Friday, November 26, 2010

Thanksgiving Week Open Forum


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.

http://www.oecd.org/dataoecd/40/31/35391062.pdf
"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!

Smeagol

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!

Sincerely,
FOFOA












173 comments:

Bob J said...

Dear FOFOA,

I have been reading you for some time now, and used to read FOA/Trail Guide/Sir Douglas in real time as he posted on USA Gold. I have pondered your thoughts at length but cannot banish one nagging question that seems fatal to the concept of 'Freegold' and ANOTHER question that is not fatal, but interesting nonetheless.

The seemingly fatal question is this: If there is a separation of the functions of medium-of-exchange and store-of-value, into currency and gold, respectively, and people generally begin to keep their long term savings in gold, where will the banks get the capital they need to loan out to fund economic development?

The interesting, thought-provoking question is this: If there is that 'one time revaluation' in the price of gold into the sixty to seventy thousand dollar per ounce range, won't it become economical and probable that mankind will be ripping and tearing up every nook and cranny of this planet looking for the yellow stuff? (including graves for the dental work)

My apologies if you have already discussed these two questions, particularly the first. If anyone can direct me to where these have been discussed I would be deeply appreciative.

Thank you,

Bob

FOFOA said...

Hello Bob J,

In answer to your first question, it is not necessary for people's savings to flow back into lending. Fiat and modern economics makes this possible, and the banks' own balance sheets can handle much debt. It is the reason for their being. And the toiling of debtors to pay on their loans lends value to the banks' credit currency. It is the securitizing and selling of that debt to the savers that has grown the system to its inevitable implosion.

Savings = production - consumption. A debtor under Freegold must produce more than he consumes to service his debt. It is only when debt grows uninhibited in the service of raw consumption that savings must be recycled into lending. This will be the key flaw removed.

To your second question, gold in the ground (what's left of it) becomes a national treasure. To, as you say, rip and tear up every nook and cranny of this planet will be as unlawful as taking artifacts away from the Pyramids. Those companies licensed by the state to remove gold from the ground for a profit will have most of the available "gold in the ground" covered.

Sincerely,
FOFOA

Blondie said...

Bob said:

"where will the banks get the capital they need to loan out to fund economic development?"

That capital will be in the hands of the people, in their gold, perfectly hedged against currency inflation, safely stored until deployed into value creating investment at the time of its owners choosing.
Bye bye to banking as we have known it.

miked said...

I see the argument for capital investment as banker propaganda.

Banks have the power to change the money supply. Other things being equal that is a bad thing (no matter what central bankers say) and just adds more uncertainty for both the lender and the borrower.

In a world with stable money supply projects could be considered on their own merits without needing to consider monetary inflation.

What if more money was needed for a period of investment? The limited money supply would restrict investments only to ones that could afford to pay the going interest rate. If there really was a period when supernormal investment opportunities existed, the entrepreneurs would be able to pay supernormal interest rates to get the money required.

I studied banking and finance and as an undergraduate I asked my lecturer why there could not be a 100% bank reserve requirement.

"That would be draconian" she told me.

mortymer said...

"Nine tenths of education is encouragement.” Anatole France

The oecd document is like a treasure in good hands, it will bring us some very good thoughts when evaluating its worth. Please explore, its too much for one, enough for all.

"From the dualist system to convertibility
As Thomas points out, if capital is to be tied up over a long period, the longterm
benefit of hoarding must be replaced by the long-term security of invested
savings. This step towards a higher abstraction was achieved by the monetary revolution
of the 16th and 17th centuries, though not in France. The monetary revolution
preceded the industrial revolution by a good half-century..." p.41

"...Because money is the abstract form of exchange, the most general of social links, it absorbs
the movement of societies with all their tensions. These tensions are themselves
fuelled by the contradictory powers (for example between creditors and hoarders
under the dualist system) which stem from possession of money. History teaches
us that when societies change, pressures build up which become incompatible
with the rules contained within a given unit of account system..." p42

"...By detaching themselves completely from gold and silver, societies cast off all the symbolic
lines that could still anchor trust in belief in a universal guarantor outside the
monetary system. Money continued down its path towards a representation consistent
with its essence: a social operator objectivised in number..." p43

mortymer said...

A small side note for:

Sssir Knallgold (msg #130858), snip:
"...On the other hand, in so called freemarkets, no personal freedom could be reached because of moral decadence (and vice versa)..."

There are very many thoughts here, just to let you get started :o)
http://www.ted.com/talks/barry_schwartz_on_the_paradox_of_choice.html

@Bob J
Yes, Top -> Down

"...The OECD should also encourage the banking industry dealing in gold (―bullion banks‖), either directly or through membership of the London Bullion Market Association (LBMA), to extend its governance of the international bullion market by establishing responsible sourcing requirements for its membership, participating in appropriate gold industry supply chain initiatives (such as RJC and WGC), and ensuring that the banks themselves establish a common set of principles, standards and certification to ensure the integrity of supply of gold from their suppliers and to the market, encouraging the use of allocated gold accounts where practicable and commercially viable."

http://www.oecd.org/dataoecd/14/18/46080654.pdf
Philip Olden: August 2010
BTW:
- Appendix 4: Annual gold jewellery demand, tonnes ... -18,3% YTY 2008-2009
- Nice to know: http://www.goldbarsworldwide.com/

costata said...

Mortymer,

Agreed, but please don't cut and paste. Sheeeeiiit.

mortymer said...

Costata, I believe those picked parts had certain relevance.

I do not post myself as I do not feel my knowledge is satisfactory to make conclusion nor I want to join endless haggling about meaning of life. I search and let time to form my thoughts.

samix said...

Mahathir calls for a gold standard

http://arabnews.com/economy/article197573.ece

Clay said...

how about somebody put up a web site to collect donations from the international community to pay off the bankers -

that way, Ireland could emerge corruption-free, and keep low tax rates and issue a gold-backed currency - and then - shazam - the irish are back off to the races -

should be a lot simpler than re-capitalizing GM -

DP said...

@Clay I like your style! ("Shazam" :-D LOL a nice way with words)

Let me know if you find someone holding out that tin cup, because I want to put in a $1 with a note scribbled on it: "here's a Dollar, now go forth and multiply, you greedy f'in a-holes"

ShockonT said...

"Bailouts" consisting of austerity like those imposed upon Greece and Ireland must happen as a precursor to any type of Freegold system, if the currencies are to survive post-LBMA. If structural, austere changes are not implemented pre-Freegold, all fiat currencies go to infinity and would not be usable in their remaining functions of unit of account and medium of exchange.

This is likely why the healthcare "reform" and Finreg bills were ram-rodded through US Congress in the face of massive public opposition. They are monstrous pieces of legislation which may (or may not) contain the necessary "levers" to contain public spending in a phase transition.

Healthcare is 1/6 the US economy. This is unsustainable. In the current environment, cutting medicare and medicaid is politically untenable. But after a phase transition, all bets are off and the infrastructure needs to be there to clamp down on healthcare costs. IMO, this is why medicare decreased payments to private practices (MDs) while increasing payments to hospitals. The hospitals are now purchasing private practices, whose business models are no longer viable. At some point in the future, hospital systems will then see a change in reimbursement to a "capitated" (cap on treatment per patient visit) model and ....voila, you have incented the medical community to reduce healthcare costs by reducing procedures/tests, etc...

You may or may not have caught it at the time, but when "Obamacare" was being "sold" to the public [unsuccessfully], the then 30+ year Senator Arlen Specter was being interviewed on TV and made the comment "we are running out of time" with respect to passing healthcare reform. (I apologize that I could not find the comment archived anywhere). What exactly did he mean by this? Was this an innocuous comment to be taken at face value, or did this Washington insider know certain legislative infrastucture had to be in place as a precursor to a phase transition?

While the $IMFS is on it's way to becoming "toast", the US is still a significant global force. Is Ben Bernanke really as stupid as he comes off, or is he following the global central banking script to a Freegold world, as taught to us by Another and his Friend?

I think that QE2 and "Obamacare" fit into the Freegold story. Without the printing of money "to be dumped right on our front lawns" we would have a deflationary death spiral with a calamitous end. The debt must, and will be socialized throughout the population of the globe, a new financial system revolving around Freegold will emerge, and austere measures will be in place coming out of the system to allow the surviving (and potentially new) fiat to function in their roles as medium of exchange and unit of account.

It is the only way.

Dave Narby said...

@ FOFOA

"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)."

Not only is it possible, I just came to the realization that it is PROBABLE.

The reasons for having a supernational, 'scientific' recognition of Freegold are the same reasons for having scientific standards of measurement:

When everyone is using the same units, it makes getting shit done a lot easier! XD

Blondie said...

@miked,

Interest rates?

Freegold requires no payment of interest.
Interest is the root of (all) the current disease.
Anyone seeing interest in the future is not looking very far ahead, IMO.

ShamefulPath said...

Blondie,

No interest = no capital. No one is going to lend me money for no interest for a capital project. Now I know you will talk about equity, but I'm willing to bet that equity holders are going to get massively hammered in the transition as well.

How will public works get funded? Would share in the road be sold? I'm actually all for private infrastructure but that would be a massive change and the state would lose the argument that it is providing infrastructure. After all only insiders and lunatics would invest in a joint equity project government ran, after all govs hemorrhage money.

ShamefulPath said...

ShocktonT,

I really don't think our political classes care about restructuring the US into the future. From my observation they are in wild looting mode. Their running towards ripping the copper wiring out of the walls in the capital building!

Once the IMFS go the US will be a smoking wreck. The US is mainly surviving by exporting inflation and war. Our whole economy rests on the system that will soon fail.

Also do you really think that the political goons know what is going on? I'm willing to guess they are mostly as ignorant as most, and just are filling their pockets.

Blondie said...

Shameful,

No interest = no lending. Or vice versa.

I made my case for this here.
I know this is a huge leap from our current system, but our current system is finished, but for the tears.
If you want to see this from my perspective, you will need to make a huge leap from current thinking, admittedly. But this is where Freegold takes us.

You can see the current system dying as we watch.
Freegold is the next step, from necessity. You can see the run to gold already underway.
This is an unstoppable shift in collective consciousness, not an economic symposium.

It'll work in the future just as it has in the past, with necessity being the mother of invention.

This shift is bigger than anything in recorded history. To think we are going to understand all the details before it has occurred is perhaps expecting too much?

The view from within the new paradigm is the one from which to see and make sense of details. The view from the current one is by definition invalid.

miked said...

>>Freegold requires no payment of interest.
Interest is the root of (all) the current disease.
Anyone seeing interest in the future is not looking very far ahead, IMO.

I suppose you are going to lend your gold out for free Blondie?

If you lend your gold or invest using the fiat the gold buys you, you will always demand a rate of return for your money, Freegold or no Freegold.

miked said...

Sorry Blondie

Missed the link to your post on the other website. I am sorry, I don't buy that. For various reasons there will always be debt and equity.

Suppose I am in business and I have such a good idea I am not prepared to give away equity in it. In order to get capital I could pay a very high rate of interest. Are you telling me that I won't find any investors in my amazing idea if I refuse to offer equity?

Desperado said...

@Dave Narby,

When I read Smeagol's comments about "scientific standards" all I could think of was global warming and I just shook my head. The left have made a complete joke out of science and scientists. Just look at some of our recent nobel prize winners. The Universities are also just as corrupt and for sale as the politicians.

And is gold really that much better? We have Tungsten bars, Non-London good delivery bars, paper gold, gold derivatives, gold leases, ETF's etc, etc.

I hope the A/FOA/FOFOA are right and that freegold will truly see the light of day, but I also hope the AGW will finally be exposed for the fraud that it is and that the "scientists" who have so selfishly promoted it are punished in the same fashion that so many would like to see the bankers punished.

I am not holding my breath.

Blondie said...

I will not be lending gold, miked, or currency either.
I will exchange gold, should I choose to redeploy some of the stored value. The rate of return will be garnered in quite a different way to the current interest on lending system, as I pointed out in the link I posted above.

Recapitalization is to Freegold what the purchase of an open-ended around the world airline ticket is to travel.
Completely necessary, and yet merely the beginning.

To see no further than being recapitalized is the same as thinking the trip is over once you have picked up the ticket from the agent.

To think that this current system will collapse due to lending, and that lending will automatically be an integral part of the subsequent system demonstrates a severe lack of imagination. And logic.

Blondie said...

"Are you telling me that I won't find any investors in my amazing idea if I refuse to offer equity?"

That's correct. What would they need your interest payments for, when gold is yielding a secure return already?

Why accept unnecessary risk?

ShockonT said...

Shameful:

Don't misinterpret my post for a vote of confidence in the political class. The central bankers, as a group, must coordinate on some level, even in a Freegold system. They need politicians to do the dirty work.

I think Bernanke is good at acting stupid before congress. I do not think he is really that stupid.

I also think that there are some in the political class that may know more than your garden variety political hack. Those that have been in the system for decades can become very powerful. I am not saying that Specter does or does not know the big picture...but somebody that is rich enough to own the color blue was pressing his button behind the scenes. Why else do you think we no longer have a representative government? "Obamacare" shouldn't have had a snowball's chance in hell of passing (based on townhall meetings and voter polling), yet it was still pushed through.

Nothing in politics happens by accident. Some are fools, some are playing the fool. Don't be fooled by underestimating someone playing the fool.

I doubt that the entirety of the "powers that be" want the country to be reduced to a smoldering hunk of rock. Especially since a substantial amount of wealth still exists in this country.

DP said...

I don't know how many times now I have seen this guy's forecasts come out wrong, but it's more than one for sure.

I started to smile to myself at first, as I read (once again) that gold is on the cusp of a crash-and-burn.

http://www.kitco.com/ind/rosen/nov222010.html

But then I thought to myself "hey, wait a minute, perhaps he's right and the paper price crash is more imminent than I would have imagined...?" and I stopped laughing. Then I thought... I wonder what kind of commentary the good folks over at the FOFOA blog might generate in response to this... could be something of a talking point. So here I am.

zenscreamer said...

@ShockonT

you said:

a substantial amount of wealth still exists in this country

by which I gather you mean the U.S.A.. The thing is, you may not be right, or if you are, it may not be in the way you think.

A lot of the "wealth" of the U.S.A. is "paper" which is really just a promise to pay from someone else. A pile of paper to reach to the stars. That "wealth" is not real and is hence best ignored.

That said, the U.S.A. proper holds a large landmass and with it substantial acreage of farmland, mining, etc. Large international corporations own huge swaths of this productive-value "wealth" and I am sure so do any number of the "usual suspects" super-wealthy.

I just wanted to make clear that the Wall Street bond trader making a $500,000 bonus may well only own paper promises, and so be much less "wealthy" than some believe.

Dave Narby said...

