Tuesday, December 28, 2010

Windmills, Paper Tigers, Straw Men and Fallacious Fallacies


The essence of a straw man argument is the superficial misrepresentation of statements taken out of context. And here, frankly, there is a lot of context. This is one of the reasons I do not actively promote, submit or publish my posts anywhere but here.

There are a few spotlight sites that link or repost articles of their choosing, and I have granted permission to anyone who has asked. I also have not objected to those who don't ask, like Zero Hedge. But I do not put them out there myself because I believe my writing is something that you, the reader, should come here to read because you want to. It is not the type of writing that should be placed in front of your face.

I'm not out there tilting at windmills. When was the last time you saw me write "End the Fed," or "support this bill," or "support this movement," et cetera. Never? That's right, never. And that is because I am simply reporting on the choices the free market has already made – developments that may not be so obvious to the interested parties in our various "hard money tribes."

My argument is that the choice of gold over silver is a free market choice that has already been made (silverbugs notwithstanding). Mr. Market always wins in the end and the CBs are aware of this, and they have already prepared for it to be so. The direction (up) and the medium (gold) are already baked into the monetary cake. The only unknowns that remain are magnitude and timing. And the problems with today's monetary system and the global financial crisis can all be plausibly explained through the context presented in this blog.

I had to laugh at all the people who described my Focal Point post as too long, long-winded or verbose. Obviously they haven't read much FOFOA, and therefore have little context in which to understand my meaning. Yet at the same time, they felt it was a threat, a paper tiger that needed to be slain, a straw man that needed to be put down.

But can you see the difference in what I put out there? I don't sell my words. I have no advertising so I am not beholden to anyone else who has something to sell. I do not try to place my words in front of people who did not make the conscious choice to read it. I do not advocate any action that will affect or coerce someone else (like busting a commodity market).

The only action I advocate is personal action, like purchasing power preservation. I also advocate the personal action of expanding your understanding beyond the standard dogma you find everywhere else, which I suppose makes me quite unique.

Now let's quickly run through Mish's "FOFOA Fallacies." I'll try to keep the incomprehensible babbling less verbose and conflated in this one, so as not to waste too much of your valuable time.

FOFOA Fallacy #1: "So we need money, and lots of it. In fact, we need money in unrestricted amounts!"

Mish says, "No we don’t." Then he quotes Murray Rothbard and sums it up with, "The key point above is that an increase in money supply confers no overall economic benefit. Over time, money simply buys less and less."


"Tolbiny" offers the following excellent rebuttal:

Imagine an economy with a single dollar bill as all the currency. Could this dollar act as money and "lubricate" the economy? The answer is clearly no. Only one person could hold that dollar at any one time- there is a basic minimum amount of money that is needed for something to even function as money. Take the quote that Mish uses from Rothbard and compare it to FOFOAs quote.

Rothbard Quote:
Like all commodities, it has an existing stock, it faces demands by people to buy and hold it. Like all commodities, its “price” in terms of other goods is determined by the interaction of its total supply, or stock, and the total demand by people to buy and hold it. People “buy” money by selling their goods and services for it, just as they “sell” money when they buy goods and services.

FOFOA Quote:
"So we need money, and lots of it. In fact, we need money in unrestricted amounts!"

There is no contradiction between the two. Mish is interpreting FOFOA as saying that we need money in UNLIMITED amounts, but FOFOA clearly says we need it in UNRESTRICTED amounts. The difference here is clear- for FOFOA the money supply needs to be able to react to the demand on money freely. The changing of a money supply (be it in volume or velocity) is important for the efficiency of an economy. This does not mean that expanding or contracting causes more economic growth, but that it allows for economic growth.


In my post I addressed "two simple, but seemingly, apparently impossible-to-comprehend concepts." The first was the splitting of the concept of "money" into separate units for separate roles. And in the medium of exchange role, I did use the term "unrestricted." But I also clarified it in this way: "Unrestricted by artificial constraints." A fixed, unilateral gold standard is an artificial constraint. A floating multilateral "gold standard" is a natural, free market constraint that allows for currency flexibility while, at the same time, exposing the exchange value (in gold) of a currency to the judgment of the marketplace.

FOFOA Fallacy #2: "Gold used as money represents debt."

Mish: "The statement is preposterous unless one allows the lending out of more gold than exists. That practice is clearly fraudulent."


Here, Mish misunderstood my meaning, which I clarified in my follow-up piece posted three days before Mish posted my "fallacies":
"Someone else said that I had money all wrong because I wrote that gold is debt. Perhaps I should have said that gold is "a credit" for future goods and services instead of using the loaded word "debt." (But, actually, I did that on purpose.)"

Again, "Tolbiny" sums it up well:

Mish again has no idea of FOFOAs point. Any money has to be "debt based" as FOFOA is using the concept. When I accept money as payment for a good I am only doing so with the expectation that I will be able to trade that money for something else in the future. This functions in the same way as debt does. I give you X and after time T has passed I expect to get Y in return. Savings is a deferment of consumption, but when you give your deferred goods to someone else and they are consumed by the 2nd party more goods have to be produced in order for you to enjoy your savings in the future. That is the debt part of money.

Had Mish understood my point, he would have noticed that he already posted a rebuttal under "FOFOA Fallacy #1," the Rothbard quote:

Murray Rothbard: "[Money] is not a useless token only good for exchanging. It is not a “claim on society”. It is not a guarantee of a fixed price level. It is simply a commodity."

I should probably parse this Rothbard quote in defense of my statement because even though Mish didn't use it in that context, it still fits. But first, here's a thought from Friedrich A. Hayek posted on the Mises Institute website:

"The gold standard is a mechanism which was intended and for a long time did successfully force governments to control the quantity of the money in an appropriate manner so as to keep its value equal with that of gold. But there are many historical instances which prove that it is certainly possible, if it is in the self-interest of the issuer, to control the quantity even of a token money in such a manner as to keep its value constant.
[…]
"I think it is entirely possible for private enterprise to issue a token money which the public will learn to expect to preserve its value, provided both the issuer and the public understand that the demand for this money will depend on the issuer being forced to keep its value constant; because if he did not do so, the people would at once cease to use his money and shift to some other kind.
[…]
"I have no doubt, and I believe that most economists agree with me on that particular point, that it is technically possible so to control the value of any token money which is used in competition with other token monies as to fulfill the promise to keep its value stable."


An interesting thought from Hayek: A medium of exchange whose value comes from its ability to serve as a medium of exchange, independent of any backing or direct convertibility. Essentially a "useless token only good for exchanging." This is one half of Freegold, or "Reference Point Gold," by the way.

Now let's take a closer look at Mish's Rothbard quote and see if there is really any contradiction between it and "FOFOA Fallacy #2: Gold used as money represents debt."

FOFOA clarifying: "…gold is "a credit" for future goods and services…"

Rothbard: "[Money] is not a useless token only good for exchanging. It is not a “claim on society”. It is not a guarantee of a fixed price level. It is simply a commodity."

I am in full agreement with Murray given the chance to expand on his statement a little. Money should not be a useless token only good for exchanging if that same money is to carry the dual roles of currency and savings. Yet today it is. Money is not a fixed value claim on society. Of course not. It is a floating, "marked to market" claim. As is gold in the store of value and wealth reserve role.

Purchasing gold confers no economic or necessary benefit to you in the present, other than storing your deferred consumption for the future. It is a way to pass your earned claim (debt to you) into the future, even through generations. Calling this a fallacy is simply fallacious.

And while the word "commodity," when used along with "money," is often assumed to mean "a physical product of agriculture or mining," the more appropriate meaning here is "something of use, advantage, or profit." In the medium of exchange role, this can be anything, even, as Hayek says, "a token money."

FOFOA Fallacy #3: "Gold and only gold will fill the monetary store of value role. Not gold and silver. Not precious metals. Just gold."

Mish: "Like FOFOA I believe gold is money. However, unlike FOFOA I think money is whatever the free market says it is. The problem is, we do not have a free market we only have government decree mandating the use of dollars, Pounds, Yen, Renmimbi, Euros, and Francs as money."


Mish's handicap here is that he is not familiar with the body of my work that describes how the monetary roles historically came together and are now separating. The store of value role is always a free market choice while the medium of exchange is presently (and usually) issued under monopoly control. The monopoly's goal is to gain your confidence in the store of value role as well, but this is failing today after decades of excess.

Referring back to my Gold is Money series from 2009, here is the modern concept of money:


Now let's compare this to that Eurosystem report:


Notice that everything is reported in euro, even gold, and even dollar-denominated claims ("foreign currency") are reported in their euro-denominated value. So euro is the monetary unit of account on this form. The right side of the balance sheet represents the base of the medium of exchange within the Eurosystem. It includes euro notes as well as other liabilities of the central bank. And the left side represents both the de facto monetary store of value (claims denominated in foreign reserve currencies) as well as the alternative preferred store of value (gold).

The interesting thing about gold on this side of the balance sheet is that, not only is it not at risk from the (mis)management of foreign economies and currencies, but as those other stores of value fail, the gold portion is rising in value to keep the balance sheet full. This is the magic of a marked to market floating monetary store of value.

All the activist toy soldiers that want silver to become the monetary store of value "because the powers that be don't have any" are completely missing the big picture. TPTB don't have any because Mr. Market, that is those Giants with serious amounts of wealth to store, already selected gold in this role. The prominent presence of gold on the Eurosystem balance sheet is not TPTB forcing a store of value on the market. It is the exact opposite! As I have said many times, the store of value role cannot be dictated, decreed or legislated.

The prominent presence of gold on the balance sheets of the modern Central Banks is the CBs front running the market! Freegold (or "Reference Point Gold") is an unfolding market force creation. Mish says, "unlike FOFOA I think money is whatever the free market says it is." That's not "unlike" me. It is simply misunderstanding me. Gold IS the market choice. And the real market for this "store of value" is the Giants with "value to store." Luckily we shrimps can tag along for the ride. But we can no more override this market choice than we can crash the Treasury market by dumping our stockpile.

