Tuesday, January 4, 2011

It's Déjà vu All Over Again

Did you experience a slight case of déjà vu today seeing the price soften as the London bullion banking community newly returns from its long-weekend holiday? More to the point, a MTM-minded person can ignore today's trading shenanigans because, more importantly, gold's price remained neatly elevated right through the key year-end revaluation period...

Friday, July 2, 2010... Timing Is Everything:


I'm sure you've all heard it said (usually by puffed-up market players, or especially in old movies featuring that sort of character) "My boy, timing isn't everything... it's the ONLY thing!"

To be sure, timing ISN'T everything, and it most certainly isn't the ONLY thing... but one thing about timing bears saying right here, right now....

Did you notice how gold's little slide yesterday occurred... (hmmmmm... how shall I put this for proper emphasis...) YESTERDAY!!?

I don't mean to say did you notice HOW it occurred, or even so much to emphasize THAT it occurred at all (that's a small matter), but rather, that such an event happened YESTERDAY!

And more precisely to the point, it isn't even so very notable that it happened yesterday (or today, or next week, or even at all) because the very significant fact is that it did NOT happen PRIOR to yesterday!!

"Yesterday", of course, being July 1st, the day AFTER June 30th, a very "special" day in the lives of many young central bankers across the world, when love is in the air and their thoughts turn to unwrapping the presents delivered to them (monthly for some, quarterly for others) on the shoulders of the resolute MTM Giants. After the "snapshots" are taken, who really gives a hoot what happens the day after?

And of course, such volatility quickly shakes loose those outsiders of least conviction, and then the price again moves upward as the giants come around again, picking up crumbs dropped by weak hands, bearing their load, bringing the gift of value...

FOA (06/12/00; 19:48:25MT - usagold.com msg#26)
Put your cards on the table!

The current paper gold world will die (burn) as its value to users erodes, not increases! We have to remember that some 85% (or more) of the long side of our world paper markets will not (perhaps cannot) take delivery of physical gold. If the paper trading price is driven ever lower from new derivative supply, these longs simply "trade out" and take their cash hit. The major banks and players in this arena know this and therefore are not at risk from expanding their positions. Truly, they are only playing behind the real political game today.

Indeed, if the Euro function will ultimately burn the dollar and its paper gold markets and replace it with a physical "free gold" market, then selling paper gold is free money! Right? This is but one segment of the coming currency transition and to date it's progressing right along!

Again, most everyone in the Western Gold bug game is running with the ball in the wrong direction. They are trying to understand just how the Euro zone players are going to get out of our current gold market liabilities when the Euro makes use of the dollar gold market! These same thinkers are looking for some kind of "work out" of our system so its price discovery function will value gold where it should be! My observation from the "Euro Makers" is that one should "forget this notion!" "Nobody" gives a hoot about holding "price discovery" paper contracts as the real thing. Except for those with the real power to trade something for full payment! OIL!

Today, paper gold derivatives are for selling because they will eventually be politically defaulted once their discount to physical drives their value next to nothing.

So who is in danger of being hurt as this unfolds?

That's right, the Western paper gold long! I'm not talking about just the US market! This is about the entire world gold market as we know it today. The real play will be for the ones that get out in front of the move by owning physical.

This stampede out of "paper physical" by the "big boys" will first discount that medium as all the selling comes to play. Then the real buying of physical will ensue. It seems every Gold bug sees only half the trade and has great faith that contract law will favor a short squeeze. Yet, none of them see where it is the long that will be dumping and forcing the discount!


So what did you think of the gold "take down" yesterday? Did July 1st mean anything to you?

Well, if I were a Central Banker who marked my reserve assets to market price (MTM<--MUST READ) like all Central Bankers should...

Then perhaps my quarterly performance "kudos" might reflect my performance. Yes? And then, once the "snapshot" is recorded in the books, it is good for what, another three months?

Ladies and gentlemen, think this through carefully. Because if any of this rings true, then one conclusion we can draw from yesterday's "price action" is that Freegold can't be very far away.

What if yesterday's "dip" was not the result of a coordinated pounding, but from the abrupt and unexpected absence of certain "giant" "longs"?

Why did paper gold hold its own all through June -- at or near its ALL TIME NOMINAL HIGH -- only to drop off a small cliff on July 1st as if one of its main support pillars called in sick for the day?

Were the "commercials" REALLY just waiting to turn the calendar page before pounding the snot out of gold? Or were certain "giant" LONGS propping up PAPER GOLD to book important numbers... on an important day? And if so, what does this imply about the real PHYSICAL prospects for the paper gold market going forward?

As long as the "paper gold" price is imputed widely to all pieces of real physical gold held tightly in vaults, it is fairly important to certain... how shall I say... published reports? Yes?

The timing of yesterday's "attack" on gold is most auspicious for physical gold. Notice I didn't say suspicious, but auspicious!

What do you think about yesterday's gold action? Please tell me in the comments below.

Happy 4th to everyone! Have a great weekend and please be safe and sane!

