any effect on the world gold market and to this end they will be announced only this once.
-- For an additional $250 GATA will have a buyer's gold certificate tastefully framed.
-- Buyers of gold in the amount of $100 million or more will be invited to GATA's annual Christmas party.
Purchasers should send certified checks payable to GATA in care of your secretary/treasurer at the address below.
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee
7 Villa Louisa Road
Manchester, Connecticut 06043-7541
USA"
and thanks for your answers to my simple question. Those of us who have been reading FOFOA for a long time understand different aspects of the world of Gold but I have a feeling this site generates new readers daily and I like to think about the kind of questions they might have. It took me months of hiding in the background before I felt confident enough to post my first comment and even today, after reading something like frycook's latest, I'm reminded just how little I actually know about this shiny piece of metal.
Again a nice similarity with poker:
You can look at the small amount of gold in warehouses as the deposits of big players to be in the game (ignore small players -> they are the side show to be played with, not allowed to play Big game anyway).
If all play in a gentelman manner, small limited deals games, many rounds, all could last long. Its not allowed to go "all in".
All "get" tokens to play with -> (They are entittled to create their "own" tokens). Big loosers will not be asked to pay to BANK (BIS - in gold) untill the lights go off and game ends.
All is about trust. If one big player looses and others consider it is not good player anymore, there is no more tokens accepted from that player.
OR unless there is another player who wants to leave a table and take his wins (China, Sheiks)?
This is called gambling, it is the gaming itself what ruins players. Those smart are leaving when its right time to do so.
Notes/conclusions:
- ECB left the arena and took out some part of its gold => less chips in the game -> So the game started naturally to change when Euro was established. (check the gold price at that time and before). Note the news that countries take their gold back home: Germany HK, etc.
- The other areas are doing now the same = ASEAN, Gulf states... -> Game is changing again.
- China will most likely not BID for teh IMF gold, they will just not RE-enter the market where from everybody (and they also) is withdrowing. IMF selling gold = countries withdrowing = end of IMF.
- USA spent all gold on gambling, how many cards left?
At this point I we can be pretty confident that the IMF has ZERO physical Gold. Heck, on IMF's terms (if those are what GATA says they are), I could sell a 1000 tonnes at half the price :-) Anybody interested?
@Martijn:
I have watched only half the clip so far but I agree 100% with Max. The sheeple in most countries have been completely brainwashed by the state controlled media and education system (including Europe as evident from the Greek analysts blaming themselves for - get this - not paying more taxes! That's like blaming yourself for not getting robbed enough!). The whole entire world is one big Rome today with the populace concerned with nothing more than bread and circuses. No wonder those of us who got their eyes opened somehow and know better are simply amazed at the ability of this rotten to the core slavery...er..."economic" system to continue operating.
After watching the full clip, I love Max even more! The way Max bluntly hit that newscaster with the bitter truth was just awesome and so typical Max. The poor guy probably didn't know what hit him. The fact that Wall Street has not been COMPLETELY BANNED from Europe thus far does not reflect very positively on the EU.
sanjay..you must have thought this is the freeGOLF forum...
also, if i'm understanding the situation correctly, it seems as though there's about $5.5+ Trillion in physical gold at today's prices, which, at 100:1 would make this a 550 Trillion dollar fraud.
So if one were to accept john williams's of shadow stats inflation numbers, (~$7500 gold JUST to get us back to the crisis in the late 70s and early 80s), which is another 7x what is above, that suggests a nearly 4 quadrillion fraud.
is this correct?
I have a funny feeling it's even greater than that, since this crisis is worse, but i'm curious to hear thoughts on those numbers.
that would sure put the $100-200T (FOFOA) number to rest, no (or $50-60 of global M2, per DollarDaze above)?
Are we seriously looking at a 4 quadrillion dollar scheme in 1970s dollars here?
Congrats FOFOA on a really seminal post! You tie together the extraordinarily delphic prophesies of Another/FOA from a decade ago with the shattering developments of the past few days. Your edifying distillations are a pleasure to digest. As always kudos to GATA, Eric King, Jim Willie and yourself/Another/FOA for your fearless pursuit of truth and liberty.
On a tangential plane.... a warning to jsmineset CIGAs about the "ease" of dealing with farmland and other investments in subsaharan africa. I read jim sinclair daily and rate him highly. He obviously has good ties with the tanzanian government. He alluded in an approving way (3/30/10 post) to a CIGA who is buying some agricultural land in tanzania.
since he has no blog and since there is doubtless a large FOFOA/jsmineset cross-readership, I would like to offer a warning based on much personal experience about investing in subsaharan africa.
DONT TRY IT!!!!!!!!!!!!!!!!
just because the chinese government are "all in" in subsaharan africa may fool the unwary into thinking that the region has undergone a renaissance in terms of investment accessibility. IT HAS NOT!
I am familiar with namibia and SA. both are in an absolute mess. don't believe me? go there for 2-3 mos and see for yourselves. serious capital crime is soaring and corruption is truly endemic. I went to namibia planning to buy a large spread in 10/08 and lived there for almost a year.
africa is hellish for the non-sovereign investor.
join the dots of economic "development" in subsaharn africa and the endpont is....ZIM(BABWE). I jest not.
apologies for the long post. happy to give experiential chapter and verse if CIGAs are really interested and post their email addresses etc.
CIGAs contemplating buying african agriculture... CAVEAT EMPTOR!!!!
@GG:
You said: "The whole entire world is one big Rome today with the populace concerned with nothing more than bread and circuses. No wonder those of us who got their eyes opened somehow and know better are simply amazed at the ability of this rotten to the core slavery...er..."economic" system to continue operating."
Although I agree with you, I would only point out that like democracy as a political system, it is the worst age but except that it is better than all the rest. Things haven't been all the fantastic in all the other ages either, in fact they were far worse. Our problem now is that the population has become to dumbed down to do anything about it.
FOFOA,
A few things that struck me this am:
1. Newcrest launched a biod for Lihir after the rumored potential bid for Newcrest by newmont. Could this be seen as the giants angling to lock up supply from a sovereign perspective. Outside of the latin american countries like Peru and to lesser extend chile/ argentina that are sellers of projects and E&D activity, there have been no major activity. i am still in quandry over the ABX decision to exit Africa (ntowithstanding its higher cost profile) to focus on the americas -- is there something to read into this about the evolution of blocs?
2. Article on bloomberg this am about 50% dip in coin production at UK mint (article last week on the Austrian mint).
3. as per point above inflation can be siphoned off by the metal but that is a one off reset. After that phase transition, you are essentially back to a quasi shadow standard as the action of the transaction side get shadowed and or telegraphed in the physical side thereby acting as a constraint on the activity. How do you envision central banks manage around this after the transition, becasue if this is the endgame you can be assured there is a scheme in the works.
4. the announcement on iron or had the ft carrying an article saying the 200m a year trade could turn into a 200B USD market for iron or derivatives..Also the met coal side and carbon cap are also potential jackpots for the USD complex.
5. Does the advent of these new derivatives - the useful ones -- represent a hint as to what a defacto standard could look like?
6. the constant drumbeat of better news on ag planting and inventory is also intetresting in this regard.
@satya
My underestanding is if futures market is leveraged 1:100 being a fractional reserve system against metal, then 500 000 open interests is 50 000 000 ozs, which are leveraged to 5 000 000 000. It is expected there is roughly the same amount of gold above ground.
So the number 1:100 seems so huge but considering all supplies it is not so frightening.
@Desperado:
"Things haven't been all the fantastic in all the other ages either, in fact they were far worse."
Don't be so sure now my friend. Considering the sorry state of our media and education system, I'm not entirely sure we know the time past quite so well.
@S:
ANY and ALL "derivatives" will soon be discarded to the dustbin of history.
And Democracy is not all that its made out to be. It is, after all, nothing but tyranny of the majority.
@GG, In the west the problems that we are facing now mostly have to do with a spoiled populace too pampered to even produce a sustainable number of offspring. My great grandfather was sent into the desert by Brigam Young with all he could carry on a wheel barrow.
Don't even start trying to say that things were better before modern plumbing and electricity.
Yup - modern plumbing and electricity - that's all we need and everything's perfect. Slaves are provided some amenities - doesn't mean they are not slaves. Far from spoiled, the population in the West - and indeed over the entire world - has been enslaved - by the bankers' empire of DEBT.
And if you happen to be out of money, watch those "amenities" of "plumbing and electricity" vanish in an instant.
Satya,
Re: sanjay
Perhaps the Masters tour people are hoping to be paid in gold rather than US$. That would explain their advertisement in this forum.
Congrats on the GATA reference FOFOA.
So i feel i should correct myself because when talking about 50 000 000 ozs (500 000 future contracts) of gold, it is already leveraged amount. Compared to whole supply above ground it is roughly 1 per cent.
Interesting read from Janet Tavakoli regarding cornering the gold market:
http://www.tavakolistructuredfinance.com/Gold.pdf
Looks to me that she is saying it is possible for someone with the help of others to crush the paper market and bring on what amounts to Freegold.
