Sunday, April 18, 2010

Life in the Ant Farm


Dear reader, is all of this Goldman Sachs securitization and interest rate swap business making your head spin? SPVs, SIVs, SPEs, PPPs, PPIs, PFIs, SPCs, CDOs, CDSs, ABSs, MBSs... whew! I know it's making me dizzy. And I find that when my head starts to spin it is useful to fire up the old hooch still and cook it down into something more easily consumable.

We all like animal analogies, right? I probably should have gone with rats in a rat race or hamsters on a treadmill, but instead I chose ants in an ant farm. Not very glamorous, I know, but let me explain why selected these robust yet delicate creatures.


Did you ever have an ant farm when you were little? An ant farm makes the ants' behavior easily visible and controllable. They are imprisoned in a two-dimensional world in which their decisions are limited and their needs are met by you! They can only go side to side and up and down. And up usually leads them to the leaf you dropped into the ant farm for their lunch! But in the wild...

Ants form highly organized colonies which may occupy large territories and consist of millions of individuals. These large colonies consist mostly of sterile wingless females forming castes of "workers", "soldiers", or other specialized groups. Nearly all ant colonies also have some fertile males called "drones" and one or more fertile females called "queens". The colonies are sometimes described as superorganisms because the ants appear to operate as a unified entity, collectively working together to support the colony. (Wikipedia: Ant)

A superorganism is an organism consisting of many organisms. This is usually meant to be a social unit of eusocial animals, where division of labor is highly specialized and where individuals are not able to survive by themselves for extended periods of time. Ants are the best-known example. The technical definition of a superorganism is "a collection of agents which can act in concert to produce phenomena governed by the collective," phenomena being any activity "the hive wants" such as ants collecting food or bees choosing a new nest site.


Superorganisms exhibit a form of "distributed intelligence," a system in which many individual agents with limited intelligence and information are able to pool resources to accomplish a goal beyond the capabilities of the individuals.

Nineteenth century thinker Herbert Spencer coined the term super-organic to focus on social organization... Similarly, economist Carl Menger expanded upon the evolutionary nature of much social growth, but without ever abandoning methodological individualism. Many social institutions arose, Menger argued, not as "the result of socially teleological causes, but the unintended result of innumerable efforts of economic subjects pursuing 'individual' interests." (Wikipedia:
Superorganism)

Methodological individualism does not imply political individualism, although methodological individualists like Friedrich Hayek and Karl Popper were opponents of collectivism. Detaching methodological individualism from political individualism... if a properly-functioning communist regime were to arise, it too would have to be sociologically understood on methodological individualist principles. (Wikipedia:
Methodological Individualism)

Hopefully I didn't lose you yet. I know, I'm supposed to be distilling not mixing, but I needed to draw the connection between ants and economics. Did you get it? Ants are dumb little creatures by themselves. But even as dumb as they are, some are more skilled at smelling and finding food while others are better at fighting, and some others are really strong, for carrying food back to the colony for lunch.


And in a wild colony of ants these individuals end up specializing in what they do best which leads to a collective intelligence far greater than the intelligence of any individual ant.

In this way, humans are similar to ants! A normal IQ distribution among humans ranges from 60 to 140. To me as an average human this seems like a very wide distribution. The dumb seem very dumb, and the smart seem really smart. But in the big scheme of things the human intelligence distribution is not so far off from the ant "intelligence" distribution. In other words, the smartest ant in existence doesn't even come close to the "distributed intelligence" of a wild colony. And the same goes for humans!


But when we put ants into a two-dimensional, controlled environment, the distributed intelligence of the superorganism is stifled and nearly snuffed out. As a confined group they end up no smarter than an individual ant.

Throughout human history the division of labor, or economic specialization, has brought fantastic growth in total human output and led to the astonishing complexity of modern computers and industrialization. These vast leaps were truly the accomplishment of the distributed intelligence of the human superorganism, with a relative IQ perhaps in the thousands.

And behind each great leap of mankind was a string of important decisions made by methodological individuals. This is true capitalism. In order for the human superorganism to display its "IQ in the thousands", certain specialized individuals must be free to make the most important decision. The individuals I'm talking about are the savers, or as I sometimes call them, the "super-producers".

They are the people whose contribution to society exceeds their own daily needs, creating an excess of wealth. And the most important decision for the human superorganism is the savers' choice between hoarding their wealth, or deploying it into the economy!

It is this decision process, made millions of times at the individual level, that lends the superorganism its superior IQ. There is no single human that possesses an intelligence high enough to compete with the human superorganism, just as there is no single ant that is smart enough to make better decisions for the colony than the colony itself. In fact, there is not a single human that could do a better job running the ant colony, although man has written many complex algorithms trying to mimic and even improve upon the collective intelligence of ants.


Debt and Specialization

As it turns out, the people that contribute the greatest leaps for mankind often don't have the wealth to realize their dreams on their own. They must engage other people with wealth, who on their own don't possess the knowledge and ability to make great leaps for mankind. It is this "working together" that made things like electricity possible.

I said earlier that the most important individual decision is between hoarding and deploying one's wealth. Modern socialist thinkers will all tell you that hoarding is always bad for the economy. That the key to a thriving economy is the free (read: forced) deployment of all wealth back into the economy immediately once it is saved. But the problem is that removing the decision process from the savers changes the behavior of both the savers (lenders) and the debtors.

Debt becomes cheap and easy to get, therefore debtors no longer need great ideas like "electricity" to get a loan. And for the savers, the choice becomes as simple as a multiple choice test for a government job. The lowest common denominator rules the collective as those with a 60 IQ face the same choices as those with a 140: low yield (supposedly safe) or high yield (more risky). What is missing is the option to hoard, without losing purchasing power, which forces lenders to look at debtor's "proposals" more closely.

The GFC

Debt is the most fundamental cause of this Global Financial Crisis (GFC). More specifically, it is the modern method of usury that compels large pools of savings into the service of new debt. Savers must have a way to hoard outside of the economy for the economy to be efficient. It is the selection process of when and how to deploy one's savings that keeps both debt in check, and the economy efficient and productive. And it is the coerced loaning of all savings, with the lenders and borrowers segregated by a "Chinese wall" of bankers interested only in fees and bonuses, that has led to the massive malinvestment and explosive debt of today.

This GFC is the final stretch in the long evolution of money, spanning centuries, that led to a global monetary system in 1944, a purely symbolic fiat system in 1971, an electronic computer-assisted system in the 80's and 90's and today's insurmountably complex system of derivatives. With each step adding new layers of complexity and distancing finance from reality, the savers and the debtors have now become so disconnected from each other that our human superorganism is now literally dumber than the lowest functioning human. The collective IQ is now probably well below 50, thanks in large part to the "geniuses" on Wall Street who created SPVs, SIVs, SPEs, PPPs, PPIs, PFIs, SPCs, CDOs, CDSs, ABSs, MBSs... We are truly ants in an ant farm!

As Paper Burns

In Sultans of Swap - Explaining $605 Trillion of Derivatives, Gordon Long writes "The cheaper money is, the more borrowing will occur. Everyone is happy except the unwitting lender."

This line really gets to why all these "genius" Wall Street creations are such an explosive problem today. "Everyone is happy except the unwitting lender." The "unwitting lender" is all the savers and "super-producers" of the world. It is everyone you know who has a pension or a pension fund. It is everyone you know who has a 401K or an IRA. The "unwitting lender" is anyone and everyone who relies on the $IMFS and its network of specially trained and licensed financial advisors with official titles like RIA, CFP, CFA, CPA, ChFC, CRPC, RFC, MSFS, all of whom are practically bound by law and fiduciary duty to NOT tell you the true nature of the risk you are facing.

On the other hand we have the writings of one with remarkable wisdom, relegated to pseudonymous postings on an Internet forum, warning us more than 12 years ago of things like this...

Much paper value will burn before this fire is done!

If you owned an oilwell in your back yard and no-one could take control of it, then oil is the best investment. But, most people use various forms of western paper to trade oil and that paper will burn in a currency fire.

Metals have not shown their true worth for many years as the world has done very well. This is very good. But, all things do change! As it is our time and place to live this change, our thoughts must view the future as it must be. Who can know the minds of men and countries as paper burns?

Remember, "when the currencies go to nuclear war, all paper and paper markets will burn"! Many hard assets will lose in the public mind as confusion will rule. In the thoughts of many, gold will perform!

In that day, debts will burn and currencies will war, and you sir will, with honor, raise your standard of living with Gold!

Your profits from such trade, will, on the last day, in the heat of fire, burn as paper does! Sir, the world is going to change, and the rules of engagement will also change. Gold will be repriced, once! It will be enough for your time of life.

Sir, The history of "Hot" paper money does show it to "burn easily" from "much heat"! If you read my Thoughts in today's replies, we see much "fuel" in dollar derivatives trading in foreign markets.

During this result, all paper will burn and the world economy will start over. However, the BIS is buying gold for customer governments as they begin to lower the dollar. This action, began some months ago will bring gold up, perhaps to the middle $360 range. If the world paper markets do not destroy themselves, gold stocks may rise for a time. But, physical gold is the good hold for this time.
Source

This kind of advice is all but illegal within the $IMFS! If it's ever even spoken, it is whispered and "off the record". But I guess that's why you're here, reading "voluminous posts" by a pseudonymous blogger, eh?

At the top of this section I mentioned Gordon Long. I recommend his recent articles for an in-depth yet digestible view of the head-spinning, mind-numbing world of "genius" Wall Street contributions to mankind, like SPVs, SIVs, SPEs, PPPs, PPIs, PFIs, SPCs, CDOs, CDSs, ABSs, MBSs...

Exponential Debt

One of the things Gordon writes about is probably the most catastrophic aspect of this mountain of debt: the maturity wall. This is the hurdle of old debt rollover that is facing us collectively right now, where all of the world's present saving must be compelled into the interest payments alone on the old debt. Talk about the unproductive and inefficient use of savings! What I can tell you is it ain't gonna happen. The system cannot be saved at this point.

I received an email from a reader, Lars Olsson, with a nice article he wrote about exponential growth and debt. Here is an excerpt from his piece with an exercise you can try at home to wrap your mind around what happens when savings are compelled into indiscriminate debt:

If you believe that 2+2=4, then you should believe the following. Compound interest at 2% is a miniscule interest charge measured by today's standards. Compounding the interest charged on a single unit of money can be written as follows: money-amount * 1.02 * 1.02 * 1.02 .... (adding another term for each year) .... and on and on. That is, if you can place your faith in mathematics and calculations and really "believe" that the calculator will return a correct result when you punch the buttons. We reckon our current time since the long ago birth of a civilization some 2000 years ago. History tells us they had money then. A functioning economy of sorts. Mediterranean trade. Payments for goods. Money of gold and silver. If any man would have placed only a fraction of his purse at interest, his descendants would be wealthy beyond imagination, and the world have been hollowed out.

Let me show you. Open the calculator function under Windows. If you run Apple you are smart enough to figure out a substitute on your own. You'll find the calculator under Accessories. Set the "View" to Scientific. Got that! If not, that's ok too, but you probably shouldn't be reading this. On the keypad, punch in 1.02, then hit the "x^y" button, then on the keypad punch in 2000, then hit "=". The display now shows you a large number. This is the multiplier for some amount placed at 2% interest for 2000 years compounded annually. On the keypad hit the "*", then punch in 0.01, then hit "=". Now the display shows you what one cent ($0.01) would have turned into. To make this a little easier to view, hit the "/" key, the on the keypad punch in "1","Exp","12","=" to get the answer in trillions of dollars. Yes. The calculator really does say that $0.01 placed at 2% interest for 2000 years turns in to $1,586 trillion, or $1.586 quadrillion, or a hundred year of US GDP. If you don't like 2%, change it. If you don't like 2000 years, change it.

What the previous exercise shows is that a purse of silver was certainly not placed at interest anywhere in the world 2000 years ago, and allowed to compound at 2% interest, since that numerical representation of wealth would today dwarf all known hoards of "money", electronic or otherwise. So compound interest is not a sustainable operation spanning millennia. Compound interest applied to any finite system will grow out of bounds, which is what we are experiencing today. The current "money" system, which is engineered with "debt/credit" as its foundation has breached its sustainable limit. Stimulating the economy without addressing the fundamentals of the "money system" decay will not restore economic prosperity. Money at interest, does not price risk in venture. A functional society requires an efficient "money system", but "money" can be made available through means other than extending fractional reserve privilege to the banking class and putting a price on the existence of money.


Lars' piece may seem simplistic, but I like it. I'll even take it a step further and say that a monetary and financial system that uses compounded interest cannot afford to compel all savings into the hands of debtors. It must have a means of hoarding wealth outside of the system in order to constrain the exponential growth function, or else the entire system will become retarded and then collapse. In return, this constraining function of "gold the wealth reserve" will restore intelligence to the human superorganism. Intelligence that has been sucked dry by Wall Street's systemic aggression against a free-floating physical gold price.

We are all like ants in an ant farm when we patronize Wall Street. Our contributions to society, should they exceed our day-to-day needs, are deployed by a system that does not care how they are deployed, just that they are deployed ASAP. If you would like to make a real contribution to the future of civilization then please buy physical gold and find a way to keep it close. Hoard your efforts outside of the system and watch as they receive a tremendous power boost just in time for deployment. You will be rewarded with the freedom to choose when and how your saved effort will be deployed and in so doing, you will help shape the future.

Sincerely,
FOFOA

212 comments:

1 – 200 of 212   Newer›   Newest»
Tyrone said...

FOFOA, reveal thyself!!!

Thanks for the article, and Cheers!

David Alexander said...

It is likely that the belief of investors that they own gold when they actually only own paper gold has also substantially reduced the demand to hold other commodities as a hedge against inflation and possible collapse of the financial system. This adds to the overall downward pressure on the prices of gold and other commodities that results from failures to deliver as naked short selling occurs and increases the upward pressure on the dollar.

Since gold is generally held for a relatively long time, funds are able to borrow the dollars and foreign currency that they receive from investors for a relatively long time. The length of time for which borrowing can occur is increased to the extent that as in a Ponzi scheme investor withdrawals are funded by increased investment.

To the extent that investors believe that even if there is not enough physical gold to back all paper claims that they will be compensated in dollars, the demand to hold other commodities as a hedge is further decreased. Demand for gold is also reduced to the extent that investors who hold other commodities in paper form believe that they have a hedge and therefore don’t need to buy gold. Because of this, rather than being limited by the current price and total quantity of physical gold and other commodities, demand for gold and other commodities can be reduced in proportion to the dollar amount of a large percent of all paper gold and other commodities.

Many overseas investors buy their paper gold from US funds with foreign currency and there is over 100 times as much paper gold as there is physical gold. If even a small percent of the foreign currency received by funds is borrowed from investors without their knowledge and sold to buy dollars to invest in the US, the impact on dollar strength would be very significant.

The greater the extent to which this type of naked short selling has occurred, the more likely it is that either a fall in the dollar or a rise in gold prices or other commodities could cause panic buying of foreign currency. Increasing positive feedback between a falling dollar and rising prices for gold and other commodities would then occur.

Jimmy said...

Happy to know, you also read Gordon T Long. I'm always impressed of his essays/works, also of your essays as always.

Curious to know if he would be right or not with his maturity wall-theory.

costata said...

FOFOA,

Another outstanding post.

Without being in any way sanctimonious, you highlight the moral dimension of withdrawing support from the present corrupt, failing system.

At the same time you point the way to how people can attempt to prepare themselves to "help shape the future" once the inevitable transition to something new occurs.

There is an implicit challenge here for those of us who expect Freegold to significantly increase our wealth and security at some point in time. That challenge is: What will you do with your newfound wealth?

Many thanks for your efforts.

Jimmy said...

Black Swan Flight 10 Is Arriving At Gate B5 (Runtogold.com)

miked said...

Hello Mr Fofoa

If I had one gold coin and I lent it out for 2000 years at 2% compound interest I would own the planet by now? Assuming my debtors never defaulted of course. Perhaps that is where the error lies in the calculation. The 2% interest is merely compensation for the risk and the 2 will net out over the long term.

As an aside I am curious about your freegold proposal. As I understand it you propose that under freegold the price of gold would have to rise 50 or 100 times to represent all assets in the economy. If you calculate all global asset prices in USD divided by the existing gold stock in USD, I suppose that is right. But what is to stop the future powers that be implementing a reserve system whereby there are bank notes backed by gold in some multiple? This would put a lower value on gold as it only needs to represent the reserves of the bank and not the whole money supply.

onasip123 said...

When Another says - "Gold will be repriced, once. " - Does that mean there will be a one time very high price spike and that's when you unload your gold? Or does it mean there will be a long sustained high price for gold? Or does it mean something else entirely like I can start using a one ounce gold coin to buy huge amounts of the real world of good and services?

GoldSubject said...

Absolutely outstanding, Sir! So inspiring, and so true.

Jimmy said...

Katla is awaking... (Big brother vulcano of Eyjafjallajökull)

Location of the seismic meter is in Godabunga (right of vulcano Katla)


Katla explained on Wikipedia.

The eruption of this nearby long-dormant volcano in March and April 2010 prompted fears among some geophysicists that it might trigger an eruption at the larger and more dangerous Katla. In the past, all three known eruptions of Eyjafjallajökull triggered subsequent Katla eruptions.


Got physical gold against vulcano? ;o)

Mohammed Sameer said...

Hey,

If I have $100 with me then It is actually a loan right ?

so if I buy gold with that $100 bill, then do I get out of that debt by transferring it to someone else and acquiring something valuable with it ?

Thanks for reading...

samix

S said...

Savings is a misnomer in a fiat system where money can be created ad hoc. Whether the equilibrium factor is gold price taking "excess savings" out of the system or whether rising oil prices obviate the strateguic rational for wage/labor by normalizing via transport costs, all are solutions that threaten the foundation of the exhorbitant privalege.

Digital currency (even if it is a supra currency vs. a local transdaction vehicle)is yet another shot across the bow of "savings." Gold or for that matter any store of value outside that which can be perverted is a mortal threat to the entire complex. Freegold for all its merits is nto a solution but a threat as it is bottoms up. Top down systems - insert virtually every example of totalitarianism/disctatorial/opressive regime and the "soltuion" is always to isolate and destroy those seeking bottoms up change (mobalizing the the collective IQ)

S said...

maybe you should call this "Digital Killing Fields"

onasip123 said...

I'm not so sure that the US government won't try to confiscate gold.

All that is needed is a dangerous crisis. Simple demonization would work wonders. Even though the crisis would be due to the fraud perpetrated by the banksters and the political elites, demonization of gold owners could be done with ease.

Law enforcement agencies and the military have had a lot of practice in breaking and entering. The law enforcement agencies have had a lot of practice in the war on drugs and the military have had their share in the war on terror.

Gold owners would be like a mid afternoon snack on Leviathan's menu.

mortymer said...

Mortymer to FOFOA:
(after reading your last one)
3rd call: Levy, Stefan -> "Artificial life: the quest for a new creation"
As long time reader I check most of links as they are very relevant. Let me offer you my participation... You will really appreciate this fascinating step by step explanation of new systems emergence. It can provide enough material for your research, synthesis on dynamic systems and will connect few more dots.

capt goodvibes said...

Many commenters above would do well to read more of FOFOA's previous posts, where pretty much all of your queries have been most comprehensively answered already.
Thank you FOFOA for your further insights; you're on quite a roll!

dojufitz said...

Ok
so lets say Gold goes to $100,000oz within one week.

What would the price of Oil be?

Do they go in tandem - or is it only Gold that squeezers cash in this amount?

