Tuesday, October 5, 2010

Open Forum

Just something to watch if you want...


Jeff said...

Kingworld news has part II interview with Ben Davies, where he discusses a revaluation of gold to 13000. He seems to feel this would bring enough physical gold to market. It sounds like a page torn from this blog.

intuitivereason said...

Seems like a small price move for the amount of value he is talking about. No way is Japan getting 20k+ ton of gold that cheap...

julian said...


I have been slowly reading through Another's writing, and I have a question for you:

Do you think, as he did, that the Euro will in fact not only survive all this crisis, due to its gold-backing, or do you think that things have changed since 1998, and the Euro is more or less doomed like all the other fiat? Do you think Another still feels the Euro has great potential during such a currency crisis, as he did back in 1998, or do you think his thoughts would have changed by now?

Or let me know if I've misunderstood the thoughts of Another.

Thanks for all you do, the wisdom around this place is contagious.

Athena & Alexander said...

consciousness + will = aberration x nature

golden tube said...

FOFOA posted these videos for a reason, is it something to do with the way debt is created?, is fractionalised ? Multiplied?, expands? Generated in math?

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

golden tube, I seem to agree with you.

Julian: When Another was posting it was a very different environment with respect to the Euro, where the architects of the euro promised that they would NOT bail out a country etc and promised much fiscal sanity, which unfortunately was thrown out of the window post the 2008 crisis.

The went all the way to bailing out Greece and committed other such insanities.

I hope that FOFOA can shed more light on this.

Casper said...

If I may jump in the middle and answer this one. I can't remember who exactly wrote (Another or FOA) that when running from a bear/lion you don't have to be the fastest you just have to be faster than the slowest (who of course gets eaten). In the world of fiat currencies euro and the dollar are the biggest (by the debt issued) but dollars are much larger (70 or so years of recent history of debt rolling over) and all this debt is now slowing it down as the bear/lion approaches. Even though circumstances are now different tham 10 years ago, I think that these kind of actions (ECB bailing out Greece and most likely Ireland and a few more to come and also political mismanagement) were predictable and baked into the cake (euro) so to speak. Of course in all out panic anything can happen and the bear/lion may still be hungry when it finishes with the dollar. I guess that's where the BIS comes in and offers quotes on physical gold only so the panic can flow to the revaluation of gold instead of goods.

I just haven't received an answer where BIS draws its power from yet?

golden tube said...


"I just haven't received an answer where BIS draws its power from yet? "

The BIS was formed in the 1930's. It was "capitalised" with 1.5 or 1.6 trillion $'s worth of gold at inception.

Jenn said...

Samix, I tend to agree with your response to Julian. I imagine at the time FOA was writing, the plan for the Euro was to create a (more) stable currency as an alternative to the dollar, but as Samix points out the ECB went the way of the Fed, that is, to bailout distressed corporations (or in this case, nations) by buying sovereign bonds to counter the junk paper on their balance sheets.

If you look back at FOFOA's July 2009 post entitled, Bondage or Freegold? you'll notice this picture where FOFOA demonstrates how world trade can continue in the absence of a world reserve currency.

Here's a quote from that post:

"This simplification of global trade would eliminate the journey the dollar makes back to the Washington DC spending machine. Each currency would only circulate between the public within its own zone, importers and exporters, the banks and the currency exchanges. And the exchange rate of all currencies would match the purchasing power parity (PPP) between countries based on the balance of trade! If the PPP got out of whack, then arbitrage would automatically step in to equal it out. How? Through the free trade of GOLD within each currency zone!

You see, with no global reserve currency in play, no single currency zone will have the wherewithal to manage the price of gold."

Now, factor in dwindling natural resources (it will be more and more expensive to ship physical goods across the globe) along with capital controls/protectionism, I could see a world that evolves into using no particular currency as a world reserve, rather nations conducting trade in a basket of currencies used by their geographic neighbors.

Jenn said...

Julian, to be more direct I don't see how either the Euro, Pound, or Dollar can survive this crisis. A/FOA/FOFOA constantly remind us that you can not analyze economics in the absence of factoring in Political Will.

Show me a government that's willing to say, "Our citizens will bear the brunt of this crisis. We intend for massive government layoffs and our citizens will forgo the many social services they have become accustomed to." and I'll show you a government on it's way out the door. The people will demand their governments to print more money and print they will. Everyone will be bailed out.

Jenn said...

It looks like if you follow the link in my first post -- buying sovereign bonds -- FT blocks access to the article. You can Google the string below to find the same article:

ECB steps up eurozone bond buying

By David Oakley and Jennifer Hughes in London and Kerin Hope in Athens

Published: September 8 2010 19:30

Jenn said...

golden tube said...

FOFOA posted these videos for a reason, is it something to do with the way debt is created?, is fractionalised ? Multiplied?, expands? Generated in math?

Hi golden tube, a couple of comments from FOFOA's October 2008 post entitled, Fractals, Chaos Theory and Black Swans.

"In this context, an event like the Iceland 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 becomes a template, by this this way of thinking, for what might occur elsewhere, and thus, not an isolated event. In essence, Iceland might be seen as a fractal. It follows then that Icelands may exist everywhere because of the global spread of fiat money systems — economies prone to stagflationary breakdown."

and later in the post:

"I can see why Taleb is having trouble sleeping nights. He is not the only one. Individual investors/citizens should take note. In the same way, what is happening in the gold market is not an isolated event. Gold could be a fractal in its own right signaling what might happen in other commodities, most notably, oil, natural gas and foodstuffs if collapsing prices cause shortages. Be aware. This is not a time to beg off as a casual observer."

Perhaps FOFOA is merely trying to expound on the concept of Fractals as they relate to his earlier post?

Michael H said...

Regarding the Dollar and the Euro:

I think the key difference going forward will be the effect of a rising gold price, even freegold, on the viability of the currency.

The dollar has a vast overhang of currency 'in reserve', serving as a store of value. When confidence in this function of the dollar is lost, those reserves will look to be exchanged into real goods and services. At that point, the inflation of the quantity of dollars over the past thirty years will be evident, and will suddenly be manifest in high prices.

Gold will be both the signal that the dollar is not a viable store of wealth, as well as the primary beneficiary of the dollar's demise.

As for the Euro, they can print it all they want to bail out every EU government. It will lead to inflation. But there is not the overhang of Euros being held in reserve to cause that sudden catastrophic hyperinflation that faces the dollar.

Moreover, when the EMU overprints, and its citizens turn to gold as a store of wealth, then this in turn raises the value of the central bank's primary reserve asset! Then, under freegold, if the european central banks decide to, they could sell of a portion of their gold to settle some of the government debt.

The flip side is, of course, that the EMU has to hold together in the meantime.

JR said...

Julian, Samix and Jenn,

Regarding the Euro printing money, I think Michael H, as always, addressed the issue pretty well.

It seems the euro is in some ways designed so that they can print money, as that was the inevitable end to the $IMFs system of increasing debt- that it would have to be inflated away. I understand the euro can be viewed as being designed to survive this inevitable end to the growing debt virus that is the $IMFs system.

Hopefully FOFOA will clarify but I have looked to
a FOFOA comment from "Gold is Money - Part 1" as an elaboration on this point:

The euro has "printed" over the last decade, making its outstanding liabilities (currency ++) increase faster than the value of its gold. If the gold market was free, meaning price discovery came from the physical market, this would not happen. The euro's gold as a fraction of its reserves has risen from 15% to 55%, yet as a fraction of its total liabilities it has fallen from 15% to 12%. The difference between these two perspectives is wholly related to the reserve dollar and the fractional paper gold market.

In Freegold, a currency will be backed by gold and exchangeable with gold automatically, but not through the CB like the old gold standard. Instead, through the free market floating goldprice. Right now it is an illusion that the $ is exchangeable with gold at $1065 because of the paper gold market, and because of suppressed demand through the MSM/Fed/WallSt. et al. If everyone tried to cash in their dollars for gold, guess what would happen.

The CB's FX (gold) reserves will lend each CB credibility. Each CB can use these reserves to increase its credibility on the global stage if it wishes, by selling or buying gold. Imagine that at SOME price, all of the ECB's liabilities would be covered by its gold reserves. Then if it wishes to print some more, the gold price will simply rise in Euros as demand to exit Euros and enter gold increases.



Also, see Randal Strauss at USA gold:

RS View: As the ECB grows the size of the Eurosystem’s balance sheet through domestic bond purchases, a rising price of gold is a natural and welcome means for the value of their reserves to keep pace as a proportion of the total… As it is, whomever said that rising gold prices were antithetical to a central banker’s operational purview is simply woefully out of step with the modern era (i.e., these recent 10 years) of mark-to-market accounting of reserve assets. In this field, gold still has a very very long way to freely and comfortably run. You can count on it; the various international central banks surely are.


Michael H said...

One more point regarding the Euro:

Right now, countries are involved in 'competitive devaluation' to try to boost exports.

When hyperinflation of the dollar happens, though, other countries will do their best to sidestep the trouble.

There is no competitive hyperinflation.

raptor said...


FOFOA afaik you mentioned in some of you articles abou the real-bills?
If not could you expand on this and the Wage fund idea?
Sound so much like the ideas you discus, about a real physical clearing house...

tdfxman said...


I am going to have to look back and see if this article has been discussed.

I am behind but now getting to shoeshine boy.

Angel Eyes said...

"RS View: The eventual inevitable outcome will be that China will indeed manage toward a quickened appreciation of the yuan against the dollar, but at the same time (and this is key!) despite its upward direction versus the dollar we will witness that the yuan will be depreciating remarkably versus gold, and as such the price of gold as denominated in dollars will be rising most rapidly of all.

This will have a beneficial two-fold effect — 1) naturally attracting/channeling international hot-money flows of excess dollars more benignly into action elevating the gold market rather than having it assert its extra unwanted pressure upon the yuan; and 2) bolstering the wealth-effect and subsequent real purchasing power of the billions of Asians and Indians through the rising valuation of their culturally-significant personal gold holdings. This latter effect will thus compensate export-minded countries for the impending loss of the American consumer as the demand-engine for world trade as these 300 million debt-laden paper-ridden customers are to be outshone by the massive revitalization of gold’s purchasing power in the hands of billions of the world’s “poor” — people with a small amount of gold and very little else. Using their revalued gold savings to upgrade their lifestyle will keep the exporters of the world busy for decades producing all of the things that had traditionally been affordable only to the 300M American consumers. And another upside for the exporters in this NEW arrangement is that the balance of trade will become more fundamentally sound on the basis of tangible gold flows rather than having it all contingent upon the tenuous quality of American-style debt.

I made this same point several (4-6) years ago, and we are now simply that much closer to its headline reality. Have you been using your time wisely to accumulate gold before the jump?"

Angel Eyes said...

"RS View: This phase transition (like the melting shift of ice into liquid water, or, better yet, the steaming shift of water into vapor) has been a long time in the making — essentially on the political stove and absorbing heat for decades. Now at last, this past decade (since introduction of the euro in 1999) has brought the elevation of that heat to the critical 212° Fahrenheit (100° Celsius) and gold is beginning to make the steaming leap — from its old position as part of the managed stew in the roiling kettle — up into the relative freedom of the vapor phase where it can finally move freely and efficiently (at much higher prices) as dictated by the economic jetstream and all other related winds of demand."

tdfxman said...