Alright, that's enough Mish. Now let's take a look at Trace Mayer, J.D. who followed Mish out of the gate slaying paper tigers and sodomizing a straw man or two of his own.

First of all, I'm not quite sure if Trace actually read my post, or if he is merely judging it based on hearsay evidence. For one thing, Trace seems to have latched onto Mish's misinterpretation of the word "unrestricted," apparently taking it to mean "unlimited" and thereby projecting me as a Chartalist. I had to laugh at that one, and I hope you did too. I guess Trace missed my comments to Greg, our resident MMT acolyte.

Anyway, Trace goes on and on reaming the 'FOFOA Chartalism' straw man:

"First, it should be noted that Greenspan implicitly admits the faulty argument behind Chartalism."

"This is the same reason Chartalism is philosophically flawed."

"A proper valuation set by whom, the State? Chartalist!"

"There is a reason Chapter One of my book The Great Credit Contraction is titled Word Games. In that chapter, I present the two competing theories of money, market versus Chartalism…"

Okay, now that Trace's poor scarecrow won't be walking right for a week, here's a little newsflash about FOFOA. Trace claims to present the two competing theories of money, market versus Chartalism. Well I, Another and FOA present ..... Option 3 - fiat currency that is dynamically priced though a floating (physical only) gold exchange rate in a free market.

More evidence that Trace either didn't read my post or was misrepresenting what he read (a bit of a faux pas for a lawyer) was this statement:

"But these individual preferences expressed through human and being revealed through the silver price does not constitute evidence of silver being overvalued as FOFOA asserts."

I can't seem to find my assertion that silver is overvalued. At least not in my post. Perhaps it is this:
To be honest, I really don't know if silver is overvalued or undervalued today at $30/ounce.

The context there was a discussion of the impact of paper markets on the value of industrial commodities. I argued that these commodities can be overvalued or undervalued. Or maybe it was this:
You see, silver needs its price propped up (huh? why?) while gold appears to need its price suppressed (see: The London Gold Pool).

The context there was a discussion of the history of bimetallism. Not quite as assertive as Trace made it sound, is it?

In fact, my position is that silver will rise just fine against a falling dollar. In fact, it may gain a little additional levitation over other commodities due to the lingering monetary sentimentality put forth by Trace and others. But it will also be limited by the economy. Where it will not follow gold is through the change in both market and function that will deliver a real, non-inflation-adjusted massive one-time return. The Freegold reset as the gold market turns physical and the gold function becomes the monetary store of value par excellence. A free market Giant event being front run by the Central Banks and a few small physical gold advocates.

Trace would probably have no idea what I'm talking about, since it doesn't seem like he has read much FOFOA. Well, if he, or any of you are interested, you should probably start here and here.

On the Regression Theorem, Trace quoted this exchange:

Congressman Ron Paul: So it is hard to manage something you cannot define.

Dr. Greenspan: It is not possible to manage something you cannot define.


The implication is that the dollar's value cannot be managed if it cannot be defined (as a quantity of gold and/or silver presumably). Obviously you cannot define anything in a vacuum. You cannot define an ounce of gold as an ounce of gold, or a dollar as a dollar. Self-reference does not make for a good definition. But to define one thing as a fixed quantity of another creates a different problem, described by Gresham's law. However, to define one thing as its floating market value in something else, why, that's just a revolutionary concept! Isn't it?

Actually, it is an emergent, market-driven concept that has been unfolding since around the time Nixon closed the gold window, give or take a decade. And it is so extraordinary in its sweeping ramifications that it requires a whole new paradigm to understand. From Bob Murphy's article linked by Trace:

""People today expect money to have a certain purchasing power tomorrow, because of their memory of its purchasing power yesterday... Thus the expected future purchasing power of money explains its current purchasing power."

Obviously this view assumes a dual role for money, store of value and medium of exchange (unit of account is implicit). But what is actually playing out today is something quite different. Trace frames the issue of money in terms of two models, "market versus Chartalism." "Aristotle" describes Trace's perspective as a pendulum with "gold money idealists" on one side and "easy money idealists" on the other. And he calls Freegold the "perfect bottom." But he also points out that it is the most pragmatic and realistic point in an arc between two opposing idealisms, Trace's "market versus Chartalism." Read the entire description in my post, The Value of Gold.

In order to dive into this extraordinary new paradigm, we should probably shed some baggage. Here are a few bullet points to consider:

1. Freegold is a Floating Physical Gold Exchange Rate system for dynamically valuing fiat currencies. It is a floating reference value, not a fixed exchange rate "gold standard." In the new IMFS, currency pairs will be a function of the relative price of physical gold trading within their legal tender zones, rather than the race to the bottom with no benchmark as it is today.

2. "Money" is a dead, meaningless concept. If you want to use it, then define it. Circulating Currency has a concrete meaning. There are other terms that will suffice for other components of the "money" supply eg. Bank Credit E-currency (for the digital deposit created credits), reserve assets for the store of value, etc.

3. The term Precious Metals needs to go. There is gold and there are industrial metals. Sure there are high value industrial metals and there are low value metals but they are all commodities and we are way beyond commodity money. If the use of a metal in jewelry makes it "precious" then advocates for this term need to make their case.

4. The gold standard, bimetallism etc. are all topics for the history books. If you want them back then you need to explain how you plan to rehabilitate these terms for mainstream consumption and resurrect the dead systems that they describe.

Finally, if you would like to view this paradigm properly, you must have a clear understanding of the natural human factions at play. These factions are "the easy money camp" and "the hard money camp." Or as I like to call them, The Debtors and the Savers. This may not seem like much, but it is a nuance that most all of my critics have wrong.

Please read the linked post. Government, commercial banks and central banks are the ménage à trois at the center of any IMFS, but they are not all in the same camp. In the correct paradigm, the government, the politicians and Wall Street (commercial bankers) are all in the Debtor's camp, while the Central Banks are in the Saver's camp along with the Giants.

But Freegold is not as simple as a one-camp solution. As I've said many times, Central Bankers are a different breed. They are not like commercial bankers or politicians. Hate them if you feel you must, but collectively they do think big picture and long term. And Freegold is an accommodation of BOTH camps! That's because it is the recognition and official CB front running of Mr. Market's eventual win.

This is just one small example of how the "Debtors v. Savers" factional paradigm differs from the "Bankers v. the rest of us" that drives all of these hard money guys into tilting at windmills. Or from the "haves v. the have-nots" paradigm that has infected the water supply in the easy money camp. It is a small difference, but a world apart.

Today we have arrived at the end of a long period in which the debtors have reaped immense amounts of real world goods from the savers. They have done so by issuing paper debt in exchange for real goods. Most of my critics confuse who the debtors and the savers actually are. They think "the American people" have been screwed over by the bankers for so long and now is the time to take it all back. What they don't realize is that "the American people" and "the bankers" (the commercial bankers) are in the same camp. So is the government. They are all "Debtors."

And as this pendulum swings, they should be (we all should be) very happy for the acceptance of Freegold by the Giants, the CBs, and the Savers. But my critics can't even see this paradigm, because they are stuck in a bad one. And their bad paradigm leads them to tilting at windmills like "buy silver, crash JPM," "end the fed," "the Kucinich easy money bill," "buy silver because TPTB only have gold," "the end of fiat is coming," "the euro is no different than the dollar," etc., etc...

What is actually coming down the tracks with the inertia of a massive locomotive pulling the Freegold party train is what Robert Zoellick has been hinting at publicly, completely misunderstood by gold bugs and Chartalists alike. It is gold used internationally in a new monetary role, not seen in prior history. It is the next step in the evolution of the concept of money.

Gold is to become the floating, free market reference point for fiat currencies of all stripes. And to do this, it will shed the albatross that is its parity relationship with paper promises of gold from private institutions that are backed by more paper promises of gold from other private institutions in a perpetual loop of paper promises. This paper promise loop/"market" is not a stable benchmark, and it will have to go.

So now you have a choice. You can hop on the party train and buy some physical gold before the journey is complete. Or you can join the ranks of toy soldiers standing strong against the unstoppable force of time. The choice is yours.

Sincerely,
FOFOA



Toy Commander: "It wasn't my intention to mislead you
It never should have been this way
What can I say
It's true, I did extend the invitation
I never knew how long you'd stay

When you hear temptation call
It's your heart that takes, takes the fall
Won't you come out and play with me

Step by step
Heart to heart
Left, right, left
We all fall down
Like toy soldiers

Bit by bit
Torn apart
We never win
But the battle wages on
For toy soldiers

It's getting hard to wake up in the morning
My head is spinning constantly
How can it be?
How could I be so blind to this addiction?
If I don't stop, the next one's gonna be me

Only emptiness remains
It replaces all, all the pain
Won't you come out and play with me

Step by step
Heart to heart
Left, right, left
We all fall down
Like toy soldiers

Bit by bit
Torn apart
We never win
But the battle wages on
For toy soldiers

We never win

Only emptiness remains
It replaces all, all the pain
Won't you come out and play with me

Step by step
Heart to heart
Left, right, left
We all fall down
Like toy soldiers

Bit by bit
Torn apart
We never win
But the battle wages on
For toy soldiers

Step by step
Heart to heart
Left, right, left
We all fall down
Like toy soldiers

Bit by bit
Torn apart
We never win
But the battle wages on
For toy soldiers"

91 comments:

Diogenes Lantern said...

You write for people who still think, and who still want to think. Thank you

ZH commentators, especially the "evangelical" ones let their personalities overwhelm their arguments. Most of them have lost the ability to convince so now they only scream.
The ZH mob can neither comprehend nor practice humility and this makes their individual PM theories ironclad. That site could be great but I fear it will burn itself out, just like fight club.