Sincerely,
FOFOA

And from July 7, 2010 5:33 PM:

Eurosystem gold reserves climb by 65.4 billion euros
Jul 7th, 2010 13:30 by RS

In the consolidated financial statement of the Eurosystem released today by the ECB for the week ended Friday July 2nd, the numbers therein capture the latest mark-to-market quarterly revaluation of assets.

With no material transactions by Euro-member central banks during the week, the 65.4 billion euro growth in gold reserves was solely delivered on account of the Eurosystem’s MTM architecture, bringing their total gold reserves to a new record high at €352.092 billion, up from €266.9 billion at the start of the year.

By comparison, the Eurosystem’s net position in foreign currency for the quarter grew by only 18.2 billion euro, of which 18bln was from MTM effects and 0.2bln from CB transactions. Foreign currency reserves now stand at €190.9 billion.

Consequently, the proportion of gold reserves in Eurosystem coffers have grown over the course of the past 6 months from 62% of total reserves to 65%.

Regarding the previous post, don’t think for a second that China is not already keenly aware and tactfully desirous of the counter-cyclical strength, stability and flexibility available in this gold-centric reserve architecture.

For more background on this new paradigm in the reserve management of the international monetary system, see my Jan 8th post.

R.

86 comments:

Andy said...

Whatever the reason, I took advantage of it.

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

FOFOA,

Why did you drop last July's post into your first post of 2011??

The "It's Déjà vu All Over Again" does not enlighten me at all..... gold goes up and gold goes down!! Big Deal.

Wendy said...

I find this very confusing.

Pete said...

I'm with you on this one Wendy.

Although, the not-so-good articles will make the really good ones seem even better by contrast :)

Poor FOFOA, always under pressure for something exceptional...

Wendy said...

Well Pete,

I'll simply remain neurtral in my Thoughts and not make assumptions until I understand.

Jason said...

Gold could be getting tired now and planning a pullback as we go into June 2011

Wendy said...

"not make assumptions until I understand"

That was probobly the dumbest thing I've said in along time. (no need for assumptions if I understand .....DUH)

Wendy said...

I'm pulling my remarks forward from the previos post,because I think it's important for new people to this site. I also think it's it's better to type it in this post vs the last.

""Wendy said...
For the first day of the new year with a really bad brain, I spent my evening nostalgically digging through some of the archives. I've decided to offer a "cheat sheet" to those who are either new here or lazy and haven't read through all the posts.

First and foremost the post in Sept 08 "freegold" is a must read. Not just the post, but especially all the comments below. Every time I read it, I have to pick my jaw up from the floor.

Back in those early days, it appears as though there had been a void in time when "freegold" wasn't discussed openly. I don't know the details, maybe FOFOA can fill in the blanks, but something happened with the USAgold site and reference to Another. But really I'm in the dark in this regard.

I do know that FOA at the insistance of Another "quit" USAgold, as his associatin with Another was more valuable than his freegold voice on the forum. (although I think he did cheat)

Anyways .............. during the early days of this blog, there were many with decades of experience and an insatiable appetite for discussing the concept of "freegold", the discussions were awesome, and the knowledge imparted, frankly priceless. FOFOA hadn't even dug his man cave yet in those days, and was entirely out there. You will better appreciate his sharpness in the older comments sections.

The following is a list of posters that when they speak, you really want to listen closely, and most especially in those early posts:

Ender - forgive him when he uses the word "irregardless" he really didn't mean it

Ivo

Alek or Aleksander

B. or Belgian, although it started as an "anyonomous" post

Any "poster" that uses HA. or ha.

And there are certainly others that I've failed to mention, but if you follow the comments of the above you will get the freegold concept.

I have seen that many who comment do so supportiing their "dogma", I would humbley suggest that before you explore the archives you drop the dogma and "pretend" that you are completly uninitiated.

Sorry guys for blowing your cover, but honest to god, we are demanding transperancy in gov. etc, yet we remain opaque even in a blog.

The rains have come, the ground is swollen and the green shoots are visable. It is time (as in the lion king)

FOFOA said...

Hello Wendy,

Within 24 hours we'll have the *official* figures on the Eurosystem's 2010 MTM revaluations. I calculate we'll be coming in just over EUR 100 billion in gains for the gold reserves over the course of the year. The final quarter alone will have accrued about EUR 32.9 billion, bringing the new Eurosystem gold total to EUR 367 billion.

It's sooooo tragic that gold reserves are such a sterile CB asset that generates no interest, garners no dividends, etc. etc... Been a really tough ten years for the euro MTM reserve concept. ->Sarcasm<-

Good thing that paper gold held its luster in record-breaking form throughout the 2010 revaluation period, or else those poor euro reserves would not have looked so good for the New Year consolidated statement. It's tough when you are holding the real thing yet it must still be officially valued by lesser imitations trading in a questionable market. All those Mona Lisa reproductions out there, trading as if they were the real thing. It must be frustrating at least, and tempting... to just push the button.