TomOfTheNorth said...

I enjoyed the Mandelbrot vids. In case you missed his 2010 talk @ TED:


FOFOA said...

Wonderful, TomOfTheNorth!

Thank you. I have just added the new video above, H/T Tom!

I write a decent number of posts that I never publish. Sometimes I just decide that I don't like them or whatever, and they go into the unpublished dustbin folder. So I hate to even mention a post before it is ripe. But if I do decide to publish what I'm writing now, you will be happy you watched the videos because they will be referenced. So you can think of them as extracurricular homework if you like. FUNtastic extracurricular homework!

For me, writing long posts is a process of discovery in and of itself. I guess it would fall under the old saying, "the best way to learn is to teach." And what I find is that the process of writing is far more riveting than the latest news or analysis, even when that news is gold at $1,350! My process is not unlike Mandelbrot magnifying his "set" and discovering infinite resolution. This is exactly how I know "my set" is working. Infinite resolution! If you can wrap your head around that, well, then you might just see the relevance.


Alan2102 said...

"For me, writing long posts is a process of discovery in and of itself."

As a writer, I've noticed the same thing myself. I don't even know exactly what I think until I start WRITING. The writing forces me to think more clearly.

Michael H said...

One more comment on currencies and hyperinflation.

While only the dollar has the massive reserve overhang that will lead to its destruction, that destruction will be like an earthquake that shakes all currencies. The weaker ones will fail with the Dollar, and the stronger ones may survive.

My intuition tells me that the weakest currencies will

1) have close ties to the US dollars, through trade and politically.

2) have high debt-to-gold reserve ratios

3) be relatively resource-poor.

Of the major economies, Japan and the UK seem to fit the 'weak' definition. Canada is close but might be better off because of its resources.

I would like to see a bar graph showing the price of gold required to balance the gold reserve assets to the debt overhang for each country. Both for the outright debt and for the unfunded liabilities.

I hadn't really considered holding Euros, since my feeling is that even Euros will lose substantial purchasing power. But, since I'm holding some physical dollar cash, Why not physical Euros as well? I might consider 1-3 months supply of dollars and maybe half or so in addition of Euros. And a full pantry, of course.

Desperado said...

Hello Fofoa,

Top of the morning to you! I think it is almost mischievous of you to make a post on a mysterious and fascinating subject like Mandelbrots on a day when the gold market is on fire. I must admit I am indulging in a little schadenfreude as the goldophobes start sweating profusely.

I was discussing the subject with my brother yesterday, and he said he is not that worried because he lives in a dollar world and the sinking dollar doesn't affect him that much.

This gave me the idea that we may well first experience the acceleration of money in the international markets, where more internationally focused investors feel the pain of a sinking dollar sooner than Americans. It would seem likely that as non-US banks, pension funds and CB's watch their home currency denominated investment portfolios rapidly sinking they will tend to try to hold dollar denominated debt obligations for ever shorter periods so as to minimize the loss. US based investors don't notice the drop in value because their portfolio's are denominated in dollars, and these are going up with the rising treasuries, munis and ETFs.

julian said...

thanks for all the responses

this place hosts some of the most intelligent people i've ever encountered

i look forward to watching that TED talk with mandelbrot, thanks for the link

zenscreamer said...

On the subject of understanding a subject better as a result of writing (communicating) about it: forgive the source (Leary) but it has been said that intelligence (understanding) is advanced by a synergy (feedback) loop involving "absorption, integration, and transmission" of information.
I'm just sayin' it stands to reason.

miked said...

After watching all those videos I am not sure you can make any predictions about the markets using fractal theory.

The "roughness" of the financial terrain, ie changes volatility should be easy to determine, but to what end? It might be useful for pricing traded options and insurance premiums, but not for saying when something might happen.

Having said that understanding the universe we live in at least lets us prepare for adversity though assigning probabilities to events.

Mike said...


gold down 20+ and silver down .70

anything to do with the strong dollar policy today greasing out the speculators? OI to drop big time most likely.
that code word again.

let the physical buying begin.

Desperado said...


In the last thread you said:

"I have some concerns that the Tea Party movement is being subverted by the Koch brothers and Sarah Palin's handlers but I realise that they give voice to some legitimate grievances."

I had read somewhere else about the Koch brothers, but could understand why they would be so much more evil than, say, Warren Buffet, the Gates family, or any other rich limousine liberals support for Obama and the Democrat party.

This article: The Paranoid Style in Liberal Politics goes into detail about coordinated assault on the the tea party due to donations to it from the Koch brothers. It makes quite a read.

The article shows how desperate the ruling elite have become, how we have a coordinated assault across the entire spectrum of the "non-partisan" MSM joined at the hip with the current administration that even gets Obama to join in on the smear.

This Democrat juggernaut is ruining lives and reputations in a last ditch attempt to cling to power. At this point in time, anyone who is not smeared as a radical, racist hatemonger by the likes of NBC, NYT, Huffpo, Robert Gibbs and President Obama cannot be considered a serious opponent to the current ruling class.

Now I know that most of you will shrug your shoulders and think that "its too late anyway", that the government will be forced to print no matter what. And you are right.

But there will be a big difference between Obama working with a rubber stamp congress and him having to face an opposition party controlled house or senate that has the power of subpoena. If after November 2 the Democrats are still in control of the house and senate, even if you ignore the much greater chance of gold seizure, you can be sure of increased capital gains taxes (and possibly VAT) on the sales of gold. IMO, you will also face a much higher chance of violence when states start seceding from the union.

Anon said...


Anon said...

Fractals! Aaahh yes. I still have the copy of the Scientific American article (1984 perhaps).
I used it back then to make some for myself, displayed under a slave-DOS computer in control of a home-build capable accelerator. An excellent visual for high-speed computation. Used multiple TMS320C30's in an array to achieve decent speed.
The Mandelbrot set (the classical little bug that keeps repeating) is not the only picture making generating polynomial. It derives from a 2nd order equation.
The same/similar methodology when using generating equations of higher orders (6th order polynomial produce pictures and features as well). But they don't repeat. And there are straight lines buried in the images.

Desperado said...

In the last thread you said:

"There are plenty of conspiracy forums where you can extrapolate new food safety laws into population control."

As littlepeople said to Costada on the same thread:

"You have likely read that some 43 million people are receiving food stamps.

Another 30-40 million people are receiving unemployment benefits. Congree voted to extend benefits further than law normally allows.

Something like 53% of the population of the U.S. pays no income taxes--though some of them pay FICA for the social security system (which is going to pay for food stamps right now).

These people haven't felt the pain"
. These are Littlepeople's words, not mine.

It is now 41.8 million receiving food stamps. And these food stamps are already a form of population control because if these people were starving TPTB would be in a much more precarious situation. A hungry mob is an angry mob.

If an international run on the dollar takes place and that causes both hyperinflation and a collapse in the federal government's ability to print money to finance its deficits, then the number of unemployed will swell dramatically as all levels of government are forced to cut. The Feds, desperate for some source of income to keep paying their bills and providing for the massive bureaucracy they have spawned will be forced to cut everything but the bare essentials, and the only way to feed the massive increase in those dependent on the government for survival will be through food stamps. If you make them move around the country, you will end up with angry, hungry mobs. So you have to keep them where they are.

The ultra rich will be looking out for no one but themselves as they always do. What else could you expect from a class of people who turned an elitist family feud into WWI and thereby causing the death of millions and the destruction of the international gold standard. So the Feds will join the elite and turn on the upper middle class (bourgeoise) for funds to feed the beast. The rich are already turning on the upper middle class, just look at these headlines: The Bill Gates Income Tax and Buffet says tax the Rich. Their targets are the small business owners and the professionals like doctors, lawyers: the bourgois who make $250K. They are the low hanging fruit. After their pensions are gutted (the social security "trust fund" was spent years ago), those not already destitute will be little better off that the German bourgois in 1923.

So in that scenario I can easily see (even predict) food becoming a political tool for population control and power maintenance. Grid lock would prevent the feds from clamping down and using force until it was too late. A democrat controlled congress would continue passing ever more pieces of legislation giving them ever more control of the populace, food supply being one of the most critical.

If my gold is my king, then a secure source of food would be my queen, and secure shelter, weapons, ammunition, and silver would all be lesser pieces on the chess board. I mention this because I do think silver has an important role to play in any "hard times tool box", if nothing else to help protect the gold, as does food.

miked said...

Just curious Desperado, as you live in Europe, do you foresee this gloomy scenario outside the USA where inflation is anticipated to debase the debts but not on the hyperinflation scale of the USA?

Desperado said...


I live in a little catholic valley in the countryside of Switzerland. In summer the dairy farmer teenagers ride up on bicycles to the shooting range with assault rifles on their backs. Every house has a bomb shelter. Today I had to wait at a check point while the local young men in the Zivilschutz practiced setting up roadblocks. My boss at the bank is an officer in the Flugabwehr (antiaircraft). He was recently gone practicing for a couple of months. Switzerland was brutally ravaged by the French, Germans and Russians in the Napoleanic wars and barely scraped by in WWI and WWII without being invaded.

In the valley where I live it is mostly inhabited by hard working tradesmen and farmers who have lived here for generations. There are 3 main families, and often couples are married with the same family names but who are not directly related.

The Swiss are like a bunch of mountain goats, up where competition for scarce resources makes people skeptical and narrow minded. But I like it all the same.

I say this so you understand that many in my family call me paranoid, but everything I saw happening has unfolded roughly as I would have expected it would had I known what I now know.

So here is my forecast. The EU as it is now composed is toast, if for no other reason than because it is a threat to Russia who feels emergent with a cocky and confident Putin in charge. Germany will relinquish control of eastern europe in exchange for energy and for peace. The Euro cannot exist in its present form.

Switzerland will once more come under immense pressure as her neighbors try to throw their bigger GDP and population weight around. Like most of the world, Switzerland will be severely hurt by the collapse of trade in general, but more specifically the loss of the north american market.

More generally, there was no Fannie, Freddie or reparations to be paid in Europe, so most of the real estate in continental Europe away from the southern coasts and the tourists is supported by significant amounts of owner equity. The debt is more that of the welfare state.

So I would expect hard times but not hyperinflation. But the key unknown is the threat of war. As anyone who ever played risk knows, being tied onto Asia almost always ends in tears as someone always tries to take the entire continent.

Aleksandar said...


I've caught myself fantacising on a few occasions about imigrating in Switzerland and working for a famous watchmaker in a nice place at the coast of one of those mountain lakes.

Now you make me check those watchmaker websites again!

FOFOA said...

Some of you may know a vocal and emphatic deflationist named Carl (with a C) from another forum. He has joined the hyperinflation discussion on an older page 2 thread. You can pick it up here if you are interested.


Wendy said...

That link posts a blank page for me FOFOA, as it did before. I'm not sure what's up with that. Anybody else having trouble with the 200-245 comments in that post?

FOFOA said...