Please do not stop writing.

elio said...

Crystal clear.

Patrick said...

If those silver advocates don't get it now .. they will never get it..
BTW.. the youtube link doesn't work in a small country in Europe....due to some restrictions..

. The term Precious Metals needs to go. There is gold and there are industrial metals. Sure there are high value industrial metals and there are low value metals but they are all commodities and we are way beyond commodity money. If the use of a metal in jewelry makes it "precious" then advocates for this term need to make their case.

BRAVISSIMO !! The gold price we are still seeing today is gold priced as a commodity... with all the paperwork attached to it.. We should all be gratefull we small shrimps can actually buy this stuff it these bargain prices... one day the music stops..

Aleksandar said...

The QE program of the ECB differs from the one used by the Fed by the fact that the ECB "sterilizes" the bond purchases while the Fed does not. Sterilizing means that the central bank performs an operation reverse to the bond purchase, effectively withdrawing euros from the supply by selling paper of its own. The goal is for the bond purchases not to affect the money supply and thus not cause monetary inflation.

According to ZH, yesterday the ECB performed such a market operation to sterilize some bond purchases. However it could not gather enough bids to sterilize the whole amount that it wished to. Effectively, excess euros remained in the system. What happened? The euro dropped and the POG rose! This usually does not happen, POG follows the eur-dollar in inverse: dollar drops gold rises.

So, I think we have seen the workings of Freegold yesterday. It functions even with a paper gold trading system.

Gilligan said...

I had to laugh at that poor strawman.

Those that are attempting to bend reality to their own will have been given ample opportunity to get aboard.

All that's needed is a yellow ticket, available at your local bullion dealer.

Get them before the train leaves the station, because this train won't have a conductor giving you a warning.

costata said...

FOFOA writes:
"The only action I advocate is personal action, like purchasing power preservation. I also advocate the personal action of expanding your understanding beyond the standard dogma you find everywhere else, which I suppose makes me quite unique.

Yes, my friend it makes you very unique.

poopyjim said...

You make a good case... before I was buying 1/2 gold and 1/2 silver (in terms of fiat, not weight). Now I think I will buy only gold.

I also read something recently that Mises wrote in the Theory of Money and Credit about the desirability of a single medium of exchange:

"Of course, if two or more economic goods had exactly the same marketability, so that none of them was superior to the others as a medium of exchange, this would limit the development toward a unified monetary system. We shall not attempt to decide whether this assumption holds good of the two precious metals gold and silver. The question, about which a bitter controversy has raged for decades, has no very important bearings upon the theory of the nature of money. For it is quite certain that even if a motive had not been provided by the unequal marketability of the goods used as media of exchange, unification would still have seemed a desirable aim for monetary policy. The simultaneous use of several kinds of money involves so many disadvantages and so complicates the technique of exchange that the endeavor to unify the monetary system would certainly have been made in any case."

I know the above doesn't exactly speak to freegold, but if there is to be a unified international monetary system, it will unify around one thing - gold. There is no way it could unify around ONLY silver instead.

Syafrin Djohan said...

I strongly believe that the extinguishing of the present unsustainable debt in the form of a forced gold revaluation is already in the pipeline. But regarding the 'stability' of Freegold in the long term I beg to doubt:

Suppose after Freegold reigns, the economy goes on for another 100 years, the dollar continues its debasement into 1/100 of its 2010 value, and now Gold will have risen from say $55,000 to $5,500,000. So a house which costs $100,000 in 2010 will cost $10,000,000 in 2110.

And if the dollar continues for another 100 year, a house will then cost $1,000,000,000 (yes, 1 b).

What do you call this in English? Hyperinflation!

***
There are two angles to look at the system: as the dollar, or as the gold. If you are the gold observing the dollar, you just laugh your way through that 200 years: the expansion of money supply through fractional reserve lending will benefit the holder of gold over and over again to infinity, minus the risk seen in the 20th century till 2010 (bank run).

It is the same rigged system as today, where those holding fiat currency will all lose to those who control the gold and practice fiat lending.

Then I suppose this is called the free market. In the meanwhile, the private central banks have mutated into much stronger economic tyrants overpowering the government.

If people refuse to let their saved toil falls in tandem will their fiat, then -just like water passing through even the smallest leak- they will start to convert their savings into gold once there is the slightest window opening for that chance, the fiat currency will fall even faster.

What I mean with 'they' may not only be small people, 'they' may also represent giants like the France, Swiss or China.

Whichever currency becomes the world currency doesn't matter, the currency will be run.

Which, then, makes me suspect what Dr. Willem F. Duisenberg gave in his acceptance speech for the Euro winning the Charlemagne Prize in Aachen in 2002 (link here) that Euro has severed its link to Gold, which again, I intepret as "not a single chance for you to redeem your Euro in gold."

So, IMO, Freegold is just a tweak in the present system to allow the continuation of the central banking system, but does not solve the real problem for Freemarket reign.

Silver, given the right accomodation and nurturing atmosphere, will come out, and performs a far longer and better job than fiat currency in reference to and shared job with gold, as long as tyrants are not given passage by corrupt judiciary branch (@100% successful prosecution rate) to rule against the market.

We didn't call the establishment of Soviet ironclad rule the expected outcome of free market's choice, did we? Maybe Darwinian survival.

What we need is another Andrew Jackson, especially when the central banking system is at its cyclically weakest time, which is now.

If we do not have an Andrew Jackson in hand, maybe we need a natural or man-made disaster of planetary proportion to reset the system.

And, I believe this decade will be a heck to ride too!

(Sorry for the long read, I can't make my words shorter)

Danny said...

Why would the IMF want to bail out Ireland and help keep the Eurozone together?

Surely the IMF benefits from the Eurozone breaking apart as this would prevent Freegold would it not?

sean said...

It's taken me a while, but I think the red pill is starting to have its effect, and I'm learning to look at things in terms of gold instead of fiat. It changes everything! For example I was trying to understand why UK house prices seem to have not suffered "too badly" at least compared to the US situation (see chart at http://www.housepricecrash.co.uk/graphs-average-house-price.php)
Then it occurred to me to look at house prices in terms of gold ounces, and this chart tells a very different story! (http://www.sharelynx.com/chartstemp/USHLSPOG1.php)
And this is while the "true" value of gold has only just begun leaking into our reality.

On a different note, I prefer the term "Reference Point Gold" to "Freegold", which is initially confusing as it seems to mean that gold is free (of value). But maybe that's just me.

The Dork of Cork said...

A silver standard can work as a counter to a freegold meme.
Hugo Salinas silver coin idea has some merit for countries with little Gold resourses but extensive silver deposits.
The silver coin with unspecified face value but with a fixed weight can be revalued yearly by its new central bank as high powered money begins to replace credit money in the system.
This will give the average Joe some protection in the face of high or hyperinflation.
Of course the FED will have to be removed from power in the US before this could happen.
Most of the worlds silver deposits are below ground and as the price of silver rises new deposits will be liberated denying old money monopoly control of the money supply as they mostly have old gold money.
A silver monetory union between the US , Mexico and Canada would deny Gold holders full control of their domestic resourses which are still extensive although I do accept that external oil will have to be paid in some sort of Gold arrangement.
You may believe that such a monetory union may be impossible but given the fact that the US would be in a sort of Great game shock it would be unwise to discount a unpredictable reaction or gamble

Jeff said...

FOFOA, don't let the haterz get you down. Mish, Denninger and the like are ideologically invested in their theories, and usually have a financial interest as well (selling subscriptions, etc.) They haven't changed their tunes in the face of mounting evidence they are wrong, and they won't. In the end, they will declare themselves victorious by twisting their previous statements to fit a Freegold outcome. That's why I read your blog and not theirs.

'Success has many fathers but failure is a bastard'.

Tom said...

Another well written post. If only all of us could put emotion aside and think rationally all the time. Things might get quite boring and dry though. I have yet to see a worthy rebuttal against one of FOFOAs post. Freegold didn't 'click' for me until I went back and read the Gold Trail, and then went on to read FOFOA's old posts from 2008, as well as the comments in those sections. I still have some lingering thoughts that the giants/CBs are discounting silver a little too early. The small portion of silver's value that is used as a wealth reserve may be useful in certain situations when gold goes into hiding and only silver is available, perhaps this will drive silver into hiding as well. Since if gold goes into hiding, wealth will flow to silver instead. Most of that probably depends on how events unfold and how CBs, Giants and Mr. Market respond. But gold is the #1, wealth reserve par excellence, no doubt.

Patrick said...

The silverprice we are seeing today is silver priced as it should be.. as a commodity...

The silverprice we will see in a couple of years will be.; priced as a commodity..

The price of silver will always be the price of a commodity..

And that's the big difference with gold... now priced as a commodity.. .. but...

scepticus said...

Interesting to find a gold bug who has a sensible view about Chartalism.

I'm not aware of any prior civilisation which didn't demand its own gold coin in taxes, so in that sense gold is chartal money, or at least has been since, well, a very long time indeed.

And you refer to your 'value of gold' post, but I don't recall a proper explanation of that value except for a recourse to the constant MU of gold, which as I pointed out also applies to fiat currency, since MU doesn't have a time axis, AFAIK.

JR said...

Forza FOFOA!

littlepeople said...

FOFOA:
Very clear and concise. I agree with everything you said, especially this:

"Gold is to become the floating, free market reference point for fiat currencies of all stripes. And to do this, it will shed the albatross that is its parity relationship with paper promises of gold from private institutions that are backed by more paper promises of gold from other private institutions in a perpetual loop of paper promises. This paper promise loop/"market" is not a stable benchmark, and it will have to go."