You should probably reread this link from the above post: "Well, if I were a Central Banker who marked my reserve assets to market price (MTM<--MUST READ)..."

With the $33 price drop today (of all days) we've now seen a curios glitch in the matrix at least twice. Thus... déjà vu! It'll be fun to look over the new Eurosystem ConFinStat in a day or so.

Sincerely,
FOFOA

Wendy said...

I'll re-read the post you pointed to tomorrow, and PerHaps I'll gain an understanding to the $33 drop "twice"

Tonight I remain "lost"

As I believe we are both on PST.... goodnignt.

Wendy said...

I re-read my comment ....sounded harsh, my apoligies FOFOA. Way too late for me to think.

Kindest resgards

David said...

This seems to expose a simultaneous weakness and strength in Europe. On one hand, they're desperate to show the world that they probably have the wherewithal to see the PIIGS through. On the other, they do hold a lot of gold. And paper gold is indeed a farce waiting to be exposed...

Interesting times.

DS

Robert Leroy Parker said...

Fofoa, enjoy your blog very much. Only discovered it recently and have just finished anothers thoughts and your more recent posts. Am wondering why TPTB have waited so long to implement freegold if it is the solution to the current problems. Perhaps foa addressed this in the gold trail or you in other posts? You have reaffirmed my belief in physical and I now have enormous doubt in my mining positions.

Seems you have vision and the rest of the world wears bifocals.

Aleksandar said...

@ Robert

Am wondering why TPTB have waited so long to implement freegold ...

Nobody is implementing anything. It is a natural process. It will happen when the time is ripe.

The "TPTB" consists of numerous actors, each having specific interests and ways to achieve them. The week-to-week ebb and flow of the economy is reflected in their actions, one day it is the Facebook deal the other day it is something at the other end of the spectrum. Your "TPTB" doesnt exist as a coherent entity, except in the minds of the people that are in awe of them, supported by the various newsletter writers, websites like ZeroHedge and cowboys like Glenn Beck that make a living out of the people's unconcious admiration for the "TPTB".

If you check the POG daily, you will see just the above ebb and flow.

Note that as the economy improves, the chances for Freegold actually increase.

Also, we often do not know the real news. They come at a later date, unexpected for us shrimps but later totally justifiable in hindsight. Journalists cant write everything. They are also conductive to the same dynamic as above.

FOFOA en his predecessors bring those news forward. The interpretation? We need a credible insider for that.

Paul said...

Fofoa, or others,

greetings, and many thanks you's,
learning a lot over here ...

I agree on freegold, there will be no other way, but I do miss some arguments concerning bilateral partnerships.

What about NATO ?
Will it survive freegold ? Or will former members be enemies ?

I can not really see a role for NATO when the dollar dies and Euro takes over. American pride will not have it that way. but on the other hand, it still could make strategic sense to just stick with NATO. can I have some thoughts please ?

Patrick said...

this post should remind people how to react on these sudden drops in the paper price.. it's some sort of training to keep you on your feet when all war breaks loose in the paper arena.. don't get fooled by these sudden drops.. the end goal isn't changing.. the weight you possess doesn't change.. and in the end. it's what you have which will count... don't let us forget this. This post should be a reminder for all you doubters...

Aleksandar said...

First:

The Goldman Sachs deal for Facebook is a textbook example of how financial capitalism ($IMFS) imputs value to some part of the economy. The target is not Facebook, but is broader. That is, all the other companies out there that are in the same business as Facebook. This deal gives the perception of value in Facebook and, by proxy, at the whole web2.0 sector. For the $IMFS, their profits are made by that "action on distance".

Second:

The value of some thing or service is determined by the maximum debt that someone can take on his shoulders to purchase that thing. Even if you think that you pay cash, you actually rely on your credit wrothiness with the CC company or bank. How much you can spend is determined by the maximum financing that you can get from the bank. Not by how much capital you have.

Even if you only spend your own capital as a consumer, there are numerous other ones that finance 100% of their purchases. These are the actors making sure the price of your consumables is equal to your peer's financing capcbility.

1 and 2 above meet in the middle:

Companies make profits not off the value of their products/services, but on the margin thay have as they pass through them. Were they to try and sequester the whole added value of their products/services, they will effectively become a bank. Witness GM.

Thats how all the profits from added value in the $IMFS participating economies end up at the top of the food chain. And why the US can afford the excessive lifestyle of (some of) her citizens.

The problem is that also the debt (financing) reaches the top of the food chain. Value and debt go hand in hand. You have the profits on one side and the debt on the other side of the balance book. You see, the model needs a perpetual accumulation of this debt, now being completely beyond what exists as real capital in the world.

Other countries/systems are now starting to challenge this arrangement. The euro structure was built for that purpose: to replace the $IMFS at a given time, when the conditions are right. Freegold is the result of the World's collective will to restructure.

costata said...

Aleksandar,

Excuse me for paraphrasing your comment:

".. when the conditions are right the World (will have a) collective will to restructure." (My edit)

I would add "and not before".

