Monday, March 1, 2010

Of Currency Wars

I think, the currency of a country does no longer hold "backing". This term, it is used often, but is not correct. Today, all modern money does have "reserves", and such is used only for "the dirty float" in currency warfare. As in war, the larger and better equipped army in "reserve" does rule over the lesser force. Perhaps we should think in this way: in a "cold war" of modern exchange rates, "digital currencies from reserves are used", however, when a "hot war" of major default does begin, "nuclear weapons of GOLD" are deployed!

As in real war defense, of today, some countries hold a much lesser army, and depend on "the alliance" with other stronger nations to defend them. Such it is with the currencies! Many states hold but a few "digital currencies" as reserves for currency wars and see no need for "gold nuclear weapons". They sell off these weapons and do join "the currency alliance" of stronger nations. We see this in Europe, yes?

- 5/21/98 ANOTHER (THOUGHTS!)



Is the Euro a child of the forces of the New World Order, or the forces of regionalism/nationalism/tribalism? **

Sir,

I would say, "Old World Order" to return. To understand/explain better: "A very easy way to view this "order", would be to simply say that the American Experience is reaching the end! As we know, world war two left Europe and the world economy destroyed. Many thinkers of that period thought that the world was about to enter a decades-long depression as it worked to rebuild real assets lost in the conflict. It was this war that so impacted the idea of looking positively toward the future. The past ideals of building solid, enduring, long term wealth were lost in the conception of a whole generation possibly doing without! In these fertile grounds people escaped reality with the New Idea of long term debt, being held as a money asset. Yes, here was born the American Experience that comes to maturity today.

New world order, regionalism and tribalism are but modern phrases that denote "group retreat to avoid paying up". The worldwide currency system is truly a reflection of an economy built from war, using the American Experience, the US$ and the debt that it represents. But, for the American dollar to continue as the representative of the global financial system, in the form of being the reserve currency, maturing generations of all countries must accept it, and the tax on real production it clearly imposes! In the very same mind set, that people buy the best value for the lowest price (Japan cars in the late 70s), and leave an established producer to die, so will they escape the American currency and accept any competitor that offers a better deal. Because we are speaking of currencies here, the transition will be brutal!
- 5/5/98 ANOTHER (THOUGHTS!)


Currency Wars, by Song Hongbing, is a bestselling book in China, reportedly selling over 200,000 copies and is reportedly being read by many senior level government and business leaders in China. Originally published in 2007 the book gained a resurgence in 2009 and is seen as a prominent exponent of a recently emerged genre labeled "economic nationalist" literature. Another bestselling book within this genre is Unhappy China, however, unlike this and other books within this genre, Currency Wars has been received more positively by the Chinese leadership as its recommendations are seen as less aggressive towards the US. The premise of this book is that Western countries are ultimately controlled by a group of private banks, which according to the book runs their central banks. This book cites the fact that the Federal Reserve is a private body to support its role.

According to the book, the western countries in general and the US in particular are controlled by this clique of international bankers, who uses currency manipulation (hence the title) to gain wealth by first loaning money in USD to these developing nations and then shorting their currency. The Japanese Lost decade, the 1997 Asian Financial Crisis, the Latin American financial crisis and others are attributed to this cause.

The book's author predicted a banking crisis in the US in 2008.
- Wikipedia


In China, which is in the midst of a lengthy debate about opening its financial system under US pressure, the book has become a surprise hit and is being read at senior levels of government and business.

"Some senior heads of companies have been asking me if this is all true," says Ha Jiming, chief economist of China International Capital Corp, the largest local investment bank.

The book also gives ammunition, however haywire, to many in China who argue that Beijing should resist pressure from the US and other countries to allow the yuan to appreciate.

The book's publisher, a unit of the state-owned CITIC group, says Currency Wars had sold almost 200,000 copies, with an estimated 400,000 extra pirated copies in circulation as well...

Chinese officials remain deeply suspicious of advice from Western countries to open up the financial system and float the currency. "They think it is just a new way of looting developing countries," Ha says.

Song himself has been commissioned to write a number of new books to capitalise on his success: on the yen, the euro and also on China's financial system.
- The Australian

...After all, the root of the world's problems for nearly a century - from the Great Depression to the Asian financial crisis - is Wall Street's manipulation of the global financial system, he says. China should be prepared to fight 'bloodless wars' waged by 'evil forces' like the US Federal Reserve aimed at destroying the Chinese economy, Mr Song's book concludes.

If that does not send chills across the developed world, another book, China Is Unhappy - which just hit No. 3 in the bestseller's chart - laid bare Chinese unhappiness with the current set-up where the West holds major influence.
- The Straits Times

Kinda makes you wonder how many of those laughing students read Currency Wars, huh?
Geithner tells China its dollar assets are safe (Reuters)
Mon Jun 1, 2009 8:03am

"Chinese assets are very safe," Geithner said in response to a question after a speech at Peking University, where he studied Chinese as a student in the 1980s.

His answer drew loud laughter from his student audience.

And don't forget that Geithner also offered China some of Europe's stake in the IMF!
Geithner offered U.S. backing for a higher-profile role for China in running global institutions including the IMF -- a controversial proposition since it raises the sensitive issue of reducing Europe's voting share in the global lender.

"The United States will fully support having China play a role in the principal cooperative arrangements that help shape the international system, a role that is commensurate with China's importance in the global economy," he said.

Who out there thinks the ECB is feeling some pressure right now?
Trichet leaves early to attend crisis meeting (ABC News)
Tue Feb 9, 2010 10:25am

There were rumours last week that the European Central Bank would hold an extraordinary meeting to discuss sovereign debt problems in some euro zone countries.

But it is not known whether the meeting Mr Trichet is leaving for is a scheduled meeting or an extraordinary event.

Mr Trichet was scheduled to be in Sydney until Wednesday for a seminar of central banks in the Euro Area and East Asia Pacific.

I'd say so. But don't be too quick to assume the euro will simply buckle under the pressure.


Devaluation today - a policy so often used to rescue the short-term political and economic fortunes of what City analysts cannot now call the PIIGS - also remains shut to the Greeks, but for another reason entirely: Revaluation within the Euro is impossible.

Joining the European single currency, and consigning sovereign notes and coins to history, meant swapping those notes and coins for a certain, agreed quantity of Euros. Once set and enacted, that exchange rate could never again be revised. Because the exchange... once you were holding Euros ...could never again be replayed.

"There is no wiggle room here," as two English academics - both smirking and gasping at the Eurozone strait jacket - wrote in a 2004 tome.

"Greece has to live with this conversion rate no matter what happens to its level of productivity or inflation relative to its Euroland partners, or its level of internal unemployment.

"If it becomes politically unacceptable to live with this rate, Greece has only one realistic option, and that is abandoning the Euro."...

Quitting Euroland, on the other hand, would leave Greece - or Spain, Ireland or Portugal, or all of them together - horribly alone. Gold Standard historian and former IMF advisor Barry Eichengreen posited an Italian exit back in late-2007. Only the names have been changed:

"The very motivation for leaving would be to change the parity [between Greece's new domestic currency and the now-neighboring Euro]...Market participants would be aware of this fact. Households and firms would shift their deposits to other Euro-area banks. A system-wide bank run would follow. Investors anticipating that their claims on the [Greek] government would be redenominated into [the Euro's devalued replacement] would shift into claims on other Euro-area governments, leading to a bond-market crisis...

"It would be unlikely that the ECB would provide extensive lender-of-last-resort support. And if the government was already in a weak fiscal position, it would not be able to borrow to bail out the banks and buy back its debt."

In short, "This would be the mother of all financial crises," guesses Eichengreen. But no matter, he says; it can't happen. "The decision to join...is effectively irreversible. Exit is effectively impossible."

How come? "The insurmountable obstacle to exit is neither economic nor political, but procedural," says the professor. Short of a coup, revolution or state failure, you have to agree.

First, all contracts - both domestic and cross-border - would either be void (which again means revolution, state failure, coup or all three), or they'd be subject to a sweeping redenomination law. That would require long, detailed, co-operative discussion, both internally and with governments, business and private individuals across the European Union and beyond. So no dice there, then.

Then there's the logistical nightmare of re-pricing all goods and services, replacing all those vending machines, and reprogramming all Greece's bank and till systems - a fun project when Euro accession approached, but hardly a laugh as hyperinflation looms. So again, we're back to revolution... if not a coup or failed state ...and you don't need to be Helmut Kohl or Jacques Chirac to wince at the irony of Europe's greatest unifying dream (to date) ending with chaos and bloodshed west of the Balkans.

Greece's problem, therefore, really is "a Eurozone problem" as finance minister George Papaconstantinou has repeated throughout this crisis. Since it cannot devalue or exit, something else has to give.

