FOA on Currency Styling, Currency Management, Dollar Hyperinflation and End Game Scenarios

Somewhere out there, FOA is walking this trail alone. He told us as much: "I will walk this trail in silence." :( <--That's me sad.

FOA (11/12/01; 16:31:28MT - usagold.com msg#132)
There comes a time

There comes a time in all things when one must do nothing and simply wait. This is an ages old truth that crosses all the boundaries of life's endeavors; for everything is not always in the doing, but also in the watching. Any good farmer knows that he does not grow a crop; he only prepares his field so the growing he knows is coming can take nature's course.

My friends, we have crossed time and space, while plowing these fields of understanding, and the unfolding drama before us must now sprout its own life. For now, it is my time to watch the trail and let the crop develop. Indeed, it will and it will do so for all to see.

Enough has been said to prove our reasoning is true, especially when the fields become full and in a shade of physical green only our seeds will produce. And planted them, we did, by hand, one at a time, over many years.

Enough has also been said about myself as this story was never about me; perhaps too much untruth was also said by others?

I am going to travel for a while and watch the trail from a distance. It won't be long before the rains come and the ground begins to open; in that time I will return. Until then; this farmer will rest from this work.

Thank you USAGOLD and all the fine people that make this media the best gold site in the world! Another time, we WILL hike again.

Sir Douglas
Your Trail Guide

FOA was the master at answering people's questions. And I often see the same questions and comments today that he was getting back in early 2001. It's almost as if we've been held in a state of limbo since then and little has changed. But much has changed. The euro has risen 60% against the dollar and gold has rocketed an astounding 425% since the posts below were written.

Also, today we can view the clash of currency styling in stark relief, which Costata illuminated in this comment:

In one sentence:
"Bondholders will discover burden-sharing. Debt relief will be enforced, either by interest holidays or haircuts on the value of the bonds. Investors will pay the price for failing to grasp the mechanical and obvious point that currency unions do not eliminate risk: they switch it from exchange risk to default risk."

Angela Merkel consigns Ireland, Portugal and Spain to their fate

FOA:
"Basically, this is the direction the Euro group is taking us. This concept was born with little regard for the economic health of Europe. In the future, any countries money or economy can totally fail and the world currency operation will continue. What is being built is a new currency system, built on a world market price for gold."

8/10/98 Friend of ANOTHER

IMO the key word in the AEP article is "mechanical". This is why the ECB politics are a "sideshow" (Another). This is the effect of severing the Euro's "ties to the nation state" (Duisenberg) and marking gold to market. A mechanism will now perform its sole function.

Stability (the sole mandate of the ECB) isn't a "fixed" price target. If the exchange rate of a currency is too high (demand exceeds supply) then more currency can be issued. Conversely currency can be withdrawn if the exchange rate is too low (supply exceeds demand).

The Euro Freegold architecture isn't a Utopian dream. It's a Grandfather clock. Tick tock!

I wish we had FOA (Trail Guide) here to answer a few questions today. But since we don't, I thought it would be fun to repost some of his answers from 2001 that are, perhaps, as timely today as they were when they were written. I can see that some of "auspec's" questions are still on the minds of many today.

It should be interesting to watch the comments that will follow. We should easily be able to distinguish between those who are only here to discredit FOA, and those who are able to glimpse the very deep wisdom that he shared with the help of his friend, Another.

I can tell you that, for me, it was only after reading the archives all the way through TWICE that I was able to go back a third time and see deep enough to find the "infinite resolution" that has powered this blog for two years now. Following the train of thoughts present in these posts, through the different links to which they lead, takes a lot of effort. Hopefully this post turns out to be a small capsule of one such train of thought.

In any case, it should spur an interesting conversation for us all to read this same excerpt at the same time. The archives contain thousands of pages and are always enlightening to read. But one can easily get lost, walking alone through the past. So let's do it together and see if there's anything in these 9 ½ year old posts that is still relevant today. Actually, that's the way I like to read them: as if they were written today. Please tell me what you think…

auspec (4/19/01; 08:48:52MT - usagold.com msg#: 52175)
ANOTHER And FOA

Thank you, wise men, for your trail illuminations, much appreciated! Please forgive my persistent questions in posts #s 51479, 51935, and 51992 and this summary of these questions, once again. Little in my life has been accomplished without an uncommon level of persistence so I must "return to my roots" and give the maximum effort, as it is all I know. Still hoping and trusting that these perspectives will be addressed by you. Thanks in advance!

From USAGOLD post #51479 {with a few additions} "In Defense of the DOLLAR"

This is your humble correspondent, trying to make sense of our rapidly changing currency world. Please bear with me as explanations for the "end game" scenario are sought. Am I really going to defend the US Dollar? Only relatively speaking, because I can't see the hyperinflation script coming to pass that we so readily toss about on this Forum. No problem whatsoever in visioning the rise of the EURO, just in what degree of demise of the dollar. The USD will get its "just desserts", the EURO is clearly a "comer".