Cheers

Syafrin Djohan said...

Just for info:
From the USAGold MTM article link here

January 1999: 404 million ounce (12,576 tonnes) at €99.6 billion.
January 2010: 348 million ounce (10,833 tonnes) at €266.9 billion.

Mathematically speaking,
348 million ounce @€266.9b equals
404 million ounce @€309.85b.

The same amount of gold now take 3.11 times of Euro paper to buy.
That is 67.85% debasement over the course of a short 10 years!

Jeff said...

Paper gold price is the physical gold price at the margin only, therefore Giants cannot benefit by buying physical in size on dips.

The paper price must be propped by those who hold physical to benefit their MTM? This is counter-intuitive; they would be supporting the system which undervalues their wealth. They would benefit much more by allowing true value of gold to be freed. That would be a quarterly bonus! Also, they will lose on their paper longs when revaluation occurs. Why throw this money away? Better to short paper gold to 0, break the paper market and profit on the physical revaluation and the paper short.

I look forward to responses.

Robert Leroy Parker said...

@Aleksander

Thank you for your reply.

If TPTB do not exist in a coherent form then what of the dealings of the BIS, central banks, and the future dealings of the old world wealth in Anothers thoughts?

Freegold may be the natural solution but if Anothers assertions are to be believed, there is most certainly powerful people influencing the world in cohesion.

While I greatly value zero hedges unique content I can
assure you Glenn beck has no influence in my thoughts as I have long since pulled the plug on cable tv.

So ill rephrase my question and pose it again to you. Are there posts you can point me to extrapolating on why the natural solution has not already occurred?

Michael H said...

Robert Leroy Parker,

I suggest you read the comments below the 'freegold' blog post by FOFOA in Sept 2008, as Wendy referred to above.

In the discussion, Ender states (to paraphrase): No official actor will be seen to go against the dollar-financial system, as that would be a critical mistake.

Instead, they seem to be preparing in the background, to survive once the dollar collapses.

Andy said...

Jeff, I believe A/FOA argued that no one can openly oppose the $IMFS. The paper game must seem to fall over on its own.

Gilligan said...

I think this quote is relevant:

'Do you think that value has been lost by holding physical gold all these years?

If the answer is yes, you are wrong! I tell you now, it's all in your perception of what is value and what is real. Gold has been increasing in value since the early 90s and doing it at a rate much higher than any other investment. Cannot see this? Hear me now, what the wealthy and powerful know: "real value does not have to always be stated or converted thruout time. It need only be priced once during the experience of life, that will be much more than enough!"' - ANOTHER (THOUGHTS!) Sat Oct 25 1997 17:16

The way I see it, these 'snapsots' help to understand this thought pattern.

It's not so much important what happens after this moment, at least until the next 'snapshot'.

Aleksandar said...

@ Robert

TPTB, if you define it your way, seems to exists only as a concept. A way of thinking, a reflection from the slow mechanism of human evolution upon the Giant's collective minds.

The fact that some people may condense this concept in words does not meen that they actively participate in implementing something.

ZeroHedge was an informative site where (semi)professionals and people of some consequence participated, including in the comments section. Today, while still informative, the readership consists of day-trader loser types and some bitter unemployed people babling about every conspiracy theory they have ever encountered. It is a kakaphony of self-empowered laymen.

ZeroHedge has turned into doomsday entertainment. They even have an in-house artist making teenage photoshops.

The drop that spilled the glass, at least for me, was the posting of the article of FOFOFOA (not FOFOA) without mentioning the difference. They also frequently re-post low quality stuff of others in the "blogosphere" to keep readership up.

The only value are the original ZH staff commentaries and analyses. The only reason I still hold a tab with ZH open. But I dont refresh as often as I did.

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

Andy,

I don't see how anyone could accept free gold w/o defaulting their debt first, especially for US to have the most to lose. I mean shipping gold to China to settle trade imbalance? Not gonna happen any day in Washington D.C. IMF itself is asking ECB and FED to keep printing money to patch these PIIGS and some more around, w/o the debt going away this printing as the last resort just wouldn't stop.

Jeff said...

Andy,

I can understand not wanting to openly oppose the IMF but the idea that Giants would actually prop the IMF paper gold system at a loss, while the IMF makes financial war on them is a reach I can't make.

littlepeople said...

Fannie Mae just accepted $1.27B from BOA to cover $128B in current and expected mortgage losses. So, taxpayors cough up another $127B to bail out a bank, as Fannie is now guaranteed by the U.S. Treasury. The FED oversees all these shenanigans.

Expect much more of these back-door bank bailouts. All the debt has to be taken out of the banks and deposited on the Treasury (taxpayors present and future), so a hyperinflation doesn't hurt Wall Street as bad.

Maybe freegold occurs after (or during) a hyperinflation, when the people are begging the government to "do something." The Treasury will then revalue all its gold to square the debt--and ditto for other CBs in Europe, etc.

Robert Leroy Parker said...