@ Desperado,

Sorry, should have said "scientific methods of MEASURMENT".

costata said...

mortymer,

I wasn't criticising you or your comment except from an editing perspective.

The extracts from the OECD were excellent but very hard to read with all the line breaks.

Cheers

miked said...

Hi Blondie

There is nothing wrong with borrowing and lending. It's been around for thousands of years just like gold has.

It's the way banks have lent money they don't have that has perverted the system.

You may do what you wish with your money in the future but you can't tell me what to do with mine. If I met the guy who was about to build the next Google and he asked for a loan with no possibility to get equity, I would take him up on that if the price was right. It just has to be better than the yield on my gold and compensate me for the risk and I will be in. It's just a question of price.

Pete said...

@ Bob J and FOFOA

"The interesting, thought-provoking question is this: If there is that 'one time revaluation' in the price of gold into the sixty to seventy thousand dollar per ounce range, won't it become economical and probable that mankind will be ripping and tearing up every nook and cranny of this planet looking for the yellow stuff? (including graves for the dental work)"

That is the same question that has plagued me as well. The best answer I have had so far is FOFOA's response to yours (also provided by Paul).

In fact I asked Prof. Fekete that same question at a local conference last year and he completely dismissed me saying it would never happen. He wouldn't give a reason, which meant I lost a lot of respect for him that day.

I think there are two pending issues:
1) individuals will still dredge and destroy river systems,etc. IMO there is likely to be a speculative frenzy of mining activity that may have a huge environmental impact. Developing countries may become slave-mining countries that ruin themselves. For example, look at gold mining and 'tantalum' mining in Africa right now. Without some global laws or similar, I don't see how the Govt's of developing countries with their limited moral/social consciences are expected to restrain themselves. Particularly as a gold-rich nation could trade 'gold for oil' for their development.

2) This 'transitionary' period will surely be very bad for all economies, whereby precious resources are diverted from productive uses such as farming, and instead directed towards hyperactive mining ventures. I sense a 'bubble' in gold mining stocks. And as much as the Govt's will want to tax the miners, it is still a very destructive environmental and economic activity.

On another note altogether, something that has been nagging me a lot is a potential link between these repeatedly proposed 'carbon taxes' and the implementation of Freegold. Gold mining is not a clean enterprise, and takes plenty of energy.

Does anyone have any thoughts about Freegold vs Carbon taxes? Could $Carbon be a rival to Freegold? (I hope not).

I can see a dichotomy:
Gold - destructive, polluting = evil
$Carbon - controlling, environmentall friendly = good

That is how I expect the uneducated masses to see it.

intuitivereason said...

Debt in fiat. Equity in gold. Never the two should meet.

ShockonT said...

@ zenscreamer:

"The thing is, you may not be right, or if you are, it may not be in the way you think"

I have never thought of paper (or electrons) as wealth. Nor is the USA a larger version of Iceland...

Anyone who has read the thoughts of Another and his Friend (and his Friend, too) is well versed in the concept of "all paper burns", and this is global.

Who is the biggest beneficiary in a hyperinflation? Debtors who hold debt denominated in the currency being hyperinflated...

What resources does the US have? Mining, Gulf and Alaskan oil, Rare Earth Minerals, intellectual and entrepreneurial superiority (yes still), some of the best arable land on the globe, superior military technology, and oh yes, probable 15,000 - 20,000 tons of gold.

Maybe all of the gold is not titled to the US, but, as they say, possession is 9/10 of the law. If the gold is here, it is ours. We can issue paper certificates to clear the books anytime we want (haven't we defaulted on gold obligations before?).

So I submit to all the USA doomsayers that it ain't quite done yet for the good ol' USA. Yes paper will burn, yes standards of living will fall substantially, but in a Freegold phase transition, the US will not be at the bottom of the heap.

There will be a rebalancing globally, some will gain, some will lose. But do not confuse the fact that the dollar reserve system failing is going to catch the power elite off guard. The have used this system to the utmost benefit in transferring wealth, knowing that some day the system would be abandoned for Another.

If the Wall Street gambler keeps his winnings in casino chips for too long, he will get wiped out just like the other 99% of the population who cannot see what is happening.

Paul said...

Hi Bob J and Pete

I've been investigating substances that are more valuable than gold at $60,000, to see what impact the search for these substances is having on the planet.

Most valuable substance I can find (apart from anti-matter) is freeze dried snake venom. Prices range from a ridiculously cheap Black-necked Spitting Cobra at $200 per gram, up to the top of the range Painted Carpet Viper, at $3400 per gram.

Good news. Painted Carpet Vipers are still relatively abundant despite high prices and lack of fractionalized venom markets.

“These small vipers are found in many parts of the Old World from Africa to India. They are very dangerous snakes due to their virulent venom, irascible disposition, and relative abundance in parts of their expansive range. When disturbed these snakes rub the scales of their C-shaped coils together making a distinctive hissing sound, often striking repeatedly.”

Pete said...

@ Paul

That is funny, but not a good argument.

Market for gold = entire population of the world.

Market for snake venom = limited.

Saffron is very expensive, but does everyone grow it?

Thing is, with those items they need to be traded for something. Conversely, gold IS value itself, it does not need to be traded (although universally is).

Why don't we have 'FreeVenom' or 'FreeSaffron' then?

This is my problem. No-one answers the question properly without leaving more questions or doubt.

costata said...

Pete,

You can get all the FreeVenom you like here. Just sing the praises of the EU political elite.

Cheers

julian said...

Hello All,

Happy Thanksgiving Week to Americans and non-Americans alike.

I haven't read through the posts yet, will do that shortly.

@ FOFOA,

Thanks for sharing that TED talk on fractals. I'm very intrigued now to get deeper insight into how that relates to Gold/Freegold.

Gold has the potential to be revalued to infinity, mathematically speaking?!

And what of the self-organizing patterns, or collectives? Or the self-organizing nature of Life in general? How about Non-linear scaling? Recursive nature of Gold?

From dictionary.com:

-n

. logic, maths : the application of a function to its own values to generate an infinite sequence of values.



Anyway, I will definitely try to ponder the connections at my leisure, and I look forward to your further explication of this whole concept.

This Thanksgiving, I am Thankful for Another and his many great Friends. I am Thankful that I found this place; it's amazing the different ways of stumbling upon such gems on the web. I am Thankful for physical wealth that is antithetical to debt-based fiat currency masquerading as a store of value. I am Thankful that I got a decently-paying job last year to help me stack some of that physical wealth. And I am Thankful to still be alive and healthy to anticipate the times that are fast approaching.

Thanks All, and Many Blessings to You and Yours.

Paul said...

Careful costata,

Vipers in Switzerland - leave well alone!

"As the Swiss summer hiking season gets underway, it's worth being aware that up to 30 people a year are bitten by venomous snakes in Switzerland."

Paul said...

Is the Irish Government sending us a message using hidden symbolism?

Let them eat cheese: Irish government hands out block of cheddar to every family

"FOFOA was recently contacted by a whistleblower who works at the IMF. He has just sent us this video reportedly of Eric Sprott at the IMF 'gold window' trying to buy gold. He informs us that the IMF code-word for physical gold is 'cheddar'..."

The Cheese Shop

or am I reading too much into events?

Wendy said...

BobJ mentioned, and this issue has been presented on a number of occasions, that if gold were to be revalued, would not dental work, graveyards, etc be mined?

Let me ramble for a sec..... in the past, I have held up a peice of printer paper and a twenty dollar bill to my kids, and asked them what's the difference, they are both peices of paper.....

Insofar as currency is paper, this has not caused the extinction of all trees in order to make paper. Because in order to become currancy the paper must undergo formal inking, otherwise it's just paper.

Which leads me to probably the dumbist question in this blog ... when freegold is "launched", is it possible that the only gold recognized is gold that has been "inked" by an official source, leaving all other gold (nuggets, fillings, one oune bars), like printer paper? Worth something in commodity value, but nothing like the official "stuff".

This causes me concern mostly becuase I have never heard mention of it? I heard nationalizing mines etc., but wouldn't it be way easier to ascribe a legal ink to it?

I would very much appreciate a reply from FOFOA and ender on this:



Wendy

Pete said...

@ Wendy

Thanks for having a stab at this one. You raise interesting points and I appreciate them because this issue is really under-done IMO.

"Which leads me to probably the dumbist question in this blog ... when freegold is "launched", is it possible that the only gold recognized is gold that has been "inked" by an official source, leaving all other gold (nuggets, fillings, one oune bars), like printer paper? Worth something in commodity value, but nothing like the official "stuff"."

I would think that, just like taxation, this would be against the principle of FreeGold and the idea that the wealth of a country can be measured more in the wealth of the Govt + citizens, rather than the Govt alone. As long as the gold is in the system as a store of value, the currency will flourish.
(someone please correct me if I am wrong on that)

Also, I would think that if a country, let's say Australia, wanted to mine the place into dust, that surely other countries would still accept gold from Australia? Regardless of whether it had some endorsing ink on it? Isn't that what black markets are all about...and isn't that one of the core arguments regarding FreeGold...that if you try and suppress it it will simply go to the black market?

The reason I push these lines of questioning is because it is in my nature to question the impact of changes. If we do not seek to understand these impacts then I think our approach is a bit naive.

Wendy said...

ooops, I cut myself off, sorry for the aweful spelling, I don't "spell check:.

Anyways before I cut myself off so bluntly, I was begging the input of those that have been part of this blog since the beginning. Somehow alex, ivo, B, martij, costata were not part of the original message ... posting confuses me now and then.

Wendy said...

Thanks Pete,

I need to think about your commenta for awhile, especially in terms of a black market.
I know there's not a black market for computer paper!!

Desperado said...

@Dave Narby,

The point I was trying to make is that in the decade since Smeagol wrote that comment, the "scientific" community has shamelessly allowed itself to be corrupted by highly partisan political hacks like Soros and Gore who push a hidden agenda. These same actors have spread also their influence throughout the worlds international organizations, like the Nobel prize committees, and yes, I think the ECB and IMF too. This is just another example of developments that A/FOA could not possibly have predicted.

Here we have a IPCC letting his mask slip the same way Obama did when he made comments about "sharing the wealth" to JTP:

IPCC Official: “Climate Policy Is Redistributing The World’s Wealth”

It never was about global warming. It was always just watermelons (green on the outside, red on the inside) pushing their marxist agenda.

costata said...

Wendy,

When I saw your first comment I thought Ender and FOFOA good choices.

Pete made an important point here:
".... the wealth of a country can be measured more in the wealth of the Govt + citizens, rather than the Govt alone."

It is also worth noting that Central Banks only hold around 30,000 m/t out of a total stock estimated at up to 160,000 m/t. This is without modern precedent. After WWII the USA had 70-80% of Central Bank reserves.

Gold would be highly sought after at any price that makes it economic to extract, recycle etc. However this is nothing new. No gold was deliberately wasted at US$255 per ounce.

Theoretically official gold could be quarantined from public gold. One way suggested to me to do this would be to irradiate the official gold. IMHO any attempt to do this would result in a huge counterfeiting problem for a government who attempted it.

Lastly let me add that a country could have a strong currency without holding 1 ounce of public gold reserves. Provided the country has no trade deficit, no capital account deficit and their currency is not over issued why would they need gold reserves?

Woe to a country with no public gold reserves, trade deficits and capital account deficits that is over-issuing their currency. They would be in a sorry state under Freegold unless they reform their economy. Unfortunately the Freegold architecture does not differentiate between reform that involves maximum cruelty and suffering for the citizens and a more compassionate strategy for reform.

mortymer said...

1/ "...Ladies and Gentlemen, Honourable representatives of the European citizens:
We are facing a decisive year. 2011 should see the adoption of the revised governance framework, in-depth discussions on the crisis management framework and possibly the launch of the procedure for a Treaty change. We need to get all these reforms right, so as to ensure that the euro area can meet the future challenges with even greater capacity and conviction..."
http://www.ecb.int/press/key/date/2010/html/sp101122.en.html

2/ via Harvey O.: "...This story has become public..."
http://www.scribd.com/doc/43680919/TroposRe

Please do not make any false easy shortcut conclusions and :o) think long.

Q: If paper gold goes too much down wouldn't ECB reserves need to go down as well? So, does it mean that the transition and cleaning of the public gold markets could be rather "swift"?

ad said...

Comments from Jim Sinclair

"As I have told you for years now, there is no practical solution anymore. The OTC derivative market and layers of debt have insured that."

and Martin Armstrong

Either we face the reality of a completely new economic model or we hang up everything now.

http://www.martinarmstrong.org/files/The%20Rising%20Frustration%20with%20the%20Debt%20Crisis%2011-11-2010.pdf

There are a series of articles written by Charles Eisenstein which put a few of the more "hidden" aspects of our present economic distress into focus. Those who enjoy Morris Bermans work will appreciate this writer. Morris Berman saw this crisis a long time ago with books such as Dark Ages America etc.

http://www.realitysandwich.com/sacred_economics

http://www.realitysandwich.com/money_and_crisis_civilization

http://www.realitysandwich.com/money_a_new_beginning

http://www.realitysandwich.com/money_a_new_beginning_part_2

http://www.realitysandwich.com/money_and_turning_age

I think what many people forget is that by the time we get out of this crisis, which will be a decade if not 2 or 3, the world will have changed massively. The perpetual growth model has to go as well as interest bearing money which drives it.

War as the great reset of capacity is not going to work either, there has been constant war since 1939 and what has that helped? Its not that the powers will not try it but it wont work.

I think as the depression deepens and governments disintegrate whole or in part, there will be a resurgence of local initiatives including local currencies such as in Worgl in Austria in the 30's.

Has anyone given any thought as to how Freegold fits into this? Sure it solves the store of value issue but the problem is the perpetual growth model which is dead in the water. There is nothing left to monetize except carbon (of all things lol) and we have no large economic drivers such as dotcoms, ipods, real estate etc left.

costata said...

All,

Time for silver to scale heights hitherto unimagined.

We sold out of silver this afternoon. Our PM funds are now 100% physical gold.

This is not a recommendation, merely disclosure.

Cheers

costata said...

FOFOA,

From the second TED video:

"The secret to happiness is low expectations."

Great stuff. Thanks

mortymer said...