Gold and Silver Equal Future Purchasing Power
"Today it is as difficult for a person to fathom gold at $5,000 per ounce as it was for a person to fathom $1,000 per ounce back in 2002. After all, hold a Krugerrand, in your hand and try to imagine it being worth the purchasing power of $5,000 - enough to buy a good running, nice looking used car."
"Soon - I suspect within a year - gold and silver will jump significantly in value. I believe the rise will be faster than the rise from $1,000 to $1,224. I can imagine a string of ~5% days that result in a $200 move in spot. That will definitely grab media and public attention, but most will not jump in - waiting for the price to fall back. Instead, after a small consolidation, it will again jump by another couple hundred dollars. Exciting! But more important to your well being is to realize - this scenario means - the separation of the value of paper gold and real gold. You will have a heck of a time getting your hands on hard metal. And most of the people you know will have stored none of this new (old) money."
"Fair market value for products and services will be up-in-the-air as well. For example, a truck (valued at $25,000 in 2007 dollars) might bring $10,000 or $6.500 or $14,000. Depending upon how useless the truck has become to the owner and how desperate he is for cash. You might be able to hire a $25.00 / hour carpenter for $50 per day. You might buy a $250,000 (2007 pricing) property for $100,000. The price for products and services will be - whatever you can get!
Forget about dollars. I might be able to exchange two of my ($395 cost) Krugers and a couple rolls of [silver] quarters for the truck. And both parties would be pleased with the sale. One pre-65 dime might buy a loaf of bread; a quarter might buy a T-bone steak; a silver dollar - a bag of groceries. I can see the carpenter willing to work under the table for a silver quarter per hour. Still receiving unemployment in paper dollars, he/she wants some ‘real’ money for the family. Gold and silver will be in greater demand than paper dollars. You will go to the front of the line if you are buying in either."
Markets! Finance! Scandal!
A Keiser Report (I just really like him, and Martijn, his Greece report was hilarious).
He begins talking about Gold Manipulation at 4:30 and his best quote is, "If you took away fraud from the business model of America thee would be nothing left except porn and donuts".
mmmm... donuts...
FOFOA: Congrats on another well deserved link from GATA!
Interesting:
No problem in a gold futures (yet):
http://en.wikipedia.org/wiki/List_of_trading_losses
Could this happen in gold?
http://en.wikipedia.org/wiki/Sumitomo_copper_affair
JHMO, but I get the feeling that we're being steered into the next phase of the gold/dollar system. The CFTC didn't have to hold that public hearing. They knew the information was going to come out and they let it come out, anyway. By the way, to any whales playing in this game, it was probably no news to them at all. It's only confirmation to us "parasites" of what we suspected (or knew) all along.
The US House has enough votes right now to pass the "audit the Fed" bill but it's still sitting on the table. It's locked and loaded and ready to be used at the right time.
Here's a scenario that I think we could see:
1. The US has no gold. We'll find that the Fed technically has ownership of it. This is an important step.
2. Some geo-political crisis (not our fault) causes the US dollar to go into a death spiral. We won't let it hyperinflate like Zimbabwe. We'll declare a national emergency or bank holiday to stop the bleeding.
3. We'll issue new dollars at some arbitrary ratio (4:1 or 5:1 perhaps) At this point, any old claims against US gold @ $35 - $40/oz will be void due to new dollar issuance and that the US actually has no gold.
4. In the aftermath, we'll audit the Fed and discover that there was some fraud committed there. Since there was fraud involved, the US could raid their vaults and confiscate all of the Fed's gold which gives it back to the US, unencumbered.
Because of the impact to the world economy, the new reserve currency will be the SDR's which will include a gold component. We'll be publicly pleading to keep the gold component at a minimum because we just found out that we have no gold. Other countries, smelling blood, will demand to up the gold component to a high percentage to stick it to us. We'll grudgingly go along with this. After that's in place, we'll get the Fed gold. We might even discover other sources of gold that we had no idea that we had. In the end, gold will be vital to the world economy and the US will own most of it.
How's that for a politically motivated rent seeker (whatever that is) theory?
By the way, these are some potential sources of our lost/hidden/unknown gold hoard:
Yamashita gold
Iraq gold
Iran gold (at that point in the future?
abandoned gold mines in the dessert that are now federal land
Anyway, it doesn't matter what the story is. I think we'll be told that we have little or no gold until it is monetized again in some form. Then we'll discover that we had more than we thought.
Sigo,
This started out good..
"JHMO, but I get the feeling that we're being steered into the next phase of the gold/dollar system. The CFTC didn't have to hold that public hearing. They knew the information was going to come out and they let it come out, anyway. By the way, to any whales playing in this game, it was probably no news to them at all. It's only confirmation to us "parasites" of what we suspected (or knew) all along.
The US House has enough votes right now to pass the "audit the Fed" bill but it's still sitting on the table. It's locked and loaded and ready to be used at the right time.
Here's a scenario that I think we could see:
1. The US has no gold. We'll find that the Fed technically has ownership of it. This is an important step.
2. Some geo-political crisis (not our fault) causes the US dollar to go into a death spiral. We won't let it hyper-inflate like Zimbabwe. We'll declare a national emergency or bank holiday to stop the bleeding.
3. We'll issue new dollars at some arbitrary ratio (4:1 or 5:1 perhaps) At this point, any old claims against US gold @ $35 - $40/oz will be void due to new dollar issuance and that the US actually has no gold.
4. In the aftermath, we'll audit the Fed and discover that there was some fraud committed there."
SOME fraud? I have been reading the Creature from Jekyll Island. The whole $IMFS is a fraud. They knew what would happen and how it would end from the beginning. This end game has been planned for 100 years.
I just don't see how "we" get the gold back as you state. I would disagree with you on that.
This is, to me, simply a time where TPTB see how the sheep respond and how much structure they can get in place before pulling the plug. I love the quote BO said recently. "we would go bankrupt if we didn't pass healthcare". I believe that. If we can stop "them" then they say OK we are going to pull the trigger now since we got all we could get in terms of gaining control of the economy. They need control of the economy so when they take it down we hear "well we have 30%, or whatever of the economy so we need to be in on the solution. WE are the market and we have to give you the solution since we control all the money anyway. So you can take all your nice monetary theories and stick them in the shredder, which oh by the way is what we have done to the free market." This is going to end when THEY want it to end.
If they can pass Cap & Trade they will. They will push as far as they can for as much control as they can, with this Congress, and then watch out.
Again, the only thing that makes sense with freegold to me is that, as stated above, only ~1% of citizens have it. So if THEY have all the gold they win the most. And when it comes to money issues THEY have been winning since Rothchild and the 1700's.
So I guess freegold is simple. If freegold is the way the cartel wins the most then it happens (the next phase transition of money HAS to involve them winning the most). Implode all the currencies and leave one structure standing from the "good old days" (BIS?).
That will let everyone continue to rant about how these guys don't like these guys but they don't know it yet. Oh the BIS destroyed the Fed. Yeah right. They are all in it together and some parts will be destroyed but it will be mutually beneficially and co-ordinated well in advance again for their maximum benefit.
FOFOA thanks for the posts. one question. Where is the gold? Is it in THEIR hands? If so, freegold is a no-brainer.
Did you read the Creature from Jekyll Island? If so, and you understand the book to be true, I take your statement..."It is where global political evolution is taking us. It is both a market process and a political process, global in scale" to make some sense. They have MADE a market to act this way for their benefit.
PS Can you recommend a specific article that covers how THEY win the most with freegold?
Steve B
Museice,
Possible answers to your questions.
1. "Cost of a gallon of milk change?" The prices of consumer goods will depend on the exchange rate between currencies. If all currencies are devalued 100 to 1 (they won't be), then there shouldn't be much effect on prices - except how the price of oil affects everything. If the $ depreciates more than other currencies, everything will increase in price because even domestic goods use foreign raw materials.
2. "Real estate prices?" Think of it this way. If you and your friends are sitting on a $trillion and the rest of the world has only a few thousand and the price of an acre of land drops from $10,000/acre to $100/acre, how many acres are you going to buy and where? You, being a smart person will buy whatever you want in the nicest locations because for you, the price is trivial.
3. "Is Greece happy?" Greece is freaking ecstatic because they can pay off the huge loans they just took out with a handful of gold coins.
4. "Gas?" Since Another told us that oil is priced in $ and gold (but mostly gold), gas should skyrocket in price because again, according to Another, oil wants payment in gold or in $ that it can immediately convert to gold.
A question I have for anyone is this: If someone wants to pay off a mortgage by selling a couple of gold eagles, where is he/she going to find someone with the cash to trade for them? Even if someone does make the trade, the government will likely increase the capital gains tax because anyone with gold is profiting "unfairly" by the decline of the $. Except of course for the big traders - they have been getting special deals all along.
Museice,
Item 2 in my previous post is confusing. What I meant to say is if you and your friends each have a $trillion and one morning you wake up to find you have $100 trillion, you could bid up the price of land by 5 or 10 times and still pay only 5 to 10% of your equivalent wealth. Those with the gold can price real estate way out of the range of the vast majority of people.
