Wednesday, December 8, 2010

Freegold in the Proper Perspective

I can see that we have a few new faces here. We even have some fast talkers! That's fine. Perhaps they have something useful to say. Perhaps not. In any case, new visitors often mistake the term Freegold for many things it is not. "Aristotle" is one who I greatly admire, for he took this journey long before me. And the records of his discoveries along the trail have been preserved for all who wish to follow. In my last post were these words from Ari:

"After a period of slower talking and deeper thinking, I arrived at a position with a realistic eye on the middle ground giving me clearer monetary understanding as it works in the real world…"

Freegold, in my opinion, is not a competing monetary theory. Nor is it a competing financial system. It is much more than these subjects of frequent debate. In my world, Freegold is a way to view unfolding events as they happen. It is a view of the valley below, as seen from a high vantage. It is a cipher for understanding what we see. It is not a description of what should be. Instead, it is framework, different from almost everything else you are reading, in which you can interpret unfolding events in a different light.

FOA: I (we) expect none of you to consider anything said here as credible. Everything is given as I understand it. If you came with a notion that I am someone who sees the future; grab the children and run far away. For these Thoughts, and my ongoing commentary, are meant to impact exactly as the "gentleman" said they would. People hear them, and whether believed or not, the words leave a mark. A mental mark on the trail, if you will. And later, after the world turns, our little "stacks of rocks" will be easier to understand next time you are passing this way. In fact, your ability to find your own way will forever be enhanced for having seen this path in a different light.

Some of you may have noticed that I added a quote at the top of the blog. It is the first line from Another's first post, found here, and it goes:

"Everyone knows where we have been. Let's see where we are going!"

I think this one line really encapsulates Freegold and the reason why I started this blog 2.3 years ago. It is also the reason why Another began posting. Clarity in orientation like this can often be found in very first posts. Notice that he did not say, "Let's see where we should be going." He also did not say "Let's see what we are going back to."

FOA used the analogy of a river for the forward flow of time. Many times he used this analogy, and the first and fullest description of his view on this concept is found in his first post (imagine that!) on The Gold Trail which came 2 ½ years after Another's first line above:

We must view the world in a broad context, just as much as in a detail perspective. The larger perception can be just like looking at a river in the valley from the ridge above. From far away it's easy to see what direction national trends are flowing. The whole body moves as one, always towards the sea. The problem comes when we get too close and interpret things using only a small river section in front of us. More often than not, the white water we see only hides a deeper flowing truth.

In like sense, national governments and society in general, are the same as those boulders and eddies in the river. Seen up close, they sometimes give the impression that the river is flowing up stream or sideways, when it's only one small section of a larger political will. The same is true in the modern gold markets. The largest part of the river could be flowing in one direction with an unstoppable purpose, but the various swirls and eddies make it look like it's going in circles.

He continues, with a reference to many "conflicting factions":

Within every social order, people have conflicting factions that try to dominate the whole. But if one can understand and pinpoint the logic and reasoning of several dominate groups, we can get a grasp for the overall eventual flow. We have seen throughout history and in our modern life that the human spirit most always reaches for, and leans towards, natural conclusions to ages old problems. There is something in us that makes mankind flow this way. Time and again we build up our emotional will. Then in a great flood we literally overwhelm the branches and rocks that distort our progress through this stream of life.

Today, it seems that the need for this natural flow has been perceived by several of the world's large groups. We see this in the progress of the gold market to date and it is something we have been discussing publicly for several years now. We have given many different perceptions of this changing modern gold market. Each appropriate to its own period of time. Indeed, they were snapshots of political will,,,, each taken in the context of the moment,,,,, all documenting the evolution of gold as a new force,,, a new player in the world today.

Truly, the stream is being prepared for the great flood that must come, will come!

A year and a half later Another withdrew from posting comments permanently. Exhausted from what FOA called "ears that bite," Another declared, "tell them right now our position and walk away, it's over!"

I ask you; were these the words of an advocate, someone who was advocating for a specific change? Or were they the words of an observer, or an inside participant, attempting to share some vital information with outsiders? Were they the words of someone who was proposing a new system? Were they the words of someone who needed you to understand in order to effect the desired change? Or were they the words of someone who hoped you would understand, for your own wellbeing through the change that is coming?

People often demand that Freegold be reduced to a few lines of description. An abstract for the Freegold concept is what they want. They say that if there is inherent truth in Freegold, that is all it will take and the truth of it will be evident from just a few words. This is all well and good. And attempts at this have been made. But experience has taught me that any reduction of this concept and the reflex of the reader is usually to dismiss it. That reduction does no favors for the concept, or for the reader. And that it is only after long consideration that the truth begins to emerge. Luckily, it is not a concept that needs you to understand.

It is also not a concept that you need to fully understand in order to share in the benefits. As long as you are buying physical gold bullion and coins, you are on the right trail. But what I've seen happen is that the more people understand Freegold, the larger the position they take in physical gold. I have yet to meet anyone who has shown me a deep understanding of this concept along with a reason to NOT buy physical gold. In fact, this is my advice to people that ask how much gold they should buy: Buy only as much gold as you understand. In other words, only what you are comfortable with.

Here is more FOA from right after Another's withdrawal:

Looking back, Another was a true master of understanding people's thought processes. He knew that none of us, that's you, me or any of the rest of us raised inside a background of American financial understanding, would ever accept his position thrust; with him just spelling it out in the open. Especially when this whole financial / political transition has been taking place over more than a decade and a half. By the way, he started this some decades ago. So, he decided to ask readers and listeners to think for themselves; by presenting bits and pieces of the flaws in our "Western Thought" as others saw it and as it pertained to his world of gold and oil. Not wanting to prove anything, while asking us to prove everything for ourselves; as these long term events unfolded.

I understand that there are a large group of basic individuals that fully understand our line of what is happening and are buying gold. What I never envisioned was how many groups make up the gold trader crowd; all standing apart from the Physical Gold Advocates. Further, I never thought they would segregate into so many vocal tribes, each trying to advance their own minor position in the gold world and willing to step all over themselves and anyone else in the process. I find it all a real show / play to watch as it truly demonstrates the very human dynamic Western governments have use to distort modern gold thought. I now understand that Another did fully grasp just how distorted this chain of thought was and went around it all by waiting for events to completely destroy their concepts; instead of debating with a host of gold tribes.

In the end, physical gold will win out and prove to be the greatest wealth holding anyone has ever known. Unable to grasp that only a transition of political influence by old world players can break this modern American Western hold on gold, these tribes are vulnerable to the same government influence they long for. Their wealth will be portioned by those same Western governments as world political reality forces our American leaders to embrace a world "free market" in physical gold. While abrogating, thru taxes and windfall appropriations, all forms of paper gold ownership.

Today they chant; "we want our leaders to recognize gold again"! OH, it will all right and the impact such a recognition will have on these various paper gold plays will leave these gold tribes dancing around a midnight fire! (smile) If nothing else, the entertainment of watching them spew brime on each other will be quite an act to follow. If nothing else it will educate future investors as to where to look for reason. Indeed, the law of ages never changes as one's conduct in social interaction still identifies oratory as being worthy or no. People that relish rash interaction always find themselves surrounded by fools. Eventually broke fools! (smile)

We've had a few "vocal tribes" show up here, haven't we? Let's see, we had the Silverites show up. This group dates back to the 1800's. They never did like the gold standard crowd. Too hard for them. Silver was the "easy money" back then, and today, as then, it is seen as the poor man's gold, or a way to (supposedly) defeat the "old money" "power elite". Certainly this is ground tread by vocal advocates, but not quite downstream from today's flow. It didn't work back then, and…

We've also had the easy money camp show up, on several occasions. They are certainly a vocal group! But then they have a tough road ahead given that we are living through an easy money collapse, which has never in all of history ended in the spontaneous emergence of a new easy money regime.

And we've had the gold bugs here, in many varieties. All with very clever ways to finally make gold a currency that can work, unlike the failed and abandoned tries of years gone by.

It is this blogger's very honest, humble and deeply considered opinion that there is not a single precious metals analyst or gold writer out there today that can hold a candle to either Another or FOA. Not Sinclair, not Rickards, not Casey, Turk or Fekete. Not GATA, not Buckler, not Douglas or Ash. Not any of the Silverites and certainly not me. And I'm not talking about whatever inside information they had, although that clearly exposed a deep and long background in these Thoughts. Nor am I talking about grammar and spelling. I'm talking about a level of understanding and wisdom (look that word up!) unmatched in any other gold writer that I have ever read.

Here was a fun little conversation that happened after USAGOLD added the Gilded Opinion page, featuring one "Professor von Braun" who happened to misspell a word that FOA also misspelled. Hopefully you will get my point and a little enjoyment from this exchange:

Hipplebeck (10/23/00; 06:13:10MT - msg#: 39699)
Trail Guide=Prof. Von Braun?

Humble Pie (10/23/00; 07:31:02MT - msg#: 39703)
Hipplebeck : I'm glad someone else noticed the bought vs brought thing . I wonder!

Mr Gresham (10/23/00; 08:11:22MT - msg#: 39709)

More likely von Braun reading FOA. Our friend IS remarkably consistent with his typing bloops. (I suspect he had a secretary most of his business days.) He's probably not an editor at The New Yorker.

Parsifal (10/23/00; 12:43:12MT - msg#: 39723)
Trail Guide=Prof. Von Braun?
Hipplebeck: bought=brought

Hard to ignore isn't it? Trail Guide so consistently uses "brought" in place of "bought," I expect he does it deliberately. Why? It is a curiosity.

Where does Prof. Von Braun post? The name is familiar to me, and I associate it with gold market commentary, but I've forgotten where I've read Von Braun. Also, could it be that "Von Braun" is another alias? Wasn't "Von Braun" a German rocket scientist the Americans co-opted after WWII?

nickel62 (10/23/00; 13:12:04MT - msg#: 39728)
Von Braun and FOA

I have conversed with Mr. Von Braun and while I was impressed the two times we exchanged emails I do not think he is on the same level of FOA. These subjects are so difficult to convey however, you can never really tell when someone is giving you the simple version of the problem because they (correctly) perceive that you can only absorb so much. I would tend to doubt it though. He posts on the Gold-Eagle forum, and occasionally on Le Metropole Cafe.

PH in LA (10/23/00; 14:45:38MT - msg#: 39734)
Trail Guide*Prof. Von Braun

Just went over to Gold Eagle to review the Von Braun pages and came away with the indisputable impression that he is not FOA. A facile writer with an original and attention-grabbing turn of phrase, the professor does not begin to exhibit the depth and overall understanding of the issues that FOA does. This would be a very hard deception to pull off. Believe it or not, it is very difficult not to let slip what one knows while trying to elucidate a point to further the understanding of others. I doubt very much that FOA could do it. At the same time, he (FOA) would find it very difficult to suppress the natural turns of phrase and liquid prose style that von Braun exhibits while writing as FOA.

Both writers are very consistent in their writing styles. Misspelling the same word in the same way does not overcome that fact. FWIW!

Trail Guide (10/23/00; 19:26:57MT - msg#: 39745)
(No Subject)

My spelling and punctuation is not right? I don't know what you mean? (smile)

This reminds me of an old reply someone put to me when I asked him to clarify himself on a strong position. "What do you want, he asked? Good flavor or good taste? Because you can't have both from me at these wages!" (Ha! Ha! What a guy!) He later took time to explain everything.

You know, hearing every comment today and with posters comparing my speech here:

I used to give talks at small meetings all the time and they never complained about my spelling! (laughing again)

You see, one of you was right, in that I have never tried to publish or write anything. My notes from meetings are what I work from and they are an outrageous hodgepodge of foreign writing no CIA agent or secretary could ever crack! (still laughing).

I'm much more of an eye to eye, face to face, quietly making my position known, kind of fella. Take MK or Mr. Turk; these men can write. Im not kidding when I say that in their presents or in the company of other smart / important people I would typically blend into the shadows.

First and foremost, my reasons here are to simply keep the path warm until the real play comes into view. If my poor writing skills don't make things clear enough, it's ok because soon enough events take a hand and clear the path enough to follow. True, talking to me in person, you would say the same thing others do; "Trail Guide, you don't sound anything like you write"! (smile)

Well, that reminds me of the guy with an extremely large nose. He went into a plastic surgeons office to get his leg burns fixed and they asked if they could also fix his nose? He said absolutely NOT! If you did that, I wouldn't be me!

So,,,,, in that light,,, if I gave these posts to someone to edit, or had someone else translate most of Another's thoughts to english, it wouldn't be me. (smile)


Holtzman wrote a good piece some time ago and I lost its location. In it he made the distinction about how we were arguing about the difference between paper gold and physical gold, along with all our other debates. I think he said that it was all useless and some of us risked embarrassing ourselves if paper / real gold spiked together. We should just diversify and watch the show, he said. (I think that's what he said?)

To a degree I do exactly as he mentions, except that I don't trust paper gold at all when the going gets rough. Our difference is the same valley that separates PGAs (Physical Gold Advocates) from many modern hard money followers. It's a difference of "learning location".

You see, it all has to do with how one orients oneself in the world today. Indeed, understanding the word "orient" provides some of the answers. Interesting word, orient.

The old romans didn't have compasses and they depended on the position of the sun to gain location and direction each day. Every morning they would watch to see where it rose. They gave the name "oriens" to this location. In other words, the east. Later, "oriens" obviously a latin derivative, was slipped into english and it became orient. Not only was orient used to describe one's positioning in the world, it also referred to all the lands east of Europe. The Asians, etc..

In time, most of the world's thought could be broadly divided into Western and Eastern. How well one understood such thought and the people forces that created them, depended very much on how well we could orient our own thinking! Are you still with me? (smile)

For myself, I have placed my feet squarely on the ground that faces East to gain a better understanding. Because from here not only do the majority of the world's people live, there also resides most of the reserves of oil. Remember, "oriens" became "orient" and that traditionally was all the lands east of Europe. The Middle Eastern oil fields included!

Now, over time and across the space of human experience, Europe has become much better "orientated" to the "orient" way of trading and thinking than the West. To this end they will always meld better with them economically than the US can.

Indeed, this is something Mr. H had better "orientate" himself with because I suspect he is British. You see, I say this because only the Brits use "orientate" and that back-formation of a word has been in use there for about a century. Truly, plenty of time for him to understand why the Duke of Edinburgh once said,,,,,,, "the English are much more culturally and emotionally "orientated" towards Europe". Check it out for yourself? Perhaps that fine gentleman also knew the "oriens" from where oil did flow!

and that my friends is why their English paper gold is going to one day burn.

Now, did I get those letters and dots in the right places? (smile) I don't think so!

Trail Guide

Ha! Well, there you go. That's a bit of the fun found in the old REGULAR archives. I saw that Jeff found the document Martijn posted on Scribid. Notice that it is called the A/FOA *REGULAR* archives. That means it came from the regular forum, not from ANOTHER (THOUGHTS!) or The Gold Trail.

Martijn put a lot of work into that document, reading all the regular forum archives from 9/22/98 through 12/16/01 (FOA's last post) and pulling out most of the FOA comments that are not in the main archives. And while discussions like the one above are not in there, it is easy to jump from Martijn's document back into the regular forum to see what other people had to say about it.

Freegold is a deep concept, with "infinite resolution," a point I have made recently through the use of Benoit Mandelbrot's (RIP) fractal geometry. Along this same train of thought, someone emailed me recently saying, "I am reminded for some reason, of Isaac Asimov's foundation series - Hari Seldon and 'the plan'. Freegold is truly a story of epic proportions." (smile) I replied, "Yes, Freegold is epic. This description of Asimov's 'psychohistory' – that it can predict the future, but only on a large scale; it is error-prone on a small scale – describes the way chaos and fractals relate to our understanding of the Freegold concept."

You see, Freegold is not a competing system or theory. It is a paradigm that, once understood, reveals unending truth (infinite resolution). But it cannot be reduced to a couple paragraphs. It must be tested over and over again, from as many perspectives as one can imagine, which is what I try to do on this blog. As one of my great supporters wrote:

…From what prior principle did Newton deduce universal gravitation? Newton's theory is the product of a grand induction, an integration of prior inductions made by Kepler and Galileo, based on observations of planetary orbits, and of the behavior of physical bodies on earth.

Freegold, too, is a grand induction. Your method of approaching the issue from a variety of perspectives, all leading to the same necessary conclusion, after precisely defining your concepts, is essential to a proper inductive process (which, by the way, the mere enumeration of swans is not).

…given a certain context of knowledge, and given a certain observation (and there need only be one observation, no enumeration necessary), the induced proposition will be seen as necessary. That is, to deny the proposition will be to deny the validity of the observation, or to contradict the entire context of your knowledge.

Because the mind is finite, the immediate context supporting your induced conclusion will be limited. The role of deduction at this point will be to explore the applicability of your result to a broader context. Think of Newton, having just induced the inverse square law in the context of local and orbital mechanics, now asking himself, "How might my equation apply to the shape of the earth?" and then deducing the equatorial bulge and the tides…

There are four key aspects to Freegold. There are also many more, but these four are key. That's not to say they are all necessary. They are not. But it is to say that in order to understand Freegold you must at least understand the significance of these conditions:

1. The end of the dollar standard (the end of its timeline as the main global reserve currency)
2. The end of parity between paper gold price discovery and physical gold price discovery
3. The Euro-Freegold concept/project, (at least) 31 years in the making
4. The flow of oil

I have compiled a few FOA posts here that at least touch on these four important aspects. They are by no means the complete picture, but more of a tease to get you to read the whole thing. Enjoy!

Trail Guide (08/21/00; 21:04:03MT - msg#: 35283)

Hello SLF and Welcome!

I say welcome because I think you are new here. But then again, I haven't read back through all the discussion that happened while away. As you know many of the posters on this forum present exceptional perspective. The kind that demands a comment or answer before moving along. Often one must be careful not to read them or risk being trapped here. (smile) Yours is the first I saw today, no doubt there are many others in the archives for later. So let's stop a while.

Your post # 35259:

--- I have been following your posts for a couple a years. I am trying to get a grasp on your current thoughts. As time goes on I am trying to see how current events will affect Gold/Dollar. It is my impression that you believe the Euro will be the currency that dethrones the Dollar as the Dollar hyper inflates. What are your latest thoughts about the weak Euro strong Dollar? -----

SLF, I see this whole progression of events as an international chess game. It's a game that has been going on and evolving for many years. It's hard to discuss it in an investment format because far too many "hard money" traders continue to grasp each move on the board as a short term isolated happening. From this view, they play these events for quick profits. Mostly they lose big, because this particular game is unlike anything in the past and continues to evolve away from past historical precedent.