"The true history of my administration will be written 50 years from now, and you and I will not be around to see it."
George W. Bush

Pakistani Military & Strategic Discussion Forum, 2003
"...It's in this context that oil geopolitics can play a role in undermining the dollar. What if most oil producers decide to take payments in Euros as opposed to dollars that account for almost 100 per cent of global sales (except by Iraq) of over $1 trillion a year? What if petro-dollars are replaced by petro-Euros? "If such a wholesale switch does happen, it could blow a hole in the dollar, which could plunge by over 30 per cent in value almost overnight," remarks a currency trader with a French bank.
So, what Iraq and Iran, the second largest producer among the 11 OPEC members, who account for a third of global supplies, have done has created a scare. Venezuela, another OPEC member, hasn't switched to Euro but has inked barter deals with 13 countries (including Cuba) to sell its oil. In fact, there's been a move within OPEC to opt for Euro...."

http://forum.pakistanidefence.com/lofiversion/index.php/t9634.html

Fofoa: Here is one more TED for you since you liked the, smile, very relevant to other side of fractals:
http://www.ted.com/talks/eric_berlow_how_complexity_leads_to_simplicity.html

Michael H said...

@ Wendy, regarding the possibility of a mad gold rush.

Your question brings to mind FOA's description of the use of gold in ancient times. A gold nugget took the same amount of effort to dig out of the ground as it took to press a jar of olive oil, and both had the same trade value. So given the choice, most people would make the oil and leave the gold in the ground. Why dig the gold out to trade for oil, when you could just make the oil?

Gold deposits are getting more dilute, and are requiring more effort and energy to mine. Why expend that effort and energy into mining gold, when you could just expend them in a productive enterprise that would create useful items, that you would then be able to trade for gold already mined?

In a peak oil scenario this dynamic would become more pronounced. Given the choice between spending scarce energy on mining, or on creating items of use value, which should be the preferred option?

Michael H said...

BTW, FOFOA, those are some sad-looking leprechauns. Did they just get 'bailed out'?

DP said...

@MichaelH wouldn't you too be a sad wee leprechaun, if you found the end of the rainbow but the pot of gold had already been looted like that? :-D

DP said...

Perhaps they were contractholders 2 and 3 to show up at the Rainbex to take delivery, with the line of 17 more behind them about to show up with equally long faces

Here is contractholder 1 though, and he's happy as Larry

http://eu.123rf.com/400wm/400/400/diomedes66/diomedes660805/diomedes66080500012/3025918-an-elder-sultan-or-shiek-with-a-sword-isolated-over-black.jpg

Desperado said...

This article is quite interesting:

Betting In The Endgame

"This private absorption of gold is unprecedented, both as to its magnitude and to its speed. The total amount of gold absorption for the entire 57-year period 1950-2007 [is] an amount greater than all the gold produced in history before 1950. ..Fifty percent of all gold in existence has been produced since 1960. The same fifty percent has been withdrawn during the same period of time from the public domain, and disappeared in private hoards.

There is no way to account for this gold. We do not know the location, the identity of owners, nor their intentions what they wanted to do with it…

The question is: Who has been buying all that gold?

THE ROTHSCHILDS

In the endgame, systemic stress often reveals information that would otherwise never be discovered. One such discovery is an unexpected clue to the identity of those buying the world’s gold reserves since 1950. The clue emerged as a consequence of the UK’s increasingly perilous finances.

A clue to the mystery buyers surfaced on November 1st when in a speech in the House of Lords, Lord James of Blackheath revealed that a shadowy group [referred to as Foundation X by Lord James] had contacted him with an offer to help solve the UK's economic problems, a group that possesses more gold than all the world's bullion reserves combined.

On the basis of these gold holdings—in excess of 30,000 tons—Foundation X is in all likelihood a front for the Rothschilds, the infamous banking family which has a long history with gold."


Knowing how ruthlessly the Rothschilds have gotten control of other peoples gold in the past is, in my opinion, not a reason for optimism...

S said...

@Paul..

On your question of interest, note the "innovation" as regards islamic finance, discounting and usury.

Blondie said...

@miked,

You are correct, everyone should be free to do what they wish with their money, including lending it out.
The distinction should be, as you say, between lending that which you have and lending that which you have leveraged into existence.

My point is simply that with Freegold the motivations will have altered drastically from those of today, and lending will became the exception rather than the rule.
With no requirement for perpetual growth, and personal financial security no longer an issue, one's motivations and risk appetite become subject to quite different forces than now. This is of course hard to predict with accuracy, but the trend is very clear.
If your venture is creating value, it will also be increasing the purchasing power of gold. This once again alters the lending dynamic when factoring form and rate of repayment, issues which again an equity position would automatically resolve.
In a new paradigm, new forces come to bear, so we must fully enter that paradigm to fully understand it. A big ask before the fact, but that is why we congregate here, no?


@ad,
" The perpetual growth model has to go as well as interest bearing money which drives it... Has anyone given any thought as to how Freegold fits into this? Sure it solves the store of value issue but the problem is the perpetual growth model which is dead in the water."

Perpetual growth is store of value driven, not interest bearing money driven, so Freegold eliminates it.


@Michael H,
"Why dig the gold out to trade for oil, when you could just make the oil?"

Well said; +(another)1 for Freegold.

Those leprechauns must be Trader Gold Bugs, rather than Physical Gold Advocates?

Blondie said...

Stewart Thomson is the only leprechaun I am aware of who is sharp and experienced enough to be a TGB as part of his PGA strategy.

bucephalus said...

question by ( auspec)The end of a currency's lifetime always ends in gold debasement?

answer by FOA (f)---- In almost every case. Sometimes in the open, sometimes hidden.------

FOFOA, sorry to ask! define please 'gold debasement' in the above context, please?

thanks

Bucephalus

Pete said...

Musings and banter... but still no-one can answer the question of the 'gold rush' satisfactorily (IMO).

@ Michael H

"Your question brings to mind FOA's description of the use of gold in ancient times. A gold nugget took the same amount of effort to dig out of the ground as it took to press a jar of olive oil, and both had the same trade value. So given the choice, most people would make the oil and leave the gold in the ground. Why dig the gold out to trade for oil, when you could just make the oil?"

So in your understanding of FreeGold, your ounce of gold will buy you a small drum of olive oil? What happened to these crazy 'revaulations'? Yes, I know it would be revaluated against fiat, and it is relative, but the point is that FreeGold would mean an era of scarcity, by weight of gold, per person, and an abundance of value.

Olive oil won't become instantaneously just as scarce. No other product would (apart from possibly energy, though that would kill the market so it is unlikely).

Yes, it is cheaper to leave gold in the ground. But it is more tradeable when you have it in your hand. Would you prefer a promise of gold in the ground in Sudan, or to actually have an ounce in your hand?

If gold revalues upwards (and I am sure I am using the wrong term, but please don't shoot me for the terminology), then the cost of mining, IN GOLD, will be less. For instance, now it takes anywhere from 1/3 to 2/3 of an ounce to mine an ounce of gold. After a revaluation, that could be 1/30 to 2/30 cost. All of a sudden a LOT more gold prospects become viable. This point would be relevant even if gold only doubled in value.

@ Blondie

I've taken this one out of its context, but I like it:

"In a new paradigm, new forces come to bear, so we must fully enter that paradigm to fully understand it. A big ask before the fact, but that is why we congregate here, no?"

This is exactly what I am getting at. To understand FreeGold fully we need to consider what the world will be like when/if it arrives. FreeGold means an upheaval...a dramatic change in the way we treat the store of value. Is it not reasonable to consider that this change might have side-effects?

If a $CO2 (Carbon dollar?) or carbon taxes are proposed, aren't they the monetary opponent to FreeGold? Then again, perhaps they are in fact the answer to the gold rush question...a way to internationally curb gold mining, via sanctions against countries that rape the land, etc. But black markets will always exist.

holdinmyown said...

To Desperado and all other who have commented on the Beck thread:

you may be interested in this link
http://ampedstatus.com/the-two-party-oligarchy-vs-the-people

Paul said...

Hi Pete

You are right that a higher gold price will of course lead to an increase in activity to locate it, wherever it is. Just a modestly high copper price resulted in copper looting and stripping. It happens, and I'm sure high price gold will change peoples behaviour, like less visible gold jewellery etc. I would be very worried if gold was an essential component of, say, nuclear power station cooling systems.

Grave robbing is not new either, most of the Saxon burial mounds in Europe have been looted for treasure over the years. There's really not that much left I would guess.

Looking back through history, in 1546 average earnings in England were under £8, and gold was £3 per ounce, so 3 ounces would be more than a years wages. Have you ever tried panning for 3 ounces of gold? Much easier to grow wheat, which is what most peasants did.

Sure there will be more wildcat gold prospecting, but if you've ever tried it, you'll know it's back breaking work with very little guarantee of success. There are now laws against using suction pumps to dredge streams here, quite rightly.

Bear in mind that crude oil can cost as little as $1 a barrel to extract, and sells for $80. That 8000% markup doesn't have us all looting the service station, except when it's a public holiday.

If gold goes to $50,000 life will go on. Just make sure your fillings are the brain rotting mercury ones. You don't want those filthy peasants chasing you with pliers.

mortymer said...

"We've climbed the mighty mountain. I see the valley below, and it's a valley of peace."
George W. Bush

Euro Pricing of Crude Oil: An OPEC's Perspective

http://www.luc.edu/orgs/meea/volume6/massood.pdf

Most important part I suppose: "...euro is a comparatively new currency and its stability is yet to be proved."

Pete said...

@ Paul

Thanks for your response, I appreciate it.

The bit about English history is quite telling - however the way we mine is much different now. Cyanide leeaching and high through-put ore processing allow mining companies to process masses of ore with little gold content, and still make a profit. This is much different compared to say 'panning for gold' or 'digging for nuggets'.

Regarding laws against dredging, yes, some countries have them quite rightly. But that won't stop illegal dredging, and it won't help those countries who are too irresponsible to stop it either.

I don't think Oil is a good comparison unfortunately. Most extractors pay much more to extract oil than $1 a barrel. At $80 a barrel, some are barely scraping by. What would happen to production if oil went to $8000 a barrel? And consider that oil extraction is (typically) less environmentally damaging than gold extraction.

Besides, we know that oil is an artificially suppressed market, and that oil is a consumable. It's different in so many ways. Oil is taxed heavily, and petrol/gasoline is difficult to store, transport and trade on the scale necessary for the average person to make significant profits. That is why we don't loot the service station.

I understand that life will go on. FreeGold would be a change, but not a huge political and social upheaval bringing on some new nirvana. However, the reason I am discussing this particular topic is that it is a strong negative consequence of FreeGold. We all talk of the positives here, and there are so many, but stepping out of the FreeGold glow for a moment, the 'gold rush' is a strong negative that could be used to argue against FreeGold by others.

Who wants FreeGold if it makes things worse? Humanity wastes its remaining oil reserves digging up gold, rather than researching alternative energy sources? Because mining gold is generally a destructive exercise. A gold mining frenzy is a frenzy of destruction. It is bad enough here in Australia where we dig up metallic ores on huge scales to ship off to China. But Joe Plumber from down the street can't easily start mining iron ore and selling it on the market. But he can buy a pump and some hoses and start dredging.

Desperado said...

@holdingmyown,

The 7 key issues identified in the article on two party oligarchy that you posted could be taken almost verbatim from the teaparty platform. This argument that both parties are a part of the same oligarchy is constantly repeated by progressives to muddy the water and stifle debate. It is an attempt to preclude listening to and debating the entire philosophy of the libertarians and tea party members like Ron Paul, Rand Paul and Paul Ryan.

RE: Beck vs Soros

Jon Stewart reveals Glenn Beck's puppet master

At 2 minutes Jon Stewart does his slapdown of Beck by mocking Beck's presentation and bases his rebuttal on the counter claim that Beck is Soros's puppet. It has a few funny moments but in general is just Stewart's typical inane spoofs that do not rebut or add any new information. It is analogous to Beck's and Stewart's rallies in Washington. There was a definite theme about regaining honor and liberty to Beck's rally, whereas Stewart's rally was about mocking Beck and getting out the message "don't vote for the tea party". Jon Stewart's other continuing theme is to mock practicing Christians, but I won't get into that here.

Beck, like most conservatives, is only marginally a Republican. Most conservatives only have scorn for what they call a "Rino". What is the equivalent from the Democrat party? What is a "Dino"? A Dino would be any Democrat who is not a socialist or communist. A blue dog would be a Dino, and they got massacred in the last election.

What bearing does this have on Freegold? Lots. Ron Paul is the shining beacon for ending the Fed and most importantly making gold legal tender (which would eliminate taxes on it!!!). Ron Paul is the father of the tea party. So when you post articles that blindly claim that the political party that Ron Paul belongs to, and the teaparty movement that he started, are the same as the Democrats, you do the country and freegold a disservice.

One of the main divides in the Republican party is between isolationists and those that are scornfully called "Neocons". I have been called a Neocon before. Unfortunately, an intelligent discussion about this divide is far too nuanced for Jon Stewart or even the author of the article you posted.

Dave Narby said...

Complexity leads to simplicity

http://www.ted.com/talks/eric_berlow_how_complexity_leads_to_simplicity.html

intuitivereason said...

This argument that both parties are a part of the same oligarchy is constantly repeated by progressives to muddy the water and stifle debate. It is an attempt to preclude listening to and debating the entire philosophy of the libertarians and tea party members like Ron Paul, Rand Paul and Paul Ryan.

I'm looking in from outside, but that is not at all the perspective I got as to why the parties are viewed as the same.

What that comment is intended to do is to twist the politcal axis through 90 degrees so that the differences between resultant democrat/republican outcomes and those of someone like Ron Paul are highlighted.

The twist moves the debate from one of social justice vs economic justice, to one of personal freedom vs state control.

Changing the debate away from party politics is necessary to get away from the entrenched positions that are emotional and historical rather than rational.

Desperado said...

"The twist moves the debate from one of social justice vs economic justice, to one of personal freedom vs state control."

This kind of mental pretzel folding is only necessary for a "liberal", which is why it is always liberals that come up with this argument. States rights, limited government, and personal freedom are very precisely defined in the constitution. One party has consistently found the constitution limits it's goals of social AND economic "justice". The other party, the "conservative" one, has had problems living within the bounds of the constitutionally limited federal government (think Lincoln). There is a very concrete wing within this party (the teaparty, the Pauls) that is perfectly clear on this issue. The progressives/Democrats/Liberals all realize that states rights would be the end of their movement, hence we have them writing stuff like "twist the politcal axis through 90 degrees so that the differences between resultant democrat/republican outcomes and those of someone like Ron Paul are highlighted.".

It is really quite simple. If you want Paul and the teapartiers in power to restore the constitution, vote for their wing of the Republican party.

Mark_BC said...

"Can an impartial metric for measuring wealth be established? Can wealth be defined as a unit, a constant?"

Yes. All wealth is a measure of ecological productivity. It's very simple. All money is a claim on human labour -- a debt on either past or future human labour. All labour is enabled by the biological energy which powers our bodies (there are no robots which can effectively emulate our brains). All biological energy comes from food. All food is created from sunshine energy via ecological productivity through plants.