Sigo:
I fluctuate between the feeling "we're being steered into the next phase of the gold/dollar system" and TPTB lost control of the system and are praying they have enough time to gobble up as much gold as they can before the system implodes.
FOFOA, in the past you have said it is out of control.
Do you still believe this isn't deliberate?
What will this possible $100,000oz for Gold do to Silver?
Silver is 5 times rarer than Gold above ground with its supply disappearing like aspro in water.....
Given that it is needed MORE than Gold for so many industries....it can be argued it might be more important to the world than oil...given that we are now starting to see non fossil fuel motors, green energy etc.....
There are claims it may be the first element from the periodic table to become extinct from the earths crust - and this by 2020!
So what is an extinct metal that IS need for everyhing going to set you back per ounce?
@widmadche
"If someone wants to pay off a mortgage by selling a couple of gold eagles, where is he/she going to find someone with the cash to trade for them?"
First, why wouldn't the bank take gold??? It will be the ultimate store of value, thus a bank's best asset on their balance sheet. Second, in the odd case they don't take gold, why can't you (for a small fee in gold) have smaller coins minted? In fact, FOFOA has stated that he expects that small coins would the norm. For example, a 1.5 gram Mexican 2 peso coin might be a large denomination in the future.
"Even if someone does make the trade, the government will likely increase the capital gains tax because anyone with gold is profiting "unfairly" by the decline of the $. Except of course for the big traders - they have been getting special deals all along."
Why wouldn't governments invite transactions in gold? Taxing gold would chase it and its owners out of country, and countries with little gold will have weak currencies. I don't see how this is in the government's best interest.
Hello Muse,
FOFOA, in the past you have said it is out of control.
Do you still believe this isn't deliberate?"
From the $IMFS perspective, my simple answer to your question is yes.
If we are following the wisdom of A/FOA here I think it is important to note the factions and their roles in this. The non-dollar faction, being the ECB and BIS, was never trying to destroy America or strip it of everything possible. It simply wants to switch the world away from the $-reserve currency system to a fairer "free gold" system and eliminate the US exorbitant privilege (which of course would leave it (the BIS) in control of the new IMFS).
Try to think of the BIS as a conglomeration or organization of all the CB's in the world (instead of a distinct entity, that (at least according to Mr. Johnston's letter which I linked earlier) controls around 20% of the world's gold in relative secrecy. This is in addition to the 10% still held openly by the CB's (20% minus that which was surreptitiously leased and sold away).
The BIS (non-dollar faction) is not trying to accumulate all the gold, or even any more gold for that matter, and hasn't been probably since well before 1997. To accumulate more than it already had in 1990 (according to the letter) would be counter-productive to its goals. (It would be akin to the Fed confiscating everyone's FRN's and then announcing it (the Fed) owned the world! People would shun dollars just as they would shun gold if it was too concentrated in one place.)
The dollar faction, on the other hand, was in the business of freeing-up or liberating people's gold (the whole "barbarous relic" thing) so that the gold could flow to the few SE's (sovereign entities) in the know, those giants who knew the $-emperor had no clothes. So the extension of this process beyond 1997/1999 was a victory for the dollar faction, and a concession from the non-dollar faction. It was not about stealing anyone's gold. It was about controlling the public perception of gold! And allowing the gold to freely flow where it needed as part of the concession.
Cont...
...
The dollar faction would like it to stay as it is today. The Freegold faction would like the public to highly value its own physical gold in possession. But we are still living under certain political concessions and the $IMFS abuses that will continue until those concessions are revoked.
That's how I see the factions. Now individual people (billionaire giants) are another story. But for them, gold accumulation is a traditional exercise. They are the ones buying up the scant physical on the open market (not necessarily from COMEX or LBMA) with their hundred million $ year-end bonuses.
The BIS, the freegold-supporters, have a good share of the gold already. That gold becomes MOST valuable once the rest is spread around as widely as possible and everyone values it highly. Increasing their share from say 30% to 50% of the world's gold would be self-defeating to the non$ CB's in their goal of switching systems away from the $-reserve system.
And I'll say it again, for the umpteenth time; nature and evolution are taking us where we are going. The BIS faction has aligned its own goals with this "tidal flow" which is its greatest advantage, its ace in the hole. And it has also been very patient, preparing for this transition for more than 40 years.
Read The Sting again. It's a little rough, but try to grasp the long term goal of the BIS as it is described in the letter. It is written by someone who studied the BIS from 1972 until 1997 when the letter was written. It's all about switching systems, not about owning all the gold. The BIS maxed itself out (from a practical perspective) a long time ago. Since then it has been secretly balancing the distributions of the rest of the world's gold, through the CBGA and the Eurozone 0%VAT among other things.
Sincerely,
FOFOA
Muse,
This speech is a must-read for you. And for anyone else on here that is honestly interested in the thought processes of the BIS and its Central Bank members:
http://www.bis.org/speeches/sp050218.htm
And get this, this speech was ONE DAY before Robert Sleeper retired from the BIS!!!
It almost has the feel of a tell-all, yet the BIS posted it on its website.
Pay special attention to the part when he starts talking about MTM, the mark to market decision CB's must make when deciding how to manage their reserves. This is very important.
The ECB's decision to mark its gold reserves to market is the foundation for Freegold in our modern world of central banks!!! Think about this when you are reading the speech. And then look at the results so far...
http://www.ecb.int/press/pr/date/1999/html/pr990105_1.en.html
January 1, 1999 :
ECB's net foreign currency position EUR 227.4 billion
ECB's gold position EUR 99.6 billion
http://www.ecb.int/press/pr/wfs/2007/html/fs071023.en.html
October 23, 2007 :
ECB's net foreign currency position EUR 141.8 billion
ECB's gold position EUR 185.8 billion
http://www.ecb.int/press/pr/wfs/2010/html/fs100330.en.html
March 30, 2010 :
ECB's net foreign currency position EUR 161.3 billion
ECB's gold position EUR 266.9 billion
Note that the gold reserves actually GREW even while the ECBMB's sold/redistributed gold through the CBGA/WAG. This is because of the ECB-MTM concept!
Sincerely,
FOFOA
Equilibrium Theory,
".... and countries with little gold will have weak currencies. I don't see how this is in the government's best interest."
I have been thinking about this issue recently. Does gold have to be in the asset reserves of the issuer of a currency in order for that currency to be strong under Freegold?
I am inclined to think that it will be essential for the ECB to maintain substantial amounts of gold in its asset reserve in order for the Euro to remain strong and to continue to be accepted by Oil providers.
I suspect CB gold holdings wont be essential for other countries and currencies provided and for as long as the Euro is well managed and not used as an economic "weapon" like the US$ has been. In other words no amount of gold will protect the value of the Euro if they emulate Zimbabwe and print like maniacs.
After the revaluation effect of Freegold has had its impact on all currencies then each currency should trade on its merits. The exchange value of each currency thereafter will depend on how well the currency is managed and the productive output of that country or region.
Euro under this system will function as a proxy for gold. IMO holding gold in a particular CB's reserves will be a decision not a mandate. Likewise whether citizens choose to own gold, how much they own and in what form will be immaterial from a local currency valuation perspective.
It will, however, be very, very "material" on a personal level if you are only holding paper when the transition to Freegold comes. This experience should also lead people to change their attitude to what constitutes a safe store of value for their savings. That lesson could resonate for generations.
Equilibrium Theory,
PS. If, after the Freegold transition, a country or region chose to hold asset reserves in Euro they would be importing ECB monetary policies.
This would operate in the same way that holding the US$ as the primary reserve currency exports the impact of US monetary policy to the economies of US$ holders around the world.
If a CB holds substantial gold reserves prior to Freegold they could expect a revaluation windfall. If they accumulate gold reserves after the transition to Freegold they would be able to run a far more independent monetary policy in their country or region.
Cheers
Saudi central bank to head new Gulf monetary union
The Saudi's seems to hold the power. Interesting development, especially when we consider that Obama wants to start pumping domestic US oil.
The new council is charged with drawing up the framework of the single currency, including an exchange rate system and setting up the regional central bank with an eye on developing a Mideast equivalent of the European Union.
...But the process has hit repeated roadblocks, the most recent being when the UAE -- the Arab world's second largest economy -- pulled out of the plan after Saudi Arabia, home to the world's largest proven reserves of crude oil, was selected to house the proposed central bank. The UAE's withdrawal was widely viewed as a reaction to being snubbed as headquarters for the new council and central bank. Oman had earlier said it would not participate because it did not feel it was ready to fully integrate its economy into a broader regional body.
Still to be determined about the single currency is whether it would be pegged to a basket of currencies, the U.S. dollar or some other currency. All six Gulf Cooperation Council nations peg their currencies to the dollar except for Kuwait which relies on a basket.
Seems to me there still is some work to do.
@costata
Let me preface this will a little about me. First, I am not totally sold on the idea of freegold, but my Chem. Eng. background has helped me understand that the system should work under a very elegant dynamic equilibrium if it comes to pass.