Except for the first sentence of this paragraph, the exact same thing will happen in silver--that is the Keiser/ZH mantra re: killing JPM by buying physical silver, thereby breaking the COMEX.

The paper promises in silver will be eradicated, just as with gold's. If Butler is correct that the Chinese are behind the concentrated JPM silver shorts (so they can continue adding to their physical silver horde on the cheap--they need silver to manufacture myriad electronic devices), and since the Chinese have already warned that their STEs are free to renege on swaps made with foreign bankers (JPM), then when they do declare the game over, and renege on their short positions, the silver longs will be given fiat currency for their troubles by the COMEX and JPM, through FED/CFTC. Then COMEX silver and gold trading will likely not exist--at least not in current form.

I still see silver being a commodity that, when freed, will have a major price increase due to it's having been held back by paper promises, as has gold. I also see gold being the essence of value storage, as those who have the gold, make the rules--the real "golden rule."

Depending on whether you want to speculate that silver will break its paper shackles first, having silver may make sense, if there is time enough to trade it out for physical gold.

I also agree with Tom, that having some silver will likely serve as a buffer for protecting whatever gold one might have. Especially coins, such as junk U.S. coinage, or Eagles, Maples, etc.

Keep up the great writing.

Patrick said...

Fofoa just punched all those who hold silver knockout..; and what do we read in the comments... yes sir.. people holding silver..for a myriad of reasons which are totally unfounded...

littlepeople said...

Patrick:
Read carefully, and think things through . . . Would you hold gold, and no food? Gold, and no shelter? Gold, and nothing to protect it?

The Dork of Cork said...

I fail to accept the argument that because silver is used as a industrial material it cannot be used as a monetary metal.
If a computer has 1 dollar of silver inside with a total price of 501 dollars then a 10 fold increase of silver will push the price of the computer to 510 dollars - big deal.
This is a radically different price increase from a oil price increase as this price is fed all the way down the production process until consumed and disposed.
Oil is very inelastic in price with Gold the most elastic as described in these various articles but silver is also very elastic due to its present very low price.
The central flaw of the ultra freegold argument is to believe that politics is not important in the great scheme of things and the market will correct to the freegold price but yet the market is a human invention to convert thermodynamics into a workable trade - it can be modified.
To believe that wealth will be concentrated in such few powerful hands is to underestimate the value of labour in this equation.

mortymer said...

Joining shortly the discussion about silver...
- Silver does not have the depth.
- Feedback based on recursion? -> No
Lets try to read something more interesting for now:
http://www.emirates247.com/news/resolutions-debt-loss-more-popular-than-weight-loss-2010-12-28-1.334999
And now Andy Warhol: He was all the time saying "Interesting" for a usual day to day things.
How deep your eyes can see?
If you still don't get it, see: "Recursion".

Luminous Views Photography Artist said...

The US Mint has no money:
http://howtobuysilvernow.com/

Gilligan said...

Dork of Cork,

"The central flaw of the ultra freegold argument is to believe that politics is not important in the great scheme of things and the market will correct to the freegold price but yet the market is a human invention to convert thermodynamics into a workable trade - it can be modified."

I think you are mistaken. Politics play an important role.

"The beauty of reserving Gold as an unmanipulated monetary asset is that individual local currencies can still be "managed" by the government in whatever manner is seen befitting that specific country, without having an adverse effect on the meaningful wealth held in reserves (in the form of Gold savings) among other nations and local citizens alike. No single national currency need ever be held by another nation as a reserve currency (which "unfairly" allows the nation that issues the reserve currency to export its inflation." - Aristotle (2/10/2000; 3:37:44MDT - Msg ID:24877)

Also,

"Gold will be saved (and will appreciate in value absent the lending/leasing of it for interest,) while national fiat currencies will circulate under the needs of the economy. It is these national fiat currencies that will continue to satisfy the demand of borrowers for loans. National fiat currencies will also serve as the means to satisfy the various governments' unrestrainable inclinations to "manage" their economies to the extent that they are able. They, too, will hold Gold in savings (reserves) for the same reason we do." - Aristotle (2/7/2000; 7:15:24MDT - Msg ID:24589)

Jeff said...

Dork, I found this quote in the archive:

FOA (9/25/99; - Msg ID:14373) "The future will see the Euro currency as the value reserve all other currencies will trade off of. Beside it will trade a "free gold" market denominated in Euros. The implications of this will be for US nationals to continue using dollars while holding gold (or Euros?) for a bulk, risk free tradable reserve. Once can see that in this picture, the purpose for silver is greatly diminished, no?

Jeff said...

And this: "As I offered earlier, the coming currency transition may render the "many present reasons" for holding more silver than gold useless. Especially if currency stays in circulation as the demand for industrial silver falls from a economic contraction."

If you search for the word silver in the archives on scribd you can read answers to all your questions, Dork.

ad said...

One thing I have learned on this blog is to read carefully. Some would do well doing so.

From wikipedia

Tilting at windmills is an English idiom which means attacking imaginary enemies, or fighting unwinnable or futile battles.

The phrase is sometimes used to describe confrontations where adversaries are incorrectly perceived, or courses of action that are based on misinterpreted or misapplied heroic, romantic, or idealistic justifications.


I'm not out there tilting at windmills. When was the last time you saw me write "End the Fed," or "support this bill," or "support this movement," et cetera. Never? That's right, never. And that is because I am simply reporting on the choices the free market has already made – developments that may not be so obvious to the interested parties in our various "hard money tribes.

Did Zoellick mention silver?
Do central banks hold silver?

It doesnt matter whether you want silver to be in a similar role to gold, it just isnt going to be.

This doesnt mean it wont hold value just like rare earths etc but there is no point in Reference Point Silver when you have Reference Point Gold. I doubt very much we will have RPS floating against RPG floating against currencies...and central banks are buyers of silver.

Robert said...

My esteem for FOFOA went up some more when I read his comment (two or three articles ago) that the fans of gold and silver are usually in different "tribes". Today's submission, nicely rebutting Mish and Trace Meyer (I like and read both), shows me again what a top notch guy we have advising this tribe. I NOW understand why FOFOA does not take advertising as well.

...

I believe a quick-and-dirty way to show that gold is a better wealth preserver than silver (or even better than my beloved platinum) would be just point out (as FOFOA has):

Gold is valued, and those who own it typically let very little go, while silver will get spent.

...

(Although we cannot deny that silver IS a great speculation...)

:)

Tom said...

I think most here are in agreement gold is far superior to silver. And will outperform through the coming events. However, Disregarding silver completely is not a wise choice. Silver has served well in past as gold's best alternative, especially in situations where gold goes into hiding. Suppose gold goes into hiding before most people besides giants, CBs and a few educated individuals have a chance to move their wealth into gold. Do you think that wealth will sit idle? It will go to the next best solution, which could be silver, or other commodities or metals. Yes gold will re-value in a major way, but to a lesser extent many commodities will as well. It will be interesting to see where silver stands once things start to settle down a little bit.

The Dork of Cork said...

@Gilligan

Yes the thesis of the Freegold argument is correct - Gold is held for the most part in strong hands, , yet that is also its weakness.

Most of the worlds gold is held above ground and even in the unlikely event of doubling mining output it will remain at something like a 4% growth rate.
Therefore if most of the worlds monetary aggregates gets converted into Gold this wealth will transfer to people who made their money during the bubble years.
This will impose tremendous disequilibrium between the capital holders and the wealth producers.

In essence labour will have no skin in the game as no matter how hard they work they will never aggregate wealth - this lack of hope for a better future will create a reaction although it is possible a pure Freegold ecosystem could remain a feudal world creating nothing but stagnation.

The Dynamics of silver are however different - this is the basis of the CBs distaste for the stuff.

If the silver price mechanism comes undone then much more silver will be mined and therefore come on the market - you will get high silver inflation.
The strong hands can only hold a tiny fraction of silver wealth if much more silver was mined and
therefore would have to buy more at the new market price.
This means they could not sit on silver and earn interest like Gold but would have to enter the world of work and toil for it.
The two metals create a balance between capital holders and wealth creators - take one away and they are unstable elements which are liable to implode productive activity over a period of time.

I can imagine a world where Freegold remains in Europe yet North America creates a moving silver standard - Bimetalism across the Atlantic !
This would reinforce the traditions of conservatism in Europe and dynamism in North America.
Just a thought.

idi said...

Anyone know whether 30 kg LGD silver bars usually come with assay certificates? banks are telling me that they don't. Thanks.

Patrick said...

I can imagine a world where Freegold remains in Europe yet North America creates a moving silver standard - Bimetalism across the Atlantic !
This would reinforce the traditions of conservatism in Europe and dynamism in North America.
Just a thought.

It is obvious you haven't read a lot over here...

Concerning your statement on bimetalims... perhaps that could be the final use of those big SUV's... moving hundreds of kg of silver around the country...

I urge you to try selling 500 kg of silver.. First stuff it in your SUV and go on a ride to sell it somewhere....

The Dork of Cork said...

@Patrick
Is that the best you can do - what is the flaw in my argument ?
I am sure that before the late 18th century the conventional thought was that the professional armies of Britain were unbeatable by militias

Imagine a world of Hyperinflation in the US - would conventional policies be in vogue after the great collapse ?
A combined North American monetary union would be the biggest silver producer in the world.
Why would a rational nationalistic goverment concede all its wealth to Europe and Asia?
A moving silver standard in North America would greatly cool the Freegold price would it not.
Money that would have flowed to Gold in a American power vacuum would flow to silver.
Poltico / economic events do not always flow in a linear fashion.

radix46 said...

Dork of Cork,

Why would the American continent do that, what with the huge amounts of gold in the ground and the coffers?

Why choose to use a wealth reserve with a low value reference point, when one could use one with a high value reference point, that is being used by the rest of the world?