@Michael H

Given that the current system has continued for 12 years post Another's thoughts, is it not possible for it to go on decades longer with even greater booms/busts? Will the paper price only rise in the time between now and the halt of gold trading?

I would like to follow in the footsteps of giants by accumulating gold at the best possible commodity price. What if the paper price is manipulated to much lower levels before freegold, and physical is still available? Is this not possible?

My concern is having currency available to maximize my physical holdings before freegold. In this matter, the timing is extremely important. Do I buy dips hard, soft, or only what I am comfortable with as Another might say? Comfortableness is of less concern to me than maximum wealth preservation.

Since time will reveal Another's truths or fallacies, I believe it is of the essence in these dealings. I would love to know when people on this blog think freegold will occur. Thank you for your thoughts.

costata said...

Rui,

You keep repeating this statement (or very similar ones):

"I mean shipping gold to China to settle trade imbalance? Not gonna happen any day in Washington D.C."

It all depends on the price of gold in US dollars and the current account balance. Please think about this.

If you have 8,000 m/t of gold and you can settle your trade imbalance with a few ounces of gold then it is a trivial loss from a huge asset reserve.

If you have impoverished your population, to the point where they cannot afford to buy imported goods and their consumption of locally produced export goods is reduced, your trade balance could go into surplus rapidly.

Wendy said...

Robert Leroy Parker said...
"What if the paper price is manipulated to much lower levels before freegold, and physical is still available? Is this not possible?"

Anything is possible although this scenario is not probable, the "price of gold" is being supported on all dips these days.

What is possible is that just before the emmergence of "freegold" that the paper price gets slammed down, at the same time physical bullion completely dries up.

I think it's fair to say that most here do not concern themselves with the "price of gold", because we hold it as a "wealth storage". In this I mean when we have excess cash, that we plan to not spend in the forseeable future, instead of holding that wealth in a bank account, watching the purchasing power dimish through time (inflation) we prefer to transfer our savings to a vehicle that has proven to maintain it's purchasing power over time.

Personally I have chosen to buy both gold and silver for my own reasons.

In terms of timing of freegold, no one can be absolutely sure, but when another said that freegold was coming 12 years ago, it was, and it has been evolving and continues to evolve just under the radar of most.

Keep in mind that most of us here have been cultured in the Western mind so to speak. We demand instant gratification, and fast everything, our "long" term plan usually involves a 5 year plan. We were likely not taught the difference between price and value.

Randy S. at USAgold is a freegold expert and predicts "in your face" freegold in 2013. There's a link to this in the last couple of posts, I'm not sure which.

If I didn't own gold I would be buying as much as I would be comfortable holding, as soon as I possibly could. Never mind the price.

Hope this helps

costata said...

Robert Leroy Parker,

The question is: "will you be able to get physical gold when you want it?"

Gold passed another milestone in the last year. Demand for gold from the fashion jewellery sector collapsed. The Eastern markets are de facto bullion markets (sold by weight and purity). The physical gold investors and CBs managed to absorb this extra "supply" and still bid the price of gold up significantly.

Scrap gold supply surged over the past three years. I am willing to bet that this source has peaked. Mine supply is more or less static.

If you want physical gold in size you will now have to compete with every physical gold investor on the planet and the CBs in a market where IMO supply is now inelastic.

Just to make the excercise a little more interesting you also have to deal with the impact of exchange rate movements. If, say, China drops the dollar peg and the Yuan doubles against the US$ then gold is sitting in the 50% off basket from their perspective.

If you are offering US dollars for gold in the USA it could quickly become a double in that market if people don't want the US$.

Let's throw a political dimension into the mix. Let's assume for a moment that the population of a large gold producer, such as Australia, suddenly wakes up and seeks to buy all of the locally produced gold. Even at $2,000, $3,000 or $4,000 per ounce there is more than enough wealth in Australia to take 250 m/t off the International market in a heartbeat.

Anyone who doesn't vote in this country wont figure in the political calculation of Australian politicians when push comes to shove.

There is a movement in South Africa to nationalise their gold mines. Please refer to the previous paragraph.

Any ways that's my 0.02 FWIW.

Rui said...

Costata,

Foreign nations hold about 3.5 trillion (or more) dollar reserve. Even if gold is revalued to 100K/Oz US government would still have to hand out 1000+ tons of gold to foreigners. To settle it in just "a few ounces" one or more zeros have to be added current gold price, but then it's hyperinflation right away.

Do you see the catch 22 here? This mess cannot be solved w/o a monumental default on all this debt, and we are just talking about trade imbalance here. We have not touched the other much bigger pile of debt.

Think about it: national debt (14 trillions), Wall St. / Fannie Freddie / GE Detroit bailout (7 trillions), Social Security/Medicare/Medicaid (40 trillions), Pension fund / Municipal bond (god knows how many trillions) and derivative mess (200 trillions more trillions). Looks like more zeros are needed.