Excerpts from
1931 For The Euro Part II
by Adrian Ash
23 February 2010

So if Greece can't devalue, can't just quit the euro, the ECB can't just bail everyone out like the Fed, and Germany is not willing to float the Greeks, what options are left? Where is the give?

It's simple really. Adrian doesn't mention the ECB's Marked to Market policy for gold bullion reserves, but that is exactly where I am looking. When your finances are insolvent you must part with some of your REAL treasure in order to keep the bare necessity wheels turning while you restructure your productive efforts and economy. This is how Freegold works. And this is what the EU now faces.

Robert Mundell and the late Milton Friedman explained in their 2001 debate, "One World, One Money?", there is a full spectrum of currency relationships which have been tried. From hard fixed, unified or common currency areas, to "dollarized" areas, to a "monetary union", a currency board system, fixed rates, pegged rates, or a floating exchange system, "the dirty float" as Another calls it.

This "dirty float" is the relationship between the US, Canada, Britain, Japan and the Euro. But Greece is in a common currency area with the rest of Europe, just like California is to New York, or Ontario to Quebec:
1. A common currency area. This is the apotheosis of fixed exchange rates. The BC dollar, the Ontario dollar and the Quebec dollar are the same currencies, the Canadian dollar. Settlement between regions, provinces and municipalities is automatic. If there is an excess supply of money in one province combined with a corresponding excess demand for goods, the excess money leaves that province (a balance of payments deficit) and that completes the adjustment process. The same adjustment process applies between New York and California or between different Federal Reserve districts. This fits Friedman’s category of “unified.” -Mundell

ANOTHER: Today every digital money is a product of the US DOLLAR by nature of "it being the book keeping reserve". To this extent, the US DOLLAR is the only world currency! To this end, no one can see the true size of the "mismatch" in gold as money in US DOLLARS.

Time does record, that many young persons do mature without a history of "currency defeat" in money wars. These same persons do attain positions of authority with respect to handling the currency "reserves" of a nation. It is in their "education" that the private citizens do lose much wealth. We proceed to such a time today, as gold loans hold only paper collateral! The motives of all Central Banks be not the same, with respect to "gold loans". A small number do travel the road of "monetary union" and sell gold as a commodity for funds to reduce debt. These officials that sell for this purpose alone will be viewed as "much the fool" by voters, as gold does become a "great value" in the future. Some CBs also "lend" gold for a small return, as they see little difference in this metal to holding the Yen reserves and also receiving perhaps 2%! These Central Banks place the gold with a private Bullion Bank. The gold is sold and the proceeds wait in this BB and draw market interest. The CB does have a "letter" claim to these "proceeds" and views it as "the same" as other "lent out currency reserves". The BB uses these "proceeds" as collateral to create a contract with a gold mine for future purchase of "new mined gold". The CB does also "attach" this "future gold" and views it as "lent out bullion reserves". With this "attachment", it could claim the entire assets of a mine in default, yes? Perhaps, we can see that "default" can also occur from other than a "low gold price"? In currency wars of the future, workers walk from doing jobs, as in Indonesia? A mine of few workers has little value, but often we see banks do claim "things of little value".

The key for this "new gold market" is found not in the process of gold loans and sales, but in the "who is the new owner of this metal"? No one did see clearly, "the other side of this". Always the view was, "see how the fools sell the gold and drive price low", not "who is buying all of this new supply at such cheap prices and giving up interest on currency also"? One should consider, "how much currency has flowed thru gold" over these past years! It is a great deal of wealth! -1998

And all this "wealth that flowed through gold" did so with the promise of a future revaluation. An unavoidable end to a finite timeline.
A prize!

Which brings us to...

FOA (09/03/00; 16:27:20MD - usagold.com msg#34)
Of Currency Wars

Gold will reset itself in value compared to all world fiat currencies. But, that percentage reset will be viewed in a different context than when gold money was ordained by governments. Gresham's understanding applied more to gold as a bankable currency, not an asset holding "in and of itself". This is the future of "freegold" in our time. It will be much like comparing an advancing stock to the currency it's denominated in, a rising asset,,,, not a competing money!

Now look northeast, into the valley:

What will make this "modern gold market evaporate"? Well, value in a paper contract is a funny thing,,,,,,, it can change radically when no market bid exists for it to trade in. Like paper dollars, contracts have no value without a trading market demand. Walk into any store,,,,, if everything is suddenly priced in a physical barter format, our dollars suddenly become worthless, no?

If the gold market was to shift to say, 5 day hard delivery, how could one trade their contracts for gold? Yes, you guessed it, paper would trade all right,,,,, at a huge discount. But in short order, as a spiking price lunges upward into the thousands,,,, and doesn't come back to earth,,,,,, what counter party on the other side of your contract could deliver? Further, how could the bullion banking system match liabilities and make good on a cascading default?

Stop here and see how it could happen two ways (or a combination of both):

You see, all it takes is for one or two government and/or private entities to pull the cord. Most all of you long ago came to the same conclusion; a Dollar / Euro currency dispute could set this off. Outside parties begin buying gold with dollar reserves,,,,, on the barrel head for 5 day placement. It begins with twenty or thirty 100 ton orders ,,,,,, a billion$$ or so each! Not derivative orders, mind you,,,, hard delivery orders that aggravate and outline the soft nature of modern gold banking. They keep coming,,, days on end! Then, suddenly the paper markets "are no more".

Yes, the name Freegold refers to an emergent system. But its ultra-high valuation of gold is also an anticipated prize. A prize that has been paid for through the support necessary to keep the dollar system alive for decades beyond its natural timeline, and to keep the price of gold metal low while it found its way to where it was wanted. With the tight supply of physical today we can assume that most of the metal has now found its home. And that those entities that have been waiting patiently for the prize and faithfully supporting a system at end of its life can now be expected to withdraw their support. "To pull the plug" so to speak.

This is what we are seeing today. From the central banks' gradual shift from sellers into buyers, through the Central Bank Gold Agreement, five years at a time, to India, China and Russia now showing an open interest in physical gold, the signs are everywhere. In the past, large entities like central banks would never openly express a desire for physical gold because it would move the markets. The last time we saw such a move Charles de Gaulle demanded official gold at its fixed price of $35/ounce, and such was all it took to end the entire global gold standard. Talk about moving markets! So it is no small thing for central banks to openly want gold.

But don't be too upset. This whole gradual shift bought us much time to prepare. And the "prize" is available to ANYONE! Yes, even you! This was ANOTHER and FOA's whole purpose through four years of postings. To get the word out that gold would be revalued by the Giants once the dollar reached its inevitable dead end.

In my last post, Greece is the Word, I wrote that the euro has a secret "nuclear" weapon. This is what I was talking about. What Another said at the top:
As in war, the larger and better equipped army in "reserve" does rule over the lesser force. Perhaps we should think in this way: in a "cold war" of modern exchange rates, "digital currencies from reserves are used", however, when a "hot war" of major default does begin, "nuclear weapons of GOLD" are deployed!

And yes, the euro is the better equipped army in this regard. The main point I made in Your Own, Personal, Freegold and Freegold was that the Eurosystem's gold is very much in play!
The Eurosystem holds 10,800 metric tons of gold, roughly one third of world gold reserves.

And in Confiscation Anatomy - A Different View, I argued that whatever gold the US Treasury and the Fed still own is most definitely not in play:
The US gold hoard is now off the table. Think of a poker cheat who pockets his winnings yet still wants to play. When he loses he writes paper IOU's to the other players. Can he ever pull his money back out of his pocket without having it taken away? Think of an individual who declares his own insolvency and defaults on his obligations to pay, only to resurface later with a windfall inheritance. What problems will he face?

This is not about Greece paying off its debt in high priced gold. It is a systemic shift to meritocracy where if you don't earn it, then you must part with some REAL treasure. Sure, Greece could theoretically sell the Parthenon.


But this is precisely "where the rubber hits the road". When a symbolic currency system starts to affect reality in dire ways it will be abandoned. This is why the gold is there. Gold is a REAL treasure that can be surrendered OR hoarded without affecting anyone's daily life. It is not consumed in any of the basic necessities of life. It is simply the 6,000 year old score keeper. And to this role it will return.

Did you get yours yet? Time appears to be running out on "the prize".

Sincerely,
FOFOA

See also:

Another Record For Euro-Denominated Gold
European currencies were again under attack
Financial Firms Receiving Subpoenas For Euro Shorting Collusion
Greek Roadmap Update From Goldman's Erik Nielsen
S&P Rating Agency Delegation Vists Greeks Bearing Gifts
China PLA officer urges challenging U.S. dominance
Head of IMF Proposes New Reserve Currency
EMF - European Monetary Fund?

107 comments:

idi said...

joining dots, endgame, must read;

http://www.marketoracle.co.uk/Article17568.html

Martijn said...

FOFOA,

That was a great post!

Thanks a lot.

JR said...

Thank you kind sir!

mortymer said...