Also if debt is the name of the game - wouldn't a price of Gold at this amount make the USA and many other entities solvent again?

Kewl said...

Also if debt is the name of the game - wouldn't a price of Gold at this amount make the USA and many other entities solvent again?
As I understand this is the very reason for revaluation. Either revalue gold and remain solvent for some more time or collapse in hyperinflation.

raptor said...

if we follow logical growth.. let say in 1900 the world GDP is 1T dollars (just as example), this means that if the world grows at steady pace of 3% per year...

-> 1 * e^(110*.03)
= 27.1126

or 4% ...

-> 1 * e^(110*.04)
= 81.4509

Sigo Plapal said...

onasip,

"...demonization of gold owners could be done with ease."

I'm wondering if that's where the SEC is going with the GS/Paulson deal. We'll have to see how that whole thing plays out but why do I get the feeling that in the end, it'll all be Paulson's fault and he'll have to give up the gold. How dare he make money on the busting of a housing bubble! And how dare he front run a revaluation of gold and buy a bunch of it right before the big event!

As far as confiscation goes, most people have been herded into paper gold. A default on paper would have the same effect. As for physical metal, the scrap gold people have literally taken hundreds of tons away from people over the last few years.

costata said...

Sigo,

"As for physical metal, the scrap gold people have literally taken hundreds of tons away from people over the last few years."

Big money has been pouring into the pawn shop business in the USA and around the globe. IMHO they will use this channel to obtain as much of the rest of the scrap and small PM holdings that can be dislodged.

.....................................

onasip123,

IMHO the fear of Govt confiscation is overdone. When FDR confiscated gold in the 1930s currency was still backed, directly or indirectly, by gold. Income tax had only been in place for around one generation.

A modern taxation system is a much better vehicle for confiscating wealth than an outright confiscation of gold. As A/FOA pointed out it is the gold miners who are most likely to find themselves the targets of the Govt. Perhaps some form of windfall profits tax will be instituted.

....................................

dojufitz,

A Freegold revaluation of gold is not necessarily inflationary. Picture two people standing in line at a supermarket checkout. An announcement comes over the public address system that gold is, as of that moment, selling for US$100,000 per ounce.

One of the people in the queue owns some physical gold while the other doesn't. How does owning, or not owning, gold affect the behaviour of these two people? I suggest it has zero impact on their purchasing behaviour.

Consider the same scenario at a gas station in relation to your oil question.

Let's assume that the announcement over the loudspeaker was that old FRNs AKA "US dollars" would be converted to New US$ at the rate of 100:1 at 5.00pm tonight. How would that affect the behaviour of our gold owner and his fellow shopper, the non-gold-owner?

If they are sensible they will both rush around the supermarket and grab as much stuff as possible to exchange for their legal tender, old US$ holdings before the prices are changed.

The supermarket owners will be racing to adjust prices upwards at the same time.

In these scenarios gold has been revalued as an asset while currency has been devalued as a means of exchange. Do you see the difference?

There's no causation in one event with the other. In the same way that the doubling of US house prices didn't cause the price of oil to track that "asset" revaluation.

Museice said...

Market Skeptics: Gold Manipulation Beginning To Appear In Mainstream Media


John Galt: Dear Gold And Silverbugs: Shut Your Pieholes and Stop Your Whining

Martijn said...

When FDR confiscated gold in the 1930s currency was still backed, directly or indirectly, by gold. Income tax had only been in place for around one generation.

Perhaps he just wanted to curb the deflation and create inflation.

Undermining trust in a currency by removing its gold backing is a good way to do so.

Jimmy said...

I'm curious how Fofoa would react on this good written article:

Debunking the Post-CFTC Precious Metals Fear Mongerig Campaign by Erik Townsend

Jeff said...

Jimmy, I read that article and it was the same old stuff paper gold apologists always say. For a good debunking listen to the Rickards interview FOFOA linked, or read the ZH article linked in the financialsense article.

Bottom line, paper derivaties of physical gold may or may not be fraud, but the result is the same; more paper claims on gold than phsical exists.

Finn said...

I thought GFC meant Global Fuster Cluck...? Maybe not.

Great piece, as always and thanks.

Jimmy said...

@Jeff


Yeah, the result is the same. It doesn't matter if it's fraud or not.

By the way, I'm interested in Fofoa's thoughts about this history...

raptor said...

Very interesting interviews :

http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2010/3/27_Eric_Sprott.html

http://www.kingworldnews.com/kingworldnews/Broadcast_Gold+/Entries/2010/4/14_Jim_Rickards.html

http://www.kingworldnews.com/kingworldnews/Broadcast_Gold+/Entries/2010/4/17_Ted_Butler_on_the_Metals_Market.html

sutski said...

Hi ALL, great piece fofoa. Thanks.

Here is a great explanation ôf the 100:1 leverage and a few other gold market revelations by Paul Tustain, owner of Bullionvault.

http://goldnews.bullionvault.com/gold_LBMA_042020104

Cheers!

Justin_n_IL said...

"In that day, debts will burn and currencies will war, and you sir will, with honor, raise your standard of living with Gold!"

World wide social chaos might dictate otherwise.

FOFOA said...

Hello S,

Here is my response to your comment posted here:

First, if you can picture the world (or even a part of it) using gold properly as real money, then you can extrapolate that "sharing a currency" is not an impediment to balanced trade or meritocracy. In fact, the adjustment of economic imbalances through periodic currency devaluations is a lazy way for national governments to cheat the system and its wealth producers.

On the other hand, sharing a currency provides some protection to the people against their national governments. It also provides the framework for a proper meritocracy capable of surviving a systemic transition such as from the $IMFS into Freegold. I will explain more in a moment.

(Review the Robert Mundell/Milton Friedman debate ONE WORLD, ONE MONEY? for an in-depth discussion on the many nuances of various currency relationships that have been tried in the past.)

Second, Dylan's argument that because the gold standard failed, therefore the euro too can fail is closer to ridiculous superstition than it is to a scientific proof. In fact, the failure of the gold standard and the Bretton Woods system is an almost perfect parallel for the coming failure of today's $-system, not the euro. More on this in a moment.

Third, refer back to my recent articles for sufficient response to Dylan's other arguments about the "we" of Europe. Especially reread the Jim Rickards interview transcript in Greece is the Word.

In my opinion, popular attention like this ZH piece is focused on the wrong ball right now. What I think is really happening is a multi-generational "free market competition" to become the clearinghouse of the world's central banks. This is a competition between the IMF and the BIS, not to become "bail-out institution to the world", but instead to become the "meritocratic clearinghouse of the world". The current climate of bail-outs-for-everyone is simply a side show, but it reveals what each of these competitors has to offer in its bid for the prize.

The euro was designed to flourish once the BIS wins this competition. But as long as the IMF is running "the bail-out show", the euro may appear awkward and weak. It is designed to function under the $IMFS, to survive the transition, and to thrive after the transition. The main difference between the IMF and the BIS is what each group plans to use as a clearing reserve for world trade. The BIS will use physical gold and the IMF will use "synthetic gold" or SDRs.

SDRs are nothing more than a synthetic accounting trick, designed not to track the price of gold, but instead to mimic the function of gold (as it would function after the transition to Freegold) but without ever setting gold free. The BIS on the other hand (and the euro deferentially to it) is relying on actual gold to do this job the SDR was designed for. International acceptance of the SDR requires physical gold to remain locked in parity with its hyperinflated parallel paper market.

So viewed from this angle, which group is actually on thinner ice right now?

Cont...

FOFOA said...

...

One thing "synthetic gold" SDRs allow is for the country with the most gross debt to be able to bail out smaller countries by simply printing paper. The US can "buy" SDRs from a country in need of cash, like Greece. The US "buys" these SDRs by printing up enough dollars to pay the value of the SDRs which is only calculated using a basket of four currencies (it doesn't actually contain any currency - it is a "potential claim on currency").

Then those new dollars purchase euros on the open market which is the currency the troubled country needs. The US then holds these SDRs which are valued by a "basket" of currencies so they will not fall along with the dollar. Essentially the US is swapping fresh dollars for a theoretical reserve unit that will float "freely" against all currencies. The idea is similar to Freegold, yet different in the same way that owning a synthetic CDO is different than owning a physical rental property.

But again, the acceptance of this anti-gold SDR system pivots on the credibility and confidence in the paper gold market. This is why the marginalization of gold is so important to the $IMFS. This is why GATA is such a threat to the Fed. It is David and Goliath, and Goliath has a clear vulnerability.

The other angle on this discussion is "The Sting". If you buy what I have written so far, then you must recognize that the euro and the BIS always has the option to "trigger" this systemic transition. It is the ace up their sleeve. They may not want to use it for obvious reasons, but when push comes to shove, this must be factored into any game-theory analysis.

For more on this BIS/IMF competition that has been ongoing for 66 years now, see The Sting:

"To get a better idea of the Swiss Connection, we have to look at the Bank for International Settlements (BIS) in Basel. The BIS is the Central Bank's central bank. It was formed in 1930 to handle the collection of German war debt following World War I. Its members are the central banks of the industrial world, such as the Bank of England, the German Bundesbank, the Federal Reserve Bank, the Bank of Japan, and so on. It is almost certainly the most powerful financial institution in the world. Never once in its long history has it ever had to ask for help from any government.

A definite coolness exists between the BIS and the United States. This goes back to the Bretton Woods Conference in 1944, held to set up the machinery for resuming world business after World War II. Even though this conference established the gold-backed U.S. dollar as the only reserve currency, the U.S. did everything it could to torpedo the BIS and give sole power to the American sponsored International Monetary Fund. The war was not over in 1944, but the combatants still got together and defeated this U.S. grab. In the final showdown, the Europeans and Japan never completely trusted the U.S."


Cont...

FOFOA said...

"...As the years went by, the BIS suspicions were justified. The U.S. began to abuse its reserve currency role by simply printing dollars. American companies began to buy control of businesses all over the world. In 1971, President Nixon took the dollar off the gold standard, and introduced the novel idea of floating currencies. Meanwhile, the U.S. national debt began to increase each year, until it now stands at about $5.5 Trillion, an astronomic amount that can ever, ever be repaid. It was clear that the U.S. was out of control.

Along about 1972, I began to spend a great deal of time and effort in studying the BIS and its agenda. The first thing I found was that although the U.S. had turned its back on gold, the BIS were aggressively buying it. By 1990, the BIS were by far the largest holder of gold, with more than one billion ounces. This amounts to an outright corner on gold.

The next thing I learned is that the BIS are extremely closemouthed. It keeps a low profile. Its favorite M/O is the sneak attack. They have their own word for this – "coup". Their ideal coup is one where the victim is taken by surprise, and does not even know what hit him. The BIS tries to leave no fingerprints. Thus their coups often become perfect crimes.

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.

We all know that the Soviet Union collapsed in 1989. This was done by the BIS without firing a shot. They simply loaned large sums of money to the Soviets, and then called the loans. Just a routine castration! A simple foreclosure. This is how they got the Russian gold.

The second goal, of bringing down the dollar as a reserve currency, has not yet been reached, but I believe it soon will be. This brings us to the present sting operation..."


Sincerely,
FOFOA

miked said...

Good morning sir

Surely we reached the position long ago when neither the Yen nor Gold are anywhere near their lows and long bonds are no longer near their highs? This is the precondition for a yen-gold carry trade not to unwind.

miked said...

Another thought crossing my mind this morning after Greece's news about a worse than expected deficit:

The more EU nations look unable to pay their debts the lower the euro goes. But to me this is counter-intuitive. Unpaid debts in euro take money out of circulation, thereby decreasing the money supply. This is good for the euro.

If nations print or borrow to bail Greece out, at worst this is euro neutral from a money supply perspective as the amount of electronic euro digits in circulation remain unchanged as the new money replaces money that had vanished.

Aren't the markets being a little myopic about this? The euro has to strengthen long term from this kind of event.

The same argument applies to the dollar and the potential default of some US municipalities. Localized defaults are good for the currency, thought they are of course bad for people holding bonds.

Mike said...

the euro falling doesn't make much sense either, the market just see it as a country in the euro with debt issues but the world totally ignores the us debt issue which is a million times larger and even the record amounts of treasuries next week.

this is nothing more then a 30 year trend of the dollar being a safe haven. one day all those holders will wake up to a devaluation of the dollar, if the same trend continues of the dollar getting stronger.

frycook said...

so, the Sting idea poses that the BIS has appx. 30,000 metric tons of gold - that's a big heap!!

outside of all of the obvious questions - 5 W's

how has Jim Sinclair missed this?

why is he stumping for the IMF?

I don't have a dog in this race, just trying to figure out what makes sense and what doesn't.

adios,
dragonfly

frycook said...

well, maybe i do have a dog in the race and now that the story-line is getting even more interesting - what with the BIS taking down the Soviet Union and now in the process of burying the dollar (on the sly, no less) - i guess it's worth trying to ferret out the truth and consistency of things, all for the simple sake of inquiry into how things work. I always thought that FOA softened the message of ANOTHER and now it seems that it is maybe being hardened once again with these new speculations. So, i'd like to go back and look at what ANOTHER actually said and fire up the flashlight and look in the corners and such. That should be something worth the effort in light of the gravity of the situation. I'd really like any feedback from any direction. Call me crazy, call me a troll, call me late for dinner. I don't care. Pull it apart and run it through the shredder. I'm here to learn. Tell me what I'm missing. Thanks, dragonfly

frycook said...

“How could LBMA do so many gold deals and not impact the price”? We are going to find out that the price of gold, in terms of real money (oil) has gone thru the roof over these last few years. Oct 05 1997

But, each time before a squeeze started to run the price the CBs would sell thru LBMA.
Oct 07 1997 - (so the story informs us that the CBs were in collaboration with LBMA)

The Asians are the problem, by buying up bullion worldwide and thru South Africa they created a default situation on all the paper for the oil/gold trade! Now the CB’s are selling in the open to calm nerves but it’s known that they will never sell enough. It was never their intent to provide the gold, only the backing until new mining technology could increase production. But LBMA went nuts with the game and the whole mess has now accelerated. Oct 19 1997 - (so let’s get the story straight – was it the Asians buying up bullion because they perceived the rigged game or was it over-playing the rigged game that triggered the default situation – or are they the same coin? We are assured in other places that some of the paper in the rigged game was good paper and would be honored but that other paper in the rigged game was bad paper and would not be honored. But somehow they both needed to flow through the same venue?? Why? If Oil needed a gold spiff to sweeten the cheap-oil deal why did the paper side of that equation even move through the LBMA? That’s not an absolute necessity. Is ANOTHER asserting that financial minds in Saudi, trained at the best Western schools, would trust having their good paper mingled with fraud paper? Taking the risk that when things got really fubar’d - and the blame placed on those rogue speculator/trader types for going too far - that their paper might be in the danger zone as well? Or maybe they print the paper on different colored sheets to distinguish the good from the bad to make the inquisitors’ job easier? Or are they parallel markets under one umbrella. Not many details on any of the mechanics as far as I can tell after years of reading this tale.)

The problem with gold physical supply is very real indeed! But, there is no way that the CBs will continue to sell off an asset for its commodity price that has many times more value as money! The talk of sales will continue for years but the real act may come to a close very soon as they try to take the LBMA off the supply hook by offering “gray paper” deals. Nov 1 1997

A sad thing this LBMA, as it winds down with it the dollar reserve and cheap oil will also go. Nov 13 1997

The sales today are done quietly with purpose. The gold must go to the correct location.
Nov 16 1997 - (so we have CBs refusing to backstop LBMA deals with their own gold -but maybe coming up with a “gray paper” deal - but, per this post, bullion (presumably) is moving quietly still - as long as it goes to the correct location. The obvious question is from where, to where? So far this part of the transition is way too foggy and enigmatic to even assess whether it makes sense. What is even meant by “sales” – sales outside of the LBMA paper world? Actual bullion going directly from CB to Oil biggie via merchant banks? ANOTHER says the buy side holds hedges so we can assume it’s real bullion moving. And why would bullion moving to the correct location – presumably a big oil state – require hedges?? With the CBs portrayed as complete nervous nellies regarding keeping the deal with Saudi Arabia, why would Saudi Arabia require any hedges? Like the CBs might not come through with the bullion? Well, if the scenario has any consistency at all then we know what would happen on a renege. Thus, no need for hedges, so why the hedges?)

cont.>>>

frycook said...

In a very real sense, no country can own its gold as the BIS has ties to all of it. Canada, Australia and others say openly “what is the use”? The BIS, instead of taking it outright, places it where it’s needed! As long as there is an open market for gold, it will not be allowed to trade above its commodity price! Nov 16 1997 – (wow, that one is amazing!! I can’t even begin to delve into the multiple meanings embedded in that statement. Does that include Saudi Arabia? How does the BIS enforce its will? The mind reels!! So will it only be a closed market when gold trades as money or wealth?)

Without cheap oil the entire system fails and reverts back to pay as you go economies. This is the central reason for “two price gold”. With gold discounted to its production cost and below, those that have it can trade it for its monetary value. (This assertion is where the leap of faith requires rocket boosters. So, once the gold miners have been turned into satraps, and their commodity-priced gold moved through the byzantine paper maze to the proper location, only then is gold up-valued in exchange for oil.) Make no mistake, the BIS knows gold in the many thousands. The future “reset value” of gold is the key - “support the dollar with oil and the currency system works” “fail the currencies and the dollar will come off the oil standard and the BIS will reset gold to $10,000+ with many conditions” Nov 25 1997 (so the BIS has the power to price gold, huh? By proclamation? By decree? Not only price it, but price it in dollars? This is some interesting organization this BIS?)

The world mining industry gained much from the forward sales. The great increase in gold produced was used for our purpose. For a time the mines made profits. The great mistake by the BIS was in underestimating the Asians. Some big traders said they would buy it all below $365+/- and they did. That’s what forced LBMA to go on a spree of paper selling! Nov 25 1997 – (now wait a minute, I thought it was the LBMA that went “nuts” with the game and drove the price lower and lower, and then the Asians got onto the game and went into buy physical mode. In that scenario it was not the Asians that forced the LBMA to go on a spree of paper selling. So, we’re pretty early on in the ANOTHER (Thoughts) posts and we’re already seeing this cause-effect mix-up which I contend permeates the whole story. Very little in this narrative is ever clearly stated. You know, like an engineer would like to see it. A to B to C to D If there’s 4 flavors of CBs and a BIS with a Jekyll-and-Hyde personality and a LBMA that does anybody’s bidding and its own insider dealing as well and an Asia that is both a tiger and a victim – then how can one not make up any story one wants out of all the details available?)

cont.>>>

frycook said...

Instead, the BIS set up a plan where gold would be slowly brought down to production price. … As the CBs never sold much of their gold, they are still locked to the deals thru the BIS. … Without real physical to supply the oil states, they WILL bid for gold with oil! The BIS will do the only thing they can, halt all trading and declare gold a “world oil currency”! Nov 28 1997 (Why does the BIS have to do anything at all? When Oil bids for gold directly, in contrast to the intriguing story we read on the gold trail, does anyone think that the BIS has to DO ANYTHING? I mean, suppose China decided to bid for gold with all of its paper accumulation. Would they not drive the price to $10,000 overnight? And?? And then?? So what!! How is Oil going for Gold any different? The BIS is completely irrelevant outside of speculative attempts to put it at some apex of world bossism. ANOTHER talks about the world like it’s some delicate mechanism that requires the finesse of deft CB hands to manage our affairs under the strict guidance of an entity, the BIS, that has a claim on all of their gold! For instance, if Oil, and we might as well say Saudi Arabia since we all know which oil state he was referring to, had decided early on to hedge the dollar with gold, it could have accumulated just as much as it has now without the alleged backroom paper deals. Does anybody have a problem with that simple idea? It didn’t turn all of its oil into gold even under ANOTHER’s scenario and it only needed to bid for a certain amount each year just like the rest of us. That would not have unnecessarily gunned the price. I’m sorry, the ANOTHER/FOA scenario is just another conspiracy theory in my book, akin to the NWO conspiracy theory. None of it is needed to explain reality. That’s not to say that it doesn’t provide some sort of cover for a deeper truth than we are privy to. Or maybe it’s just a rabbit-hole with a wild goose in it.)