"Does gold have to be in the asset reserves of the issuer of a currency in order for that currency to be strong under Freegold?"
No. If its citizens allow gold to settle trade imbalances, then the government doesn't need to implicitly back its currency with gold holdings because its citizens have taken up that function. That said, if they want to implement monetary policy, gold reserves would be the key to those policies being effective. Remember that gold IS final payment and under freegold it will act as the arbitor of trade imbalances.
Let's walk through one hypothetical scenario under freegold, and for simiplicity's sake I will limit it to two countries.
At a fixed point in time let's say the US imports more from China than it exports based on each country's currency. Thus, the Chinese have extra dollars. The Chinese would use the dollars to buy gold from the US (government or citizens). This settles the trade imbalance. If this imbalance continues over time, gold will drain from the US and lead to a rising price of gold in dollars. Then, the price of goods and demand for goods of each side will change dynamically so that both parties are satisfied.
You won't get a situation like today where China gets fiat paper for its goods. The US would have to pay in gold or change its habits. Furthermore, I can see no fundamental reason for a government to hold another government's currency under freegold. The asinine assumption made under the Genoa Conference (1922) that a fiat currency is a gold equivalent will not be accepted under freegold.
Not sure if this was here or not ->
Fate of Paper Money:
http://news.goldseek.com/GoldSeek/1214842037.php
One thought, one possible scenario:
About India purchasing the IMF gold.
China buying gold straight is not politically ok so could it be resold to China via someone being (again) too short on LBMA/Comex? They both hide the oficial amount in accounting. Only China and Russia could hide this purchaise in domestic orders.
Equilibrium Theory,
"Furthermore, I can see no fundamental reason for a government to hold another government's currency under freegold."
Provided a Government was confident that they could convert a given currency into gold at a stable ratio it could make sense to hold their reserves in that currency.
FWIW one of the advantages I see in the Euro Freegold system is that it could dramatically reduce the need for countries to hold forex and other reserves.
Let's consider SE Asia as a case in point. At present in order to defend their currencies they need to hold US$. In a system where their currencies were being dynamically marked to market in gold I think it would reduce their need for holding reserves period.
The exchange rate setting mechanism would be a meritocracy under Freegold. Politicians might hate this but eff them as far as I am concerned.
If a Govt is mismanaging their currency or economy gold should flow away from their country and their currency would be weak. A well managed economy and currency should see the flow reversed.
Reviewing the A/FOA archive leads me to conclude that one of the aims in the design of the Euro Freegold system was to prevent dangerous imbalances from building to a point where the whole system is at risk. Basically to avoid the situation that the $IMFS regime has brought us to.
As FOA said while Another was posting:
"Basically, this is the direction the Euro group is taking us. This concept was born with little regard for the economic health of Europe. In the future, any countries money or economy can totally fail and the world currency operation will continue. What is being built is a new currency system, built on a world market price for gold."
http://www.usagold.com/goldtrail/archives/another4.html
8/10/98 Friend of ANOTHER
FOFOA,
Your latest post (9:47-8) highlights for me, a freegold skeptic (I want to believe), the highs and lows of this blog.
A low
First you say "The non-dollar faction, being the ECB and BIS, was never trying to destroy America or strip it of everything possible. It simply wants to switch the world away from the $-reserve currency system to a fairer "free gold" system and eliminate the US exorbitant privilege".
Then you say read the Sting which says "The third thing I learned was that the BIS had two ironclad objectives. Both were so bold that they would take your breath away:
1) To destroy the Soviet Union, as a threat to world peace.
2) To destroy the dollar as the worlds reserve currency."
Are you saying pulling that dollar band-aid off won't hurt?
The Federal Reserve System was modeled after the central bank of England. The Rothchilds signed off on the US Banking system. It is the definition of unfair. But yet you say the mother ship of central banks, BIS, is wanting to switch to a “fairer "free gold" system”. Fairer for whom? How does freegold live with the 5 main principles of Central Banking that by that time would almost be global in scope.
Central Banks operate under 5 main principles.
1) stop growing competition among banks
2) be able to create money out of nothing for lending
3) control all reserves so that reckless banks are less exposed to currency drains and bank runs
4) get taxpayer to pick up the Cartel’s inevitable losses (bailouts)
5) convince Congress and the public that the banks protect “the system” (too big to fail)
Does any poster have a thought, pardon the pun, on that?
How does freegold live inside the rules that central banks follow? Many I am missing it and it is simply everything you post on this blog. Everything discussed goes to that point. But yake those 5 principles global and I see the BIS standing side by side with a one world government controlling most things. Sacrifice the dollar faction on the altar for the greater good (for them). I agree with JS, this is the PERFECT set-up for a single western world currency. They can use the death of one faction, as you call them (they are in close coordination), to birth a stronger mothership.
Then we get a high.
“The BIS (non-dollar faction) is not trying to accumulate all the gold, or even any more gold for that matter, and hasn't been probably since well before 1997. To accumulate more than it already had in 1990 (according to the letter) would be counter-productive to its goals. (It would be akin to the Fed confiscating everyone's FRN's and then announcing it (the Fed) owned the world! People would shun dollars just as they would shun gold if it was too concentrated in one place.)
The dollar faction, on the other hand, was in the business of freeing-up or liberating people's gold (the whole "barbarous relic" thing) so that the gold could flow to the few SE's (sovereign entities) in the know, those giants who knew the $-emperor had no clothes. So the extension of this process beyond 1997/1999 was a victory for the dollar faction, and a concession from the non-dollar faction. It was not about stealing anyone's gold. It was about controlling the public perception of gold! And allowing the gold to freely flow where it needed as part of the concession.”
Awesome stuff. I never thought about how gold too concentrated in one place would make it’s value go down. China and Europe’s recent action don’t speak to centralized gold.
Then another low
“And I'll say it again, for the umpteenth time; nature and evolution are taking us where we are going”
You call it evolution? I hope that is a metaphor. Nothing evolves. Things can adapt based on the genetic material they already have. I see this central banking system adapting, based on the materials by which it is already made, into something even stronger and LESS politically controllable (is there any now). BAD PEOPLE are taking us where THEY WANT to go, not “nature and evolution”.
From the Creature from Jekyll Island “although national monetary events may appear mysterious and chaotic, they are governed by well established rules which bankers and politicians rigidly follow”. That doesn’t sound like nature to me. It sounds like they WANT us to think things are out of control but they really aren’t.
Then this..
“The dollar faction would like it to stay as it is today.” I would argue the dollar “faction” has a job to do. That is to supply a transition to a new supra-national currency. Break it, the dollar, SO bad, only TPTB can “bail us out”. EVERY move the US makes points to this “lets hurry up and break the $. We will hear “no nation can be trusted with their own currency EVER again”. The Euro withstood the PIIGS crisis; let’s follow that model. That Euro is built to last! I understand the ECB balance sheet will look REAL GOOD after a MTM of its bullion.
I agree, sorta with...
“It's all about switching systems, not about owning all the gold.” I agree. It is ALL about switching systems. But this is a political equation and a political outcome that is MOST desired. Bigger more global government is the solution. (Thought popped in on rereading…MAYBE we get some economic freedom in freegold, carrot, in exchange for a little less political freedom, stick). You must see that with Copenhagen, global bank taxes, global terror fight etc. We are being gradually conditioned to think globally. Can someone tell me why they disagree with that?
If things are as you state, “out of control”, please tell your readers what they are doing to get things UNDER control. Via the prism I look at things, every single thing they do makes PERFECT sense. Perfect. The dollar breakdown is utterly deliberate. What hatches next won’t be pretty, for us, but it will be for them. Again it is as much a political solution as a monetary one. With what they have set up now, it’s hard to beat. For the few citizens who hold gold globally (is it de-centralized enough?), a new global system involving freegold would be a boon. Is it enough cover politically? Again, I wonder, and I have seen no analysis on it, if freegold is a big enough carrot.
What I can’t quite get through my thick head is how freegold benefits TPTB going forward.
Can someone tell me how the logical globalization of the 5 central banking principles, that have been in affect for about 100 years but we now read are now suddenly “out of control”, lives with freegold? Maybe my problem is I equate gold with liberty and central banks with tyranny. And those 2 don’t mix.
Lastly, I can see HOW gold could, and should, be valued very highly in the future. But I see those things now as well and it ain’t trading very high. When gold trades as money and not as a commodity, WHY will it be allowed. Some peons like us are gonna make out BIG TIME if they allow it. Looking at this weeks CFTC meeting confirms to me something doesn’t happen unless they allow it. WHY will gold trade the way you think it should? Another poster said he KNEW gold would trade higher (freegold). How can you know what they are capable of? I can see a huge dollar gold price since the dollar is being turned into toilet paper but if the Euro is too strong isn’t that not good for a global currency where weaker is better. Freegold is about MUCH more than a high dollar price on gold.
Making one more push for enlightenment before I give up on this.
Just when I thought I could possibly wrap my mind around some sort of eventual outcome I read this The Genesis Of The Gold-Tungsten: The Rest Of The Story
How screwed up does the Flow of Gold Paper vs. Physical now perhaps vs. Fake get?