Wendy, have you tried clicking on "newest" in the pop-up comments window? Try this link.

Jamie said...

My brother-in-law gave me "Fractals: The Colors of Infinity" in DVD form a few years ago and I have shared it with many. I was thrilled to see you sharing it as well. I believe it is something we all should be exposed to in order to sharpen the lens through which each of us view the world, life, God, existence, etc. You are my financial/economic prophet and I am your humble disciple . . .

Wendy said...

THANK YOU FOFOA, yes your link worked. It was driving me .....


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

Thanks for your insight Desperado. I have to admit it's all very cloudy for me. People talk of a two-speed euro with a northern southern split so the nations with stronger finances can still have a union. However, I remember when I lived in Sweden a few years ago that virtually nobody owned their own home. They had 60 year mortgages which never get paid off. The banks own everything there. Sweden is not in the Euro but its neighbours are and they have similar debts. Have a look here at per capita mortgage debt figures and remember this is per capita, not per family. Some of the numbers are horrendous. http://www.hypo.org/Content/Default.asp?PageID=202

My point here is that the stronger countries might have apparently sound government finances but the mortgage debts in some of these countries is bigger than the government debt, and that's without getting started on corporate borrowing.... When push comes to shove the euro will be printed to wipe these debts out. The north south divide in national budget deficits will seem a trivial measure for deciding membership of the euro. These deficits are a minuscule fraction of the debt.

Could the euro hyper-inflate? The difference between Europe and the USA is obviously reserves held abroad which would be repatriated in a panic. Euro reserves abroad are not trivial. China's reserves are 65% usd and 26% euro, and the euro is the second most commonly held reserve currency worldwide. Panic dumping of euro could possibly start a hyperinflation.

As for geopolitics, who knows? There are two many variables that cannot be measured, so in my opinion we can only say there will be lots of trouble if the euro fails :)

Desperado said...


The hypo table is startling, too bad they don't have the US and Switzerland on it. The UK, Netherlands and Denmark are shocking.

I think the Germans will leave the EMU if the ECB starts printing euros, I am sure they have contingency plans. Are Commerzbank and DB to big to fail? One advantage Germany has is that they never allowed the financial sector to dwarf the industrial sector. Unfortunately, Switzerand is the bitch for their 2 big banks.

In Switzerland most home owners never pay off their 1st loan (usually up to 60% if the purchase price) on the house debt, they usually amortize the second (up to 80%) and then carry the first forever. This is because the cantons tax you on the amount of money that you would have earned if you rented the place out and then allow you to deduct the interest. The banks love it. I know, it's crazy, and it's one reason over 60% of the people rent.

The unofficial motto for Baden-Wurtemburg (Stuttgart) is "Schafe, schafe, Husli baue" or "work, work, build a house". In general, away from the population centers people are much more fiscally conservative. But each country has its own character. In Italy I think that there are a lot of houses owned outright (as its ratio of 19.8% confirms), in Spain it seems that most have mortgages that they will never be able to pay. So it is hard to generalize.

I bailed on 2 Euro bonds I held and bought gold back in May/June. I have little faith in the Euro and would prefer to see the EU break apart in its current form. I am still almost 10% in the red in Swiss Franc terms on this purchase, gold was up to CHF 1400/oz then and now has dropped down to 1280. IMO, all this gold price rise and volatility in the last month has been due to the weak dollar, the gold price hasn't hardly changed in Franc terms.

miked said...

Some more data on ability to repay debt.


Most people hear about debt/gdp ratios and assume that's the whole story. They are forgetting how much tax the governments collect to service those debts. As you can see the USA's tax base is about 27% of GDP. Now, the US has an official forecast debt/GDP ratio of 100% for 2011 (http://en.wikipedia.org/wiki/United_States_public_debt). How long will it take to repay with a tax base of 27% of GDP? The US cannot even balance the budget, let alone pay anything off. The interest bill alone hast to be in the order of 3% of GDP. That means before Uncle Sam spends or saves a penny 10% of the tax base is gone.

As for other countries the ones already with huge taxes as a percentage of GDP have no scope to raise more to pay their debts and the ones with low percentages will see riots as they raise taxes to try to raise funds. And on top of this, nearly everyone is running a budget deficit and all have targets not to reach surplus but a lower deficit than they currently run.

All in all the government debts look pretty unpayable to me. That's before we get into mortgage debt.

Economicon said...

If you find the Mandelbrot interviews compelling, and would like to know more context of why they are relevant, I recommend you watch this: http://www.youtube.com/watch?v=DLFkQdiXPbo
and read Taleb's "Fooled by Randomness", and the lesser of his two books, "The Black Swan".

Desperado said...


I have a black market story y'all might enjoy. My son is finally getting off of Corsica tomorrow. He was trapped with his girl friend with an empty diesel tank on the west side of the island in our diesel Westfalia. From an internet cafe he skyped with me. The French dockworkers are on strike in Marseille and no oil is coming in and none is going out from the numerous refineries there. I suggested he stand outside a grocery store with a sign offering 20 euro's for 10 liters of gas. Finally a shipment of oil from the Italians via Sardinia arrived. They ended up waiting in a massive line and being allowed to buy 30 liters (about 8 gallons) for 40 euros. He said that since then the gas stations have already run out again. It turns out that the Corsicans simply went from gas station to gas station taking their 30 liters at each one.

raptor said...

You would like this one then :
The Secret Life of Chaos Part (1 - 6)

(in general all series of this guy are very interesting : The Atom, Chemistry a volatile history, ...)

As you were talking about fractals..and other mind boggling things ...here is a list of some of the books I read last couple of months :

Mind Tools - rudy rucker
Infinity and the mind - rudy rucker
The mystery of the Aleph - Amir D. Aczel
Zero: The biography of dangerous idea - Charles Seife
Decoding the Universe: How the New Science of Information Is Explaining Everything in the Cosmos, from Our Brains to Black Holes - Charles Seife
One, two, three, infinity - George gamov

and several others.. I learned so much in such short time.
(check their descriptions on amazon..)

All books are layman books, easy to understand.Except in some cases.
Common theme is :
Entropy, Information theory, fractals
Infinity in all of its forms philosophy,math,mind,physical,its history..etc

fredquimby said...

Interesting stuff.

NO chance of EVERYONE in the world waking up one day and ALL deciding that fiat is dead and long live gold??!

Nope, no chance of that happening, move on people, no black swan here.... Haha

Desperado said...

Bernanke's Declaration of Independence

Gary North discusses Bernanke's Oct 9 speech and decides that it is a shot across their bow. I love his conclusion at the end:

There is going to be a great default. I think he knows it. His speech laid the groundwork for "Don't say I didn't warn you."

What was he really saying? This: "The Federal Reserve will not take the fall in order to bail out Congress." He was saying that both of the escape hatches will close: private lending and Federal Reserve lending.

This was why he spent so much time on the threat of rising interest rates. If the FED is there to bail out Congress, holding down rates through hyperinflation, then Congress will not have to get its fiscal house in order. But he was telling Congress that it must get its house in order. Conclusion: the FED will not hyperinflate.

I don't know if Congress will get the message. The rest of us had better get it.

Congress will kick the can. But the day will come when the FED will not help Congress kick it any longer. That will be the day of reckoning.

Bernanke was saying that Congress will have to nationalize the FED in order to gets its deception game rolling along. The FED will not destroy the big banks by destroying the dollar.

He was speaking for the biggest banks. They have just sent Congress a memo. Congress had better read the memo.

bailingout said...


I don't know if I'm worthy to comment on such an intellectually advanced blog but here's my two cents.

"Credit only works as money for as long as asset values can appreciate and new debt can be added. The moment those two variables cease to function, credit evaporates out of existence and this includes positive credit (credit held in excess of debt). Money, even if its fiat, doesn't do that."

Credit only 'becomes' money when and if it is used to purchase something. Once the purchase has occured money is magically brought from the future into the present and placed into the sellers account.

One thing deflationists don't seem to understand is that once credit is used to purchase, money is created and cannot be destroyed by a credit collapse. When Joe buys the house, whether with savings or a mortgage, money is placed into the sellers account. With the mortgage the money is "poofed" into the present by Joes' bank from his future earnings (fractional reserve banking). After the credit collapse the seller still has the money in his account.

The inability or refusal of Joe to use credit in the future does not reduce the money supply but only prevents the supply from increasing due to Joes use of credit.

Deflationists confuse asset deflation with price deflation. When assets deflate there is no reduction in the money supply. If you only look at purchasing power you can easily see that asset deflation is similar to money supply inflation, as the assets purchasing power is reduced much like moneys purchasing power is. This is confusing since asset deflation is actually asset inflation (an increase in assets compared to chasing dollars).

It's helpful to look at assets in the same way you look at money. As people wish to exit assets for money the relative value of assets goes down. The next phase is people wanting to leave money for tangibles where the relative value of money will be reduced; and propbably greatly reduced since there is so much money (almost all the worlds central banks reserves, derivatives, etc.) which will be chasing so few goods.

As assets purchasing power is reduced moneys is increased. This phase is when investors trade assets for the more desireable money. The hyperinflation phase is when money is no longer desired, due to its inherant worthlessness, and people wish to trade it for something more enduring.

"you are incorrect on two counts, 1) The money supply was not increased by $5,000, debt was increased by $5,000 and as we all know, debt is not money, it is an obligation to pay."

You have it bass ackwards. Neither credit nor debt is money. When the card holder borrows the $5,000 the credit becomes money and is deposited in the sellers account.

"As for #3: Like "an act of god" is used to explain things that appear to occur for no reason, I think "a collapse in confidence in the currency" is used in that same vain, to explain away a series of events that are far more complicated and diverse than that succinct little quip would lead one to believe."

It helps to recognize that economics is more psychology than science. Economics is essentially comprised of interactions between human beings and is therefore greatly controlled by fear and greed (both very powerful emotions and hard to model).

I hope this adds to the discussion.

Gabriel said...
This comment has been removed by the author.
Fred said...

FOFOA, A question on Freegold. This is where gold is freely traded within a currency zone and can be freely transported/traded between currency zones by individuals. Is there any more to it than that this (and I admit that I haven't read through all of your posts in detail).

What if all banks and central banks complied with the following rules? Banks publish the value of their physical gold holdings against their outstanding currency on an ongoing basis. In the case of a central bank this is the cash in circulation plus member bank reserves divided into the central bank gold in hand (other securities owned by the central bank are excluded). In the case of a bank it's their deposits divided into their holding of gold backing the deposit. They then stand in the market at this price (with a spread between buy and sell). Gold will then flow into the bank/currency zone with the lowest reserves of gold as a ratio of their notes on issue, ie where the price of gold is the highest. Governments should be free to spend in gold or fiat, and taxes can be paid either in gold or fiat. My question is whether the continual “mark to market” of the banking system's gold reserves are a necessary rule for freegold to work.

Gabriel said...

The FED still has a great tool: interest rate. At the cost of a huge depression, and maybe bankruptcy of the government. The interest rate will rise to 30%, but there wont be hyperinflation.