FOA, your 3-10-01 piece, "On the Road", is classic excellence so I would like to take excerpts from it as this "Defense of the Dollar" takes format. My questions/comments are surrounded by *s.

Trail Guide: Well,,,,,,, things are not as before,,,, are they? (smile)

In my last post USAGOLD Forum post (#48858) we noted that the paper gold game was reaching its limits. The BOE was almost asking "what do you want us to do"? The answer came as plain as day as the paper price was driven a little lower in return for a gold sale reduction. Yes, clear as a mountain stream,,,, the unwinding has begun! It will continue until the big event when the gold rules are officially changed. Not much different than when the dollar hit its credibility limit in 1971. As Randy has often pointed out; the US printed gold contracts back then until they (dollars on the gold exchange standard) lost their mathematical ability to be converted into gold.

Auspec: *If the dollar's status is now so similar to what it was in 1971, why would we see the Brazil type hyperinflation now as opposed to the simple ongoing degradation of fiat that we have all come to know and hate? Why the extreme portrayal of the dollar? It's clear the dollar is an old toad and there are young stallions waiting in the wings, but it's hard to see this as an all-or-none issue where the dollar {banana} goes from being the world's reserve currency to being "nada". Where's the middle ground with dual and competing reserve currencies in common use?*

Trail Guide: What's in process now??:

The Washington Agreement placed in context where the Euro system is going with gold. That pronouncement drove home the fact that our Dollar gold pricing system was going to die with the dollar reserve function. The WA placed us "on the road" to high priced physical gold and low priced contract gold. It could have been the end of the LBMA pricing structure, right then and there, except that it would have clocked the global financial structure too fast.

Indeed, our Euro friends helped the system out by giving it some more of the same poison, more paper gold inflation. Yes, all the while since the WA, people have been falling all over each other trying to explain why so much new European gold has entered the market through lending. Yet, all that was mostly lent was more paper credits built upon a failing dollar gold pricing system. You see, they left the maintaining of system credibility [supplying token amounts of physical] to the dollar faction. Kind of strange how gold keeps showing up as part of the US trade deficit? Even if it's only a trickle.

Gold bugs cry that the paper market is not free because government endorsed inflation in this arena is killing its price structure. Almost as if they want fiat gold that less inflated? Well, that's great if your "gold" money is in our modern gold producing industry that's hip deep in committing its product to satisfy these same paper contracts. Yes, this mistake of "hard money" allocation by Western savers is the result of ignoring history and how currency systems evolve. Gold industry investments work if the current fiat system is remaining "in use" but showing price inflation. However, when currency systems fall "out of use" while moving into super price inflation,,,,, the next competing system will side with physical gold! It doesn't happen often, but when it does real wealth in one's hand becomes worth many times investments in "almost gold". Truly, the dollar price of physical gold is going higher than anyone expects. END

*Comments: Again it is easy to see the dollar as losing a large piece of the action, but hard to see its total demise or its falling out of use. The US as the largest military force in the world certainly has its overriding benefits. The US has enormous resources; physical, financial, and spiritual. American creativity and "know how" has changed the world. This country will not turn over and simply give in! Let's look forward to the next 5 years and place probabilities on what is likely to happen as far as the dollar/euro is concerned. I will rank these various scenarios in what I see as their most likely odds of happening:

1} Ongoing MODERATE debasement of US Dollar. {Brisker} Business as {than} usual.

2} Gold and/or Oil breaks away from the dollar.

3} Dual and competing reserve currencies. "Co-Currencies" in Reserves. The currency war that is in clear sight {thanks to ANOTHER and FOA}.

4} Status quo.

5} All-out war that distracts/rescues the dollar and extends its life. Wag the dollar.

6} Dollar merged with euro/backed by euro.

7} Brazillian or Weimar style hyperinflation of the USD, the Big Banana, or the 'little banana'.

What ranking would you give these possible scenarios? And yes, we all know the DEBT is a monster lurking closer and closer! Debt is designed for default as fiats are for debasement. Looking for a catalyst to get the EURO kick started a bit? All that is necessary is for ECB to get rid of a % of dollar reserves about the time the common coinage comes into play. Ouch! But still, "death" of the USD?? At $30,000 POG the US as we know it will be no more, agreed?

Another question comes to mind: What advantage would it be to the Power Elite to destroy the dollar. Yes, a one world government and currency would suffice as a legitimate reason, but the old guy likely has many deeds yet to perform. Do you respond to questions in regards to mentioning the "Power Elite"? Some won't "go there" and that is their free choice, no problema.

The dollar has defaulted twice to date, yet chugs along. What "history lessons" best show us the endline that awaits the dollar? The end of a currency's lifetime always ends in gold debasement? By "super price inflation" are you referring to something much worse than the US in the 1970's? You must be, as that fiasco was "successfully" negotiated. The 13% mortgage wasn't a world stopper. Are we looking for a low probability event that has only happened a few times in history, or a high probability event that has happened EVERY time in history as a currency reserve ages? Odds or the END?