Seems like cutting the nose off to spite the face. Defiant, but stupid and nonsensical in my opinion.

THEBIGE said...

I can't stand MISH and don't worry about what he has to say we get the message. I wish we could save more people. Schiff sinclair and FOFOA along with zero hedge are now national heros. Been following you for 2 years. Schiff for 6. You guys get it and we appreciate your time in trying to save the "small people"

radix46 said...

Schiff doesn't really get it. He wants a classical gold standard and would actually sell his gold at some point 'waaaaay before it gets to $10,000'. Being half-right is no good.

holdinmyown said...

Hello Dork of Cork.

"I fail to accept the argument that because silver is used as a industrial material it cannot be used as a monetary metal."

This is not the only reason that silver is inferior to gold as a store of wealth. I suggest that you read FOFOA's article "Focal Point: Gold". However to address your concern, it is not necessary that a commodity being used as a store of wealth cannot have any industrial uses. Gold in fact does have some such uses. It is preferable from strictly a moral perspective that the item being used as a store of wealth have the least possible alternative economic uses other than as a store of wealth. The value of such commodity will necessarily be driven to levels that far exceed any other uses. If silver (or platinum or oil or any other commodity) were used as a store of wealth the hoarders (savers) would be damaging the livelihood of all people who rely on those commodities in order to earn a living on their excess production.

The Dork of Cork said...

PS @Patrick

The role of silver is not to cater for large banking transactions between banking buddies.
It is the peoples money.
It greatly improves the efficiency of local transactions removing parasitic arbitrage from one of the most basic functions of money.
If we went on a moving fiat, steady true value of gold system under Freegold the fiat would have little or no stability creating chaos even when people crave some form of stability in the value of their transactional currency as even this must hold value for some period of time.
If a legal tender fixed weight silver coin was revalued as high powered money was created and credit destroyed it would create some value in the transactional currency perhaps changing on a yearly basis based on published base money creation whose information is open for all to see.
A daily / hourly / minute by minute moving fiat against fixed Gold would merely enrich another class of speculators who do not do anything productive such as the great armies of men who now speculate in the FX market today against moving bank fiat currencies.
Note I stated that America after collapse will have to pay for oil under a Gold system.
However concentrating all wealth into Gold is madness akin to the present bank fiat fiasco.

The Dork of Cork said...

@Radix 46
North America may have a significant amount of Gold both above and below Ground but it is a far bigger silver producer.
The US also lives far beyond its means and so if it went back to a gold based system would rapidly loose all its remaining Gold - it needs Gold to pay for external oil but it could cool the buying power of Gold by remonetizing silver and therefore redirecting fiat - this silver could represent the internal wealth resources of North America and would be much more creditable then a pure fiat dollar.
In essence although silver is a better local currency it could be used to price Canadian oil sands in a North American monetary union as Canada or Mexico would have little choice but to deal with their primary trading neighbour.

rcpilotwing said...

"Imagine an economy with a single dollar bill as all the currency. Could this dollar act as money and "lubricate" the economy? "

This example is faulty from the onset.

A dollar bill unit is NOT divisible and has no material existence. It is not even money, it is a piece of paper with fancy printing on it.



But we could conceive theoretically conceive an economy founded on a supply on one gram of gold, which contains trillions and trillions of atoms. It would be theoretically divisible, though highly unconvenient to say the least.

A DOLLAR IS MANUFACTURED BY MAN. GOLD/SILVER WERE CREATED - and are on very limited supply on this planet.

The market chooses money in virtue of 4 fundamental qualities : SCARCITY, durability, divisibility, portability.

Throughout human history, the best candidates for the role of money were 2 precious metals : Gold and Silver.

Radek said...

Dear FOFOA,

One aspect of your posts which always makes me astonished is your ability to see into the psychic of the people/market. Often, I feel like you describe my action/beliefs which made me act when I realized that the system was screwing savers. The savers are waking up and that will mean only one thing, more and more will discover gold.

I am a saver, a small one a shrimp. ;). Yet, I have discovered gold some time ago and have found my safe-heaven of the saver. I only wished it did not go up so quickly as it did because I would have been able to buy more ;).

I keep my gold play as a monetary metal, but I do not ignore the potential of raise of silver due to industrial demand and misguided actions of some people for silver as monetary metal. The silver market is so small it may in short term give spectacular gains which I would be happy to quickly transform into gold.

I think the worst thing which can happen to your readers believing in you is to observe silver spectacular rise and convert their gold into silver in the worst possible time just to see silver going down and gold going up. I keep some silver to avoid such temptation in the moment of weakness ;).

best,
Radek

The Dork of Cork said...

@Holdinmyown
Again a $10 dollar price increase in a computer is not the end of the world - most of the hi tech uses for silver have much greater labour input costs then raw material costs despite the epic labour arbitrage model we have seen over the last few decades.

The Dork of Cork said...

@Holdinmyown
Again a $10 dollar price increase in a computer is not the end of the world - most of the hi tech uses for silver have much greater labour input costs then raw material costs despite the epic labour arbitrage model we have seen over the last few decades.

The Dork of Cork said...

@Jeff
The euros will not hold much value in the long term - if you divide the Euro gold into its M1 supply you get something like 13500 euros a ounce.

Even if you divide it into its physical cash you will have to multiply the Euro gold price by something like 2 and a half times.
There has been a massive rise in the shadow banking sector in Europe with little rise in Goverment debt creating epic malinvestment with little long term revenue.
The Euro is a dog like all the others although if we have global free gold Europe may have first call on the worlds resources using the limited central bank gold to magnify the buying power of private European gold as this is held outside the Euro balance sheet and is therefore not balanced.

Jeff Allen said...

I would like to draw attention to FOFOA's savers/debtors dichotomy. This is not a minor nuance. It is rather a consequence of a fundamental fact of human nature, and therefore a major strength of FOFOA's Freegold hypothesis.

Each of us has but two modes of survival open to us: to control nature, or to control those who control nature. The first are self-sufficient. The latter are dependent on the former.

For more on the subject, read "The Fountainhead" by Ayn Rand.

holdinmyown said...

@Dork of Cork

"Silver more than other precious metals, has significant demand rooted in sectors as diverse as imaging, electronics, jewelry, coinage, superconductivity and water purification. For this reason, silver is no longer known as just a precious metal, a store of value, a work of art or an industrial metal. It is all of these. Today silver is indispensable, working all around us to improve the quality of our lives."
http://bullion.nwtmint.com/silver_uses.php

Also, according to Wikipedia, in 2001 38.51% of silver demand was for industrial uses excluding photography, jewelery, coins and medals. http://en.wikipedia.org/wiki/Silver

I suspect that this percentage of industrial uses of silver is much higher now than it was in 2001. Sounds to me like your plan would affect more than the price of one computer.

The Dork of Cork said...

Holdinmyown
I never said that silver was not a indispensable industrial product - you miss my point.
However a significant rise in the price of silver will not dramatically effect the final cost of most of these products except perhaps jewelery which is also used as a store of value especially in India.

However It will effect its production and recycling.

Labour and energy are the two biggest cost inputs in manufacturing with transport significant for heavy items - silver is just one tiny component of these products in many cases although vital.

The Dork of Cork said...

Holdinmyown
I never said that silver was not a indispensable industrial product - you miss my point.
However a significant rise in the price of silver will not dramatically effect the final cost of most of these products except perhaps jewelery which is also used as a store of value especially in India.

However It will effect its production and recycling.

Labour and energy are the two biggest cost inputs in manufacturing with transport significant for heavy items - silver is just one tiny component of these products in many cases although vital.

mr pinnion said...

Shit FOFOA, your last three posts have swung it for me.I m convinced.
Now i m going to have to swap lots of my lovely silver for gold.
Not all though.

I ve always thought mish was a bit of a tit ever since he started taking pot shots at Peter Schiff, now he s at it again with you.
MK s childish , shallow response makes me think you have started to put doubts in even his mind.He s a good entertainer but i dont trust the guy.

Your posts do my head in.They make me think till my brain hurts.
It s not easy letting go of an opinion, but as more facts become known it has to be done sometimes.Some commenters at ZH are a bit too stubern , i think.

Thanks for all your hard work on this blog.

Regards

Ozzy

costata said...

Sorry to stray from the dominant theme of this discussion but hyper-inflation is the other major theme of this blog.

"At the White House on Dec. 15, business executives asked President Obama for a tax holiday that would help them tap more than $1 trillion of offshore earnings, much of it sitting in island tax havens." (My emphasis)

http://www.zerohedge.com/article/how-killer-b-and-deadly-d-strategies-allow-companies-repatriate-billions-and-find-higher-irr

It might be wise to find a chair before the music stops.

holdinmyown said...

Dork of Cork

I didn't miss your point, I was being flippant in dismissing it. You obviously missed my point. By choosing silver instead of gold to hoard as a store of wealth you are playing with the livelihood of many people. No, the profitable manufactures may not be affected much but what of the marginal producer?

The Dork of Cork said...

@Holdinmyown
ok - fair enough , you are indeed correct, it will effect demand for certain products and put some people out of business but my concern is the nature of power dynamics and the effect of monopoly control of the worlds money supply by certain strong hands - this ultimate power will corrupt as the dollar has under fiat, without balance in systems they become unstable.

littlepeople said...

If the giants and CBs and a few shrimps (us) are the only ones with gold, and the rest of the human population can play with fiat, it seems SOMETHING must take up the slack for the rest of us shrimps who want to store wealth.

Many people (try to) do this through pension funds; assuming that freegold manifests as per FOFOA, and gold "stands still" why wouldn't pension funds run to silver? It is still seen as "mildly monetary" today, and the paper farce in silver will blow along with that of gold.

Silver relegated to something like copper or tin is not something I can bend my mind around . . . gold will be king, but silver will be more than a plebe, I think.

Quasimojo said...