ECB buying gold?

mortymer said...

BTW: Another issue about Greece - the low efficient government is not comatibile with freegold so it must go... Natural change. This will happen in all countries. In EU area change is "more safe" as central government guarantees certain stability against speculation while giving time to adjust. No need to sell gold or other tresuries, just get rid of extra weight.

mortymer said...

What about Soros and gold to look at from this point of view? His and his buddies hoard was in Pounds and he feels it goes down, so to change into what? Dollar not good, Euro not possible, then the only other option left is gold. So, 1/ Is he naturally shorting Pound, again? 2/ He wouldn´t put the capital (his tool) he works with into an asset with moves are not so well hidden from view unless necessary. Right?

Shanti said...

Brilliant FOFOA !

The collective mind is ripening by the day, to result in a brutal shift.

jimmy said...

tungsten cropping up...

http://www.zerohedge.com/article/exposing-london-bullion-market-association

costata said...

FOFOA,

This may be your hardest hitting article to date. The sense of urgency is palpable. IMHO Excellent.

M A M said...

It appears that the buyback prices for gold coins are rising compared to some time back, all are already above spot by about 1.5% minimum in US and even in my part of Europe where the spread is min. 4% for 1 oz coins (only Kruger Rand has just 0.5%+ price above spot locally).

sobione said...

FOFOA
do I read you correctly that it is about time for the european masters to "pull the plug" (so to speak)in order to save the Eurozone? And - at the same time - facing the wrath of our American brothers?

well, who knows - maybe you are right...

regards

Sobi

capt goodvibes said...

FOFOA,
Another thought provoking post, thank you.

In an era of Freegold, countries entering the era with no gold reserves would be at a slight disadvantage, no?

Any comments anyone?

Martijn said...

@capt goodvibes

In the previous era (running until now), were countries that had no dollar reserves at a disadvantage?

frycook said...

I love being able to refer people to this site and know that they won't have to contend with crypticism, rhetorical flourishes, misguided ideology and a hundred other twists and turns that alienate comprehensive understanding of the world we live in and the direction it is headed.

Thanks FOFOA for doing such a nice job of weaving the various threads of this tapestry together in a way that folks can really get the big picture without plowing through years of blog entries.

It seems that you have joyfully taken up the machete to clear the final portion of the trail leading to the vistas from the summit.

I was just reading the Wiki on Mr. Strauss-Kahn, which is really interesting, and it hit me as somehow appropriate that a former French Finance Minister would be in a position to play a role at this point in history, a role that would undoubtedly bring a smile to the face of Charles DeGaulle and certainly to Jacques Rueff - http://en.wikipedia.org/wiki/Jacques_Rueff

Maybe he'll win the French Presidency in 2012 and help manage the transition.

Adios amigo

Martijn said...

Has any of you guys read that book by Song Hongbing?

Here is some discussion on it, but some more info might be nice...

Martijn said...

More

S said...

this is the point I was trying to make re M&A cross border flows. The idea that one can print dollars and appreciate on a relative basis gives US multinationals undue ability to buy "real assets." this morning CF renewed the bid for Terra over Yara - cash and stock. Major attempts to buy core assets cross border is a tell. All the non tariff barriers that are going up are obvious enough but the dearth of cross border plays tells you we are already late in the 4th Quarter. As Pritchard said yest in the Telegraph "don't go wobbly on us Ben." That alone says it all. Gold is the ultimate curency unless you belive Fitts who thinks Ags has a role here!

Permaculture said...

@s:

pritchard, as in A.E.

Fitts, as in ??

EquilibriumTheory said...

Fitts...as in Catherine Austin Fitts.

See her friend Franklin Sanders' site called The Moneychanger. He also posts commentary on goldprice.org.

Permaculture said...

i'm quite familiar w/them. i was just wanted to make clarify which fitts.

but fitts is advocating far more than ags, she's advocating sustainable local community and investing in family, friends, neighbors, community.

so i was wondering if there was someone else who had the same name advocating ags.

Permaculture said...

also, @martijn, you speak german yes (i forget which country you're from). can you (or anyone else) confirm the translation of the german tungsten story? anything particularly off in it?

thanks,

satya

GG said...

Here is an interesting piece from Jesse's blog:

http://jessescrossroadscafe.blogspot.com/2010/03/is-sprott-in-market-trying-to-buy-12.html

If anybody knows Eric Sprott, they know that he will not buy anything but the physical (and he's aware enough of the Ponzi schemes/scams that the US Govt. runs, so rest assured tungsten bars will not be accepted :-)). Could this be the [one of the] private entity that FOA was refferring to:

"You see, all it takes is for one or two government and/or private entities to pull the cord. Most all of you long ago came to the same conclusion; a Dollar / Euro currency dispute could set this off. Outside parties begin buying gold with dollar reserves,,,,, on the barrel head for 5 day placement."

Perhaps it was just a matter of time before somebody like Eric Sprott - not your run of the mill wall street scam artist but an investor with integrity and actual knowledge of the Gold market scams - came out and did this OR it might have taken some "encouragement" from the ECB. Who knows? Granted it's a 10 ton order (not a 100), but with the present sorry (and tight) state of the physical market, perhaps that's all it might take. Things are indeed getting interesting.

Desperado said...

GG, Jesse says:

...Spot gold has risen quite a bit since last Friday. There is not enough data to suggest a correlation. However, if the entire IPO was placed, and the current gold holdings on the web site are accurate, they need to acquire almost 10 tonnes of quality physical bullion in a market reported to be tight in deliverable quality supply.

And the purchase is large enough so that we ought to be able to see an inventory drawdown somewhere. I have heard the buying will be done in London, and not at the Comex. The last purchases of this size were supplied by the IMF directly.


This also correlates with increasing premiums on gold coins at Tulving

capt goodvibes said...

@ Martijn:

Silly question really wasn't it?
As long as the country is running a surplus, it would be accruing gold.
Just doesn't leave any 'wiggle room' for deficits, but that is a good thing.

Martijn said...

@Satya

The translation in the vid is 100% accurate.

JR said...

Hi FOFOA,

Its not about Greece paying off debt in high priced gold, but the Euro's gold is in play.

Do you see Greece remaining in the Euro and Euro selling gold to raise funds to bailout Greece?

Or is it more as defaults happen there will be more demand for gold, and the Euro won't sell, pressuring the US paper market?

Sorry to be such a noob but how does the Euro deploy its nuclear weapons. If the Euro keeps the gold off the market, thereby accelerating a squeeze on paper gold and an appreciation of the Euro gold - how does this resolve/address the Greek situation, especially as it spread to other Euro nations (PIIGS)?

Many thanks

idi said...

must listen interview with harry markopoulos (of madoff fame) at king world news..

http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2010/3/2_Harry_M._Markopolos.html

FOFOA said...

Hello JR,

"My friend, debt is the very essence of fiat. As debt defaults, fiat is destroyed."

What is the problem with Greece and the other so-called PIIGS? Is it profligate public spending/financing, the credit that enabled it, the system that helped hide it, and the mountain of unserviceable debt that resulted?

The difference between the $IMFS and Freegold is that the former encourages and enables the above while the latter never lets it get this far along so as to become a systemic risk. It's called 'balance as you go', as opposed to enabling the growth of an imbalance so large that it finally collapses back into balance.

I cannot give you the blow by blow that you ask for, but I can still show you what must happen. And it is helpful in this regard to work backward from the future until we come to two choices that will both result in the same end.

First is that we are facing a systemic shift from the $IMFS to Freegold. Don't forget that the actual value of an individual transactional currency unit (even a euro) doesn't really matter in the context of its primary function. So even though one currency is built for the new, emergent system, I would still not want to be holding that currency through the transition.

Second is that Greece's debt cannot be paid back in real terms, and neither can the aggregate planetary debt. It doesn't really matter if it is not paid back through default (bankruptcy) or through devaluation of the currency... it will not be paid back in real terms. But devaluation of the currency is certainly the more politically acceptable route.

Third is that all this planetary debt (including Greece's) is a function of the $IMFS. The eurosystem, even though it was built to thrive under Freegold, is still supporting the $IMFS. The action to look for is the passive action of withdrawal of support.

The way the $IMFS works is that, at the very end, it either bails you out or kills you dead, depending on who your friends are. Freegold spanks you along the way with a little pain here and there until you get your finances back in order.

I expect Greece and the PIIGS to get spanked hard at the beginning of the new system. I do not expect Greece to leave the euro, but it will certainly have to get its public finances in order.

You see, the shift is going to be swift and it will reveal a change in perception that is almost impossible to imagine right now. Physical gold is going to rise so high, so fast that it will become known as the most prized treasure a collective state can hold. And immediately upon this recognition Greece will have to either part with or encumber its most prized "monetary" treasure while it restructures its newly devalued debt and its economy.