Please read this and post your thoughts people.
I'm scratching my head thinking about all the different ways this can play out and who, because someone always knows, has the Real Gold.
Place finger on lips, move finger up and down while saying the letter 'B'.
People,
Dont read literally into the matter. This means that we shouldnt try too hard explain or imagine the technicalities of a future system. It is a nice intellectual exercise but more often than not it leaves us with a misleading oppinion. Thats how things work out in reality.
Take for instance the "article" linked above (the tungsten story). It is pure rubbish. A number of conspiracy theories stiched together into an incoherent story. Please dont form oppinions based on such junk as other people that actually matter (managers of OPM) never do so.
Secondly, speculation about the order of all things macro, such as the relationships between BIS, IMF the ECB etc. are out of our competence. How many of us have worked at the BIS? As a matter of fact how many of the posters here have uberhaupt worked in a bank on a macro problematic? It is really childish to read blogs and offer our thoughts on this.
There are exception of course. For instance the speech that the president of the ECB gave recently. That we can discuss but I see very little form that discussion because it is too tedious, too "difficult" and not instantly rewarding our point of view. In other words, it is not entertaining.
Although the concept of freegold is a good read, and as I said above, a good intellectual excercise, remain sceptical of both sides of the coin. Freegold has some things going for it but it is also riddled with assumptions and extrapolations that may never prove correct. We dont have enough information to work this market and even if some of us did, they will never be posting on this forum.
Keep reading the great prose of FOFOA, enjoy his style and admire the instructional craftmanship he exhibits. But dont fall too much for technicalities and dont read the subtext too literally. It is not what matters.
At the end of the day, it all comes down to political convictions whether a freegold-like system is born or not. Because like it or not, freegold is in essence a neo-libertarian declaration.
As a saver I am offered in a bank on a current account 0,15%, others are not any better. Gold goes up for last 10 years...
More need to know those who want to know more, why, what,...
BTW: One friend from Iceland a week ago told me that she lost a lot of her savings. I told her that she should of diversified and that savings are not to be kept in bank.
Common sence 99,9% does not get untill they get it the hard way.
FOA: “The important thing to remember is that these positions are not and never will be used to demand physical gold.”
Populist: Rule-of-law and morality should trump any elite machinations that effectively help hide inflation by leveraging the price of gold to something lower than it would normally be and in the process steal value from developing nations and unsophisticated investors. The crime is actually a national security issue because the fallout will eventually be quite devastating to our well-being and worse the longer TPTB prolong it.
Questioner: How does the recent revelation that the leverage has been 100-to-1 and that the terminology “physical market” actually means physical-and-paper combined, affect the interpretation of the Forward (by MK presumably) to the ANOTHER (Thoughts!) Foundational Gold Trail Commentary?
ANOTHER: “Westerners should not be too upset with the CBs actions, they are buying you time!”
Questioner: Is buying time a good thing when the longer this goes on the deeper the damage to the real economy and the more drastic the measures to mitigate same?
Chris Powell: “It’s immoral, I think by any standard in spite of all the people who have built their livelihoods upon it. It’s still built on a fraud that is expropriating many, many people, many more people than I think understand it. I mean, any country, any commodity country, any country in the developing world has been expropriated here, that’s all that developing countries can do basically is exploit their natural resources to get started in the world and this is a fraud on them. It expropriates their natural resources by paying them less than a market price for those resources. It is a cosmic crime. It is the assignment of power to a very few people to determine the value of all capital and labor in the world. It’s an affront to decency, it is an affront to democracy. There is an old Latin phrase that used to be familiar in British jurisprudence, it’s something like – Fiat Justitia, Ruat Coelum – Let Justice be Done, Though the Heavens Fall.”
ANOTHER: “The Western governments needed to keep the price of gold down so it could flow where they needed it to flow.”
ANOTHER: “To avoid a spiking oil price the CB’s first freed up the publics gold thru the issuance of various types of “paper future gold”.
cont.
Adrian Douglas: “I think these bankers are, have not done this for the good of the people, they’ve done it for their own self-interest, first that it started out small and I think most members of the general public don’t object to intervention from time to time, although they should or it’s not a free market, but the problem is that intervention from time to time morphs into intervention every day. And of course that’s not intervention anymore, it’s then manipulation and suppression and so then the markets are totally dysfunctional and we don’t have the true price of anything anymore because there is this constant interference in the market and I think it’s a crime which is not just fraud but it’s treason because this is damaging the country, it’s making the country vulnerable on a national security basis, so it is a very serious crime.”
FOA: “What doesn't seem to be obvious is the "why" the paper market grew so large. It grew to dominate because world wide dollar expansion reached its "non hedged" peak. In other words, the dollar's timeline was ending as its ability to produce non price inflationary economic gains came into sight.
In order to push dollar holdings further, international players needed and purchased "paper financial hedges" to balance their risk. Within their total mix of derivative hedges were found "paper gold price hedges"; modern gold derivatives. The important thing to remember is that these positions are not and never will be used to demand physical gold. They are held to buffer financial and currency risk associated with holding any form of dollar based asset. To work these items don't need to really perform "dollar price movements" in the holders favor as much as they are present in the portfolio to act as insurance stickers.
In that truth, these paper gold positions act like FDIC insurance at our banks.”
ANOTHER: “Sir, a day will come, when those who have sold gold they do not own, will be forced to buy it back. It is the nature of men, to once in life do a foolish deed for gain. Some walk away, with understanding. Some stay too long and are made to walk low without wealth. Today, our world is fat with stolen profits in a paper world, even as poor ones starve. In that day, men such as I, will take from those who make simple ones hide! You will not find the lies of paper in my house.”
Questioner: So which is it?? Monster LBMA gold derivatives hiding back-channel physical deals with Saudi per ANOTHER’s thesis – which is plausible, but generates as many questions as it answers, not to mention his odd “vengeance is mine” quote – OR – paper forms of gold acting as a hedge? in some sort of currency-settlement sense, which begs the question as to FOA’s definition of currency risk.
Populist: Either way, the execution of policy through fraud is wrong.
ANOTHER: In our present system, all currencies are backed by the US$. As long as the US$ is on an “oil standard” of backing, no other country can change. The BIS would destroy their economy in a second of storm. Many think that a country may sell or cut it’s CB/US debt backing at will! They cannot, they will not! Oil will not accept another system as long as the oil/gold bond works and the world currency system is somewhat in order.
Questioner: The BIS would destroy their economy? WTF’s up with that?
Populist: Well, it’s obvious – the BIS and Saudi are in cahoots. Yeah, that’s the ticket – they know the dollar’s no good but no need to hurry things, they can just milk the world until the udder’s dry and hey, maybe play a little paper themselves in the meantime, you know, currency risk and all that jazz.
Questioner: But wait, isn’t it clear that this is a standoff between the LBMA and the CB’s? And, per ANOTHER no less – “We will no doubt see a mass run of CB’s into gold at ANY price! This I know!” OK, so LBMA will make evil do good, is that it? And what about dispersing gold to the noones so that better things will come? If the CB’s make their run, probably ongoing now, how does that help disperse gold?
Caveat: Transitions are difficult, especially during times of change!
Flitting along,
dragonfly
Kenya suddenly thinks gold is a good investment.
"Large scale mining of gold is set to resume in Kenya soon after 50 years since the British companies abandoned the venture, the Commissioner of Mines and Geology, Dr. Bernard Rop, has said." http://www.kbc.co.ke/story.asp?ID=62972
Did they get a hot tip from cuz? http://africanpress.wordpress.com/2008/08/10/senator-barack-obama-in-kenya-obama-and-odinga-the-true-story/ PS Odinaga is not literally Barry's cousin.
What are the alternatives to the Euro Freegold solution?
@frycook: Brilliant, frycook/Dragonfly! Lot's of things to ponder in your soliloquy of sorts.
Has anyone heard any recent news about whether the large part of Germany's gold that was held in custodial holding in New York as discussed recently by Max Keiser has been returned to them? Without the return of their gold, they wouldn't have as much of a defense against Goldman Sachs and therefore neither would the EU without their support. Since a sharp rise in gold would reduce the chance that all of their gold would ever be returned, they would be less likely to support setting up a physical gold exchange to cause the price of gold to rise to remove the debt burden of the PIGS and therefore the EU bailout debt.
Re: David Alexander
Same question regarding Dubai (if I'm not mistaken). Weren't they about to take their gold from London and store it themselves about a year or so ago?
Never heard of that story again...
@ David Alexander
***Has anyone heard any recent news about whether the large part of Germany's gold...***
There is some indirect evidence which points at that possibility - namely, gold exports from USA. It is not a solid proof, unfortunately - just a suspicion.
http://www.google.com.tr/search?hl=en&q=us+gold+export+site%3Aharveyorgan.blogspot.com&btnG=Search
See also:
http://www.zerohedge.com/article/gata-present-new-evidence-feds-gold-price-supression-scheme-coming-through-oddly-unredacted-
---
CHAIRMAN GREENSPAN. Did I hear you correctly when you said that the gold exports in October appear to have come from the coffers of the Federal Reserve Bank of New York? Has anyone looked lately?