The scenario of jumping interest rates is much more appealing than hyperinflation, at least in the eyes of the FED. It allows an efficient control over the rate of inflation, and can be claimed a weapon of last resort. World economics might suffer greatly, but both the banks and the $ will be preserved.

costata said...

Re: Gary North

I have enormous respect for Gary's intellectual capacity and knowledge. However he may have a blind spot or two. I would suggest the following:

1. When he says the Fed will "not hyper-inflate" I suspect he is applying an Austrian economics perspective similar to Carl's view. He may be saying "the Fed will not increase the current money supply to a level that will cause hyper-inflation".

2. He is an American and his focus is on the USA.

I would like to ask him the following questions:

Are there enough US$ in the rest of the world to cause a hyper-inflation in the USA if these dollars attempted to repatriate to the USA?

What makes you (Gary) so sure the Fed can control the situation?

Under the Austrian definition of hyper-inflation Iceland did not experience hyper-inflation. They experienced an increase in some prices of up to 300% due to a collapse in their currency.

Any debts the Icelanders held that were denominated in a foreign currency would, most likely, have instantly exceeded the value of the collateral pledged against the loan. IF the lenders foreclosed and dumped the assets on the market it might have caused deflation in asset prices.

End result. At the time of the currency collapse as an Icelander I'm broke, my country is broke and my cost of living has gone through the roof. The price of gold in my local currency is currently infinite.

BUT I have an Austrian economist at my front door telling me to take comfort from the "fact" that I didn't experience hyper-inflation.

Should I be grateful?

Tyrone said...

FOFOA, A question on Freegold. This is where gold is freely traded within a currency zone and can be freely transported/traded between currency zones by individuals.

Uhhhhhh... FAIL.

raptor said...


The money are destroyed when the banks writes off the debt.. if for some reason a borrower defaults and can't pay back.
In fact it doesn't exactly disappear, just limit the ability of the bank to extend more credit because of the reserve ratio, so in a sense "money" are destroyed.
But it is right that the fractional system based on interest sooner or later will have to contract/collapse on a pure common sense mathematical principle, because the money are lent into existence with attached interest (i.e. they create X$, but expect to receive X$+interest$).
The only way for such system to exists is if there are enough ppl defaulting on the other side (by default I mean not paying their debt) AND non-stop-growth (which is not possible because it is exponential process, but is based on limited natural resources) to balance the equation.
The problem then is if you sustain such system for long as it happened now the only way is to have at the end a big-default to balance things, but the problem with the BIG-DEFAULT is that it transforms from economical/business (ordered deflation) event in political/psychological(uncontrolled deflation --> hyperinflation) event.

That is the problem deflationists don't take into account. They make the correct calculation with the numbers (M1,M2,M3,GDP,CPI...), but don't account for inability or may be even impossibility to control BIG-DEFLATION event (coupled with unsustainable world trade balances and funny money).

costata said...


Why did you give Fred's statement a "Fail"? It is partly correct. Freegold requires a free market in physical gold. That's a reasonable starting point from which to explore the much larger concept of Freegold.

What you go on to describe is basically the structure of a gold exchange standard. That isn't Freegold.

Assume that currencies aren't backed by gold but valued in gold on a dynamic basis in a free market exchange. Gold operates as a reserve asset, a store of value. Fiat currencies continue to be used as the medium of exchange but every currency floats against gold.

By way of example if too much of a particular currency is issued its' exchange value in gold would fall. If a country has a strengthening currency the exchange value in gold will rise under a Freegold regime.

One of the critical things to understand is that A/FOA predicted a revaluation of gold to correct the cumulative imbalances in the present system. In currency terms this would look like a huge rise in the "price" of gold in, say, the US$ as but one example. FOFOA's probability analysis puts this revaluation at somewhere in the region of US$56,000 per ounce.

You have scratched the surface and if you read the archives of the posts of Another, FOA and FOFOA you will find that Freegold is part of a new monetary system to replace the failing $IMFS (glossary at right of screen).

The other key issue that FOFOA addresses here is hyper-inflation. A/FOA argued convincingly that this would be the inevitable outcome of the end of the life cycle of the current US$ reserve and monetary system.

IMHO it is worth the time to study these matters. Forewarned is forearmed.

Wendy said...

I agree costata, the A/FOA archives are incredible to read, particulary insofar as "time will prove all things". I've only read them once, but not studied them.
In order to fully understand the concept of freegold these writings are a must.

In addition, FOFOA has done an incredible job presenting the lessons of A/FOA, and this blog post represent many thousands of hours of research, consulting and writing. I am regularly aghast at the serial same questions that are posted by some that drop in to read a post and then have the audacity to argue uninformed. Hats off to you FOFOA, I would have told many to F&**&k off!!

Desperado said...

Hola Costada,

You said: "He is an American and his focus is on the USA."

You are right in this, but I am too having spent the first 30 years of my life there. But I also realize that Switzerland has benefited immensely from Pax-Americana.

I don't think Norton was making any judgement on how effective Bernanke and the Fed will be. But Norton did make some bold statements (he extrapolates too much) about what written between the lines in Bernanke's speech:

"He told his audience that the escape hatch of ready lenders is going to be shut. The lenders will reduce their purchases of debt at low rates.

This is another way of saying that the AAA rating of the U.S. government will fall. The idea that you cannot lose by buying Treasury debt will go the way of the dodo bird. This was a major statement by the FED Chairman. It went right to the heart of Congress's deferral of the day of reckoning."

Wow, if true this would foretell a coming domestic feud between congress and the Fed. Throw in a congress with a strong minority of teaparty congressmen who finally have the means to get their message and stories out and this could be quite interesting.

"He was telling Congress to begin to decide whose oxen must be gored."


"I sense that this speech was his attempt to send a signal: "Don't plan on the FED to bail you out.""

and then

"At what point? When the FED stops buying Treasury debt. Then there will be a default. Of course, he never used this politically incorrect word. But it is clear that he expects Congress to intuit this.

Will Congress intuit this? Of course not. It will kick the can."

It makes perfect sense. The bankers must know that if the US gets into hyperinflation then the most incredible money tree in history is going to be taken away from them and that they will be out of a job. Norton says that the Fed and the Banks won't commit suicide and will resist printing to pay the government payrolls after the dollar and tax revenue collapse. That means that there will be an enormous power struggle. Could the military be called in to support one side or the other?

As far as Iceland goes, they had a certain credibility that helped them avoid hyperinflation because as an Island they have a high degree of social cohesion and also a lot of resources. In short, the world realized that there were assets that would always be of some value, especially when spread over only 300,000 inhabitants, so many were willing to wait to see how the people handled it. And it certainly would have turned out differently if the dollar had collapsed at the same time as the krona.

Paul said...

Things are sure moving fast.

"And while the French deny that they are in talks with China over the creation of a new currency regime, I heard French finance minister Christine Lagarde say in person at a meeting in Italy that France would use its G20 presidency to push for an alternative to the dollar. She specifically cited the “Bancor”, the idea floated by Keynes in the 1940s for a commodity currency priced off a basket of metals. The US risks gambling away the “exorbitant privilege” it has enjoyed for two thirds of a century as currency hegemon."


Someone should explain Freegold to Christine!

Fauvi said...

That could be Benn Steil of CFR. January 2007 he spoke about Freegold. He doesn't support a gold standard and promotes digital gold as (free floating???) currency.

"Digitized commodity money may then be in store for us. Gold banks already exist that allow clients to make and receive digital gold payments—a form of electronic money, backed by gold in storage—around the globe. The business has grown significantly in recent years, in tandem with the dollar’s decline."


FOFOA said...

"French... to push for an alternative to the dollar... specifically cited the “Bancor”..."

Thanks Paul. Sounds familiar:

At the world gold conference in 1933, France
wanted international monetary reform
. France
wanted the United States and Britain to go back to
fixing of the price of gold. President Roosevelt
said no, and the dollar continued to float until,
unilaterally, the U.S. devalued the dollar, raising
the price of gold from $20.67 per ounce to $35.
The United States did not want to move back to an
international monetary system, except under terms
that gave it leadership.

At Bretton Woods in 1944, President Roosevelt
told Treasury Secretary Henry Morgenthau to
make plans for an international currency after the
war. Economists remember that Harry Dexter
White and the staff at the US Treasury made a
plan that involved the creation of a world currency
to be called the unitas. Keynes, in London, made a
comparable plan for reform that included a world
currency called bancor. When the British
delegation came over for the Bretton Woods
conference, it kept bringing up the question of a
world currency, but the Americans now had
second thoughts and kept silent. Thus academic
internationalist idealism fell prey to economic
national self-interest. As a result the enlightened
superpower backed away not only from Keynes'
bancor plan, but from its own unitas plan. Bretton
Woods did not create a new international
monetary system; it kept the system that had been
in place since 1934.

"Bancor is the name of the supranational currency that John Maynard Keynes was conceptualising in the years 1940-42 and which the United Kingdom proposed to introduce after the Second World War. This newly created supranational currency should then be used in international trade as a unit of account within a multilateral barter clearing system – the International Clearing Union –, which would also have to be newly found. The Bancor was to be backed by barter and its value expressed in weight of gold. However, this British proposal of introducing a supranational currency could not prevail against the interests of the United States, which then at the Bretton Woods conference established the U.S. dollars as world key currency.

Since the outbreak of the financial crisis in 2008 Keynes' proposal is winning in importance: In a speech delivered in March 2009 entitled Reform the International Monetary System, Zhou Xiaochuan, the governor of the People's Bank of China called Keynes' bancor approach "farsighted"..."

FOFOA said...

BTW, the bancor or even a new SDR "basket" would not be antithetical to Freegold, but perhaps a little superfluous. It would be primarily an international unit of account and national fiats would be transactional. Gold would still be the monetary reserve asset.

ANOTHER: "There are nations that will try to "resource a new currency" as the old financial system implodes. Oil or gold or both may be used. If it is done at the correct time, much will be gained by all!"

Aristotle: "I was personally shocked when I discovered that we absolutely NEEDED paper currency in order to set Gold free."

FOA: "Should one risk financial assets based on this series (Aristotle's) alone? Never! On the contrary, no one should believe what he has written. Rather, we as a society should "study" his fine work and seek to understand its meaning. Once fully understood, I think most would then agree with its inevitable outcome. Indeed, a "free gold market", based only on physical holdings would impact the world economic system unlike anything seen before it. And Yes, its impact on the relative value of gold will make that metal the monetary wealth investment for the next thousand years!

This my friends is why so many today, "Walk In The Footsteps Of Giants"."



Tuco said...

"...based only on physical holdings"

"Digitized commodity money" requires trust, no?

raptor said...


Because gold has limited utility, its price is irrelevant to ongoing economic activity. As a comparison, if oil shoots to $500/barrel that means that your paycheck would allow you to drive just one-fifth the distance it allows you to drive now. Such a move in oil would have drastic implications for the global economy. But if gold shoots to $5,000, what happens? Well, the gold stays in my teeth. Jewelry demand goes down even more, but nobody makes any decisions to substitute out of gold because it really isn't being used for much. In other words, it really should not affect the economy.

costata said...

Hi Desperado,

I think you are right about the election. There could be increased Fed-Congress friction.