As the human race gets larger and our economies grow, the amount of total human wealth increases. This was not constructed out of nothing. Rather, it was taken from the natural world, from farms and mines and fishing boats, and converted over to human uses. Therefore, the amount of human wealth in the world is a measure of the proportion of total global ecological productivity which gets diverted towards supporting humanity -- our "ecological footprint". Around 1/2 now, give or take a planet or two.

Gold may have a place in this but it is only a proxy for ecological productivity. The ultimate and purest measure of human wealth is how many usable kilowatt-hours of biological energy we can sequester from the natural world for our own uses.

Money is commonly said to be a "store of value", but of what? "A medium of exchange", but for what? "A unit of account" of what? Goods and services? What are goods and services? They are a measure of usable biological productivity.

David said...

The article very reasonably states that 99% of the population, those who are not so rich and well-connected, have become entrapped by the two-party oligarchy, now under the firm control of worldwide corporate paymasters. That is, our government(s) and political system(s) have been captured by those with less than good intentions for these 99%.

It would be ideal as a starting point in a debate with anyone if this fact were acknowledged. I hope we'll get to this point soon. To obsess about Democrats or Republicans, or liberals or conservatives, being at the root of the problem is to misidentify it. This diminishes any chance for any measured solution over time.

Mark_BC said...

"" The perpetual growth model has to go as well as interest bearing money which drives it... Has anyone given any thought as to how Freegold fits into this? Sure it solves the store of value issue but the problem is the perpetual growth model which is dead in the water."

Perpetual growth is store of value driven, not interest bearing money driven, so Freegold eliminates it."

_____________________

Maybe Blondie could explain that second statement some more and see if this is inline with my line of thought. I have been thinking about this very issue the past few days. In a freegold environment, or one with a finite money supply, parking your money in an interest bearing leveraged institution like a bank leads to your money taking money out of circulation so that others can't have as much. With a fixed money supply, this will eventually gobble up all the money, this is the usury problem which is why it was outlawed for centuries in our past. But, in a freegold type environment with no leveraged fractional reserve banks ... then we wouldn't have this effect would we?

Instead you'd take a great deal of personal interest in your investments and invest your gold equivalent money in stocks or other such things which actually produce something of value for society -- nothing like an interest bearing bank account of today which produces nothing of value but more ponzi paper. This would not take money out of the money supply because it would be spent by the entity you are lending to in order to do its useful things for society. If you made money off your investment, you would basically be taking money away from someone else who made poor investment choices and lost money by investing in an underperforming stock.

Mark_BC said...

"To obsess about Democrats or Republicans, or liberals or conservatives, being at the root of the problem is to misidentify it. This diminishes any chance for any measured solution over time."

____________________

As a staunch centerist myself, I'd have to wholeheartedly agree with that. This futile left / right bickering is only serving to strengthen the "divide and conquer" intentions of the bankers who are taking control and powering the freight train full steam ahead into the wall.

I can't help but point out that Sweden has offered to help bail out Ireland. So .... the quintissential socialist state has such better economic fundamentals (compared with most other western countries) that it is in the position to help bail out the utopian free market economy of Ireland, from collapsing under the burden of its excessive wealth created by 10 years free market deregulation of the financial system?

Just sayin'....

intuitivereason said...

When I said I'm commenting from the outside looking in, that rather does mean voting is out of the question.

At least over your way you have a 'limited government' wing to one of your major parties.

In Australia, we suffer the same two party problems, exacerbated by the fact that our parties vote as fixed blocks.

Blondie said...

@Mark_BC,

Your thermodynamic view is not complete with regards to money, and thus not supplying the full picture.

Money is the system which facilitates the flow of value through society.
Wealth is the stock of value, income and expenses are the flow.

Value is not measurable in terms of energy.

For a start creativity is a large factor in the production of value, and I don't believe this to be correlated with energy from the Sun.

Value is also entirely subjective, which once again has very little to do with the energy expended in its production, but a whole lot to do with how many people want it, how much they want it, and perhaps most importantly, when they want it. And all those variables are subject to constant change, in accordance with our whims.

Mark_BC said:
Money is commonly said to be a "store of value", but of what? "A medium of exchange", but for what? "A unit of account" of what?

Of value. Not everything can be expressed in terms of pure energy, not when there is consciousness involved.

Pretty much anything can act as a proxy for value, but gold has, for no small number of reasons, been selected through monetary evolution as the master proxy. The displacement of gold from this role seems highly unlikely, as thousands of years have produced no other medium better suited.

Mark_BC said...

Blondie, I had also posted another comment asking for further qualification from you on your above statement, "Perpetual growth is store of value driven, not interest bearing money driven, so Freegold eliminates it.", since that is something I have been pondering lately. I provided my take on this myself, how this would work, wondering if this is similar to what you were alluding to.

But it has not appeared yet, maybe it will later when the cobwebs in cyberspace sort themselves out.

You say that, "For a start creativity is a large factor in the production of value" and I fully agree with you. That's the topic of my next treatise that has been formulating over the last 10 years, but it's not quite so straightforward to throw it down on the computer as is a logical thermodynamic analysis, especially since it gets into the tricky subject of spirituality and attempts to bridge it with science.

"Value is also entirely subjective, which once again has very little to do with the energy expended in its production, but a whole lot to do with how many people want it, how much they want it, and perhaps most importantly, when they want it."

But that's basically my point. You said "want" three times. The more people want something, for whatever reason, the more they are willing to work for it, otherwise they wouldn't want it so much. And what forms the basis of human work (ie labour)? The key word is want; it doesn't have to be a logical want, it just has to be a want. That's why gold is not the ultimate measure of wealth. I am just as much of a gold bug as the next guy is (more accurately, I'm an anti-fiat bug), but I realize that it is just a hunk of yellow metal. It has no magical properties. You can't eat it, it has very few real world applications that could not be substituted with other substances, and if there was no gold on earth our species would still function (but I admit that our history would have been quite different...) Gold is merely a proxy for value because, as you say, people just want it. And that is fine. Whatever works works.

Blondie said...

I should have included experience, skills and the ephemeral noun "wisdom" as additional non-energetic factors involved in the production of value.

There are no doubt more.

muelwagon said...

Endgame approaching - China, Russia quit dollar on bilateral trade, announced today on People's Daily:

http://english.peopledaily.com.cn/90001/90778/90859/7208907.html

mortymer said...

Few days I was found this:
http://www.oecd.org/dataoecd/34/2/35431514.pdf
(Annex 4: Reporting of the asset ‘Monetary gold and Special drawing rights (SDRs)
OECD: Member countries’ practices
Eurostat: Conceptual questions: Treatment of monetary gold and SDRs)

But then even more obscure showed up:
http://www.gata.org/files/Lambourne-BISGold-11-09-2010.doc

R. Lambourne asked for clarification if these could be connected, will keep you posted :o)

Michael H said...

More thoughts regarding 'gold rush':

My original post was meant as a 'direction of thought' more than as a full answer. Pete, I like your direction of thought that "now it takes anywhere from 1/3 to 2/3 of an ounce to mine an ounce of gold. After a revaluation, that could be 1/30 to 2/30 cost."

Seeing your thought, I realize that what matters is not 'gold above ground to mining cost' ratio. What matters is 'how much oil (petroleum, this time :) ) is consumed in the mining of gold.'

Fundamentally, freegold is not a revaluation of gold relative to fiat, but of gold relative to oil. Oil is the yardstick by which the cost of everything else is measured.

This thought unfortunately does not bring us closer to a resolution of the gold rush issue. If, at current gold:oil ratio, it is profitable to mine gold, then at a much larger gold:oil ratio the profits will only increase!

Maybe the solution is in a different ratio -- that of oil:labor. Currently, oil is ridiculously cheap in terms of labor. We each 'employ' hundreds of man-hours worth of energy in fossil fuels daily. What if part of the freegold revaluation was a peak oil revaluation of oil relative to labor? Then we would have gold rising in value with respect to oil, and oil rising in value with respect to labor, therefore gold positively skyrocketing in value with respect to labor.

So far, I still don't feel closer to a final answer.

A different aspect of the issue is, will gold become the new petroleum? By this, I mean: will gold-producing countries, and those with gold reserves in the ground, form a cartel to regulate annual gold extraction, so that the mineral wealth of the country is not exhausted in one generation. Unfortunately this does not seem likely either, as gold is not used up but is instead hoarded. So instead of having a 'swing producer' that sets the price, as with oil, gold would need a 'swing hoarder' to influence the price.

Pete, I share your apprehension about the destruction that a gold rush would cause.

Maybe in a post-freegold world, people will realize that what matters is value, not cost and price. How highly will people value the natural beauty that surrounds them? More than (free)gold? .. OK, OK, you can stop laughing, a guy can dream.

littlepeople said...

FOFOA:
In the article below,

http://www.321gold.com/editorials/schoon/schoon112310.html

Darryl Schoon has some "proof" that an entity, possibly The Rothschilds, have amassed something on the order of 30,000 tons of gold since 1950. This is more than all CBs combined.

Since Rothschilds are bankers themselves, how does this play into freegold?

Schoon assumes they are the "Foundation X" that has offered to support England to forestall the endgame that would decimate England and the Rothschilds (other than their gold!).

Schoon says we are at the endgame of capitalism. He is a fan of Fekete. He does not mention freegold, but the end of capitalism will require something to replace it.

Were you aware of this? Do you think this revelation, assuming it is factual, supports freegold even more?

Blondie said...

@Michael H,

Looks like you answered your own questions pretty thoroughly.

Ultimately, will people not value happiness the highest?
If so, we could work backward from there to see how we get there from here. I suggest Freegold will necessarily occupy some point of that journey.
If we consider those factors we would all commonly agree happiness to entail, aside from subjective factors, we are then building a clearer vision of where Freegold takes us.
It is all resting upon a foundation of value.
Gold is simply the key tool in enabling our freedom to manage value's flow with integrity.

I think that if we remove the "Maybe" from the beginning of this statement of yours thusly:

"...in a post-freegold world, people will realize that what matters is value, not cost and price. How highly will people value..."

we are left with a perfect point of entry into the infinite resolution of Freegold.

Desperado said...

@littlepeople,

I made a post about that Schoon article yesterday. It said that my comment had been posted, but either blogger ate it or it's still in Fofoa's spam box.

Schoon implies that the Rothschilds control 30,000 tons of gold. I find that a little far fetched, but it touches on something I have being trying to bring attention to, namely that gold is also power. It paid for all those pretty battleships during the naval arms race in the lead up to the great war. There are tons of gold hidden from view waiting for the right moment to be transformed into power. A/Foa called them the giants. Giants don't just want gold for wealth...

@Fofoa, I have been following Boardwalk Empire. As fantastic as HBO series usually are. I love episode 7 where James meets Harold, the sniper. Beautiful story line, great acting.

I want to draw your attention to the Italians getting ready to hit Nucky. One of them says:

"How many times do you thing you can knock down Nucky Thompson's bag man before he bites back...
..
You ain't got no jurisdiction down here in Atlantic city..."


When markets fall under the control of thugs only the strong survive. The weak end up dead or marginalized. Did A/FOA discuss this? Or perhaps were they caught spellbound in a moment Fukiyama's "end of history"?

intuitivereason said...

@Michael H

I'm not sure that Freegold is so much a revaluation of gold vs oil as a recognition of the value of gold vs oil.

Gold will remain the only valid exchange for oil, and the rate of flow won't vary significantly.

The value and significance of the dollar cost will drop away.

Peak oil and Freegold are not unrelated in terms of timing.

julian said...

Hello All,

You have provided me with many great Thoughts, since I have been reading these posts for a few days.

I wish to have commented on so many, but I don't know if that will happen. Still, so inspirational to Thought, these Ideas are.

Blondie has offered Thoughts of Happiness, Freegold, and Beyond. I think this to be the sort of discussion for Rare Precious Minds, with Freegold as ultimately a 'minor' detail, a (natural?) result of the Value that critical mass of Humanity will inevitably, given enough time, adopt. Beyond Freegold, there is Freedom.

The rainbow is Freegold. In the pot, we as yet have no Freedom.

The long-term trendline, if you can imagine the chart of Humanity's Time, seems to be bullish on Freedom. On Freedom, I'm a Long-Term Bull, Short Term Bear.

And in fear of any misunderstandings, might I articulate that my meaning of Freedom is: No coercion, force, violence or threat thereof from any Other, or to any Other. This definitely includes any Organization, namely "The State," or any group of humans claiming things from other humans using force or coercion with impunity.

Freegold is a result of such thinking. Until then, all Gold Monetary Systems will be with a view to Statist control. (Whether Social/Commune-ist State, or Democratic State / Republic, fit in Corporatocracy wherever you want, or Tyrranical Monarchy, or whatever Form of governance, Human On Human, we choose to scheme up, Libertarian included.)

Voluntary Interaction, which we might prefer to name Anarcho-Capitalism, on a macro level is the Flower in full bloom of Human achievement, in terms of Behavioural Value. Perhaps than that, there is a Greater Beyond in Humanity's Time Curve, as related to human potential socially, interactively. What is the Telos, the "End" of Humanity? (Is there one? Or perhaps cyclical is the nature, not linear? Or some sort of Fractal Asymptotic logic then?)

A deep understanding of Economics and Human Action illuminates the Value of Voluntary Interaction. It is effective, efficient, peaceful by nature, and negotiates equitable and prosperous outcomes for all. Just see the problem of the commons, and its solution.

(yes i realize that each human is flawed, and in a normal population distribution of humans, a miniscule propensity for violence and abuse and psychological 'issues' exists.)



In Honour of American Thanksgiving (or any other preferred Celebration such as "Can't a Guy Dream?!"),

I am Thankful for many things, Regretful of others.

It is best to cultivate MySelf constantly; sowing Giant Ideas, reaping Fruitful Thoughts, so that I might improve and be added in value. The ROW will eventually follow suit.

No Ego Mind. Lest One Forget.


P.S.

I enjoyed writing with more capitals. Made the words look tall with firm stature.

Pete said...

@ Michael H

Thanks for your post, I enjoyed reading your thoughts on this matter.

Another example for us to think about: Deforestation

Everyone knows that deforestation, to some extent, is destructive. Yes, it can be done sustainably, but that requires significant planning, investment, and restraint (and laws).

Why is Brazil being deforested? Some asian countries are being laid bare too. Surely it doesn't make sense, especially considering that the price of woodchips is fairly low?

(also they use the wood for their own stoves to cook with, which is another story)

The point is, where people can make a profit, they will. The state can try to curb destruction to a point, but if the profits are rewarding enough, they will be fighting a losing battle.

Another example is Poaching - why would anyone want to kill off an entire species of animal, just for fur, ivory, etc? Because it is profitable.