As per gold "industry" investments, they will do just fine at your $360 POG from today's level [gold was at $260/oz. when this was written]. The Romanian deposit that contains 8-10 million ounces should fare well regardless of what currency is "reserve". You stated: "Gold industry investments work if the current fiat system is remaining "in use", but showing price inflation." Are you talking all or none with the dollar as reserve currency of the entire world or reserve currency of none? The dollar will remain in use, imho, until there is a one world currency, even Brazil "uses" their currency of old. So we have the dollar and we have the inflation, and we get gold stock appreciation. Yes, a gold stock is a problem if it must sell gold in dollars and the dollars are TOTALLY worthless, but I'll take those odds, thank you. Please don't misunderstand me, as I have a greater current appreciation for physical {thanks to the brain trust of this fine establishment} than stocks, but just can't see this as 'all or none'.

Maybe a lesson is needed in "how currency systems evolve". The waiter replies: "Sorry sir, we're out of the hyperinflation, but there is ALWAYS plenty of inflation available in the kitchen."

There are many on the Forum that struggle to see a USD "cataclysm" as a high probability event and it does seem to be a KEY question to address if you would. These questions are, or possibly ought to be, in the minds of all of us as we make our financial decisions.

Thanks, ANOTHER & Trail Guide, for your many and fine efforts. I remain, on the trail.*

au{in}spec{tor} Clouseau

FOA (4/19/01; 17:50:29MT - usagold.com msg#65)
Reply

Hello again everyone,

I thought it would be a good idea to make some clear comments and replies regarding my perceptions. Using some questions and thoughts from the main forum will also help. This may make it easier for us all as we "follow in the footsteps"!

Auspec makes several points and contention for me to address. Please read his complete post first (and all the others I'll address). Hello auspec, you write in reference to my hike #61 here on the trail:

auspec (4/19/01; 08:48:52MT - usagold.com msg#: 52175)
-------*If the dollar's status is now so similar to what it was in 1971, why would we see the Brazil type hyperinflation now as opposed to the simple ongoing degradation of fiat that we have all come to know and hate? Why the extreme portrayal of the dollar? It's clear the dollar is an old toad and there are young stallions waiting in the wings, but it's hard to see this as an all-or-none issue where the dollar {banana} goes from being the world's reserve currency to being "nada". Where's the middle ground with dual and competing reserve currencies in common use?*
--------------------

Well sir, I'm going to try and reply in context to the way you asked these questions. Considering well all your prefacing stated before asking for info.

Using the 1971 dollar incident is a perfect way to engage common ground thinking about our contract gold market today. No it's not a perfect analogy, but it's real, real close, and sharpens our understanding and ability to see the subject clearly. Especially considering the tremendous number of different hard money people that read this Centennial Forum. But we must not confuse the point by thinking a similar break today will cause the coming price inflation we speak of.

Yes, after the 71 dollar gold break, we did see some good price inflation. But was that caused by the wholesale cancellation of international dollar convertibility into gold? No! That price inflation was not gold backing related because we had already, years before, been printing dollars far beyond our stated gold to dollar conversion ratio. That spell of price run ups was the result of too many dollars being printed before and after the 71 gold breaking event.

Sure, the gold price run up after that didn't help the dollar's image. But, by then it didn't make any difference what the gold price was. Even if it went back to $10/oz. we were never going back to governing the volume of dollars in supply. Not by using gold, not by silver, not in any way that would fix or slow the presses! We couldn't. Any long term slowdown, then or now, in such an established fiat was well past the politically survivable stage. This is the way fiats work, whether gold backed or not, they always break from strict printing discipline. The history behind us says so and the future before us says so. As an example in dollar terms, look at any five year average of money supply growth from 71 till now. Truly, we were and are printing our way towards the end time of dollar use. The only question was how long would the world keep using dollars? How much longer would the timeline extend?

Some hard money people thought that the world would simply convert to gold itself, in place of dollars. But, the simple fact, as I and most especially Another have said so often, is that the modern world must use a fiat form of currency to operate. And, considering that point, after the 71 gold break, there was no other strong, fluid currency for us to revert to. It wasn't until the end part of the 70s that the Europeans started down the long road of creating something else.

There were times when our foreign trading partners were thinking of breaking away. This is when the US spiked rates. Again, we confuse this action with stopping the inflation presses. Quite the contrary, the killing rise in rates was just a signal that we would not go completely hyper. On our side, the only reason we could afford to take this economy-killing gamble was because oil was still priced and settled in dollars. But that is a whole Another book.

The prestige of many international dollar holders took a real bath because they held dollars in place of gold. When they tried to initially bid for gold, the US and London made sure the price rose fast enough to tell a story to these dollar converters. That is; "bid for gold and it will soar" cutting off your conversion. Sure the US made all sorts of noise about how awful and incorrect the rising gold price was. Even showed their hand at managing the price a little so it didn't go up too fast. All the while saying they were fighting for all they were worth to keep it down! Truly, the last decade shows naive Gold Bugs just how much in control they were and are of this so called "free commodity market in gold". Oh well, back to your point.
---------

You see, the dollar is going to fail now because a good alternative is available now. All this has something to do with the coming new gold valuation, but that new price level is not related so much to gold backing a currency again. (more on that in a min). The dollar is toast because most of the world doesn't like the management policy. They didn't like it in 71, but tolerated it because gold was supposed to keep flowing in repatriation payments. And if they didn't like it back then, they god awful hate it now!