We have seen the last of cheap oil in US$ as the oil states are no longer taking paper gold! Nov 30 1997 (so as of Nov 1997 the esoteric (oil) justification for the paper gold world ended – somebody better tell GATA. Can we assume then that with all the gyrations in oil price since 1997 that somehow bullion is still part of the deal but just not in paper form? And if so, why the gyrations? Isn’t the point to have stability and growth and such? Maybe it jumps around so much based on how much golden pocket-change the CBs have left over each month after keeping the hoi-polloi sedated.)

You see, a country can buy all the paper gold they want as that gold remains on deposit at the BIS controlled CBs. But, if they try to buy real gold outside the LBMA system the price would explode and the BIS would not come to rescue their currency. All real bullion outside the system must remain available at production cost prices (in US$) for the cross trading of oil thru the LBMA. Dec 07 1997 - (But elsewhere ANOTHER contends that the first country to go gold will “own the rest”. How does that square with this? And just how does a banking institution like the BIS rescue anybody’s currency? I can’t recall them involved in such activity but I’m no expert on such things as ANOTHER seems to be ;-) Well, be that as it may, we have a direct statement that BIS controls CBs and somehow forces them to operate within the confines of the LBMA to purchase paper gold representing gold that remains in their vaults. Yowser!! So why is everybody so worried about bullion having moved out of the US :-0 They must not have caught on to the real deal yet. If the BIS says it’s not a problem, it’s not a problem. But wait, these are the guys that completely miscalculated – oh, I forgot already, it’s the Asians that messed things up.)

cont.>>>

frycook said...

There is a limit to how far gold can be inflated in quantity using “fractional reserve leasing” as backing. The fatal flaw was found in the “forward sales” of un-mined gold. The whole system counted on the expansion of cheap mining techniques to supply much more gold at a cheaper price far into the future. This happened to a degree for a few years but then just leveled off. Now the LBMA continues to flood the market with paper gold as if nothing has changed! But it has, we reached production cost! That wasn’t supposed to happen until the mining industry had raised supply many times what it is today. … Will the BIS try to settle this unbalanced market by destroying LBMA? Or will they drive the CBs to lease another 20% in an effort to inflate this “paper gold currency”. Dec 07 1997 - (hold on a second, the LBMA is out-of-control and flooding the market with paper gold? You mean the BIS has no control over the LBMA? I thought they were the big, bad bosses of all things financial! They can “destroy” countries in a “second of storm” and they command the affairs of CBs to the level of forcing their gold buys to occur only via LBMA paper but the LBMA is out-of-control? What am I missing here? Have the Asians infiltrated LBMA? Is this one of those Toyota steering problems? Did somebody leave the back door open to the LBMA computer room? And pray tell, how would the BIS “destroy” the LBMA if that is the option chosen? Tell the world that LBMA was their preferred vehicle but somebody stole the tires and the seats are worn through? Perhaps employ the services of a “whistle-blower” a mere 12 years later? But I digress. Time for a Heineken!!)

cont.>>>

frycook said...

You will not see 80% or more of gold deals. If it was done with all to see the discount value would be lost as the world price would explode. This is not the realm of any public “wall street”. At one time it belonged mostly to the Barron. Now it is large with the BIS and super rich. Wars will be fought over the lack of “visibility” of these dealings.
Dec 12 2007 - (by the serfs right? Or is the Barron, BIS-crats and Super Rich going to suit up in glorious armor and mount the noble steeds of justice and chivalry – gag me with a spoon – oh I forgot, ANOTHER maintains that “All is fair” in the cheap-oil for cheap-gold game - but we’ll get to fight wars over the lack of visibility. But wait, the lack of visibility was necessary to skim the value – don’tcha love that “discount value would be lost” thing? Just Good Bidness - Shame on those wily Asians!!)

The BIS has been asked / told “lower gold no more”! Jan 08 1998 - (was it the oil states that slapped BIS on the wrist? How many geniuses did it take to understand the relationship between hitting production cost and reduced production? Jeez – shades of centrally-planned economies!)

You have CBs that highly value gold, but need its price in currencies to fall as a means of pricing oil. Jan 23 1998 - (what a convoluted statement – how about this translation? You have CBs that are able to backstop a paper-gold arrangement that drives the price down to production cost and in essence cheats the seller of any gold that is sold into such a price-rigged environment – ANOTHERs so-called “discount value”. Truly a socialistic scheme whereby individuals, companies and countries are looted for the “greater good”. What is it about ANOTHERs totalitarian message that gets past the normal filters that most folks have regarding elitism and rigged markets and such?? Maybe it’s the payoff?)

Even the new EURO will not be backed by gold! It will HOLD gold only as insurance against the worst outcome, war. Feb 04 1998 - (c’mon, is it money or not?)

In that day, “good money” will become “bad money” and “derivatives” will be paid to the holders of “derivatives”! In that day, a gold mine will also be paid in “derivatives”, for its gold will be for the benefit of all. Feb 09 1998 - (sounds to me like ANOTHER’s previously presented logic is that the gold miners’ output has already been appropriated over many years for the “benefit of all” via BIS/LBMA paper gold deals, considering the fact that driving the price of gold down to production cost has really been a policy of picking the pockets of resource countries and the investors who participated in liberating those resources from the earth – he’s defending a policy of nationalization here but doing it in a strangely nasty way, as if anybody silly enough to be holding paper, without a CB imprimatur is some sort of stupido for believing in contract law and it’s like they deserve to get screwed for participating in the game since they are minnows. He’s describing a totalitarian system. That may well be where we’re headed but that isn’t why I hold gold and it surely is a perverse perspective in my opinion.)

cont.>>>

frycook said...

The BIS stopped the CB sales and drove physical gold from Asia as a last resort! Oil has locked the CB and IMF gold from sales of significance. What metal trades worldwide, is all there is. Feb 14 1998 - (don’tcha love that euphemism – “drove gold from Asia” and the violins playing the “as a last resort” theme?? Has a kind of Rowdy Yates thing goin’, “Ye ha!! get them doggies movin’ rawhide”!! Did that trail action happen to coincide with ‘Anybody But Bush’ – ‘31 Flavors of Color Revolutions’ – George Soros’ raid on the Asian economies? Wish I could pay attention to all the dates. You know, the part that makes me go a little goofy when contemplating the meaning of ANOTHER’s message is the part where a piss-ant dictatorship supposedly tells the West where to get off. Yeah right, like there’s not a word such as renege in the English language. It takes a monster leap of faith to go along with his geopolitical suppositions. Like - Oil was so hungry for gold that the BIS had to go loot it from Asia to keep the peace. Wow!! And those other Asian giants buying physical on every dip with endless money in the same timeframe. Wow!! Kinda like a Rube Goldberg Mobius Strip Perpetual Motion thingy. Next installment we’ll hear how Oil was selling gold out the back door to the other Asian giants – kind of a multi-national privatization scheme. Wow!!)

sorry about that last flight of fancy but my head was spinning from all the lights going off.

thanks for reading
dragonfly

SatyaPranava said...

dragonfly, thanks for the critique. some of us (though i speak only for myself) lilliputians are sensing something that doesn't exactly pass the smell test, yet are having a hard time get past all the olfactory bombardment which has hit us as we were walking out of the department store.

So i'm curious to know the following from you: why do you hold gold? what else do you get a sense is a safe bet? and what do you think is going on re: the geopolitical transitions that seem to be upon us?

satya

FOFOA said...

Hello Dragonfly,

Thank you for your excellent debunking of ANOTHER (THOUGHTS!)

However, I am trying to figure out your view. Do you view ANOTHER as a fraud, an idiot, or a wolf in sheep's clothing? Serious question! You seem to bounce around between the three.

Also, you seem to view the BIS as a discrete entity, which perhaps leads to your conspiracy theory view. The BIS is the CBs. Think of it as a kind of CB organization, or club! Look at who the BIS board of directors actually are!

"You mean the BIS has no control over the LBMA? I thought they were the big, bad bosses of all things financial! They can “destroy” countries in a “second of storm” and they command the affairs of CBs to the level of forcing their gold buys to occur only via LBMA paper but the LBMA is out-of-control? What am I missing here?"

The BIS is the CBs of the world. More specifically, it is mostly the CBs of the non-dollar part of the world, which are the monetary delegates representing the areas that were "looted" as you say.

I know, Greenspan finally took the Fed's seat at the BIS, I think it was in 1994. But still, as far as central banking goes, the BIS is a lot more globally balanced than the IMF, wouldn't you say?

"so the BIS has the power to price gold, huh? By proclamation? By decree?"

If the CBs started printing the people's money to buy gold, ie. to draw private gold into the BIS (CB) system, would that not "price gold"?

"You have CBs that are able to backstop a paper-gold arrangement that drives the price down to production cost and in essence cheats the seller of any gold that is sold into such a price-rigged environment – ANOTHERs so-called “discount value”. Truly a socialistic scheme whereby individuals, companies and countries are looted for the “greater good”. What is it about ANOTHERs totalitarian message that gets past the normal filters that most folks have regarding elitism and rigged markets and such?? Maybe it’s the payoff?"

Clearly you are compelled to pass moral judgement in the process of your analysis. I know, it is hard to avoid. But I suggest that there is value in being able to see reality from all sides. To see the good and bad in things rather than to view things as good or bad in themselves. The latter makes your analysis too rigid as you much assign fixed values to things.

Perhaps in the above quoted paragraph Another's message to which you assign a negative value was only describing the paper-gold arrangement that had grown out of the $-system. And which could only be broken by encouraging it toward its own inevitable end.

I agree with you that the world would be better without central banking. But do you really see that as a possibility? I don't, at least not in our lifetime.

"The BIS stopped the CB sales and drove physical gold from Asia as a last resort! Oil has locked the CB and IMF gold from sales of significance. What metal trades worldwide, is all there is."

It seems to drive you crazy that you can only read Another's message as praise for everything that he describes. I don't read it that way. He and FOA were quite clear that they were trying not to judge things as good or bad. Not that there is anything wrong with passing judgement, but it is simply a different exercise.

Sincerely,
FOFOA

Byzantium said...

Hi FOFOA and contributors;

I have been following the blog for about 6 months, all fascinating stuff. I am a GATA follower too, and from a holding of zero some 14 months ago, am now a holder of physical gold and silver. I failed miserably, to promote the idea of ownership to any friends or close colleagues. Either I am naive, or they are.

Like many, I disbelieve the official version(s) of the way the world works. Identifying how it actually works is the quest. The Another stuff, and this blog, is very enticing, and there is much 'intellectual gold' and revelation along the way, regardless the ultimate truth.

I am also mindful of what seems to me to be ongoing ambiguity and fog in the Another posts. Frycook / Raptor raises some good points and questions, to which I would add this one.

FOFOA, you wrote that the BIS had two main objectives; the dismantling of the Soviet Union, and of the dollar. However, above you write that the BIS is not a distinct entity, but a gathering of CBs.

To me, this is one of the main ambiguities. A large number of those CBs are from the dollar camp, and earlier, presumably the Soviets were members. Do members sign up to objectives which involve their own destruction? Or that of the currency of their camp? Is the BIS a faction riven institution, at war with itself?

Or, is it the case that Central Banks in fact are Trojan horses that nominally represent country x, y or z, but in fact have their own agenda. The US Fed for example, is a famous case of an alleged Trojan horse, that should be resisted by every patriotic American, or even hung from lamp-posts.

So there is the question;
- either the BIS is a faction riven organisation, that might nominally have 'objectives,' but which really follow national interests,
- else, they do share a common purpose, separate from the interests of nation states to which they are nominally affiliated.

If the latter, then is this not some kind of global coup by stealth? Who are these people really? Is it something you know but which we are supposed to figure out by ourselves?

I think Raptor was asking a similar question, about the nature of this BIS.

thanks again for the wonderful blog.

Byzantium said...

Sorry, when I credited Raptor, I meant dragonfly.

FOFOA said...

Hello Byzantium,

"FOFOA, you wrote that the BIS had two main objectives; the dismantling of the Soviet Union, and of the dollar. However, above you write that the BIS is not a distinct entity, but a gathering of CBs."

Actually, Douglas Johnston wrote that in 1997. I just shared it as part of what I called "The other angle on this discussion..."

"A large number of those CBs are from the dollar camp, and earlier, presumably the Soviets were members."

The only CBs that I would put solidly in the dollar camp are the Fed and the BOE. Can someone find out if the Soviet Union was a member of the BIS before '91? Russia now is, but several countries joined recently, including Argentina and Thailand. I don't know when Russia joined. Here is the list of current members:

Algeria, Argentina, Australia, Austria, Belgium, Bosnia and Herzegovina, Brazil, Bulgaria, Canada, Chile, China, Croatia, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hong Kong SAR, Hungary, Iceland, India, Indonesia, Ireland, Israel, Italy, Japan, Korea, Latvia, Lithuania, Macedonia (FYR), Malaysia, Mexico, the Netherlands, New Zealand, Norway, the Philippines, Poland, Portugal, Romania, Russia, Saudi Arabia, Serbia, Singapore, Slovakia, Slovenia, South Africa, Spain, Sweden, Switzerland, Thailand, Turkey, the United Kingdom and the United States, plus the European Central Bank.

Russia does not have a seat on the board of directors. The BIS Board of Directors presently has six permanent seats for the CB Governors of Belgium, France, Germany, Italy, the US and the UK. Each of these Governors can appoint a second board member of the same nationality. And then there are also eight or nine elected board members, which are currently Brazil, Canada, China, Japan, the Netherlands, Sweden and Switzerland and the President of the ECB.

Here is the full Board of Directors:

Christian Noyer, Paris (Chairman of the Board of Directors)

Hans Tietmeyer, Frankfurt am Main (Vice-Chairman)

Ben S Bernanke, Washington, DC; Mark Carney, Ottawa; Mario Draghi, Rome; William C Dudley, New York; Philipp Hildebrand, Zürich; Stefan Ingves, Stockholm; Mervyn King, London; Jean-Pierre Landau, Paris; Henrique de Campos Meirelles, Brasilia; Guy Quaden, Brussels; Fabrizio Saccomanni, Rome; Masaaki Shirakawa, Tokyo; Jean-Claude Trichet, Frankfurt am Main; Paul Tucker, London; Axel Weber, Frankfurt am Main; Nout H E M Wellink, Amsterdam; Zhou Xiaochuan, Beijing


"So there is the question;
- either the BIS is a faction riven organisation, that might nominally have 'objectives,' but which really follow national interests,
- else, they do share a common purpose, separate from the interests of nation states to which they are nominally affiliated."


My answer is that #1 is true. I imagine that Dragonfly and others that gather eagerly when he speaks would answer that #2 is correct.

This speech provided me an enlightening window into the mind of a BIS central banker. It was given by Robert D. Sleeper, Head of the BIS Banking Department, one day before he retired from the BIS...

http://www.bis.org/speeches/sp050218.htm

Cont...

FOFOA said...

...

I also found this Q&A between ANOTHER and Michael Kosares illuminating regarding the BIS:

5/5/98 ANOTHER (THOUGHTS!)

[MK questions in italics - ANOTHER answers in bold]

** Is Europe (led behind the scenes by the BIS) an opponent to the United States?**


Sir, Yes, but not in the ways of war, as it is in the feelings of "pride" and "we go our own way". The downfall of the Russia, did allow for the Euro and all that it will build. They now see the debt of the US$, as a reserve money can be escaped! As even the US citizen will leave it's own workers to die as products are purchased "overseas", how much less will the world also flee the dollar! Opponents? No, I would say they are learners of the "American Way" as they embrace the "American Idea" of a "free world market economy".

*** If so which countries are in which camp? Your associate seems to feel that Asia is split between the United States which has Japan as an ally, and Europe which has China as an ally ( a notion I found particularly intriguing). Where is Britain in this? Japan? And most importantly, the Gulf States, particularly Saudi Arabia? **

Sir, I feel he is correct in this thought. Europe does grasp for a relationship with Asia as the US did have with the Japan. It would build a mighty economy on a foundation of oil and gold as backing for new money. As China and Arabia was once a part of the Europe economy, in a small way. They may now return with no fear of Russia. Britain? A lost nation. Japan? This one is "of the American Economy" and is to live and die by it! They will seek your Alaska oil before loss of face with gold. A dead Yen be a dead Japan.

**Along these lines, I too believe that currency movements will flow through Europe because the Euro currency will be gold backed. Where does that leave Japan with over $200 billion in dollar reserves, let alone its massive U.S. Treasuries' holding? **

Perhaps, they be like Korea? Rich in paper until the world says, "this paper, it is not good"!

***Your associate says that BIS helped China increase its gold holdings. Please tell me what the source of that information is, or is it simply a speculation on his part. ***

The BIS is the gold broker for all interbank sales/purchases. Bullion Banks are for sales to other entities. I think, at first, China was leverage against the oil producers. Then Arabia was allowed into BIS for Euro.

**One other item you might clarify for me is "Who is really behind BIS?**

Perhaps, "who control them"?

**The Swiss?

Yes.

**The eurocentral banks?

Yes.

**Who does BIS really represent?

"old world, gold economy, as viewed thru modern eyes" or " way to move from US$ without war".

**Why was Saudi Arabia just included in BIS?

answered.

**Has Saudi Arabia gone with Europe?

Yes.

Sir, there is much more to this, but we talk over time, yes? I will be away for perhaps ten days. We speak again.

Thank You


Sincerely,
FOFOA

costata said...

Satya,

You might find this link helpful.

http://en.wikipedia.org/wiki/Sophism

Cheers

Martijn said...

Also somewhat interesting, albeit to a far lesser degree than most things mentioned above is that the first director of the BIS, Jelle Zijlstra, was granted a doctorate after studying money velocity and its impact on monetary stability. While president of the Dutch CB he also inquired with Volcker whether dollars could still be exchanged for gold, upon which Vocker replied "you are rocking the boat". At the moment of that enquiry about gold he was also president of the BIS, where he sat from '67 to '81.

A rather long period for someone oriented on gold and monetary stability (besides his doctoral study on money velocity and monetary stability he devised the "hard guilder" policy in the Netherlands which coupled the guilder to the Deutschmark).

Martijn said...

Duisenberg, who played an important part in devising the Euro and openly mentioned the role of gold during one of his speeches was president of the BIS twice.

Things like these seem to provide some funding to the notion of the BIS being more gold oriented then they openly admit.

Martijn said...

A rather long period for someone oriented on gold and monetary stability.

Well, off course it's logical for the president of the BIS (or any CB) to be oriented on those things, but it shows that they did pay attention to gold, even though calling it a barbaric relic in public.

tdfxman said...

"So there is the question;
- either the BIS is a faction riven organization, that might nominally have 'objectives,' but which really follow national interests,
- else, they do share a common purpose, separate from the interests of nation states to which they are nominally affiliated."

My answer is that #1 is true. I imagine that Dragonfly and others that gather eagerly when he speaks would answer that #2 is correct.