Short-term gain trumps long-term pain, nearly every time.

Another example is mining in Africa. In some African nations the people are essentially forced to pan for gold or mine rare minerals just to survive. Some of them plant crops, but not everyone has arable land to do so.

If you had to choose between a) growing crops that are subject to pestilence, theft, natural forces, etc, and live a very humble existence, OR, b) pan for gold and import luxurious foods and live prosperously, what would you do? Perhaps you might do it in order to buy arable land? To support a starving family?

@ intuitivereason

On the topic of oil, I find this part quite interesting. I am not saying that an oil revaluation will not happen, but it might not happen at the same ratio as the gold revaluation.

For example, let's say that right now it costs $50 to fill a car fuel tank. That is roughly 1/30th an ounce of gold. If gold is revalued to roughly $50K, and oil is revalued the same amount, a tank of fuel will cost you 1 ounce of gold.

Who can pay for that? I know some people certainly could. But I know billions of others that could not. And plenty of oil suppliers that would see demand drop so dramatically that they would no longer be profitable.

Surely oil, being a consumable, will always be restricted by the effects of supply and demand. If you price your product too high for your buyers, demand will fall. And I doubt OPEC has the organisation and will-power to restrict the oil supplies that much, whilst taking huge hits in their trade. Maybe Venezuela can do it. Can Qatar? Nigeria? Russia? Canada?

Unfortunately, on this topic (and some others), I think many of the people on this blog are falling for Confirmation Bias, and also confusing what they WANT to happen with what WILL (or is likely to) happen.

I certainly don't want negative side effects to FreeGold. I want FreeGold to fulfil its purpose. But I won't pretend that it doesn't pose some significant problems that we should deal with if we are going to be prepared for the future. And isn't preparing for the future the reason we are all here?

Pete said...

You know who else writes with capitalised letters?

Clergy.

Let's not start a cult now.

intuitivereason said...

Lets say of that $50, $1 is used to facilitate the transfer of gold.

Which is roughly 1/1500th an ounce of gold.

If gold is revalued to $50k, the price of fuel in gold doesn't need to change.

As to bias - Freegold is one of any number of suggestions out there as to what happens next.

Intuitively, it seems reasoned. One of those concepts that, once you hear it, it just clicks into place and fits. And so, it forms part of my picture of what happens next - the where we will end up bit.

The when can be found elsewhere.

The how.. I have yet to find.

Pete said...

@ intuitivereason

I agree that FreeGold fits. It is very sound. But so is central planning, when you look at it idealistically. In practice it is another thing altogether.

You made a good point - there was an obvious flaw in my reasoning regarding the oil. Oil could be revalued with gold, staying at the same 1/30th oz per tank of fuel ratio.

That means that in todays dollars, a tank of fuel would still cost $1500. It works out to be roughly $50K worth of fuel every year, for a fairly moderate user of fuel. That is roughly the entire after tax income of someone with a decent job.

Assuming certain things stay relatively even, could a couple really expect to devote one entire income just for fuel purchase? I doubt it. It comes back to supply vs demand as I mentioned before.

This is quite an interesting notion though - that a gold rush would be limited as the cost of extraction would rise proportionality with gold's value.

So for instance, if gold cost a miner $800 oz to mine today, making $500 oz profit, in the future it might cost (30x) $24000 oz to mine, making (30x) $15000 oz profit.

However, I can think of many reasons this does not work:

1) supply and demand of oil will likely restrict oil's revaluation to less of gold's when FreeGold comes
2) energy (oil) is not the sole source of mining costs and many miners would reduce dependency on oil if it they could find cheaper alternative energy
3) where previously a certain ratio of ounces obtained to ratio of effort was required, this ratio can now have ounces obtained reduced by up to 30x (in this example), meaning that much more effort can be expended to obtain each ounce.
4) following from 3, mine oz scarcity becomes a lot less important, meaning that many more mines can open, if they can meet the revalued oz:effort ratio. 5) whilst the costs of mining might go up relatively (to say $24000 oz) and the profits by the same ratio ($15000), the profit PER OUNCE has still gone up 30x. For example, where a miner might have turned their nose up at a prospect of 1000oz's in the past as it wasn't cost effective to mine (profit of only $500K), the revalued prospect now represents a profit of 30 x 1000oz ($15M).

So far, the only ways I have heard of to manage this 'gold rush' is to:

- implement strict international laws to restrict gold mining
- implement a strict international cost burden for environmental damage (eg $carbon)
- re-mint all gold to ensure that it can only be accepted through a special Government tracking system (i don't think people will like this) (gold could be implanted with special chips or un conunterfeitable ID markings)
- FOFOA/Paul has suggested that mining will become pointless and in-ground gold will be used (although I don't agree, especially as gold reserves are hard to prove until you actually dig them up, and still then at such high values they are just begging for corruption. Although perhaps this is what will bring on the paper money again after the FreeGold phase).

Would love to hear other suggestions.

Alternatively, the world could put in zero restrictions for gold mining - after which it seems likely there would be a gold rush, extra supply would reach the market-place, gradually reducing demand, reducing value... and gold would eventually reach a point of equilibrium whereby its value was not so high that there was a gold mining frenzy, yet not so low that it all mining would cease (perhaps a similar state to say 2004).

Personally I don't like this alternative, even though it is very free-market-ist, as it is devoid of social/moral responsibility and will likely be a target of future attacks on FreeGold (by the environmental and anti-gold types)... possibly even leading to its destruction.

Paul said...

Hi Mortymer

The OECD document is making observations and recommendations on central banking accounting policy with respect to Gold and SDRs, and trying to standardize practices. Nice find.

What I find interesting is the impression given that there are indeed multiple markets in gold, as we suspected.

Firstly, CB to CB monetary gold. Monetary gold transactions can be conducted “directly” with other Central Banks, or the IMF. Note the phrase “whatever the agreed price”.

12. "Directly" should refer rather to bilateral transactions between central banks (whatever the agreed price), including "off-market" transactions, as carried out by the IMF under the HICP initiative.

Secondly, CB on market non-monetary gold. For sales of CB gold on market, the gold must first be de-monetized, whereupon it becomes a “valuable”, and is sold into the market presumably at the market price.

13. In this case, gold offered on market should be no more considered as monetary gold but as nonmonetary gold, recorded in ESA95 as a non financial asset under the category "valuables" (AN13), subcategory "precious metals and stones". It means that there is be forehand a demonetisation process that is described in ESA95 in 5.31 and in 6.32.

Thirdly, look at this crafty gem.

17. However, in some cases, sales of monetary gold on international market are managed through the Bank for International Settlements in Basle, who receives a specific mandate. BIS is to be considered as a monetary authority, according to ESA definition in §5.27. In some occasions, BIS has been acting for stabilising exchange rates or has helped some central banks in trouble with their exchange position.

The BIS has a “specific mandate” to sell monetary gold on the international market, on behalf of central banks. What’s the mandate? What is it they offer a CB that can’t be had from the CB de-monetizing and selling on market itself? And how would this process help stabilize exchange rates?

Answer: Volume and secrecy. The BIS is the central bank to international market interface, brokering large volume gold sales for physical non-paper prices, whilst ensuring the details of the transaction are kept secret. Busted.

costata said...

A few thoughts on taxation.

There have been discussions here at times speculating that the shrimps will be denied the benefit of their gold under Freegold through taxation and other strategies. On a number of occasions these discussions touched on fears of a NWO that was being hatched to create a new global hegemon.

These discussions remind me of the fall of Singapore during WWII. Their shore based artillery could not be rotated. When the final assault came all of the guns were facing the wrong way.

In a recent paper Professor Michael Hudson describes how the game is played and makes a prediction for the USA which he anticipates coming to fruition in 2011.

http://michael-hudson.com/2010/11/schemes-of-the-rich-and-greedy/

Here's a few extracts. The first concerns Latvia. For those of you unfamiliar with Latvia's fate. The Swedish bankers who helped to "modernise" the financial system of this former member of the USSR created a system of incentives that created a massive property boom for the benefit of the FIRE sector.

"On November 22, Latvia’s Dienas Bizness newspaper reported how the new plan. It is to reduce the flat tax on income from 26 to “just” 25% (and as a sop to the poor, to raise the untaxable minimum from 35 lats to 45 lats a month (less than $90). The even more onerous “Social Security tax” (i.e., tax on wage-earners to free the wealthy from taxation) is to be raised to over 35%. (Employers are to contribute 24.09%, as before, while wage withholding on employees is raised from 9% to 11%.) The tiny 1% property tax will be roughly doubled and made slightly progressive.

The result is that employment taxes total 60% (25% + 35%). And it gets worse. The VAT on sales is 22%. Assuming that Latvians spend the entire remaining 40% of their wages on sales, this would amount to 8%. All totaled, this would raise the overall tax burden faced by wage earners to 68%.

However, this calculation does not take account of what Latvians have to pay for debt service on their mortgage loans, car loans and other bank debts, and on housing. If these costs amounted to just 25 or 30% of their income (much lower proportions than for the United States), this would absorb over 90% of their income before they have any month to spend consumer goods."


Continued/

costata said...

\Continued

Similar plans seem to be unfolding in Ireland's "rescue", likewise Greece and it was attempted in Iceland. Here is the good Professor's prediction for the USA:

"Here’s how I think the plan is intended to work. Given the fact that voters have already rejected the flat tax in principle, it can only be introduced by fiat under crisis conditions. Alan Simpson, President Obama’s designated co-chairman of the “Deficit Reduction Commission” (the euphemistic title he has given to his “Shift Taxes Off Wealth Onto Labor” commission, STOWOL) already has suggested that Republicans close down the government by refusing to increase the federal debt limit this spring. This would create a fiscal crisis and threat of government shutdown. It would be a fiscal 9/11, for the Republicans to trot out their “rescue plan” for the emergency breakdown of government.

The result would cap the tax shift off finance and wealth onto wage earners. Supported by Blue Dog Democrats, President Obama would shed crocodile tears and sign off on the most right-wing, oligarchic, anti-labor, anti-black and anti-minority, anti-industrial tax that anyone has yet been able to think up. The notorious Flat Tax which would fall only on wage income (paid by employees and employers alike) and on consumer goods (the value-added tax, VAT), while exempting returns that accrue to the wealthy in the form of interest and dividend income, rent and capital gains."


I'm told there is no VAT on gold in the EMU countries. Could the taxes levied on gold be relatively low because some very wealthy and powerful people own quite a lot of gold, politicians and banks?

Paul said...

Pete,

Re the whole oil gold value thing.

Let's pretend that tomorrow Saudi Arabia decide they want gold for their oil. (Some believe they decided this a while time ago ;)

They sell 10 million barrels of oil a day. That's 800 million dollars a day they receive. At todays price, that's 17 tonnes of gold a day. They know they will not get 17 tonnes of gold a day. They are not that greedy or that stupid.

So instead they ask for 1 ounce of gold for every 1000 barrels of oil. Now they get 0.3 tonnes of gold a day. That's still a lot, but a bit more realistic.

What does that do for the man in the street? 1 ounce of Gold is now worth $80,000. But how much is oil? It's still $80 dollars a barrel. Get it?

Dave Narby said...

BIS gold records may facilitate double counting, study concludes

Submitted by cpowell on Wed, 2010-11-24 05:11. Section: Daily Dispatches

12:10a ET Wednesday, November 24, 2010

Dear Friend of GATA and Gold (and Silver):

The gold records and accounting procedures of the Bank for International Settlements, the central bank of the central banks, are ambiguous and confusing and seem to facilitate the double counting of central bank gold amid gold shortages, GATA researcher Robert Lambourne concludes in a study presented to the Gold Symposium in Sydney, Australia, on November 9. Lambourne's study has been posted at GATA's Internet site here:

http://www.gata.org/files/Lambourne-BISGold-11-09-2010.doc

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

http://www.gata.org/node/9331

=====

Report is 21 pages, too tired to read closely, but looks like there might be less gold out there in CBs than there should be... O_O

Pete said...

@ Paul

I understand the gold/oil thing.

The only reason I mentioned it is that the increased cost of mining (due to cost of oil) was used as a reason that there may not be a gold rush. I was simply trying to illustrate a counter-argument to that.

Casper said...

@ Paul

You write:

"They sell 10 million barrels of oil a day. That's 800 million dollars a day they receive. At todays price, that's 17 tonnes of gold a day. They know they will not get 17 tonnes of gold a day. They are not that greedy or that stupid."

I often wondered about this... Why would they settle for 1 ounce every 1.000 barrels and not for the whole 17 tonnes? Why take dollars when you can have gold? I came up with one reason only and that is because they expect to someday employ the purchasing power equvivalent to 80.000 of today's dollars. Or maybe they already are employing it. It makes no other sense to voluntarely settle for such a low dollar price if you could receive much more.

What i mean is they expect that someday gold will be revalued in real terms not just nominal.

Casper

DP said...

I wonder how many years of Forwards the Saudis already have booked in for delivery in the future, locked in at yesteryear's prices?

And I wonder how much they make out of artfully timing trades of the beta on Futures along the way, with their Forwards as collateral?

Pete said...

@ Casper and DP

You should probably read this:
FOFOA: It's the flow stupid

The exact amount or price isn't so important. When dealing with those quantities of gold, it is the flow that is important.

For example, if I was to put in an order for 1000 ounces on the market, i'd probably get it without too many issues. But what about 10,000,000 ounces? The issue becomes availability of supply. So a guaranteed supply at a low price is more important than an unguaranteed supply at any price.

At least that is how I would summarise it.

Casper said...

Hi Pete,

I understand that it's the flow that is important and I agree with you 100%, but still, you would want something from real economy for that gold in the future.

Regarding low prices, I think it's clear that the low price of gold is there only because price of oil has to be kept low also. Beside cheap gold it also provides "confidence" in the system of fiat.

There were many examples of gold for oil ratios... the last example was 1 ounce of gold per 1.000 barrels of oil. If we consider that the flow is of outmost importance than why stop here, why not 1 ounce per 1.000.000 barrels or even more? The guarantee of flow is important but not at any price of gold per oil. What is that price?

DP said...

I was thinking it's possible perhaps they don't receive 17t of gold each day, but they get a Forward commitment to receive deliveries from the mine to make the 17t payment by smaller installments, far into the future. Like a massive and ever-growing gold loan to buy oil each day. Every day they get a commitment to deliver some more gold once it has been mined, further and further out into the future. I'm not saying this is what the arrangement is, but that it occurred to be as one possibility.

If it were the case, the gold would clearly be committed for delivery way beyond when the oil eventually stops flowing.

ad said...

I'm sure many of you have read that China and Russia will dump the dollar in favour of trade with their own currencies?

http://www.chinadaily.com.cn/china/2010-11/24/content_11599087.htm

This is a movement towards Freegold is it not? That countries use their own currencies for trade instead of the dollar?