We like to think that the dollar is what it is because we are so good. (smile) But the truth is that for over a two decade period +, none of our economic policy, our trade financing policy, our defense policy or our internal lifestyle policy has pleased anyone outside these borders. We managed the dollar for us (U.S.) and the rest could just follow along.

Our fiat currency has survived all these years because others have supported our dollar flow in a way that kept it from crashing its exchange rate. We talk and think like we are winning the tug-of-war when, in fact, they just aren't pulling to hard. Waiting for their own system to form up.

Truly, most of the world likes the most conspicuous aspect of the euro that we describe as its biggest weakness; its management by several varied nation states. All supporting different thoughts, cultures, backgrounds and perceptions of government policy. Some compare it to the many nationalities in the US, but it's much more competitive than that. It's thought that this mixture will produce a "more good for all" management of a Euro world reserve currency. Truly, because gold plays no part in today's dollar management or the Euro, then political styling is all that's left.

My friends, a national fiat in our modern world only functions if the whole world uses and supports its flow and most importantly likes its management (political styling is the catch word). This support and use of our dollar can and will change faster than many think possible once the Euro is finished. Our dollar is not going to become a "banana" or "nada" in the future, as auspec notes. It already is and has carried this trait for some time now as does every fiat today. The only thing that keeps them from cascading away is world support and use.

Point:
When most of the major players that styled the Euro decide to swing even 1/2 support toward that new money, the exchange rate for our dollar will plunge to its true worth! That dollar value is there now, you just don't see it yet. The price inflation that many (auspec) don't / can't see happening, will be the result of our currency management changing to confront the nature of all the above. The world economic financing, pricing, saving, settlement and opinion is shifting toward the Euro. As this happens the US will have to raise rates ever higher, even as it massively prints more currency to support our internal economy. Our entire economy will slow and fail as this price inflating process moves on. Some will call it stag / flation, but will change that description as it becomes more of a crash / hyperinflation.

Right now, the actions of our fed is telling this truth. We must inflate while we watch the Eurozone enjoy its basically internal trade economy. As other nation blocks embrace that zone, they will pull economic function from us.

You write:
------

*Comments: Again it is easy to see the dollar as losing a large piece of the action, but hard to see its total demise or its falling out of use. The US as the largest military force in the world certainly has its overriding benefits. The US has enormous resources; physical, financial, and spiritual. American creativity and "know how" has changed the world. This country will not turn over and simply give in! Let's look forward to the next 5 years and place probabilities on what is likely to happen as far as the dollar/euro is concerned. I will rank these various scenarios in what I see as their most likely odds of happening:

-------------------

Auspec, before I list your most likely odds, I would like to comment on your above.

We must not confuse a currency's "total demise" or "falling out of use" with a "loss of identity". In our time there have been few major moneys that went away. Today, we have a whole world of national fiats "in use" and "not demised" that still carry their nation's identity. They lose value at an incredible rate, are mismanaged to the highest degree, are laughed at and despised. But, still they are "in use" as they function for their governments and economies. Usually, they function alongside whatever major reserve currency is in vogue. Today the dollar, tomorrow the Euro. Make no mistake, the entire internal US sector can and will function as its currency runs a price inflation just like these third world countries. We will adapt as they have by dropping our living standard accordingly and adopting the Euro as our second money. Also:

The prestige that we have the largest military force in the world does not help our money problem. We talk as if we will let any country die that does not use our money or support our currency. I point out that the British also made such comments and it didn't stop their downfall. Nor the Russians. Also:

I point out that many, many other countries also have the same "enormous resources; physical, financial, and spiritual" that we have. But the degrading of our economic trading unit, the dollar, places the good use of these attributes in peril. Besides, the issue beyond these items is our current lifestyle. We buy far more than we sell, a trade deficit. Collectively, net / net, using our own attributes and requiring the use of other nation's as well. Not unlike Black Blade's Kalifornians sucking up their neighbor's energy supplies (smile). We cannot place your issues up as example of our worth to other nations unless we crash our lifestyle to a level that will allow their export! Something our currency management policy will confront with dollar printing to avert. Also:

NO, "this country will not turn over and simply give in" as you state. But, we will give up on our currency! Come now, let's take reason in grasp. Our American society's worth is not its currency system. Around the world and over decades other fine people states have adopted dollars as their second money, only to see their society and economy improve. Even though we see only their failing first tier money. What changes is the recognition of what we do produce for ourselves and what we require from others to maintain our current standard of living. In the US this function will be a reverse example from these others. We will come to know just how "above" our capabilities we have been living. Receiving free support by way of an overvalued dollar that we spent without the pain of work.
--------

Your "various scenarios" with mine notes added :

1} Ongoing MODERATE debasement of US Dollar. {Brisker} Business as {than} usual.