MR. TRUMAN. Well, I didn't want to tell too many secrets in this temple!
VICE CHAIRMAN CORRIGAN. Obviously, we knew what happened to the gold, but I don't think we knew what it did to exports.
MR. TRUMAN. What happens in the Census data is that the Federal Reserve Bank of New York is treated as a foreign country. [Laughter] And when a real foreign country takes some of the gold out of New York and ships it abroad, it counts first as imports and then as exports. However, the import side is not picked up in the Census data. So there you get the export side of it.
MR. LAWARE. Great accounting!
MR. BOEHNE. Great confidence building!
MR. TRUMAN. That's because you haven't been filling out your import documents!
MR. ANGELL. Let me run this by again. You mean a country owns gold and has it stored in the Federal Reserve Bank of New York and if they ship it out, that's an export?
MR. TRUMAN. And in the balance of payments accounts it also counts as an import, so it washes out.
CHAIRMAN GREENSPAN. The Federal Reserve Bank's basement is a foreign country. When they move it out of the basement into the United States, it's an import. Then, when they ship it out again, it's an export.
April 5, 2010 1:16 PM
A most interesting concept, that (intentional or not) we are hiding true inflation by placing inflated values into non-real assets (stocks, bonds, derivatives, etc).
Hmmm, lets see then. If we assume that the value of the only real hard money, Gold, should be equal to the sum of all other real assets at any point in our history, and we then assume the value of all the real assets is currently "counted" in US Dollars, what then should the price of gold be in this fiat USD?
If you look at the chart at http://tdziebarth.com/goldinusd.pdf you can readily see Gold should be presently at about $27,000 per Toz and rising FAST! Much closer to the 100:1 price than 1:1 I would say!
Note that we clearly break from a fixed value for the Dollar (roughly) precisely when we creat the Federal Reserve, and it begins accelerating enormously when Nixon took us off the international gold standard.
Hmmm - does this also mean, in answer to Museice, that if we have gold approach its true dollar value, a loaf of bread would cost $300 USD? It's time to make your list of which assets you own OR NEED TO SURVIVE will be subject to 100:1 revaluation, and which will hold their value.
Tim,
I posted this comment earlier in response to a similar thought about inflation. If you are worried about hyper-inflation you may need to look for other indicators.
".... that if we have gold approach its true dollar value, a loaf of bread would cost $300 USD?"
Earlier comment:
IMHO under Freegold, gold, as an asset class or store of value, can rise to a very high currency price without causing the price of other things priced in that currency to rise along with it. As FOFOA often says Freegold is a (final?) DE-monetization of gold.
This isn't an inflation of currency - defined as a fall in the purchasing power of that currency across the board. It is a fall in currency purchasing power in one asset class/store of value - gold.
It is a revaluation of gold or price discovery of the intrinsic value of gold disguised and confirmed by the 100:1 leverage in paper gold.
This event (Freegold) stands apart from the inevitable hyperinflation in the USA, caused by the $IMFS, as described by A/FOA and FOFOA. The pre-conditions for this hyperinflation have developed over decades. The Euro is the catalyst for the USA/US$ hyperinflation not Freegold.
The pre-conditions for this hyperinflation are:
- The massive amount of US$ (both digital and physical) issued already.
- Reduction (Massive reduction?) in the use of the US$ as the primary reserve currency around the globe.
- Reduction in (not Ending of) the use of the US$ in International trade.
- Surge in the issuance of the US$ to cover the massive debt issued in the US$. (The drop "dollars on your front lawn" stage described by A/FOA.)
The Euro catalyses this reaction by fracturing the US$-Oil bond in providing the Euro-Oil alternative.
There is a strong case provided by A/FOA, FOFOA and others that the US$-Oil nexus was in fact a US$-Oil-(cheap)Gold nexus.
ECB (and BIS?) physical gold provides the asset reserve that makes the Euro strong and appealing to the Oil providers. Freegold provides the true market value for gold that tells the world precisely how strong the Euro really is.
I'm interested in knowing what happens to Silver 'in this revaluation of Gold'?
They do seem to go up and down together - Silver of course being the more volatile sister.
Silver being an industrial and money metal....if it follows the high revaluation of Gold -
does the high new Silver price get passed onto all things containing Silver...unlike the loaf of bread example?
dojufitz,
FWIW I cannot make up my mind about silver. I hold some but I am overweighted to gold. Anyway some thoughts.
A/FOA seem to believe that the rise in the currency price of gold would be much greater than silver. In other words silver would not be going along for the Freegold "ride".
Monetary history demonstrates bi-metallism was abandoned after technology had made it redundant. I am NOT suggesting causation. It may be co-incidence or a correlation of some description.
As FOA pointed out we have the technology to place a single atom of gold into a coin style receptacle. Assuming for a moment that the "return to the hard (or commodity) money" pipedream was realised. An argument that silver is needed to provide small denomination coins doesn't hold up. If necessary gold could provide any denomination required.
Personally I don't buy the silver for barter and small transactions argument. Perhaps, as a ZeroHedge commenter argued, it is a layer of protection for a core gold holding (with physical currency as the first line of defence).
I would be very interested in other people's views on this matter:
Why did the Chinese decide to push both silver and gold to their citizens? Do they have their own designs for silver's role in this new monetary system?
I have both Gold and Silver
- more Silver in weight due to its lovely low price....
Gold is the Kings metal and i hope to get some more before this revaluation occurs.....
I still feel Silver has amazing upside in the future years.
Good luck to all here - the pm community certainly is a tiny one!
Perhaps we will all be the very few hard money trillionaires in the coming years! lol!
Soemone doesn't believe the silver manipulation story:
http://www.itulip.com/forums/showthread.php?p=156095#post156095
@Jeff:
I used to read Eric Janszen during the initial phase of my "enlightenment" (if you will) process until I realized that his knowledge about the current state of our financial and economic system is somewhat limited. He has a tendency to miss the forest for the trees. He underestimates the extent of the rot in the present system/markets and the degree of the implosion that awaits us. He thinks we're just in another "cycle" like the 70-80's and is only interested in the paper Gold $price gains (i.e. unaware of the freegold concept and the history behind it all). Many people (like the trader he references as well as Janszen himself) are dependent upon the paper markets for their livelihood/"investment" gains and therefore might be biased against theories that expose them for the frauds that they are today i.e. are preferring to be in denial.
"The remaining assertion that banks are manipulating gold and silver to manipulate the dollar makes no sense."
This one sentence alone exhibits a fundamental lack of knowledge about the present dollar based system as well as lack of historical knowledge and perspective.
@costata, dojufitz
Let me throw in my two cents about the case for silver vs. the case for gold.
We discuss gold's revaluation here based on its new 'monetary' role as the ultimate store of value. On the other hand, the case for silver depends more heavily on its commodity use, but for now silver remains tied to the story of gold.
As I'm sure you know, silver is consumed in tiny amounts in electronics, medical equipment, etc. Roughly, 850 million ounces are used every year and 600 million ounces are mined. Of the 850 million used, ~150 million are recycled which leaves a yearly deficit of ~100 million ounces. This physical deficit cannot proceed forever and, therefore, the silver price must justify further recycling, drive additional mine production, reduce demand, or some combination of all three.
Now why didn't A/FOA discuss silver in more depth? Simply, A/FOA didn't focus on silver because its not held by the Giants. However, silver remains tied to the gold narrative because silver is used as part of the gold manipulation scheme. So while A/FOA did predict the destination, the arrival time remains imprecise, and this imprecision is working in favor of silver investors.
I contend that the gold manipulation scheme has resulted in a silver market which depletes physical stocks. Thus, the later freegold arrives, the more depleted world silver stocks will become. So while I am waiting for gold to leave the launchpad, I own a nice pile of silver too because I believe that the longer this 100:1 manipulation goes on, the higher silver price potential is. It is a speculation, but it is based on my view that silver is collateral damage in the ongoing gold war. The longer the war, the larger the collateral damage to the world silver stocks becomes.
Equilibrium Theory,
"I contend that the gold manipulation scheme has resulted in a silver market which depletes physical stocks. Thus, the later freegold arrives, the more depleted world silver stocks will become." (My emphasis)
In support of your theory, when A/FOA were writing China (and possibly India) were reportedly still selling volume silver into the market. 10+ more years of consumption exceeding mine supply has to be a factor.
Another or FOA also made a comment (which I am trying to find) that suggested some insider knowledge of a large stock pile of silver sitting off-market. This may be a reference to the reserves that others have speculated remain in China as a legacy of their trade in the late 19th and early 20th Century.
A silver corner by the Chinese using the same strategy they employed in the rare earth market would fit the available information. (Happy to sketch it out if you haven't followed this market.)
"So while I am waiting for gold to leave the launchpad, I own a nice pile of silver too because I believe that the longer this 100:1 manipulation goes on, the higher silver price potential is. It is a speculation, but it is based on my view that silver is collateral damage in the ongoing gold war. The longer the war, the larger the collateral damage to the world silver stocks becomes."