Not only the above debt is too much it keeps growing year after year, which is why I said gold revaluation alone is not enough. The debt has to be liquidated away but so far there's no political will to do it. Like someone mentioned already that a gold standard might happen only after a hyperinflation, which is free market imposed default.

Robert Leroy Parker said...

@costata

Very interesting scenarios, perhaps the sort of thing that could set freegold in motion. But I am no giant and have not been hampered by inelastic supply.

My next question is how do the believers of freegold at this blog go about their accumulation process? A steady diet until the moment of truth? Do any of you actively invest in mine shares in the attempt to increase paper wealth for physical purchases? Or is this seen as too risky given the sudden truth possibility.

Jeff said...

Hoenig likes the gold standard?

http://abcn.ws/e0wIIk

costata said...

Rui,

The two (2) major themes of this blog are Freegold (Reference Price Gold) and hyper-inflation. A/FOA and FOFOA have provided sound arguments that the $IMFS will experience both hyper-inflation and a revaluation of gold.

I suggest that you compare your most recent comment with your earlier comments. You are truly exasperating, mon amis, but it sounds like the penny may have finally dropped.

Rui said...

Costata,

I am not sure you have got what I've been saying: If our ever growing debt is caused by endless supply of bad money then Free Gold with its inherent support of bad money does not solve it, especially if it is engineered by IMF that has been one major propeller behind the global debt crisis.

Wendy said...

Robert and Jeff,

In July 2009 there is a post called "How The Dollar Made It This Far"

It discusses $IMFS propping, it also discusses the evolution of the systemic disintegration that will lead to freegold.

It further discuss the cracks that show up and have been papered over in an attempt to delay the inevitable. FOFOA or Alex are better at explaining the skateboard/wobble/faceplant theory.

It touches upon the fact that Central Banks are increasing their gold holdings with the goal that eventually the value of their gold assets will offset the losses they WILL take in their $USD researves, when the dollar tanks.

This information is not found in only reading the article. You must read the comments as well.

Wendy said...

Rui,

Freegold is not being engineered by the IMF. I think you'll find value in the post is recommended above.

JR said...

RS:

These MTM revaluations were taken and entered into the books on the closing business day (Dec 31st) of 2010, and therefore as far as the Eurosystem’s year-end balance sheet (and through the current quarter) is concerned, the dip in the price of gold these past two days is of no consequence at all. It’s like taking the official family Christmas-card photograph on a pristine day — a week before your precious toddler takes a tumble whereupon examining his black eye in the bathroom mirror decides to shave some of his own hair with daddy’s razor. Sure, the kid is a frightful sight at the moment, but you know he’ll grow out of it — and meanwhile you really don’t care because the Christmas card looks as good as you desired and is already in the mail.

To the point:

Eurosystem gold reserves are now valued at a record €1055.418/ounce, thus bringing its 348.1 million ounces up €33 billion on the quarter — up €100.5 billion on the year — to a total valuation of €367.5 billion.

Over the past twelve-year lifespan of the Eurosystem, when coupling gold’s rise from the January 1, 1999 euro-launch price at €246/oz along with MTM revaluation accounting methods, the gold reserves of the Eurosystem have elevated from €99.6 billion, even in light of a weighty 56moz net decline from 404 million ounces owing largely to CBGA-related reallocation of Eurosystem gold reserves.

This growth in gold reserves makes a stark contrast when compared to the initial net position in foreign currency held in 1999 (€227.4 billion) that has undergone a significant shrinking to the net position in foreign currency today at €180.1 billion.

Within this positional admixture*, gold’s role has gained musculature from a mere 30.5% proportion to it’s current dominance now at 67.1%.


http://www.usagold.com/cpmforum/2011/01/05/gold-remains-precious-eurosystem/

Robert Leroy Parker said...

@Aleksandar

Are you a professional of consequence? If so perhaps you would enlighten me with your accumulation strategy? And maybe your thoughts on how long the timeline before freegold can extend?

Syafrin Djohan said...

Anybody who is keenly interested in full description of real life hyperinflation should read Jens Parsson's Dying of Money, which in the first chapter describes so skillfully the situation in the Weimar Republic prior to hyperinflation in 1923.

The PDF can be found easily via Google.

It was booming time in 1921-1922. Nobody predicted hyperinflation. Few doubted the strength of Reichsmark. All sorts of non productive businesses sprung up as the result of inflation booming. The productive workers were the worst affected by inflation while the professional parasitic class (government employees, finance industry, law) thrived well.

When hyperinflation catched up the lag, wealth was simply transfered from the productive class to the Weimar government who could then pay its war debt so insanely easy.

Rui said...

Wendy,

Maybe I should replace "IMF" with "bankers" to make my point clear. The future monetary system should, I hope, ban fractional reserve lending and bad money from existing.

If after several decades central banking practicing they are not only unable to prevent a systemic threat from happening but also make each one grow bigger & more devastating then I think we should conclude FLR and bad money are too dangerous so we'd better drop them, otherwise I feel we'd end up in another cycle of boom-bust-bailout-depreciation and fixing nothing.