On the other hand, there is a whole world of people out there that are making a killing for reasons they profess to fully comprehend. Yet truly, their wealth making is little more than a mistake of historic human proportions and they will have it all taken away for reasons fully incomprehensible!

SO,,,, For us to see the whole board we must wade away from shore. Away from all the shallow water traders and into the deep blue. There we can feel the real current.

Our dollar has had a usage period that corresponds with the society that interacts with it. Yes, just like people, currencies travel through seasons of life. Even gold currencies, in both metal and paper form have their "time of use". Search the history books and we find that all "OFFICIAL" moneys have at one time come and gone with the human society that created them. Fortunately, raw gold has the ability to be melted so it may flow into the next nation's accounts as "their new money".

This ebb and flow of all currencies can be described as their "timeline". We could argue and debate the finer points, but it seems that all currencies age mostly from their debt build up. In a very simple way of seeing it, once a currency must be forcefully manipulated to maintain its value, it is entering the winter of its years. At this stage the quality of manipulation and debt service become the foremost determinant of how markets value said money. Suddenly, the entire society values their currency wealth on the strength and power of the state's ability to control, not on the actual value of the money itself. Even today our dollar moves more on Mr. Greenspan's directions than from the horrendous value dilution it is receiving in the hands of the US treasury.

This is where the dollar has drifted into dangerous waters these last ten or twenty years. If you have read most of Another's and my posts, it comes apparent that preparation has been underway for some time to engineer a new currency system. A system that will evolve into the dollars slot once it dies.

Out here, in deep water, we can feel what the Euro makers are after. No one is looking for another gold standard, or even something that will match the long life and success of the dollar. We only know that the dollar's timeline is ending and a new young currency must replace it. No great ideals, nor can we save the world! But a reserve currency void is not acceptable.

Now look back to shore and watch the world traders kick ankle deep water in each other's faces over the daily movements of Euros. From here, up to our necks in blue water, you ask "What the hell are they doing?" I'll tell you. They are trying to make $.50 on a million dollar play! Mostly because they are seeing the chess game one move at a time. (smile) Truly, their real wealth is in long term jeopardy.

Our dollar has already entered a massive hyperinflation. Its timeline is ending and there will be no deflation to save it. The currency and all the multitude of derivative instruments that make up our money system have expanded rapidly over the last 20 years. [1] Even at a super hyper rate for the last five years or so. We cannot read it because much of what we "Western" savers call paper wealth has really become money substitutes thats value is supported by the government. This paper wealth creation cannot reverse and is beginning to enter the "natural world" of real things. The best sign that the currency has entered its last, final inflation is seen in the manipulated price gauges. Truly, this is only the beginning. Eventually we will see roaring price increases in everything, even as our government indicates level prices or perhaps a deflation in our price structure. This has to happen, because there is no saving a society's currency that has indebted itself beyond any known example in man's past.

In our time we will all see the Euro become very strong. You will read and hear this. But, Another and I have known for some time that it will be the dollar falling away that will make the illusion complete. I say this because all currencies are but an illusion of value.

Eventually, either before or after the dollar's transition, the illusion that makes currencies real will also undergo a change. That illusion / vision is the current world paper gold market. Often known as the dollar gold market. This marketplace will fail with the dollar's timeline and so too will its use to value gold. In this time gold will not soar in value, rather all currencies will seek their true relationship to a "FreeGold" market. The US dollar will someday see $30,000+ for an ounce of gold. So too will the Euro price gold much higher ($$3,000 to 6,000???).

It is here that our Euro has planned to play the game to the end. (more later)

In your post:

---- When Another talks about "slow oil" what does he mean? Is the current short term oil price increase the beginning of something larger and more sustaining?---------

Yes, SLF! The transition from a world of dollars into something else is truly an evolution. There is no definite point where political wills draw the line. Once the Euro was born and "online" the dollar evolution began to speed up. Oil, out of a seemingly impossible position, suddenly began to rise in price. The paper gold markets were adjusted in what was the first step of their destruction, the Washington Agreement. Now, oil prices are set to evolve high enough to test not only the dollar's strength, but to force the physical gold market to separate from its paper controlling world. Indeed, our paper gold markets will very much simulate the same manipulation of price gauges as the CPI. All in an official attempt to say that our dollar is not dying. In many ways, it will be the paper longs that abandon the gold markets (forcing prices ever lower) even as the physical price soars. Yes, the shorts may make a killing but the money they make will be worthless!!!!!!

Your post:

--- In reading your last post on the trail, you say "one Gold is coming my friends, one Gold"-----

I think Another means that oil flow will slow until we have one physical gold price. Perhaps this is the end of Another's beginning odyssey of many years ago. It could be that the REAL GAME HAS BEGUN!

My friend, the future of physical gold is to become a wealth holding of a lifetime. However, the world will not take lightly to such a recognition of private wealth gain. I hold physical gold in good proportion but am prepared to see its current paper fictional value plunge to Another's very low dollar price. A paper price that will be as fictional as $1.00 gasoline during a dollar hyperinflation. This is the reason I hold a lifetime position in a few gold shares. Their value may plunge to zero before things change (an event the shallow water boys could not stand with). Even in the face of a soaring physical price, investors may choose to believe the paper markets over reality. Don't laugh, they believe the CPI today and continue to buy bonds????

Your post:

--- I know you don't have a crystal ball to see the future, but I am under the impression you are a person that has high level information about what is going on with Gold/oil/currencies.--------

AS Another often put it, "I am but a simple person". Events will make this knowledge real, not the words of myself or Another. Indeed, only "time will prove all things".

I hope to continue this, be back next day? , thanks

Trail Guide

Trail Guide (08/28/00; 20:35:52MT - msg#: 35674)
The big trade!

Hello Everyone!

I would like to start this as an offshoot from my post earlier today to Peter Aster (msg#: 35638). It seems we have run into a roadblock of thought. Perhaps a traffic jam would be a better analogy.

Let's talk:

In its most basic form, this presentation has been that;
----in the worldwide modern paper markets, contract trading has taken over the role of setting gold prices at a tremendously understated level.----
Years ago hard physical trading once did that job and did it at a correct level relative the physical product that was changing hands.

For us to follow and grasp this concept change correctly, we must start at the very beginning of simple economic principle.

When someone buys a product and takes possession of that product he impacts the value of that item as it relates to the next person in line waiting to buy. Like this:

When Joe buys one of five apple from the table of a vendor, he leaves only four apples left on the table to be bid on by the next buyer. This ages old act of "hard trading" demonstrates the whole human interaction with supply, demand, need and emotions. When the next buyer sees that only four apples are left, where there were once five, whether he likes it or not his mind will consider the above supply and demand possibilities. All the while personal need and emotions mix in his brain.

The result may or may not be a different bid from the first buyer of an apple. But it will be a true value assessment based on actual, hard, real time circumstances known at that moment.

When Joe brought that apple, he impacted real supply and forced the market,,,,,,, that's everyone trading behind him,,,,,, to form "hard opinions" about "real demand" and "real supply". In this dynamic, the next trade is not priced by "soft opinions" based on conjecture of "will Joe really take delivery".

You see,,,,,, in real life,,,,,,, in real trading,,,,, Joe taking delivery now, hard down, undisputed,,,, and this forms a different "mind set to bid" by the next in line. This mind set is what creates a "real value bid" instead of a "possible value bid". These "hard bids" based on "hard opinions" overshadow and usually bid higher for product than "soft opinions". In times of "Hard Trading",,,,"Soft opinion" bids even fail to materialize mostly because "Joe has shown that he does take delivery"! ========

I had today, asked 10,000 Kansas investors to line up along their border with Colorado. This nice straight border is very long and allows room for everyone to have some space. I asked half of them (that's 5,000 (smile)) to stand on the Western side of the border (Colorado for you non Americans) and the other half of them to stand directly opposite on the Eastern side (Kansas). All of these people did this in a hurry and they remembered to bring the very last $50,000 in cash they had to their name along with a pen and paper.

This was quite a mess to organize, so I hope everyone will appreciate this effort! (smile)


Today, while the Comex was still open and trading,,,, and the US dealer markets were open,,,,, I instructed all 10,000 of these people to enter into a REAL LEGAL PRIVATE OFF MARKET CONTRACT with each other for "1,000 ounces of gold". In effect, I asked that 5,000 of these investors contract to buy from the other 5,000 the equivalent of "ten 100 ounce gold contracts" that would expire in one hour. That's one hour before the gold markets closed today.

Yes, that's 50,000 contracts for five million ounces of gold that existed during trading today.

Further, not only did the sellers not have any physical gold, their last $50,000 in margin cash could not possibly buy the 1,000 ounces to deliver. Nor could the 5,000 long traders hope to use the last $50,000 they had to their name to buy that same 1,000 ounces. But their margin deposits did seem to make the deal real.


While this trade took place and the contracts were in force (they were legal and binding),,,, I called several bullion dealers to ask if the gold market was being impacted. I also watched the computer screen intently to see if anything would happen.

Surely, with five million extra ounces of gold being traded, it would have changed the price of gold.

"Just think, five thousand rich Americans contracting for five million ounces of gold should have done something!"

Well, it didn't. So all 10,000 Kansas investors canceled their contracts by buying each other's commitments and went home a little smarter.==========


The reason this little trade didn't impact the "real value" of physical gold was because they didn't trade any real gold. As big as the numbers seem, the real physical supply of gold was never touched. All they traded with each other was their "soft opinion" about the future price of gold. Again, I say soft because they only traded bluffs that were for far more metal than their real financial assets could cover.

Their trading, like so much paper trading today creates and expands a soft paper market that not only overstates demand, but more importantly allows sellers to "vastly overstate supply without DRAWING FROM THE APPLE TRAY.

Further, the worldwide paper markets our margin money has helped sustain, continue to trade an outstanding interest that is far in excess of real available bullion. ------"""" Yet this outstanding interest is the supply gauge that so understates what physical gold would trade at as it's used to price the much smaller dealer gold demand""" ----.

Oh,,,, I'm sure 5% or 10% of my Kansas traders actually did make and receive delivery while I wasn't looking. They most likely had some gold and extra cash to make the deal. But with the size of the world gold market it didn't really notice.

By far, the majority of these investors were playing out my observed typical "Western Style". They trade the price of gold while waiting for someone else to buy enough physical gold to impact supply. All the while helping support a system that dealers use to price bullion at an understated price. Again, a price that's not created by taking real bullion off the market in a volume equal to contracts traded.

My reply to one investor heard saying, "why does anyone have to take delivery at all?".

My good man, then you would end up just like my Kansas traders as they wade in our modern mess. Always settling up and trading nothing, and doing it at a lower price. Because the paper price of bullion will continue to fall from a continued increase in paper supply. No different than the way our governments lower the value of money by supplying more of it. The correlation between the two concepts is indeed staggering. [2]

This logic is almost like our early currency thinkers asking, "you know, we really don't need gold as a currency. Let's just trade dollars!"!===========

Trail Guide

FOA (2/26/2000; 11:13:56MT - msg#7)
A Day Walk

If I had a nickel for every time we thought the dollar was finished, I would have a bunch of nickels! Remember back in the early 80s or even further back into the 70s. All we heard was how the dollar was finished and going to crash and burn. Books about hyper inflation and the need for gold / swiss francs were all over the place.

I read all of them to gain perspective and also acted on some of their advice. Made some money on it too. But even then, something just didn't completely ring true about the whole scenario. Indeed, in hindsight, gold never did return above $800, the dollar didn't hyper inflate and most of the world kept using the dollar as a reserve.

Today, we can more fully understand why so much of that early insight failed to deliver.

True, the dollar was seen as a basket case back then. It had just been pulled from its gold bond and prices were going up all around us. However, because the world had been on a simi dollar / gold standard, all nations that had previously signed onto using the US buck as their currency reserve now did so with even more resolve. More important, it seemed than using gold itself was out of the question as every country's Central Bank brought dollars as fast as we printed them. The dollar still settled most all trade accounts while dollar reserve buying made an obvious show of support for this world system. No matter how much bad press was offered, they were staying on track and they have continued to do so right up into the 90s!

But all of this flew into the face of what every economist was saying, back then. The common understanding of the era was: if the US didn't stop over printing its money, we would all experience a major price inflation,,,,,, and no one could stop it! Again, "major" inflation didn't happen and to ask a further question: if the dollar system was so bad, why didn't the world just dump the reserve system and refrain from using it further? In other words, let the dollar be "the US dollar" but don't use it as a backing for your own money system.

Thick Brush Now

Going against the logic of "sound money": throughout all the currency turbulence of the 70s and 80s era (including today), the US never did reign in the over printing of its currency. It continued almost nonstop money supply expansion for its local economy and in addition sent a good portion of its cash all over the world. On and on the US trade deficit continued to do its work of feeding ever more US cash into foreign economic systems. We printed paper currency by borrowing it into existence,,,,,, used it to purchase real goods overseas ,,,,,, while foreign governments actively soaked up this dollar flood by expanding their own money supply.

Like this: When you buy an item externally, a dollar is sent overseas to pay for it. Usually, through the world currency trading arena, that dollar is converted into the local currency of the nation which the goods came from. But more often than not,,,,,,, as we print that dollar out of thin air, the foreign government takes the dollar into its reserve account and prints one of their units for deposit in the local economic system. They do this because: if the foreign CB didn't save the dollar as a currency reserve ,,,,,, and sent it back into the world currency markets to "buy" an existing unit of their money supply,,,,, this action would drive up their currency value vs the dollar and make the price their goods non-competitive in world markets. In other words, a US citizen couldn't use a printed (borrowed) dollar to buy an item for $10.00 that outside the "dirty float" of exchange intervention would cost $15.00.

This is how the "dollar reserve process" inflates the money supply worldwide as we (USA) run a trade deficit for our benefit. It keeps the dollar exchange rate higher than it would naturally be thus allowing a US citizen to buy goods at a cheaper price than our expanding money supply and implied currency value would normally dictate. A process in and of itself that invites still more dollars to flow out and purchase still more external goods. Had foreign CBs not taken so many dollars, the ever expanding US money supply would have long ago impacted currency exchange rates and forced a major price inflation internally (in the US). Yes, the major inflation so many saw coming,,, back then,,,,, would have arrived,,,,, then.

So why did these other CBs do it? The standard explanation was that this created a market for their goods here in the US. Yes that's true, but it begs the question; did no one in their land want to buy goods manufactured locally,,,,,, and pay for them with the same printed money supply? Why is it the US could inflate its money supply to buy cheaper goods externally for no more than the price of printed paper? But, in the same country our paper was sent to, they couldn't print their own currency to buy their own goods? Why couldn't they raise their real standard of living somewhat using the same process like the US,,,,,, and doing so without the burden of inflation or importing foreign currencies?

Again, why would our printed, inflated money movements not create price inflation for us (USA) in goods purchased externally? What if they (foreign goods producing countries) printed an amount of their money equal to the inflow of dollars,,,, but, without holding paper dollars as reserves to back it,,,,, brought the exact same goods from themselves. Common prevalent economic theory says price inflation would result? Or would it? Or better said: why them and not us?

Into the deep woods again

Again, and as above,,,,, In the 70s, it was widely held that the dollar reserve system forced other countries to inflate their local currencies, thereby importing dollar price inflation. But, as time went by,,,,, indeed a decade or two now,,,,,, the same process continued nonstop, with no change. It seemed that some "other" countries had found a "new way" to somewhat circumvent the dilemma. Or was this "new way" something sold to them in order to extend the dollar system's timeline?

Many of the lesser third world countries experienced a combination of sporadic hyper inflation and deflation as we forced the dollar reserve system down the throats of their citizens. Their people's living standard constantly fell as they worked ever harder to produce more goods in return for more of our printed dollars. But, instead of using the extra inflow of dollars (positive trade balance) to buy their own currencies in the local system,,,,, thereby keeping their currency strong,,,,, they used that dollar flow as collateral to borrow (from IMF and international banks) more dollars from the world dollar float (mostly called Eurodollars). The lure (or the hard sell) was that they could build up their infrastructure,,, increasing their production efficiencies (human productivity's),,,, thereby raising the national standard of living. Further, they were sold the unneeded idea that even if they didn't completely use the dollar surplus to borrow more, they should hold those dollars in reserve (buy and hold US treasuries) and print more of their own money!

Again, it seemed they had no advocate to push for their own best interest. No one told them that their people already worked cheaply enough to more than offset the competitive loss of a stronger local currency. No one told them that with a strong local currency structure,,,,( that using the dollar surplus to buy their own currency would create),,,,,,,, would allow them to borrow in their own capital markets. A more go slow approach that builds long term benefits. This process would free them from the entanglements of making international debt payments in another money. Indeed, the costs of those involvement's later proved overwhelming!

Now the trail becomes more open

For third world countries their international dollar debt exposure eventually locked them into a servitude to the dollar reserve system. Despite all their natural and human resources, currency involvement had taken a lion share of any productivity increases and increased lifestyle this modern world offered.

However, it did help the cause for the dollar reserve system. By creating an ever growing international debt in dollars, eventual dollar demand to service this debt would only increase. Thereby keeping its value artificially high. In addition, any leftover floating dollars quickly took the form of US treasury debt held in these small countries treasuries. There they were used to further hyper inflate their own currency supply.

For the more developed gold owning countries of the G-7, they had a different question in mind. Again, if taking in inflated dollar reserves was the act of importing US dollar inflation into ones local economy,,,,, and in the process creating a market for your goods overseas,,,, why not just print your own currency without taking in dollars,,,,,, and in doing so give the same buying power the US citizens have in your market,,,,,, to your own people?

If it's not price inflationary to take in part of a world "inflated dollar supply" and create jobs for your people locally,,,,,, why would it be any more inflationary to print your own currency outright? Indeed, why does one need a dollar inflow to legitimize the same money inflation process? That being currency inflation to create jobs?

Why should we (as dollar asset holders) think about this question? Because someone else is and doing something about it today!

Back to a marked trail

Today,,,,,, and after all of this,,,, the dollar never did crash from price inflation. At least nothing like what was expected earlier in the last two decades.

The dollar reserve system was never going to fail then because the major world economic powers were willing to use (waste) all the productive efforts of the world's people to keep it running. Looking back we now understand the thinking behind this. Without the dollar acting as a reserve, we would have had to go back to a gold system. There was no other currency structure strong enough or deep enough to carry the load.

But, gold had been proven to be much too easy to circumvent as a national or world currency. It seemed human dynamics would never allow an economic system that operated on a pay as you go process without gold debt. If history had proven anything it was that if we have a money,,,, fiat or gold,,,,,, we are going to lend it, borrow it and in the process create debt. Yes, even using gold!