FOFOA,
If i remember correctly, one of the stated principal purposes in creating your
blog was to sharpen and refine your own notions and understanding
of "Freegold"--that premise you embraced as first proffered by Another and FOA--
through efforts to express your own understanding and through interaction
with readers. Well, I'm here to tell you that, by way of this little exercise in
responding to the swarming and agitated arguments arising from
kicking the hornet's nest, you've apparently risen to new heights of understanding
and expression (to the increased admiration of devoted readers). By unknowingly acting
as devil's advocates and forcing you to defend your convictions in a way common
blog essays could not compel, these critics have squeezed from you a distillation
of understanding and conviction previously unseen. If any of us had lingering doubts
about this silver-versus-gold issue or any lingering doubts about the probable
outcome of the current, ongoing drama of debtors-versus-savers, you have, in responding
to your detractors in so forcible and credible a manner, largely dispelled them. Having
been boxed in and forced to defend yourself you've shown how deep your thoughts run.
So allow me to express great appreciation with respect to such fortuitous events as
kicking hornet's nests, and voice great regard for the animated and furious arguments
of so many silver "bugs" having provided FOFOA the opportunity to convincingly
swat them down, one after another.

THEBIGE said...

@RaDIX
You know what I was trying to say regarding Schiff he was THE FIRST on mainstream TV to EXPLAIN to average citizens on what was going on.
You must be a bigtime MISH guy who doesn't explain himself very well. Maybe you are MISH or work for him his people tend to show up places.
I'm sure Peter Schiff will be selling all his gold waaay before 10k (laughable) (smile)......

Rui said...

Quotes: "Central Banks are in the Saver's camp along with the Giants."

Nah. Not a chance in heck. Not in past. Not now. Not in future.

CBs are by the bankers and for the bankers. No more, no less. This is probably where most of the fallacy of FreeGold theories stems from - a belief in CBs having enough interest in protecting savers.

The sole purpose of this "floating" (sinking to be precise) rate mechanism proposed by FOA is to make defaulting debt easier, let's face it. And who are the biggest debtors in the world? Reckless spending government and Wall St casino bankers. Where is "savers" in this picture? I cannot see any.


Quote: "but collectively they (CBs) do think big picture and long term."

Is that so? Anyone traded gold to gulf nations to achieve a period of cheap oil only to run out of gold and now scramble for a gold revaluation IN ADDITION TO HAVING TO PAY THE HIGH OIL PRICE ANYWAY can only be defined as myopic, which is exactly the opposite of "big picture and long term".

Would a true free market choose to trade gold that cheaply for oil? No. Who would? Well, these clueless central planners at CBs. I don't know about you guys, I myself wouldn't want them to plan any more things for me. It's funny FOFOA talking about free market all the time and yet siding with central planners whose track record could only be described as disastrous.

The real working monetary system needs two things: Hard money standard and free market Darwinism. You need hard money to put handcuffs on government and crazy bankers so their debt mania is under control. You need free market Darwinism to cleanse the incompetent elements from economy so the healthy and strong thrive to grow economy. That's how a free market works. Fighting TRUE free market principles with some "floating-rate" gimmicks or CB planning is asking for another meltdown.

CBs, IMF, BIS, World Banks, Bad Money and what not are barbarous relics rather than free market components and therefore have to go one way or another.

Michael H said...

FOFOA,

Regarding the discussion of your statement, "Gold used as money represents debt," I would add one more point:

The key component of the statement being "as money". A commodity used as money must be overvalued relative to its commodity value alone, and this overvaluation is the 'debt' component of the (commodity) money.

Syafrin Djohan,

Relative to gold, the dollar currently has 1.5 % of the purchasing power it did in 1930. Would you call this hyperinflation? 100 years is a long time. Even a drop to 1/100 of value over 100 years is just 'inflation', not 'hyperinflation'.

As to your statement, "...maybe we need a natural or man-made disaster of planetary proportion to reset the system" -- be careful what you wish for.

The Dork of Cork,

Why do you believe that "no matter how hard they (labor) work they will never aggregate wealth"? Thrifty laborers who spend less than they earn will be able to convert their excess earnings into gold, to be either spent in retirement or passed on to their heirs. Is this not a much better and stable situation to the one we are currently in, where everyone must either be a speculator or watch their dollar savings steadily erode?

Jenn said...

Hello littlepeople-

"If the giants and CBs and a few shrimps (us) are the only ones with gold, and the rest of the human population can play with fiat, it seems SOMETHING must take up the slack for the rest of us shrimps who want to store wealth."

I agree. All sorts of things will serve in the minds of the masses as a store of wealth -- some will perform better than others. During hyperinflation when currencies lose purchasing power with great speed, people do and will rush to anything and everything to try and preserve their wealth. They will buy farming tools, they will buy bicycle rims, they will buy concrete bricks, and yes, silver too. The point is that nothing is better suited to preserve wealth than gold for a myriad of reasons FOFOA has pointed out -- and the bigger point is the Giants (big chunk of wealth in the free market) made their decision long ago. Much of the great wealth in this world will not be running to gold in a panic for one important reason, they already own it! The goal for you and I is to buy up the scraps while gold still trades at its commodity price. As FOFOA mentioned (I thought this was an awesome perspective) all we are doing is front running the Central Banks as they front run the ultra wealthy.

"Many people (try to) do this through pension funds; assuming that freegold manifests as per FOFOA, and gold "stands still" why wouldn't pension funds run to silver?"

Because silver will not lie very still. Gresham's Law.

It is still seen as "mildly monetary" today

Yes, but by whom?

"Silver relegated to something like copper or tin is not something I can bend my mind around"

Now we're on to something littlepeople. That is precisely where you should focus your attention. If you can bend your mind around silver as a commodity and not a store of value that the free market Giants intend to defend, everything else will fall into place.

Here's a little meditation I wrote just now that you can read to yourself as you try to solve this koan. See what you think.


The Giants own gold.
The Central Banks own gold.
What should I buy?
Silver.


--Jenn

confederate miner said...

Do not be tricked. Do not be fooled. Silver is the banksters Achilles heel. By all means buy gold but also buy silver! I assure you silver is their week spot and will be what brings them down.

Syafrin Djohan said...

Michael H,
Indeed I tried very hard to abbreviate my explanation in my post. If the dollar / Euro / world reserve currency after Freegold is allowed to keep exporting its inflation abroad, then we can only see inflation (to 1/100 supposedly).

But, while the fractional fraud is now done in the open daylight, then I guess, more and more people are seeing the export, the world reserve's exorbitant seignorage may not be that easy, so I jumped to quote hyperinflation.

I really do not wish for such event, but I think such an extreme Freegold revaluation portents the collapse of rule of law.

Just a relatively much simpler Treaty of Versailles could cause a worldwide political earthquake, what about this one? I really hope I am wrong.

holdinmyown said...

Dork of Cork

"my concern is the nature of power dynamics and the effect of monopoly control of the worlds money supply by certain strong hands - this ultimate power will corrupt as the dollar has under fiat, without balance in systems they become unstable."

Fair enough. My understanding of Freegold is that it does not propose an immediate solution to all the monetary problems that exist today. What it does lead to is an improvement of the present situation over time. After Freegold there will still exist the uber-rich as well as the desperate poor. However, savers regardless of their means will be encouraged to save their excess production in gold instead of being held in manipulated and constantly debased fiat currencies. One will be able to vote with gold as well as at the political ballot box. If one believes that the monetary authorities are destroying the currency you can convert your fiat to gold. On the other hand if one believes that the economy is strong and well managed by fiscal and monetary authorities allowing the free market to work its magic then you as well as the Giants can release some of that gold in order to invest in revenue (profit) producing enterprises. Freegold won't result in an immediate utopia but it will provide a feedback mechaism to the politicians and the montetary powers that be (PTB) as to their performance. This voting mechanism is not restricted to a 2 or 4 year cycle. The votes would be cast daily and in fact minute by minute. The PTB would be foolish to ignore the will of the marketplace in such a situation. I see this as the ultimate form of democracy. Even the "shrimps" would have more say in the future of the country. Today they are forced to accept whatever the PTB dictate. In Freegold they will have more say.

Over time the amount of gold in the hands of the "shrimps" will increase (relative to the entire above ground stocks) as more and more Shrimps save instead of mindlessly consume and as the Giants sell off their gold hoards in order to invest in profitable enterprises (which of course require fiat currency to pay wages, buy resources, build new capital assets and pay taxes).

confederate miner said...

To me this arguing is a thing of bullish beauty! Maybe one day the whole world divided into two camps silver and gold. The dust dollar just a memory! Does not the most hardened silverbug buy at least a little gold.and likewise the gold buy a little silver?

Museice said...

Reference Point Gold...
I was hoping for 'Nexus Gold'
It has that future feel for the masses.

boricuadigm-shift said...

This post was simple, yet so informative and excellent. I've been a Zerohedge reader for over a year and a FOFOA reader for about 6 months. I like how zerohedge has the latest news right after they come out and in many cases even before. But most importantly, I love how FOFOA brings a point so important, yet so hard to grasp for many readers. "Freegold or Reference Point" allows all central banks to continue any type of monetary policy they desire. Either they strength their currency, they devalue it or they leave it stable, gold will reflect that reality. SIMPLE!

This is paradigm shift in its essence. FOFOA you don't have to keep writing posts about what other people think about your writings. With this last post you have made it more than clear of what your idea and in my opinion the most probable case for monetary future. I started partying a year ago with gold and silver. Now that the ratio is a lot lower I WILL exchange 80% of my silver for gold. I will position 90% AU, 10% AG.

Thanks for sharing your knowledge.

Namm said...

You know I get the gold over silver really I do......

Yet I cannot deny the profits I have since Oct 2008 when I took 50% of my assets to PM's
I put 1/3 of it into physical silver & 2/3rd's into physical gold

Today I have a 154% profit on the Silver & 69% profit on the gold.