However I keep reminding myself that the Fed = the banks + the "debtors" including the USG. So I don't buy the line that they won't default the debts through hyper-inflation. This could be mere theatre on Bernanke's part. Even if Gary North is right about Bernanke and the Fed the USG can over-ride them.

Also I don't think enough attention is being paid by some analaysts in the USA to attitutdes toward the USA and the US$ outside the USA. That line "it's our dollar but your problem" (from the Nixon era) doesn't wash if you are heavily indebted and import dependent.


Desperado said...

Hello Fofoa,

Gary North has an interesting look at "Greenbackism" in Cheerleader for Hitler's Economics. He has researched Ellen Brown extensively. He discusses her and the Greenbacker links to the tea party, and I would think they would fit together like a hand and glove. The Greenbackers have historically been against gold based money and they could easily help push the teaparty into being swept up in an anti-gold and anti-hoarder populism.

It seems that we are having more than a currency war, we are having a struggle between monetary philosophies at a very base level as gold reasserts itself and the $IMFS breaks appart. This is something that has not happened for over 100 years when the Greenbackers, the Silverites, and others struggled against the gold standard.

I would love to hear anything you (and anyone else) might be able to add concerning this re-emerging conflict.

Devils Avocado said...

''During the span of ones life we must consider weather we really do experience changes or are we just experiencing a rebirth of old values from the past, repackaged for this modern world.'' Another.

Fractals. I watched a film called The Fountain recently, I saw imagery of fractals throughout.


Museice said...

"What is a currency war? What they mean is each currency is trying to devalue against all of the others. They all want to devalue but they can’t, it is a zero sum game. Some people can devalue some of the time, but not everyone can devalue all of the time.

What is the solution? The solution is to identify a store of value that everyone can devalue against all at once. And there are two obvious candidates. First is gold, and second it is to invent a currency.

The preference of central banks is to invent a currency such as the SDR or the Bancor. But, the market’s preference seems to be for gold. So the currency war comes down to a race between gold and the new paper currency. Who will win?”

Jim Rickards...

A store of value everyone can devalue against! I can understand that concept.

FOFOA said...

Hello Desperado,

"Hello Fofoa… I would love to hear anything you (and anyone else) might be able to add concerning this re-emerging conflict."

Certainly! First let me say that I thoroughly enjoyed that Gary North piece. Bravo to him! As always, I only have minor differences with him.

I have been writing about this "re-emerging conflict" a lot lately, but you simply cannot see it, Desperado. Politically I am firmly on your side. Monetarily, you are blinded by your intense political focus, in my opinion.

You say, "It seems that we are having more than a currency war, we are having a struggle between monetary philosophies at a very base level..."

Yes, absolutely. Go reread my post about the Debtors and the Savers. You can think of them as the "easy money camp" and the "hard money camp" if you like. And "hard" means "difficult to obtain" not "metal" in this case. That's why I used "easy" and not "soft" for the other camp.

Ellen Brown is in the "easy money camp," as are many others who are unfortunately frequented by our online peers, like the AMI, Freedom's Vision, Bill Still, this guy, this guy, this guy, the entire MMT blogging crowd, and many more, including a lot of deflationist and silverbug names you would recognize but I'm not going to list.

Hopefully you can tell these people by those they associate with. It is basically everyone on the left that is anti-Fed and anti-"banksters," including Ralph Nader and Dennis Kucinich. These people, and the "greenback historians" that North so brilliantly illuminates have contributed most of the "anti-bankster" myths that have lasted 150 years. Just watch the Secret of Oz to see them all laid out. People like Ron Paul are mainly opposed to the Fed because they want a gold standard reinstated. You should consider this when I, FOFOA, state that bankers and the Fed are not the CAUSE of what we face today. Not that they are all good and fuzzy like little bunnies, but they are not the cause. And those of you obsessed with the Fed and the bankers should take a look at the company you share.

Moving on…

Okay, Desperado, the bottom line you need to internalize is that we are the tail end of a giant "easy money" cycle. And these always, without fail, end with a switch back to "hard money." But... and of course there's a but... this time it will be a little different.

There are a couple more important points that you should internalize. Point 1: the government can only legislate the medium of exchange. It has no legal power over the choice of reserves (how people choose to spend their extra cash), nor over the true numéraire (how people choose to think about value).


FOFOA said...

Point 2: The evolution of the "concept of money" is at least 2,500 years old and is still unfolding. It went something like this...

1) numéraire
2) numéraire & store of value
3) numéraire, store of value & (legislated) medium of exchange

Then there was a split between the A. the West and B. the East

4A) numéraire, store of value & (legislated) medium of exchange
4B) medium of exchange

Now, when "easy money" cycles end, it is those that held (saved) in the "easy money" that are hurt most, "the savers." The debtors are actually relieved of their debt at the end of an "easy money" cycle. Sure, life gets hard for a while, but that's only because they now have to earn their keep.

And as you can see in 4A and 4B, we have this general discrepancy between the East and the West. It will be resolved as we move on to #5 in the evolutionary cycle, without an A and a B. Either A will come to view money like B, or B will come to view money like A. One or the other.

I know this is a very broad generalization that fails in many individual cases, but here's the gist of it. The East is the global producer and the West is the global consumer. They share the same medium of exchange. But not the same numéraire (thought or idea of how their goods should be valued). And herein lies the problem. The real wealth of the West, its gold, has been rapidly depleted because of this misunderstanding in the non-transactional monetary roles. The only way this problem can correct is for everyone to get back on the same page. Either the East will learn that dollars are the best numéraire and Treasuries are the best wealth reserve, or the West will learn about gold in the monetary wealth reserve role.

Which one do you think is more likely?

Now back to Point 1: the government can only legislate the medium of exchange. This is the only role these "easy money" people are whining about. Because it is the only thing that can be legislated. It's the only monetary role that they could ever have any say over. And that's a good thing! Because we are about to switch from 4A+4B to 5. And here's what 5 looks like:

5) medium of exchange & partial numéraire

So, you see, both camps will get their way this time. The "easy money camp" will get its easy medium of exchange. And the "hard money camp" will get a viable "hard monetary alternative" to save in. They will both be happy. But there will also be inevitable political changes that will follow. This is a fun part of the exercise that I don't write too much about because I get swarmed by all you NWO-focused guys that can't seem to understand that the "NWO" is losing its power in this phase transition. So I just keep it to myself. You can do the exercise on your own if you want to.

The "NWO Socialist Welfare State" (or whatever you want to call it) is completely dependent on the US dollar's global use in the store of value role. Something that cannot be controlled. It can only be earned through confidence. And most simply stated, that's ending. Look no farther than how the creep of progressivism has paralleled the creep of the US dollar, and then you will see how far this movement is about to be set back.


FOFOA said...

They can try a welfare state with an "easy medium of exchange," but it won't get very far in Freegold. There will be an uncontrollable transition whereby the "free stuff crowd" goes back to work out of necessity.

There is a fatal flaw in the reasoning of "easy money" thinkers like Ellen Brown. The flaw is in the cause and effect blame game they play. Their disdain is directed at the wrong cause.

I dislike debt as much as the next guy. In fact, I think that equity engagements will ultimately be more appealing in a balanced and stable economy with multiple viable alternatives for capital to park in. I am certainly no fan of the Fed and I don't like what banking has grown into over the last 30 years.

But debt itself is not the cause of our problems today. Today we have a situation where the vast majority of excess production value (excess capital) is enabling massive amounts of global malinvestment through new debt creation. That has peaked and is now contracting. But the problem is not the debt itself. The problem is the enabling effect of excess capital not having a viable alternative that floats against the currency. The problem is the lack of the adjustment mechanism of Freegold. There is no viable counterbalance against uncontrolled debt growth today. So we are only left with credit collapse and hyperinflation of the monetary base to clear the malinvestment from the system.

It is easy to blame this on debt as a principle, but unless you don't mind being wrong, there are some deeper explanations out there. Debt under Freegold will not reach such destructive levels. "Easy money" thinkers may or may not get their debt-free money, but if they do they will suddenly realize the flaw in their reasoning. Oops! That it can only have expandable value (needed for the welfare state) if producers are willing to hold it while it expands. Without that, socialist welfare expansion will simply dilute the value of the currency and be as limp as a eunuch.

And this fatal flaw in the "greenbackers'" reasoning is, for all practical purposes, written into their Western genetic code. They won't see the flaw until it finally fails them. It comes back to the concept of money. Ever since the Dark Ages, money has been both a medium of exchange and store of value, for better or worse. They can't even conceptualize the separating of functions, so they don't bother considering the consequences. They think "all we need is free money and it will be a wellspring of value, because money is always valuable." How wrong they are.

If you want a glimpse at how things will actually play out monetarily, it can be most clearly seen in the structure of the euro. As Wim Duisenberg said in his famous speech, "It is the first currency that has not only severed its link to gold, but also its link to the nation-state." Here, the euro solved TWO problems. 1. It severed its link to the wealth reserve function of money. And 2. it severed its link to the Triffin Paradox.

The resolution of these two problems with the dollar (1. trying to be everything to everyone, and 2. suffering the Triffin Paradox) is the inevitable shakeout of this crisis. This is the final point you should internalize.

Now, I fully realize that this is the point of the conversation where you glaze over and start foaming at the mouth with hatred for the NWO Socialist elites that forced the euro on Europe. So I'll just stop here and not waste any more of our time.


Joshua Kane said...

Hello hello FOFOA. I am enjoying the open forum today. And I am proud to report that I have finally managed to put a TSIBR post together. Entitled:
The Globe Has Seen This Play Before, Act II Brings Currencies to the Fore, Act III Brings War.
Please do check it out at:
Let's catch up soon!
Joshua Kane

FOFOA said...

Great quote, Muse. Thanks!

Here's another good one from Randy Strauss at USAGold:

When you understand how it is that it is economically (and therefore politically) undesirable for other major currencies to appreciate against their peer currencies (which is exactly what would happen to any currency replacing the dollar’s reserve status), you will subsequently know why gold shall continue to emerge as the de facto solution to the international reserve question.

And here I emphasize de facto rather than de jure because this has become a global phenomenon driven by a natural evolution (survival and ascent of the fittest) and does not require any additional international treaty or enabling legislation as a prerequisite or for motivation.

The breeze is fair and the road ahead is clear for the ascent of gold.

That's just the end of it. The full quote can be found at the end of my post, Gold: The Ultimate Hedge Fund.


costata said...


That comment to Desperado was worthy of a post. Excellent.

I see that I will have to abandon my second favourite hobby, heaping scorn on bankers (minus the NWO angle).

Fortunately, I still have politicians to vent on, so it's not a total loss.

SatyaPranava said...

desperado, fofoa. as both of you (and others) may have noticed, i've taken much of a break here in the past several months (or so it seems) to just observe where things are going.

I must say, as one who went head to head against some of the parts of the NWO on both a national and international stage some 13 years ago, I have been firmly entrenched on the desperado view of the world. Even when coming here, I sought to offer my experience and perspective in a way that you, desperado, and others in the more anti-totalitarian (or as fofoa might refer to it as the NWO paranoid-fantasy) camp have expressed quite well.