No longer will unlimited Ponzi finance be an option for ANYONE'S financial difficulties. But at the same time, the worst of the financial predicaments will have been significantly devalued, as they were bad bets by creditors from the start.

This is why it is so important to understand the implications of Freegold now, because the cascade of events once "the plug is pulled" will be mind-numbing. The ability to understand events as they unfold will be quite rare (and quite valuable) as we are in uncharted waters.

Does this explanation help you find the answers to your questions?

Sincerely,
FOFOA

Museice said...

Hey FOFOA, what do you think of this?
The Skinny On Greece And What It Means To Gold

FOFOA said...

Hey Muse,

I think that either Jim knows something more than he is saying or else he is trying to describe the road to Freegold in his own way.

I would say; try adding the abandonment of foreign support for the $IMFS into his equation and see what comes out. And that includes the IMF. I think Costata nailed it on the IMF/SDR issue, and not far off from what Jim was saying about SDRs just a year ago. I think it's far too late for a "single virtual reserve currency" as Jim says. Remember what Another said back in 1998...

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

Another problem that I see with Jim's analysis is that it requires the rise of paper gold within a functioning paper gold market. If/when paper gold fails to suffice physical demand, $1,650 isn't even in the ballpark. Neither is $5,000.

If Jim knows more than he is willing to say, then most likely it comes from the Volcker sub-faction within the dollar faction. And it probably does not give proper weight to the unknown agendas of the ECB/BIS faction, not to mention the BRICs and Arabian Oil.

This was interesting... "That means gold would rise from here to $1650 by January of 2011, or as Martin Armstrong said, by June of 2011."

This is the first time I've seen him back away from his date. Is he getting shy now that it is less than a year away? Curious statement if we are dissecting his post.

A few words that sounded awful freegoldish... "not tied to the dollar" "the new form for gold’s role in a monetary system" and "Gold will not be fixed". Incidentally, I hear that Jim spoke the words "free gold" together during a recent speech in Toronto. Yet he answered a question saying he was not familiar with Another or FOA. Uh, okay.

I can understand that talking about super high value gold might challenge the credibility insecure. I always found it curious that Freegold and A/FOA were topics non grata at USAGold at the end of the public forum days. But I have yet to see anyone credibly dispute their message or thesis. So a whole lot of "pretending it doesn't exist" is forgivable I guess. Which is why I started this blog. ;)

It's one thing to help people save themselves. As I have said many times, it doesn't matter if you buy my story or not, as long as you buy some gold. A rising tide lifts all lifeboats, even those with little faith in rising tides. But it is something entirely beyond providing a meal, to teach a man to fish. To share the understanding that explains things... that brings confidence. This is what Another and FOA gave us... IMHO.

You know, Jim's description is not very far away from Freegold. And other than that, I would say that he is basically seeing the same things we are seeing... that the end is clearly near.

Sincerely,
FOFOA

FOFOA said...

Idi,

Amazing and chilling interview with Harry Markopolos. You can really hear the anger in his voice all the way through. Everyone should be so angry. Thanks.

MP3
KWN Markopolos

FOFOA

Martijn said...

interesting peace by a physical market operator, albeit a bit speculative if it is true.

Martijn said...

interesting peace by a physical market operator, albeit a bit speculative if it is true.

In my opinion it is an honest article btw.

Martijn said...

People sometimes ask me, “Jason, why don’t you buy silver off the COMEX, and clean them out?” I don’t do that because the terms are horrible, and the reputation is even worse! I hear there are horrible delivery delays of up to a month or two beyond the delivery month. Because even if they do deliver in the right month, it’s no good to have a delivery at a random time during 28 days! In this business, we need to replace product almost immediately, within 2 days or so. Instead, we buy silver from major wholesalers, who have it in stock, or who are getting it quickly from the refineries. Locking in gold or silver for delivery “at any time within a month” is about the worst possible terms that could be imagined. What kind of a lock is that? Who can do business on those terms? Ridiculous!

COMEX is a farce of a gold and silver market. Attempting to regulate it just seems silly.

Freedom said...

Hi, really been enjoying your blog.

Readers here may have noticed the tungsten filled gold bars showing up lately.

No coins have showed up yet, but I think that's just a matter of time, since there's at least one Chinese company that makes them.

I have a design for a coin discriminator that will be able to tell the difference between a gold plated tungsten coin and a solid gold coin.

Right now it looks like I would have to charge around $1000.00 for the device, so this is probably only something for smaller dealers that don't want to spend $12k on a precious metal analysis machine.

If anyone here thinks this is something they would be interested in, shoot me an email at VerifyYourGold at Gmail dot com

idi said...

FOFOA; yes it is interviews like that with Markopoulos (William Black another example of clarity and outrage) that wrench us back to the real world. We languish in an MSM parallel universe.

These are capital crimes in most "real" countries which weigh the collective damage of a given crime against the required punishment. This is vast theft on an epochal scale.... all in plain sight, the Obama charade notwithstanding.

We await the catalyst that wrenches people out of the stuporous parallel universe en masse. The Greeks and the French could teach us a thing or two about self respect!

Perhaps when the mass perception of the people darkens and realises that the only hope lies in their own hands and the tattered pages of The U.S. Constitution.

Tipping point approaches.

GG said...

IMHO, Jason Hommel is one of the most honest operators out there.

Tekin said...

Turkish gold imports have collapsed after the 2008 crisis.

See:
http://www.iab.gov.tr/Veriler/data/data021.pdf

from page:
http://www.iab.gov.tr/data.asp#data3

Jewelery shops (which also act as coin shops) are in distress. Trade is coming to a halt. Many of them are closing. Fall of the gold price, is the only hope of the remaining shop owners. Gold coins are now beyond the economic reach of the retail investors.

During the 2008-2009 crisis, Turkey became a net gold exporter as the distressed small businessmen and farmers dis-hoarded.

---

The moral: Do not expect the Turkish retail investors to tip the gold market - they are out of money!

GG said...

In the interview linked above, Harry Markopolos refers to the significant destruction of lives and wealth caused by the Madoff scam; I thought to myself,"Wait till the Ponzi scheme - the biggest one in the entire history of mankind - perpetrated by the US Government comes to light. Madoff is but a drop in Uncle Sam's massive Ponzi finance ocean and the destruction of wealth and lives due it will be on a scale that is incomprehensible."

GG said...

@Tekin:

Not to worry - the Indians are doing a damn fine job of it. To citizens of Turkey all I would say is - prepare for a life of penury in the third world.

Martijn said...

That fake gold/tungsten vid apparently was ten years old.

http://goldchat.blogspot.com/2010/03/fake-tungsten-gold-story.html

Tekin said...

@GG;

We have been there - and we are still there. However, that is not my point. Now try this:

China catching up as gold demand in India falls 33%

http://www.indianexpress.com/news/china-catching-up-as-gold-demand-in-india-fa/581661/

(Feb 19, 2010)
... gold demand in India fell by 33 per cent to 480 tonnes in 2009 from 712.6 tonnes the previous year...

---

Gold market is changing. Small players are exiting the market. Only a handful of big players will remain. As the gold price goes higher, the number of players will diminish. The lesser the number of players, the easier shall be the political bargaining.

I am trying to understand the implications of this phenomenon. Toying with the idea of 10 to 20 more years of "managed" bull market - instead of a market rupture. Possible?

FOFOA said...

Tekin,

When you see golden trends mapped out in weight instead of fiat currency the message can be deceiving. I'm not talking about Turkey, but in your India quote demand fell by 33%. Well, the price rise during that time period was not far off. Remember demand in India was at its highest, weight-wise, when gold dipped into the 700's during the 2008 wedding season. So the fiat demand may have remained relatively constant or even increased.

When you think about freegold, very high value gold means the movement of very small weights. This is because the number of players is very high, not low.

I'm not arguing against your thesis, just saying that statistics quoted in weight can be confusing to the underlying trend. Anyone that says gold is too expensive now for the small investor is ignorant of the fact that gold's price or value is completely arbitrary in the investor realm. In the jewelry realm, the commodity realm, gold CAN get too expensive. But that is why I have said that in freegold gold's commodity uses will mostly disappear. So a trend in that direction may actually be freegold-positive news.

"Jewelery shops (which also act as coin shops) are in distress. Trade is coming to a halt. Many of them are closing. Fall of the gold price, is the only hope of the remaining shop owners. Gold coins are now beyond the economic reach of the retail investors."

If the jewelry shops in Turkey, that also sell gold coins, are in distress, how can you say it is the coins that are distressing them, and not the jewelry? I would say it is the jewelry because that is where the profit margin really is. Gold jewelry is marked up 300% while coins are marked up only 5%.

"As the gold price goes higher, the number of players will diminish."

I would suggest that as the gold price goes higher, the weight of each recorded movement of gold will diminish, but the number of players will be increasing. Of course that is not how it will be reported.