Even if we have a pure gold system, human nature will find a way to turn it into securities. In doing so we will,,,,, come hell or high water,,,,,, lend more gold than we have and borrow more than we can pay back. One has but to return to the history books to see it all in plain print. Over and over again, we start with a solid gold foundation and soon degrade it into trash. It's not just the American way,,,,, it's the world's way.

Because the modern world had progressed into the efficiencies of using high speed digital fiat currencies, no one at that time or today, was willing to crash the whole system by returning to gold. I suspect that the world's richest would have lost a lot, but so to would "us regular" people. Even with our savings in the form of a "digital illusion", at least we had a job to go to and a dream in our bank account. Removing the dollar and returning to gold would have erased the illusion and temporarily shut down the jobs.

So, dollar hyper inflation never arrived and gold did not make its run because world CBs bet your productive efforts on supporting the dollar reserve. In the process, the US standard of living was raised tremendously on the backs of most of the world's working poor. But this is not about to last!

A broad view from the ridge

Not long after the US defaulted on its gold loans,,,, dollars held as gold certificates,,,,,, major thinkers began the long process of forming another world currency. One that would not maintain the fiction of a gold standard with the somewhat fixed gold prices inherent in such a system. The creation was distorted, to say the least. Just as the River in my first post was often seen in distortion, so too was this currency issue. It began with the European Currency Unit (ECU) and has later progressed to its present state of the Euro.

After operating on a fiat system for 20+ years people are starting to realize that the only thing that backs a currency is the real productive efforts of their people. Yes, over time we always borrow more than our productive efforts can pay back and proceed to crash the money system.
But what else is new? (smile)

We call this a money's "timeline" and it's as new an idea as life, death and taxes! Time and debt age any money system until it dies. The world moves on. Only this time gold is going to play a different part in the drama. We will all watch it unfold.

It seems people saw something else that would make the Euro unique. Paid-up assets also stand behind circulating money. Indeed, if someone owns a $100,000 dollar piece of land , has a good producing job and borrows $50,000 against his land,,,,,, the world is likely to circulate that debt note as a fiat land backed currency. But, if his gold (the land) is worth $1 million in a free physical market,,, AND RISES FURTHER IF CURRENCY SUPPLY OUTPACES REAL PRODUCTION,,,,,,, and his other debts are relatively low ,,,,,, the same note would circulate just as effectively if the $50,000 was borrowed against his name alone.

In essence, the jump into the Euro is more based on a new currency that is more honest in dealing with our historic human dynamics. Let's try not lying to ourselves and admitting that gold alone in a currency will not remove our will to borrow and lend and therefore eventually defraud each other! Would it not be better to at least not shackle the money to gold? Indeed, a real physical freegold market will constantly be devaluating any fiat currency over a long term. While removing the need for CBs to maintain fixed exchange structure through a dirty float against gold.

But, the most important aspect is in the escape valve gold would provide to developing countries with positive trade flows. Those that wish to settle their debts outside the currency arena using gold as a settlement. Or, if they wish, to buy gold in the open market with their trade reserves.

The secret to all of this is in the "Legal Tender laws". Allowing gold to be used as a Legal Tender,,,, "for the settlement of all debts public and private",, but changing international law such that no form of debt can force its payment in gold! This opens a one way street for gold and a two way street in fiat currencies. No one will lend gold because they cannot force its return in the courts, thereby making gold a physical only international currency. Yet, on the other hand, we all must borrow in this modern world and currencies will be the only avenue for this. Creating a demand (and added value) for them [fiat currencies] in addition to general use demand.

The first thought many will have is that everyone will just buy gold to make debt payments, driving out fiat currencies. But remember, if you have debts they will be [enforced] in currency settlement only. One will weigh the cheapest form for repayment! Gold in this atmosphere will be completely free to trade, become extremely expensive and stay that way.

We rest now

True there is a lot more to this story. Some posters have been discussing it publicly for some time on the USAGOLD forum. If you want a wonderful background reading on what "Freegold" would mean,,, get your laptops out tonight and read the entire link below. There is also considerable agitation voiced against this view.

First read all of:

Aristotle (2/7/2000; 7:15:24MDT - Msg ID:24589) It begins!
-----* Executive Summary --an Outline of Observations *----- [3]

My position: The world is going to change its currency system before long and this will greatly impact the wealth of dollar asset holders. Not to mention physical gold holders. As a note for further consideration and talks,,,,, we have talked before about the "Texas Railroad Commission" and how it once declared oil a public utility and later controlled its production. In the future, international law must declare all large gold reserves to be "public utilities" in the countries they reside. Mines will be very profitable and good investments after they recover from the destruction of our existing paper gold market. Still, their total production will be controlled and somewhat taxed. Small private operations will more likely be heavily taxed.

We will pick up the pace later (smile). Eventually getting to oil and the markets today.
Fires out.

Thanks for reading,,,,,, FOA/ your Trail Guide


[1] For more on this topic, see Credibility Inflation
[2] For more on the subject of "soft supply and hard demand" see my old post,
The Call of the Century, named for Another's open-ended call to buy physical gold in the $200's.
[3] I second FOA's recommendation. Read the link.

PS. I have received two separate submissions from readers for Freegold theme songs (I would not go so far as to call them anthems). I think they are both excellent candidates. So over in the right-hand column you will find a poll where you can vote for which one you think is best!

In this instance, I recommend that you first read the lyrics, pass judgment on the lyrics, and then watch the video. It may help counteract "artist bias" in the voting. Remember, you are voting for the most Freegold-worthy song, not your favorite artist or even your preferred music style. Here's the first one:

Do you ever feel like a plastic bag
Drifting through the wind
Wanting to start again

Do you ever feel, feel so paper-thin
Like a house of cards
One blow from caving in

Do you ever feel already buried deep
Six feet under
Screams but no one seems to hear a thing

Do you know that there's still a chance for you
Cause there's a spark in you

You just gotta ignite the light and let it shine
Just own the night
Like the Fourth of July

'Cause baby, you're a firework
Come on let your colors burst
Make 'em go "Aah, aah, aah!"
You're gonna leave them all in awe, awe, awe

Boom, boom, boom
Even brighter than the moon, moon, moon
It's always been inside of you, you, you
And now it's time to let it through

Cause baby you're a firework
Come on show 'em what you're worth
Make 'em go "Aah, aah, aah!"
As you shoot across the sky-y-y

You don't have to feel like a wasted space
You're original, cannot be replaced
If you only knew what the future holds
After a hurricane comes a rainbow

Maybe a reason why all the doors are closed
So you could open one that leads you to the perfect road

Like a lightning bolt, your heart will glow
And when it's time you'll know

You just gotta ignite the light and let it shine
Just own the night
Like the Fourth of July

Cause baby you're a firework
Come on show 'em what your worth
Make 'em go "Aah, aah, aah!"
As you shoot across the sky-y-y

Baby you're a firework
Come on let your colors burst
Make 'em go "Aah, aah, aah!"
You're gonna leave them all in awe, awe, awe

Boom, boom, boom
Even brighter than the moon, moon, moon
It's always been inside of you, you, you
And now it's time to let it through

(I'm sorry that this video doesn't include the last verse of the song, but it compensates in other ways)

Katy Perry – Firework


When the time gets right
I'm gonna pick you up
And take you far way from trouble my love
Under big ol' sky
Out in a field of green
There's gotta be something left for us to believe

Oh, I await the day
Good fortune comes our way
And we ride down the Kings Highway

No you can't hide out
In a six gun town
We wanna hold our heads up, but we gotta stay down
I don't wanna end up
In room all alone
Don't wanna end up someone that I don't even know

Tom Petty - King's Highway

PPS. Here is a list of recommended reading for anyone who would like to delve deeper into this fascinating concept of Freegold.

FOA's The Gold Trail
Hall of Fame Posts
Regular Forum

On this blog (in no particular order):
Bondage or Freegold?
The Shoeshine Boy
How Can We Possibly Calculate the Future Value of Gold
Relativity: What is Physical Gold REALLY Worth?
Gold: The Ultimate Wealth Consolidator
The Debtors and the Savers
"It's the Debt, Stupid"
Open Letter to EMU Heads of State
The Dukes of Wetton
All Paper is STILL a short position on gold
Your Own, Personal, Freegold
Call Me Contrarian
The Triumvirate of Wealth
Dead End
The Bermuda Triangle of Currency
Mona Lisa or Ben Franklin?
The 21st Century Bank Run
Greece is the Word
Living in a Powder Keg and Giving Off Sparks
Gold: The Ultimate Hedge Fund
I can feel it coming...
Gold: The Ultimate Wealth Reserve
Gold is Wealth
Gold is Money - Part 1
Gold is Money - Part 2
Gold is Money - Part 3
Fair Value Gold?
Say Goodbye to Wall Street
Shake the Disease
The End of a Currency
No Free Lunch
Confiscation Anatomy - A Different View
Confiscation Anatomy – Part 2
The Waterfall Effect
Taking Delivery of Physical
The Underwater Beach Ball Effect
The Judgment of Value

On the relevance of oil to Freegold:
GOLD & MONEY: More Than Meets the Eye
The King and his Gold
It's the Flow, Stupid

Also, Ender's comments beginning here: "The concept of Freegold is something that means different things to different people. It is amazingly simple, yet curiously complicated. We are on the path, yet the world races at a snail’s pace.

"From my point of view, Freegold is not a “solution for” but will be the “result of” the current financial mess that we are in today. To better understand what lies ahead, one must be willing to have an open mind and think objectively. More importantly, the seeker must be willing to set aside triggering emotions that prevent thinking as the ‘other’…"


Blondie said...

Theres a good life
right across the green fields
And each generation
Stares at it from afar
But we keep no check
On our appetites
So the green fields turn to brown
Like paper in fire

Paper in fire
stinkin up the ashtrays
Paper in fire
Smokin up the alleyways
Whos to say the way
A man should spend his days
Do you let them smolder
Like paper in fire

John Mellencamp "Paper In Fire"

littlepeople said...


Elucidating. One must open his mind, and vanish the Western stigma. I vote for VS as theme song! Wow!

In your answer to Wendy, you state that the fact that much physical gold resides in the U.S. is not a deterrent to euro-inspired freegold. I politely disagree. The U.S. has the most feared and powerful military the world has ever seen.

It seems to me that before allowing the U.S. to collapse, the U.S. would commandeer whatever gold is within its shores, prior ownership be damned. Just pay for winning the Great Wars. Compensation for 70 years of world police force. Call it anything you want, but I do not believe the U.S. will give up the gold just to allow the euro to replace the dollar as currency reserve.

That is, unless the PTB, the uber-rich international banking families deem it will be done. Their power to "entice" or "enforce" seems to have caused the demise of more than one high ranking "nationalist."

Maybe this is why you are so certain of the euro replacing the dollar as freegold manifests alongside? A higher power than that of the U. S. government?

julian said...

fascinating piece!

and you even tied the connect between fractal geometry and freegold!

(big smile)

raptor said...

Ireland, the Euro, & the Future: An Interview with Ambrose Evans-Pritchard

FOFOA your comments on the Euro vs. USD, based on the discussion in this podcast ?
It seems the tensions are very big and the need of creating more debt in the Eurozone could disintegrate the currency before the crisis ends.
The question is could European countries hold off for another 5 years.

David said...

Great stuff -- and I particularly like Tom Petty's "King's Highway" video... the perfect Freegold song! :)


Robert said...

I am finding it rather hard to completely get Freegold, but the effort so far has been very enlightening.

Thank you FOFOA for your continuing to work to educate us on the importance of owning physical gold.

In my case, I too have found no diminishing marginal utility for each ounce I buy. Your comment that one ONLY has to buy gold, even though one does not fully understand Freegold, will be just about as good as having a deep understanding.

I am currently outside the USA as I write. Over at zerohedge I read more and more about shortages of physical gold and silver. These shortages, if true, are a big signal that gold will come back soon to its ancient role as the best preserver of wealth.


Dave Narby said...

"We have seen throughout history and in our modern life that the human spirit most always reaches for, and leans towards, natural conclusions to ages old problems. There is something in us that makes mankind flow this way. Time and again we build up our emotional will. Then in a great flood we literally overwhelm the branches and rocks that distort our progress through this stream of life."

Love that!

Another's observations are quite spiritual in nature, and accurate.

littlepeople said...

I refer to that period of time during which dollar (paper) gold declines toward zero (when COMEX longs realize there is no physical to be had and liquidate for whatever fiat they can get), and when freegold manifests fully, as the "blackout period."

During this time, which may be short (6 mos.) if things stay together but possibly quite long if, for example, the internet is taken down, the value of physical gold will be unknown.

There may be opportunities to buy at ridiculously low prices ($200/oz. ala Precter) as people freak out when dollar gold tanks, and they need the money for food, etc.

Again I say that having physical gold is important, but having some cash will make sense for two reasons--to get through the blackout period without the need to sell your gold to survive, and to possibly buy more as the dollar gold price scares out the weaker physical holders. I doubt there will be very many of them, but maybe a few.

It will be a crazy time, I think, with chaos ruling the financial world. As DP said in a much more colorful way, you'll want to lay low and create as small a footprint as possible during these times.

Dave Narby said...

"Hard" SDR proposed


… on The Role of Gold in the New Financial Architecture
Dec 9th, 2010 11:11 by News

09 December 2010 (DIFC Press Centre) —

… In short, the size of the dollar liquidity necessary to finance global trade and capital movements will, in the near future, outweigh the size and the capability of the of the US economy to sustain it. Hence in a multipolar world where the economies of China and Euroland have a size on par with that of the US, the international role of the dollar would come increasingly under strain. Furthermore, the significant role played by other countries, such as Brazil, the GCC, Korea, South Africa, on the world stage will lead to a more decentralized network of financial centers unlikely to be revolving only around the US dollar.

The note argues that this situation needs to be addressed by considering an alternative source of international liquidity. Specifically it suggests creating a “Hard SDR”. The SDR is issued by the IMF and used in transactions among central banks. Currently it is linked to a basket of major currencies but its supply is not sufficient to provide a viable alternative as an international reserve asset. The Hard SDR, especially in these testing times when investors’ confidence in paper assets is irremediably dented, should be pegged to a basket with a significant weight attributed to gold. Gold has represented historically a hedge against traumatic events such as inflation outbursts or major financial breakdown.

In particular, Dr Nasser Saidi suggests: “International liquidity should be supplied on a large scale by an international currency such as the SDR, whose value should be tied to a basket of major currencies and gold, with the weight of the latter set at 20-25%.”


RS View: Economists tend to be theoreticians and mathematicians first and foremost, and next they tend to be political policy wonks, and only much much further down on the list do they ever exhibit any true problem solving sense such as, for example, a professional engineer maintains in the topmost drawer of his own tool chest.

Thus, the ongoing obsession with some form of SDR as part of the solution remains on display in these various economists’ policy papers when, in fact, there is no rational justification for inclusion of the bureaucratic SDR component in a viable restructuring of the international monetary architecture. Floating MTM gold is sufficient to provide the desired foundational stability — the ‘hard’ core — of the central banks’ international reserves, and these solid reserves would be gently and judiciously padded out with only a thin additional layer of foreign currency reserves for the convenient facilitation of month-by-month international trade. With this solid core of reserves to give weight and credibility to the larger portion of politically appropriate domestic assets that comprise the asset side of a central bank’s balance sheet, the structure is thus in place for the independent conduct of stable and efficient monetary policy on a nation-by-nation basis without all the geopolitical jibing and intrigue that the current dollar-centric structure tends to engender. And so shall it be because on a majority vote there are enough right-minded central bankers who know when it is time to kick the geeky head-in-the-clouds economists to the curb and let the more practical solution-oriented engineers prevail in the final assessment and implementation.


What caught my attention is the rather large allocation of gold, even more than the Euro.

Wendy said...

little people: "That is, unless the PTB, the uber-rich international banking families deem it will be done. Their power to "entice" or "enforce" seems to have caused the demise of more than one high ranking "nationalist."

If I might offer an unreferenced opinion here?

I believe the US has been "allowed" to run amuck, much like a spoilt child by TPTB.

All evidence suggest to me that the real power lies within primarily european interests, even and especially, the privately owned US Fed. China is like "new money", lots of cash, but little real power yet, politically.

If the US does not play by the rules assigned to them, they can be taken down almost instantaneously via financial sabatoge. No money, no war making!! Period!!

Even the spoilt child knows where the "real" boundaries lie.

littlepeople said...

Good point. Even the most powerful military in the world cannot keep a high-powered pol from having a completely unexpected "heart attack."

When you essentially have more money than God, you can afford to hire the "best."

Museice said...

I found this fascinating: "The secret to all of this is in the "Legal Tender laws". Allowing gold to be used as a Legal Tender,,,, "for the settlement of all debts public and private",, but changing international law such that no form of debt can force its payment in gold! This opens a one way street for gold and a two way street in fiat currencies. No one will lend gold because they cannot force its return in the courts, thereby making gold a physical only international currency. Yet, on the other hand, we all must borrow in this modern world and currencies will be the only avenue for this. Creating a demand (and added value) for them [fiat currencies] in addition to general use demand."

FOFOA- Will International Law change organically as Freegold manifests? How is this stumbling block achieved? (I don't remember ever reading about it being necessary for it to be illegal to force someone to pay in gold).

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

Being a male it is hard (no pun intended) not to vote for the VS girls. However all testosterone aside my vote for the gold theme song is linked below.

GOLD FREAK said... Sung by the Bernak

Dave Narby said...

"Get Back in Line" - Motörhead



oldinvestor said...

Another candidate for theme song.

“The Times They are a Changing”

Jenn said...

Perhaps I'm being a bit too obvious here.

Gold by Spandau Ballet.

Thank you for coming home

I'm sorry that the chairs are all worn
I left them here I could have sworn

These are my salad days
Slowly being eaten away
Just another play for today
Oh but I'm proud of you, but I'm proud of you

Nothing left to make me feel small
Luck has left me standing so tall



Always believe in your soul
You've got the power to know
You're indestructible
Always believe in, because you are


Glad that you're bound to return
There's something I could have learned
You're indestructible, always believe in

After the rush has gone
I hope you find a little more time
Remember we were partners in crime

It's only two years ago
The man with the suit and the pace
You knew that he was there on the case
Now he's in love with you, he's in love with you

My love is like a hard prison wall
But you could leave me standing so tall



Always believe in your soul
You've got the power to know
You're indestructible
Always believe in, because you are


I'm glad that you're bound to return
Something I could have learned
You're indestructible, always believe in

My love is like a hard prison wall
But you could leave me standing so tall



Always believe in your soul
You've got the power to know
you're indestructible
Always believe in, because you are


I'm glad that you're bound to return
Something I could have learned
You're indestructible, always believe in

Wendy said...