I must say that I've been shifted not only back to neutral in all of this, but FOFOA, and the writings of others, has me even leaning a bit toward the thesis that they're desperate and grasping at straws.

So as much as I don't like the FOFOA attempts to belittle a POV that is richly documented and proudly shouted from the mountaintops with a gleeful gloat, I am not sure he's wrong on this.

I think our cynicism (if I may impart an "our" to the group that seems so) is appropriate looking back, and is probably healthy looking forward (especially if one is to consider Hannah Arendt's quote about totalitarian regimes creating fantasy worlds of consistency before they drop their iron curtains).

However, I must say, that I think it's just as important not to get stuck in our own thinking and be too past-oriented. I too still question whether or not things are being controlled by such groups, people, and their agendas (are Pakistan and Afghanistan really a mess? or are they going according to the Brzezinsky--Grand Chessboard plan ?).

But I can also see the immense power and Taoist flow that is FOFOAs thesis. I just though I'd throw that out there. As one who's open-minded, I'm glad to hear the POV that believes they are firmly in control, as well as the one which says they're not only desperate, but just about out of ammunition.

and, for the record, I firmly believe that politics and economics are so inextricably entangled so as to make discussion of one without respect to the other baseless and moot. So both have a place in blog about freegold, IMHO. Moreover, though, I think it's important to address the limitations of the theories presented here, if possible without (and excess of) fear, impassioned vitriol, or belittlement. Most of the time I believe we achieve that here. Some of us are better at it than others, but it's an important goal to achieve.

thanks again for the blog, fofoa, and to everyone else for the great conversation and intelligent perspectives.


costata said...


Would it contradict your experience of 13 years ago if the key elements of a NWO were put in place at the end of WWII?

Serious question. Some folks I respect reached the conclusion that the NWO has been in place all along. FWIW I tend to agree with them.

samix said...

With respect to the NWO, my two cents, the normal theories are that they are a set of people who are trying to take over the world, that these guys have started conspiracies that have been running flawlessly through generations.

I used to subscribe to this, but lately I tend not to, because this would mean that

1) Every new player in the club was as dedicated and effective as the last member.

2) That there is unity of goal to such an extent that there have never been fights or fallout's.

3) That each subsequent heir was equally capable.

Such a hypothesis contradicts human nature.

I feel that yes there are these people and the only thing that binds them together is their lust and greed for power and money, they have just made themselves into a cartel for this purpose.

I am quite confidant that not one of them would give up the opportunity of stabbing the other one in case there is massive profit to make.

It is a bad bad world of you scratch my back and I scratch yours.

I am a firm believer in the Quran and this description matches exactly with the one given in the Quran about the power hungry and the greedy.

samix said...

also, looking back into history , such groups have always existed.

Only the players have kept changing.

Desperado said...

Hey Fofoa,

Thanks for the long reply. I remember your post "Debtors and the Savers" and I re-read it.

As Satya hinted with this statement, "the immense power and Taoist flow that is FOFOAs thesis", this blog is more "spiritual" (for lack of a better word) than I normally am. I have a degree in statistics and have worked in the very cut-and-dried IT world for almost 30 years as a database specialist. I am an atheist. This clip about Man against Mountain is about as spiritual as I normally get.

I mention this because you and others here often approach freegold with a kind of divine reverence, a kind of "faith" almost like it is "ordained". Like the farmers in the Swiss valley where I live, I am very skeptical and even cynical about things that I cannot directly control, about centralized authority and especially about those who hunger for power and prestige. I doubt freegold will ever be universally accepted because there are powerful people around the world who would lose power if it came to pass.

I don't believe that there is one big conspiracy trying to impose a NWO, I believe there are many. I don't believe that the "banksters" run the US but that many powerful parties are constantly playing tug-of-war with it. All around the world there are simply rich, powerful people who constantly yearn for more wealth and power. It was always so and so will always be. They flow in and out of partnerships and alliances with friends and enemies depending on how events unfold. Some of them are a bigger threat to my family than others, and I resist the more immediate threats than the less. This is why I expatriated when I finally realized how broad uncle Sam's pursuit of financial control over every US citizen had become. So yes, I am intensely political about anything BUT small localized government and low taxes. This fits in with freegold perfectly.


Desperado said...


Now to the Greenbackers, you wrote:

"They can try a welfare state with an "easy medium of exchange," but it won't get very far in Freegold. There will be an uncontrollable transition whereby the "free stuff crowd" goes back to work out of necessity.

There is a fatal flaw in the reasoning of "easy money" thinkers like Ellen Brown. The flaw is in the cause and effect blame game they play. Their disdain is directed at the wrong cause. "

If this came to pass, I would dance with joy. It would mean that their policies had been rejected. The problem, as Gary Norton discusses, is that the soft-money populists often (as in Hitler) have a bigger agenda than social welfare and will attempt to catch a ride on any significant populist fervor. By all appearances Ellen Brown would likely dog pile on gold "hoarders" if she thought that represented be her best chance for power. She might even decide she likes living in the White House just as FDR did after he had stolen everyone's gold.

I love this statement of yours:

"Debt under Freegold will not reach such destructive levels. "Easy money" thinkers may or may not get their debt-free money, but if they do they will suddenly realize the flaw in their reasoning. Oops! That it can only have expandable value (needed for the welfare state) if producers are willing to hold it while it expands. Without that, socialist welfare expansion will simply dilute the value of the currency and be as limp as a eunuch. "

This meshes well with your statement from Debtors and Savers:

"Today we are living the end of the longest stretch of time in which "the soft money camp" has been in power both politically and monetarily. For a century now they have been softening our money more and more. And for those of you obsessed with the "emerging" NWO and One-World Currency... surprise! You've been living with it for 66 years now.

This latest push for central control and massive deficit spending by the "soft money camp" is simply the blow-off phase right before the long awaited collapse. And when soft money collapses, the transition is always financially painful but not necessarily bloody like the French Revolution, which was the end of the "hard money camp"."

The burden of paying back debt in a period of deflation (late 1800's) hurting debtors is actually the inverse of what you described, a period of low interest rates with hidden inflation and currency debasement meaning debtors are being favored over savers. I think we all understand that not only economically but psychologically and culturally we need to get back to a society that favors savers. The problem is when the $IMFS collapses, there will be acute instability. This will be a big chance for any powerful opportunists, and it one reason why the $IMFS are frantically trying to get a new OWC ready (Bancor).

After the collapse, there will be so many conflicting signals about who to blame and what is the best path forward. I can see that having gold ownership spread as widely as possible among the people would not only be a powerful incentive but also help them understand what role honest money should play in their lives. A wide heald distribution could also be an advantage for the silverites...


SatyaPranava said...


it wouldn't contradict my experience at all, though i must admit that I believe it goes back further than that. 13-14 years ago is just when I went head to head, unbeknowst to me, with some of the players in Israel (some whose power base and handlers were through France, Spain, and the Vatican; others, the majority, whose power base and handlers were Anglo-American). I was also young, had some experience in Washington DC, and fortunately for me at the time, my best friend was the nephew of one of these people (he wrote a book entitled "the new middle east" for a new world saying borders will be irrelevant in the future, among other things.

But learning what i've learned since, and even reading so many things, such as the article I posted on here approved by Dr. Nicholas Murray Butler and the United States of Europe and its elite planning, inevitability, and the near-explicit threats leveled against those who would try to stop it, and all in a 1914 New York Times (despite the Times' history) article that was front page.

I don't know how far back it goes, but there is a thread of power there that has been there a while which has been increasing its tendency to concentrate and consolidate power onto a larger and larger scale.

From my perspective, nature abhors centralization, and this centralization in many respects was the enemy of the german people in 1871 (unification), as well as from '33-'45 and in many other countries, not to mention economies. I've only skimmed the North article mentioned above, but centralization is one of the things he vehemently attacks, and I think rightfully so. Though I also believe that no system can have everlasting peace and balance, because it skirts the one issue that is inimical to them all: human beings and their motivations, greed, lust, and fear.

But this is why I don't really care about the term NWO. In fact, I'm pretty against it as well, as I would argue historically it's been abused by those on the marginalized right and left, but it's also been abused (intentionally) by those in counter-intel, not to mention it's been use glowingly in the past few years in the press as the savior of all things.

Imagine that, the wizard, jumps out from behind the curtain and says we've been here all along, just as you've been calling us, even though we've been calling you crazy. But what you missed, is that we're doing it to SAVE, not EXPLOIT, the world and humanity.

Too many of us have been conditioned to think of a conspiracy (which happens every day at all levels in courtrooms throughout the world) as 6 cigar-smoking suits sitting in a dark room, planning all the world's events and having the power and experience to execute them perfectly. In my studies of propaganda, that's a straw-man argument that succeeds in doing exactly what it's supposed to do (as Rivero says), "give moral cowards an excuse not to think at all."

So much of so called conspiracy (or agenda), however, is so well-documented, that those who simply try to belittle others show, IMHO, either their vast ignorance, their close-minded and steadfast desire that it's not so, or their culpability in attempting to prevent the masses from learning about such things.

Again, remember I said above that nature abhors massive centralization. So what I'm still wrestling with here, is whether or not freegold is a force that is more powerful than those with such machinations.

Again, there will always be people who exploit the system and other people for their own benefit and to the significant detriment of others.


SatyaPranava said...


But freegold, at least, in theory, and in the visions of FO/FO/A, has a possibility to be that. What I've enjoyed just as much as FOFOA's amazing writing, though, is that tension that arises when two paradigms begin to clash. And this is what I'm seeing here in this blog, with and pardon me if i mess up the names (desperado, dragonfly, tdfxman, and some others) and their reservations about counting out the those who would be incorporated under the banner of the term "NWO" and those here (FOFOA and others) who believe that such a movement will be thwarted by the idea behind "freegold."

It'll be interesting to see how it all plays out.

So, costata, sorry for such a long answer, but the simple answer is that I think it very reasonable to conclude that the NWO types (I include in here agents of empire with global conquest as their realistic goal) go back at least 100 years, and I think a good case can be made that they go back several hundred, if not a thousand years. However, I am only really comfortable documenting the last 100-125 or so.

But the beauty of freegold, if (when?) it happens in the manner that FO/FO/A are suggesting, is it's massive tendency toward monetary decentralization. and decentralization is ding-dong the witch is dead.

SatyaPranava said...

samix, I tried to answer some of your concerns in the post above, but suffice it to say that IMHO, the term NWO is a catchall term that means many different things to many different people. This is not all that different than the way people think about the Fed, intelligence agencies, or even Jesus, Mohammad, Moses, Confucius, Lao-Tse, or the Hindu Godhead.

Thus, as someone with a background in History, I tend to sift through the many ways people tend to think about things and attempt, to the degree possible, to go read the source material and assess the evidence.