So yes long term I see & understand & in fact have recently swapped some of the silver for more gold.

Yet.......who can deny these profits?

Wendy said...

“confederate miner said...
Do not be tricked. Do not be fooled. Silver is the banksters Achilles heel. By all means buy gold but also buy silver! I assure you silver is their week spot and will be what brings them down. “

It’s not ok to drop a bomb on this blog and hide, therefore I respectfully ask that you observe this etiquette and expound accordingly.

Kindest Regards

Wendy said...

My apologizes FOFOA, I forgot that I was in your house, and I don't make the rule. But if I did that would be a good one ;)

radix46 said...

THEBIGE
I wrote "Schiff doesn't really get it. He wants a classical gold standard and would actually sell his gold at some point 'waaaaay before it gets to $10,000'. Being half-right is no good."

You wrote
"You know what I was trying to say regarding Schiff he was THE FIRST on mainstream TV to EXPLAIN to average citizens on what was going on.
You must be a bigtime MISH guy who doesn't explain himself very well. Maybe you are MISH or work for him his people tend to show up places.
I'm sure Peter Schiff will be selling all his gold waaay before 10k (laughable) (smile)...... "


How could I know what you were trying to say if you didn't say it?

I said, Schiff doesn't get it as he is an advocate of a classical gold standard. If you understood FOFOA's writings, you would understand what I meant when I said "Schiff doesn't really get it." This was perfectly clear for those who actually read this blog. Since we are posting on this blog, I don't think it is unreasonable to expect you to have actually read it.

Schiff has said, in an interview with Bill Murphy of GATA, on Schiff radio, that he would sell waaaaaay before 10 large, whilst laughing at Murphy.

If I were MISH, I would be more inclined to support Schiff over FOFOA as they are working within the same paradigm. Schiff likes silver, as does Mish. No, I'm not Mish, nor do I work for Mish. My post was in support of FOFOA over Mish's position.

This is most likely wasted on you. I have noticed that those that default to ad hominem attacks are beyond reason.

Just because I take a slightly different position to you does not mean that I am attacking you personally. Are you such a fragile creature that you must make ridiculous accusations to defend your precious views?

I don't think FOFOA put the strawman in the picture above as an invitation to deploy such childish tactics.

Saul said...

All very interesting stuff. I really like reading and considering A / FOA / FOFOA and commenters various perspectives. There is usually at least some truth in each of them!

As for myself, for what it's worth, I have some physical silver and gold. Not much, and I would like more, but some. By weight a lot more silver than gold. By current value, about 3x more gold than silver. To me, that feels about right. I have a win and a place, perhaps. Not that I bet on horses, but that's the analogy that springs to mind.

From a Feegold perspective, Silver is perhaps nothing special. However, there are other games in play. If you consider the silver price suppression that's been going on for a long time now, that is reason enough to own a bit, IMHO. That may break apart and become bigger news before Freegold - in which case you can convert for maximum profit. Get a bit and try to relax a little, that's my ethos. I'm not good at timing, but I am ok with being patient.

Syafrin Djohan said...

"In essence labour will have no skin in the game as no matter how hard they work they will never aggregate wealth"

I fully agree. The current situation creates a currency war, where other nations are forced to support the reserve currency nation.

So, no matter how hard you work, the CB of a country will have to keep its currency value down relative to the world's reserve currency in a perpetual race to the bottom. This is done with various reasons such as to stay competitive in global trade and to accumulate more reserve currency as to ward off FX speculators.

Thus, the wealth producers become the perpetual absorber of the inflation from the world reserve currency unhindered export of inflation, because the manufacturing owners have to cut cost to stay competitive, and the one factor to cut or to keep from rising is labor, because commodities are usually priced in the reserve currency.

Thus the wealth producers stay slaving forever, unless the central banking system is being undone, and people return to sound money, which is gold and silver.

Adding fractional reserve lending via international lenders, the world will still IS a huge slave market (for Private CBs) under Freegold system without the power to exchange their currency into gold (which I am so sure will not be allowed or strongly hindered by using tactics such as propagating cashless (digital) society (eg. Assange v. Visa), 2 months waiting time for conversion, levies, change the rule in the middle, etc.).

***
We do not call slavery, colonialism, and apartheid Freemarket's choices, don't we? Giants' choice, correct, but certainly without consent from the suffering parties.

confederate miner said...

Sorry. I work in the river industry. We work 6 hours on 6 hours off for 30 days at a time and I am using my phone to post. Depending on where we are I usually don't have a signal. Right now I don't have the time energy or means to make a large post.

The Dork of Cork said...

@Holdinmyown
There is more then just Gold on the Euro Asset side of the balance sheet.

For instance the ECB to prevent rollover of its clients senior bank bonds and certain default has absorbed these loans in exchange for cash to keep dead banks in operation.
Now the servile Irish have pumped government equity into these banks - this is junior to the ECBs collateral and remaining bank bond holders and will be destroyed over time - this will increase the ECBs clients relative wealth over the general population.
Only if the losses go beyond the new equity will Gold balance its balance sheet.
If the ECB was obliged to back its base money creation with silver it could not afford to bail out its clients in the shadow banking sector as the cash it produces would have a cost.
Also there was two ECB rules to fiscal rectitude
1. A Government defecit of less then 3 %
2. A government must have less then 60% debt ratio.

Ireland had a effective 20 % debt ratio before 2007
But for Ireland to remain below 60% it would have to default on the shadow bank debt.
The ECB could not allow this to happen.
The ECB is a corrupt institution with only one goal - the perservation of its clients wealth.

Its reign has seen the destruction of large parts of Europe to the advantage of its current pet Host Germany.
The ECBs current "freegold" system is deeply flawed and corrupt as the Gold is kept behind numerous shadow bank fences - It is not to be trusted.

holdinmyown said...

I am certainly not an apologist for the ECB or any other central bank for that matter. I agree with you that their overriding goal is the preservation of the banking system and ultimately the preservation of the wealth of their clients (in most cases these are also their owners). I am not sure that I agree with FOFOA that the CBs belong in the Savers camp. I see them as enablers of easy money and solidly in the Debtors camp. Their clients make more profits when money is cheap. This in turn encourages speculation to the detriment of wealth producing investment and ultimately is damaging to the economy and the well being of the Shrimps.

The ECB is no model citizen in the ranks of the CBs. If I were an Irish citizen I would vote against the forced bailout of German, UK and French banks by the taxpayers of Ireland by electing a new (populist) government next year. The Irish should not bail out the bad financial decisions made by Irish and EU banks. The bank bondholders took a risk and by definition that means the possibility of loss.

Having said all of that if I were suddenly charged with the security and management of the Euro, I would want to tread lightly. We are where we are in this mess due to numerous bad decisions made worldwide over decades. Crashing the system to save it is not a rational move. If (when?) this were to happen there would be great suffering. It behoves us all to avoid any radical moves that would destroy the present system early. We need to give people as much time as possible to try to get their own houses in order to protect themselves from what I fear is an eventuality. Getting out of debt and saving in gold are essential for this preparation. I realize that if everyone did this today it would immediately crash the system. Not everyone will come out of this crisis financially intact but I hope that as meany people as possible are well prepared when the worst is upon us.

holdinmyown said...

Dork of Cork

My apologies for failing to properly address my previous comment. It was of course directed to you.

tripper said...

I've been reading more and more of this blog and this is a real eye-opener. Keep up the good work.

But there's still much I don't understand of this Freegold concept. I was recently wondering about the role of governments in it. If the era of Freegold arrives, and currencies will be free floating against the gold, don't you think it will be natural for governments to outlaw possession of physical gold? I'm guessing most countries track citizens that got their gold through official government entities. I know that mine does. So what's to stop them from nationalizing all the gold in private possession? I mean, the governments will need that gold more then it's citizens, right? And it's not like this did not happen before (Executive Order 6102).

Matt said...

this was an absolutely ace post FOFOA - very concise and well rounded in terms of bringing 'freegold's' relevance right up to present developments.

the silver paper dam might be about to break but we know that more significant developments are afoot beneath the surface, further down the rabbit hole as it were.

about schiff - his main problem is that he only sees gold at much higher nominal values and not necessarily with much more purchasing power. he thinks that gold would peak in a classical hyperinflationary period and fall thereafter. he'd sell all his gold for productive foreign assets at what he believes to be the most optimal timing. but maybe that strategy will actually work out for him, as long as he isn't too early!

but it still assumes we would use the same fixed gold standard system to resolve a modern monetary crisis. i've only started reading in more recent times but FOFOA introduces the idea of a more dynamic response being neccesary, inevitable and the extensive context for this laid out. so cheers :)

costata said...

Trader Dan (of JSmineset fame) writes:

"Here is wishing all our readers, even the jerks, a Happy, Safe and Prosperous New Year."

ideaman said...

I personally don't want to make change in atoms of gold. Nor do I want to carry a credit-type card connected to my infinitely divisible store of gold at some bank equivalent. Be damned after all this if I want a warehouse receipt from the clerk promising me my 1/100,000 oz of gold as change. And I shudder at the thought of govt. promises that the paper they're printing really, honestly, this time we're not lying is fully convertible and backed 100% by something other than debt or promises.

I'm perfectly content buying a house with X oz. of gold. I'm content paying for my cartload of groceries with X oz of silver. I don't even have a problem paying a kid to mow the lawn with X oz of copper.

If the govt. will stay out of the business of declaring the values of those bits of metal, my trading partners and I can figure out how much of each is needed for each purchase. What the heck, the requirement of thinking through the values in an evolving economy might help keep people busy enough so they don't have time to worry about panda bears in China or world literacy.

Museice said...

I wonder how this plays into the difficulty of implementing Freegold.