OMG jenn, that's way too funny. If there was a prize you would take it hands down.

Wendy said...

Alhtough I must say that I think the song sucks, and the video makes me want to vomit, it's great!

Paul said...

OK this one should really kick the party off:

I realized the way your eyes deceived me
with tender looks that I mistook for love
So take away the flowers that you gave me
And send the kind that you remind me of

Paper Roses
Paper Roses

Oh how real those roses seem to be
But they're only imitation,
Like you imitation love for me
I thought that you would be a perfect lover
You seemed so full of sweetness at the start
But like a big red rose that's made of paper
There isn't any sweetness in your heart

Paper Roses
Paper Roses

Oh how real those roses seem to be
But they're only imitation like your imitation love for me

Marie Osmond - Paper Roses

M said...

I am still very skeptical about FOFOAs take on gold mining shares.

Debt free gold mining equity is not what I would call a part of the "paper gold bug world" as FOFOA says. Sure, ETFs, the LBMA,COMEX et al are paper gold but not gold equity.

Gold companies will make huge profits and the government might tax the hell out of them but that will be after the fact. Unless the government puts in these tax laws NOW, there will be profits to take.

Wendy said...

Oldinvestor, I love that song, even though it's an oldy.

Oldinvestor: "Consider buying a small piece of land and an old used trailer house. After all, what is shelter but simply a place to keep warm and dry and cook your food."

I'm with you one this one. Many years ago when I was a university student raising a very young child (my oldest now), I bought a trailer (mobile home), We became "trailer trash" and I loved living there.

Would I go back to living like that?

In a heartbeat!

All I need is a south facing window for my aquaponics system, and I'm good to go ;)

My now adult children would, of course object.

Diamond Jack said...

Tom Petty's Wake Up Time -

You follow your feelings, you follow your dreams
You follow the leader into the trees
And what's in there waiting, neither one of us knows
You gotta keep one eye open the further you go
You never dreamed you'd go down on one knee, but now
Who could have seen, you'd be so hard to please somehow
You feel like a poor boy, a long way from home
You're just a poor boy, a long way from home

And it's wake up time
Time to open your eyes
And rise and shine

You spend your life dreaming, running 'round in a trace
You hang out forever and still miss the dance
And if you get lucky, you might find someone
To help you get over the pain that will come
Yeah, you were so cool back in high school, what happened?
You were so sure not to have your spirits dampened
[ From : ]
But you're just a poor boy alone in this world
You're just a poor boy alone in this world

And it's wake up time
Time to open your eyes
And rise and shine

Well, if he gets lucky, a boy finds a girl
To help him to shoulder the pain in this world
And if you follow your feelings
And you follow your dreams
You might find the forest there in the trees
Yeah, you'll be alright, it's just gonna take time, but now
Who could have seen you'd be so hard to please somehow
You're just a poor boy, a long way from home
You're just a poor boy, a long way from home

And it's wake up time
Time to open your eyes
And rise and shine

'Cause it's wake up time
It's time to open your eyes
And rise and shine

Museice said...

I currently have no song but thought this was important.

The Wall Street Pentagon Papers: Biggest Scam In World History Exposed - Are The Federal Reserve’s Crimes Too Big To Comprehend?

"Think about it. In just this one peek we got at its operations, we learned that the Fed doled out $12.3 trillion in near-zero interest loans, without Congressional input.

The audacity and absurdity of it all is mind boggling…"

"That’s not what happened here. The Fed doled out $12.3 trillion in near-zero interest loans, using the American people as collateral, demanding nothing in return, other than a bunch of toxic assets in some cases. They only gave this money to a select group of insiders, at a time when very few had any money because all these same insiders and speculators crashed the system."

DP said...

Masterful. [Spoken slowly :) ]

For me, you have brought me to see Freegold as the missing piece in so many of the issues around us. A Swiss army puzzle piece.

Thank you for continuing to bring out so many of these different puzzle games and guiding us to see where the Freegold piece goes in each instance. I'm sure I will continue to enjoy each additional puzzle as much as the ones I have deliberated over to date. It certainly helps me to ponder each puzzle individually; I couldn't have hoped to fully appreciate ALL of the puzzles simultaneously, but each one seems to become progressively easier to complete as a result of the preceding.

RE: the Freegold theme song, I thought I perhaps detected a Depeche Mode theme to a couple of your post titles, and this made me think of throwing Your Own Personal Jesus into the ring (it occurred to me that Blondie may appreciate the Wild West theme of the video too :-) ). But then, on reflection, I thought perhaps the Johnny Cash version might have a wider appeal.

The lyrics, as by now customary:

Reach out and touch faith
Your own Personal Jesus
Someone to hear your prayers
Someone who cares
Your own Personal Jesus
Someone to hear your prayers
Someone who's there

Feeling's unknown and you're all alone
Flesh and bone by the telephone
Lift up the receiver
I'll make you a believer

Take second best
Put me to the test
Things on your chest
You need to confess
I will deliver
You know I'm a forgiver
Reach out and touch faith

Your own Personal Jesus
Feeling's unknown and you're all alone
Flesh and bone by the telephone
Lift up the receiver
I'll make you a believer
I will deliver
You know I'm a forgiver
Reach out and touch faith
Your own Personal Jesus
Reach out and touch faith

DP said...

Museice: I don't remember ever reading about it being necessary for it to be illegal to force someone to pay in gold

A wise man once pointed out that it's impossible for a judge to enforce a bankrupt tractor manufacturer provide the missing tractors.

DP said...

M: I am still very skeptical about FOFOAs take on gold mining shares.

Debt free gold mining equity is not what I would call a part of the "paper gold bug world" as FOFOA says. Sure, ETFs, the LBMA,COMEX et al are paper gold but not gold equity.

Gold companies will make huge profits and the government might tax the hell out of them but that will be after the fact. Unless the government puts in these tax laws NOW, there will be profits to take.

FOFOA: The value of Gold may be of use to you

Far Sailor said...

Forgive me my lack of understanding on this point: what I do not yet understand is how the TPTB (maybe you can rewrite that as central banks) would ever allow freegold to erode their power. Anyone?

Michael H said...

Far Sailor,

Other people can chime in with their opinions, but here is my take:

The central banks aren't TPTB, they are an instrument of exerting power -- a tool, if you will. That tool is about to wear out. It will be replaced with a tool that is not quite so sharp, but will perhaps have a longer useful life.

The choice TPTB have is not between freegold and the current system. The choice is between freegold and anarchy, or perhaps barter.

Jeff said...

I keep coming back to the EU situation. FOA expected the euro to be strong; he also expected the UK tho join the EMU. We do not now see a strong EU and we know the UK decided to go their own way.

FOA also said: "If the Euro fails, as the dollar has, it will do so in a world where gold in the hands of man will balance the loss." And this: "Make no mistake, mankind has before and will again use physical gold in barter by trading it wealth for wealth. But once we try to morph it into money, it's function is diminished by
socialist design."

If the Euro fails, what is the role of gold? Barter, leading to gold money, leading to overlending, and repeat the cycle?

scepticus said...

If gold is a physical only international currency is it the case that it will actually be shipped back and forth across the oceans every day?

Or will it actually be warehouse notes?

If the latter how are notes cleared between different warehouses?

Wendy said...

Strength is relative. I think when the Euro was introduced it's exchange rate was about .90 USD, and today about 1.33 USD.

Further, Another said that the transition from USD to Euro dominance would create some inflation.

DP said...

@scepticus: BIS

Jeff said...


FOA never said the USD/Eur exchange rate would favor euros. He said the Euro would be the international reserve currency, that other nations would choose to hold Euros over dollars. FOA: "There is only room for one world reserve 'digital' currency that would take on the trade settlement functions of the dollar".

This has not happened. Neither has oil settlement in Euros.

Lomcvok said...

@Far Sailor,

IMHO TPTB or the $IMFS will eventually have no choice but to accept Freegold, The world is slowly beginning to discover that their savings are simply the debts of others, and that the system can only continue with MORE debt. Gravity will eventually take hold. There will be no choice at some point. Americans will not voluntarily accept austerity (punishment) and much higher taxes when the simple route (and the best for politicians) is to continue to print. What has worked in the past will continue to work, until it can't.

I would also humbly submit that our friends in the east are making provisions for the transition even now. Look at the increasing gold reserves among the Shanghai Cooperation Treaty members and observer states (China, Russia, India, etc.). All of their central banks are hording gold and growing their reserves. Perhaps this is out of a necessity to dump dollars, or perhaps it is part of the long term SCO plan, but the end result is the same.

Gold Climbs to Record as India’s Central Bank Buys IMF Bullion

Russia's Central Bank Buys 600,000 Ounces of Gold In October

Gold is part of the new economic order

I can also tell you from personal experience (I've spent a bunch of time in China) that they don't think of wealth in the same way that we do. Factories and companies are built to be passed down from Father to Son, not necessarily for immediate monetary gain. Each generation's sole focus is to create a better life for their single child AND for the family lineage. Ask yourself a question, if you were a rich Chinese citizen, or even one of meager means, how would you store your monetary wealth or savings for your single child and your lineage? the paper currency of your transitory dollar "clients", or in the form that has worked for thousands of years?

If we step out of our western shoes for a couple seconds, we can see that the emerging powers do not view gold as a currency "competitor", but as a key to the future.

Personally I believe that the transition to Freegold will not be smooth in the US. It will be fought each step of the way by the $IMFS. Eventually, however, gravity will take over. As such, there may be attempts to simply "default" against the US gold reserves with a "fixed" price (say $5000), or even attempts to restart some sort of fractional gold standard. These may come out of necessity from a falling dollar, as a counter to some other country's attempt to default against their own gold reserves, or even through the dreaded hyperinflation. Eventually however, the outcome must be some sort of mechanism that freely values physical gold. If other countries have large gold reserves (and they do/will), then the $IMFS won't have the power to assign and enforce a "fixed" value. It must float.

This recent interview with Jim Rickards on KWN is very interesting. He advocates a much higher gold price that is set through "open market operations" by the Fed. I personally don't think such a system is tenable, but his point about the "inevitability" of gold's role in the future is valid, as are his thoughts about a "smart transition" versus an "ugly transition".

Franek said...

Is good way to get physical?

Anthemius said...

Hello everyone

I have a question about oil-gold. The general thrust makes perfect sense to me except I don't see the actual mechanics of this exchange and I've not seen this explicitly anywhere here.

That is, an oil state wants (partial payment in) gold for its oil, ok - but does this mean companies and corporations were providing the oil states with gold in return for oil to sell in the US or wherever? Because these companies were not in a position to manipulate the gold price themselves. So does this mean the companies asked for help from central banks? That they all colluded and no'one made this public?

scepticus said...


Are you suggesting that the BIS is the guardian in waiting of freegeld?

costata said...


By suppressing the price of gold in the paper markets the parties to the oil-US$ dollar scheme were able to make gold artificially cheap in US dollars.

The ME oil producers could then pick up under-priced physical gold in various ways with the US$ profits from their oil sales. This wasn't US Govt gold. It was gold supplied by other parties such as dollar bloc allies (including Australia and Canada) and privately owned gold.

Oil was therefore artificially cheap in terms of US dollars as well for all purchasers of oil who could access US dollars cheaply. Obviously the major beneficiary was the USA.

One of the ways this scheme was disguised was through funding gold miners via gold loans (repayable in gold) and by purchasing the forward sales from gold miners undertaken as part of their hedging programs.

The key element in this scheme was focusing the attention of gold 'buyers' on the paper price of gold. In Western minds this IS the price of gold to this day. In Eastern minds the price and value of physical gold is the real benchmark.

While we foolish Westerners shuffled pieces of paper around thinking that we were becoming rich, wealthy Easterners were accumulating real wealth, real jobs and hard assets.

costata said...


Correction! This should read:

"The key element in this scheme was focusing the attention of gold sellers on the paper price of gold. In Western minds this IS the price of gold to this day. In Eastern minds the price and value of physical gold is the real benchmark."

Jenn said...

Hello Franek-

"Is good way to get physical?"

It's one way.

If you're worried about government controls limiting the outflow of capital, it's a way to store your gold outside of the country. You can easily move about the globe without having to lug your gold around. You can transact in gold globally with other GoldMoney account holders. GoldMoney conducts independent third party audits. But most important of all you don't have to worry about someone stealing the gold you stashed under your kitchen sink!

Me? I'd rather have my gold a little closer to home where I can easily get my hands on it -- even if it's just to say, "yep, it's still there."


Edwardo said...

On another, not entirely unrelated note, The U.S. seems to be exporting quite a bit of its "inflation" to China. I have heard some posit that this is part of Bernanke's plan, namely to cause China to depeg from the dollar which, among other things will assist our trade imbalance with China.

I don't see how our rather feeble export market will find legs via China depeg or no. My view is that, in the main, what China would like to buy from the U.S. the U.S. is opposed to selling them.

And as my mind wanders, I wonder, with respect to the game of Chess being played between the U.S. and China, what role China may have in ushering in fostering freegold.

Jenn said...

Whoops, two more comments that come to mind.

Frenak, I don't mean to imply that I know much of anything about gold storage. I encourage you to do your own due diligence.

|> Alhtough I must say that ... the video makes me want to vomit

Oh, c'mon Wendy. This song is awesome.

Check out the part starting at 30 seconds where Tony Hadley turns around, looks at the old man, and the old man pulls that big chunk of gold out of his pocket. Wasn't that just awesome?

Although I have to admit if I dim the lights in my office and turn my head at just the right angle -- that big chuck of gold looks a lot like a big chunk of silver, no?

Well, it was only a thought (without the T).


Wendy said...

jenn:Oh, c'mon Wendy. This song is awesome

The song was great in a free gold sorta way.

He's kinda cute in a Brylcreem
sorta way.

However the artistic merit????

OMFG!! I'll stand my my pool of puke thanks!!

Wendy said...

Hmmmm, that wasn't very dignified, so I'll retract my "pool of puke" remark, and say:
I prefer Tom Petty's artistry :P

GOLD FREAK said...

"While we foolish Westerners shuffled pieces of paper around thinking that we were becoming rich, wealthy Easterners were accumulating real wealth, real jobs and hard assets."

As their people suffer providing the West with cheap goods and food. The paper trade was able to siphon wealth and labor from the East. Farmers and Laborers busting their asses for $3 a day is not a benefit to the people of the East

costata said...


I wasn't implying that the benefits were evenly or fairly distributed in the Eastern countries.

How narrowly are you defining the 'East'? I was using the same definition FOFOA used in his post ie. the orient.

When you refer to the paper trade are you meaning fiat currency (as in the US$ reserve system) or debt instruments in general?

GOLD FREAK said...

The $, futures contracts, and any instrument with a price suppressive effect.

The Orient. From the imported labor the rich middle eastern countries use to the poor producers in China, and the struggling farmers of SE Asia. The current system in play gives these folks a raw deal as their products and labor are undervalued and their "leaders" are busy trying to accumulate $'s and stabalize their currencies.

Patrick said...

I ll go for this one
So, so you think you can tell
Heaven from Hell,
Blue skies from pain.
Can you tell a green field
From a cold steel rail?
A smile from a veil?
Do you think you can tell?

Did they get you to trade
Your heroes for ghosts?
Hot ashes for trees?
Hot air for a cool breeze?
And cold comfort for change?
Did you exchange
A walk on part in the war,
For a lead role in a cage?

How I wish, how I wish you were here.
We're just two lost souls
Swimming in a fish bowl,
Year after year,
Running over the same old ground.
What have we found
The same old fears.
Wish you were here.

ciaoant1 said...

Especially after the signing of the GATT deal back in 1994, the West has been "going down".

The assimilation of China in the world capitalist system ment that the western workers where no longer "competitive" compared to the bullions of chinese workers. So, the capitalists invested theis capital in China, not in the West.

The Wetst "lasted" another 20 years since GATT, mainly thgrough even more bank lending/money creation.

So, now their dollars/euros/etc are going down, because they were used, are are still being used as "fuel" (money to burn) in order for the western societies to function.

Now "there is no more fuel" - so only gold will remain.

PS: Here is a cool video with yet another Hitler Parody - Hitler as the CEO of a big corporation. It actuelly makes a lot of sense:

DP said...

Hi again, scepticus. I dont think the BIS are custodians in waiting, I think they're already custodians for some time:

Foreign exchange and gold services
Services offered are:

- spot deals, swaps, outright forwards, options, FX-linked deposits
- foreign exchange overnight orders
- safekeeping and settlements facilities available loco London, Berne or New York
- purchases and sales of gold: spot, outright, swap or options

Seems to me they hold the gold on behalf of others and administer who owns what, without it ever needing to move. Sort of a, but for the CBs of this world. Seems a lot cheaper, more efficient, and safer than loading boats with bullion each day and passing through, say, the Gulf of Aden! :-> As FOFOA said earlier, short of that total war scenario, it should be all good.

costata said...

Well worth the time to read this short piece IMHO

FWIW I think Faros Trading has hit several nails on the head in this piece.

Wendy said...

Thanks for the link costata, and I agree with your sumise.

costata said...


You may also be interested in this link.

If this GATA piece is accurate investment and reserve demand for gold may have overrun the jewellery market.

Again if true, IMO this is a major step toward Freegold. With the gold fashion jewellery trade out of the way can there be any debate about who or what is driving the gold demand?

If gold scrap supply starts to plateau or decline - fasten your seat belts.

A few snippets from the GATA piece:

"Fashion has driven jewellers away from gold too. At the mid-market UK jewellery chain Ernest Jones, some of the best-selling items contain little or no gold: a silver bracelet which can be accessorised with charms, many of which are made of stone rather than precious metals, or a leather necklace with a pendant made of silver."

"Jewellery is not the only traditional area of gold demand to be hit by high prices. The watch industry is struggling: Metalor has closed its business supplying gold to watchmakers because it "crashed," Mr Morrison says."

As Jim Sinclair has pointed out many times 'jewellery' demand in the East is a bullion market not a fashion market. After you strip out this component of the GFMS figures the gold demand from the fashion jewellery market could be very low.

Hopefully there will be some good news in this development for the silver holders. Perhaps some of the jewellery demand will switch from gold to silver.

scepticus said...

@DP, this from the BIS page you linked to:

"Fixed-term deposits can also be denominated in and index-linked to a basket of currencies such as the SDR"

That sounds to me like the future international medium of exchange, the debt liabilities of the BIS. When widespread, what would be the difference between an SDR and a bancor?