Just back from a trip to Hawaii but this recent flurry of activity is great to read. I for one didn’t fail the smell test dragonfly of ANOTHER’s posts. They are interesting but not gospel truth.

Don't we KNOW #2 is correct? To me it is as plain as day. There is no doubt about it. To me it is not even a question but the real question is what happens BECAUSE #2 is true. Answering that to me is the real quest.

How do we know #2 is true? One way could be FOFOA’s own logic. If the BIS is the CB’s, and the Sting, which he promotes, says one of their goals is to destroy the dollar (I agree), then that is not in the USA’s interest but it is the Fed’s mission. How is THAT in the national interest for your national central back to want to destroy your (its) currency??? I posted about this exact subject before I took off but it wasn’t a good enough post to draw a reply from FOFOA. Dragon did a much better job. I also stated the 5 goals of the Fed, and they are all anti-national interests.

Also, the IMF and Fed are NOT national organizations. How can they have “national interests”? They are completely held by the global banking cabal as independent companies. When do independent companies look out for J6P?

A third reason, I am sure thousands could be listed, for knowing #2 is true is to look at history and WHO is behind all these organizations. Sure John Maynard Keynes and guys like Harry Dexter White, google him, and all these other socialists engineered Bretton Woods, kinda like Jekyll Island II. What did BW do? What was THEIR goal? Hint it wasn’t a national one.
“The goal of the organizations was to create a world currency, a world central bank, and a mechanism to control the economies of all nations. In order for these things to happen, the USA would of necessity have to surrender its dominant position. In fact, it would have to be reduced to just one part of the collective whole”. P89 Creature from Jekyll Island.

The quest is ahead of us. Again, to me the real question is “What happens to gold when #2 is correct”. Or better, what happens to gold when enough people wake up and realize #2 is correct. Will it be too late?

I found the below article to be very good.
From article, http://www.augustreview.com/issues/globalization/trilateral_plan_to_corner_world_gold_market?_20081209107/,

“Central Banks (including the Federal Reserve) could well be left to disintegrate in order to give way to a single global central bank controlled and fueled by the bullion banks who have Monopoly control over the world's gold.
These superbanks are all closely tied to the goals and membership of the Trilateral Commission, whose members have methodically carried out a monetary policy designed to bring about this eventuality.
For all practical intent, individuals will be frozen out of the gold market at any price.
Indeed, a global totalitarian state may be closer than we think; as the globalist's golden rule states, "He who has the gold, makes the rules."

frycook said...

@ hey costata – you crack me up!!! - thanks for jostling my neurons – I never even heard of Hippias, but I like the name – and itinerant fits me to a T. See if you can find a full description of this wonderful painting variously titled ‘Plato’s Academy’ and ‘Academy at Athens’ and of the various historical figures on each “side” of this ancient Hegelian dialectic.

http://media.radiosai.org/Journals/Vol_03/05MAY01/images/01-Plato-and-Aristotle.jpg

Seems that everyone likes to “pick sides” - even when we know that the Sophists were right – being the practical rationalists that they were. No “philosopher-kings who could perceive the higher-ordered geometrical forms” needed. No “reductionists who could only name things ad infinitum as their form of knowing” needed either. That’s why Sophism has become such a pejorative term in this day and age of both idealism and banality. Plato pointed up and Aristotle pointed down and the Sophists never got their picture taken so-to-speak, but if they had they’d be slappin’ five!!! I’m still awaiting your timeline on the details of how Another’s predictions went awry and I can appreciate the time involved in such an undertaking. I always thought there was something to that area around $354 gold that got Sinclair so worked up way back when and which was mentioned in the $360 area by Another or FOA. Somebody really thought it was going to blow back then – but it didn’t. Keep the faith brother.

frycook said...

@Sataya Pranava,

fair question, the only reason for holding gold for some of us is so that the system cannot steal our labors. It is very much what ORO used to describe over at USAGold - what astute businessmen do to take their money off the table and secure their profits. For those of us whose lives revolved around various forms of labor it was the same. What we did not spend to stay alive was our profit so to speak. And gold was and is the only way to keep it from being stolen. Not investment and not even insurance but payment in full. If we rode the coattails of this "conspiracy" then so be it. That doesn't mean we need to condone it or try to rationalize the value of what it has wrought or glorify what it may bring about. Sometimes that whole thing about the ends justifying the means is kind of warped. Hopefully you'll get a better sense of what I think from my response to FOFOA which I'll spend some time on as he makes some good points and has pointed out weaknesses of my line of thought that might cause me to re-think some things. I'm a simple guy too which just means that I have to work harder to find my way through the complexity. Good fortune to you and yours. dragonfly

SatyaPranava said...

looks like the ants have left the building...er flown the coop...er flocked from the farm. glad to see it.

i must say as a philosopher of sorts myself, i appreciate very much dialogue, and discussion, as the means to get to the heart of the matter. This is why i value this post so much more than many of the other posts. FO/FO/A's thoughts are great and a wonderful thing to believe may be coming, and i hope they are. But i feel like i'm in some deep bush here. so i appreciate those who've been around the bush for a while and are able to start seeing where those shades of black and white turn gray. That is where the magic happens. When we start delving into those shades.

then again, i just appreciate good critical thinking (hats of to everyone who does). so please keep up the excellent discussions and disagreements.

@costata, i'm familiar w/sophists, though i am curious if your reference to dragonfly was more of a modern or greek one? either way, it sounds like he's proud :)

and dragonfly, thanks for the clarification and critical approach.

costata said...

frycook,

"Seems that everyone likes to “pick sides” - even when we know that the Sophists were right – being the practical rationalists that they were."

Presumably anyone who disagrees "doesn't know" and is therefore "impractical" and "irrational".

You and tdfxman are out of your league here at FOFOA's blog. You should seek another (sorry, make that some other) venue.

Satya,

"and dragonfly, thanks for the clarification and critical approach."

What was clarified? Did you mean "critical" as in criticism or are you seeing some hint of critical thinking?

The reference I made to Sophism was an attempt to point out the way frycook simply twists words to persuade readers to accept his arguments. Arguments that seem to consist entirely of pre-conceived ideas and a desire to pursue his own agenda.

raptor said...

dragonfly@ Somebody really thought it was going to blow back then – but it didn’t.

]- that was me puzzled alot.. those ideas where said 10y ago.. and "they" were able to hold for so long.. and 20y earlier ~1980 "they" saved themselves again..
in general many trends get established in the third breach :), lets hope it will work out this time.
I think that even for Fed/US transition to SDR-world-currency is much preferable than total trashing of the dollar. Remember $ is part of the basket, the biggest one.
So this way is probably escape route for not being devalued to 0, but let say just 50%.
All dollar holders benefit from that, think about it ?


I was thinking now with the internet and with the low-level of education, human society is morphing more and more to ant-like society, if you get my idea.
Specialized workers with the queen World-central-bank et all to steer the process.
18-20th centuries were individualist ages.
Don't recall history before that. Did we have similar cycle.
Greek-individualist city states toward Roman-all-over empire !

raptor said...

contd>> All dollar holders benefit from that, think about it ?

and you have the paper (no! electronic) currency to play for another 20-30y.
And no need to issue new per-country currencies, use SDR! just for the inter-CB-bank payments... just devalue against the bigger paper.

Put some 10-15% gold (paper-gold!) in the mix to make gold bugs happy...;)

raptor said...

>>> if you get my idea.
oops :) ... not my idea.. I meant such level of communication between all the ants was not possible just 10 years ago..

Isn't process like this to be expected.
As long as there is cheap resources and energy avail. this will be natural process.. (Socialist regimes were possible for 45 years, cause Russia were subsidizing the whole soc-camp with cheap oil and other resources)..
Once it became cheap commodity/energy unsustainable it collapsed.

SatyaPranava said...

@costata. re: clarification, dragonfly clarified what I had asked of him above re: his positions and what he sees.

I mean critical in either and both ways. I think even when you have very intelligent people who have a lot of knowledge get together (like some on here) then they can get stuck in group think and find reasons to not think so critically about their approach. That's why I supported Martijn's questioning many things on here before. I've also tried to be quite critical, but unfortunately, I realize i'm out of my league on here and try to learn. So i'm glad to see those who have considered different perspectives and taken a critical approach voice their perspectives or observations. Such is the nature of discussion.

I'm not sure i'm seeing the modern, sophist, rhetoric-for-rhetoric's sake in dragonfly's arguments as much as you may be. I may be mistaken, but as admitted just a few lines ago, i'm just a little guy in this. an outsider. and I've read enough books by insiders to come to believe that there's absolutely an admitted agenda (some would call it a conspiracy) to bring a single-currency globalist government run by corporations to replace the antiquated nation-state and religious institutions of power which dominated much of the past 1500 years of history. Might I be wrong? Sure. But people like Quigley, Brzezinski, Rockefeller, and plenty of others have made it pretty clear in my opinion.

Also, costata, i'm not sure i understand why you think that tdfxman and dragonfly are out of their league?

i know i'm out of mine, but i'm curious to know, what is the league here? since everyone is anonymous, can we really know what anyone's league is? is this forum primarily just gold bugs (seems not...too low a league), Central bankers (doubtful, but there could be a couple here), counter-intel (likely, but probably only a few), macroeconomists? geopoliticians?
other academics?

what is the league?

also, i'm curious to know what you think dragonfly's agenda is, since it's not as apparent to me as it seems to be for you.

thanks for your consideration in advance,

satya

SatyaPranava said...

"post a comment" popup shows my last comment, but it's not posting to the blog...are we having a problem with comments posting properly again?

costata said...

All,

This article ties together a couple of interesting strands of the gold manipulation program. IMHO well worth a read.

http://www.bullionbullscanada.com/index.php?option=com_content&view=article&id=11038:goldman-sachs-and-gold&catid=48:gold-commentary&Itemid=131

Cheers

frycook said...

Howdy FOFOA

((replies are in double brackets))
It’s a pleasure to read your thoughts!

Hello Dragonfly,

Thank you for your excellent debunking of ANOTHER (THOUGHTS!)

However, I am trying to figure out your view. Do you view ANOTHER as a fraud, an idiot, or a wolf in sheep's clothing? Serious question! You seem to bounce around between the three.

((Actually, I tend to think ANOTHER represents another strain of elitist control that may well be successful in instituting the next level of the game in which we’re all involved. My thoughts come from a place that regards authority as generally false - in the sense that Ben Hecht put it in Perfidy – he said: “The answer is that authority has an unshakable faith in the image of virtue it calls itself. Authority knows the thousand lies and shenanigans out of which it was created. But authority does not regard these as its true character. Its true character is not what it is, but what it can induce people to believe it is. Thus, until it is led off to the guillotine for its villainies, its true character is always glory and beneficence. Like the actor, authority has faith in its false whiskers. But its deepest faith is in the human hunger for illusion. People will hang on to illusion as eagerly as to life itself. To the people, the false whiskers are the Prophet; the actor strut of Bossism is the Patriot; the reiterated lies of power are the soul of truth.”

So, from that perspective, I don’t know if the BIS actually knows or can honestly represent what it is to itself, much less whether it has come to grips with its past activities and somehow redefined itself and its mission in order to drive such a dynamic and intricate change in world financial affairs as this theory suggests. What I do know personally from experience at multiple levels in large electronics manufacturing companies, including Siemens and Honeywell, is that what it says on that ISO-900x certificate and the corporate advertising is most often not what occurs on a daily basis from the highest level of management on down. So I doubt the BIS is any different, whether they’re operating from a mission statement or some other protocol.))

frycook said...

Also, you seem to view the BIS as a discrete entity, which perhaps leads to your conspiracy theory view. The BIS is the CBs. Think of it as a kind of CB organization, or club! Look at who the BIS board of directors actually are!

((No, I get the gist of what the BIS is, I’m trying to analyze ANOTHER’s view of the BIS. I’m repeating his words and seeing how they fit with other things that he says – and then I’m making judgements about his perspective – whether the predicates of his argument are true or not. It is ANOTHER who speaks of the BIS as a monolith in so many of his communiques. I have no way of knowing whether he speaks the truth about the power of the BIS or its capacity for long-term planning, but those are not required to make the case, for if what he has stated is true, then he has made the case for us and I’m merely pointing it out. It seems pretty clear to me. Just for the record, I’m not arguing the dollars’ brief, especially after having run the treadmill trying to stay ahead of its depredations for decades now. I’m just trying to make sense of the world coming at us and trying to discern whether it will be beneficial to humankind or be just another iteration of our previous experience. Actually, I think ANOTHER’s narrative is the one that is conspiratorial, not that he was necessarily involved in those conspiratorial revelations, and from many things he said it seems he was not in the loop on a lot of stuff, but that what he presents required utmost secrecy at the highest levels for many years and the cooperation of quite a number of vested interests to accomplish the stated goals. The fact that many people not in on the deal took the hit, as it were, makes it all the more apparent for what it was, if we are to take his words at face value. I’m not saying that I believe the BIS/Euro/Let-The-Dollar-Hang-Itself conspiratorial scenario. Not at all. I’m more of the opinion expressed by many far more knowledgeable and accomplished in these investigations than I am that the evidence of co-operation between supposed enemies is more often the case. A sort of plutocratic anarchy.))

frycook said...

"You mean the BIS has no control over the LBMA? I thought they were the big, bad bosses of all things financial! They can “destroy” countries in a “second of storm” and they command the affairs of CBs to the level of forcing their gold buys to occur only via LBMA paper but the LBMA is out-of-control? What am I missing here?"

The BIS is the CBs of the world.

((I won’t contest that point but it’s a non sequitur vis-a-vis my critique of ANOTHER’s logic stream. Whether the formal organization is a collective of CB’s and speaks for them as a whole or something more specific, which only purports to speak for them all, is something I can’t know and thereby I can’t have a sense of conspiracy about them and if it seems that way I’ll have to work on my editing to get the point clearer.))

More specifically, it is mostly the CBs of the non-dollar part of the world, which are the monetary delegates representing the areas that were "looted" as you say.

((Well, one can wonder why the northern powers came down so hard on the Non-Aligned Movement back in the day and whether the post-colonial nations have more power at the BIS than they traditionally have exercised at the United Nations. ANOTHER, per your post on his Q & A with Michael Kosares, tells us that the Swiss and the EuroCBs “control” the BIS. And as you pointed out, the permanent board members look pretty status quo, don’t include any southern-tier countries and then there’s the potential 12-to-9 configuration possibly giving the upper-hand to Belgium, France, Germany, Italy, USA, UK. It’s hard to figure how egalitarian it actually is or will be. From the Sting speculation they’ll certainly be able to afford to be generous, so maybe all that acquiring is a good thing!))

frycook said...

I know, Greenspan finally took the Fed's seat at the BIS, I think it was in 1994. But still, as far as central banking goes, the BIS is a lot more globally balanced than the IMF, wouldn't you say?

((Yes, it does look that way, and again for the record I’m not in the IMF camp at all. Remember though, part of the game over these years involved recycling petro-dollars which had a real deleterious effect in those nations which became indebted. The IMF as I recall from studies done a long time ago was serving the interests of Western Banking as a whole and not simply the so-called dollar faction throughout the multitude of financial crises plaguing the world. I think the IMF was everybody’s bully and was ever useful if you had money on the line. The Europeans don’t get off scot-free by any means, due to their enthusiastic cooperation in these debt and dominance schemes. We can hope they have turned over a new leaf because it’s apparent that the US has not.))

"so the BIS has the power to price gold, huh? By proclamation? By decree?"

If the CBs started printing the people's money to buy gold, ie. to draw private gold into the BIS (CB) system, would that not "price gold"?

((You’ll have to elaborate on that, I’m not sure I follow. Do you mean that the BIS would buy an ounce of gold from me with newly printed currency? And if they did that in order to “re-value” gold, how would that not cause more currency to be out there in the marketplace bidding on goods? And how would that help anything other than my momentary purchasing power? The part that I always liked about your take on things is that FreeGold would happen naturally, in a sort of organic evolutionary way. This whole BIS thing is the sticking point for me. I can see gold buying currency and having the impact that way but not CBs buying gold as the means leading to FreeGold.))

frycook said...

"You have CBs that are able to backstop a paper-gold arrangement that drives the price down to production cost and in essence cheats the seller of any gold that is sold into such a price-rigged environment – ANOTHERs so-called “discount value”. Truly a socialistic scheme whereby individuals, companies and countries are looted for the “greater good”. What is it about ANOTHERs totalitarian message that gets past the normal filters that most folks have regarding elitism and rigged markets and such?? Maybe it’s the payoff?"

Clearly you are compelled to pass moral judgement in the process of your analysis. I know, it is hard to avoid. But I suggest that there is value in being able to see reality from all sides. To see the good and bad in things rather than to view things as good or bad in themselves. The latter makes your analysis too rigid as you much assign fixed values to things.

((Maybe so. Sometimes I do wonder about FOA’s point that the CBs were doing the best they could with a world already in motion and that they really put their minds towards doing the right thing. That’s plausible in some respects but it’s hard to figure where it all breaks down. Does that include the CB of the USA? I guess I’m always looking for the flaw, the inconsistency, the part where one says ‘hey, that ain’t right – even if it is supposedly for somebody’s greater good’. It’s always about who gets to make the call for the rest of us.))

frycook said...

Perhaps in the above quoted paragraph Another's message to which you assign a negative value was only describing the paper-gold arrangement that had grown out of the $-system. And which could only be broken by encouraging it toward its own inevitable end.

((That could be. It is an interesting and subtle point and one of the one’s I recall thinking about as among FOA’s embellishments on the general theme. I could be mistaken, I’ll have to see if I can find where that idea first crops up on the trail. The one that’s kind of a judo move, Europe actually selling into the dollar-paper-gold game to hasten things.))

I agree with you that the world would be better without central banking. But do you really see that as a possibility? I don't, at least not in our lifetime.

((No, I don’t either - barring something really out of the blue. But it doesn’t mean we need to stump for either “side” – IMF or BIS – and maybe I am misreading things but it sure seems like ANOTHER and FOA do a lot of rationalizing in support of this change as opposed to merely describing it objectively. And since we’re not really sure how the new game is really going to work, are we really sure that we should support the concept – whether it benefits us as individuals or not? Hey, I’d be happy to see the dollar sail slowly into the sunset and new arrangements made that include all manner of regional arrangements and gold and oil and barter and new currencies and countries emerging as sovereign in truth and finance. And illegitimate debts reneged and noones liberated from the tyranny of stupidity and inflation. And if gold retained its purchasing power or returned a few percent a year I’d be happy. Much happier than the apocalyptic scenario described by ANOTHER and then toned-down by FOA as time went on.))

frycook said...

"The BIS stopped the CB sales and drove physical gold from Asia as a last resort! Oil has locked the CB and IMF gold from sales of significance. What metal trades worldwide, is all there is."

It seems to drive you crazy that you can only read Another's message as praise for everything that he describes. I don't read it that way. He and FOA were quite clear that they were trying not to judge things as good or bad. Not that there is anything wrong with passing judgement, but it is simply a different exercise.

((Good point. I’ll try putting on a different set of lenses on my next run through the archives. But maybe I’ll just do one more scan for all those juicy quotes indicating that FOA and ANOTHER were at least intermittently proselytizing for and putting a positive value judgement on this new arrangement as do most of us who first encounter the ideas and I’ll just put those in simple bullet points without all the other vituperous jazz.))

Thanks for taking the time to respond and critique my analysis.

Best regards,
dragonfly

costata said...

Satya,

Compare frycook's earlier comment with the one where he is responding to FOFOA's response to him.