FOFOA

frycook said...

@FOFOA

Interesting bit on what Sinclair may have said in Toronto.

Your quote:

"Yet he answered a question saying he was not familiar with Another or FOA. Uh, okay."

I have archived somewhere a post from his site from maybe 2002 or 2003 where he was asked directly about ANOTHER and the related scenario and he responded that it was possible but he'd rather not think about it.

We can be pretty sure that either Jim or someone running his website is reading your blogs since a day or two after you had those pictures of guys about to crash their bikes and motorcycles two of those very same ones were used over their site in a post by Jim.

On the IMF/BIS subject it's hard to conceive of the IMF not being intimately involved in the transition along with the BIS. Just the fact that it holds such a large quantity of gold puts it in the loop.

It's kind of amusing to read how much breast beating is going on by folks who presumably have been through the USAGold archives and have travelled along on the Gold Trail with FOA, Trail Guide, Another et. al.

This situation, the end of the dollar's timeline, is precisely what they spent so much time trying to explicate, yes?

If all paper is to burn, then it is presumably hotter in the hands of those closest to the fire and what appears to be profligate looting is simply a manifestation of that inevitable process by those who have already "lost faith" (as if they ever really had any) in the dollar and can barely speak in trillions now, when just a few years ago billions were still worth counting.

Didn't ANOTHER (or was it FOA) speak directly to the idea that the world's central bankers were doing the best that they could with the cards they were dealt and that the whole process was essentially 'baked in the cake' long ago?

They never even put down Greenspan that I can recall, in fact they were the ultimate gentlemen about these things. A perspective that the world will have its way and we'll evolve through it the best we can.

I hope others don't criticise gold owners for front-running the collapse of paper values somewhere down the road.

I think maybe Fintan Dunne is reading over here too. He's recently picked up on the Martin Armstrong stuff and has some interesting thoughts recently in his series of audios on the recent failures of the nwo crowd.

FOFOA said...

Bill H sounding A/FOAish, relayed on Harvey Organ's blog...

"...What I am saying here is that once ANY sovereign default occurs, IT"S OVER! EVERYTHING paper goes boom and in a puff of smoke so does ALL the "supposed" value. EVERYTHING paper blows away and ONLY assets that you can touch, feel and actually USE (manufacturing, farmland, mining) will have or retain value!

THE only true hedge against ANY sovereign default is either Gold or Silver, period. Gold and Silver are real money and will accrue ALL of the "printed" monies' value over the years. This is a difficult concept to understand but all the fiats that have ever been printed in the past and present really had no value other than "confidence" value. Each Dollar, Pound, Yen, Euro etc. that has come into existence will "spill" its value into the metals upon its demise..."


(This is only a snippet. Bill's entire rant is well worth the trip over to Harvey's Organ. Just search for "Bill H")

Also, Randy lays down some fine commentary over at USAGold...

Snippet:

"Remarks by John Lipsky, First Deputy Managing Director, International Monetary Fund...

There is little doubt that a simultaneous move to acquire new reserves would complicate the effort to restore strong and sustained global growth…

[RS Note: That's true.. but only if assuming that these accumulated reserves take the form of sovereign debt, whereas the gold reserve alternative neatly sidesteps the problem completely.]

The test of any alternative to reserve accumulation would be the ability to provide resources reliably, rapidly, in an adequate scale and at a favorable cost relative to reserve holdings. To some extent, this function was filled in a very ad hoc and partial manner during the recent crisis by central bank swap lines…

[RS Note: With the gold reserve alternative, additional reserve resources (i.e. BOOK VALUE) can be reliably, rapidly and adequately achieved simply by CB bidding for gold on the open market. Any resulting price pressure upon the meager ounces available at the margin of the open market will subsequently become leveraged to the institution's further advantage through MTM revaluation upon the larger body of its existing gold reserves. And from a stance that abhors systemic risk, this paradigm is superior to the current system that attempts to achieve similar results through similar bidding on an imponderable supply of U.S. debt which is even further derivatized many many times over.]"


JR, "Sorry to be such a noob but how does the Euro deploy its nuclear weapons."

I think Randy just exposed one of the nukes.

FOFOA

oldinvestor said...

I wonder if the 10 tonnes of gold that Jason Hommel was asked about

http://www.silvermonthly.com/1160/inept-sovereign-fund-or-gold-scam/

has any relationship to the 10 Tonnes of gold that Sprott Asset Mgt is potentially trying to buy?

http://jessescrossroadscafe.blogspot.com/2010/03/is-sprott-in-market-trying-to-buy-12.html

costata said...

frycook,
"On the IMF/BIS subject it's hard to conceive of the IMF not being intimately involved in the transition along with the BIS."

Do you think that they are on the same team? A/FOA were unequivocal that the IMF was on the opposing team (Anglo-American US$ sponsors) and would be cut off by the sponsors of the Euro project, a team that includes the BIS.

"Just the fact that it holds such a large quantity of gold puts it in the loop."

I will bet my last gram of gold that the IMF have (had?) no more than 400 m/t of physical and the rest is paper based commitments from members. The business of the IMF is extortion of developing countries' assets and resources as well as acting as enforcer for the Anglo-American faction of the Giants in dealing with sovereign debtors.

FOFOA, has the IMF just been "swapped out"? If so, can the USA be far behind?

Martijn,
Thanks for the heads up on the tungsten video. I have a lot or respect for Bron Suchecki as a very sober, thoughtful observer of the gold market and antidote to some of the more excitable analysts.

IMHO this business of the "tungsten gold bars" is starting to look like there is an agenda behind it.

oldinvestor,
Re: 10 m/t

The same thought crossed my mind but I cannot see the commercial advantage in the acquisition approach described to Hommel.

FOFOA said...

@ All,

There is so much noise out there. So many stories about what went wrong with Wall Street and what caused this crisis. More regulation, less regulation, more government, less government?? The answers are really not so complex.

Please read the second ANOTHER quote I used in the post. Read it 3 or 4 times until you get it. Seriously. It is very deep IMO...


MK: Is the Euro a child of the forces of the New World Order, or the forces of regionalism/nationalism/tribalism? **

Sir,

I would say, "Old World Order" to return. To understand/explain better: "A very easy way to view this "order", would be to simply say that the American Experience is reaching the end! As we know, world war two left Europe and the world economy destroyed. Many thinkers of that period thought that the world was about to enter a decades-long depression as it worked to rebuild real assets lost in the conflict. It was this war that so impacted the idea of looking positively toward the future. The past ideals of building solid, enduring, long term wealth were lost in the conception of a whole generation possibly doing without! In these fertile grounds people escaped reality with the New Idea of long term debt, being held as a money asset. Yes, here was born the American Experience that comes to maturity today.

New world order, regionalism and tribalism are but modern phrases that denote "group retreat to avoid paying up". The worldwide currency system is truly a reflection of an economy built from war, using the American Experience, the US$ and the debt that it represents. But, for the American dollar to continue as the representative of the global financial system, in the form of being the reserve currency, maturing generations of all countries must accept it, and the tax on real production it clearly imposes! In the very same mind set, that people buy the best value for the lowest price (Japan cars in the late 70s), and leave an established producer to die, so will they escape the American currency and accept any competitor that offers a better deal. Because we are speaking of currencies here, the transition will be brutal!
- 5/5/98 ANOTHER (THOUGHTS!)

And then remember the end of my post, "Say Goodbye to Wall Street"...

"...No longer must we raise entire industries that suck in generations of our best and brightest talent for the sole purpose of designing paper wealth derivative products in a vain attempt to make money be a store of value. No longer. Say goodbye to Wall Street."

The end game prize is sitting out in plain view, in the middle of the road, yet everyone is driving too fast to see it.

Sincerely,
FOFOA

Tekin said...

FOFOA

***If the jewelry shops in Turkey, that also sell gold coins, are in distress, how can you say it is the coins that are distressing them, and not the jewelry?***

Well, jewelry demand is obviously falling heavily. However, anecdotal evidence suggest that coin demand is falling as well. Jewelery shop owners request the mint to produce a smaller coin, saying that demand of bigger coins are falling. In the weddings, there is some anecdotal evidence that paper money instead of gold is being given as a gift - which is not unexpected since each guest has a limited budget for gift buying. In a high end wedding, there would not be any problem of course, since the guests would be high net worth families.

The mint statistics also suggest this.

http://www.darphane.gov.tr/tr/content.php?parent_id=201&content_id=696

The mint produces two kinds of coins, ornamental (ziynet) and bullion (meskuk). Each coin is minted in 5 different sizes. Ornamental coins minted in 2007, 2008 & 2009 are, 48.7, 43.0 & 25.7 tons. Bullion coins minted in 2007, 2008 & 2009 are; 13.2, 14.8 & 8 tons.

Anyway, I am not insisting that my thesis is correct - just sharing my observations.