And one more point, I would say that the BIS, having a large stock of gold, will be able to charge a negative deposit rate on it, which is only limited by the degree to which people wish to utilise the international clearing service it provides.

So if one has some physical gold, how does one obtain international currency, for transferral overseas, without going through your national central bank? Because if you do have to, there will be a haircut involved somewhere in the process sure as night follows day.

I'm sure all this is covered in the freegold compendium somewhere?

Texan said...

Patrick I like your choice. Mine is "eclipse", from dark side of the moon.

DP said...

scepticus: "Fixed-term deposits can also be denominated in and index-linked to a basket of currencies such as the SDR"

That sounds to me like the future international medium of exchange, the debt liabilities of the BIS. When widespread, what would be the difference between an SDR and a bancor?

And one more point, I would say that the BIS, having a large stock of gold, will be able to charge a negative deposit rate on it, which is only limited by the degree to which people wish to utilise the international clearing service it provides.

So if one has some physical gold, how does one obtain international currency, for transferral overseas, without going through your national central bank? Because if you do have to, there will be a haircut involved somewhere in the process sure as night follows day.

One aspect of the way I see the SDR is that it's a convenient way of diversifying a CB's currency reserves, compared to accumulating a specific currency of a high-deficit country. When a deficit country overspends, SDRs will flow out from their account and their reserves will necessarily decline. They will become demonstrably less wealthy. Because no country is the issuer of SDRs, they cannot just issue them at will to pay the bills -- as is the case for the US today. They will have no choice but to live within their means.

In the longer term, yes I agree with you its likely the SDR is a viable international settlement medium, once everyone is fairly comfortable with the stability of all the currencies that comprise the basket in the SDR. So, for me, it appears to be viable only once the global rebalancing has taken place. Who really wants to sink all their eggs into a basket full of declining paper? Even when things stabilised, I for one wouldn't fully trust any of the issuers for the currencies in the basket. I would still wish to maintain some weighting of gold to hedge the by-design decline of all paper currencies over time.

The Bancor does seem to be the conceptual precursor to the SDR. I note that Keynes suggested it 'was to be backed by barter and its value expressed in weight of gold'.

Freegold is the evolutionary mechanism by which the world will be able to rebalance. Gold is the thing that anyone wishing to maintain their purchasing power must hold, as the currencies are devalued against it to varying degrees. But as individuals we can choose to do that or not do it, as we see fit. Once that rebalancing is done, it will be less important for you or I to hold physical gold in order to maintain our purchasing power. That said, only a CB will, I think, be able to "hold" an SDR. It will be a notional thing, not something you can hold in your hand or fold in your wallet. We will be holding and folding currency. Or gold, depending on our time preference.

As for how in future to obtain and send foreign currency as a person, again I see this all as an evolution, not a reinvention. So you will do exactly what you do today -- obtain your local currency whatever way you see fit, perhaps by selling some gold at a coin shop or scrap dealer, then exchange your currency and send it just as you do today. Perhaps in the future the forex shops will accept that gold is a currency, and you will be able to perform a direct exchange with them. There will be a transaction cost for any exchange (why would they do the transaction otherwise? I wouldn't!), so clearly the fewer transactions involved the less will be chiselled from your purchasing power.

DP said...

I have another theme tune option to offer (re we allowed to present >1? :) )

The Chameleons, Monkeyland

I shake my head and shiver
They smile and they stab my back
As they shake my hand
Send out an S.O.S. please
I'm marooned in monkeyland.
I'm idly staring at the sky
Did anybody hear me cry
A billion stars are a moving sight
To all you out there reading this tonight
It's just a trick of the light
I have to know what is real and what is illusion
Tell me how does it feel beyond this confusion?
Is there anyone there?
Do I dismiss this with a sigh?
And let the answers pass me by?
Is my creator God or a man?
Does someone somewhere care and understand?
It's just a trick of the light.
I have to know what is real and what is illusion
(Rest of chorus)
Is there anyone there?
Life's an optical illusion like other optical illusions

mr pinnion said...

I like the idea of freegold but one thing bugs me.
If gold does increase in price and value to the extent you sugest then where would u store it?
Would nt the crime rate go through the roof?
Would nt every tinpot dictator be invading any smaller country that has gold?
Who would dare wear a gold weding ring in public?
If a 1 oz gold coin was enough to buy a house, then would nt criminals move heaven and earth to find and steal them?
A person would have to spend 2 oz of gold to pay for the security to protect 1 oz.
I love the idea, but so many realworld practical reasons why it wont happen

DP said...

Hi mr pinnion,

For people of a nervous disposition there are services like or

DP said...

I already have a [almost worthless :) ] silver ring, ready for the day my better half accepts it is no longer acceptable to risk wearing my gold wedding band in public.

She thinks I'm being ridiculous now, but let's see...

Jenn said...

Goede morgen Martijn-

Hoe is het weer waar je woont?

A big thank you for bringing the Regular Archives to our attention and uploading them in one continuous thread. I have to admit I haven't read them before. I began reading today and already stumbled across a few things that help lift the fog from the Trail before me.

ANOTHER (9/22/98; 07:00:04 Msg ID:79)
Aragorn III (9/21/98; 16:07:21 Msg ID:71)

Mr. Aragorn, Your write offers good thoughts. I also often question why a person would want to hold the "silver for the little person"? Indeed, the gold can be divided into very small parts and still it holds the good value. I think the silver issue comes from the same view point that gold should not be "up valued" against paper currencies. It has always been seen that an official reset of the gold price is "the bad thing". Always, it is "at all costs do not raise gold price"!

The political Western stand is "Give the citizens silver and let that price rise, but, keep the gold low and we purchace it for our well being". It would seem that those of the "democratic power" want to hold the gold for "insurance" (as Mr. TYoung rightly does) and never allow it's good effects to pass to the "little person", as you say. Perhaps we do still see the "human nature" at work with silver. Persons are always attracted to the leverage argument in any investment. Again, the western analysis uses the past dollar performance of silver to make the point of "it will rise at faster rate than gold". I think, if the past economic and monetary performance was to continue, this could be true. However, we come to the end of this era. The changing of a monetary system for the benefit of removing "debt load" does also require the changing of rules for past game!

History will be written as this: "we now know that in times of major financial change, real gold increases in value and holds that value far greater than any paper gold derivative" also " no other form of commodity (silver and platinum included), even food, was valued as gold". Even in times of past war, soldiers and citizens

Ok, I admit it. I am a speculator. There I've said it. Don't get me wrong, I own physical gold heaven forbid. But I don't understand why Turk, Sinclair, et. al. would so easily dismiss the words of A/FOA. Is it really as simple as them running forward while looking backward? Did they choose not to heed the Thoughts of Another or did they choose not to read the Thoughts of Another? I guess wise men these days aren't really all that wise (wisdom: the trait of utilizing knowledge and experience with common sense and insight).


Jenn said...

Whoops. I chopped off the last sentence from Another. That last sentence should read:

Even in times of past war, soldiers and citizens were found starving for food, but still, gold was found in the pockets, not food!

Blondie said...

mr pinnion,

What motivates theft?

costata said...

scepticus and DP,

I was reading your exchange about the SDR, bancor etc.

A sovereign can achieve all of the benefits that you describe by doing the following things:

1. Holding gold reserves or having a trade surplus.

2. Currency swaps with trading partners.

3. Referencing gold in trade settlement. In other words either settling the net balance in gold or a top up in the deficit trading partners currency if their currency has devalued against gold.

Therefore no US controlled IMF required in the dealings among trade partners. No need to accept an SDR currency basket (fixed for another 5 years recently) that is overweight in US dollars.

Running trade deficits under this regime would be inflationary in terms of currency issuance if a trade partner had no gold but it could allow world trade to continue without the US$ as the trading currency.

I realise that this strategy would have problems over the long term but it has the merit of simplicity and speedy execution in the event of a crisis. Many nations are already doing currency swaps with China, the latest being Russia.

Dimmed aurum said...
This comment has been removed by the author.
Dimmed aurum said...
@ Jenn
Silver has a vital meaning even in the freegold system though FOFOA would not admit it jet.
All freegold gurus point to the failure of silver in the 1800`s without listening to their own argument that money/wealth always flows in a tightening (hard to get, hard to borrow and repay debt) vs loosening (easy to borrow,…you get the idea..) kind of fashion. So the banishing of silver as a monetary metal was just a part of the hardening phase back then. Try to think of it this way:
There cannot be freegold without currencies to borrow in (/abuse them for the welfare`s sake). Back then it was silver that played the appeasing part for the easy money group. Now, especially if you are a peak oil believer silver is not much easier to obtain than gold.
Besides those industries that began to use silver for their productive purposes came here squatting uninvited on the silver`s turf. So it will be either start recycling/owning mines or get the hell out of it altogether. I envision this will be a very positive thing to do for mankind`s sake, for we must put ourselves into recycling the stuff we use.
Further 3 points I would like to make:
1. It is very difficult to subdivide gold in lesser and lesser weight (alloys included) and still keep the faith among wealth exchangers. It is laborious time consuming effort that requires skill and learning, not to mention testing material acids etc. It is complicated a lot even now: we have the poor man`s jewelry at 9carats, 14 carats – ordinary western gold jewelry, 18 carats in between, than 20;21.6;22;23.65;24 carats for both jewelry as coin alike. My head swells when I just think about it. Silver there will be accepted for one`s word (trustfulness) only.
2. One will get their wealth chiseled away if he/she needs to swap large amounts of wealth (gold) for currency at the wrong time. Governments and bullion dealers will be quick to put their sticky fingers on the transfer. Therefore silver could be used as a better timing tool to put part of your revenue into savings (gold) at the moment of your choosing especially when you are 100% sure that you would not be needing that value for intermediate business deals. This works even better when a ban for lending/borrowing gold is put in place and one still can borrow silver/PM for a limited time span – a modern day jubilee system in which all debts in PM (excl. gold, see above) resettle in say 5-10 years.
3. If USD for example continues to be badly managed (or the perception of it) and starts declining in terms of other currencies. You may find it better to use silver in day to day op. instead of holding Euros for instance. Besides in a hyper episode workers need to be paid in sth. more stable than fiat or they will demand to be paid a barrel of fiat each day – so this will divert precious effort and thought away from production.
It may take the “silverites” to unleash freegold. The silver battleship has joined the fight all guns blazing against the COMEX/LBMA abominations. You make like it or hate it but silver IS money (may it or may it not be as much of wealth item) and ever more so. And if freegold is about what IS in reality vs what SHOULD BE in the perfect fairytale world than that fact should be acknowledged.

Martijn said...

Hi Jenn,

Thanks. The weather is ok, it's winter her now (in Nederland).

I've deleted the link FOFOA posted because I had added some to that document and uploaded another version.

It's here

Good to see others reading it; who knows what will be found!

For any of you guys interested in twitter, I'm testing the usability for some event I'm planning. It's here:


DP said...

Hi costata,

From my POV I have the SDR as viable, after rebalancing, but for me personally it would still not be an especially desirable solution. A basket of inflating paper, even if they're inflating less than the papers of today, is still not something I would
particularly have enduring faith in. However, it would seem a lot of significantly more powerful voices than mine are singing the praises of SDRs, so it seems quite likely it will eventually come into use regardless of any misgivings I might have, and it at least wouldn't be the *worst* thing.

Martijn said...

Hmm... I thought I already left a comment. Anyway: thanks Jenn.

I've updated the link as I made some alterations to the previous document.

Here is the new one.

Motley Fool said...

Greetings FOFOA

and others.

I have had a few days to contemplate. I am also steadily busy reading through all FOFOA posts.

I have realised a few things. One is, that you are speaking from the perspective of observer, not activist.

What follows now is my opinion.

I think you are correct that Freegold is the next evolutionary step in our monetary system.

My biggest personal problem is that I am too eager, I suppose. I look at what should be the end result, and don't have the patience to wait for the intermediary steps. Freegold, in my opinion, is a intermediary, and I see now, needed step.

Once we are there, it becomes possible for the evolution to continue, but the jump from where we are now to where I want us to be is too far, in one go.

The Freegold system is immeasarably better than what we have at present, and as such I welcome it, even though I don't see it as the last step on this trail.

Sincere Regards.

The Fool

Ps. My apologies for my earlier enthusiasm.

"Further, I never thought they would segregate into so many vocal tribes, each trying to advance their own minor position in the gold world and willing to step all over themselves and anyone else in the process."

I found this very amusing. :D

Casper said...

Welcome back Fool!

Glad to see you're online again.

After reading your comment I speculate that you think Real Bills will come after Freegold or at least will drive out fiat within Freegold monetary system?

Since Real Bills are drawn on production/actual goods hope you don't mind me asking how do you see the state in all of this? Since the modern state/government is not part of creative (goods) process how do you see it's role in the Real Bills environment?


littlepeople said...

Dimmed aurum:

I too, think silver will have a role in the freegold world.

According to the freegold argument, gold will be held tightly. As we know, not many people own gold. It is being accumulated by giants, and us few hangers-on.

In a freegold world, where the vast majority of the people have no golden "wealth preserver" it seems silver will again be a good choice for the masses, and be useful in exchanging for things of low to intermediate values--even cars (but not BMWs). It will certainly hold value better than fiat currencies.

Assuming that silver continues to be used in many production processes, it will become more rare as well. So, there will be a market for silver beyond that of exchange.

As you mentioned, I think, silver could be a good buffer, so that one would not need to use (or expose) his gold, yet have value exceeding currencies.

I do not think that Another or FOA foresaw the drawdown of silver stocks, or the plethora of uses of silver today. When they wrote, silver was assumed plentiful as far as the eye could see. At least, that is what I gather from their writings and from others in that era--even just 10-12 years ago.

Jenn said...

Hi Martijn-

Thanks for the updated version. I'll start with that before I get too deep into your first post.

We zijn van plan om in juni 2011 naar Nederland te komen. Misschien kunnen we dan elkaar ontmoeten?


sean said...

One assumption I read often about silver is that its industrial consumption guarantees a minimum price. However during the turbulence of transition to freegold I'd be very worried about that industrial demand evaporating. Rather than standing on the "unsinkable" titanic when the iceberg hits, I think it would be advisable to be in the freegold lifeboat.

DP said...

@Dimmed aurum/littlepeople:

It seemed to me that a lot of people like silver, and a lot of people dislike silver. I have liked silver myself for some time, but lately I have traded out for gold. I am very interested in this debate, as I'm sure are many others. So interested, that you today have drawn me to the conclusion perhaps it is interesting enough to put up a post where I hope people will state their case on both sides, and we might end up with some kind of concensus eventually. Or perhaps a few nice new trolls from elsewhere, who knows?

To that end, all who are of a mind are cordially invited to said post, here :

To silver, or not to silver, that is the question...

(Apologies are due to FOFOA for my freeloading on his traffic. I hope he sees this as a relevant and perhaps interesting side-branch of his main river system, as intended, and is prepared to tolerate such audacity!)

Casper said...

I see that many use the industrial use of silver as a advantage to it's price when the opposite is true. As FOFOA (I think) stated, no commodity will be allowed to be hoarded if it can be used in production of goods.
Maybe that is also the reason Gold/Silver Ratio is this high.

That said I agree it's price could reach very high and then drop like a stone - they don't call it poor man's gold for nothing.


littlepeople said...

You said, in part, "As FOFOA (I think) stated, no commodity will be allowed to be hoarded if it can be used in production of goods.
Maybe that is also the reason Gold/Silver Ratio is this high.

That said I agree it's price could reach very high and then drop like a stone."

Could you supply some reasong behind your thinking? Why would silver drop like a stone? If it is a necessary metal, and people are hoarding it, how will it ever reach the market if the price drops?

There are millions of ounces of silver sitting in peoples' homes across the world today, precisely because the price is TOO LOW. Silverware, teapots, rings, necklaces--the way to get this to its higher use is through higher prices. Maybe if the price gets high enough, this stash will be pried loose, sent to China for smelting, and then what? China is no longer exporting much silver.

It seems to me that silver, which has fewer proven mining reserves than gold, is, and will remain, a precious metal.

I do think gold will be used as the premier wealth preserver, but silver will also have uses, and will provide a nice complement to gold owners, and others in a freegold world, for reasons explained previously.

Dimmed aurum said...

@ all
Industries should substitute silver whenever they can with materials/metals that are more abundant, I think. Industrial usage put aside (although it is an important issue), the debate I envision may go along these lines: should the EURO fails its role as pre-ordained by design (and thus predicted by ANOTHER/FOA) and falls prey to the politicians and the welfare state; gets massively abused, overprinted etc., than what? Is not better to hold silver as an intermediary (/a bridge of a sort) between wealth (gold) and building wealth (productive activities); between everyday needs and intergenerational wealth building activities?

Jenn said...

@DP, Casper, littlepeople-

Having this debate about silver over and over isn't helping anyone. It goes without saying that you are free to choose which ever side you'd like, but if you take the time to read through A/FOA/FOFOA's Thoughts on silver, you'll find that any/all questions/arguments/angles you can come up with have already been answered -- some of them over a decade ago.

FOFOA is not trying to say silver will be worthless in the future. What he is trying to say is that when discussing the coming revaluation of gold versus silver -- there is no comparison. The footsteps of giants do not lead to silver. It's that simple.


Casper said...


I am not a believer in a "Mad Max" scenario, therefore I believe the world and it's economy will continue to expand when the issue with gold/wealth is resolved.

I also happen to believe in A/FOA/FOFOA line of thinking with a few reservations -some details still bothering me, but basically agree with the overall picture.

You say the price of silver is too low therefore much of it exists in a shape of "silverware, teapots, rings,...". Do you also agree that the price of gold is too low but we fail to see it in such large quantities as above mentioned products? Why is that?
Maybe silver never was "a store of value" in the past maybe it just performed a role that will in future be the role fiat (medium of exchange).

Regarding the price.... I guess we all agree more or less that the paper price of gold can/will reach who knows what heights and then drop due to default. I believe similar will happen with the price of silver with one little difference in regard to gold. Physical price of silver in gold will drop afterwards.

That was what I meant with "drop like a stone".


littlepeople said...

Why should we stop just the silver discussion? FOFOA may as well stop the blog, if, as you say, it has all been decided already.

Or, do you simply dislike silver so much that that is the only discussion you'd like terminated? Why might that be?

Casper said...


I agree with you 100%. We just need to look at the balance sheet of central banks to see what they value most.