Do you see the improved clarity and focus when frycook is responding to FOFOA?

When frycook comments on A/FOA's posts it is like listening to a prosecutor grilling a witness who isn't present in court. The "jury" will be led to any conclusion the prosecutor desires. That is one of the areas in which I see sophistry in his writing.

The conspiracy theories of tdfxman and others are probably well grounded in reality. To quote a Benedictine nun who led a campaign in Spain against the Swine flu pandemic fraud "some people want to take over the world, this is a story as old as mankind, Ghengis Khan, Rome ...."

Will they succeed? I suppose it's possible but is it probable? What is the point in discussing these theories?

As to the "league", I was referring to the standard of focused critical thinking of A/FOA and carried forward (and developed further?) by FOFOA.

In reading FOFOA's writing do you see that he addresses probabilities in his analysis as opposed to possibilities. There is also consistent logic and an attempt to gather facts and evidence.

The references and quotes from the A/FOA archives clearly demonstrate that FOFOA places great stock in the information and knowledge that they attempted to impart. He also obviously thinks their writing has contemporary relevance. The recent validation of Another's claim that the LBMA was leveraged 100:1 twelve years ago should lend some weight to that judgement.

If A/FOA's words seem to conflict or do not make sense to the reader, whose failure is it? I think humility would dictate that the first place to look is to the reader.

Lastly, is FOFOA partisan in relation to the material in the A/FOA archive? His pseudonym might offer a clue to the answer to that question. However, I would suggest that no-one should underestimate the amount of research FOFOA has undertaken, and continues to undertake, to validate/invalidate the Euro Freegold concept.

miked said...

Personally I am enjoying the debate. I certainly don't think Dragonfly is out of his/her league... at all.

There are many good unanswered points casting doubt on the certainty of a one time gold price upward revaluation.

Here is another. In whose interest is it for the paper market in gold to crash? I'd suggest only parties holding physical gold. Parties holding physical gold are unlikely to trade paper gold and take delivery. Why would they risk it when they can just buy the real thing? So who will trigger the run on gold? Only a select few have the resources do it but why would they?

The only scenario I can imagine triggering a gold run would be if the spot price deviates so much from the physical price that investors insist on delivery en masse to arbitrage the difference. What could cause such a difference in pricing? I'd suggest only a total lack of confidence in the solvency of the counterparties writing paper gold contracts, and the central banks who back them up.

Jeff said...

Miked,

Don't assume that a paper gold crash would be intentional. Every success carries the seeds of failure, and paper gold has been successful at manipulating for a long time. As the system grows it becomes more brittle, and eventually breaks.

Better to ask, what would hold the system together? ANOTHER thought the paper gold system was finished 12 years ago, but it wasn't. Why not? What held it together? Can it continue?

As for leagues, surely we are all in the league of extraordinary gentlemen.

SatyaPranava said...

costata,

actually, i'm not sure if I see a clarity and focus emerge from dragonfly's more recent posts; rather, I see it as a change in style or tone. I do agree that his styles was more polemic in nature, and at times I am inspired by the same style. In many ways I consider that both a blessing and curse, though it depends on the circumstance.

But ultimately, on a deeper energetic level, I saw that Dragonfly was speaking directly to A/FOA on the blog, and expressing a frustration about lack of clarity, and also about credibility, that only comes with the advantage of a decade of hindsight. he also might have been talking and expressing frustration toward the system itself, and that energy might have come through. i don't know as i don't know dragonfly very well.

i've been here for well over a year, and obviously i appreciate FOFOA's approach very much, even though his style and some of our beliefs are different. In fact, especially because they are. Coming from a philosophical background, again, i appreciate a dynamic, critical approach.

Maybe you saw something in dragonfly's posts that I did not. Something deeper. But for me, coming from a Rabbinic tradition where months of debate can focus around a single word of text, again, I appreciate a critical perspective as it helps us counter potential group-think.

I also don't have a book on tdfxman, and haven't noticed anything completely out of line re: anything i believe; however, I quite agree with the Spanish nun, whom I'm assuming is Sister Dr. Teresa Forcades (if not, i'd be curious to know who).

I also don't know that I've seen any vast pontification of conspiracy theories on here, though as someone who has experience in both Washington and Jerusalem and many of the relations between, I can tell you that conspiracy (in the tone and spirit of term) happens every single day, and especially at the higher levels of political and economic power. In fact, it happens at every level of society, but especially at those levels where the thirst for power, money, and control are greatest, not just amongst the little people. And especially in countries who have to compete with the "bad" guys of the world and still pretend they're wholesome democratic/republican (in governing style, not political parties) nation-states. But with that being said, from someone who's studied conspiracy from an anthropologic perspective, the spirit of conspiracy as it's stated from the masses seems to represent an inherent frustration about the ethics and morals of those who rule from on high with respect to things that they have no control over. But from my experience, some things that are alleged to be conspiratorial are simply complex factors that people who don't have access to answers simply don't understand. Some are things about which they're completely correct about, but are quite legal (though, from their perspective unethical and definitely immoral). Yet even others are completely true and the masses have absolutely no clue about them.

In fact, the very EU itself is one of those entities. It was created outside of democratic halls, by a coordinated set of actions over dozens if not hundreds of years and by the same elite cadre of people who many feel have not a shred of historical interest in the fates of the masses besides as useful chattel and labor.

cot'd

SatyaPranava said...

Now I'd like to be clear, I don't usually discuss these things in here, because the tone is different. But it's not that I don't think about these things. It doesn't make them any less true or relevant. It also doesn't make them any less probable in determining the future. In fact, I would argue that much of history would argue that political, economic, and social power will always remain concerted in the hands of the few who desire such power, even if those foundations are of sand and not concrete (also sand).

I do that because my goal is not to interrupt the flow and the ideological biases (however correct or incorrect) of most of the posters on this site. But it's also one of the things that makes me wonder if some of those who post mocking such forces do so out of knowing (with professional counter-intelligence motives, or motives of keeping the system together), or out of sheer ignorance. But i consider a major deficit of an otherwise interesting well-articulated, and captivating perspective.

Again, I come here precisely because it's the opposite of how I perceive the world and its economic and political power. So I hope I'm clear on that. Thus, I had really wanted to respond to your point about probability. I am not sure how to ascribe probabilities (or determine any potential statistical significance) to the things said in this blog, but I appreciate the conceptual and rational attempts by all thereat.

Though to answer your next question, the point about discussing these theories is that unless one or all of us has impartial inside knowledge of what is coming down the pike, we need to determine what is likely. But also, to be fair, based on your line of thinking (and i'm sure that of others), if someone here did have that knowledge, then by default, s(he) would be engaging in a conspiracy which is either not likely, or doesn't exist. Thus, we're left with intelligent people who have different perspectives on the historical, social, political, economic, and geographic forces, just to name a few, who come here to try to determine what the future might hold.

Our esteemed writer, FOFOA simply imparts greater probabilities (reasonably or not) to the writings of a supposed duo who wrote ten years ago.

In fact, FOFOA even referenced his position on conspiracy in the Virtual Currency post, though I must admit my thinking is always on different levels. i.e. it was meant both to consider the practical real-world considerations of a truly virtual currency, in addition to the forces that desire to have people respond to stimuli and games that ultimately consolidate their power and wealth.

But in that post, he linked to another site where an author presented his case for why conspiracies don't exist. I thought that article interesting, though certainly nothing very original, and I thought the responses in the comments (by dragonfly as well) to give a richer and fuller context to those speculations.

cot'd

SatyaPranava said...

ow, w/respect to focused critical thinking, I think that is one of the beauties of FO/FO/A's styles (esp. FOFOA, w/whom ia most familiar with), which very few here, if any, can match (definitely not me). so again, I realize that dragonfly's style may not appeal to some, esp you, rhetorical, semantic, and polemic in it style.

But one thing this blog is usually pretty good about is actually responding to the arguments made. To his credit, FOFOA did respond to dragonfly. But i'm still not sure I have heard a good discussion of the many points he made (though this discussion seems to be developing here, which is good. i hope it continues).

re: the information and knowledge of A/FOA, i think that FOFOA has expounded quite nicely on what they say. In fact, I'm in awe of his ability to do that, as i suspect we all are. But that art does not necessarily confer any predictive quality to it. and this is what I see some people questioning.

I'm not sure how much stock to put into A/FOA's words for myriad reasons. But I'm not sure that that necessarily has to do with the reader being humble and looking inward, necessarily. In fact we all read something different from their words, as we would anyone's words. This is why great poets and authors have such followings. One of the beauties and weaknesses of text is that even with an articulate writer, the message is more derived from the inferences of the reader than the implications of the writer.

So I think FOFOA is rightly partisan, because he can see a kernel (hell a potful of popped kernels) of insight into the texts of A/FOA. I don't have that insight, which is why i come here. But I think those that question their insight is an important dynamic of this blog and hope to see it continue.

costata, thanks for the response, i hope that the dialogue will continue.

Satya

miked said...

>>..Don't assume that a paper gold crash would be intentional. Every success carries the seeds of failure, and paper gold has been successful at manipulating for a long time. As the system grows it becomes more brittle, and eventually breaks.

Thanks for your opinion Jeff. I am particularly interested in the timing. I don't want to be old and grey, sitting on a pot of gold and still waiting for the endgame to play out.

I don't doubt that the whole house of cards will come crashing down around our ears at some point. Even the most naiive market participant has to acknowledge that pressures are building and debt levels are dangerously high. It would take 50 years of belt tightening to just pay down total existing debts, let alone levels by the end of this downturn.

So, we all know at some point the game will be over. The question is, is it imminent or are we going to be waiting another 10 or 20 years to see that day?

What might the trigger be, and would there necessarily be a gold run just because currencies are in trouble? And if there were to be a gold run, would it wipe out the banking system as we know it, or would it just take out a few over exposed merchant banks and leave a lot of paper gold investors empty handed?

Even if there is a gold run, probably only one player in 100 will have the cash on hand to take delivery as they are all leveraged up to the eyeballs. If one investor in 100 took delivery this would not crash the system.

I don't have the answers, but these are questions we should be asking if we are planning ploughing in significant portions of our wealth into gold and silver.

Comments, complaints and ridicule are all welcome.

dougfisk said...

Thank God for dragonfly/frycook. I do not know what "league" he is supposed to be "out of", and I am not arrogant enough to even ponder.

I have read this blog and the comments from the beginning. Sadly, "I call B.S." has been lacking in the comments; which have heretofore consisted mostly of group-think and inside baseball.

I am just a simple caveman lurker... This is my favorite blog and I have continued to read it, regardless of the previous vacuity of the comments section. FOFOA posts are so exceptionally well written, that I will continue to read it even IF the whole Arab oil / BIS / gold price manipulation premise is paranoid conspiratorial nonsense.

Once again, bravo to dragonfly and bravo to FOFOA for responding in a respectful tone.

zenscreamer said...

RE: timing -- I don't think we will have to "wait" for bullion to be our safe haven, as the whole world is already in Kondratieff winter whether the man in the street knows it yet or not.

The issue of how long the $FRN/IMF faction will retain hegemony is a hot one, and I for one am watching the daily economic and political developments closely. Also an open question is how soft a "landing" the $FRN/IMF system and member economies will get -- is it even possible to wean the United States off of the teat of exorbitant privilege slowly enough that the mass of voters won't wake up.

Certainly the extend-and-pretend tactics that the Treasury & FED are using won't help in the end, but the Trilateral Commission may very well know something we can't guess about how this all will play out.

I don't think that there is a government in any developed country that wants to bring about true social disorder, but humans make mistakes and its best to be prepared.

robert said...

Some think the current financial state of affairs continue for another 5 or 10 years, or maybe even longer.

I think we hit the wall sooner rather than later.

I say this because of the laws of compounding - and the massive amount of new debt that it takes just to keep the financial system barely afloat.

With the amount of debt and leverage currently in the system, we are highly vulnerable to any kind of economic shock that may await.

Jeff said...

Agreed, timing is the big question. Most of us are here because we believe the end is nigh, but so did ANOTHER years ago. The trigger could be anything and when (if) it comes we will only recognize it after the fact, unless of course FOFOA is right and the EU/BIS is playing the final hand even as we speak.

This game has gone on too long!

FOFOA said...

Hello Dragonfly,

I'll use your format for ease, keeping you in ((parentheses)).

First I want to jump down to one of your lines in the middle:

((The part that I always liked about your take on things is that FreeGold would happen naturally, in a sort of organic evolutionary way.))

Thank you. Perhaps you noticed my comment that seemed to raise your ire was delineated into two separate parts by the line, "The other angle on this discussion is..." You'll notice that part 1 deals with the more natural, organic evolutionary forces at work while part 2 deals with the incentive, motivation and even the possible long-standing agenda of the non-dollar part of the world to help nature along its course.

Your seemingly visceral response to my comment honed right in on part 2. That's fine. I understand that private, unpublished agendas are a lot harder to prove than natural forces are. Natural forces can be demonstrated with empirical evidence while hidden agendas must be illuminated through hearsay and circumstantial evidence. Believe me, I'm not a fan of any analysis that uses unobservable theories as its fundamental building blocks.

So you correctly indicated that the vast majority of my blog is dedicated to the natural, inevitable, unavoidable evolutionary path leading us to a free floating gold price. Which, of course is the natural, inevitable, unavoidable consequence of the dollar losing its reserve status, which is solely responsible for its (the $IMFS') ability to contain the gold price globally at parity with its own paper contracts. Everything else I describe is just lined-up dominos.

Now you might say this aspect of my approach to Freegold is different than A/FOA's. But I would argue that it is not. There is a big difference between the sheer load of mind-bending that we each had to deliver to get our points across, since they went first, but not in the fundamental concept behind the message.

You see, I think Freegold is all about defense, not offense. This is a difficult-enough concept to get across even while having the backdrop of the A/FOA archives. I can only imagine the headaches they went through with combative participants like you while having no body of work to fall back on. A fair and cordial debate is one thing, but some of the accusations leveled at FOA went too far, IMHO.

Freegold is all about defense, not offense. It is not a competing system trying to beat out the others. It is the system that emerges when the imposed system fails. It is the void of a failed system. The best anyone can do is to prepare their little corner of the world for it. Just like the euro architects did. Just like the CB's of the BIS did when they started collecting gold after WWII. If you think we need to talk the world into Freegold, then you are misunderstanding it.

Just try to imagine explaining this without any voluminous backdrop or context. A/FOA were coming from the perspective of people that had already made preparations for the inevitable collapse. And they wanted to share this knowledge so that others could prepare. But they first had to explain the reasoning behind their preps.

And in the process, they had to explain what was at stake in order to get people's attention. Much of what they had to literally spell out for the reader is accepted reality today. I wonder what the Gold Trail would have looked like had it begun in Sept. 2008.

Cont...

FOFOA said...

...

Here's a great quote I found in the archives:

"Isn't it easier to blame leaders and bankers and so on for great evil than to face our smaller complicities which enable them?

I doubt that the idealistic position on hard money will hold much sway in the councils of decision-making that shape the world and guide the relations of nations.

So Free Gold is interesting. What if those nasty Euro-socialists are merely doing what they must given the deteriorating geo-political situation. Maybe this isn't even their baby ultimately. Yeah, they got stiffed in 1971 - but I suspect this is about alot more than that humiliation. How many large-scale considerations are playing into this resetting of the playing field? China, Russia, Brazil, Oil, Global Crime Syndicates, Islam, etc."


That's right, you wrote that. And I like it!

Ironically, it was something you said that led me to take part 2 more seriously. But that's neither here nor there.

((I don’t know if the BIS actually knows or can honestly represent what it is to itself, much less whether it has come to grips with its past activities and somehow redefined itself and its mission in order to drive such a dynamic and intricate change in world financial affairs as this theory suggests.))

Do you believe in fractals or scaling? Can an ant colony represent what it is to itself? Does it need to? Unlike you, I don't believe this theory suggests the BIS must drive intricate changes. And I assume you are referring to the BIS' Nazi past, are you? What does that have to do with what we are discussing?

((It is ANOTHER who speaks of the BIS as a monolith in so many of his communiques. I have no way of knowing whether he speaks the truth about the power of the BIS or its capacity for long-term planning, but those are not required to make the case, for if what he has stated is true, then he has made the case for us and I’m merely pointing it out.))

A defensive strategy is tailor made for the long term. I think it was you who misunderstood the thrust of Another's message, perhaps because of your own ideas about the power elite.

((Actually, I think ANOTHER’s narrative is the one that is conspiratorial, not that he was necessarily involved in those conspiratorial revelations, and from many things he said it seems he was not in the loop on a lot of stuff))

Perhaps, but there are two different kinds of "plans". Those that fight against nature, and those designed to receive an "assist" from nature. Everything in Another's narrative can be viewed as the latter. And therefore, it can be viewed as a long term defensive strategy.

((but that what he presents required utmost secrecy at the highest levels for many years and the cooperation of quite a number of vested interests to accomplish the stated goals.))

I disagree with this statement. There have been many open moves on gold over the years. And they are always openly marginalized and repudiated by the $IMFS. I think if you try viewing it my way you will see the difference.

Cont...

FOFOA said...

...

"If the CBs started printing the people's money to buy gold, ie. to draw private gold into the BIS (CB) system, would that not "price gold"?

((You’ll have to elaborate on that, I’m not sure I follow. Do you mean that the BIS would buy an ounce of gold from me with newly printed currency? And if they did that in order to “re-value” gold, how would that not cause more currency to be out there in the marketplace bidding on goods? And how would that help anything other than my momentary purchasing power? The part that I always liked about your take on things is that FreeGold would happen naturally, in a sort of organic evolutionary way. This whole BIS thing is the sticking point for me. I can see gold buying currency and having the impact that way but not CBs buying gold as the means leading to FreeGold.))

It's called imputability. If the CBs wanted to, they could put out the offer to buy and sell any and all gold at $50,000 per ounce. How much gold do you think they would get flowing in? The answer is they would get less than you think, because that price would be instantly imputed across the globe as long as the offer was credible.

And the very action of making the offer would expose the collective consciousness to certain realities that had been previously marginalized. The amount of cash ultimately printed would not be sufficient for the inflation that you mentioned. If it was the Fed that did this instead of the BIS, the final result would probably be a run on the US gold at that price.

I'm not suggesting this will happen, even though something similar happened in 1934. But it is a possible option, and it is one way to revalue gold and devalue currency in the face of an imminent catastrophic collapse.

((But it doesn’t mean we need to stump for either “side” – IMF or BIS – and maybe I am misreading things but it sure seems like ANOTHER and FOA do a lot of rationalizing in support of this change as opposed to merely describing it objectively.))

Again, we have the luxury of talking about this within the context of the Gold Trail archives. They did not have that luxury. So their descriptions had to spell out all the players and their incentives, motivations, past actions and possible agendas. I do realize this came across as stumping to a lot of people, but I didn't read it that way.

((And since we’re not really sure how the new game is really going to work, are we really sure that we should support the concept – whether it benefits us as individuals or not?))

I believe we should support the concept, obviously. But that is different than fighting for it politically. The benefits of free gold are available to anyone, on any scale. It's not like a big conspiracy where only certain people can buy physical gold before the revaluation happens. Anyone can. In fact, it is true that the richer one is, the less physical he will likely be able to obtain as a percentage of his wealth. So if you are not supporting the concept of free gold, then what exactly are you supporting? Hard money? Wall Street?

I don't see this as a Eurocentric thing, even if the euro was designed for it. I simply view at it as the euro having built better levees for the coming hurricane. Shouldn't we encourage everyone to follow their example?