One good money is enough, my 2Cs.

Wendy said...

Rui,

Nobody, and no body is engineering the freegold concept. It is a natural force gaining momentum as a result of decades of price suppression resulting from derivitization of gold, combined with the derivitization of the entire financial industry Globally. Basically empty paper promises that have to be settled. ie: implode. When this happens trust in all paper promises will extinguish ... poof.

You can hope all you like, but currency (money) both digital and paper are not going anywhere, and nor is fractional reserve banking, although it might become somewhat tamer in the future.

Keep reading, I can see your understanding is growing. Believe me when I say, freegold is not my "religion". After years and many many thousands of hours research, the concept of a gold reference point makes sense. As I observe events/consequences taking place in the world "above the radar" that would never have been imaginable in the past, the concept of freegold makes even more sense.

Wendy

Museice said...
This comment has been removed by the author.
Robert Leroy Parker said...

@Museice

Thank you for your reply. I will absolutely keep reading Fofoa as he is very compelling. And I will also keep asking questions of his readership. For you:

If indeed the revaluation requires one to perhaps only need less than 10% of ones assets in physical to maintain equal or greater wealth, is that how you are approaching freegold?

And if you do have cash in addition to physical, what do you do with it? I can only imagine the annoyance of having to go to the coin shop before every grocery trip.

costata said...

R L Parker,

One of the best replies I have ever seen to a similar question to the one you pose came from a USA resident who used to comment at Zero Hedge.

He used the analogy of moats and other defensive structures around a Castle. Basically he said that his cash was his first line of defense, physical silver was second and both were intended to defend his physical gold.

His stated aim was to never be in a position where he would be forced to liquidate the gold.

I recall that he also mentioned some emergency provisions in case of a temporary breakdown in the food distribution system and other disruptions resulting from civil disorder.

Chico_hawk said...

The ECB reserves are growing because they are devaluing the euro (and their foreign currency paper reserves are being devalued by all other CBs in a race to the bottom - the so-called currency wars), so the same amount of gold is worth more & becomes a larger component of total reserves...

This process continues until all paper becomes worthless (& gold becomes priceless)...and paper becomes worthless once sellers recognize its quickly declining value & refuse to accept it in return for their goods (namely commodities such as oil, food, etc.)

The central banks, in particular the US Fed, are attempting to suppress the gold price (and delay a meltdown in their paper currencies) by selling paper gold derivatives (that have no physical gold backing)....In doing so, they know that at some point, the paper gold market will collapse, sending the bullion price skyward, as all those long paper gold who thought they were "protected" realize they aren't & scramble to buy physical...

if my summary of the situation is accurate, the collapse of the paper gold market will coincide with the collapse of paper money (essentially the $US & world currency reserve)...whether due to hyperinflation or outright default of paper obligations that simply can't be met....

the global financial system will then out of the ashes (of the burned paper currencies) look for a currency that will restore/provide a relatively stable medium of exchange and a reasonable store of value...and the euro, with its now priceless gold reserves, will emerge as the new world reserve currency, since the stated US gold reserves are found wanting & unable to sustain the paper $US dollar.

some questions on this hypothetical scenario

how does the US military react to the loss of the $US as the world's reserve currency? (as that status has largely helped fund the growth in the US military industrial complex) - do they attempt some action (attack on iran, korea, etc) to try to retain US superpower status?

I don't see how this could or would change much in terms of the ultimate financial outcome, but it certainly would add (unecessarily imo) to the pain/misery index in the world & only prolong the US's ultimate financial decline.

thoughts welcome.

Wendy said...

No money, No pay cheque, No military!!!

Robert Leroy Parker said...

@costata

I have seen similar arguments of multiple lines of defense. Do non-mining stocks have a place in this idea as well? What about other commodities? And do you hold a other currencies besides the dollar?

I suppose the question that I am really interested in for the freegold crowd is do you have doubts? And if so, are you prepared for alternate outcomes?

The future is not certain.

Chico_hawk said...

Actually, from a strategic perspective, I can see the US attempting to secure the next best thing to gold (especially if their gold reserves aren't as claimed by the Fed)...and that is oil.

of course, the rest of the world won't exactly look at this very favorably, especially with the US being the biggest debtor and having devalued its reserve currency status (& debts) with reckless printing.

if you don't have the gold you claim you do, but have an unrivaled military to control oil (which the rest of the world needs & which you can exchange for hard assets such as gold), it is conceivable you can retain your sole superpower status for a while longer - at least you might consider such an option if you are a member of the US "elite ruling class"...

A world war starting in the middle east doesn't sound all that far fetched (or that great of an outcome).

costata said...

R L Parker,

For my own part I have been trying to invalidate the Euro Freegold proposition for over two years without success. Every alternative outcome that I have looked into failed to stand up to close scrutiny.

In terms of gold, I have as much confidence as a natural sceptic can have in the Euro Freegold outcome compared to Zero confidence in the other "contenders".