----Near term, yes.-----

2} Gold and/or Oil breaks away from the dollar.

---- Oil is already doing so for a year now. The gold market is in the process of self-inflating its paper side of the function. The first minor lease rate signals are already behind us. [March 9, 2001] The ECB and BIS are coming more in control as the dollar faction must either sell its gold also or begin to fold. If they want the game to continue a little longer, the US must not put its gold on the market or the BIS and ECB would bid it with their dollar reserves. Ending it all then and there.------

3} Dual and competing reserve currencies. "Co-Currencies" in Reserves. The currency war that is in clear sight {thanks to ANOTHER and FOA}.

----- I would add that the vision of co-currencies is just a passing function as we get from here, dollar reserve, to there, Euro reserve.-----

4} Status quo.

----- We have not been here in our life times (smile).--

5} All-out war that distracts/rescues the dollar and extends its life. Wag the dollar.

------ As we enter the down side of our economic function (like we are doing now) the massive money printing by the Fed will risk the dollar's slow slide to becoming a super slide if a war breaks out. People run to the best managed world money in a war, not just the one with the current best exchange rate value. In the past the dollar was the one, today the Euro would receive the flow. The US would be risking killing its last bit of dollar timeline with any war today. [unless, perhaps, A) it wasn't an "all-out war" and B) it has the backing of Europe and the Saudis in pursuing the war?]---------

6} Dollar merged with euro/backed by euro.

------ I know a few people that made a lot of sudden money wealth and gave almost all of it to the church (or charity). Others are much more smarter and support the church (or charity) for the rest of their life. Retaining some control over how the charity is used. This is how the EuroZone would handle us. Actually, it's the same way we handled them after the war. We didn't just merge our checkbook into theirs, did we? Net / Net, they will have the wealth to be offered, not us.-----

7} Brazillian or Weimar style hyperinflation of the USD, the Big Banana, or the 'little banana'?

------- Full on, wide open, in your seat, flat out! It's in the pipeline!------

You write and I comment:

Debt is designed for default as fiats are for debasement.

--- My friend, debt is the very essence of fiat. As debt defaults, fiat is destroyed. This is where all these deflationist get their direction. Not seeing that hyperinflation is the process of saving debt at all costs, even buying it outright for cash. Deflation is impossible in today's dollar terms because policy will allow the printing of cash, if necessary, to cover every last bit of debt and dumping it on your front lawn! (smile) Worthless dollars, of course, but no deflation in dollar terms! (bigger smile)

What advantage would it be to the Power Elite to destroy the dollar.

-------- Wrong context. What advantage does the Power Elite gain by expending assets to save an already failed currency. Better to do what major players have done for centuries and are doing now, buy gold and evolve your power base to use the next reserve.-----------

The end of a currency's lifetime always ends in gold debasement?

---- In almost every case. Sometimes in the open, sometimes hidden.------

Ok, this is going overtime (smile). I will try to cover more (and others) in a day or so. Also, the question of Another at his keyboard? I reword things from him quite a bit for bare readability. But, his delivery is pure. I don't always pretend to understand it. Then, that's a whole other story (smile)

Thanks
TrailGuide
_______________________________________________________
Sidebar:

The above reference to ANOTHER was because he resurfaced with a series of comments just prior to FOA's post. Here are those comments…

ANOTHER (THOUGHTS!) (04/14/01; 18:08:54MT - usagold.com msg#: 51887)
Thoughts!

To this USAGOLD Forum and Mr. Kosares, good evening.

Thank you FOA for your time and work.

We talk once again my friends. This forum, it grows strong for all ages and nature of peoples. Read they do, from all places on earth. I read and see the knowledge as written, but it be the knowledge we still must see that speaks with greater strength.

Walk the gold trails of my good friend, do I. On my feet are "strong sole" of thick leather, purchased with much knowledge of physical gold. These shoes not go bare before our journey is done. On trail I see your "thin sole" gold investments cast aside and scavenged by beasts. Their owners walk no more as these investments took not this hard road of dollar transition. Many more will wear paper gold wealth thin before this walk be done. Only physical gold will see sun after this storm.

Some say dollar strong and holds much value still. It bends not and is strong and worthy. I say their vision is limited to see only post supporting roof. Not what on roof already or what must be placed on roof. When new Euro currency is done, full weight of dollars will return as your wet snow. In that day, we check curve of this good post, not before.

Some say dollar buys much gold and is strong in metal. I say, paper gold be not metal! We have more dollars than gold in world. As long as your system works, you sell gold to gain real dollars and we sell dollars to gain real gold. All be well in your world and mine, yes? Soon, dollar return in bank and Euro return in bank be equal, no? More later, dollar return become even less than Euro. Tell me about your paper gold value then, my friend. Perhaps, dollar then seen strong in this lesser gold only. You think long and hard on this before end of year?

I think Euro buy much more oil then. We shall see. I will return often now. Discuss our future then.

