I have sensed some consternation about the Irish bailout and how it relates to the 10 year old USAGold archives written by Another and FOA. The theme goes something like this: A/FOA didn't foresee what is happening today, therefore the Freegold they did foresee is now in jeopardy... Malarkey!
Europe is presently operating under the $IMFS (that's the dollar international monetary and financial system) and has been since WWII. Europe has supported this system, kept it alive, and bought into it for the last 30 years. The foundation of the $IMFS is the use of contracts obligating someone's, anyone's debt as everyone else's savings, their security for later years, their nest eggs, their pensions, 401K's and IRA's. The tradable value of these "investments" is the very lifeblood of the $IMFS. When that value fails, so will the system.
The system will never voluntarily bleed out as long as it can print money to bail out the value of those paper promises. In the case of underwater homeowners, the bailout goes not to the homeowner, but to buy up the trading price of the debt contracts. In the case of sovereign debt, the bailout goes to the debtor government to drive down the interest rate and maintain the value of debt held in savings.
This is the very essence of the system we have today. It is not a system that was forced upon us. It is a system that was demanded BY us, all of us. But it is a flawed system that is collapsing. And that is why they made the euro the way they did. So that the collapse of the $IMFS would not take down global economic trade continuity with it, whenever it came.
14 months ago, in Say Goodbye to Wall Street, I wrote:
And with the recent bailout of the banks, it is repelling to think that we are responsible. It is true. We are all, as a society, responsible for the actions taken. It was a foregone conclusion a long time ago. That if losses ever loomed large enough to bring down the system, society at large would end up covering the losses. This is the very nature of the system we have built as a society. A system that sprung up from man's desire to borrow, not from man's desire to lend or steal.
Europe is part of this same $IMFS system. And it will be, until the system implodes under its own weight from the mountain of debt (systemic lifeblood) that must be nominally preserved. The dollar will be the primary victim of that implosion in a hyperinflationary fire. But the euro will also suffer inflation. Back in 2001, before even the launch of euro currency, FOA wrote:
… even Euro inflation, that ECB people openly admit must be a part of a dollar to Euro transition.
Here is the context of that statement, only because it is oh so fun to post controversial (yet true) statements by FOA:
Who has the gold?
I do and so should anyone that wishes to participate in the next currency system. Only, don't expect your gold to become money, it won't! It will become the most valuable wealth asset in your portfolio,,,,, by a long shot. For the simple thinker; gold is good. That's all we need to know. For the man with a question: Gold must rise in value many many times just to regain its wealth barter asset value. Perhaps $10,000 to start. Then, it will run with any and all dollar inflation,,,,, even Euro inflation that ECB people openly admit must be a part of a dollar to Euro transition.
The EuroLand Central Banks have every bit of gold in their vaults their accounts say they do. For that matter, so does the USA (for now!). So what if they or we swapped it out on paper? It means nothing because the gold never moved. Remember, EuroLand is playing a dollar gold market game for now. If we walk, and they know we must walk first, they will simply opt out of the dollar bullion paper system. Period! Why do you think England it trying so hard to enter the Euro fold? Think: saving their bullion liabilities by opting onto the other side!
Hell, pre 1971 the US swapped its entire vault of gold to foreign interest by issuing dollars overseas. In a news flash, some seemed to have missed, we killed that arrangement by simply keeping the gold! Today, because the ECB would love to see the entire dollar gold market fail, I cannot imagine them shipping gold to support it if we default on shipments. Well, perhaps gold bugs would think this appropriate because it saves their leveraged futures, options and mine investments?
No,,,, most of these theories about missing gold are extrapolations that attempt to explain how the industrial / physical gold market is meeting demand. Hard money thinkers simply cannot believe that private Western gold holders have been unloading real gold for the paper variety and filling the physical demand void in the process.
There is no right or wrong, good or evil here, monetarily speaking. There is only gravity, which tugs in one direction: Freegold. If bailouts are not done millions of people's retirement promises (from the system) will simply vanish. Did you really expect the system to endorse this gravitational implosion denouement while it could just print the money? By the way, austerity requirements (which force cutbacks, higher taxes and put the burden of interest payments on the taxpayers) are kind of like monetary fingers crossed behind your back, hoping that the money actually remains valuable.
Unfortunately (for the system) it cannot print value. So one day soon, while you are all watching the price of your physical gold rise, it will suddenly skyrocket. On that day you will thank me.
I'll leave you with a couple gems. The first, from the OECD way back in 2002. Hat tip to Mortymer.
"All that is not only necessary for our euro zone, for our national economies. It is also important if we want to see an increased international use of the euro, which requires certain elements to be in place. Otherwise we cannot one day be in a stronger position vis-à-vis the other major international currencies. We do not want to replace them – that has never been the goal of Europe – but we want to have a strong currency equal to the other important international currencies. The euro is a strong political symbol of European integration. It must become an internationally used, strong currency. That will take time, but as we are discussing the future of money I’m talking many years ahead. Nevertheless I hope one day to see the euro used as an international reserve currency, as a currency used in international transactions. I also hope one day to see the euro used to pay the bills for the petrol that we import in the European Union. That would put us in a much less uncomfortable situation than we were in the past months."
And the second, an old USAGold post from Smeagol. Hat tip to Ragnarok (who may or may not be related to Smeagol?)
Smeagol (4/5/05; 07:48:41MT - usagold.com msg#: 130922)
Toward a Scientific Wealth Standard?