Gold and Gold Mining Shares in % of global assets

Mike said...

if i never found FOFOA's blog i would also be convinced about silver based on this video.

http://www.youtube.com/watch?v=-IiarVvZguY&feature=player_embedded

will we ever see a counter act youtube video with Another/FOA's and FOFOA's view on why gold is better then silver?

costata said...

I think this is a good time to talk about ..... gold.

h/t JSmineset

http://goldswitzerland.com/index.php/hyperinflation-will-drive-gold-to-unthinkable-heights/

"All currencies are declining against gold but some faster than others. The US dollar for example is down 78% against the Swiss Francs since 1972. During the same period the pound has declined a massive 85% against the Swiss Franc. Both the dollar and the pound are now at all-time lows against the Swiss currency. But the Swissy is only strong relative to weak paper currencies because against real money/gold the Swiss Franc has declined 87% since 1972."

"We have in previous articles forecasted the gold price to reach anywhere between $ 6,000 and $ 10,000 in the next few years – see “Gold entering a virtuous circle”. As we explained at the time, these are totally realistic targets without the effect of hyperinflation."

David said...

My thanks again to Fofoa and others here that have opened my eyes.

Happy New Year....

David said...

Mike,

"will we ever see a counter act youtube video with Another/FOA's and FOFOA's view on why gold is better then silver?"

I would certainly like to see this happen.

Larry said...

Hi All,

I was hoping to get some feedback/ideas about dealing with an IRA. Part of my IRA was in gold coins, and I have already taken delivery of these (along with tax penalties). The rest is in bullion funds CEF, and PHYS. I know this is dangerous in the long term, and I don't trust the gov to leave IRAs alone. I have been told by some to just liquidate the IRA, take the tax hit, and buy gold.

Any thoughts out there?

Thanks All,
Larry

oldinvestor said...

Take a look at this.

http://www.thedailybell.com/1247/Terry-Coxon-Protecting-Your-IRA-Part-1-The-Danger.html

“An ordinary IRA is sponsored by a financial institution – a bank, a mutual fund family, a stockbroker or an insurance company. Not surprisingly, it only allows you to use the investments or services the institution wants to promote.

An Open Opportunity IRA changes all that. It doesn't just stretch the envelope of investment choices, it breaks out of it.

With an Open Opportunity IRA, the custodian you select holds just a single asset -the shares in a limited liability company (LLC) that you manage. You deal with the custodian just once, when you set up the structure and roll your IRA assets into it. From there on, you are in charge.

As Manager of your IRA's LLC, you open a bank account for the company wherever you want. The checkbook sits in your desk draw, and you are the only one who signs. You also can open a brokerage account for the LLC and give the buy and sell orders. But that's only the beginning of the possibilities. Acting as Manager of the IRA's LLC, you can:

• Buy gold coins and store them however you think fit – in safe deposit box at your local bank, in a Swiss depository or in a mayonnaise jar in the back of your refrigerator. You decide.

• Buy real estate, for appreciation or income

• Buy and rehabilitate dilapidated houses

• Buy an apartment in Buenos Aires or a farm in New Zealand”

Rui said...

Matt

Schiff is actually correct about needing a fixed rate system. A new monetary system that doesn't have a fixed rate will end up being abused by government to death like every past one despite the propaganda from the central banker camp about the "benefits" from a floating rate.

The only "benefit" is to the debtors as according to FOA's proposal debt is not settled in gold AKA good money. Just think of this: why do debtors NOT want to settle it in gold? B/c they cannot afford paying back in gold. So they choose to pay back in something less valuable - bad money.

With the motive of bad money clear, does anyone think the value of bad money would float upward? To what end, so that debtors pay it back at a cost higher than when they borrow it? Fat chances. It can only float downward so that they can get off debt easily. If it only floats downward, it's not floating at all. The correct definition of that motion is SINKING.

So is it perfectly clear now such bad (SINKING) money element in the "Free Gold" system is a banker scam? Again I don't doubt the integrity of Another or FOA but still I only look at the end result and call a spade a spade.

Some says, "Hey, if gold price is sent to high then they'd bring it down to restore the balance." Nah, you are asking these bankers to be both players and referees and expect them to act fairly. There's too much conflict of interests for that to happen.

Central bankers have been the one for decades fighting gold price tooth to nails with London Gold Pool, CRIMEX, Paper gold, OTC derivatives and so on. Every time when debtors had a crisis they came in, devaluing the currency to bail them out. There's zero chance for them to turn 180 and start to care savers in a free gold system.

Larry said...

oldinvestor said...

Take a look at this.

http://www.thedailybell.com/1247/Terry-Coxon-Protecting-Your-IRA-Part-1-The-Danger.html

Thanks oldinvestor - I read the article, and it does sound like a good option for IRA protection (at least for a while). I've been moving in the direction of greatly simplifying life where possible - so that I can concentrate on what is unfolding rapidly today.

I'll look into it further - there must be custodial services around that can do this.

Larry

Casper said...

@ Rui

Recently on ZeroHedge I've read someone's post that said historicaly silver was at much lower ratio to gold as it is now. He/She state that in ancient Mesopotamia the ratio was somewhere between 1:2 - 1:6. Later he describes as time passed it became higher and as we know it just a hundred or so years ago it was 1:15 and today it stands at roughly 1:40.

I can't verify these facts but if correct I call that sinking and can define silver as "bad" money in relation to gold.

If the ratio was stable then silver wouldn't be "bad" money but would be just as good as gold!

Of course fiat would be sinking that's the premise behind labeling it "bad" money. It only depends on the administrator at what pace it would sink against gold and if that pace is low (like silver sinking about 5 - 10 times ag gold n 5.000 years) than I can conduct commerce with it.

Casper

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

Casper,

Historically gold / silver ratio is decided mostly by how much of these metals there were above the ground. It kinda went up and down around that 1:12 amount ratio in the earth crust. Sometimes more gold was found then the ratio was tilted toward silver, and vice verse.

Back in 19th century when there's first a 1849 gold rush in California, silver looked more valuable. Then quickly when silver boom popped up in Nevada and Idaho, gold looked better instead. So you see by themselves, there's no real advantage of one over another.

Today's 1:40 (it was stretched to 1:100 once) had a lot to do with Treasury department dumped its 2B ounces silver into the market to facilitate a precious metal suppression scheme.

Once the physical stockpile is gone, the game is turned against them and price will have to go up, which is why silver investors are so confident in silver's future.

This ongoing currency crisis will reinvigorate silver's role as a monetary metal. Remember this: money is whatever the savers and producers trust the most to store their wealth in, and I guarantee there's lots of trust in silver coming once the inflation kicks in.

Notice I specifically use the words "savers and producers" to leave debtors outta the picture. Debtors have very little say over the matter during this transition. And government and bankers are two notorious debtors.

Obviously D.C., BIS, IMF and Wall St are not going to sit there taking it lightly so they'd try to fight the transition, thus lots turmoils to come.

What is left for us is therefore to own lots of gold and silver, survive the turmoil and get out fast enough once gold and silver overshoot their reasonable price.

Regarding administration controlled depreciation (in other words inflation), government is not good at long term planning, not in this an election every 4 years model. The best example is to look the recent two administrations: Bush and Obama.

Bush inherited a Nasdaq bubble from Clinton. He could have told the nation that party was over and capitals had to be rebuilt but it would have made him look weak in 2004 election. So long term plan be damned. Bring on the Greenspan housing bubble for the next election.

Bush's bubble didn't carry him far enough and then blew up right in front of his face started from 2007. Then came Obama who promised changes, and has he changed any?

Obama inherited again a bubble. He could have told the nation party was over and there'd be lots of pain in rebuilding but it would have made him look bad in 2012 so long term plan be damned, AGAIN! Bring on one trillion deficit every year for 2012.

See? This is why I'm such a pain in butt hard-money advocate. Government and bankers cannot be trusted to self-regulate. There's too much conflict of interest for them to do so. Only a fixed-rate hard money system could lock these beasts down.

Matt said...

Rui,

interesting posts. i can't say i disagree as i am still early in understanding a lot of what is laid out on this blog. it seems that a lot of the counter arguments to freegold and a common dividing factor in debate here, is how much of a grip the more nefarious/power grabbing elements have over the entire scenario right now.

do they have that much power that they can control all elements of an inevitable worldwide monetary reform? the class above all this described as 'giants' are for all intents and purposes savers. extreme amounts of wealth to protect and consolidate. they need the 'hardcore debtors' locked down eventually, for their own sake.

but from my understanding, the crux of 'freegold' is that it does lock them down through the establishment of a 'real' gold market. if a 'real' gold market existed on an international level, governments could not mismanage their currency as it would immediately be translated to higher gold prices. kind of similar to what happens now, but no paper gold. entirely different ball game. i guess the grey area is to what extent the larger wealth interests are in collusion and co-operation with the government/banker peeps as this all goes down.

just my little stab at tying some things together =]

Finn said...

Stepping to the left a little....

A quote from the latest GEAB report....the Euro is NOT going anywhere..

"in the past years our team has, of course, looked at the possibility that the Euro might disappear or collapse. Its conclusion is cut and dried because we have identified only one set-up where such a development would be feasible: at least two major Eurozone states must be headed by political forces wishing to revive intra-European conflicts. According to our team, this prospect has zero probability of taking place in the next two decades (our maximum anticipation span in political matters). So, exit this scenario, even if it makes some with nostalgia for the Deutschmark and Franc sad..., some economists who believe that reality pays little attention to economic theories, and some Anglo-Saxons who cannot imagine, without pain, a European continent which carves out its economic and financial path without them."

http://www.leap2020.eu/GEAB-N-50-is-available-Global-systemic-crisis-Second-half-of-2011-European-context-and-US-catalyst-Explosion-of-the_a5625.html

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