We watch this new gold market together, yes?

Thank You
Another

ANOTHER (THOUGHTS!) (04/15/01; 18:58:39MT - usagold.com msg#: 51943)
Mr Gresham

Welcome Mr. Gresham. We talk for a time, yes?

You write:

"We who read here generally buy the coins, one ounce and less. The "Giants" you speak of are usually buying the large bars (100 ounce?), yes?"

I ask you, how many of your bars in tonne? This is the small purchase size.

"Is there a limited supply for them to get, and only through the large brokers with their "private wealth management" programs?"

I would say the BIS is best broker, always. It best to sell dollars for gold when gold is offered.

"I am trying to understand why this knowledge you bring is not being acted upon by some others with "deep pockets", such that the markets would be moved, or shortages occur, even before the dollar is seen in weakness."

My friend, you see the gold with "Western eyes". In mind, it be always, "how much currency does my gold bring". In this world of much paper gold, it bring not much dollars yes. In such matter, your currency makers do make your wealth lay low. This dream of much dollar currency for gold is the illusion in the "Western Mind". Your men of "deep pockets" do probe for shortages, however, their wish for low supply is not to be found. Their pockets are full with "credit gold" and sad are they at currency price this brings. It is the fools game to corner paper gold printing press, no? Sir, I stand with no fools!

Days and nights do pass and one morning will bring a dollar price for gold you have never known. In that day, I will cast this currency down and walk with real wealth. In this day, the gold will trade in Euros and no bribe of credit gold will be needed to mark this new money.

Today, I my world it be how much gold does dollar currency bring. A difference in understanding from yours, I think. Today, amount of bullion available for dollars no longer the reflection of bullion dollar exchange, it be now the most terrible bribe for world dollar use. An acceptable deal in most of world, such is real world outside your laws, no?

But, it is here, in act of making extra credit gold, where the "shortage" you speak of, is measured my friend. A good man with one eye does see this time as of but few years and short days. Aside from our Euro political changes, history alone does show all great currencies end with this overselling of credit gold as last of era. This paper gold credit is always for the fools first and last. It value is later reduced to same as currency, along with holders of no gold.

It be our good fortune (and yours) that bullion is offered still. For the simple man, such as I, this wealth is that for kings but more so for his people. For all peoples, gold will be again the wealth of ages.

In this day, at end of dollar era, all do see real bullion sold for sake of market credibility, only. Perhaps too, bank credibility, I think. In this world, the lower this dollar paper price, the more bullion becomes available for credibility sake. It is the good thing for men of "small pockets" and the curse against traders and fools.

I bid you the good fortune of "small pockets" with much physical gold! We watch this new gold market together, yes?

Thank You
Another

ANOTHER (THOUGHTS!) (04/18/01; 06:19:54MT - usagold.com msg#: 52086)
Reply

USAGOLD (04/16/01; 19:15:36MT - usagold.com msg#: 51997)

----- I would also like to take this opportunity to welcome Another back to this Table. The circle is now joined in continuity again -- all around. Already I have added to my own file of vintage "Another (Thoughts!)" with this shrewd observation:

"This dream of much dollar currency for gold is the illusion in the "Western Mind". Your men of "deep pockets" do probe for shortages, however, their wish for low supply is not to be found. Their pockets are full with "credit gold" and sad are they at currency price this brings. It is the fools game to corner paper gold printing press, no? Sir, I stand with no fools!"

The smile of recognition returns to my face as this point is made in these few, short sentences better than I have seen it made in entire articles on the subject. Welcome back, my friend. --------

Mr. Kosares,

Thank you for your welcome and acknowledgment. I add that within this circle many feet have walked and the prints of the Kosares show most lasting impression. I see the stature of this man as American, however no Western mind is found within him. One day all will rush and follow your path before strong tide washes the deepest heal mark from sand.

It be true, my friend, in history no man does corner printing press. Many have taken this path before. Even declare themselves "leaders" of "financial knowledge" and "sophistication", do they. The Gresham does make wonder about such things and asks for reason no one does claim gold from printer?

Such demand be as 100 men with contract asking Spanish farmer for 100 basket of olives where clear examination in field display only 10 basket. Such good reasoning have these men, demand delivery and illusion of wealth to others be none! None ask full collection for fear of illusion to become reality, no? Perhaps, take what offered and wait next year. Better, sell claims for olives to Western investors with little eyes and clean shoes? Perhaps financial knowledge and sophistication of these paper sellers is more considerable than average fool. In the days that come,

"better one olive in house than six blooms on tree"!

We watch this new gold market together, yes?

Thank You
Another

ANOTHER (THOUGHTS!) (04/18/01; 06:41:33MT - usagold.com msg#: 52088)
Reply

Mr Gresham (04/17/01; 10:33:51MT - usagold.com msg#: 52041)
ANOTHER: WA, BIS
Was the Washington Agreement the most significant event in gold since you were last posting in 1998? Do you have any reflections on those events?