Sssir Knallgold (msg #130858), snip:
"So far, I did not get an appropriate response about why not an honest Goldstandard. I knew this hit the core, but tell Ari never to propose an honest fiat! To be clear, an honest fiat is probably as good as an honest Goldstandard. I have learned that its human to wax endlessly about the systems and its merits, out of opportunism and lazyness as one can circumvent the "what is MY duty". Because in the end its more important, no, essential, that the participants (especially the leaders! thats why they are LEADERS) adhere to the moral principles. Even in communism there were good places to live (in the family, community), where the people stuck to their human duties. On the other hand, in so called freemarkets, no personal freedom could be reached because of moral decadence (and vice versa)."
A fine Post that was! (And others since regarding the topic) Got us seriously thinking yess it did… ssss... thank you all! We will have a crack at part of it, precious, and throw in our two cents worth (now devalued to $1.90 and climbing)... but we will have to get Ragnarok the tutor to help uss craft our thoughts sstraight and clear sso we can write it nice and pretty for you O yess...
[Okay, Smeagol, let's do it.....]
This is all IMHO and FWIW, of course.
A true gold standard would require gold to be an absolute reference which is determined, agreed upon and then forever disconnected from further influence. The meter and the gram are examples of this kind of standard. They are international, knowing no borders. Their definitions are not open to debate, nor are they subject to political wills or the whim of the markets or anyone's opinion. Things are measured against them; they themselves do not change. Rather, they can be trusted NOT to change over one's lifetime (very much like death, taxes and a certain pretty yellow metal we are all familiar with (grin)). How can we get this kind of impervious honesty in a gold standard? What a Question!
Anybody with at least one eye open knows gold is a standard of wealth of sorts, yet no one living has ever known its ‘reference’ value; the past and present struggles surrounding gold have distorted its true worth. Today gold resembles a meter-stick seen through a thick lens - the proportions of the meter-stick are apparently the same, but compressed to a fraction of what they would be if you could see the meter-stick itself. And all the while, the shape of the lens itself (and the meter-stick image along with it) is constantly being fought over and manipulated! Now, why would anybody want to do that?
To become a standard comparable to the meter and the gram, gold would have to be moved from the economic/political arena to the scientific, openly and unanimously declared world-wide as THE sole true-wealth reference against which all other wealth is compared, and once and for all disconnected from economic and political influence and control of any kind, just like any other scientific standard. Only then would the relative values of currencies and monetary policies become transparent and resolve in proper perspective with each other and with goods and services.
While I don't wish to sound pessimistic, I believe we may never see gold achieve the status of a scientific standard until all of society (and political will) takes a miraculous collective leap in understanding concerning it. Good luck!
Scientific standards are internationally accepted, uniform, uncomplicated, not profit motivated, do not affect what they measure, and everyone can use them if and when they have need. There is no reason for anyone to want to avoid them - they render consistency and stability to our knowledge of the world and as such are desirable. Standards serve blindly with impartial justice, giving no one any edge over anybody else. They are not subject to greed. They give no political advantage. Morally they are nonexistent, and perhaps most problematic for our purposes - they are not tangible!
In gold we seek an unassailable wealth measurement standard, but at the same time we must deal with its tangibility. Chew on this paradox awhile.
Is this possible? Can an impartial metric for measuring wealth be established? Can wealth be defined as a unit, a constant? If not, there can never be a standard; only changing frames of reference of variable duration (see History).
In the other hand, if a wealth metric and a unit of wealth can be designed, and actually established, what will be the reaction of those suddenly confronted with the real measure of their ‘wealth’ constructs versus how they look through custom-made rose colored lenses?
Compare the mundane manner in which the meter and the gram are perceived and utilized every day, versus the formidable money/fiat/central bank/bond/stock/carry trade/swap/X/derivative/political cyclone howling around an obscured pile of gold somewhere and you can see we likely have a very rough road ahead. An impartial scientific standard of wealth is anathema in the current climate, but anything less is doomed to fail the test of Time.
I'm no expert by several kilometers, and while this may be too simplistic (I hate legalese, and a standard should be a simple thing), if I were given the task of submitting for consideration a proposal for a scientific wealth standard it might include something like the following…
(1.) True wealth is defined and established as elemental gold, and
(2.) the unit of true wealth, Au, is defined and established as one gram of true wealth, and
(3.) is not subject to law, regulation, tax, fee, duty, or any obligation or liability whatsoever, and
(4.) monetary unit values extant on shaped or unshaped true wealth and its alloys are null, and
(5.) a publicly verifiable mass of true wealth may reference a monetary unit of account through a wealth quotient, where
(6.) the wealth quotient, wq, of the monetary unit so referenced is defined as the Au of said mass divided by the sum of the existing monetary units of account.
…the intent being that every thing tangible (and intangible) other than elemental gold may be wealth, but not true wealth, which is reserved exclusively to elemental gold so that ‘normal’ everyday wealth in any form can then be measured (and fluctuate) against it without prejudice. There can be no speculation on a unit of measurement; gold-referenced currencies would exchange with each other at their wealth quotient ratios – which mean the true-wealth value of a thing is constant world-wide, no matter what currency you use (unless you can get more for it, or have to accept less, as the instant situation dictates). If a country or money authority printed more currency, loan or issue more debt, or added or subtracted gold from its reserves it would become instantly apparent in the currency's value quotient.
There could be omplicarions or flaws I can't see or have not anticipated based on my limitations; this is just a gold Thought experiment that has bugged me for three days, and I'm placing it on the Table Round for analysis (or shredding!) and comment.
Thank you all for the great posts lately – excellent reading, and intriguing. Things are definitely getting interesting!
I may also post a couple more videos below. I have a few submissions for "open forum videos" but I have not yet watched them all. So check back.
And Happy Thanksgiving to you all. Here in America it is a time to give thanks for what you have in front of you!