I don't mind discussing things that have already been discussed because otherwise we wouldn't have much to say to each other. After all we have all (majority) read the archives. What's there to discuss that hasn't been answered yet? :-)


DP said...

@Jenn: I agree with you. It's not going to help anyone here who is already on the same page.

I'm hoping others, ideally including non-FOFOAland citizens, might come to understand as you do, by having a specific post where that specific topic is the thing that is for discussion. There is always a chance someone does have something new to say that is of interest, I guess. I have started out the post attempting to suggest I am ready to be convinced, but in truth I find it hard to believe right now that anyone is going to tell me something that will change my mind on this question! :) I am really just trying to start out from a non-confrontational position, so that nobody gets out of hand, well perhaps not right away at least... :-D I have every faith that some barstools might be thrown at the mirrors, and some bottles will get broken. I am holding off from putting a link on JSMineset FB page just yet, from where I expect to see some... interesting... comments eventually, for example. ;-P I am looking forward to hopefully sitting back and enjoying the show.

As you, I also don't think it's perhaps an especially productive use of this space here, nor I would think to some people here desirable, to have that kind of [probably animated] debate in among the other comments here at FOFOA's place(?). So I thought I would try putting it out elsewhere. Perhaps some more people will find their way to salvation here from that; the breadcrumbs are certainly dropped to help people find their way. Hopefully not too many real trolls are smart enough to follow the trail... (My apologies to all if they should do so! :->)

littlepeople said...

At the risk of drawing the ire of FOFOA, I would like to address an issue prevalent among several posters here.

The issue is one of total acceptance of FOA/Another's writings.

As mentioned many times here, I do think freegold is a concept that makes sense, and will manifest. But freegold is not just gold becoming worth a whole bunch of fiat currency in a vacuum.

I respect FOA/Another/FOFOA's writings, their perceptions, and their knowledge; not just of the monetary world, but their knowledge of human frailties and foibles as well.

But, as I said a long time ago, they have not yet proven as reliable as Nostradamus.

It seems that Another was of either european or middle eastern descent, from what I have read. And, had close contact with CBs and/or their managers. With a close-up view of what was behind the euro during its incubation period and subsequent birth. All well and good.

However, much water has gone over the dam in the ensuing years since then. Much has changed, even while much has remained the same.

I cannot bring myself to blindly accept every word uttered by these people as the absolute, undying truth. Can there not be any other way than the proffered way?

Regarding silver--Another wrote during a time when silver was seen as relatively plentiful, and the G:S ratio was 1:65 to 1:75 or so. The present times tend to weigh heavy on people's view of the future.

I do not recall ever reading anyhting from FOA about the silver manipulatuon, which was ongoing at the time, but not discussed as was gold's manipulation (hence the failure of paper gold).

Those people who made the decision to cash in silver for gold when the G:S ratio was 1:80 lost out on a huge opportunity, as the ratio has gone to 1:48 in the last several weeks.

I know that the argument is that having gold at all times is critical, as when freegold goes live, it will be fast and furious. But freegold has now been "imminent" for 10-12 years . . .

Anyway, my point is that NOBODY knows everything. If I am correct in that point, then ongoing discussion, even of those things such as silver's value being already "settled" seems to still posibly be of some value to someone, somewhere.

As Yogi once said, "It ain't over til the fat lady sings." She may be approaching the podium and is warming her voice, but the singing is yet to begin. My opinion.

Dimmed aurum said...

You said:
1.“Silver demand today comes predominantly from manufacturers. It is positively correlated to economic demand; it does well when there is strong consumer demand for the products it is used in. This is one of the reasons cited by silverbugs to justify future massive price rises they anticipate - its scarcity value. However, if (when?) the economic demand for those products dries up, perhaps brought on by the very same high inflation that the silverbugs foresee coming down the pike, industrial demand for silver will dwindle along with that. Silver is used in desirable consumer products, but I don't think it's in anything quite as necessary as, say, food or energy? That is the largest part of the current buyers -- who steps into their shoes to buoy demand for silver, when the manufacturers leave the market as a result of sluggish global demand? There is no significant industrial demand for gold; it is uncorrelated to global economic performance. If/when the global consumer economy contracts significantly, there will be no disappearance of industrial demand for gold -- there is only really investment demand, even in the form of jewelry the purchase is fundamentally an investment by the buyer. If (when) the global economy takes a bath, the desire for gold is likely to only increase, in my opinion.”
In Bulgaria where I live, jewelry demand for silver outstrips by far that for gold. It is the fashion of the teenagers now - the adults of tomorrow. Guess they do not think of silver as just another commodity. Somebody mentioned that gold evaporated from Peru never mind its booming economy. Here a wall has fallen (literally) between gold and silver jeweler`s shops. And those of them that once swore they would not even touch silver now make their profits predominantly on silver.
2.“Silver is the poor man's gold. The massive investors of this world, the Central Banks (CBs) and Sovereign Wealth Funds (SWFs) of current account surplus countries, do not add silver to their reserves in any meaningful degree. They keep gold in their reserves, but not much, if any, silver. If industrial demand for silver should fall, these giant potential buyers are not going to suddenly step into the shoes left empty by the manufacturers of this world, I strongly suspect. There are reasons that they do not keep silver...”
I do not expect these rotten reeds (CBs) to support my way of living in any way (, in fact I will feel disgusted if they do;) should somebody lean on them they`ll brake and penetrate his arm. Broken edifices of broke governments are they; nasty joke; devours of freedom and supporters of the political/economic oligarchy.

Dimmed aurum said...

3.“Silver is a "necessary" commodity. Many products that people need and/or desire contain silver, and in many of those applications there is no substitute for using silver. This means that it would be deemed totally unacceptable to hoard silver, because it treads on the toes of consumers the world over. Imagine CBs or SWFs decided to hoard, say, wheat or corn? These are similarly necessary commodities, and hoarding of them would distort the supply/demand balance, speculatively increasing the price and impinging on consumers. There would be uproar. These foodstuff examples are intentionally selected to emphasise the principle -- clearly I am not attempting to say that silver is as necessary to human existance as wheat or corn! But the principle I am illustrating is the same, albeit to a significantly lesser degree. The reason gold has been selected over the millenia as "money", is specifically that it impinges on nobody if you choose to hoard it. The price can rise as high as is necessary to clear the supply/demand balance, and nobody would be hurt. In fact, unlike any other "commodity", the higher the price of gold goes the better people like it! This is simply not the case for silver.”
Was it not convenient to demonetize/demonize silver so that it fell perfectly in the big boy`s scam of defrauding the large population out of it for “the benefit of humanity”. Most of silver`s uses can be substituted at the right VALUE or better still if is repeatedly recycled (or extracted out of the ocean`s water if you will).
ANYTHING is substitutable, even gold. One just has to put his mind into it, smile.

Dimmed aurum said...

4.”Silver is actually not that rare to find, relative to gold. There are very few silver mines in operation today, with most silver mined as a by-product of mining other industrial metals. This is not due to there being little silver to mine in the world, but because the economics of mining silver mean that it is in most instances not economically viable to dig it up. Getting it as a by-product of some other activity is a bonus to the miners pulling out copper etc, it is an afterthought as far as they are concerned and they are not especially bothered how much they get for it. If the price were to significantly rise, it would mean that many more silver mines become economically viable, and the supply will ramp up to meet demand (bringing the price back into balance). There is plenty of silver to mine, just not at today's prices. This is quite unlike the case for gold, there are plenty of mines digging up only gold in the world today. When the price rises, I daresay more gold mines might become viable and there could be an increase in supply as a result, but I think you will find that the ability to respond in this way to higher prices is much less than is the case for silver.”
Yes that`s right. But in a world where energy needs soar and the eco system in many parts is on the brink of collapse it will be much more feasible to recycle than to mine. And you cannot get silver out of scrap iron for example.
Even if you mine and thus produce “new” silver as a byproduct in “new” copper production that would mean that you would have needed copper in the first place as a result of stronger industrial demand (than normal recycling would require). This is a feature of a rising economy that will normally accommodate this new supply of silver nicely, so that no cornering of the silver market can occur.
5.”Similarly, because silver is a part of many consumer products, as the prices rises it becomes increasingly viable to recover the silver from products at the end of their life, increasing the scrap supply. Since gold is not used to any significant degree in consumer products, that avenue for increased scrap recovery will not be available. Gold is held pretty much only for monetary purposes, and it will only be returned to the market at a price that people believe it is fully, or more likely over, valued. Given the on-going, by-design debasement of paper currencies, any thinking person should understand that there is no time that paper is better than gold, unless you want to spend your wealth immediately. So, if gold should some day become significantly overvalued then perhaps yes, it might be dishoarded until the price comes back to whatever is deemed to be fair value. But I don't think this significant perception of overvaluation is very likely to happen to be honest.”
Exactly what I was writing! Recycling means restoration of true value. Now my friend the jewelry fixing guy can well send his silver`s dust to the refiners as well as his gold`s. Besides, recycling will increase the stock to flow ratio of silver enhancing its “uncornerability”. A key freegold feature.

Dave said...

I am bullish on silver.

But realize if you own silver, you are a speculator, and could lose money if you don't trade out for gold in time IMO...

From Harvey Organ

(Emphasis *** is mine.)

"Thus by taking 81 billion dollars and dividing by 17.00 dollars we get 4.7 billion oz of silver shortfall. I had originally estimated that I thought the shortfall was 3.3 billion ounces.

We know that the USA had 2 billion oz in 1990 ***and that silver is gone.*** The supply of silver from the mines over the 20 yr period has averaged around 500 million oz and demand of oz. at around 750-800 oz. This year demand will exceed 900 million oz."

That's one of many reasons I'm bullish.


"It has been our supposition that ***China has supplied the remaining ounces of silver with their left hand in order to receive gold in the right hand.***"

And that is why I will trade my silver for gold as the GSR continues downward.

I want to hold what the CB's hold.

Jenn said...

Here's a great post from Michael H left behind only three months ago (how quickly we forget).

One more comment, as a general comment on silver.

The fact that silver has industrial uses is a strike against this metal for use as savings, as far as the giants are concerned.

To see why, look at oil. Imagine OPEC really wanted to squeeze the west. They slow their oil production to a trickle. What happens? First, of course, the spot price skyrockets as the last stored oil is burned up. But then, as oil stops flowing, the infrastructure and industry that oil supports will atrophy, and demand will fall away. Now, instead of having the west at its mrecy, OPEC has just succeeded in returning its economy to nomads herding sheep.

I imagine a similar dynamic would occur with silver. If the price of silver is too high for industry to absorb, the industrial demand will disappear.

This scenario would leave investment demand of course ... but it shows exactly why there is an incentive to limit that investment demand as much as possible.

Overall, A / FOA / FOFOA's position on silver reflects the long-term expected outcomes. Short-term, I see it as a literal coin-toss. Which spring is tighter wound, and which will release first? Gold, or silver?

FWIW, FOA predicted that gold would have a huge run-up in price before a hyperinflation hit, and then outrun all other real goods during the hyperinflation. But 'time will prove all things'.

(I, too, own a fair amount of silver, and am thinking about when to trade it for gold).

FOFOA had an interesting response

Michael H,

You clearly have a good understanding of things!

@ All re: Silver

In order to understand why silver cannot chase gold in Freegold you must understand what is really happening with gold. My best recommendation is to start with the ANOTHER and FOA archives. The past ratios between silver and gold can all be explained with an understanding of the monetary history and their relatively similar roles throughout, as well as the subtle differences. FOA goes into this history in depth. Mundell is also good.

Changes to the ratio throughout history can be understood through circulation velocity, coinage overvaluation, reserve vs. transactional roles, etc... What is happening today is happening to gold and not to silver. It's not a simple reversion to the ratio mean as all technical analysts would love. There is a role change coming for gold that is not coming for silver. It's not you and I that impart the necessary value to them to change this role. It is the truly wealthy of this world and the super producers. The giants. They impart value and they have already chosen gold... a long time ago. We are just going along for the ride thanks to ANOTHER and Ben Bernanke.


Dave said...

@ Littlepeople

Your interpretation of the GSR is backwards.

As this chart goes down$GOLD:$SILVER&p=D&b=1&g=0&id=p62250048810
The number of ounces of silver needed for an ounce of gold goes down, or silver is being valued more and more vs. gold.

So, it is better to swap your silver for gold at 1:65 rather than 1:75

I think the GSR will go as low as 1:10 before this is over. I don't expect when it hits that ratio to be very tradeable though (it will be a spike that is hard to capture).

Fauvi said...

Dave & all,
this subject is very interesting for many. I think we should keep it alive in order to try to catch that spike we are all waiting for.

henq said...

Freegold in a nutshell:

The international gold market was developed in London while Britain was in its heyday. One of Britain's colonies, South Africa, supplied at its peak 1,000 tons of gold a year to the market, so it was natural that London, at the time also the hub of world business would develop the systems and institutions that developed the world gold market in London. At the time of the gold standard, the gold market in London made the system possible. New gold supplies allowed for the expansion of money (gold) as the world grew (today rising gold prices could fill that role too)....

Dave said...

@ Fauvi,

Well, that's my point. The extreme in the GSR is likely to be a spike that you can't capture.

TTBOMK, a similar thing happened in the '80's when sliver spiked to $50.00. The exchanges printed the price, but very few paper contracts were exchanged at those prices. It was worse with physical, you could get $30-40 per oz, but not $50.00. Dealers wouldn't do it.

If you must own sliver for whatever reason, and you want to preserve a gain by converting into gold, it is best to watch gold, silver, the GSR, global and corporate bonds to gold, and anything else you can study to get an idea, and then look at the historical GSR, which has gone from something like 1:12 to 1:75 (not sure on the high end), and then formulate a strategy to get out of your silver holdings.

I don't mind discussing it, but IMO the comments section of any Goog group is a crappy place to do it due to posting constraints, I'd prefer a better board.

holdinmyown said...


"If you must own sliver for whatever reason, and you want to preserve a gain by converting into gold, it is best to watch gold, silver, the GSR, global and corporate bonds to gold, and anything else you can study to get an idea, and then look at the historical GSR, which has gone from something like 1:12 to 1:75 (not sure on the high end), and then formulate a strategy to get out of your silver holdings."

In March 2008 the GSR was 46 and only 7 months later in October 2008 the GSR reached a high of close to 94. Even in "normal" times the GSR can change quickly to the detriment of your wealth position if you hold the wrong asset. I am not sugesting that 2008 was a "normal" time but relative to the coming disruption it may appear to be so. You will not be able to time your exit out of silver into gold ... it will happen too quickly. Having said that I must confess that I own silver bullion as well as gold (8 times more silver than gold in terms of oz held). I am not confident that I will be able to transition my wealth holdings from silver to gold at the right time but that is ok with me. The silver will serve as a hedge during the transition period as I do not want to be forced to liquidate my gold. Since the future is unknowable I cannot maximize my wealth position over any given time period. I can only take precautions to preserve (and possibly increase) my wealth over that period. I hold gold and silver for the same reasons ... as a hedge against uncertain times.

Wendy said...

It's fun to over think things on paper or in a forum! Your investment decisons today should give you "peace of mind" today. If they don't you are doing something wrong TODAY.

For christ sake, we could walk across a street and get dead tomorrow.

Certainly make plans for your future, but do not count on any particular outcome.

silver or gold or whatever helps you sleep!!

Dimmed aurum said...

Silver is not a highly leveraged game on gold (at the moment). It is a levered game none the less because of these assumptions:
1. Budgets of western nations are not going to be balanced soon, which will lead to overprinting. This will bleed gold out towards net exporting nations and will infuse silver as monetary anchor of a lesser quality. SDR word reserve currency (or bancor if you wish) if introduced could “mend” that and slow the process, not being able to reverse it though. In any case silver could suffer as well as human liberties for such a move will be leading to NWO.
2. Silver is a leveraged game on the EURO. The more it is seen as just another corrupt currency the more of the meager savings of world`s plebs will be directed towards silver. And it is wrong but it will happen (it is already happening).
3. Industrial demand for silver is inelastic. It isn`t (approx. 85% of the cases). But can always (and relatively fast) switch in and out of silver if it as a partly industrial metal offers the right VALUE.

Silver has a role to play only in highly inflationary or hyperinflationary environments, otherwise own gold. In a hyper-deflation induced hyperinflation of base money gold rules supreme unless confidence in fiat evaporates too quickly and society disintegrates as a result.

DP said...

@D.a: Good morning! :-)

I see that you have saved your best until last: NB!
Silver has a role to play only in highly inflationary or hyperinflationary environments, otherwise own gold. In a hyper-deflation induced hyperinflation of base money gold rules supreme unless confidence in fiat evaporates too quickly and society disintegrates as a result.

I hope that we can agree now that hyperinflation is effectively the opposite of inflation, not a super-version of the same? The massive currency issuance in a hyperinflation situation is a response to the massive real deflation; the cart that is behind the deflationary horse. That being the case, in your first of these sentences the word "hyperinflation" seems it might be included in error, while it is used in the correct context in the second, no? Given that the grand Freegold reset is essentially the manifestation of your second sentence, you are perhaps making the case yourself for gold over silver? That is, unless you think the deflationary reset of Freegold is further away than many here believe, and it is safe to continue speculating rather than rigging for a storm? Finally, I would think that if confidence in fiat evaporates too quickly and society disintegrates as a result, this would only be more fuel for gold's rise, not less?

Dimmed aurum said...

It is like truck tire bursting: You get the bulge, than the rip (tearing of the protector), and then the bang.
There is a time lag between printing the notes (base money inflation) – THE BULDE, the lost faith in the futures market -> COMEX/LBMA go bust first in the gold and silver accompanied by high price inflation in some commodities – THE RIP, and then the complete loss in fiat, futures market, and paper promises where only street dust bids for the currency – THE BANG. Before and after that process it is fine to own silver. Should the buck stops somewhere in between – then gold.

Dave Narby said...

@ Holdinmyown

"You will not be able to time your exit out of silver into gold ... it will happen too quickly. "

Sez You.

Let's go back and look at period the GSR took a moonshot.$GOLD:$SILVER&p=D&b=1&g=0&id=p62250048810

Looks to me like there was the entire month of August in '08 to get out, and that was before the massive deflationary event that was the 'crisis'.

The chances of that happening again (massive rapid decline in stock prices) is small, as the leverage that precipitated the billion dollar margin calls that transpired is gone, and the Fed will step in to support prices in nominal terms.

This is to both keep the sheeple from panicking (whew! My portfolio is still pretty much OK, stocks must be a good hedge against inflation!), and to preserve the capital structure of the giant banks (every scrap of debt will be paid for in cash and dumped on the US taxpayer's (and perhaps now the EU taxpayer's) doorstep).