Best Regards;

Tekin

FOFOA said...

"Jewelery shop owners request the mint to produce a smaller coin, saying that demand of bigger coins are falling."

Small content coins are the future!!

FOA (10/10/01): "Probably, gold will be used for large purchases because gold will carry a very high price by then. And too, 1 gram coins will be the norm; being the size of our one ounce now, but with alloys. I doubt gold will ever be used in regular store / retail sales."

stibot said...
This comment has been removed by the author.
stibot said...

Greeks have to made some payment originating in loans they have. They are not able and even need to issue new debt to satisfy preceding creditors.

Germany refuses to bailout Greeks, because they don't want to give up their capital.

I consider this really funny: numbers in computers are accepted as capital today. Germans want some numbers within the computer to be added by Greeks, who have no access to computer which is able to add those numbers.

I realized this fun when i was reading news about Germans' suggesting Greeks to sell sights or islands to raise funds. Proposal which people consider insane, because they are used to use numbers in computers.

Permaculture said...

@martijn. thanks for that link. i must admit, i'm smelling so much BS re: the tungsten story now. at first i was very captured by it, but since, i haven't seen any significant and credible evidence that it's true. just the obvious, greater rife speculation, hoping, and dreaming that it is. and while i'd love it to be true on one hand, bc of the implications (people who thought they bought real scrambling to get real "real"), it terrifies me on the other hand (does every little bit i have or people i know have "real"?).

but that story seemed odd to me. just the way it was produced. i didn't think of the time aspect, but something didn't smell right (hence my request about translation). i'm glad someon fereted that out.

there's no doubt the gold bug movt is highly infiltrated with counter-intel and Ft. bragg types (disinfo and controlled opposition). so we must always be careful not to get too caught up in those shenanigans.

good work.

satya

Desperado said...

Permaculture, I agree with you about the tungsten stories. First of all, the bar melted in the video looked to be too short and fat for a standard kilo bar. Second of all, they never provided any information on the casting itself, as in which smelter cast the gold bar. It is standard practice to provide a certificate of authenticity from the producing bank or smelter with the bar. Normally a bar accepted without the certificate would have to be assayed. Most likely, this assay led directly to this bar being smelted. In any case, any bank accepting an uncertified and unmarked bar merely by weight and implied content is, as they say in Germany, Selberschuld.

costata said...

FOFOA,

Re: Smaller Coins and Demand

I have been following your discussion with Tekin. I think you have pointed out an interesting way of filtering out the "noise" about demand.

I don't want to make this too subjective but doesn't this reflect the buying patterns of many (most?) of the contributors to this blog?

If, say, we have been purchasing gold over several years haven't we been accepting less gold each time due to higher unit prices with each purchase? Is our individual "demand" falling? Expressed in quantity terms, many of us have been accepting smaller and smaller "coins" for years.

If we graphed these purchases over time and adjusted out any increase in the amount of fiat exchanged for gold in the series I imagine we could "prove" that our "demand" is falling due to our declining personal gold "imports".

Tekin said...

costata;

Well, here are my clues & questions:

* The demand of established gold buyers are falling when measured in mass (grams, kilograms, tons etc.)

* Gold production is falling, however, it is not falling in proportion with the demand of traditional gold buyers. It has fallen about 10 percent from the 2001 peak.

* Therefore, additional buyers must have entered the market.

* We do not know the composition of this new demand. ^^^Suspicion^^^ Is the dollar faction a component of this new demand?

* If so, does that provide additional wiggling room for the dollar faction?

* If so, moving the gold price to say 5,000 in orderly fashion might provide additional wiggling room?

* Theoretically, China, Russia, Europe or US could pull the plug of paper gold market at any time. However, that would be a political decision with political consequences. This may or may not happen. Therefore, one should be prepared for this possibility. I am indebted to A/FOA/FOFOA for the insight they provided on the gold market. The threat of market implosion exists as long as the imbalance between financial assets and gold is not corrected.

* It is possible that this "price rise" may stretch into a very long period time. One should also prepare for this outcome as well.

Just my 2 cents on the subject. Sorry for occupying so much bandwidth.

Museice said...

Another great post from Gold Versus Paper
Retail Powers Higher - Or Does It?

"So, I guess if we believe in the validity of the U.S. Dollar Index, then the currency has been stable overall since the mid-2007 peak in the retail index and thus the chart is valid as posted. But what if the U.S. Dollar Index is a meaningless concept? What if the international monetary system is backed by nothing but unpayable debt heaped upon unpayable debt? What if there is no anchor of stability for the monetary system? What if all paper debt-backed currencies are sinking together - how would the U.S. Dollar Index reflect such a situation? Well, actually it wouldn't and it can't.

That's what Gold is for this cycle. Gold exposes the myth and fraud of our transactional paper debt tickets/currency units in this part of the cycle, just like real estate did the past decade and stocks did the decade before that. Defilement of the currency is an ongoing process. Since the business conditions are so weak and fragile at this point of the long-term economic cycle, Gold becomes the most reliable barometer of the declining value of currency units and the go-to asset class."

costata said...

Tekin,

"Sorry for occupying so much bandwidth."

Not at all. I appreciate you sharing your thoughts. I'm always pleased to read your comments.

Desperado said...

Gary North expresses a sentiment in Gold Money: Power to the People that I have had but have been unable to articulate: That buying physical gold is an act of defiance towards TPTB in general, and the Fed in particular. By purchasing physical gold we are not just protecting ourselves, but also effectively "starving the beast". As Gary explains, this is an act of veto, and it is far more effective at stopping the bureaucracy than voting.

Martijn said...

First of all, the bar melted in the video looked to be too short and fat for a standard kilo bar.
Perhaps that why the vid said is was 500gr.

Second of all, they never provided any information on the casting itself, as in which smelter cast the gold bar. It is standard practice to provide a certificate of authenticity from the producing bank or smelter with the bar.
It's not that standard I believe. Some banks even sell bars without the certificate.

Martijn said...

* We do not know the composition of this new demand. ^^^Suspicion^^^ Is the dollar faction a component of this new demand?

What exactly is "the dollar faction", and is it a homegeneous group?

Desperado said...

Martijn, here in Switzerland if you go to the gold window at a large UBS branch office, and you have the certificate with serial number to match your gold bar, UBS will purchase the gold from you at their official published price without an assay. Anyway, despite your nit pick, the bar was still a strange shape for a 500gr.

Why do you think der Speigel (I believe they published the tungsten piece) failed to mention who cast the gold bar? If there was no casting identification, then don't you think the bar would automatically be suspicious? And if there was casting identifications on the bar, why didn't Spiegel mention the name?

My guess is that this latest tungsten story is merely disinformation to try to smear gold's reputation as a safe investment.

Tekin said...

Martijn; I would describe dollar faction as those people represented by Benn Steil, who wrote an article titled "The End of National Currency" for the Foreign Affairs, May/June 2007 issue. He concluded that "It is the market that made the dollar into global money -- and what the market giveth, the market can taketh away. If the tailors balk and the dollar fails, the market may privatize money on its own". I do know now the inner structure of that group; but he mentions powerful private banks; " Modern technology makes a revival of gold money, through private gold banks, possible even without government support".

http://www2.ups.edu/faculty/veseth/econ371/Steil.pdf

Martijn said...

@Desperado

Above I've posten an article claiming that the tungsten vid is 10 years old.

Nobody knows if it's true, but personally I believe it is.

We have also seen Chinese companies advertise in making fake tungsten bars, so there probably is at least some market for that.

Whether it is intended to smear gold's reputation or not I cannot assess.

Martijn said...

That buying physical gold is an act of defiance towards TPTB in general, and the Fed in particular. By purchasing physical gold we are not just protecting ourselves, but also effectively "starving the beast".

Off course it is. If that was not clear to some people hopefully the mentioned article helps.

Ishkabibble said...

If you look at the gold is tungsten video at full size, I think you'll see that the tungsten within is rods, not a brick. There are gaps between the rods; it isn't believable. It wouldn't pass a basic density test, much let alone anything more complex.

It does get me pondering though; if there really is fake gold, it's likely filled with tungsten fleck in a gold suspension. That would be very hard to detect and much less risky to produce. Not saying it's out there, just pointing out that the current suggestions of a plated brick or rods aren't really the way it would be filled, if indeed it even is.

Museice said...
This comment has been removed by the author.
Martijn said...

Perhaps those gaps are not real gaps, but lead. Tungsten is not exactly the rigth weight and mixing it with a little lead might yield better results.

/

In general I do not think this vid is all that important, although it might add some credibility to the tungsten story.

If it really is ten year old and the tungsten topic was already there back then it might certainly have inspired people since.

costata said...

FOFOA,

I'm revisiting your post "Martin Armstrong Makes The Case for FreeGold".