@ Blondie

Yes you are right, the perpetual growth model is a store of value issue. I suspect that Freegold will make an impact on conserving our resources, for the better.

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

Casper said:

" The guarantee of flow is important but not at any price of gold per oil. What is that price?"

Swapping "value" for "price" may rephrase the question better?

Life's Innocent Bystander said...

I LOVE TURKEYS

Edwardo said...

http://www.thedailybell.com/1552/Global-Depression-Just-a-Dodge.html

Paul said...

Hi Edwardo

Thnx for the link. The comments by Ingo Bischoff are spot on.

"1. Gold is the standard. The value of gold is established by the decision of billions of peoples throughout the world. No further "establishment" of gold's "value" is required. It is the value of the currencies in ratio to GOLD which must be established, not the value of gold. Gold is already valued the world over.

Rather than fixing their currencies to a specific weight and fineness of gold, Russia and China decided to use the specifications for AU (Gold) fineness and weight set by the precious metals market to have their currencies "priced". After this move by Russia and China, other major "international trade" currencies will follow the Ruble and Renminbi. These currencies are the Rupee, Real, Rand, Euro and the "new" Dollar. The trade balances between these currency regimes will be settled in GOLD, eliminating the USD/FRN as the reserve currency.

Does Russia have significant gold reserves...??? I say yes. Does China have sufficient gold reserves...??? Questionable, but China has been mining furiously and the largest "gold market" in the world is in Shanghai. Besides, China will try to run a trade surplus. Does India have enough gold reserves...???

Unquestionably...most of which resides with individuals. Does Brazil have enough gold reserves? I believe they do. Does South Africa have enough gold reserves? Absolutely...if not in above ground inventory, certainly in discovered reserves in the ground. Does the Eurozone have enough gold reserves? Yes...if you combine the reserves of Germany, France, Italy and the BENELUX, the reserves amount to roughly 9,000 tons of gold. Does the U.S. have enough gold reserves. Absolutely...we have approximately 8,400 tons stored at Fort Knox.

2. Will this new system work? Absolutely......and the U.S. must be part of it, if it is to prosper in the future. However, it can only do so, if it resolves its present dilemma with the Federal Reserve Note.

Whether anyone realizes it or not, Russia and China have done the American people an immense favor. The U.S. Congress will now be exposed for doing the New York bankers bidding by agreeing to amend the 1913 Federal Reserve Act in 1934 to establish a central bank. The New York bankers at the same time will be exposed for trying to manipulate GOLD. The March 25/2010 congressional hearings laid the foundation for finally putting the responsible people in jail. With the teaparty pressure mounting, the congressional "friends" of the Wall Street bankers will not be able to save them. The present U.S. President has already lost its usefulness to the Wall Street bunch."


Looks like what we are seeing now is ROW trying to give US enough time and space to resolve it's dollar dilemma, whilst keeping up enough pressure to encourage resolution. That resolution being in reality damage limitation.

Tyrone said...

Not sure if anyone has posted a link to this video, but I have found FOFOA Porn on YouTube...

Video: FOFOA Porn

Cheers!

SatyaPranava said...

tyrone, that's great. i definitely remember some of those pictures :)

satya

costata said...

Paul et al,

Does anyone have verification of this claim by Ingo Bischoff?

"Russia and China decided to use the specifications for AU (Gold) fineness and weight set by the precious metals market to have their currencies 'priced'."

I have not seen any reports about the China Russia bi-lateral trade deal which mentions the method of valuing the currencies. If Ingo is correct this is hugely important.

costata said...

Howard Davidowitz lays it all out in just a few minutes:

"Obama is Toast", Davidowitz Says: U.S. to Face Dollar Crisis by 2012

http://finance.yahoo.com/tech-ticker/article/535652/%22Obama-is-Toast%22%2C-Davidowitz-Says%3A-U.S.-to-Face-Dollar-Crisis-by-2012

ShamefulPath said...

Question for all,

Ok so I was wondering if currently there is a tax on bringing gold into the EU or selling it there? I see that there is no VAT applied. But could an American wander into Europe with a pocket full of maple leafs or philharmonics and sell them for Euros at no tax? Other then the cut to my pimp Uncle Sugar of course.

Help and links to the relevant laws would be appreciated,thanks!

holdinmyown said...

While we consider the possible demise of the Euro, is it possible to contemplate an expanded Euro that includes Russia and the UK?

http://www.telegraph.co.uk/finance/currency/8163347/Putin-Russia-will-join-the-euro-one-day.html

costata said...

holdinmyown,

"...is it possible to contemplate an expanded Euro that includes Russia and the UK?"

IMO yes but I suspect, at present, for the UK the only politically feasible course would be a currency peg. If the ECB and BOE both committed to defending the peg it would be a brave speculator who attempted to break it.

Laszlo said...

ShamefulPath,
For everything to be perfectly legal: It seems to me, you could benefit from joining the sovereignsociety.com and its Freedom Alliance, perhaps get personalized consultations. But for simplest logistics, if you already own the coins, consider Kitco.com: you can ship your standard coins to them and they will credit your GoldMoney.com account, from which you can conveniently draw euros or other currency, world-wide. Digital FreeGold, see Trace Mayer/RuntoGold.com (also check out his Hawala articles). If you still like adventure and insist on carrying your coins on board and add to the already brutal stress of air travel, place your coins into a transparent plastic bag in a separate tray. Never try to hide it, and declare properly, there are no costs. You don't just "wander in to Europe", but that's the easy part: you want to arrive at Zurich or Vienna airport (Schengen Area members). If face value of gold coins plus currency carried equals or exceeds 10000euros, you must declare at airport customs, red corridor (1oz gold Phil=100euro face value). Yes, you can sell any gold coins in Vienna at banks and coin shops easily and completely tax-free, but only against full photo ID. No exceptions. No matter how small your sales, they will definitely be reported to the international databases, and Uncle Sugar knows it all. So, why bother with all of this? I would not. Your moves are in any event as transparent to Uncle Sugar as your clothing at the airport scanners, and you cannot opt out. It seems, Kitco/GoldMoney for the wise, but again, remember the reporting requirements. Unless you have other citizenship(s), and are also willing to expatriate, (not for most, certainly not for the faint of heart), you remain in the dragnet. Interestingly, rumor has it, Dubai asks for no ID for metal transactions. I would love to learn more on Dubai gold market. Real FreeGold. You should want professional legal/strategic advice, perhaps try Sovereign Society. Do not try any stunts without professional assistance. You also want to be very clear, what you want, and what that's worth to you. All of above are opinions and not advice to anyone. I am one of simple mind and small means, I am not a qualified or certified financial, tax, customs or legal professional. Always assume Uncle Sugar is monitoring everything all the time, and I believe is likely actively using our newsletters and blogs to continually tighten the dragnet in legislation and rules. Good luck, and for simple minds and small means, why not just keep things simple, keep much of your physical gold near you, and enjoy life? From a serendipity prayer: "Learn to accept the things you cannot change, have the courage to change the things you can, and have the wisdom to know the difference."

Dimmed aurum said...

@Pete - http://fofoa.blogspot.com/2010/11/thanksgiving-week-open-forum.html?showComment=1290472359529#c7033757150085977327
and @ Wendy - http://fofoa.blogspot.com/2010/11/thanksgiving-week-open-forum.html?showComment=1290492576432#c7584948035812691116
Very, very valid points you two make here!
Don`t expect FOFOA to reply unless seriously teased about it! So I will give it a try the best as I could.
It is a kind of an anathema for the freegold gurus to answer the tetrachord of questions, so usually they would go along these lines.
1.@ Pete – yes new sources of gold can be brought online but very slowly ≈ 2% - 3% increase of gold stock from now till eternity no matter unearthing of the dead for the tooth fillings, polluting rivers, diverting resources from productive endeavors etc. blah blah = gold is the best matter to store wealth into (see the “giants”)
2.@ Wendy – there is too much disunity in the world to stamp the “legal” gold against all other no matter what the Revelations (and it`s one world - one tax system under the Antichrist) say.
3.@ Desperado (I think) and others – No, no, there is no such thing as peak oil (not until 2020, 2030,2040 at least) for it is Another who said so – therefore it is a given.
4.@ me (and maybe others) still waiting for an answer (or maybe I am ignorant to not have read all the previous postings) of the question: What will happen to all the debtors in this world (pensioners, government “dole_ers” – see desiders, fringe professioners – pedicurists, dog care-takers for example, or all the others oversubscribed professions based on overconsumption) who are extracting till now real value from the system. Are they gonna be cornered without putting a fight? And I know that borrowing in fiat does not mean extracting real value for it belongs to savers and by extension to Gmen extortionists alone.
Continued…

Dimmed aurum said...

@ Pete.
The “revaluation” of gold (to 60k-70k-whatever paper it might take) has two most possible paths of happening and all a hyperinflationary ones:
1. Outright LBMA default in a cash settlement only market.
2. Creeping default in a exponentially steepening $ revaluation curve until budgets are balanced and debtors extracting value from the system are contained (FOA/Another`s scenario).
1 can happen if all the savor`s savings are poured in physical gold, bursting a hole into the LBMA settlement procedures for there will be no (quantitvely enough) underlying physical asset bidding for dollars. After the paper gold market is exposed for the fraud it is, a cascading effect will happen to all other paper futures markets – silver (some argue it is first the silver market to blow sky high), oil (“it`s better to keep oil in the ground….”say the Arabs – the thoughts of Another somewhere) etc. because they all rely on paper promises in the current $IMFS. And it is important to remember that every asset has an oil price imbedded in its cost of production!
2 can happen if the FED and the other CBs successfully paper over all credit “money” in a hyperdeflation-hyperinflationary set of events. While successfully diverting savers` attention away from just one particular market (e.g. paper gold ) spreading the fraud thin in all futures markets – gold, silver, copper… tangibles thus keeping the LBMA alive as long as possible.
Saving in the production resources of others is an explosive mixture able to utterly destroy the complex society of ours – see my previous reply @julian, FOFOA and all:
“As I previously commented http://fofoa.blogspot.com/2010/11/dilemma-2-homeless-dollars.html?showComment=1289066373843#c5346711955621533643 on the subject of silver, it is obvious that people a stirred away from gold, as well as from silver into copper, diesel fuel in tanks (oil drums etc.), stainless steel et al. In doing so the masterminds (power elites/TPTB) are opening a Pandora`s box. So in my mind they are clueless of their actions and do not know what are they actually wishing for.
I am free as a “supperproducer” to store my forgone consumption in whatever I like (anything of the above mentioned items) and I am actually doing this (black market ops under the radar of the welfare state) but by doing this I am actually bidding resources from the productive side of the economy thus killing those producers who operate on the margin, causing their death, loss of production and I am ushering hyperinflation in the process – see the historical part here http://www.financialsense.com/contributors/chris-marchese/the-road-to-ruin .”
@ Wendy
If I were you, I would not worry about official vs. other gold. I would rather worry of united world electronic currency subjugated by the will of a few.

Dimmed aurum said...

The point I am trying to make is with or without freegold fundamentals do matter. And what are they:
1. The comparative rarity issues.
2. Use, utility - industrial use vs. wealth reserve status issues;
3. Longevity etc.
Ratios will always exist and they can be - gold:silver 1:500, gold:copper 1:20000, or even gold:barrel_barrel_of_oil 1:200 some of the time, but gold:all_of_those cannot be at these ridiculous levels all the time. Especially in this 8000000000+ people world of ours where real savings are a dying species.
So Pete, once dust settles (and no paper promises comparative revaluations reestablish themselves, ) there is NO way that civilization/societies will self-destruct in a frantic search for gold.

Andrew said...

Well, I am gonna run right out and sell off all my PMs! Thanks dimmed aurum; to think I was wasting my time and resources on these barbaric relics! You can't eat them, they don't pay interest, and nobody really cares for them anymore; just a bunch of speculation and folly. And since I am the worst spec in history, freegold would happen the second after I did that... Ah well, so it must be...

Dimmed aurum said...

@ Andrew
“Well, I am gonna run right out and sell off all my PMs!”
I never mentioned selling. What I was trying to promote is the concept of value exchange. If freegold happens that does not mean that relative values evaporate in an instant. The real change will be the store of value perception and it is here that things get tricky. What I might do (and it is MIGHT not WILL) is go long physical diesel fuel for it is main resource my company uses and it is a hedge against supply disruption in the interim.
Depending on the abruptness of change (slow=plenty of time to adapt, quick=teutonic shift, possible wars, bad things happening) and debtors vs savors balancing act, I will consider whether saving in anything at all should be a “winning” strategy (and my guess is that all other savors in the west will be reconsidering this – lowering the need for a wealth preservation medium - gold)

Andrew said...

@Dimmed aurum
I have observed this twisted system for many years now and am still befuddled by the way my fellow man continues to run on the hamster wheel; not moving forward but as long as he is moving, life is good.

Consider real estate. The purchase of a home; one accepts a mortgage where all interest is paid before any substantial amount is paid towards principal (typically, on 30 year mortgage, one is paying TWICE the cost of the home; WTF!?). Oh sure, you could play games with a 15 year mortgage, pay an additional 2 payments to principal, blah, blah, blah... But even that takes an understanding of finance well beyond the average bear. And yet, we chug along, happily, moving forward, or so it seems, on the hamster wheel... Not only do I say NO but I say F NO to that system! Let someone else take on that risk; until sanity reigns I will not participate.

And you come along, not with ill intentions, but making a call for exchange. From what? Physical in my possession PMs for diesel fuel? Doesn't any fuel have a limited shelf-life? Sure there are additives, but the assumption that you have just timed that segment of the market to meet those limits is highly suspect. Better to maintain PMs no? Yes, have a plan; food, guns, ammo, fuel, etc... But plan to rotate some of that stock or you will be sitting there with unusable supply. PMs will always have a place and will always be valued (see Zimbabwe where people don't eat unless they can pan for gold or have USD).

Not ranting against you but amazed by what I have seen in a system that punishes the savers/producers and rewards the intellectually and morally lazy individuals...

Pete said...

On a completely separate note, I noticed this in the news today:

"Saudi king 'urged US to attack Iran'"

http://news.smh.com.au/breaking-news-world/saudi-king-urged-us-to-attack-iran-20101129-18cnj.html

Part of all of this WikiLeaks saga. Interesting huh? Your primary oil supplier, or at least the supplier you have to grovel to, asks you to bomb Iran. Bush was pretty close to doing it too.

costata said...

Ireland, Hungary and now France using pension funds to pursue their own ends.

http://www.zerohedge.com/article/following-hungary-and-ireland-france-next-seize-pension-funds

Having some pension funds in something tangible is looking more "super" by the day IMVHO.