I don't believe that if there were people who would want to "control the earth" or whatever spheres they set as their goal, would necessitate that every new player be just as dedicated or effective. to portray that into sports teams, it would suggest that the yankees, who have been considered the evil of baseball, would only get better players every year and more dedicated and effective people and they would never lose again. This obviously is not the case. And the yankees even in their greed for world series have only accomplished it 1 out of every 4 years in the history of baseball. yet they try and they have a disproportionate share of the market which gives them a huge advantage.

it also doesn't necessarily mean there's a unity of goal beyond the idea of world power. For even in the many organizations i've been a part of over my life, even the ones who steadfastly mandated that we cast a face of unity to the public, each person had his/her differences with the best way to get to the goal.

your reservation 3 I think is really an extension of reservation 1, so you can see above.

such premises would contradict group human nature, you're correct. It is for these reasons that I think that they are straw-men arguments. If the denial of these points necessitated group conquest, then the yankees, or democrats, republicans, or the vatican, or countries like Germany, Russia, China, and others, would not have to worry about thwarting such groups because it woudl be impossible.

In short, if one understands the historical mechanism behind regional empires (see Greece, Mongols, Turks, Romans, etc) one can understand a desire and attempt to have a global empire.

many of us on this blog live in a country that has had the privilege of controlling (used loosely) the first global empire, however, short-lived that empire may be. Brzezinski writes that we must maintain that hegemony at ANY cost in The Grand Chessboard. the Caspian Sea is that cost (his assertion), which is why we're in the areas we're in globally (my assertion).

but just as one should be skeptical of broad-ranging all-powerful conspirators/cies, one too should be just as wary of those who try to tell you that such things are simply fantasy and paranoia. For there are always groups who desire such things and always people inside those groups willing to get a little to high on the money, power, greed, lust, and even fear bandwagon to trust that humans will never act with such pre-planning.

but again, as i finished the last post, with respect to this blog, the question is if freegold or what's likely coming down the pike, ultimately concentrates or decentralizes (of even neutralizes) that power, tendency, and those whose Machiavellian philosophy would have them spend generations of energy to achieve it.


SatyaPranava said...

desperado, it looks like you were writing your posts at the same time i was writing mine. well put.

on an aside, every one of us here have our biases and presumptions that cloud our attempts to view other perspectives, so don't take it too personally if others can't see yours.

it can be hard to get past one's own presumptions if one doesn't question them. too often i find that most people with whom I've had contact in life are so afraid of questioning their presumptions that they tend to react, quite aggressively to people who ask them to do so. those people just aren't ready, and may never be. for most prefer the comfort of feeling like they have a large group of people who think like they do, and thus, validate their way of thinking. I've also noticed that many would prefer to believe a convenient and easily disprovable lie than to have any uncertainty about how something happened (i.e. if you attempt to disprove a theory with evidence, most will not believe you unless you offer a competing theory with as much if not more evidence). people tend not to like uncertainty. so they fall into ideological comfort zones. we all do this to various extents.

so (everyone) keep up the critical thinking, and the questioning of your own presumptions, and we'll all likely be better for the process.


Desperado said...


Nice reply, I totally agree about decentralization. I really don't care if these elites have gobs of wealth, I just want them to stop pulling the rest of us into their petty feuds. IMO, this is why they always have to centralize and get bigger, and it is exactly the same with corporations and their ceo's. It is all about ego and they are amoral about everything else in their lust for power.

Gabriel said...


Thank you for this blog, its insights and information. Please consider in the following comment the reflections of a naïve layman, rather than any criticism, especially as I do not find their answers in your (or Another) writings:

You say: [we are the tail end of a giant "easy money" cycle. And these always, without fail, end with a switch back to "hard money." But... and of course there's a but... this time it will be a little different.]

Yet, it seems we assume the FED and policy makers are not fully aware of the risks involved in their operations. I tend to disagree. If they were enlighten and strong enough to understand and then enforce the $ as being the international currency reserve, they still are. That means two possible outcomes: Either their policy has not changed, and they will use any means necessary to preserve their hegemony. Or they have today a better strategy, and are fully aware of the implications.

Under the first scenario, the purpose is a strong devaluation of the $, in order to partially default on all external debt. Imagine a 50 or 70% devaluation, is the best thing that could happen today for the USA, and screw everyone else. It would be simple to avoid a hyperinflation tornado by simply apply the Volcker solution: raise interest rates to hell, once adequate devaluation level was reached. The combined effect of devaluation and interest rate is to be fully assessed here, to see if the USA would not come out with the upper hand. The other nations, holding currency reserve, won’t be so keen to trash what is ultimately defining their wealth.

Under the second scenario, there is a fully aware decision to precipice hyper inflation. In that process, there are clearly few assets left to define wealth: gold and land. We have seen lately the trial by banks to appropriate lands, even using fraudulous means. Yet we should expect the FED to purchase gold like there is no tomorrow (as there will be no tomorrow). This doesn’t seem to be the case, and to me this undermines the plausibility of a voluntary hyperinflationary cycle.

Now, how such currency destruction could occur, that cannot be controlled? I see only one set of events: a simultaneous run from the $ from several national entities. This would effectively put the value of the $ to zero overnight. This would not be driven by the people lack of confidence in the fiat currency, but effectively calling war on the US. As the rest of the western world suffer from as strong a recession as US, this doesn’t look a good strategy to them. We are then left with China. Is it in their interest? Not under their own internal political framework.

So as much as the current system is statically unstable, it is dynamically kept stable by the same powers that keep a bike dynamically stable (you referred in an earlier post to the feedback/feedforward process). Margin might diminish, but we are not, by a long shot, in an overshoot mode. Maybe the economy, especially the US, will suffer, the dollar hegemony can be conserved.
Therefore this renders the discussion on hyperinflation, gold price, and freegold, an academic wish–thinking.

Note: this is not to say I have not exchanged what little resources I have in gold a few weeks ago. But this is simply hedging, not believing in unrealistic actuarial values.

JR said...

Hi Gabriel,

From my perch, if I am not mistaken, it seems you envision the Fed as being in control and the center of the show, while perhaps FOFOA is more describing the powers that be reacting to forces outside of their control.


A different way of expressing this concept is perhaps recognize that the money printing so often associated with hyperinflation is not really the hyperinflation/ currency collapse, but the reaction to it.


Regarding the Volcker defense and raising interest rates, consider FOFOA's reprint of excerpts from John Law's classic "Why the Global Financial System is About to Collapse"


I hope some of this helps you better get a brief flavor for FOFOA's writing on some of these issues.

Good luck

Greyfox "It's the Debt, Stupid" said...

Per Jim Richards:
The preference of central banks is to invent a currency such as the SDR or the Bancor. But, the market’s preference seems to be for gold. So the currency war comes down to a race between gold and the new paper currency. Who will win?”

My belief is that FreeGold will be the eventual outcome of the failure of the $IMFS. However, if on a transitional/out of desperation, the PTB are able to institute a SDR/Bancor/Free Ranging Chickens system in hope of preventing/hindering/ slowing gold from being the wealth reserve since they would have modest influence in a FreeGold system and alternately would be able to partially manage/pervert/influence the above named new monetary system.

Question: Would not gold have a first of a probable two “once in a lifetime” revaluations (2nd revaluation being when new system fails and FreeGold wins) because of the failure of the $IMFS and loss of confidence in fiat?

S said...

greyfox +10

The growing discussion of int'l supra fx suggests the path to any gold basket will pass through a sovereign induced pergatory. How long that last is perhaps best evidenced by the decaying half life of Yen intervention. One suspects that the market will quickly see through the half measures. The IMF meeting fail in DC was indicative of perhaps the decaying value of $IMF?

FOFOA: it seems to me the US has to be engaged in a coalition of the willing mode in terms of aligning a diluted buy in to the Western axis. This is what the IMF governance/vote and India elevated to Security Council (An US nuke deal)issues are all about and the article yesterday about. Further, the US/White House allowing defense exports to China (and the recent Shale buy in the US by CNOOC). Finally the US power oplay via the OECD in Kyrgz which turned out to be a fail and the reassertion of US role in the SOuth pacific re China. it is obvious isnt it: the US is negotiating out in the open in a last ditch attempt to sway!

The question is if there is a price of extension? I continue to watch cross border M&A as a serious tell. The rumor this AM that JPM is looking to buy Stan Chart is somewhat of a tell (JPM into Asia) but that is a US/UK tie up. One would think companies with massive cash balances (net) would be aggressivily moving to buy as they anticipate inflation or debasement. But the action has been stillborn. Is that a function of nationalism/regulatory?trust in current fiat or just a lack of recoginition of the growing risks by corproates whoc are more focused on cutting financing costs and bottm line boosts. Anecdotelly, I can say that having put the question of a major devaluation and or rebasement to a regional bank CFO, he responded with I have never had that question before but I am sure we have game planned for such situation. Not confidence inspiring really.

S said...

One thing does appear clear the window and timeline for action is truncating for the US and $ faction. The ECB appears (?) to be tailing off from the Fed which means either (1) preparing for the ahrd money faction to take control via the Germans or (2) the EUR is being set up for a raid on the peripherals (though recent comments by China re Greece seem to be an obvious flanking tactic).

Diamond Jack said...

I recall Adam Hamilton of Zeal intelligence saw fractal patterns in the price movement of gold. Here is a taste from 2007

The endless greed-fear-greed-fear cycles that gradually drive bulls higher are easy to understand. Traders naturally oscillate between sentiment extremes over time, and these emotions drive their trades which lead to the major interim highs and lows. But in the HUI's case, a provocative and very profitable meta-pattern has emerged beyond this typical cycle. Even more interesting, so far it has proven to be fractal in nature.

In this usage, a fractal is a repeated technical price pattern at ever-larger scales as the HUI bull evolves. There have been several of these fractal patterns so far in this bull to date. I chose not to draw them in this chart so you'd have the opportunity to see them leap out with your own eyes. They are defined by their two phases, a surge and a drift. Each fractal pattern starts with a surge higher and ends with a drift sideways.

costata said...


Thanks for the reply and for sharing your thoughts.

SatyaPranava said...

my pleasure. thanks for asking. as always, please feel free to share yours :)

Desperado said...

N. Gregory Mankiw's (professor of economics at Harvard. He was an adviser to President George W. Bush.) NYT piece titled "I Can Afford Higher Taxes. But They’ll Make Me Work Less" has raised a few eyebrows. He talks about the effects the various tax rates have on savings and inheritances.

"...Suppose that some editor offered me $1,000 to write an article. If there were no taxes of any kind, this $1,000 of income would translate into $1,000 in extra saving. If I invested it in the stock of a company that earned, say, 8 percent a year on its capital, then 30 years from now, when I pass on, my children would inherit about $10,000. That is simply the miracle of compounding.

Now let’s put taxes into the calculus. First, assuming that the Bush tax cuts expire, I would pay 39.6 percent in federal income taxes on that extra income. Beyond that, the phaseout of deductions adds 1.2 percentage points to my effective marginal tax rate. I also pay Medicare tax, which the recent health care bill is raising to 3.8 percent, starting in 2013. And in Massachusetts, I pay 5.3 percent in state income taxes, part of which I get back as a federal deduction. Putting all those taxes together, that $1,000 of pretax income becomes only $523 of saving.

And that saving no longer earns 8 percent. First, the corporation in which I have invested pays a 35 percent corporate tax on its earnings. So I get only 5.2 percent in dividends and capital gains. Then, on that income, I pay taxes at the federal and state level. As a result, I earn about 4 percent after taxes, and the $523 in saving grows to $1,700 after 30 years.