Interesting angle - shifting the emphasis from relative price performance and the gold-silver ratio. Much food for thought. Thank you.
Let me throw another question into this discussion regarding a possible upper limit in the silver price.
If the price of silver appreciates to the point where most, if not all, silver used in industry is recycled does that represent a price ceiling?
If so, this would be quite a different dynamic to the effect, anticipated by many here, of the Euro Freegold project on the revaluation of gold ie. no meaningful "ceiling" until the $IMFS stops expanding the pool of debt.
jeff, interesting take on this. wow. that just makes me now wonder to whom itulip is catering...i loved their oversimplified images that represented the fall of the economy (though the crash has yet to happen) over the past year ortwo. unfortuantely, i didn't realize just to what extent those oversimplified videos actually represented the intellectual breadth of their readership.
with that said, i'm also suspicious of the maguire story and the hit n' run. i can just imagine some of the those who actually perpetrate the fraud laughing at all of it for falling for it (just as cool hand luke would jump the fence post to throw off the dogs). and something doesn't smell right about the hit and run.
but with that said, i am definitely thinking that my suspicions do not fall along the same lines as Janszen. I definitely believe there is some serious fraud goign on. i wonder if it's just different or much worse than the whistleblower maguire might have us believe.
All,
CLARIFICATION
In that earlier exchange with Equilibrium Theory reference to "stocks" meant stockpiles or above-ground supply not "stocks" as in stock certificates.
Cheers
It's interesting how often oil is presented as the backing of the dollar. I believe a critical component is missing. The US dollar is largely backed by the good faith and trust in CHINA's productive capacity.
When China chose to peg to the dollar, it created a guarantee of value in trade for US dollars... bypassing gold through the established trade mechanism. Differentiation between the US currency and Chinese currency was eliminated. One could trade dollars for a known value in product, even if the product didn't originate from US soil. Consider the strength that lends to the US dollar.
When the productive capacity of China was pegged to the financial currency of the US, the ability to exchange US dollars for goods became sound. Today, China openly states it will not break that binding force, perhaps in recognition for how it would impact their society. Oddly, the US has asked them to do so. In fact, US administration has directly stated that the peg damages the US economy and suggested that the peg (at it's present value) is hostile.
Other threats to this stabilizing force exist; the US and China have started a bit of a trade war... with small sanctions for now, but it appears protectionism is growing fast. When the two nations cease to operate as a team, the peg will be threatened. Have you considered what would happen if the peg were dropped and China went to a floating exchange? The US would be a currency producer with little to exchange said currency for. The expanded productive base would immediately cease to be, but the debt would live on.
We have long wondered how the US maintains stability when the system is clearly dying. Thank China for this; were it not trading it's goods for the promises of a bankrupt nation, the US fiasco would have blown long ago.
We look at gold as the sound foundation. Over time, no other foundation has held true as well as gold. It is doubtful any will for thousands of years to come. But this doesn't preclude another diversion. A short term foundation can be based, not on gold, but on anything others deem of value. Oil, productive capacity, military might... they all lend power for a spell.
@costata
Thank you for clarifying that point. I really should have used the word stockpiles and not stocks.
"If the price of silver appreciates to the point where most, if not all, silver used in industry is recycled does that represent a price ceiling?"
I believe what you ask is unknowable. My gut instinct as an engineer tells me that much of it can't be recycled profitably. Though I don't have any hard evidence to back up that statement. I believe there are too many unknowns to even begin a swag (scientific wild ass guess). For example, how much energy is consumed in collecting and extracting each incremental quantity of recycled silver? Does the infrastructure exist do recycle additional silver? How long does it take build out new infrastructure? What is the price of energy/oil in the future? Since silver is largely a byproduct of other mining, what is the cost of mining copper, gold, etc. in the future? ...and so on.
"Interesting angle - shifting the emphasis from relative price performance and the gold-silver ratio."
I wouldn't say shifting emphasis. I am merely viewing another facet. I fully intend to use the volatility of the GS ratio to my benefit if I am given the opportunity.
Equilibrium Theory,
Perhaps we can hone in on a few of the issues that you raised.
The recycling infrastructure for silver is well established and extensive. At present many recyclers and refiners will not touch silver flatware and other coated items at any price. Apparently at zero the cost of recycling this material cannot produce a profit at US$18 per oz.
I have been told (but cannot difinitively prove or disprove) that recycling of silver flatware etc becomes viable around US$130 to US$150 per recoverable ounce. If someone here has a reliable contact in the silver refining business we may be able to verify a number.
No guesstimates I have heard for the amount of ounces in flatware, cutlery etc has been less than billions of ounces. So this could represent a potential "ceiling" that stalls a rise in the price of silver.
I think the key point is that at some price level the tiny amount of silver in a large number of devices becomes worth recycling rather than paying for it to be placed in landfill. This may represent a ceiling for the price of silver that could be hard to ascend through.
IF there is a price ceiling for silver it could be an important number to attempt to identify even if it is a SWAG. IMHO particularly if you are playing the gold:silver ratio.
Scenario: silver price appears to be tracking gold in line with historical GS ratios. Ratio hits, say, 80:1. This tempts a holder into switching a gold position into silver for an expected fat arbitrage.
In fact silver has hit its "ceiling". GS ratio abandons traditional range as Freegold transition (event?) occurs. GS ratio climbs to 100:1, 150:1 ???? and never returns to the historical range of ratios.
Ouch!
All,
Howard Katz latest article is well worth reading IMVHO.
http://www.kitco.com/ind/katz/apr052010.html
Must listen King world news update with Adrian Douglas and Howard Organ on recent discussed anecdotal observations on the 100:1 paper:gold ratio.
Douglas metaphor on offered cash settlement; it is like pre-purchasing a lifeboat on the titanic and when the icy waters soak your trouser legs being told that the boats have been oversold but a cash settlement is available!
http://kingworldnews.com/kingworldnews/Broadcast/Entries/2010/4/7_Andrew_Maguire_&_Adrian_Douglas_files/Harvey%20%26%20Lenny%20Organ%20%26%20Adrian%20Douglas%204%3A7%3A2010.mp3
Douglas metaphor on offered cash settlement; it is like pre-purchasing a lifeboat on the titanic and when the icy waters soak your trouser legs being told that the boats have been oversold but a cash settlement is available!
Today I would take the cash as well if my position wasn't too large.
These days the water is still warm enough to swim to a neighboring ship and buy a lifeboat there, although that could perhaps change in the foreseeable future.
Don't kid yourself into believing you are somehow smart because you have an internet connection.
Many of the big boys have been knowing about this leverage - which occurs not only in the gold market - for many years. They weren't shocked then and won't be know.
Greek debt is collapsing. The 6 month GGB is over 7 percent, 3 month over 4. The end is nigh.
central fund of canada doesn't hold the metal?
http://www.zerohedge.com/article/latest-gold-fraud-bombshell-canadas-only-bullion-bank-gold-vault-practically-empty
@costata
Let me cut to the chase...
To estimate a ceiling for silver, you need to identify that ceiling in terms of energy costs and not $/oz. If silver is $150, then gold is $6500??? and oil is $250/bbl???. Don't let me discourage you giving this a shot. All I am saying is the ceiling is a moving target. A higher silver price would be a reflection of a weaker dollar, and a weaker dollar would result in a higher oil price.
One additional thought... Before you hit the ceiling, do people hit the psychological breaking point where you move from holding dollars to holding anything but dollars at any cost? I say yes. This change would deem any rational estimates irrelevant.
Wealthy greeks an corporations are fleeing from Greece, going offshore...
Fofoa, the link to Zerohedhe is the old one... :o)
10 years:
Silver 6 - 18 = 3x, gold 300 -> 1200 = 4x. Both great returns for savers.
This will probably be drawn out for years but it could happen overnight.
From King World News: No Gold Or Silver In The Vault
I told a mate at work about the 100:1 re Gold.
He said 'You are most likely the only person who expects to take physical delivery....
......maybe 1 in 100 people will ask for delivery'.
He said 'Its all just a derivative.....no one is going to take delivery'.
(btw i'm not rich enough to buy comex contracts)
@dojufitz
It is quite likely that COMEX players are mostly in it for the (paper) money. To them gold is just a game like all the others. The have to post ROI measured in US$, and have no time to buy and hold physical waiting for the bang.
Those wanting to really protect themselves and understanding the situation probably won't be playing the COMEX at all. Underneath the separation between the paper and physical gold markets might already be a lot bigger then we see or think.
Sovereign debt crisis at 'boiling point', warns Bank for International Settlements
Art Cashin discusses freegold?
There were several hypotheses for the gold step-out. One was a rumor, actually a series of rumors that one or more gold fund or ETF had scantly any real bullion backing. That would not show up in trading but only if delivery was called for. Some felt the buying of gold was kind of a short covering to reduce the gap.