I'm betting for various reasons the GSR will get a lot lower before it goes higher.

And let's say I'm wrong, and Freegold happens, but we can't trade out because the GSR shoots to 1:200 and stays there (unlikely IMO, but possible), and I'm kicking myself saying "Damn, I only did half as well if I had just bought gold."

But Freegold happened, and gold is now at 50k an ounce.

...So what's silver at again?

...Thanks, I think I'll risk it...

Jeff said...


I often consider where A/FOA got off track. Timing, certainly, and a few other major points. The question to me then is whether the errors invalidate the premise. I think they do not, but there has never (AFAIK) been a discussion here of the reasons A/FOA predictions did not come to pass as they expected. It might be beneficial.

DP said...

@Dave: "Damn, I only did half as well if I had just bought gold."

Mightn't that be "Damn, I still did half as bad as holding dollars" ? :)

Dave Narby said...

@ DP


I actually did the math on this, but decided not to post it because it's really very simple. Once you do it yourself, you'll see (we hope).

DP said...

:-) Touche!

However, I was making reference to our differing frame of reference, rather than the detail of numbers being "half" of anything in either case.

In your frame of reference dollar=0 and gold = say +100 for simplicity, and silver is something between 0 and +100. Gold and silver are both a win.

In my frame of reference, gold = 0 and dollar = say -100 for the sake of simplicity. Is silver a positive or a negative from this viewpoint?

I am interested in trying to maintain something as close as possible to 0 and avoid -100. You are saying you'll have a win in the end with say +50 in your frame of reference, but that would be -50 in mine.

Each to their own, but for me it no longer feels worth the risk. As Wendy said silver or gold or whatever helps you sleep!!

Robert said...

The non-giant Bearing finds comfort in holding both gold and silver (and platinum too). By far the greater $ amount is in gold. Bearings are no good at predicting the future, so I diversify.


Shameless Plug! Readers are invited to our Peruvian bearing import company´s new website:

It is in Spanish and still needs a fair amount of work, but we are on it!


mr pinnion said...

@ blondie

"What motivates theft"?

Y greed or need i suppose.
Obviouse i would av thought.
And while i m here , theres another problem with the getting rich with the gold idea.

Many ,including me think there will be a food crisis soon.What if the food runs out and it becomes pricless.The government is the only one with food which it gives to the people who need it.Any stockpiles are confiscated as happened in hurracaine kat.
The gov. gives food out to the poor free of charge.But heres the rub.It s means tested.The price is dependant on a pearsons abillity to pay.No pay, NO food.
Now try and buy stuff with your gold.If you do, you ll only have to sell it the next time you need to eat.If you dont declare your gold and get your food for free,then you cannot buy luxuries without being found out and being charged with food assistance fraud.


Paul said...

"Britain's 38 million savers were urged to invest their money in the stock market after being warned that for many of them it was now a "waste of time" putting their cash into a savings account."

Investors told forget savings accounts, think of shares

More writing on the wall. For those many, many ordinary people who have little savings and live payday to payday, this means spend it on necessities as soon as you get it. How long till the big H?

littlepeople said...


"I often consider where A/FOA got off track. Timing, certainly, and a few other major points. The question to me then is whether the errors invalidate the premise."

As you said, and I agree, the lack of timing does not necessarily invalidate the premise. Freegold is the most sensible way for the world to escape the death throes caused by overriding debt. Many things take much more time to manifest than one would think.

Mr. Pinnion makes a good point about the upcoming food shortage, which has been festering, hidden by USDA reports, for months. A goodly supply of rice, beans, wheat, water, liquor, guns and ammo are another good hedge to protect gold. Silver is also a hedge, along with a bit of fiat currency.

Gold, unhedged, will be a conundrum--how to utilize it without fear of loss.

Wendy said...

Foor security is essential. It's great to have a well stocked pantry, but in the end, that stock only lasts so long. Taking steps to secure food is a learning process. learning to grow some of your own food is one step. Even most urban centers today allow the raising of chickens.

I have a tank full of tilapia fertilizing a garden in my front porch. I have tomatos ripening and green pepper, beans etc. growing, while outside there's several feet of snow.

Again my point is that providing for your food security requires alot of time and effort and LEARNING.

Taking the time today to challange yourself in this area is a worthwhile endevour, and if you end up needing these new skills ....?

PS I don't have any chickens (yet)

Jenn said...

Hi Wendy-

Great insight. I rent and I've got bees and chickens (I bet the Ben Bernanke doesn't have bees and chickens), however I'm quickly realizing that tilapia would add a whole new level to the mix.

@mr pinnion

You've got some good points there. It sounds like you might want to stock up on canned goods -- and silver!

"The price is dependant on a pearsons abillity to pay.No pay, NO food."

No gold, no ability to pay. Can I have some of those inflation-adjusted bread coupons, please? (big smile)


costata said...

Hello Mr Narby,

I, for one, do not have the skills or temperament to trade regularly.

I admire gutsy traders and I hope you make out like a bandit.

That said, from time to time we see comments from newbies weighing gold versus silver. If a newbie asked you: Should I buy silver instead of gold? What would be your advice?

costata said...

Hi Jeff,

You raise some very interesting issues with this comment:

"I often consider where A/FOA got off track. Timing, certainly, and a few other major points. The question to me then is whether the errors invalidate the premise. I think they do not, but there has never (AFAIK) been a discussion here of the reasons A/FOA predictions did not come to pass as they expected. It might be beneficial.

These issues have been discussed in the comments over the last couple of years. Sometimes quite heatedly. A lot of e-mails too.

FWIW I'm going to put together a comment based on a recent e-mail exchange on the issue of timing. I'll post it as soon as I can.

It may help to encourage the discussion you are seeking.


Blondie said...

@mr pinnion,

""What motivates theft"?

Y greed or need i suppose.
Obviouse i would av thought.

It doesn't appear you gave it much thought, but I'll bite...

What motivates greed?

What causes theft to be the only avenue to meet need?

I personally have no intention of "getting rich with the gold idea". Your understanding of Freegold seems quite different to mine.
Physical gold is not for "buying stuff" during a theoretical govt sponsored food crisis.
It is held as a store of value rather than a medium of exchange.

costata said...

Hi Jeff,

Re: Timing

I don't think it would be a stretch to say that the failure of Freegold to materialise, at the time (or soon after) Another and FOA stopped writing, damaged their credibility in many people's minds. Some of us take a similar attitude to the one that you express here:

"The question to me then is whether the errors invalidate the premise. I think they do not...."

Another and FOA's warnings and predictions were akin to someone warning of the risk of an avalanche. The avalanche never came, so some people are understandably given to wondering "will it ever come?". Others might complain bitterly about missing many years of trading opportunities because they heard A/FOA's message and went all in.

Yet another group might be very grateful that the avalanche was delayed while they accumulated more physical gold and prepared for a tumultuous transition period.

So the question of timing could be posed as:
1. Will the avalanche ever come?
2. If it is coming, when will it come?

For some input into consideration of question 1 the A/FOA and FOFOA archives are a rich source of insights. So I'm going to skip that question and propose a method to address question 2.

I was recently involved in a discussion about timing that centred on one key factor - complacency. Out of this discussion an approach emerged that draws on dialectic reasoning. We proposed two columns headed:

Encourages Complacency
Discourages Complacency

I imagine a long list of items in each column. Let me propose two to (hopefully) start a discussion.

Under Encourages Complacency I would include Launch of the PM ETFs. Under Discourages Complacency I would include Gold spot price falls below cost of mine production. (One of Another's main reasons for speaking out.)

In this exchange about timing the participants came to the conclusion that the signs the "avalanche" was getting very close would include:

1. The items under the heading Discourages Complacency are increasing rapidly while new items in the Encourages Complacency column are static or increasing much more slowly.

2. Items from EC are migrating to DC. An example of this would be, say, "Gold is in plentiful supply for retail purchasers" switching to "Gold is in short supply for retail purchasers".

We also discussed a few premises that could be adopted to save time and effort. The first premise we adopted was: The paper gold price is manipulated for reasons other than price discovery.

If anyone thinks this method could assist a discussion about timing perhaps they could propose a few items for each list. If they dated them it might also help to make sense of the delay in A/FOA's "avalanche".

mortymer said...

An avalanche is a sudden rapid flow of snow down a slope, occurring when either natural triggers or human activity causes a critical escalating transition from the slow equilibrium evolution of the snow pack.

When you are in a big avalanche, do you see the snow around is moving? Compared to what? A lot of snow dust around, its hard to see at all clearly.

We all feel we are getting just little bit less air now, lets hope not too many go under. While one swims in it - is relatively still a nice ride.

The game is over, its been when Another, FOA started to post, the gold market has been cornered back then. We just observe what is happening after. The big crash did not happen yet? I say it has not been just realized.

Dont you all see the mountain of derivatives? Those debts piled up as far as one can see? Why it did not happened yet? The "big" event? Well, I suppose that: Nobody wants to be the trigger? Everybody walks silently around on this very thin ice.

Fauvi said...

"We are trying to guess how dramatic that end will be. It will be difficult enough to stop a run by unallocated account holders on the bullion banks, without forcing a cash-payout amnesty. But if the central banks themselves cannot supply the necessary bullion to prevent this, the prospect of a total collapse of paper money will be staring us all in the face."

The avalanche is about to get started. What if the BIS doesn't have the unallocated gold? what are the implications for Freegold?

Jeff said...


I can think of a few under DC:

Euro in place
Rising gold price
Rising oil price
Dollar debts continue to explode

And under EC:

Oil still settled in dollars
Dollar still reserve currency (?)
Euro debts continue to explode

I think the Euro debt issue is very big; FOA stressed that the Euro was the anti-dollar because it did not carry such debt weight as the dollar. After just a decade that has changed. Of course the dollar debts are still much larger but has the calculus of Euro not changed?

Jeff said...


Could I also ask again a question from upthread? FOA believed people would run to the Euro, but he obliquely admitted that they may not.
FOA: "If the Euro fails, as the dollar has, it will do so in a world where gold in the hands of man will balance the loss." And this: "Make no mistake, mankind has before and will again use physical gold in barter by trading it wealth for wealth. But once we try to morph it into money, it's function is diminished by
socialist design."

If the euro fails, what is the implication for gold? Thanks.

DP said...

The war on terror?

Youtube:Gold Dinar, Silver Dirham

Museice said...

mortymer: I read the same piece, When That Happens The Game Is Over and now have another answer as to how China is diversifying out of dead Treasuries and into precious metals. It appears the US has just given up or we are rock dumb stupid.

Michael H said...

@ costata:

Yours is a great way to look at this issue.

Previously, in my thoughts regarding timing, I looked only at 'what has the $IMF system done to beat back the onslaught of freegold, and how much longer can they keep it at bay?'.

I can't recall the full list but it included

- Iraq war
- Mt. Derivative
- China -- US trade and financial relation

Regarding complacency, one could also think about psychology. It is said that market tops happen when investors are the most complacent, confident that prices will continue to rise, sure that 'this time is different'. At that point, everyone is on the same side of the trade and nobody is hedged, hence panic can set in suddenly. Likewise, bottoms are formed when everybody is convinced a certain asset is trash.

I realize that the freegold transition is not a market pricing phenomenon, but perhaps some psychological parallels exist.

Jeff, that is a good list to start.

But, under which heading does 'rising price of gold' really fall? costata lists "gold spot price below the price of production" as DC -- a warning flag.

A steadily rising gold price, on the other hand, could be an EC signal. With a rising GP, speculators are encouraged to play the paper gold market for leveraged paper gains. Also, a rising gold price makes sense fundamentally at this point. What if the FED was printing $$ to oblivion, and the $GP was falling? That might be a sign of insanity, and a time to panic. FOFOA has said numerous times that he expecs the spot (paper) price of gold to freefall prior to the breakage of the paper gold market and the end of the $IMF.

Items that I would like to list seem to have two sides, an EC side and a DC side. For example:

- EC: low interest rates
- DC: increasing notional of derivatives

These two are flip sides of the same coin, since many derivatives are interest rate swaps that keep rates low!

Likewise, "bank and sovereign bailouts"; on the one hand extend business as usual, EC, and on the other hand increase debt levels and provide a window into systemic risk, DC.

Compiling this list seems a worthy project for ongoing discussion, and for a post summarizing the results for reference at the end.

Michael H said...

Side note: a worthwhile read from Mish regarding the JPM / silver stories going around.

"Still More Hype Regarding Silver; Just the Math Maam",

The easiest way for the CFTC to accomplish the silver conspiracy advocates' goal of eliminating the massive short position of JPM would be to up the margin maintenance on silver futures and not let anyone buy any more futures until open interest shrinks sufficiently.

Ring a bell? It should. If not, please consider Hunt's Attempt to Corner the Silver Market (
and how the story ended.

I am not proposing that solution, I am merely warning silver conspiracy advocates including Ted Butler and GATA that they better be careful about what they are asking.

In my opinion, if controls are placed, those controls WILL be on the long side (which of course will affect the short side) and everyone screaming for controls will get what they ask – forced long liquidation via inability to buy futures, only sell them.

MH: "The Hunt Solution", as Mish calls it, could be a mechanism that leads to the falling gold price before the break of the market. I think FOA might have described it as well in his writings. It would truly be a sign of desperation by the $IMF, since, without the leverage of contracts that don't stand for delivery, the COMEX price might reflect the true physical price. It would fall, at first, as weak leveraged hands shake out. But if it starts to rise again, then the $IMF may be out of bullets.

Michael H said...

btw, costata,

You never did get around to responding to 'Carl' in the 3rd hyperinflation post. Were you just toying with him to leave him (and the rest of us!) hanging? :)

Michael H said...

A different view on timing:

If Another was around now, he might say something on the lines of "You fools of western mind, always running around and expecting instant gratification! See you not how far we have come in 13 years?"

Take FOA's view into the valley. What is freegold? It is nothing less than the replacement of the dollar financial system -- the removal of the current system of world domination, and its replacement by the next evolutionary system.

The history books will not have a one-line entry, 'freegold occurred on June 23rd, 20xx.' Rather, they will describe the entire process -- the first meetings that led to the formation of the Euro decades later, the closing of the gold window in 1971, the Washington Agreement, everything. When Another was writing the process was well along, but at least it was beginning to come out into the open. Now we wait for 'time to prove all things'.

Fauvi said...
This comment has been removed by the author.
mortymer said...

Museice: Few issues came to my mind when I was reading the article:
First: Another/FOA connected dots (or were helped to understand it more deeper), about what actually happened already at that time. Great insight showing deep understanding and a lot of thinking. We start to understand it now as we see results not what is so obvious for all to see.
Secondly: The cornering was in that time on paper; it has not materialized in taking the physical out of the market, yet, the big money FULLY understood their position and it was not possible to shake them down, time plays on their side, they got what was going on and started to move into physical. They did not rush anywhere. It is the same understanding as with certain players demanding slowly payment for their oil not to disturb private market.
Continuing: accelerated hoarding directly from lbma/comex is the further step, it means IMHO this market is being dismantled.
Lastly: China importing is not a new event. 1/2-1,5 year ago I read reliable post about Chinese "agents" (?) or individuals buying kilos from Dubai, small shops, all around. (I ask if private individuals could actually do that in this country); Anyway fact is they are the best customers and it does not matter who owns in China the gold, the flow matters... :o)
Yes, I believe it is unfortunately the second from your options.

oldinvestor said...

Wealth asset allocation.

In regard to having regrets about missing opportunities and the timing of freegold, it has helped me to think in the following terms about my total wealth and how to allocate it.

I put my total wealth into 5 different categories.

The first is my home. I do not think about it as being any kind of an investment. I plan to live in it until I die, and it is fully paid for. Under no circumstances would I encumber it. However, rebalancing into a smaller place may be appropriate at a different stage of life.

The second is what I call “insurance”. It is the insurance premiums I pay for fire insurance on my home, and includes in addition such reasonable reserves as a few months of food, several months of necessary expenses in cash, and some tubes of silver.

The 3rd and fourth are sometimes lumped together. I separate them out and call them “investments” and “ “speculations”

I define investments as purchasing an income stream. This would include buying a profitable small business, productive agricultural land, good quality rental real estate, and blue chip companies with a proven history of good dividend payout.. I do not buy any of the above with the aim of profiting from capital gains.

The 5th category I call “speculation” This is where I do buy assets that I expect to increase in price and sell at a profit. This I think is mistakenly called “investment” by many.

The fifth category of my wealth I put in the category of “long term savings” I want this to not be thought of as earning anything, but only as a vehicle to preserve the purchasing power of that wealth through what is obviously going to be some kind of currency debasement.

Once I have separated out these five components onto my balance sheet, then I can see what percentage of asset allocation I have for each of these asset classes, and, more importantly, I can see if these asset allocation percentages make sense in light of current changing conditions, and can take steps to rebalance them accordingly.

Museice said...

Fellow Denizens of Fofoaia Land: It is the 15th of the month and time to politely remind all that any contribution to our Glorious and Dignified Leader would help balance the budget of the Realm.

Now back to our regularly scheduled programming. HoHoHo

Martijn said...


We zijn van plan om in juni 2011 naar Nederland te komen. Misschien kunnen we dan elkaar ontmoeten?


Kan zeker. FOFOA heeft mijn mailadres.

littlepeople said...

Michael H., Museice, Mortymer:

First, even if the CME declared no leverage in the silver COMEX, I don't think the Asian longs (and others) would bail. A lot of longs would bail, I am sure, but not the strongest ones who will stand for physical delivery--they pay 100% at notice time anyway.

"When that happens, it's game-over" is an instructive article. The strong longs are playing a game. They do not want to cause a default in LBMA or COMEX, as that would end their ability to get physical gold and silver.

Chinese companies could easily cause a force majeur--if they wanted to. They have more dollars than God, and no good place to spend them. They could enter a blizzard of longs that even JPM could not handle--but that would disrupt their plans, which has a goal of obtaining any and all physical they can find.

It appears to me that these entities have decided to buy all the down and all the way up, but doing so carefully, so as not to attract attention of masses, and with intent to take delivery of physical in dribs and drabs, as it becomes available.

How long will this game of musical chairs go on? So long as JPM can conjure the physical from unallocated accounts such as SLV, GLD, etc., and even unsuspecting allocated accounts. After all, criminality does not apply if one is TBTF.

S said...