((Good point. I’ll try putting on a different set of lenses on my next run through the archives. But maybe I’ll just do one more scan for all those juicy quotes indicating that FOA and ANOTHER were at least intermittently proselytizing for and putting a positive value judgement on this new arrangement as do most of us who first encounter the ideas and I’ll just put those in simple bullet points without all the other vituperous jazz.))

What are you hoping to prove? That A/FOA had a Eurocentric perspective? I have been describing the same concepts without that perspective. So what's the difference? If the devil describes the sunset does that make the sunset bad?

Sincerely,
FOFOA

mortymer said...

What I admire is the FOFOA´s patience.
This on the spot blog could help to find some answers to newbies:
http://www.goldsubject.com/
(short, clear, summarized)

Jeff said...

FOFOA (or others),

If we do not see an EU revaluation or gold backing of the Euro, and instead the IMF (with or without the EU) does a bailout of Greece based on the fiat extend and pretend games we are so used to, is there an alternate path to Freegold? Or are we just back in the waiting game? Or is Rickards right and the focus becomes the US dollar possibly being backed by gold?

Is there a plan B for freegold?

miked said...

Evening Jeff

Personally I cannot see the urgency for a gold backed currency until the US has payment difficulties on its debt. This could be the trigger for a dollar collapse, as the treasury find it impossible to raise new debt at acceptable rates, and instead resort to printing to pay their debts as they fall due for roll over. This is a fair way off, as US debt is not even at PIIGS level yet.

Incidentally, I don't know if anyone noticed that all PIIGS except Ireland have huge holdings of gold as a percentage of total reserves. Ironic they are at the epicentre of the debt crisis.

Desperado said...

Reading through the dragonfly/FOFOA debate, I was struck by dragonfly's expectation that Another and FOA should have been able to describe the entire timestream of gold's monetary ebb and flow like an electrical engineer designing a circuit.

One of the interesting aspects of Another's writing style was the way he used hints and allusions to themes and left the reader to fill in the blanks and make judgements and interpretations.

IMO, dragonfly pointing out various discrepancies in Anothers writings is like trying to debunk a Greek oracle by playing a tape recording of someone else's visit to that Greek oracle 12 years in the past. The Greeks always knew that an oracle's predictions were laced with half truths and sometimes outright deceptions.

Clearly, Another used this style not only to force readers to think, but also to cover some of his tracks. His writing was very effective due in a large part to this writing style.

For dragonfly to now try to discredit or refute the oracle after all these years because some of his predictions to different parties were inconsistent or did not happen in the exact way or in the time frame expected, is IMO, off target and missing the point.

Tyrone said...

I don't know if anyone noticed that all PIIGS except Ireland have huge holdings of gold as a percentage of total reserves.

No, miked, nobody has noticed.

(Greece is the Word)
Greece is less than that but still has a significant amount at over 100 tonnes, and then you have Ireland which only has 5 tonnes. So the amount of gold they have to back up their reserve positions, to, in effect, back up their central banks varies widely. And I've actually read the S&P and the Moody's, the ratings agency reports on these countries and they don't even mention gold!

[FOFOA: The PIIGS combined gold hoard is 3,233.8 tonnes, more than three times that of China. And their combined population is only 133 million. So the PIIGS actually have about the same amount of gold per capita as the US. And they have 34 times as much gold per citizen as China. In fact, Greece alone has 14 times as much gold per capita as China. China has 0.7 tonnes per million citizens. Greece has 10 tonnes per million and the PIIGS as a whole have 24 tonnes per million!]

.

costata said...

FOFOA,

This via Casey Research. Looks like a run up in gold may be imminent. (My emphasis)

http://www.caseyresearch.com/displayCdd.php?id=410

"Good News: Gold Is Going to Fall!

Old friend Clyde Harrison sent this across the fiber optics yesterday. Those of you familiar with the advantages of being a contrarian will read into it a very bullish signal for gold.

Poll: 93% of Investors Believe That Gold Will Fall
By Rutam Vora, 21 April 2010 (Commodity Online)

At a time when gold prices reeled under pressure, for a sustained period after hitting their all-time high in December 2009, the perception towards the yellow metal seems to have reversed with investors hinting at weakening of gold prices in the near future and strengthening of other investment avenues...

In an online opinion poll conducted by Commodity Online, a majority of the respondents have hinted at a possible fall in gold prices in the near future, and better earning opportunities will come knocking on the door.

In an online poll of a sample size of 21,600 respondents selected from across the globe, 93% or 20,100 of the total sample size had opined that there would be a fall in gold prices due to a recent upbeat mood in the global equity markets, while only 1,400 respondents contradicted the stand, 0.46% did not comment on either side.

This showed that most of the respondents believed that there would be a fall in gold prices in the near future due to a recovery in global equity markets...

Similarly, of the total respondents as many as 53.1% believed that the US dollar would replace gold from its status of 'safe haven.' Looking at the recovery of the US economy from the nightmarish recession which had started from the US and hit the world economy in 2008, the dollar was found gathering steam once again.

However, 46.8% of the respondents contradicted the view and maintained their skepticism towards the dollar and put gold to their preferred investment mode..."

Desperado said...

It looks like the rich are starting to dump their dollars into physical assests besides gold...

I watch the jewelry auctions, and I subscribe to the Sotheby's and Christie's catalogues. Prices for top-grade gems are going through the roof. I was talking to a jeweler friend yesterday who just returned from a Sotheby's auction. He said he couldn't believe the prices that some of the jewelry was going for. One diamond that he expected to be able to buy for $200,000 went for $950,000. He said he was staggered by the prices.

It's apparent that BIG money is buying items of intrinsic value for the future. These buyers don't really care whether their ruby rises in price over the next ten or twenty years. They know that twenty years from now that ruby will represent WEALTH.

miked said...

That sounds to me more like some people are scared they will have to uproot in a hurry and take their money with them across borders without declaring it.

Greek bankers perhaps? :)

Seriously though that sounds like some people are anticipating a Mad Max scenario. My banker says that about 1% of his clients are thinking like this. Still a minority view but a lot more popular than 5 or 10 years ago.

S said...

FOFOA,

The leaked document via the fed castigating derivatives legislation is very telling per FT Alpha ville (it would crimp Us competitiveness). if that doesn't say it all.

@frycook - much to agree with in your skepticism re the BIS/central banks and Freegold.

S said...

@frycook

martin armstrong's latest is a piece you might appreciate.Money is a measure of productive value of a nation. While there is much to disagree with here like human nature it is worth considering in view of the debate around the BIS and the Fed and their intentions.

http://www.usafreecall.com/The-Paradox-of-Solution-4-18-10.pdf

Jeff said...

Fascinating action in old Europe. Greece is boiling and threatening to set the dominos in motion. Portugal downgraded.

KnallGold said...

IMF, SNB to hold conference on IMS

Interesting part is here "improving the supply of reserve assets"

http://www.imf.org/external/np/sec/pr/2010/pr10171.htm

Btw ANOTHER USAGold oldtimer here...

Byzantium said...

Hi FOFOA,

thanks for the earlier reply.

i have more questions, but i better read more of the older material first, as the answers may be there.

In terms of the culture of this blog, is the intention essentially a gathering of like minds to discuss unfolding events, or is respectful challenge actually welcomed as the prompt to demonstrate the resilience of the core arguments?

By the way, as I write this, the dollar is soaring, and so is gold. Good sign eh? this hints at the oft talked of decoupling.

Mike said...

but the EU is collapsing, when will the BIS use this nuclear weapon?

raptor said...

hi guys,

all this discussions here and many other places ? China will buy so much gold? russia will double its holdings ? India just 4-5% reserves ? Euro CB banks will be net buyers ? This and that country have so much gold ?....but why never I have found a information how much gold the middle east countries have ?
What is the amount they bough/sold over time ? are their reserves increasing/decreasing ? a graph ?

They should be the most interesting part of the story - because they hold the bulk of oil ?
And all this oil sold over time does not seem to impact so much the prosperity of middle east countries ?
Except may be in recent years, gargantuan construction projects ?
and couple of super rich dictators ?

any more details on the process and the current state ?

frycook said...

Howdy FOFOA,

Thanks for your thoughtful responses once again! You’ve pointed out a number of things I need to consider and I appreciate that effort to bring me up-to-speed, as I know you have only so much time for these exchanges. My thinking has changed over these years and it could well be that frustration and other emotions have indeed spilled-over and unduly affected my assessment of both ANOTHER’s and FOA’s message. I had a couple of buddies in my early teen years that almost threw me out of a rowboat one morning for being cantankerous, so I try to be careful, even after all these years! Anyway, I’ve pretty much covered what my present take is on the subject and I’m going to retire to the bleachers and watch the game progress. I’m hoping things will go into extended-innings and not end-up in a brawl on the field, much less in the stands. I look forward to following your excellent work and hope that things turn out in the sense that you perceive them regarding FreeGold and the future of economic exchange on our planet. Best regards, dragonfly

frycook said...

@S - thank you for the link to the latest from Martin Armstrong - pretty heady stuff - I'm in the middle of it right now. His elucidation of things is really interesting. I'm also avidly following the debate that ensued from the CFTC hearings, as well as the blog entries over at Chris Martensen's site and at iTulip.com

idi said...

watching lloyd blankfein's pantomime "grilling" by senate stalwarts yesterday reminded me of an aphorism of the late, great J. ken galbraith;

"the study of money, above all other fields in economics, is one in which complexity is used to disguise or evade truth, not reveal it."

Martijn said...

but the EU is collapsing, when will the BIS use this nuclear weapon?

FOFOA, others,

Would you say that the increased focus on the eurozone and the downgrading of Portugal is the US intensifying its war against the euro, or merely a natural course of events?

sutski said...

@raptor

"but why never I have found a information how much gold the middle east countries have ?"

Indeed something I have been wondering. With the USA buying a million barrels a day from the Saudi's, (at any price you care to use) that equates to an awful lot of gold/currency per day??!!

Over the last 20 years, that must be a staggering amount of "gold reserves" or "paper gold reserves" haha...

Seriously though, I really would like to see a number or two regarding the middle easts tonnage!!

Wiki says

24th Saudi Arabia 143.0T 10.2% of its reserves
35th Kuwait 79.0T @ 11.4%
73th Iraq 5.9T @ 0.4%
64 Qatar 12.4T @ 2.4%

If this is so, what have they been accepting for oil I wonder...

Aleksandar said...

100 to 120 billion in loans for Greece for a 3 year period. That comes down to just above 10k per every person (including kids and babies) in the next 3 years. Or about 40k per family. An average annual salary here in The Netherlands is somewhere about 30k-40k bruto. 2/3 of that probably in Greece. A Greek family will need to pay 3/2 of their average anuual salary back in 3 years.

No way. We are not seeing our money back. At least thats settled.

mortymer said...

Martijn:
What I see clearly is the paper burning.

If to believe a point of view as a war between US and Euro now then => now race with time in a battle between: Rating agencies which support their card/ace - paper wealth (trust) - versus old real values in this new Euro currency standing straight.

Will Europe economy withstand? Time only will tell. This is not the last attack I bet, it seems like well thought tactics if to look at it this way.
If I was US I will try to attack weakest spots of Euro and it will not be Greece, like before Iceland, Ireland, Latvia - its perifery :o) but I will go for the heart -> Germany x France alliance.
Note the consolidation with the Lisbon treaty - a well timed action.
Russian card has been tried but failed.

If to believe in Freegold then I take it this way:
On political level - Euro needs to go through battle and shake down somehow the old system dollar ties attached to it and then it will be more freegold like. If it was painless it was done long time ago. Other issue is that if freegold will be implemented it has many other implementations and consequences in real life as well. Btw: Only politicians could screw it... or objectives have changed since Another appearance.

All above is just one from many points of view one could look at. I prefer to see what is happening and now thoughts go to interest rates and timing of Ice,Ire,Lat,Gre problems discovered - rates will be, I believe, the real big turmoil...
And well, from a personal level I know that only in a real battle you find strength, untill then you dont know yourself. So I have not made my mind, I watch, hedged.

FOFOA, I was thinking about you and I have a feeling that one of the rewards you get from this is once you will know more about Another.

Has anyone thought that it is quite strange that his name has never been publicly disclosed? Quite an unusual thingy in 20th century :o).

Martijn said...

No way. We are not seeing our money back. At least thats settled.

Although that does leave Greece's gold out of the equation.

CloudFive said...

100 to 120 billion in loans for Greece for a 3 year period. That comes down to just above 10k per every person

150 billion euro divided by 300 million eurozone inhabitants results in about 500 euro per person, or 167 euro per person per year...

(Which still is about 500 euro too much of course)

S said...

Martijn,
Excellent observation. The morons at CNBC echoing the line that the Europe situation helps justify more low rates for longer. The only way the dollar survives even in a blow off the top inflation is to lay waste to the euro. Note that in all the discussions coming out of the usual suspects no mention of the UK. Albeit outside the eurozone, that shouldn;t surprise. The Fed is desperate to distract attensioon from its won balance sheet and what bette than to point to the ECb as being equally loaded to the gills with junk.

FOFOA, do you agree this is a $IMFS attack on the flanks? If so, how does the eurozone playt it. Where does the greek, italian, spanish etc gold reside? is it already collateralized or unencumbered?Gold pressed down after rate statement ironically. Even if your logic of a "rope-a-dope" let the $IMFS punch itself out is correct it doesn;t negate that even a defense strategy requires goal scoring. When does the ECB/BIS strike and where?

As an aside, it isn't a coincidence that the US is flexing its space and icbm (conventional) muscle - nto to mention flexing over in the middle east as well. A two pronged strategy here with the later laying in wait......

S said...

"only way the dollar survives even in a blow off the top inflation is to lay waste to the euro"

correct that to say in the shrot to medium term. Longer term the US it seems to me is playing for a negotiated settlement with that move of voting at the world bank for china a few days back a foreshadowing of things to come. The question is with Russia straddling the middle - merely look at how quickly Ukraine folded on the port - and the "east" where the growth resides - and Japan is peeling away ever so slowly - the US is left clinging to Europe as the locus of the axis of the willing. Only to speculate, but that Korean action is very itneresting in the context of the regiopnal reshuffle ongoing and the increasing aspirations of the Chinese blue water ambitions.

Like you say of the BIS the Us can't bee seen obviously to endorse what is happening though the coming from the ratings agencies it is ironic. nor does it help the release of the us intelligence report suggesting the german population be counterprogrammed to support the war in afghan recently.

How long can this thing hold together with the central banks in the nonaligned states raising rates into biting inflation. or better yet how long will resource states continue to pull their resource out of the ground?

CloudFive said...

More relevant is perhaps this gold dealer in Brussels. It publishes both purchase and sales price for some commonly used gold coins like vreneli's, pounds, napoleons etc.

The usual spread it takes is about -1.5% from spot for purchase and +1.5% above spot for sales. This has been very consistent whether spot moves up or down.

Since last week however, popular coins are now purchased by them for 0.5% to 1.0% above spot. (Selling for 3.5% above spot. )

Although I'd like to think this has some significant meaning, I also notice other dealers still have plenty of coins available. One can still buy 100 golden pound coins or 100 dutch guilders at about 1% above spot with a few mouseclicks.

100 coins doesn't seem much to me when public decides it wants physical gold, but it sure looks like even this uncertainty regarding Greece et al doesn't want them to part from their euro's?

Aleksandar said...

@ CloudFive:

I forgot to mention that I was calculating the debt per Greek citizen (11mil pop): they are the ones that will need to pay it back!

Aleksandar said...

@ CloudFive:

I forgot to mention that I was calculating the debt per Greek citizen (11mil pop): they are the ones that will need to pay it back!

CloudFive said...

@Aleksandar
Thank you for clarifying.

Of course investors like pensionfunds also won't see their (our) money back when we don't bail them out, which results in lower payouts when you retire :) Or we will pay the bill by rescuing our government-owned banks when they get a sizeable haircut on there bonds.

Either way, we lose

golden tube said...

@CloudFive , which Gold Dealer in Belgium, do they have a website??

CloudFive said...

That would be

http://www.gold4ex.be/servlet/javaparser?pgm=lst_or_new&lg=uk

There's also one in Antwerpen, that one provides their actual stock. (Dutch only).

http://www.goudbank-antwerpen.com/gouden-munten-muntstukken.php

I browse both sites regularly as they give me some intel on the pressure on the physical market.

FOFOA said...

"When the impossible is eliminated, the improbable becomes a certainty."
- Mencius Moldbug in Gold and the central banks: the game theory

"When you have eliminated the impossible, whatever remains, however improbable, must be the truth."
- Sherlock Holmes

Those of you that think the EMU is imploding right now are too quick to forget the fundamentals, IMHO. Any debt implosion is a positive catalyst for a gold explosion, even in the EMU. Remember that debt is only one side of a two-sided coin, the other side being paper wealth with insolvent counterparties. Each bailout that occurs is the open and advertised Ponzification of the entire system, tempting the devil of instantaneous collapse.

I have already explained how the Eurosystem will be strengthened when gold explodes at the same time the $-system is decimated, and I have also explained why I believe a breakup of the euro is all but impossible. It really doesn't matter to me what happens along the way, I know how this will ultimately end.

Sometimes, when you know something won't or can't happen, yet all events seem to be leading in that direction, the proper analysis is to ask "Where will be the give? What will change (or break) that will disallow that which can't happen?"

Freegold is the deterministic end of initial conditions set in place a long time ago, perhaps 39 years ago, perhaps 66 years ago, perhaps 15 years ago, or perhaps even 97 years ago, depending on which scale you wish to view.

"For those of you who don't know much about Chaos Theory, the name can be somewhat misleading. It is a theory that deals with complex systems that, on first glance, appear completely chaotic or random. But the reality is that these complex systems are actually deterministic. That is to say that seemingly chaotic gyrations in the future are actually amplifications of the initial condition of the system, and do not require the interference of random elements to explain."
From More on Chaos Theory

Cont...

FOFOA said...

...

"Those of you who have read my writings over the years know that I put stock in the idea of fractals and chaos theory, though I think “chaos theory” a misnomer. There is a great deal of structure to the chaos Mandelbrot and Taleb describe...

In this context, an event like the Iceland [or Greek] breakdown, for example, is important not so much in that it will cause further, knock-on problems in the financial system. It is important because it is the result of circumstances which exist everywhere, i.e., provocative circumstances in place system-wide. Iceland [Greece] becomes a template, by this way of thinking, for what might occur elsewhere, and thus, not an isolated event. In essence, Iceland [Greece] might be seen as a fractal. It follows then that Icelands [Greeks] may exist everywhere because of the global spread of fiat money systems — economies prone to stagflationary breakdown..."

From Michael Kosares in Fractals, Chaos Theory and Black Swans

This is the way I view the Greek debt crisis. When S&P downgraded Greece many viewed it as the $IMFS' deathblow to the euro. But I saw it for what it really was, just another element of the real coup de grâce... to the $IMFS itself. This is not about one fiat currency versus another, trading higher or lower. That nonsense is just noise. All the fiat currencies are overvalued right now. This is about one system versus the abandonment of that system. Those are the two possibilities. As debt fails, the system that requires ever-growing infinite debt dies. And that is the dollar reserve system.

The only hope the $-system had at the beginning of this crisis was voluntary austerity and allowing all insolvent financial institutions to fail. And I'm not talking about Greece. Greek austerity or bailout is but a drop in the bucket. But it is very much a fractal example of the US. This "hope" was never really an option as anyone with eyes could clearly see, which is why I say that Freegold and hyperinflation are 100% assured at some point. And the Greek debt crisis is just one more step in the march toward the known end. The deceptively chaotic unrolling of time. As Another liked to say, "time will prove all things."