There were also rumors that gold might be used as the anchor of a new monetary basket that might become a supplemental reserve currency. That thesis may have sprung, in turn, from reports that China is looking to allow the Reminbi to trade with several currencies, most notably the Russian Ruble.
http://www.zerohedge.com/article/morning-musings-art-cashin-7
FOFOA,
Any comment on the ECB shiting to Euro denominated collateral only? MAny out with the Euro death watch?
10 years:
Silver 6 - 18 = 3x, gold 300 -> 1200 = 4x. Both great returns for savers.
And TAX FREE!!!
*wink-wink*
"10 years:
Silver 6 - 18 = 3x, gold 300 -> 1200 = 4x. Both great returns for savers."
As you can see on shaddow stats an average annual inflation is around 8 %.
Am i something missing? What is so great on return of 3 % (silver) per year?
Sitbot,
you left a digit off....it is not 3%....it is 30% a year.
300% over 10 years....
divided by 10 doesn't equal 3%.
It is 30%. That is why Silver is a good investment.
@dojufitz
300 % in 10 years is no way 30 % per year. It is 11.6 % per year: $6 * 1.116 ^ 10 = $18. Substracting 8 % of inflation you are above 3 % of return.
The European soap continues airing episodes.
I wonder how much is control and how much is choas.
I see similarity in paper gold trading and thirties. All were in then when things went up.
People want to live like nobs never satisfied getting themselves into debt with low interest rate.
Then they use leverage to get into higher yield game. Players use only tiny part of their winnings as capital somewhere else, they hoard positions and thus the paper game grows. Wrince repeat.
-> Everybody plays the game, these in know for long play in big digits.
Work of GATA seems to make difference, suddenly game changes, more cards are on open and sunshine exposes dark corners...
I see there will be now quite a ride up. The 10 year curve looks more and more exponential.
FOFOA: Looking forwaed to next article :o)
Martijn: I see it also as some kind of old fashion haggling. The news we get are just second-third hand. Germany has the upper hand but there are third parties liabilities and thats the issue. They are stuck now to two masters, between the IMF and ECB fractions. I watch changes in Italy and Spain as they seem to be more relevant and they already proclaimed cuts and changes in policy.
mortymer
Spain and Italy are indeed more relevant, but the Greek problem needs to be resolved too, although as long as the focus is on Greece it might distract attention from elsewhere.
On a more general notice I found Trichet mentioning gold again:
My third reason for welcoming the invitation to speak is because I am convinced that economic and cultural affairs, that money and literature and poetry, are much more closely linked than many people believe. There are a number of examples; let me give you three.
...Secondly, there is a relationship between poetry and money which has always struck me. Poems, like gold coins, are meant to last, to keep their integrity, sustained by their rhythm, rhymes and metaphors. In that sense, they are like money – they are a ‘store of value’ over the long term. They are both aspiring to inalterability, whilst they are both destined to circulate from hand to hand and from mind to mind...
...And thirdly, both culture and money, poems and coins belong to the people. Our currency belongs to the people of Europe in a very deep sense: it is their own confidence in their currency which makes it a successful medium of exchange, unit of account and store of value. Our culture is the wealth of literature and art that the confidence of the people has decided to select and preserve over time.
Have you gusy already seen this: Gold remains an important element of global monetary reserves. To support this statement, the ECB, together with the 12 national central banks of the euro area and two from outside the area signed the Central Bank Gold Agreement to reiterate our position in this regard.
And this: The euro is the first currency which has abandoned not only its anchor to gold, but also its anchor to the State. For hundreds and, indeed, thousands of years, currencies have had both these anchors. They severed the last link to gold less than 30 years ago, and they have 'disanchored' themselves from the State only with the advent of the euro. To have this latter feature in a currency which, being not anchored to gold, has no intrinsic value, which is just a piece of paper has a special significance. It is so because the fact that people exchange goods and services against something which has no other value than the confidence placed in it, is - in my view - one of the most striking manifestations of the bonds which unite a society. The society with these unifying bonds is now the European society, and not only a national society: this, I think, represents a profound change in human history.
Or this: For centuries money has had two anchors: a commodity, usually gold; and the sovereign, i.e. the political power. Less than 30 years after the last bond to gold was severed (August 1971), the second anchor has also now been abandoned. Although I personally think that political union in Europe is desirable, I am aware that the present situation, in which the area of the single currency is not a politically united one, is likely to persist for a number of years. This means that we have given rise to an entirely new type of monetary order.
Or.. The explosion of the size of the economy made necessary the replacement of gold by fiat money. The available stock of gold is limited, and the possibility of subdividing gold into tradable items which can be physically handled is also limited. These two constraints preclude gold from being the base money for today's economy.
Trichet in 2009: For some financial assets, such as gold, we are seeing a return to risk-taking on the part of investors. Is this a parameter that the ECB takes into account in its strategy?
I will not make any specific comments regarding gold.
It seems as though the ECB is not undivided regarding gold. Also not regarding the IMF. In this speech Lorenzo Bini Smaghi, who recently firmly opposed IMF interference in European (Greek) problems), claims to see a more prominent role for the IMF in the future: In sum, a new world monetary order – that is, a framework for payments between residents of different countries which ensures smooth trading in goods, services and financial assets – requires a mechanism to keep imbalances in check. Key elements of such a mechanism include a prominent role for the IMF in two essential areas: strong and effective surveillance in crisis prevention, and responsible lending, with appropriate limits and conditionality, to countries in need.
They had to be willing to exchange goods and services among themselves against a currency, the euro, which would not be linked to gold or to the power of the state, and which has no value other than the confidence placed in it by them.
Duisenberg was not the only one who said it.
Greece to receive an IMF bailout. No mention of gold, the EU, or euros. The almighty dollar reigns supreme.
zerohedge:
The IMF, realizing it had a catastrophe on its hands, has caved in and according to Reuters will provide US taxpayer money to Greece at vastly below market rates of the SDR rate plus 300 bps plus a 50 bps service charge. With the SDR rate at 0.26%, this comes out to a ridiculous 376 bps, or massively below where Greece could possibly borrow at market. And guess who takes the first loss risk on a pro rata basis? That's right US taxpayers - you. At least when Greece bankrupts eventually, which it will, and the debt is equitized, the US, well more like Lloyd Blankfein, will become owner of the Cyclades at zero cost. Win win for everyone except 99.5% of America.
EU Says It’s Ready to Aid Greece as Fitch Cuts Credit Rating
Of course the EU is ready to help Greece now that the IMF is doing the actual work. European politicians will do victory laps this weekend.
Zero interest rates, giving loans to almost everybody, bailing out banks, now loans to countries which obviously can never pay back... all these is just 1 = saving the debt system (and its growth) at any cost. Familiar :O)
Old article of GATA about treasury (2007), but important to know...
And martijn, for all comments and posts: +1000
Moody's Cuts LA Credit Rating, Warns of More Downgrades
Take this F(b)itch...
Retail Staple Food Prices Increase Slightly in First Quarter.
WASHINGTON, D.C., April 5, 2010
@ Stibot
300 % in 10 years is no way 30 % per year. It is 11.6 % per year: $6 * 1.116 ^ 10 = $18. Substracting 8 % of inflation you are above 3 % of return.
Friend,
Would you rather have had your money in the Stock market at app. 11,000 DJIA in 2000 and have lost much more than half of your purchasing power with 8% inflation per year. Perhaps in cash with an average 3% return with a loss of 5% per year for 10 years. Silver and especially gold will return hundreds of percent, inflation adjusted returns in the future. With free gold it will be 1000's percent returns.
Monsanto GM-corn harvest fails massively in South Africa...
Lorenzo Bini Smaghi is italian and a creature of the World Bank global complex. Any wonder he backs the IMF? Kind of like Prodi declaring the all clear on greece weeks ago. Always key to consider the course.
Important to know:
1) Central bankers (also BIS) think CDS are the most important economic indicator to watch out. (also the Libors – the all important inter-bank lending rates that tell us something about how liquidity is flowing among banks)
2) BIS pointed out that the bank rescue packages have transferred significant risks onto government balance sheets (sovereign CDS, so the governments could come in big troubles coming years) (read also the post of kewl on April 8, 2010 2:35 AM Sovereign debt crisis at 'boiling point', warns Bank for International Settlements).
3) The transfer of CDS-risks from banks to sovereign (people are the dupe, they must pay for the greed of few international bankers) is biggest crime ever seen (= privatising the profits and socializing the losses). We will (must) pay our (read: bankers) debts with inevitable hyperinflation in the nearly future.
4) Central banks own gold as monetary 'nuclear option' to pay our (read: their) debts back. Read then all FOFOA's articles to understand it.
And also important to know:
Got physical gold?
And not fake bars...
jim rickards:
A gold price of $5,500 per ounce would comfortably support a broader U.S. money supply on a one-to-one ratio and maintain confidence in the dollar and U.S. sovereign debt.
http://www.zerohedge.com/article/ltcm-general-counsel-debt-denial-there-little-time-avoid-catastrophe-and-almost-no-exit-sugg#comments
Jeff,
"Of course the EU is ready to help Greece now that the IMF is doing the actual work. European politicians will do victory laps this weekend."
+100
Martijn,
Great quotes and links. Thanks.
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