IMHO this extract from Armstrong's latest piece may explain why he seems so close conceptually to a Freegold solution yet doesn't see gold as a possible "top tier" reserve in his two tier solution.

Behind The Curtain Part II
http://economicedge.blogspot.com/2010/02/martin-armstrong-behind-curtain-part-ii.html

"Nevertheless, the manipulation of a market is possible ONLY WHEN THERE IS NO REAL CENTRAL MARKET FOR CLEARING WITH SUFFICIENT LIQUIDITY. In other words, it is next to impossible to manipulate something like gold because (1) it is a worldwide commodity, (2) the supply cannot be cornered, and (3) there is extreme depth to the trading." (Page 10) (My emphasis)

If this was an accurate description of the gold market rather than the heavily manipulated market described by A/FOA, FOFOA and many others then Freegold would be moot. Perhaps in Armstrong's eyes gold hasn't provided the top tier of his One World Currency solution despite gold having had ample opportunity to do so. Meanwhile we see a solution in Freegold that has not even been tried, yet.

costata said...

FOFOA,

Reading Harvey Organ's blog it crossed my mind that Sir Topaz' prediction of "toil and trouble" in March could be on the money.

Perhaps he will get his longed for 5 in front of the gold:silver ratio as well.

OR will the CFTC ride to the rescue and protect the godly shorts from the "evil speculators" who are demanding physical metal?

The steadfast response of the gold shorts is food for thought.

Could a clandestine "swapping out" of the USA "political gold" free up enough supply in the wholesale market to allow the BB's to smack gold down one more time?

costata said...

Did someone mention Currency Wars?

http://www.telegraph.co.uk/finance/7386391/China-ready-to-end-dollar-peg.html

"At the annual session of the legislative National People’s Congress in Beijing, Zhou Xiaochuan, governor of the People’s Bank of China, said that the days of the “special yuan” policy were numbered. He described the dollar peg as a “temporary” response to the global financial crisis, but gave no timescale for any change in policy. The currency has been pegged at about 6.83 yuan per dollar since July 2008."

Museice said...

I post this because I was shocked to see it front and center on USAToday.

Keeping 5% of portfolio in gold isn't a bad idea as a hedge

Permaculture said...

museice, to me, front and center of any major publication usually red alert...lies within, esp. w/the USAT. w/that said, maybe they're encouraging ppl w/10-20% to lighten up their load :)

but i'm always open to the fact that those who like to make lives difficult for lilliputians have a plan for gold (though i'm hoping and betting they don't).

but seeing that article worries me. USAT is anything but spreading news for the little guys.

Michal said...

Washington Must Ban U.S. Credit Derivatives as Traders Demand Gold.

Shanti said...

Well, well, hear Jim talking on the deployment of nucleair wapons!

http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2010/3/8_Jim_Sinclair.html

Fofoa frontruns the Giants !

costata said...

Permaculture,

In the near future it may not be valid to look at this type of reporting in the MSM targeting the "little guys" with recommendations about gold from a perspective of altruism vs cynicism.

In order to launch Freegold a much wider acceptance of gold as the premier store of value is a prerequisite IMHO. They will want (need?) the "little guys" to dive in at some point.

BTW did you know that permaculture has produced more vegetables than Fox and NBC combined?

Cheers

Permaculture said...

costata,

i realize that they're going to have to spread, and if/when it does, it will show that TPTB are definitely priming the pump, but i don't feel we're there yet. maybe we are. maybe this is the beginning of CCM (vs MSM) changing the tune in the US in the same way china, SE asia, and some of europe has. but i take your point, with mixed emotions, that CCM promotion is the inevitability.

Re: premaculture and vegetables, while I trust that you've done your research on that, i must exrpress sheer shock that you're correct. I'd actually like to see a study, because my research indicates that there's so much male bovine fecal matter on FOX and NBC that there's no way permaculture could match those cycle of nutrients :)

Satya

costata said...

Satya,

Sorry, no research. Anecdotal evidence only.

All,

Re: Offshore Holdings

IMHO the trend described in this article strongly supports A/FOA's and FOFOA's contention that gold wont be confiscated. Taxation looks like being the preferred strategy.

"A "financial agency" is “a person acting for a person as a financial institution bailee, depository trustee or agent, or acting in a similar way related to money, credit, securities, gold, or in a transaction in money, credit, securities or gold.” Basically, what this means is that if you entrust a person outside the USA with your money, securities, or gold, FinCEN wants to know about it."

http://nestmannblog.sovereignsociety.com/2010/03/secret-treasury-agency-wants-to-retroactively-expand-offshore-reporting-requirements-part-i.html

Museice said...

Here is a nice read:

John Embry: As Confidence Returns, Gold Will Rise

"TGR: Would you speculate? I read that the IMF is going to be selling some gold and India stepped up earlier. What are your thoughts on that?

JE: The whole thing irritates me. The IMF has announced the sale of this gold 500 times and every time with the express purpose of knocking the price of gold down. It was interesting the last time when the Indians actually relieved them of over 200 tons because that was what basically vaulted the market from about $1,045, which the Indians paid, up to $1,225 in the space of less than a month. That has been followed by the third significant correction in the last three or four years.

I think we've seen the vast proportion of the correction and I think what may be one of the factors that could get this thing going again is when somebody does relieve the IMF of the gold, the 191 tons to be exact. There's speculation that India might be prepared to go to the plate again because the Chinese have been reluctant to step up. Number one, I don't think they want to be seen publicly doing it. They'd probably rather do it more clandestinely because they've got so much money to convert into hard assets. And, secondly, as somebody pointed out, the Chinese at least have a domestic supply of gold. They can buy all their domestic to augment their reserves, where the Indians really don't have that. So I think the Indians conceivably have a bigger vested interest here in taking that IMF gold. And there's also sort of the suggestion that the Chinese wouldn't want to be seen to be paying more than the Indians did, so they're reluctant to step up with the gold price $50 higher currently than the Indians paid. If it was really a free market, if they were really prepared to sell it to anybody, I think I could name any number of institutions, organizations, individuals that would be more than glad to relieve them of it. It's not much money. It's $6 billion. They throw it around as if it's a big deal. Heck, given the budget deficits in some of these countries, $6 billion is literally a piss in the ocean."

Museice said...

Michal:

From Jesse's Cafe Americain
Are Traders Demanding US Credit Default Swaps Payable in Gold?

Martijn said...

From Jesse:

In short, if the existence of CDS on the default or downgrade of US sovereign debt payable in gold bullion be true, who would be in a position to stand behind these Credit Default Swaps with any reliability, and what buyer would be in a position to make such a demand of a credible source?

Interesting story; the plot thickens everyday.

GG said...

"Taxation looks like being the preferred strategy."

Well, say hello to my little friend - Black markets (which is really a misnomer - true free markets is really what they are). No matter how much the idiot politicians try to tax it - there always has been and will be a "black" market (read: free market) for physical Gold (e.g. the bazaars of Asia).

S said...

FOFOA,

What do you make of the Chinese comments on Gold not being a replacement for their Treasuries. The first thing that popped into my mind was they don;t have top buy it they are getting it for free (in exchange for extending the game)......

capt goodvibes said...

Interesting post over at Zero Hedge-

http://www.zerohedge.com/article/federal-reserve-insolvent

Comments got a bit off topic for Tyler(s), so he posted this comment-

"A quick note here is in order. Some readers seem to have missed the nuance of this post. The question is not, despite what the title implies, whether the Fed is insolvent. That is obviously rhetorical. The real question is what is the cost of solvency. As the fed continues purchasing non-UST securities, which are getting increasingly impaired in a deflationary environment, the only offset to the capital deficiency is, logically, the purchasing of ever more assets, presumably of the UST variety, but with Ben at the helm, Agency and MBS, and even corporate purchases seem likely. This process leads to lower rates and, implicitly, to even more pronounced disinflation, thus, greater impairments (as deflation is the near-term outcome), and so forth, in a closed loop, with the inflationary spring getting more and more coiled (which would presumably drive equities higher, in the paradox discussed by Seth Klarman, whereby both bonds and equities yield greater returns at the same time). This is the real question: the Fed has now found itself in a Catch 22, whereby QE leads to monetization, which would lead to further QE, simply to prevent capital shortfalls. And the offset is greater excess reserves, because the dominant force is the asset composition, not the liability side (at least, that is our view). Within 5 years we anticipate the ratio of currency to excess reserves to be well below 25%. How this fine balance, which like a gyroscope now stays balances until such time as angular momentum disappears (in this case, indirect and PD purchasing of Fed securities gives way completely first to covert and then overt Fed monetization) will play out, is the true topic of future history textbooks."

capt goodvibes said...
This comment has been removed by the author.
capt goodvibes said...