Then, when my children inherit the money, the estate tax will kick in. The marginal estate tax rate is scheduled to go as high as 55 percent next year, but Congress may reduce it a bit. Most likely, when that $1,700 enters my estate, my kids will get, at most, $1,000 of it. "

I was stunned that he would go through all these calculations and fail to mention how much less value $1000 would have in 30 years compared to now. But even worse, if he was half as smart as he thinks he is, he would have had to make a comparison to investing in gold and then passing gold coins to his children.

This complete lapse in common sense is what so many of my acquaintances, friends and family suffer from. I was discussing gold over lunch with friends, and I said that the dollar was going to burn and all I got was scorn and statements like "they have been saying that for decades". I guess some people just have to suffer before they will stop to think, including harvard economics professors like Mankiw.

oldinvestor said...

There is an article at the GATA site by by Edwin Truman writing in the Financial Times, entitled, “America Should Open Its Vaults and Sell Gold”

The link is http://www.gata.org/node/9150

What does anyone here make of this?

Greyfox "It's the Debt, Stupid" said...

It is another desperate attempt at gold price suppression.

Per Jim Rickards:
"the last gasp of the ancien régime of fiat money"


Desperado said...


Great piece by Rickards, this quote syncs perfectly with what I was saying about Mankiw:

"He writes, “Official discussions of the reform of the international monetary system do not include any advocates of a return to gold…” (emphasis added). The problem with this observation is that he is almost certainly right. And this is scary. I have maintained for some time that the return to gold is inevitable and the only issue is whether it would happen through a rigorous and studied process led by the United States or by a chaotic process in which the United States is caught off guard to its disadvantage. Learning from an insider like Truman that none of the power elite are thinking seriously about gold increases the odds that the dollar dénouement will be chaotic not orderly. "

I makes me wonder whether there isn't a coordinated attack on gold being led by our ivy-league trained economist elite.

S said...

Readthe Martin Wolf piece via Jesse's Cafe for a picture of exactly what the isnider baseball crwod thinks. Gold is not on the agenda, rather per wolf the USD will win the currency battle...what he doesnt say is that it has already lost the gold battle.

Desperado said...


As you say, not one time in the article did Wolf mention gold. Again, there seems to be a coordinated chorus between all the prima-donna economists. All we need now is for Krugman and Stiglitz to join the choir. Perhaps with Roche singing backup. All will ignore gold. It appears that they are getting desperate.

Desperado said...

All these threads about financial events are deliberately been used to divert the sheeple's attention away from gold. Taxes are the problem. No, the Fed should sell the gold. No, it currency wars. I guess a lot of you have already figured this out, but it seems to be getting increasingly blatant. I sure would like to know how much these economic gurus have privately invested in PM's.

Greyfox "It's the Debt, Stupid" said...

BIS preparing for end of $IMFS???

BIS taking in more gold - who are the counterparties this time?

The Bank of International Settlements hit the headlines earlier this year when it was discovered that its gold holdings had soared, now it appears they are on the increase again


Greyfox "It's the Debt, Stupid" said...

I sure would like to know how much these economic gurus have privately invested in PM's.

Yes, so would I. My best guess is that many are invested even though they espouse the establishment propaganda. Being seen as to have drunk the cool-aid is required of them.
Desperado, I see much of myself in my younger years in your attitude and beliefs. It has been difficult to watch that which we care about so much being destroyed from within. “We have met the enemy and it is us.” As I have matured (older-than-dirt syndrome) it is less stressful to view all the destruction of Liberty and the Constitution. I have not rolled-over but have learned thru many years of “preaching” that the best we can do now is just prepare ourselves, our family, and friends, at least that very small percentage that will listen.
Take care my friend as there is a future for meritocracy and our value systems.

costata said...

Hi All,

Gotta love the blogosphere. Some news or analysis hits the iWaves and a second later people are all over it deconstructing and reprocessing the data.

Great link Greyfox. Thanks.

Now why would the BIS be draining gold from the market?

BTW did you notice the reports from the World Gold Council about the increase in scrap gold supplies filling the physical gold supply shortfall since 2005?

No? Neither did I. They were not vocal about this in 06, 07, 08 or 09.

Their promoted published reports suggested that supply and demand were roughly in balance during this whole period. If they had acknowledged that there was a huge surge in the supply of scrap they would have been forced to admit that it was going somewhere wouldn't they?

Some interesting graphs here on gold scrap supplies from our very own Capt Goodvibes:


DiverCity said...

Here's another writer questioning why the U.S. doesn't just sell all that shiny stuff and reduce the deficit: http://www.theatlantic.com/magazine/archive/2010/11/uncle-sam-8217-s-mysterious-hoard/8254/


Museice said...

Best thing I read today!

"Gold rallied sharply today on news that the US would sell its entire stock of gold to China….. whoops, wait a minute – it wasn’t the US, it was England trying to sell all their gold to China. Oh drat – I forgot – they don’t have any gold left to sell to anyone because Gordon Brown sold it all back when it was $250 thinking that it would be a great way to reduce Britain indebtedness and get some assets that really do pay something. After all, gold doesn’t throw off any yield; it just sits there gathering gold rust.

Great idea Truman. That turned out really well for the Brits. Got any more nuggets of wisdom for us to swallow? Please enlighten us mere mortals and pray lead us from darkness into the light where we may bask in the glory of your countenance. I can see copious amounts of incense ascending right now in the lands of China and India imploring the gold gods to sway the minds of the US officials to give heed to your counsel. Why not go a step further and urge the US to offer a discount on the gold; that would really facilitate the sale and get it all over with quickly so that we could use the proceeds to pay off 1% of our massive debt load. That would really shore up the Dollar now wouldn’t it?"

Trader Dan

Texan said...

The Truman and Wolf articles were shocking for how brazenly they told the rest of the world to get in line. It must be really, really desperate.

So far, it appears the world is allowing a pretty hefty USD adjustment to take place, but it doesn't seem like this will end well. I don't even think it will work in the US, once oil hits 100.

The Fed is clearly totally out of options.

Greyfox "It's the Debt, Stupid" said...

The US dollar just blew through .7700 USDX on the downside.

It now sits at .7671


tdfxman said...

Just want to say thanks to Satya and Desp and FOFOA. I can’t let a NWO discussion slide by without comment. :)

I agree, this comes down to "do the people get more freedom or less?"

I think the trend to, and a desire for, global/regional currencies/solutions is so obvious that it hardly needs explaining. I don't think I need to post 5-10 links to show how badly freedom is being tread upon and how 400+ banks want a global currency. Get the US off the dollar and everything else can fall into place quickly IMO. This is why we see so much damage to our currency. They are in a hurry to kill the USD.

Again thanks to this thread to at least cut to the chase.

Believe me, the next step is a currency crisis because there will be a rejection of the dollar, the rejection of the dollar is a big, big event, and then your personal liberties are going to be severely threatened.
- Ron Paul

But since I could be wrong, I am trying to spend time thinking about if there is a middle ground (rare for me to do). I am feeling like there might be, at least as the USD starts to collapse. I agree they won't "take" the gold. ENOUGH people would go crazy. They won't tax it 99% either for the same reason. OTOH, TPTB won't just get up and die after being around for generations making history either. The start of WWI just floors me. Anyway…

I think this phase of the transition to world government has been designed to just get the US off the dollar. This last 2-8 years in this country has been about nothing but debase the currency and limit freedom. Forget the (D) and (R). It ALL makes sense seen through that prism (to me at least). If they can make us want to get off the USD, good for them. I think it is as simple as that. Can they get the US population on a non-national currency out of pure need due to all the reasons we understand will happen to the dollar? That would lessen the push back. They want to hear the bleating sheep say “Give me the Amero/Bancor/global currency if it makes my problems go away.” To me getting there is their "win".
Capitalism being “bad” is another threat I hear WAY too much from our “rulers”. Those “speculators are bad” as we say hear in the states out of our admin. Well those gold “speculators” have broken the dollar and shown how really fragile it is. We need to get away from gold and how easily “manipulateable” it is. Do wehave ANY free markets what with the plunge protection teams etc. Can the OPPOSITE of freegold happen? Can they put gold in bondage? Take it out of the picture?
FOFOA, and all of us, will blow a gasket but most people, a critical mass of folks, won’t know any better if gold grabbed some bench.
FOFOA likes to say, and I understand him, TPTB can’t determine what people SAVE in. I still can’t accept that fully. MOST people save in money. If they control the money they control the savings. They are harvesting the middle class’ savings right now. Some folks might not like it but that is the way it is gonna be.

Currently run of the mill politics (health care, cap and trade) has everyone bent out of shape. We get the Tea Party etc. They don't want this. TPTB will push the envelope but they don’t want to wake the sheeple. But if it is CLEAR to the sheeple that the dollar is toast, as we get bad inflation, and you the politician can make that pain go away, the sheeple will run where-ever they are directed (see above). When only 2% of folks "get" how gold works, that is not a political force they need to worry about. Getting off the USD and to something ala the Euro (regional) to me is the plan all along for this phase. That is huge in its consequences. But again is there a middle ground in a transition between and gold/freedom tyranny?


tdfxman said...

Maybe a gold standard/backed currency comes along and having gold at this (next) time is huge and FOFOA will be "correct". But then what? Oops our new currency will "have to be" controlled by a regional custodian. We can't have nations doing this again (blowing up their fiat) etc. They just need to get the slippery slope started. Then we go from regional to global since that is easier to manage and heck we are a global economy anyway. Again, just get the USA started and this thing will go downhill quickly. The bottom of the hill is a one world digital currency IMO. I don't see how gold helps at that end state.

“Quick” thoughts…
How do we get RID of the TBTF banks? I can’t see how they WILL NOT be the players in the next currency. All these Chase branches ain’t goin away. J

I can see how FOFOA doesn’t like going down this road since it is so speculative. He is into how things do and SHOULD work. But that is not economics. There is too much human behavior in economics to 100% say for sure what WILL happen. To all you guys that are 100% FG believers I have a question. If these economists are right only 1% of the time why trust them? Have you ever taken the umbrella and it was sunny? :)

Gold has a WELL documented history of freedom and TPTB have a WELL documented history (shorter) of getting what they want. Something has to give.

I would argue a BIG first step to taking the USA away from a national currency ALREADY happened with the Fed in 1913. We have Fed Notes not US Treasury notes. For FOFOA to say the FED is NOT the problem was a shock to me. I am surprised no one else has commented on that. It was also proof to me that he has either not read Creature from Jekyll Island or rejects the book and it’s core tenants. It also explains why he does not see a credible threat from TPTB. Rothchild says if you control the currency you control the laws. Well a global/regional currency = global/regional laws = you have less liberty. I don’t see how you can be 100% sure of freedom (freegold) from these guys. I hope you are right though I tell ya!

My worldview shows me the last chapter. The fun is putting together the clues to how we get there. However, we certainly seem to be running out of chapters.


synarchy said...

Oct. 16, 2010

Benoît Mandelbrot, Novel Mathematician, Dies at 85

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