Retirement/pension funds = Superannuation in Australia.

Pete said...

I agree Costata.

I've thought for a while that Australia will do exactly that. One way they might get away with it here would be to force our superannuation funds to allocate a certain amount of the funds to "Govt Bonds".

However there are all sorts of problems with our Super here. Imagine what would happen to the ASX if the Super funds dumped 1/3rd of their equities in favour of Govt Bonds?

Also, many of the baby boomers I know of that are set to retire are planning on using their Super to pay off their mortgages! The whole point of Super was to relieve the pension system...now our property bubble is taking over. Hence the burden on the unretired generations will be pretty big...

Anyway, I digress. The Govt raiding of Super funds seems pretty likely to me. Which pollies could avoid that big carrot?

The problem is, it is quite tricky to allocate any PM's to Super in my understanding.

Andrew said...

"Ireland, Hungary and now France using pension funds to pursue their own ends."

Wow...

And the US is likely not far behind... It is frustrating that so many are blind to the injustices perpetrated against them. Suffering doesn't have to be part of this transition and yet, it will be fought to the bitter end. I hope I am wrong and that we will find a way to ease into Freegold with the least amount of pain, that would be my desire.

costata said...

Pete,

I wasn't thinking of investing in gold via a super fund. I meant that by acquiring physical gold you can create your own personal retirement fund.

As to the Govt grabbing super funds in Australia, one of the ways they could do it would be to siphon off cash holdings (and cash equivalents) into Govt bonds. They could also divert the flow of contributions.

Liquidating the super fund share portfolios doesn't have to be part of the equation.

Pete said...

@ Costata

"I wasn't thinking of investing in gold via a super fund. I meant that by acquiring physical gold you can create your own personal retirement fund."

Yep, that's where I am at now.

Good point about the cash siphoning. The concern being that once enough bonds are in play, the Govt will be on the hook for the debt.

I don't trust Super at all. Locking money away in someone else's hands for 30 odd years seems like a recipe for disaster to me.

Paul said...

Pete, Costata (and other Aussies)

You can reclaim control of your super and compulsory contributions by setting up a SMSF. I use these guys:

https://www.supereasy.com.au

Then you can invest where you like. Here you can get a SMSF compliant gold/silver bullion account:

http://www.abcbullion.com.au/index.php/default/page/3

costata said...

Paul,

Thanks for the info.

M said...

@ Dimmed aurum

Yep, Physical diesel fuel, go long physical diesel fuel. What a joke of an idea.

Anything but gold right ? Anything but gold.....

That seems to be the trendy sentiment theses days. More and more people are starting to understand the problem but nobody wants to concede to the "goldbugs" by investing in gold. Even Warren Buffet refuses to buy gold, at least refuses to admit it. He wants to go broke buying farmland instead.

When a seemingly intelligent person is knocking gold on the FOFOA comment board, then that is a good indication that realized value of gold has a long way to go from here.

Dimmed aurum said...

In fact I am a huge gold bug, silver bug, and diesel fuel bug. LOL
Here we have a saying: “Fear guards the vineyard”. So a little bit of hedging will not hurt.
And I have to always remind myself that Iran is just a missile away.

littlepeople said...

FOFOA:
You have said many times, as did FOA and Another, that the euro was designed to be flexible enough to allow for freegold. Does the fact that 66% of Germany's gold resides in the U.S. and another 22% in London have any bearing on this? My readings say other countries' gold also resides in the U.S.

Since possession is 90% of the law, and the U.S. only follows its own laws (as they are made up) does the euro still look "as good as freegold" as before these facts were uncovered?

BTW, I am not trying to be a smarta$$, I really would like an opinion.

Ender said...

@Wendy’s “Inked gold”

Acquiring knowledge is a noble pursuit – there are no dumb questions.

Many older gold coins are ‘inked’. Here is a picture of one inked at 20 dollars: http://www.usagold.com/gold/coins/uslibiii.html. These ‘inked’ coins were part of a monetary standard that failed. The current system, one of much paper gold, has rendered even the weight valuation meaningless.

Freegold is a system of possession – either you have it or you do not. Promising to exchange it at some particular price does not represent the value of gold. The value comes from the part of having it.

As we (us humans) move towards valuing settlement, freegold will move one step closer to fill the function of providing settlement. What you will find, as this transition continues, is that no CB will sell their gold – none! Gold has been locked up for 10+ years with just enough flowing to make the game look solid.

Keep in mind that any government that tampers with the exchange of physical gold will be seen as blocking settlement. If the ‘official’ gold is irradiated, say, to render it harmful to humans, that gold which is not irradiated will be all that much more valuable!

In the end, when the general public relearns what functions as a store-of-value, we will learn what real value gold has.

julian said...

Hail Friends,

On Cyber Monday, I should buy a new laptop, yes? But seriously, I need one (yes need is relative term).


Regarding FOFOA's writing, those of FOA and A, and in general the concepts and descriptive language used in discussion of our Gold History of Freegold, I connected to this from :

http://blogs.forbes.com/andygreenberg/2010/11/29/an-interview-with-wikileaks-julian-assange/

Obviously out of the literal context, and into the abstract metaphorical context, we shall think in terms of Freegold?...

And I quote: "Forbes: To start, is it true you’re sitting on trove of unpublished documents?

Julian Assange: Sure. That’s usually the case. As we’ve gotten more successful, there’s a gap between the speed of our publishing pipeline and the speed of our receiving submissions pipeline. Our pipeline of leaks has been increasing exponentially as our profile rises, and our ability to publish is increasing linearly.

You mean as your personal profile rises?

Yeah, the rising profile of the organization and my rising profile also. And there’s a network effect for anything to do with trust. Once something starts going around and being considered trustworthy in a particular arena, and you meet someone and they say “I heard this is trustworthy,” then all of a sudden it reconfirms your suspicion that the thing is trustworthy.

So that’s why brand is so important, just as it is with anything you have to trust."


777

-Julian

DP said...

A Bernanke in every pot -- love it! :)

Museice said...

Interesting...

China Approves Fund to Invest in Foreign Gold Funds

Wendy said...

Thanks to all for your comments regarding my ideas of "inked gold", if I hadn't had 3+ glasses of wine, I probably woundn't have posted, but c'est la vie. I do however need to let this idea percolate in my head for awhile, and do some more research. I can't help having this nagging thought that somehow the BIS could "ink" official gold, for settlement of international trade, at a price that it has infact been trading at for many years (6K, 10K, 50K??), and all other gold aquired for investment, manufacturing, jewelery prodution, is priced as commodity gold. (legal tender vs printer paper).

In reality it's just an intellectual exercise for me, as I have no intention of selling my gold or silver.

I don't have very much at all, only 10 onces of gold and 430 ounces of silver, but it's better than none, and most importantly it gives me "piece of mind" today.

Tomorrow I have lots of guys with shovels coming to my house to deal with the busted sewer line I discovered today, hopefully I have enough paper puke to pay them, leaving my stash untouched ;)

kevin said...

does this thing work?

Dimmed aurum said...

Hi Wendy,
If they (BIS/G20...) want to ink sth. why should that be gold?
They can pretty much create fiat world paper/electronic currency with the same effect. What happens if a member CB decides to cheat and inks "commodity" gold as "official" gold?
So in reality one world balance of trade clearing system requires only full and utter control of the "agreeing" parties not gold as a didciplinarian element.

kevin said...

I've never bothered to comment before so I have no idea how google accounts work. Sorry for the test comment. I have to agree that there is a revaluation of gold into a "new normal" at some point. However I don't see how the Euro and freegold resolve Triffin's paradox any better than the dollar and free gold. In either case you must have a continuous devaluation of the unit of account either the Euro or the dollar and a gradually expanding price of gold in whatever unit of account is used. Otherwise no country or group of countries would ever want to take the place of the dollar as a reserve currency. I don't think a unit of account separate from a store of value can constantly devalue in a controlled way. The monetary velocity would not remain constant but would begin to increase exponentially. This world currency would have a shorter lifespan than the dollar. Or am I missing something here? In a world where a unit of account is separate from a store of value everyone would compete to be the reserve currency because then you truly could run a deficit without tears. It's free money for the issuer. Why would China and other nations be happier with a constantly devaluing Euro versus a constantly devaluing dollar? It seems more likely that a world currency is likely to be a basket of fiat so everyone can get their proportionate share of free money so to speak by being able to contribute a gdp proportionate share of their own devaluing fiat to a basket such as the SDR? Or am I missing something?

DP said...

@kevin:

1) Where did your second comment go since 06:23 today? It's still right there on my Android in Gmail, but it's not here on the blog now. Spooky!

2) You might like this

On the much-misunderstood Euro

DP said...

@Wendy I thought official gold was already inked, as numbered standard LBMA good delivery bars from officially recognised refiners

costata said...

kevin,

"Or am I missing something?".

I think I understand what you are missing to some degree.

1. Euro was not designed to replace the US$ as the sole international reserve currency. That is a poison pill.

2. The Euro Freegold separates fiat currency and gold into two distinct roles. Fiat as the medium of exchange and gold as the store of value.

3. Provided gold floats freely then gold values all currencies under this system. A scientific standard in the same way that a minute is the same length of time worldwide, a metre is the same length and a gram is the same weight wherever you go.

What is wrong with the currency system we have at present?

I would argue that the main problem is that nobody knows what anything is worth (in terms of durable value).

DP said...

Not often you get juicy tabloid gossip in the central banker circles, so let's enjoy this while it's here

http://www.telegraph.co.uk/news/worldnews/wikileaks/8173048/WikiLeaks-Mervyn-King-urged-to-resign-after-admitting-Cameron-concerns.html

kevin said...

Thanks for the reply but it doesn't address the Triffin's paradox why anyone would want to be a reserve currency unless they can have a constantly devaluing unit of account. The euro if designed to end national control of monetization and be a "gold light" would then become overvalued compared to other currencies and this harms export competitiveness because wage deflation is a painful and inefficient process to adjust account balances as compaired to devaluation. Triffin's paradox is still in effect whether or not it is a group of countries or a single country that controls the money supply. If the intent of a unit of account is to constantly devalue in a "controlled way" against gold and give the issuer a free lunch, then anticipation, front running and repudiation would result eventually. It's really the situation we have now, but under free gold this constant devaluation of the unit of account and separation from store of value would be done openly and purposefully. YOu still end up with fiat destruction eventually. No one will accept a constantly devaluing unit of account if it is done so openly and in a way that rubs it in the faces of those who don't get to benefit from first issuance.

kevin said...

if they do accept a constantly devaluing unit of account for transaction purposes then it will only be held for an instant before being exchanged for something with tangible value. MOnetary velocity increases to infinity and boom. You have lost control of your fiat. There at least has to be a myth if not reality that the unit of account is still a storage of value at least temporarily. It is not a stable system.

kevin said...

freegold that is. It's not a stable system to openly and publicly separate out the unit of account from the store of value. Our current system is described as the least ugly lady at a beauty contest. It has it's flaws, but if the freegold concept includes maintaining a transaction measuring system (money) that is not also somewhat of a storage of value then it will be less stable than our current system. I've read all the articles before posting. Maybe one of the gods could answer

DP said...

Hi again kevin -- I'm glad to see your post turned up again sometime earlier.

Nobody has to keep their stored wealth saved in Euros for a rainy day. More people will see that this is not the best course of action, as Freegold comes into the light of day. But they might choose to do so in preference to in Dollars/Pounds/Yen/yadda yadda yadda. It's pretty unlikely that many shops will sell anything for gold or silver coins, but will need/want currency.

The expectation level is that the Euro will inflate close to 2% per year, and that political concerns are going to be of little concern to the issuer. The ECB have only one mandate, and that is CPI price stability of close to (ideally just below) 2% a year. This is what has been achieved to date.

All currencies will come to be seen against the yardstick of gold, as Costata says it will come back to being the international "millimetre" of value measurement, as it was in the past for a long, long time until quite recently. The currencies will be marked against this and will compete with each other, and gold, for usage in the various monetary roles (unit of account, medium of exchange, store of value). If they don't compete, they will fall by the wayside as people abandon them.

Gold is not the CPI. Tough times will reduce demand for CPI items, which will reduce their value. The Euro can follow these prices down; it is the stated aim of the ECB. The deflation in the prices of CPI items not only can, but will be offset by inflation, as a matter of policy to achieve the goal of 2% CPI price rises in Euro terms. Once the excess demand from the previous credit boom has been washed out, people adjust to more "normal" lean times again, the Euro (and consumer items per CPI) should be expected to stabilise again.

At least, that is how I see it. I am more than ready to be better informed and find out how this isn't going to happen though.

kevin said...

if everything is measured in terms of ounces of gold then gold becomes the money in people's minds not the fiat, and people will generally insist on a dual system of exchange, acoounting for a transaction in both gold and fiat. In such a system it's really gold that is the money, not the fiat if people insist on future payments in grams or ounces. If you can't insist on future payment in grams and ounces, in a system where fiat is purely a unit of account and not a store of value then people will have to hedge all transaction for gold. The hedge itself becomes the currency. I don't see how a unit of account can be separated from a store of value. No one will accept it ultimately as an income stream because the net present value can't be calculated, and then if everyone hedges currency risk of these future income streams then the hedge becomes the currency. People will buy and sell the hedges to use as a unit of transaction because they have some value in relation to the "store of value."

kevin said...

a controlled rate of inflation rigidly applied to some yardstick is the economic construct of monetarism, Friedman and all that. This makes fiat a store of value because the rate of decline can be calculated if it is rigidly kept at two percent no matter what. There is no need for gold in such a system, and no need for it to shoot to the sky.

kevin said...

but I am fascinated by this and want to learn more

DP said...

Apologies for stepping in once more to reply to your comment Kevin, I did that before I saw the one asking for a "god" to do so, which I don't blame you for doing. I don't want anyone to think I consider myself in that category.

However, in for a penny, in for a Pound... :)

kevin: a controlled rate of inflation rigidly applied to some yardstick is the economic construct of monetarism, Friedman and all that. This makes fiat a store of value because the rate of decline can be calculated if it is rigidly kept at two percent no matter what. There is no need for gold in such a system, and no need for it to shoot to the sky.

The Euro is going to take us along this path, but first there is pain to unwind the credit problems as a result of the unchecked expansion of paper credit over the decades past.

Men cannot be trusted with the stability of the universe, even Central Bankers, hence we need to have something outside man's control to be the anchor of the system, the benchmark unit of "value". Look what happened when the Fed was trusted with the anchor. The way I see it, the ECB want to show themselves to be more accountable than the Fed, more trustworthy. They want to be measured and rewarded based on their performance as measured.