As regards the transition, once the "rubicon" is passed the handoff to the political realm is effected. Linear economic progression stops meaning anything when the price value mehcanism breaks. It is prude to assume the various parties (notwithstanding Russia who has shown a determined interest)are willing to lead their "wealth" into the $IMF gallows? Ireland makes clear the issue is not to obtuse for the folk - that is problem (riots in italy, Spain, Greece, UK). Cross border M&A will only grow as a challange as price ceases to mean anything other than a short term arb to gain control of strategic assets - none of which will trade hands until a new value mechanism is in place. With so much talk and action in korea (trade, military etc), one might even think the US is seeking to lock in a migration path from a Yuan wage to a Won wage or better yet a dong wage.

China and Russia just launched trade settle outside the dollar...ding ding ding...small step but Russia is afterall the largest oil producer in the world. Yes the size is small, but the step is symbolicly large.

I respectfully disagree with your comment re SDRs can not be created.

This from Wiki:
"The first allocation, 1970–72, was made due to the possibility of an insufficient amount of US Dollars, as the US was reluctant to run the deficit necessary to supply future demand.[7] While this situation was soon reversed,[9] suspicion of the Dollar during the late 1970s led to the 1979-81 allocation.[10] The financial crisis of 2007–2010 precipitated the latest issuance of SDRs"

In short an off budget/montetary plug.

costata said...

Michael H,

Re: Carl

I started to compile a response to Carl. As I continued to read his subsequent comments I came to the conclusion that there was no point in putting time into the excercise. I felt (feel) that he will be 'right' until he is dead wrong. IMO nothing, no argument will dissuade him.

I also read comments he has made on another blog that I was referred to. He has been a blight there for over two years.

If time permits I will complete the comment I started to compile and post it. If only to fulfill the commitment I made. This is a snippet from the draft.

Carl's definitions:
"1. Inflation - Increase in the money supply
2. Deflation - Decrease in the money supply
3. Hyper-inflation - Hyper increase in the money supply
4. Hyper-deflation - hyper decrease in the money supply
5. Money - Legal Tender - Federal Reserve Notes & U.S. Minted Coin - Cash."

Let me add: credit is money for only as long as it works then it goes "poof" leaving nothing behind but debt. At least when fiat fails you have the paper and the debt to remember it by.

'Nothing' behind but debt? Payable in what? Carl 'money', perhaps?

How would the heavily indebted issuer of the world's reserve currency resolve a problem of this nature? Stewart Thomson offers a clue:

"15. What is critical to understand is that the Govt does not view itself as verging on default, but on the verge of burning all their creditors, burning all their own citizens. The govt is not worried; they are ecstatic!"

To this simpleton it sounds like hyper-inflation might be on the menu. Maybe Dick Cheney wasn't joking when he said "Deficits don't matter". If you are not planning to redeem your IOUs I guess they don't.

Carl wrote:
"Money is what people will accept as payment for a service or good."


Back to Carl's definition 5.
"5. Money - Legal Tender - Federal Reserve Notes & U.S. Minted Coin - Cash."

Correct, except when it doesn't suit Carl's argument. The list of Carl's glaring inconsistencies goes on and on.

DP said...

@S: Yes, the control over issuance of SDRs is an interesting topic isn't it. I meant that one nation's CB cannot unilaterally decide to issue more. However, who controls the IMF ultimately. They'll at least have to discuss it before it happen I suppose, but at the end of the day there is nothing to stop them doing it.

I actually found a number of sources on Google when I looked for "islamic dinar sdr", which all say that 1 dinar = 1 SDR. However, the Islamic Mint website doesn't appear to mention this. I could not find any "official" site where this was confirmed, or denied. Probably one of these unofficial sites put it up, and all the others just copied and pasted it into theirs because it sounded good(?). But I still thought it was an interesting though. They are suggesting the SDR is "linked to gold". Hmmm...

mr pinnion said...


You did nt seem to understand my plain and simple post.

I know freegold is a system where gold is a store of value.
I was talking about a crisis situation(which is not beond the realms of posibility), where you are forced to cash in your store of value in order to buy food.
I m talking about the time(months/years?)from the currency collapse to the birth of a new paper currency.
You say you wont "spend" your gold.Well if the paper money can t buy food,you will starve.
All of you, please take of your rose tinted specks and watch the utube video of people panning for gold all day in zimbabwe.Handing over specs of gold to buy bread at well below the spot price, from government thugs.
The gold then works its way to the government.
If the dollar collapses then it WILL get that bad for x amount of time in the USA.
During that time you will trade your gold for food.Possibly.


This blogs getting a bit too culty.
Can you all stop talking in riddles like some sort of Yoda wannabees.It worked for another but copy him ,must nt should you all.

costata said...


"If the euro fails, what is the implication for gold? Thanks."

You have a knack for posing interesting questions. Bearing in mind that the Euro Freegold architects are Giants and Central Bankers (if we believe A/FOA).

What would constitute failure for the Euro in the EU? Perhaps total rejection of the Euro by EU citizens. They might all buy gold and only use Euro to meet their legal tender obligations. Alternatively we might see a Misean 'crack up boom' where hard assets rise in price to make existing debt irrevalent. Perhaps a hyper-inflation that voids all government and bankers' debt denominated in Euro. A new Euro gets issued with a few zeros lopped off. Checkmate to the Euro Freegold architects.

Rejection by the international users of the Euro? If their debts are payable in Euro or their trade contracts specify Euro in settlement then they must buy Euro. Their demand would underpin the value of Euro. Checkmate to the Euro Freegold architects.

If the Euro falls to a very low exchange price versus other currencies then the EMU gold reserves will be worth a phenomenal amount of 'money' and their export industries will rejoice. Banks exposed to the deficit countries will fail but banks weighted toward exporters and surplus countries will survive. Terrible for the ordinary citizens in terms of energy costs but checkmate to the Euro Freegold architects nonetheless.

If the Euro rises to a very high price relative to other currencies then energy will be very cheap in Euro. Since energy is the prime cost component of most essential consumables then checkmate to the Euro Freegold architects yet again.

If the EMU disbands and ALL members return to national currencies then their sovereign gold comes into play for the transition. No-one wins. If some of the weaker members of the EMU leave and re-denominate their debts into national currencies then the rest of the EMU members get a stronger Euro and their banks fail. Big, big problems but the Euro survives.

Oil bids for gold? Everything falls apart including the Euro. Mad Max to the max.

miked said...

Hello Mr Pinnion

A couple goldsubject posts relevant to your thoughts (that's me in the comments section BTW):

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

To those FOFOAers who are familiar with John Williams at, he has released his 2010 update to his Hyperinflation Special Report of Dec. 2009. It is long but a “must read” article. A couple of snips are listed below. It sooths the nerves to have popcorn and gold while reading this paper.

A Great Collapse. The U.S. economic and systemic solvency crises of the last two years are just precursors to a Great Collapse: a hyperinflationary great depression. Such will reflect a complete collapse in the purchasing power of the U.S. dollar, a collapse in the normal stream of U.S. commercial and economic activity, a collapse in the U.S. financial system as we know it, and a likely realignment of the U.S. political environment.
The U.S. has no way of avoiding a financial Armageddon……
What lies ahead will be extremely difficult, painful and unhappy times for many in the United States. The functioning and adaptation of the U.S. economy and financial markets to a hyperinflation likely would be particularly disruptive. Trouble could range from turmoil in the food distribution chain to electronic cash and credit systems unable to handle rapidly changing circumstances. The situation quickly would devolve from a deepening depression, to an intensifying hyperinflationary great depression.

Museice said...

Mr Pinnion: I believe that it is safe to say that we all understand that we can't eat gold.

Wendy said...

I cannot believe my stupid ass>>>>>

I wrote this awesome post and lost it.

Anyways, the jist Ozzy

I agree this blog has become cultish, and that's the nature of blogs. You either belong or don't. if you don't identify with the group you will find yourself (unoffically) ignored. This is not the work of this blog host (FOFOA) it's the work of a bunch of adults that really have their 2 year old brain in the drivers seat.

Wendy said...

cannot believe my stupid ass>>>>>

I wrote this awesome post and lost it.

Anyways, the jist Ozzy

I agree this blog has become cultish, and that's the nature of blogs. You either belong or don't. if you don't identify with the group you will find yourself (unoffically) ignored. This is not the work of this blog host (FOFOA) it's the work of a bunch of adults that really have their 2 year old brain in the drivers seat.

Benjamin said...

I also think FOFOA may be wrong about gold mining shares.

Unless there is some event or law that people envision taking place I do not see how gold covered in dirt will be somehow worth less than gold not covered in dirt.

What am I missing? Because if I have physical and cover it in dirt I don't see why this would change the value of the gold. If a company owns a lot of gold covered in dirt, why would legal shares of their income not be valued highly?

The only thing I can thin of is if these gains were retroactively made illegal by some sort of law.

costata said...

My two year old brain (smile) is troubled by something.

Where are the Petrodollars?

A/FOA and FOFOA wrote about the huge inflationary surge in the 1970s that was fueled by Petrodollars after Nixon terminated the US$ gold exchange standard and the price of oil rose 400% over a short period.

A/FOA offered the explanation that a cheap gold + US$ for cheap oil deal soaked up these Petrodollars.

It appears there is no cheap gold available in size that could absorb the ME oil producers' profits. Oil prices are obviously much higher than the 1970s. The USA is importing a much larger percentage of their oil consumption.

The world is consuming a much larger volume of oil these days. I assume that most oil is still traded in US dollars.

A couple of hundred billion Petrodollars ignited a savage inflation in the 1970s and almost brought the US$ down as signalled by gold's huge rise.

Where are the hundreds of billions of Petrodollars that must have been pouring into the ME over most of this decade?

If the paper oil markets siphoned off a big slice of the profits where are these US dollars and the Petrodollars now?

costata said...


It's very hard to hide a gold mine. Many of us assume that Governments will grab most of the gold produced by miners in their jurisdiction in order to obtain or increase gold reserves after Freegold revalues gold.

Russia is exchanging Rubles for locally mined gold right now.

mortymer said...

Costata: Perhaps we can learn here something.
and also here:
Pls check also links...

I like this part from IMF:
"Oil-exporting countries found themselves with so much money, they could not spend it fast enough. Some had small populations; many were still at early stages of industrialization. They could not import enough from the countries that bought their oil to keep from piling up enormous dollar surpluses.
The world economy would contract if all that money was taken out of circulation (i.e., not spent or loaned to someone else to spend). Oil exporters needed investment outlets for their petrodollars. "

Edwardo said...

Museice said...

From Edwardo's: Are the central banks running a fractional gold system?

For those of you interested in whether gold will be confiscated: "if they (Russia & China) also conclude that the Western central banks are running a fractional system using sight accounts, this knowledge hands them great economic power. It is relevant to bear this in mind, because it will condition the US’s response to what is developing into a destructive gold crisis. Political and strategic considerations will have to be weighed as well as purely financial and practical ones. It would be downright stupid, for example, for the US to confiscate privately owned gold, without international agreement from Russia China and India as well as the Europeans to take similar action. And how co-operative would any nation be when they discover that the gold they thought they had at the BIS, the Fed and the Bank of England has actually vanished?"

Patrick said...

burningfiat said...

Nice one Patrick. Pure legend.
Always knew Another and FOA would return, but as bears???
I hope FOFOA is alright after the crash though... He hasn't commented in a while.

costata said...

Hi mortymer,

Thanks for the links. Very interesting background information.

Let me outline a scenario for Petrodollar Flood II.

It seems reasonable to assume that the ME oil producers have not attempted to put their profits into gold for the last few years otherwise the price of gold would have soared.

So, I'm wondering where did they invest their staggering oil profits of recent years?

It seems they have managed to do this without causing a 1970s style outbreak of high inflation or attracting the sort of unwelcome publicity they received in the 1970s.

AFAIK the only markets large enough to absorb huge amounts of Petrodollars (without leaving any footprints or running up prices) are:

1. The Forex market.
2. Sovereign debt and corporate debt.

Let's assume for a moment that this is where a lot of the Petrodollars went.

If we also assume that the estimates of ME gold holdings (which surfaced while A/FOA were posting) are correct. The Saudi Royal family have more than 5,000 m/t of gold. So for the ME as a whole let's add several thousand m/t more.

If true, then a business case emerges for helping to fund the developed countries debt binge over the last decade.

1. It helps to prop up the $IMFS.

2. It supports the buyers of their oil.

3. They receive an income stream from the debt instruments and trading profits on the funds turning over in the Forex market.

4. If the debts are defaulted they are (fully?) hedged in gold. At the same time their oil gives them enormous power over debtors.

5. It buys them time to pursue a worldwide hunt for attractive hard assets along the lines reported by Matt Taibbi in his new book.

What do you think of this scenario?

mortymer said...

IMHO very likely scenario, you described something I had in mind. It´s actually very simple, after reaching the point "you have it all now" one wants to secure same in the future and the best it is with hedging your future inflow in silence. BTW SA has bought huge farms in Africa to feed its population. Is it cos their humanity or cos it is good to feed mobs rather than having them in unhappy in streets? Those 2 your choices - Forex and debt markets are good picks.
Another point of view could be: why else do we bail out those zombie states, banks?
I do not know but the time bomb is there since we discovered oil. It brings great new value in play but in the same time its management against other assets gets disconnected from reality and we get more dependent on it.
Maybe the postponing of Freegold is not that it is not understood but because it is perhaps understood too well by those who decide.
There is still one unclear issue, who will be their guardian an army doing the dirty work? I would pick somebody who can hold walls for dozens of years.

raptor said...

James Rickards - video

DP said...

@myself and anyone else who thinks it might be interesting, I found an "official" site that confirms one "Islamic Dinar" is equivalent to one IMF SDR.

Islamic Dinar:
A unit of account of IDB which is equivalent to one Special Drawing Right (SDR) of the International Monetary Fund (IMF)

Well, I find it intriguing.

Dimmed aurum said...

@costata and mortymer
Here is sth. To chew on:
Suppose that ME oil producers are promised sth. they desire deeply. Sth. they hope to acquire the same way they acquired their gold in the 80`s and 90`s namely ARABLE LAND. But this time this promise is a complete and utter LIE!
They are getting nothing, nada, zero – hopes that puff into oblivion.
“Where are the hundreds of billions of Petrodollars that must have been pouring into the ME over most of this decade?

If the paper oil markets siphoned off a big slice of the profits where are these US dollars and the Petrodollars now?”
IMHO they are buying into this lie this way – they are promised they could buy assets (land in mind) on the cheap by means of owning banks. Thus the side-show bad bank – good bank was created. To create the vehicle and assure them that piling petrodollars in the banking system would somehow get them that very much desired LAND. Not going to happen. Our BG prime minister got on a trip to Qatar and Kuwait recently. On both occasions the Arabs had put forward the question of the means of owning land. They have got nothing (except murky promises of leasing some land from the state`s land fund) and this direct slap on the face from our relatively poor country.
Obviously a united EU tactic is involved here to deny any real means of support for that demographically exploding Arab population.
I`ve learned from my elder relatives that survived the previous Depression that land was only traded at the time for gold and gold only. Even then people were ridiculed for selling their land. The only socially acceptable motivation was illness or the education of one`s children!
IMHO one of the reasons not to have freegold by now is to deny the Arabs arable land.

scepticus said...

casper says "I am not a believer in a "Mad Max" scenario, therefore I believe the world and it's economy will continue to expand when the issue with gold/wealth is resolved."

The world and its economy can only continue to expand as long as the population continues to expand.

You cannot have a larger economy with less people.

And actually the number of people is secondary to the population age structure. Historically a population pyramid is big at the bottom (young) and small at the top (old). The old have accumulated in their life most of the assets and they sell them to the large base as they age and hence they realise a capital appreciation. Young labour is cheap and assets are much in demand.

Invert the pyramid and the opposite applies. Young labour is expensive and assets cheap. THis applies to financial assets like gold and to things like land and equities.

As the world enters a historically extremely rare phase of pop pyramid inversion that is likely to last for at least a century, labour will be the only thing that will generate positive real returns.

Just another reason why gold is in particular danger of ongoing monetisation in the 21st century.

scepticus said...

ongoing demonetisation, that should have said!

oldinvestor said...

World Population pyramid does not appear to be inverting. At worst, it is squaring off.

Jenn said...

Museice said...

"Fellow Denizens of Fofoaia Land: It is the 15th of the month and time to politely remind all that any contribution to our Glorious and Dignified Leader would help balance the budget of the Realm."

Thanks for the reminder Museice. After all I've learned from FOFOA the last thing I'd want is for him to have to sell some of his gold just to continue this blog. I just pressed the Donate button. I would encourage others to consider the value this blog holds for them and vote accordingly.


News Wire said...

People accept gold and silver as money throughout history. Paper manipulation of the silver price is the only reason for the price of silver trading at ratio of 50 to 1 or whatever it is right now. If I choose to store my money in silver like many other people do, then silver is money to all of us who do. I get that gold is money of the central banks, but silver is money too. That is all.

Jeff said...

So,,,,, in that light,,, if I gave these posts to someone to edit, or had someone else translate most of Another's thoughts to english, it wouldn't be me.

Translate Anothers thoughts into english. And yet at the end he said Another was english. I don't think A was english and other hints from FOA indicate he was not an english speaker. I still think A was japanese.

Jeff said...

A freegold theme song and you don't include They Might Be Giants? Come on FOFOA, Ana Ng is a catchy tune!

DP said...

DP said...

DP said...

Stagger Lee,

Ha ha, I made a rhyme!

ein anderer said...

my I ask a question here, again 2 years later:
FOA said 16 years ago:
The US dollar will someday see $30,000+ for an ounce of gold. So too will the Euro price gold much higher ($$3,000 to 6,000???).
Do you still hold this statement for true?
It’s important for me because my little gold reserve is my old age pension—or not!

FOFOA said...

Hello ea,

A revaluation is in real terms, meaning against real things. Your European gold will purchase you no less real things than my American gold. It's better to think in real terms than in currency terms. And no, I don't hold that statement as necessarily true today. I think it conflicts some of Another's thoughts about the future gold:real things ratio, and I think it would require a euro deflation.


ein anderer said...

FOFOA, thanks. Your answer brought me back to Another and I found more or less by accident this paragraph:

All persons hold wealth as never before, but search in vain for "this measure", one that "blows not in the wind of thought". For the good of all, this search does end, but brings with it the storm of change! The trust of old values will break in this new wind. Hold your worth firm on the ground as no storm will move a true value with weight, a weight for the winds of this season, gold!

He is talking about an enormous change of peoples thinking, isn’t he?

Before: "For as persons need real things for life, they do "want" and "reach" for a "real measure for worth". Not one by concept, but as "true from the past". All persons hold wealth as never before, but search in vain ..."

After: "... this search does end ..."

Again, thanks.

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