Sincerely,
FOFOA

Byzantium said...

Hi FOFOA.
regarding Europe's gold, and specifically Germany's, is it true that Germany's gold is 'looked after' by the US on US soil?

I would moot that this is effectively 'paper gold.' Your 'possession' is actually just a claim.

If this is the case, I am wondering if anybody has information regarding how much Eurozone gold is held inside the zone, and how much outside it.

Apologies if this has been covered before, but it seems to be critical to the plot.

FOFOA said...

Hello Byzantium,

While it is interesting to speculate who will have the gold after the reset, I don't find it to be "critical to the plot" as you do. Actually, what I find when I think about gold movements over the past 15 years or so is that a good deal more likely moved from official hoards into private hands, rather than the other way around. Another interesting idea to consider is how the legal ownership of the gold stored in London and NY will ultimately be resolved.

After the 1933 confiscation and WWII, the US had possession of 22,000 m.t. of gold. This included legal ownership as well as physical possession. Over the next 20 years the US sold off (exchanged for paper) roughly 14,000 m.t. of that gold to the rest of the world's CBs. That was an average rate of about 700 m.t. per year flowing out of the US during the 50's and 60's.

That's about 62,000 ounces of gold flowing out of the US each and every day for 20 years! How's that for gold bank run? And that was rougly 2/3rds of US gold gone in what is now less than 1/3 of the lifespan of the $IMFS. No wonder they closed the gold window. Talk about unsustainable!

To put that 20 year run on US gold in perspective, the last time the US experienced a run on its gold was in 1893 and it almost brought down the US Treasury then, too. The US was in fact bailed out in 1893 with a gold loan from JP Morgan himself, in an amount close to only one month's average outflow during the 1950's and 60's!

Today the Eurosystem claims ownership of 10,833 m.t. and the US claims 8,133 m.t. of gold and gold receivables! That's a total of just under 19,000 m.t., 3,000 m.t. short of the 22,000 the US started with at the beginning of the Bretton Woods system.

So it is helpful to look at the overall flow of gold, from West to East, from US to Europe, and from official into private hands over the full course of the $IMFS. And also to realize that "gold receivables" means flow from official into private hands that will not be returned to the CBs by the BBs. So the CBs of the world will likely have less gold than they now claim once we lose the $IMFS and its "paper gold".

Someone here mentioned gold in the Middle East recently. It needs to be noted that WGC figures are for officially held gold only, and the numbers are reported voluntarily. And within the royal families of the ME the distinction between official and private ownership is blurry at best.

But I think you will be surprised to know that immediately after Brown's Bottom and the gold backwardation that happened right after the Washington Agreement on Gold (WAG), Kuwait loaned its entire stockpile of gold, 79 m.t., to the Bank of England! Oct. 21, 1999 was the date of the announcement. Backwardation happened on Sept. 29th and the WAG happened on Sept. 26th. And a few days after Kuwait's announcement Jordan announce that it too had sold 10 tonnes of gold.

The point being that the flow of gold is fractal and deceptively chaotic as well. And it can be very confusing when looking closely at individual movements. But when viewed from afar, definite patterns emerge.

Here is a good post from 2000 that describes some of the above.

Sincerely,
FOFOA

Shanti said...

A question...........

Could a revaluation of the POG, change the fact that GOLD is physical or on paper ?

I mean if the GOLD stock @ certain CB (who has probably no physical left). Would it not be of their utmost interest to let the POG rise in the existing monetized environment?

costata said...

FOFOA,

Please allow me to present a scenario for your consideration.

Weaker EMU members' sovereign debt is discounted to around 50% of face value. The capital impaired EU banks take positions in this unloved paper.

Perviously agreed austerity measures and gold revaluation puts Greece, Portugal, Spain etc back into (very?) creditworthy position. Their sovereign paper regains most of its lost value. Voila! Banks recapitalised by repo with ECB for Euro.

Supposed "excess" printing of Euro is re-rated against ECB and Eurosystem CBs gold reserves marked to new gold price. "Excess" Euro finds huge demand as the role of the US$ in world trade (especially oil) is reduced again.

Check and mate to the Euro Freegold sponsors.

Joshua Kane said...

Hey FOFOA. This is Joshua Kane from TSIBR. I've been underground for a bit, sorta waiting for news on a certain individual known as Hakimullah Mehsud, the CIA Khost Bombing mastermind, who seemed to me from all appearances, to likely be ALIVE, even though he was being reported as very dead. Well, Mehsud lives. From TSIBR tonight:

New US intelligence reports suggest strongly that Hakimullah Mehsud is alive, just as TSIBR surmised:
http://abcnews.go.com/International/wireStory?id=10505681
If true, the implications for terror soon coming to American shores, stamped with the face of Mehsud, are grave. Within the next week or so, there will be a mega-update on TSIBR overviewing each of the many facets of the deteriorating world order and providing the inimitable TSIBR viewpoint. Get back in tune soon with TSIBR.
END

So please do get back in tune with TSIBR soon, FOFOA, and any of his fans who are looking for a journey to the darker side of political economy. Mega-update coming by Thursday of next week!

Joshua Kane
http://thesystemisblinkingred.blogspot.com/

Martijn said...

FOFOA,

On chaos theory Mark Buchanan's writings are quite interesting as he takes a somewhat different but very refreshing perspective on chaos theory.

His books are quite easy to read, so if you find the time order one and find out whether you like it.

'Ubiquity' is a good one.

Sigo Plapal said...

That's exactly right, Costata. But don't rule out the new USD getting in on the action, too. http://www.roadtoroota.com/public/261.cfm

I didn't think the newly redesigned dollar was important until I found out that it's not available until February. Of course, this could be delayed or pulled forward as needed. The point is they are printing new money with gold ink. It's not an interpretation of the color, the BEP calls it a gold colored 100. And gold wasn't chosen as a security feature because they say in their FAQ's not to rely on color to detect counterfeit notes because "COLOR IS NOT A SECURITY FEATURE". They also call it "new money". AND, they created a website called newmoney.gov. A gold 100 is also on the back of the new note. It can't be called a "greenback" which was first used to describe Lincoln's unbacked paper money.
They have really set the table and hidden it in plain view of everyone.

Martijn said...

Can we also find this new dollar bill on an official site?

Sigo Plapal said...

newmoney.gov
or
http://www.bep.treas.gov/

Jimmy said...

BIS, The most powerful bank you've never heard of, by Doug Casey

Jeff said...

FOFOA,

You say as debt fails the system dies. But isn't the bailout to prevent the failure of debt? It seems like extend and pretend, and no one allowed to default.

GG said...

I have to say that this extended drama over Greece, PIIGS, etc. with conflicting statements being mouthed every other minute shows the Euro managers in a very poor light and is not doing the Euro any favors in its attempt to become an alternative world reserve currency. If they are only pretending to be incompetent, they are doing a damn good job of it.

costata said...

GG,

"If they are only pretending to be incompetent, they are doing a damn good job of it."

FWIW I don't visualise the contest between the Euro Freegold and the $IMFS as a match race between two thoroughbred horses.

I see it as being akin to the young male challenger attempting to take over the leadership of the pack/herd from the failing, but still dangerous, Alpha male. The succession will probably be anything but smooth and orderly.

costata said...

Sigo,

Are you anticipating the final devaluation of the US$ to be an event instigated by the issuer rather than a gradual process?

Sigo Plapal said...

Costata,

I don't know if there will be an instigator (there have been plenty of those already). But I do look for some big event to trigger a currency crisis. To me it looks like a contingency plan is in place that could be implemented now if necessary. And yes, I think once the next crisis starts, everything unwind rapidly. I just can't see the current financial situation remaining in limbo for another year or two.

costata said...

FOFOA,

HEADS UP EVERYONE

IMHO everyone should take note of this development in the Land Downunder. Australia is currently the second largest gold producer.

In light of A/FOA's views on the likely fate of gold miners in a Freegold world, I don't share the author's enthusiasm for Aus mining shares. Rather I direct your attention to his comments on the pending delivery, by the Aus Govt Treasury, of the recommendations from a major tax review.

Extract:
"The consensus is that the form the tax would take would be for it to kick in only after project capital is recovered and “excessive profits” are being earned (by miners)." (My edit)

The author has titled his article,
"Get Prepared For Massive Launch"

http://www.financialsense.com/fsu/editorials/charnock/2010/0429.html

I think it should read,
"Get Prepared For Massive Reaming"

raptor said...

Just read this one :
http://www.financialsense.com/fsu/editorials/amerman/2010/0429.html

Decided to do a back on the envelope calculation. The question is can the Fed by outbidding the market keep those 1T out of the economy i.e. not having an inflationary impact.
So my scenario is how much money can those money create into the economy for 5 years if the avg interest Fed pays is 3%..so here goes :

-> ( ( ~1T *e^(5y *.03) )-1T ) * 10 times (via fractional banking system)
= 1.61834 T

So in five years as low estimate, just the interest on the parked money can create 1.61T dollars.

If the interest jumps to 10%, interest on the money CAN create up to 6.48T, so much for the deflation of the dollar.

As comparison afaik average MZM is around 13-14T, so 6T means 50% inflation can be generated just by the parked money by the Fed.

S said...

"As comparison afaik average MZM is around 13-14T, so 6T means 50% inflation can be generated just by the parked money by the Fed."

Need to have a factor representing the destruction of money supply coming from ongoing debt destruction. Start with banks loans and work your way back to treasury debt as the realization grows that the US productive "potential" is nowehre close to 14T in GDP- Fed will have to move to open monitization in due course - will that be the phase transition is the question? ZH running story that the Fed has intiated swap lines into the greek weekend and Kaufman is openly calling to kill the banks. this while AIG is drawing down credit at fed to finance itself. GDP was disgusting this morning.

raptor said...

The main argument of deflationists is the enormous defaults still ahead. I agree with that, but the problem there is that if we get too many defaults as you mentioned it will undermine the economy and the possibility of psychological-devaluation of the dollar grows exponentially which of course again means inflation as an end result, even if we have disinflation period for awhile. (we haven't have yet any deflation, cause if we had there would wholesale decrease in prices by 10% or so per year).
I think the Fed can approximately well handle dollar-creation/destruction if we talk about USA. But the big unknown is the worldwide-holders of dollars, this where the main inflation trust I think will come from, when foreigners repudiate their dollars holdings.

The other major argument that the money are parked at Fed and they wont cause inflation because of this.(I just mentioned what just the interest on these money is capable of generating).
And lets not forget that even if the Fed gives better %, it is not the same as leveraging those money by 10-fold (fractional ratio) and lending it even on lower interest to the public at large. The moment the majority of ppl and businesses think that the economy has recovered they can consume those money and cause inflation.

So it seems the Fed goal would be to make this crisis protracted and long, so
there is enough time balancing defaults&money printing to fight each other.

One small bump and everything either implodes and then explodes, or just explodes.

GG said...

At this point I am not sure even the Euro will survive the Armageddon that's about to ensue. It's time might indeed have come and gone.

GG said...

At this point I am not sure even the Euro will survive the Armageddon that's about to ensue. It's time might indeed have come and gone.

GG said...

The reason I'm saying this is that I think that when it all collapses, it will be more horrible than anyone can imagine at this point. Fiat money and the governments that issue them will have been so thoroughly and totally discredited that nobody will accept them as payment for anything. Indeed it's only apt that the governments and their tools of control (i.e. fiat money) collapse together.

miked said...

Perhaps a bit of wishful thinking GG? Bond holders might take a beating in the Eurozone but as I understand it euros cannot just be printed willy nilly so the euro will eventually emerge from the devastation, I would bet without the need for gold backing. After all why would anyone demand gold to back up a fiat currency which just came through a huge period of contraction?

This is a sovereign debt crisis, not (yet) a currency crisis and it could also have happened just as easily under a gold standard. The cause of the massive debts has been reckless consumerism combined with excessive government intervention in markets..... not fiat money per se.

Kewl said...

http://www.prisonplanet.com/former-nazi-bank-to-rule-the-global-economy.html

Martijn said...

FOFOA,

Interesting article on mining taxes in Australia.

I would not be surprised if A/FOA will prove to be right in the near future.

/

Different issue: here is Trichet calling for global financial governance.

Joshua Kane said...

FOFOA and friends:
Hakimullah Mehsud has revealed his increasingly infamous face in two new videos where he issues stark and grave threats against the American homeland. From TSIBR early this morning:

Hakimullah Mehsud, previously thought dead, has shown in his face in two new videos released hours after Sunday’s failed NYC bombing attempt. In both videos he issues stark threats against the American homeland. A video dated April 19th shows Hakimullah Mehsud sitting next to a map of the US containing multiple explosion graphics. Mehsud declares that massive retribution will come to American shores within the month. The threats are being viewed as credible:

http://www.telegraph.co.uk/news/worldnews/asia/pakistan/7672214/Taliban-leader-Hakimullah-Mehsud-threatens-US-months-after-death.html

Meanwhile, an anonymous 911 caller has tipped off the NYPD that Sunday’s failed attempt was a diversionary tactic aimed at distracting law enforcement from a much bigger explosion coming within days. TSIBR will lend some credence to this view, in that terrorist events usually don’t occur while markets are closed. Is something bigger coming?

http://www.realclearpolitics.com/video/2010/05/02/local_nyc_channel_reports_failed_bomb_at_times_square_was_a_diversion_for_massive_explosion.html

Undoubtedly, at TSIBR, there will be much to cover going forward, and much to catch up on as well, as we continue to trace the path of world order collapse and reconstruction, peppered with a nice dose of educated premonition, just to keep things fresh. Mega-updates re-initiate on Thursday.

Joshua Kane

Visit TSIBR at:
http://thesystemisblinkingred.blogspot.com/

Jimmy said...

Watch out, hyperinflationary depression is on way... John Williams

Martijn said...

The mining tax did affect stock prices, as it will world wide.

JSE mining shares down on back of Australian mining tax

Martijn said...

Chavez threatens to nationalise gold mines.

Similar story for the diggers.

Martijn said...

Btw we're not far from new info on Brown's bottom as ordered by court if I recall correctly.

Martijn said...

FOFOA,

Where would you picture the SP500- and/or DJIA-to-gold ratio under freegold?

Jimmy said...

Found a good site about war:

antiwar.com

And this is a good article of antiwar:

a realist breakthrough?

Jeff said...

Oh dear, the EUR is crashing. If they want to save it now would be a good time to do something...

miked said...

Not sure about that Jeff. I think they would prefer a weaker euro right now.

S said...

IF Trichet steps in and buys debt would that not be a full scale capitulation to the Fed and a repudiation of the entire Freegold thesis? The Fed obviously is sitting back loving this while the ECB and their go slow approach is looking increasingly hollow. Is this a knife at a gunfight scenario or is it gold?

Shanti said...

@S
Trichet could buy Gold and that would be another stocking at the leg !

Remember what ANOTHER said;

"In this age of "digital currencies" it is impossible to see how fast the thoughts of people are shown as actions! Many will wait for markets to do what they have done in the past, "looking backward to see forward". Be known that most of the actions by the ultra large players is complete. When the change in direction of gold starts, it will be hyper fast! A good many will run to the US$ first, making that currency rise with gold and misleading much people"

Martijn said...

I wonder how much is war and how much is coordinated.

Off course the US hopes that the Euro fails politically, but they also know the chances, and all would have some interest in a smooth transition.

Hieu said...

I have a hard time understanding how gold will become the ultimate store of value, yet not function as "money." Maybe I'm unclear as to your definition of money. Money is a commodity by which the value of all other commodities are denominated. Think of a transaction where Bob exchanges 10 Xylophone to Claude for 1 Zebra. Here the transaction is 10 X = 1 Z. In rudimentary societies, this is simply barter. However as towns, villages, and cities rose with its specialization of labor and excess capacity, barter no longer functioned. If Bob now wished to exchange a bible for bread, he may have to go through several intermediaries in order to get his bread. However, as the markets developed, certain commodities were used time and again in the process of exchange that all other commodities could then be quoted in the value of this one commodity. This then becomes known as the monetary commodity. At first, salt, grains, cows, etc were used, however that proved inefficient. Storage and transaction proved to be too difficulty. Thus, over time society has gravitated towards the precious metals.

With this understanding of "money" as a commodity, we must understand the concept of value. All commodities has value. In my opinion, it is based upon two factors: labor and use. Classical economics may only include the former, but that to me is insufficient to explain the rise and fall in "value" when labor input remains the same. If a black rock on the floor turns out to produce energy, its value has changed significantly although the labor costs are the same as it was before. Thus all items, including "money" has value as expressed in b quantity of x = c quantity of y. All values are in relation to something else. Value does not exist on its own.

What then is the value of a monetary commodity or "money." Well as stated before it depends on two factors: labor and use. The most important use of money is a means of exchange. It is quintessential element for a functioning society aside from the most basic need of food, water, and shelter (energy may be important for modern society, but human civilization has existed with much lower energy requirements).

So let us assume the labor cost of money is constant. The value of gold thus is a function of its use. Gold as jewelry has relatively little use. Gold as money becomes far more valuable as it is NECESSARY for society to function. Thus its value or store of value is dependent upon it achieving its role as "money" or the monetary commodity. The principle mechanism of exchange. You can actually argue gold as jewelry has value only so far as it has value as money.

Fiat has value because it is declared money. Or rather, the state has declared it as the means of exchange. What is the labor costs of fiat money? 0. Nothing more than the cost of ink and paper, or now electronic transmissions. Yet it is still used as money. Mainly the dollar is used as money the world over. In other words, the dollar is used as a medium of exchange for all goods and services the world over.

Store of value or rather expected future "value" is a function of the expected future labor and expected future use. Gold as an ultimate store of value, must be as the ultimate future expected medium of exchange. Or rather gold must become the ultimate form of money once again. It is not to say currencies or fiat, will lose its role as "money." But it will be subservient to gold.

Btw, this is not to say gold will outperform all asset classes intermediate to long term.

Jeff said...

Miked,

The longer they wait to act the more damage is done to Europe. Greece looks like it is in revolution today, and Portugese bonds are collapsing. Is anyone in control?

Jeff said...

Please weatch the Jim Rickards CNBC interview today. I can't link it but here is a quote: "... there is a meeting in Zurich on May 11th... I call it the new Bretton Woods.. Basically the IMF is convening a meeting to look at the issuance of SDRs and the alternative is gold. So the G20 and leaders want to go to SDRs to take the dollar off the hook. The market may go to gold on their own, so it's sort of a race between SDRs and gold. The dollar, as you know, is pretty much at the end of the line. ... "

S said...

CS out saying that Trichet will have to go down the Qe road. Wolf picks up the theme in the FT this am - only he is less sanguine on the outcome.

@Shanti
Agree he could buy gold - it is +6 euros to 902 - though as long as the $ complex is the clearing mechanism is that buy not being disadvantaged (even if it is not the case vs. intrinsic value, whatever you pin it at)?

No King But God said...

At Hieu (May 5, 2010 5:25 AM),

The following FOFOA posts may be helpful: (1) Gold is Money – Part 1; (2) Gold is Money – Part 2; (3) Gold is Money – Part 3; and (4) Gold – The Ultimate Wealth Reserve.

If I’m reading you correctly, what you may be missing is FOFOA’s insight that the 3 functions of money will ultimately separate, those three functions of money being the store of value, unit of account, and medium of exchange. To quote from Gold is Money – Part 1:
“And can we now agree on these three statements at least? 1) Gold is a form of wealth [NKBG – read long-term store of value]. 2) The pure concept of money fits best within the unit of account function. 3) The word currency best describes what we currently use in the medium of exchange role.”