Mr. Gresham,

One must weigh the mind of this Randy. It be heavy, yes? Do read the thoughts of the BIS for these same are printed review as #52046. Hold a mirror to these events for reflection. Such descriptions I discuss come next day.

Thank You
Another

[And here are Mr. Gresham's and Randy's posts referenced by ANOTHER]

Mr Gresham (04/17/01; 10:33:51MT - usagold.com msg#: 52041)
ANOTHER: WA, BIS

Was the Washington Agreement the most significant event in gold since you were last posting in 1998? Do you have any reflections on those events?

Who were the players that made the price spike upward so quickly in 1999, and how was it managed back down? (How were so many "fearless" shorts recruited so quickly?)

What is the BIS' role in the "currency war"? Is it somewhat trying to walk the middle of the road? Did the US members take their seats recently as an attempt to manage BIS' involvement, or does this express any measure of US control over BIS?

Randy (@ The Tower) (04/17/01; 13:37:02MT - usagold.com msg#: 52046)
Mr Gresham, nice question

--- "Was the Washington Agreement the most significant event in gold since you were last posting in 1998?"---

If I may be so bold, let me anticipate ANOTHER's answer with an answer of my own.

The most significant event in gold since the dollar's gold default in 1971 has been the successful launch in 1999 of a long-awaited new currency system built upon neutral (meaning, multi-national) management and, more importantly, a floating gold reserve structure that finally abandoned the now obsolete "fixed" gold legacy of the failed Bretton Woods structure.

With this new reserve structure, the prevailing institutional incentive, from '71 to the end of the millennium, need no longer be one of "price suppression" for the perceived market value of gold.

In this light, the most significant element of the Washington Agreement is seen to be NOT the amount of pre-announced gold sales, but rather, the self-imposed curb on gold lending operations by these European central banks. And if you think about it, this action with the Washington Agreement was nearly just a predictable inevitability from the moment the eurosystem committed to provide for freely floating gold reserves. The "tools" of the prior suppression are on the outs. Believe it. The WA simply announced the foregone conclusion in a package suitable for newspaper headlines.

Just as the value of the post-'71 paper dollar has long been propped by the international yet artificial "mandate" to hold these dollars almost exclusively as reserves (acting in tandem with the dollar settlement for oil and the overhanging debts of the "Third World"), through this new currency structure gold (and its price/value!) has now been "officially" set free to replace these dollar reserves (savings).

The reason this full transition has not already occurred is that institutional interest still exists to foster the smoothest practicable transition until that unknowable moment where the final remaining *SNAP* in the adjustment occurs.

Speaking for The Tower and personally, I continue to buy gold with excess funds because I prefer the real wealth of gold over managed paper (and digital) contract currency. As a bonus, the real wealth value of same gold will provide a pleasant benefit upon full completion of the transition in world currencies' reserve structures. (An understatement, to be sure.)

End Sidebar
_______________________________________________________

FOA (04/21/01; 21:12:52MT - usagold.com msg#66)
Of Money and Men

Hello again!

Continuing along with our discussion, clarifying some points and positions, we once again offer some straight talk. Elwood has some points in his Elwood (04/19/01msg#: 52225). Sir, you referenced our last full hike on the GoldTrail #64, quoting first this portion:

FOA: "Many hard money philosophers have pointed their finger at others for the fiat situation we use today. It was the bankers and governments, the kings and cohorts, big business and robber barons or some communist manifesto that forced us to use this type of money. Well, you may not like the process and consider yourself above or apart from it all. You may even declare all of them evil. But, in the end, one fact remains; society may govern itself in many ways over thousands of years, but it has never stopped the evolution that corrupts the use of real money as official money."

Then you write:

------ Thank you, sir, for sharing your deep thoughts. True, your words are, but why is this a reason to abandon the fight for sound money? Surely you must be aware of the massive inefficiencies that will accompany a system with two moneys. There will be two prices for every good, one stable, the other not. Would not the timeline of such a system be extremely short compared to that of a system of sound money even though the sound money eventually becomes corrupted? How is this system better (or even different) than what we have today?---------

Hello Elwood (smile),

The fight for sound money is not dissimilar from the ages old fight for peace in the world. Mankind has been striving for peace over our entire existence and still it does not come. Countless lives and fortunes have been lost and the same battle continues. Perhaps we should reexamine our collective needs and try something different. Truly, what is to be lost? This is the same mind set our new political styling is shooting for. It's a good effort because history is on their side.