Peter Cooper has intriguing comments on Arabian gold demand, and possibility of fed raising interest rates next week, which includes the following -

"There is talk in the market that one Gulf oil state is presently swapping 200,000 barrels per day of oil for bullion, and of flights into the region from Australia laden with gold."

http://news.goldseek.com/PeterCooper/1268146193.php

He concludes with-

"Investment demand for the yellow metal is far harder to quantify. Purchases of gold by Arabian investors that now sit in foreign vaults will not show up in the Dubai figures.

It would therefore be wrong to conclude from these figures that the Arabian love affair with precious metals is over. Far from it, anecdotal evidence all points to far greater interest in bullion as a means of protecting against possible currency instability in a world of massive budget deficits.

Inflation has always been the traditional refuge of governments with large debts and inadequate revenues, and that means that cash will lose its purchasing power. Gold as a currency that cannot be printed, and silver as poor man’s gold, are still on the way up, and increasingly recognized as vital for any Gulf investment portfolio."

Martijn said...

I've posted on those Australian vibes before, I guess about half a year ago. Don't really remember, perhaps FOFOA does.

There was one flight from Perth, with quite a lot of gold. There were two main Saudi families in a fight with each other. When asked if they had anything to do with the flight they pointed to one another. I thought it was pretty relevant, but did not read much about it anywere.

At about the same time some other middle-east man - I believe from Kuweit - was also talking about the three functions of money and that they are not well understood by everyone.

Martijn said...

Australian vibes

I don't know what I was thinking there... I meant "Australian flights".

The flew to Saudi if I'm not mistaken.

capt goodvibes said...

But this gem sums it up the best...


http://www.youtube.com/watch?v=7GSXbgfKFWg

ROTFLMAO

capt goodvibes said...
This comment has been removed by the author.
S said...

http://rick.bookstaber.com/

Bookstaber now saying its a bubble from his SEC perch - it gets more sureal by the day.

allen said...

Ok, so I have seen this a couple of times now and it seems pretty obvious. I guess the reason the Fed started this policy was that there was no other choice. Is there really a choice now? What is really behind the curtains on this announcement and what is the Fed really up to??????????

===================================
1) US could face debt crisis over Fed decision to halt agency MBS purchases
Benn Steil, director of international economics at the Council on Foreign Relations, said his analysis suggests entities that purchased US government debt in 2009 might cease to do so once the US central bank halts purchases of Freddie Mac and Fannie Mae mortgage-backed securities (MBS) – which could precipitate a debt crisis in the world's largest economy.

"Who owns US Treasuries? The Federal Reserve was the biggest net buyer of US government securities last year and it accounted for almost all the purchases or the financing of US government debt.

FOFOA said...

S,

I'm with Jim on the China story:

Jim Sinclair’s Commentary

Do what the Chinese do. Do not do what Reuters tells you they will do.

The best book on negotiations in China is "When Yes means No."


On that Bookstabber piece, statements like this are insulting to his readers and say a lot about the quality of his arguments:

"I don’t want to waste your time on that point. We all know it is a bubble."

Museice said...

capt goodvibes:

Thanks for the laugh. We deal with very serious, world changing topics here and a humorous distraction is sometimes rewarding.

154 billion dollars of treasuries are going to be auctioned off this week. A slightly bigger suitcase but still full of IOUs.

Martijn said...

How's silver doing? Busted the COMEX yet?

idi said...

simon johnson reviews hank paulsons new book

http://www.tnr.com/book/review/inside-man?page=0,0

SatyaPranava said...

it's interesting for all those here now to look at the one-hour chart of silver.

whoever is executing this selloff (algorithms?) is pulling it off against some one who keeps popping the price back up to 17.63 over and over again, but the price just keeps falling anyway.

interesting tug of war.

No King But God said...

Public Pension Funds Are ‘Going to Vegas’ - States, government bodies are increasing investment risk to raise returns

Wow, doubling down and going for broke with OPM. Must be fun having sovereign immunity.

I can’t imagine the carnage when the worthless paper that these government pensions are chasing starts to burn. It’s stuff like this that tells me that Sinclair is right about one thing – QE to infinity. Or to use one of FOFOA’s favorite quotes, “policy will allow the printing of cash, if necessary, to cover every last bit of debt and dumping it on your front lawn!”

The story also briefly mentions how private corporate pensions are finally turning conservative by pulling out of equities and getting into bonds. Pretty sad, really. They’ve got the right idea that there is no need to risk their “never go broke” money in equities, yet they are jumping from the frying pan into the fire. When the dollar dies and paper wealth burns, fixed income will be the last place you want to be, IMHO.

allen said...

I couldn't agree more. Maybe most people don't understand what bonds really are. I wouldn't touch them with a 5000 foot pole. It's going to be interesting when defaults start happening in mass.

Museice said...

This quote struck me as the most powerful mathematical concept of the day:

"The problem is very very simple indeed. This week alone the U.S. Treasury is borrowing 1 1/2 times the entire annual global production of Gold. And how much have they borrowed the week before that and the week before that...? The math is impossible and the lifeboat far to small to accommodate anyone even 1 second too late!" Bill Holter

Think about that concept for a moment and let it sink in.

Martijn said...

his week alone the U.S. Treasury is borrowing 1 1/2 times the entire annual global production of Gold. And how much have they borrowed the week before that and the week before that...? The math is impossible

Without additional information it is not necessarily impossible. Gold had been around for thousands of years, hence many annual productions remain above ground. Data on total production and distribution of that production should be included before doing any math.

I am not stating that the Treasury is perfectly safe and no schemes are going on, but the above quote is not exhaustive.

Museice said...

FOFOA:

Have you listened to the latest Jim Sinclair on King World News Part II?

At about 30% in he talks about Gold and says, "Gold would have to be converted into a form in which it can't compete with a central world currency but instead support it" and then he describes a strange variation of what sounds like Freegold.

I'm curious as to your opinion.

and Martijn... come on... the point was to show the tiny amount of gold in relation to Treasury. Even without a definitive number of tons mined per year the concept is valid.

Total above ground gold = 125,000 tons (approximate)
Total above grounf gold = 4,018,750,000 ounces
Current price for all the above ground gold = $4,420,625,000,000

Four Trillion Dollars In Above Ground Gold At Current Price.

I wonder what percentage of World Debt that amount covers? Or in less than three years the Obama Administration will borrow the equivalent of all the gold in the world!

Martijn said...

Alright, I certainly agree that the gold-price is way to low the financial paper "above ground", or even its production. We've all seen Exters pyramid.

Mike said...

so if we use that calculation then all the derivatives in the world are worth 1.14 quadrillion and the total price of all gold is 4.4 trillion then gold needs to be revalued to $29,272 for starters.

No King But God said...

Wish I could edit my last comment on this post:

"When the dollar dies and paper wealth burns, fixed income will be the last place you want to be, IMHO."

It should read “when the dollar [system] dies . . . .” FOFOA, the first paragraph from your most recent post, The Gold Man, reminded me of this.

As you have stated many times, FOFOA, when paper burns, it is the dollar system, not the dollar itself, which is likely to die. The dollar itself will likely survive in some form or fashion, just reemerging on the other side of the waterfall with a pittance of its current perceived value.

Museice said...

If you are new to 'FOFOA' or a constant visitor YOU MUST READ THIS!

It's Going To Implode: Buy Physical Gold - NOW

"The bond market is the backbone of the US Ponzi Finance system. When it goes – and the day is not far in my opinion - the whole enchilada will come crashing down. Any type of financial asset that has a counterparty – which is pretty much all the paper assets in the world – bonds, futures, any and all derivatives and yes, even the paper currency – will crash. What will they crash against? Yes, that’s right - Gold. All the world’s capital – trillions, perhaps quadrillions of it - will come rushing into the very tiny physical (NOT paper) Gold market. Remember, the world’s real physical capital – real assets such as land, oil-refineries, mines, infrastructure, etc. will not vanish, only it will be re-priced in terms of Gold and its ownership transferred to those who hold it. Since everything stays on this planet, it is a zero-sum game and the winner will be Gold. In other words, an ounce of physical Gold will command a lot more in real purchasing power than it does today. Just like a national currency is a claim on goods and assets within that country, Gold will be a claim on global goods and assets worldwide."

and my favorite line: "Additionally, there is increasing evidence that the Europeans have withdrawn support from Wall Street’s paper Gold market (COMEX and the LBMA, which also operates on a fractional reserve basis as documented here) and are in favor of setting up a physical only Gold market (this is quite a long story - for details, I suggest you go through FOFOA’s blog)"

All I can say is 'WOW'.
Got Gold?

Museice said...

The Paper Bubble

"Trust will continue to decline. Gold will reflect such a lack of trust during this economic depression. Gold is not in a bubble dynamic, it is a manifestation of rational behavior to protect savings and a conservative investment for the current environment. If Gold gets into a bubble dynamic, it will be multiples of the current price.

The real bubble is in paper and our current monetary system."

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