Central Bankers will be trusted to manage their currencies prudently in future, once they will be measured against something tangible and highly stable. Gold. The only thing in 5000 years to prove repeatedly it can be trusted to be stable when men cannot. If they don't demonstrate they can be trusted, by measuring them, they will be dropped.

I too look forward to more thoughts from the gods, I offer myself up here once again as a potential sacrificial lamb, ripe for the slaughter in the quest for us all to establish the truth! :->

kevin said...

I think there is a new normal coming up with gold at some higher valuation. I think the explanation may be a bit more mundane and have to do with business cycles and credit expansion, so this is just another cyclic up for gold. Can the Fed thread the eye of the needle with a big fat qe2 elephant? Can the fed avoid the rock of deflation and the hard place of the crack up boom? Stay tuned! But in any event this is just one in a series of dreary inflation deflation cycles as we don't learn from the past. Timing the upleg of gold in terms of fiat and believing that we are going into a whole new world of freegold is just repeating the mistakes of the past. Gold is inefficient as a currency. It causes a lot of problems. This is why every gold standard in the world has failed. People say that every fiat money has failed, but they don't realize that gold money has also always failed, but it at least retains a store of value when it fails as a currency. Deflation at some point is inevitable and gold will go down, but from what level we don't know. Continuous inflation and monetization ultimately leads to repudiation which inhibits transactions and makes them more inefficient, thus causing deflation. We may go back to a "goldish standard" at some point as a result of excessive credit expansion during this cycle, but that too will pass. Free gold is not a permanent system but merely a temporary part of the normal business cycle. Eventually once people trust fiat again they like it better. We regret now that we don't value things in terms of gold because we see the excesses of fiat. Look at the people writing about the gold standard in every era where it has been tried and failed. They were gnashing their teeth at the terrible consequences of a gold standard. We always forget and then repeat the cycle. I'm along for the ride and the freegold concept will likely come to fruition, but only temporarily. Like Buffet said "sometimes I want to own the paper and sometimes I want to own the company." Don't get stuck owning the company when the paper is the better deal. Don't get stuck owning the paper when the company is the better deal. Gold is definitely going up, but it doesn't seem it can ever be completely untethered from fiat permanently. Everything is linked and interacts with everything else. A wall between the unit of account and the store of value can never be maintained.

kevin said...

one last comment. Fekete's "real bills" doesn't solve this problem either. If someone says it does then I will post a response. Please god. can you answer my questions? I believe I am worthy of a response since I have read everything of fekete, hayek, and now fofoa foa and a. Also Keynes, Milton. We shall see if I can reply at your level.

kevin said...

I do appreciate your responses DP! They help me think through this a bit more! But what you are describing is just another phase in a cycle, not a transition. Don't be so humble!

DP said...

While we all wait patiently and drum our fingers on our desks, I will step up to keep the conversation rolling again with another tidbit of opinion... what the hell...

The gold standards of the past saw the gold (at least... some of it; enough to maintain the veneer of confidence) circulating as part of the physical currencies. Gold (and silver? hmmm...) is too precious to pass from hand to hand every day, wearing it away little by little. And having some of the currency represented in your hand in specie isn't enough because it didn't stop the over-issuance of credit that was unpayable by honest means anyway.

I'll shut up and drum my fingers again.

S said...

@ Kevin,
"People say that every fiat money has failed, but they don't realize that gold money has also always failed, but it at least retains a store of value when it fails as a currency."

Gold standards have failed why? If your anwser is becasue they didnt like the outcome you win a prize.

Forget freegold, go back to econ 101 and begin your thought experiment with perpetual growth assumptions and its enabler - fractional reserve banking.

Dress the arguments any way you want, but your beginning premise is simply wrong.

DP said...

The way I see it, the Euro is the "goldish standard", with the benefits of externally-applied restraint similar to gold, and also the flexibility of paper. An economic shock absorber.

Fekete's real bills is a whole different kettle of fish to currencies in my opinion, that is about a short term, self-liquidating credit mechanism, enabling goods to flow from producer to consumer through a chain of transactional confidence and mutual benefit. Having a stable medium of exchange would certainly aid that mechanism, but the medium of exchange and the mechanism are not the same thing to my mind.

(Drums fingers... :) )

Dave Narby said...

@ DP

"The expectation level is that the Euro will inflate close to 2% per year, and that political concerns are going to be of little concern to the issuer. The ECB have only one mandate, and that is CPI price stability of close to (ideally just below) 2% a year. This is what has been achieved to date."

There is the observation that any statistic used to determine government policy will be gamed to the extent that eventually it becomes useless. This has happened to the US CPI, Google "CPI without lies" to see.

I wonder how gamed the EU CPI has become? My thoughts are not as bad as the US since it has a weaker central authority.

Dave Narby said...

@ Kevin

"I don't see how a unit of account can be separated from a store of value. No one will accept it ultimately as an income stream because the net present value can't be calculated, and then if everyone hedges currency risk of these future income streams then the hedge becomes the currency. "

This can easily happen, and is the case today, as in the US only FRNs are "legal tender" (used to pay debts to the state, or able to be demanded as payment). Another way to look at it, let's say you do a lot of business with Canadian companies, and keep an account in Canadian dollars for convenience. Because you can't pay your Ohio state sales taxes in Canadian dollars. You need to first swap them for FRNs and pay the exchange vig.

Simply make the unit of account the only legal tender, and you're done. Store of value is whatever you want (art, live cattle, cowrie shells, etc.).

Dave Narby said...

@ Kevin

"a controlled rate of inflation rigidly applied to some yardstick is the economic construct of monetarism, Friedman and all that. This makes fiat a store of value because the rate of decline can be calculated if it is rigidly kept at two percent no matter what. There is no need for gold in such a system, and no need for it to shoot to the sky."

Gold production is ~2% annually.

This is why the price of gold is stable in a ~2% inflation environment.

The reason for fiat such as the EUR is elegantly explained here http://barondayne.blogspot.com/2010/11/on-much-misunderstood-euro.html

Dave Narby said...

@ S

' "People say that every fiat money has failed, but they don't realize that gold money has also always failed, but it at least retains a store of value when it fails as a currency."

Gold standards have failed why? If your anwser is becasue they didnt like the outcome you win a prize.

Forget freegold, go back to econ 101 and begin your thought experiment with perpetual growth assumptions and its enabler - fractional reserve banking.

Dress the arguments any way you want, but your beginning premise is simply wrong. '

+1

The problem is never with gold standards, its with over leveraged banks vs. a currency that can't be expanded except by mining & refining.

Tragi-comically, fiat clearly doesn't solve the problem with over leveraged banks, it just makes it harder for J6P to defend himself against them.

DP said...

@Dave Narby: First up, thank you for the kind words and the toot. I am deeply flattered and much indebted to you for your indulgence. :-)

RE: the ECB's particular brand of "CPI", this page is instructive, I thought.

ECB:The definition of price stability

Of particular note, but by no means am I suggesting nobody needs to bother reading the above linked page as a result of my snipping:

Symmetry
By referring to “an increase in the HICP of below 2%” the definition makes clear that not only inflation above 2% but also deflation (i.e. price level declines) is inconsistent with price stability.


They have a nice stats page for all to stop by and see too, here:

ECB:Inflation and the euro

As I said earlier, the goal of the ECB and the euro is not to provide a new benchmark for "value", which people should always use as their long term store of value, but to have a currency that maintains its purchasing power in terms of CPI consumer goods. Its purchasing power will track DOWN with a deflationary environment, as well as UP with an inflationary environment. Rather unlike a classic "gold standard", which is like economic cryptonite in a deflationary environment, and rightfully avoided as a result. At the other extreme you have the infinitely available Dollar, how is there EVER going to be a real CPI price deflation with that as your price marker? The Dollar is all about the inflation, all the way to destruction.

Here's the Wiki on HICP if anyone's interested to start the dig into detail for more specifics.

DP said...

Dave Narby: The problem is never with gold standards, its with over leveraged banks vs. a currency that can't be expanded except by mining & refining.

+1

costata said...

Kevin,

We talk often here about Central Banks but neglect the role of politicians. Who are the currency debasers? The inflaters? The truly profligate borrowers? I would argue that it is the politicians.

On one reading of present debt levels it is the ordinary citizens who have over-borrowed. They are blamed for this. Who created the incentives and systemic distortions that encouraged this borrowing? In the USA it was the politicians and their campaign contributors - the bankers and speculators.

As Wim Duisenberg said the Euro has severed its connection to the nation state. I see this as an attempt to dilute the control of nation state politicians over the Euro (as far as possible).

The designers of the Euro Freegold architecture were not attempting to create a new world reserve like the US$. That is one reason why they promote gold as the reserve asset of choice. Gold can address the imbalances while the ECB carries out its sole mandate - currency stability.

The tussle we are witnessing between the ECB, the politicians and the bankers and bondholders is IMHO driven by the desire to avoid paying the price for their excesses and foolish risk taking. If the taxpayers don't stand up for themselves they will continue to be screwed.

Iceland or Ireland? I think it's a challenge that many of us will be confronted with. Will the politicians "do the right thing" without being forced to do so? I for one doubt it.

BTW I'm not taking up the mantle you offered.

littlepeople said...

Kevin, DP:

Gold standards don't fail--the PTB get too constrained by them due to human greed, and jettison them for ways to grow faster (and get rich faster)than gold standards permit. So shall be any future gold standard, unless the keeper of the system is above human frailty.

As for freegold being just another business cycle, I'll concede that someday, after this episode of failure is forgotten, somebody will restart the fiat (Keynesian) fiasco in some way, shape, or form.

And, those with the gold at that time (some generations down the road) will go along with it--but hold onto the bulk of their gold--because nothing is forever--except gold.

On another subject, I could not resist buying some standing liberty (silver) halves yesterday. In an antique store, for $7.50 and $8 each--silver dimes for $1.50 each. Huge 25% discount from spot. People still don't know what silver is worth--even some who own it now!

People now are conditioned to know what gold is worth, but silver is still too paltry to worry about, I guess. Good for me, bad for them.

littlepeople said...

An excerpt from GATA's latest article posted re: Bundesbank secrecy:

"Schall sought an explanation from the Bundesbank about its activity in the gold market and the security of German gold reserves held outside Germany itself, particularly German gold held in the United States.

The Bundesbank's refusal to answer Schall's questions can only heighten suspicion that use of German gold is central to the gold price suppression policy undertaken largely surreptitiously by the Federal Reserve, U.S. Treasury Department, and Bank of England.

In a letter sent in September 2009 to GATA's lawyer, in response to GATA's request under the U.S. Freedom of Information Act for access to the Fed's gold records, Fed Governor Kevin M. Warsh confirmed that the Fed has gold swap arrangements with foreign banks and insists on keeping them secret:

http://www.gata.org/node/8192"

I earlier asked FOFOA for his opinion re: euro CB gold as it may now relate to freegold, as much of it is in the U.S. or London. I tend to think Germany wishes it had the gold in Frankfort or Berlin or anywhere but Oz.

GATA's stance directly contradicts FOA and Another's . . . GATA says the gold is half-gone; FOA/Another/FOFOA say it is all there and in correct possession. Why are the CBs so secret? I suppose it is their duty to befuddle the people, so as to keep a lid on things . . .

Dave Narby said...

@ Littlepeople

Pretty sure those swaps don't actually involve moving physical gold beyond this:

"Centrality is due to the bank's location. Having gold deposited in the trade and financial capital of the world's largest economy enables international payments to be made easily, quickly and inexpensively. The ability to make gold transfers between nations within the confines of the vault merely by moving bars from the compartment of one country to another was a major attraction. "

I'm sure everyone sees the problem with that...

"Why are the CBs so secret? I suppose it is their duty to befuddle the people, so as to keep a lid on things . . ."

Not sure I'd use the word 'duty', but close enough.

littlepeople said...

Dave Narby:
Not sure why my post was erased, but you must've read it before it went to never-neverland.

Swaps are paper--sort of like fiat. The gold still exists, sure, but who has the PHYSICAL POSSESSION? When rule of law means nothing, paper ownership means little.

Germany, I am sure, considers the fact their gold is in U.S. and London was a big boo-boo.

littlepeople said...

A return trip from never-neverland . . . thanks, cyber-god!

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

‘Shock and Awe’ in Precious Metals

kevin said...

quite interesting. A lot of this relies on circular logic which is not really logic. It is hard to see how we get to universal agreement on one standard of wealth. I may prefer owning things that produce more wealth however it is defined in dollars or grams of gold. I would consider myself wealthy if I owned an asset that continuosly produced more wealth above and beyond the cost of that wealth's production, such as a stock, or a rental unit, or even a bond in some circumstances. Granted that assets are often someone else's liability, but gold does not reproduce itself. Don't get me wrong. I am definitely along for this ride on precious metals and think it has a longer way to go, but there are lots of ways to get wealthy and most include not holding an asset that doesn't have a return of some type. Investing in your education provided you did it the right way can give you a greater return than that same investment in gold. Other investments can return far greater than gold, but definitely we should all have at least a little bit of the shiny stuff.

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

Jaques Rueff's

"The monetary sin of the west" P16

http://mises.org/books/monetarysin.pdf

"There is one innovation which has materially contributed to the difficulties that are besetting the world. That is the introduction by a great many European states, under the auspices of the Financial Committee of the League of Nations, of a monetary system called the goldexchange standard. Under this system, central banks are authorized to include in their reserves not only gold and claims denominated in the national currency, but also foreign exchange. The latter, although entered as assets of the central bank which owns it, naturally remains deposited in the country of origin."

>>Expanding the monetary base !!

Greg said...

I thought someone here might latch onto this

"Endgame approaching - China, Russia quit dollar on bilateral trade, announced today on People's Daily:"


Except this doesnt mean what the author of the post thinks it means. This is not a rejection of dollars this is simply changing the numeraire in transactions. They are simply saying they will now price all things previously priced in dollars in renmibi or rubles.

Big Whoop.

If they are interested in selling anything to us they will still be paid in dollars, they have no choice in that matter.

Much ado about nothing

Par for the course in this economic environment.

eric said...

"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..."
This quote is breathtaking, implies that our modern society is totally crooked to it's very foundation.
I carry gold and silver as insurance (but now worried about silver) but never dreamt of this scenario. Thanks for drawing it to my attention.
There are alternatives of course but your views have compelling aspects.
From an intellectual viewpoint, society by necessity will always value ideas and desirable objects and art, the latter preserve wealth (to an extent) - ideas create it.
Gold, being a widely recognised money, can always be manipulated and be a target for confiscation and theft by the less imaginative and the homicidally inclined everywhere. Maybe we have to become more subtle in our desire for a fulfilling life and protection.
In my view we should not play along with the meme of these megalomaniacs but reject them and publicly defrock the shell game.
Thanks for your efforts and insights.

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