Yes, it's a noble effort to try and get the world on a sound money program, but after failing at it for centuries, a little side trip cannot hurt. (smile) Most people, like yourself, say sound money and think sound currency. Usually it's some form of gold backing that makes the currency sound. The trouble is it cannot be maintained. The logic in my words above are evident and the last part of the statement demonstrates the self-replicating nature of our dealings with "sound money". Again, in a restructured form:

""""Society has never stopped the evolution that corrupts the use of real wealth (gold) as it strives to use it as official money""""

Elwood, I don't care if all of it is legal or illegal, moral or not, right or wrong, because the larger issue overwhelms these arguments. That being; we have never been able to control our power structures in a way that disciplines the printing of currency. The Romans alloyed other metals into their gold in a form of modern day paper printing. Even in the so called wonderful days of the various gold standards, be they actual coins or paper substitutes, the world debased the system from the start. Also you write:

----Surely you must be aware of the massive inefficiencies that will accompany a system with two moneys. There will be two prices for every good, one stable, the other not.-----

We never intend to have two moneys. The concept is better seen as the Euro and a wealth reserve. Still, to defend against your thrust, what do we have now? Travel the world, my friend, and mingle in the world of currency. In almost every country of the planet there are several prices for every good sold! All depending on what nation's currency you choose to use. Today's system is working with perhaps hundreds of moneys!

------Would not the timeline of such a system be extremely short compared to that of a system of sound money even though the sound money eventually becomes corrupted? -------

My goodness, we have used a dollar system that has been debased and on the way out for 40+ years. Well before our 1971 gold break, this country was printing IOUs as if they were currency. Yet, the thinkers of our time, the same ones that employ two week trades on the stock markets, all ask for guarantees of decades before considering a new currency? Planners simply cannot employ the logic of a group that trades options, futures, strips and swaps, then asks for longevity before the fact.

-----How is this system [euro-Freegold] better (or even different) than what we have today?---------

The real issue is our misunderstanding and misuse of the term "sound money". That thought has been bantered around for hundreds of years. Truly it does not exist except in the minds of men.

Money, the term, the idea, perhaps the ideal,,,,,,, is something we dreamed up to apply to one of our chosen units of tradable wealth. Usually gold. We could take almost every item in the world and use it in this same "money fashion". Still, this form of trading real for real is just exchanging wealth. It isn't exchanging money as we understand money.

Gold is no different than anything else you possess as your wealth, it just so happened to be the most perfect type of tradable wealth in the world. So it evolved to be used the most and eventually labeled in the same function of what we consider to be "sound money".

Now, consider that all wealth is represented in and of itself. You cannot reproduce wealth through substitution, like giving someone five pieces of copper for one piece of gold and then have them think they now have five pieces of gold! This is the process we try to perform within the realm of man's money ideals. We have always debased trading wealth by duplicating it into other forms and calling all of it, collectively, "our money".

This duplicating, this replicating, this debasement is the result of taking the concept of a credit / contract function (paying in the future) and combining it with the concept of completing a trade at the moment. Think about that for a moment.

As an example, I'll give you a paper contract to pay you later for some oranges and you give me the basket of oranges. Better said, I just gave you modern man's actual concept of money.

Or… I trade you a basket of apples (or gold) for those same oranges and the deal is finished, done! We have been taught to think that this is also the concept of money trade.

The first uses what our currency system has evolved into, what is really money in our mind. Where the second uses no credit form at all and is more comparable to trading real wealth as the ancients traded using gold.

Contemporary thought has always blurred these two notion; saying that these two methods of trading are one in the same and both forms use the same idea of what we think money is.

Further refined; we evolved our money ideals into a perception that credits and contract payments can be used as if they contain the same value in payment as trading real wealth. They could and can if managed correctly. But we have never managed credit money to match the same proportions as existing real wealth (gold). We have tried to manage this combination of wealth trading and money credit for as long as we have been seeking "peace"!

So:
We use, today, many forms of wealth holdings, all standing right beside our dollar use. Many of these wealth items have and do perform much better than our fiat currency. One has but to use one stock holdings as an example.

You may have $5,000 in cash in hand and in a checking account, while also owning $200,000 of, say, Microsoft? Obviously, the stock is a competing, dual form of currency wealth. Its value rise has overshadowed the gain on your fiat. But, is it driving your currency out of circulation? Seen anyone recently using this superior form of competing wealth to pay for a fill up at the station? No?

We all need and must use some form of fiat currency to operate in this modern world. It makes little difference if MSFT went to $10 or $10-billion, you would still use the currency system in trade as a more efficient form of modern trade. Society now uses these "money" systems without any form of gold backing, not because they are "strong" or "stable", but because they work more than they fail.

Still, over the last several decades, we now have come to expect an attempt at "political styling" our fiat money that benefits more than one nation block. Further, we expect a wealth asset to not so much stand behind the system but to measure its speed of failure or success. Knowing full well we will accept and expect some loss of value as payment for this use convince of Fiat Euro.

This is the road ahead. A fiat no different from the dollar in function, yet a universe away in management. A wealth asset that also stands beside this money, yet has no modern label or official connection as money. In this way modern society can circle the earth, to once again begin where we started. Having learned that the concept of wealth money and man's money were never the same. We shall see.

Thanks
TrailGuide

FOA, you need not walk alone any longer. From where I sit, it sure seems like the rains have come and the ground is beginning to open. I, and many others here, would give anything for you to share your latest thoughts in proper posts or simple comments. You can email me at fofoamail@gmail.com if you want. How wonderful that would be. :) <--That's me happy!

Sincerely,
FOFOA

(All emphases and [brackets] in the above posts are mine)