If anybody else can further explain this or correct any misunderstanding on my part, your assistance would be greatly appreciated.

No King But God

Kewl said...

Jim Sinclair was talking about SDRs replacing USD with gold included to basket to avoid competition. And now Jim Rickards... Is there any link for information about the IMF meeting on 11th of May?
What happens to USD/EUR then?

S said...

@kewl

I think that the SDR plan is clearly en vogue at the moment given it amoutns to opacity upon opacity. Including gold is tha analog to the Greek bailout. in other words the market will see it as weakness and bid gold to a level which will show the move to be one done out of weakness. The strong hand...

This is from the SDR factsheet (which should insopire huge amounts of confidence):

"The SDR is based on a basket of international currencies comprising the U.S. dollar, Japanese yen, euro and pound sterling. It is not a currency, nor a claim on the IMF, but is potentially a claim on freely usable currencies of IMF members. The value of the SDR is not directly determined by supply and demand in the market, but is set daily by the IMF on the basis of market exchange rates between the currencies included in the SDR basket

Also in 1972 the USD bought .888671grams of gold (or 0.31347oz) and if my calcuation is correct today it buys .000851oz of gold.

http://www.imf.org/external/np/exr/facts/sdr.htm

Kewl said...

Thanks for reply, S!

Thats a heck of inspiration :)

"The SDR is based on a basket of international currencies comprising the U.S. dollar, Japanese yen, euro and pound sterling.

They utterly miss gold in that basket.

mortymer said...

So, if there is now the "crise" in EU land, paper burning, trading down, fiat in problem, confidence low, big money houses shaking, etc,... how is it that the gold is not higher but goes up so slowly??? What is holding it down?

Martijn said...

Mortymer,

99% of the gold market is paper trade, which means that 99% of the gold market is (or can be) controlled.

I don't think too much will happen until physical prises rise above paper an/or we see backwardation occur.

miked said...

Martijn I don't get this argument about gold and silver having their prices driven down by the paper market. Surely the same applies to any paper derivative from pork bellies to natural gas?

For every party there must be a counterparty. I assume the banks don't hold the short risk on their books but sell the paper contract onto another party who wishes to short the market. In this case the market is balanced. You have one party who is long gold and another who is short at the spot price.

If the banks had been manipulating the gold price all these years and had held all this paper on their books they would have been wiped out 100 times over as the gold price rose from the late 90s onwards.

S said...

"If the banks had been manipulating the gold price all these years and had held all this paper on their books they would have been wiped out 100 times over as the gold price rose from the late 90s onwards."

Gold shorts are not the only position ojn the book. If you are short gold and taking a loss to roll the position forward while collecting tolls across the complex not a bad strategy - of course an unrelenting bid spoils the party whcih FOFOA has discussed at length via Asia

Satya said...

@S

I'm not sure your calculation re: 1972 is correct, and please correct me if i'm wrong.

but ~0.3oz of gold per USD equates to about $3/oz, and in 1972 the price ranged from ~$45-$64 per ounce or (in my head, some 0.022 oz/USD to some 0.015 oz/USD).

gold is roughly 20 times more expensive today than then, so it would equate roughly to .0001 oz/USD today (1oz/$1175, which did equal your .000851 number).

http://www.usagold.com/reference/prices/1970.html

miked said...

So are we going to see a pork belly run on the banks too? When the bannks fail to deliver all these bellies the price must rocket to infinity :)

SatyaPranava said...

is there a working link to the rickards's interview? i've seen several and they all point to:

http://plus.cnbc.com/rssvideosearch/action/player/id/1485831315/code/cnbcplayershare

but none of them are working. thanks,

satya

S said...

Sorry .03 oz originally not .3

Hieu said...

@ NO King But God

I don't understand the unit of account function of money. All value is in relation to another. It is in the equation B quantity of X = C quantity of y. What is the unit of account is really the magnitude, the "B quantity of." Money in its purest form is not the magnitude, as the magnitude is the expression of the relation of one commodity to another. Your bank account can be designated in dollars, ounces of gold, barrels of oil, bushels of wheat, but they need not be money. I could set up a bank where the unit of account is measured in pork bellies, but the world again would over need not perceive this as money. I would still have to exchange X quantity of pork bellies into Y quantity of dollars in order to purchase whatever Z quantity of goods i so should desire.

My argument is that money is a the monetary commodity wherein the value of all other commodities are measured against. As such, often times the monetary commodity loses its role as an industrial use and becomes a medium of exchange. This is the result of the value placed on its use as a medium of exchange far exceeds its use as an industrial metal. In essence, I don't see this bifurcation of the role of money into 3 distinct roles, as there is no such distinction in the first place.

Narcolepzzzzzz said...

Rickards interview here:
http://www.cnbc.com/id/15840232?video=1485831315&play=1

FOFOA said...

Hello Hieu,

Here are three diagrams that I hope will reconcile my words with your perception.

Quadrangle.jpg: In the separation of monetary functions that is happening right before our eyes, we will find that fiat currency acts as the store of value, unit of account and medium of exchange in the short run, but that something more solid will fill those roles over the long run. As for gold actually being used as a physical medium of exchange for large purchases... that remains to be seen.

Fence3.jpg: Gold's value must inflate tremendously from present levels in order to fill the long term wealth reserve role.

Fence4.jpg: Gold could become a transactional currency like it once was without changing value too much from its present level. But that is not what is happening.

Your confusion may lie in my use of the word "demonetization". I use this term to mean the end of any fixed or even flexible parity relationship between gold and the transactional currency we use. True, gold moves against currency today, but not freely. It is still held in a flexible parity relationship with the dollar through the paper gold markets which are used more like a currency exchange than a commodity exchange. In terms of the ratio of stocks to flows the supply of gold is far and away greater than that of any commodity. This is precisely what sets it apart from commodities and makes the futures market in gold so deadly to the global economy.

Hope this helps.

Sincerely,
FOFOA

Hieu said...

How would you define a wealth reserve and how is it different from say a silo of wheat? Is not a silo of wheat a wealth reserve? Are you trying to differentiate between paper wealth reserves of today (CD's, bonds, stocks, etc.) and physical commodities? The purpose of storing gold is so that it may be at some point in the future be exchanged into something else. So in a way, isn't the ultimate wealth reserve, the ultimate money. The ability to exchange itself into any other commodity at any point in time.

My thoughts on the final outcome may not be much different since in my view, if gold was to take the role as money, then its value has to be significantly higher to mediate the exchange of goods. Your diagram of paper wealth to me is a symbol of the current dollar system. That this current floating amount is used as money to lubricate the flow of resources across the globe. For gold to take this role, its value would have to expand to equal that of the current dollar reserve system.

miked said...

This is also what I don't understand about the freegold concept.

Unless people are actually paying solely in gold as a means of exchange, it's just another commodity.

In a reserve system anything the government recognizes as exchangeable for note and coin at a predetermined rate can be used as a wealth store.

In a freegold system where gold represents all wealth gold must BE money, not a reserve backing money up. That implies that the electronic economy would grind to a halt.

mortymer said...

Martijn: I was looking a bit into the price discovery and I have to say that it still puzzles me, there is so much more of OTC and other non futures backdoor deals which are not reflected in the moves up/down so I am wandering what actually lbma and comex track... E.g. those revelatons of IMF, interCB deals - when it happened and to whom and how it exactly affected price?

Tekin said...

@ miked

As far as I understand, this "freegold" concept is largely related with central banks.

1) Export-import regime is changed. The importer would have to find the currency of the producer nation, before initiating the import procedure. In today's world, this means that the US would have to find Chinese yuan before importing from China; or, find Euro before importing from Europe. Therefore, there would not be an accumulation of dollar "reserves" at the Chinese and European central banks - as it happens today.

2) In the foreign trade between countries, daily export-import movements would usually cancel each other; however, any persistent trade deficit would have to be paid in gold by the deficit producing country. Therefore, US would not be able have persistent trade deficits, year after year, as it happens today, because eventually, they would run out of gold.

3) A clearinghouse is needed to keep track of the cross-border movements for this system to operate. The managers of this clearinghouse would have the privilege of knowing who is doing what in the international arena. In the gold standard days, London acted as the clearinghouse, therefore exactly knew who bought what and who sold it, and what price. Currently, in the Dollar standard days, New York has this exact knowledge. Europe wants to be the next clearinghouse.

4) The price of gold has to increase in order to perform this “trade deficit settling” function. After the new system starts operating, gold would be so expensive that most people would only be able to see it at the museums.

5) This transition phase gives small players like me a window of opportunity.

6) Do not expect governments to give up fiat money and return to the bi-metallic (gold & silver) standard voluntarily. They profit handsomely from this fiat money scheme and they would only give it up at the point of a gun.

Just my 2 cents on this subject.

Hieu said...

I have found this slide show very informative. Gold as the ultimate money need not exchange hands between us peasants (i.e. serfs, slaves, peon). What i call the ultimate money, the side refers to as an anchor. Maybe what is considered freegold?

publications.wiiw.ac.at/modPubl/download.php?publ=CM20100412

Hieu said...

The authors actually advocate a super currency. I would prefer gold.

FOFOA said...

Hello Hieu,

"How would you define a wealth reserve and how is it different from say a silo of wheat?"

In 1690, John Locke wrote...

"Now of those good things which nature hath provided in common, every one had a right (as hath been said) to as much as he could use, and property in all that he could effect with his labour; all that his industry could extend to, to alter from the state nature had put it in, was his. He that gathered a hundred bushels of acorns or apples, had thereby a property in them, they were his goods as soon as gathered. He was only to look, that he used them before they spoiled, else he took more than his share, and robbed others.

And indeed it was a foolish thing, as well as dishonest, to hoard up more than he could make use of. If he gave away a part to any body else, so that it perished not uselesly in his possession, these he also made use of. And if he also bartered away plums, that would have rotted in a week, for nuts that would last good for his eating a whole year, he did no injury; he wasted not the common stock; destroyed no part of the portion of goods that belonged to others, so long as nothing perished uselesly in his hands.

Again, if he would give his nuts for a piece of metal, [cue chuckles] pleased with its colour; or exchange his sheep for shells, or wool for a sparkling pebble or a diamond, and keep those by him all his life he invaded not the right of others, he might heap up as much of these durable things as he pleased; the exceeding of the bounds of his just property not lying in the largeness of his possession, but the perishing of any thing uselesly in it.


Hopefully you can see the intrinsic value in a wealth reserve that can be hoarded in any quantity, for any length of time without depriving humanity of an item necessary for survival. But there are other more technical differences between gold and commodities as well. Differences that set it apart from even silver, platinum and plalladium for example.

The wheat silo is a good example of commodities as a group. It is produced on one end and consumed on the other. In between the two it is bought, sold and stored. The market state of contango or backwardation reflects the supply and demand on a seasonal basis. Sometimes crops are destroyed, shortages emerge and grain cannot be stored at a profit. Other times it is very profitable to store grain until the cold months of winter. But gold is very different. For this I quote Fekete:

"Contango whereby the futures price of gold is quoted at a premium to the spot price is the normal condition for the gold market, and for a very good reason, too. The supply of monetary gold in the world is very large relatively speaking. Babbling about the ‘scarcity of gold’ reflects the opinion of uninformed or badly informed people. In terms of the ratio of stocks to flows the supply of gold is far and away greater than that of any commodity. Silver is second only to gold. It is this fact that makes the two of them the only monetary metals. The impact on the gold price of a discovery of an extremely rich gold field, or the coming on stream of an extremely rich gold mine, is minimal ― in view of the large existing stocks. Paradoxically, what makes gold valuable is not its scarcity but its relative abundance, which evokes that superb confidence in the steadiness of the value of gold that will not be decreased by a banner production year, nor can it be increased by withdrawing gold coins from circulation. For this reason there is no better fly-wheel regulator for the value of currency than gold. The same goes, albeit to a lesser degree, for silver.

Here is the fundamental difference between the monetary metal, gold, and other commodities. Backwardation will pull in stocks from the moon as it were, if need be. The cure for the backwardation of any commodity is more backwardation. For gold, there is no cure. Backwardation in gold is always and everywhere a monetary phenomenon"


Cont...

FOFOA said...

...

It is very helpful when trying to understand "gold the wealth reserve par excellence" to think about the many qualities possessed in the Mona Lisa and how it relates to money. Is the Mona Lisa money? Of course not. Is the Mona Lisa a great wealth reserve? One of the best! Except for the unfortunate fact that it cannot be cut up into smaller pieces with each piece retaining its relative value to the whole.

The Mona Lisa is priceless. Its specific value doesn't really matter to its owner from day to day because it is priceless. Its momentary value could only ever be discovered at auction, and then it would only be fleeting. These specific qualities go on and on and are quite illuminating when considering Freegold.

Don't get too hung up on the romantic ideal of the world going back to the physical gold coin standard or even to the gold exchange standard with a fixed parity between fiat and gold. Ain't gonna happen. Instead, look at what actually is happening. It is quite exciting for the physical gold holder.

Please read my post:

Mona Lisa or Ben Franklin?

Sincerely,
FOFOA

Hieu said...

The mona lisa is not priceless. It has a value. Being sold at auction is a testament to its value. The magnitude of that value again depends on use and labor. The labor to create the mona lisa is rather high, as there is only one dead da vinci. The value to France as a national treasure has monetary and indirect (prestige) benefits.

I can't understand why something as the ultimate wealth reserve without any other function than as a wealth reserve. Why would an individual trade his excess apple today for a shiny object if that shiny object could not be later exchanged for an apple tomorrow? The answer would be, he would not. He would keep the apple even it rotted away. But if it represents the right to a future apple, then that is a different story.

I don't believe in a gold fixed exchanged parity. Left to its own devise, the markets will use Gold as an anchor to settle balance of payments. Gold would float freely among all currencies (i.e. freegold?). Or else we get a global currency to anchor all others (some form of tradable SDR) managed by some super sovereign entity. Not sure if the last would work or the world over would agree to such.

FOFOA said...

"The mona lisa is not priceless. It has a value. Being sold at auction is a testament to its value."

Exactly! It has a value... but not a price!

This is the difference between Freegold and gold money. Gold money always has a price. Freegold's value floats. It has no price!

Hiew, I'm not sure we have an argument here. I'm not even sure at this point what you don't like about what I write. Our differences seem semantic at worst.

However you do seem a little confused on this commodity money issue. I'm not really sure if you are here to pick my mind or to change it. If it is the former, I suggest you read all of Another and FOA linked on the right side of this blog. Also, here is the link to the full piece by John Locke:

Second Treatise of Government - CHAPTER V: Of Property

And here is the piece by Fekete that I quoted:

GOLD BACKWARDATION

Sincerely,
FOFOA

Martijn said...

So far it's been remarkably (or perhaps expectedly) quiet regarding Brown's bottom.

Following a series of freedom of information requests from The Daily Telegraph over the past four years, the Information Commissioner has ordered the Treasury to release some details. The Treasury must publish the information demanded within 35 calendar days – by the end of April.

Martijn said...

According to Max Keiser Germany's gold is in the US.

source.

I wouldn't be to happy about that if I where Germany.

Martijn said...

More here

miked said...

Hello Again FOFOA

I also have a hard time understanding why gold can be the only commodity to represernt wealth. If there is just not enough of it at current prices, why not just add some others into a basket?

One other thing I am unclear about is how the fractional reserve system is accounted for in estimates being bandied about that gold should multiply 100 times in value to represent worldwide assets. Banks usually keep 8-10% in reserves. If in the future that reserve had to be gold or gold-backed then surely the gold would only represent 10-12% of total wealth and not all of it?

FOFOA said...

Anyone else catch this exchange between Joe and Jim?...

Joe Kernen: So you're not saying that gold and silver would be a thousand times more expensive if free market forces were...

Jim Rickards: No no, I am... no, I am... ten times... I am saying gold would get to $5,000...

Joe Kernen: (Laughing out loud) Okay...


What I want to know is who are the "outliers" that Joe is reading that are saying gold will go up 1,000X?

Or perhaps 50X or 100X just don't sound crazy enough for CNBC. Maybe he felt he had to add a full order of magnitude to be sure he was clear of reality? And Jim, is it 10X or $5,000?

So we have Joe exaggerating up to 1,000X and Jim moderating down to 5X or 10X. Hmmm... howz come no one wants to touch the whole order of magnitude in between the two? Could it be that the truth is too hot to handle?

Just sayin'

http://www.cnbc.com/id/15840232?video=1485831315&play=1

miked said...

Forgot to mention that I did read the John Locke, and I understand gold has nearly no industrial uses and it would place less of a drag on the economy if it were the only commodity to be used, but looking at what we are facing if freegold were to play out, isn't adding some other commodities into a basket a less painful option?

Martijn said...

Interesting indeed FOFOA.

Did you read this from Jesse?

Interesting description of the silent currency or gold war we are witnessing.

FOFOA said...

Hi miked,

History, monetary evolution and the actions of many giants all say that gold is the one. Remember that we are talking about a bottom-up spontaneous self-organized emergent order that will naturally arise from many giants all with the self-interest of protecting their wealth.

If you are a giant yourself then you can cast your vote for "some other things in the basket" buy spending your billions on those things. But be careful, if you are wrong you could lose it all.

Sincerely,
FOFOA

Martijn said...

This probably holds water, so it might have been more then just oil-for-gold:

"Basically, what Economic Hit Men are trained to do is to build up the American empire. To create situations where as many resources as possible flow into this country, to our corporations, and our government, and in fact we've been very successful...We knew Saudi Arabia was the key to dropping our dependency, or to controlling the situation. And we worked out this deal whereby the Royal House of Saud agreed to send most of their petro-dollars back to the United States and invest them in U.S. government securities...The House of Saud would agree to maintain the price of oil within acceptable limits to us, which they've done all of these years, and we would agree to keep the House of Saud in power as long as they did this, which we've done, which is one of the reasons we went to war with Iraq in the first place...So we make this big loan, most of it comes back to the United States, the country is left with the debt plus lots of interest, and they basically become our servants, our slaves. It's an empire. There's no two ways about it. It's a huge empire. It's been extremely successful...This empire, unlike any other in the history of the world, has been built primarily through economic manipulation, through cheating, through fraud, through seducing people..."

John Perkins, Confessions of an Economic Hitman

miked said...

Chance would be a fine thing sir :))

On the other hand if gold fails to emerge as the saviour in such a state of emergency then it could lose all much of its value too.

capt goodvibes said...

http://www.scribd.com/doc/30907410/Thunder-Road-Report-19-4th-May-2010

mortymer said...

Miked: People run always in circle and there is nothing else on the landscapt to catch on... For some it could loose value but there are too many for whom it will be a chance to get more and people are increasingly buying no matter the price goes atm up.
Martijn: I was exactly on the same thoughts as FOFOA highlighted the discussion on (May 6, 2010 3:22 AM). That the present value is far from supply/demand free market forces. The paper gold explains only the major part of the price maintanance. Could there be some other ways how the "right" price could be achieved? Do you remember the piece about the US gold being exported/imported when only one part of transaction is recorded? I am curious what time will bring.

mortymer said...

Fofoa, others: could you please somebody elaborate a bit on the lease rates? Did somebody else realized that they made a spike 0,5pp few days ago?

miked said...

http://www.kitco.com/charts/g_leaserates.html

Martijn said...

Did you guys ever bother to look up the meaning of Trichets surname?

"Tricher" means "cheat".

If we trust that "nomen est omen" we should conclude that Trichet is somehow a fraud.

Off course we do not know who he is cheating...

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