I have equal confidence that the failure of the $IMFS will result in hyper-inflation in the USA if not elsewhere. The case for physical gold stacks up well in a hyper-inflation scenario too. I think silver will do well in a hyper-inflation but it will not experience a Freegold revaluation IMHO.

A/FOA were firmly convinced that Governments would not permit the gold miners to keep their windfall profits or the gold. This argues against long term holdings in gold mining shares.

In relation to other investment classes I wouldn't presume to offer an opinion. We do however maintain an AUS$ currency buffer in case of a banking system crisis in Australia at some point.

Aleksandar said...

@ Robert

I am not a "professional of consequence", certainly not in this field. But, people believe that Another and Foa were. Moreover, they seem to have been insiders.

Of course, we have no evidence. Freegold's arguments are based on logic and deduction from historical data. That is why I asked in the other thread about the (former) poster here that collects evidence about the gold-for-oil deal. Even if it is circumstantial, it is still a reality check. I find it very important for a number of reasons.

It is your own choice whether to believe Freegold's arguments as they are.

People will not tell you on a public forum whether and how they buy gold or other things of value. You paint yourself as a nice target if you do that. I am what they call a "low net worth" individual and have just a modest portfolio. Mostly cash at the bank. Some shares from Sinclair's company. I am not sure that you want my advice.

As costata says, for a buyer of physical in size it is expensive and difficult. As a rule, nobody should know that you posses physical gold. Maybe just your bank or the tax agency if necessary. Thats why I would suggest anonymous buying with cash from coin dealers out of town every now and then.

If you have the capital that buys 400oz bars, well, I dont think we can help you much. Rich people usually have multiple residences, some out of the country. They also have pre-planned flight routes and other logistics organized and have stashed valuables once they get there. Who said it is easy to be rich? :D

mortymer said...

Extrapolation to get the A-Ha! moment:
"This growth in gold reserves makes a stark contrast when compared to the initial net position in foreign currency held in 1999 (€227.4 billion) that has undergone a significant shrinking to the net position in foreign currency today at €180.1 billion. Within this positional admixture*, gold’s role has gained musculature from a mere 30.5% proportion to it’s current dominance now at 67.1%."

...So, what is Your count result in quarters from now on when ECB foreign currency is around 0-10% and gold in reserves 90-100%? (lets assume there is no default)...

What we get will be, 2 fully competing systems where:
- USD is a declining reserve currency with no foreign reserves and gold at historic frozen price in dollars.
- Euro is a dynamic currency with no more foreign reserve but gold in MTM
(not including some swaps, small change to keep the liquidity)

So here you go:
"Randy S. at USAgold is a freegold expert and predicts "in your face" freegold in 2013."

A-Ha!?

Fauvi said...

Could it be that A/FOA were not up to date re OIL????

" Complete Press Release

CAMBRIDGE, Mass., November 14, 2006 – In contrast to a widely discussed theory that world oil production will soon reach a peak and go into sharp decline, a new analysis of the subject by Cambridge Energy Research Associates (CERA) finds that the remaining global oil resource base is actually 3.74 trillion barrels -- three times as large as the 1.2 trillion barrels estimated by the theory’s proponents -- and that the “peak oil” argument is based on faulty analysis which could, if accepted, distort critical policy and investment decisions and cloud the debate over the energy future.

“The global resource base of conventional and unconventional oils, including historical production of 1.08 trillion barrels and yet-to-be-produced resources, is 4.82 trillion barrels and likely to grow,” CERA Director of Oil Industry Activity Peter M. Jackson writes in Why the Peak Oil Theory Falls Down: Myths, Legends, and the Future of Oil Resources. The CERA projection is based on the firm’s analysis of fields currently in production and those yet-to-be produced or discovered."

http://www.cera.com/aspx/cda/public1/news/pressReleases/pressReleaseDetails.aspx?CID=8444

http://ebookee.org/Daniel-Yergin-quot-The-Prize-The-Epic-Quest-for-Oil-Money-amp-Power-quot-_262367.html

Why the whole scam???
Could it be that actually the US never ever REALLY paid that gold - or got it back - to the UAE???

I wonder if ppl here wish to think out of the box....

sean said...

Jeff was asking why CBs don't actively short paper gold and give freegold a push. It's an interesting question - perhaps they, (like FO/FO/A) prefer to allow the change to(or understanding of) Freegold to develop of its own accord, without forcing it. That way it takes better. I have the impression that they are already at the table, watching as "Uncle" gets more and more drunk, and waiting patiently until he passes out. Then they can have a proper conversation (about Freegold). By the way, Fed Governer Hoenig has just pulled up a chair at the freegold table (http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/1/6_Jim_Rickards_-_Gold_Standard_Coming%2C_Feds_Hoenig_Correct.html)

As for the MTM, I'm not sure I understand why it is necessary to goose the end-of-quarter MTM Euro gold-backing. It hasn't increased the Euro exchange rate (which might be useful for short term political stability), and eventually with freegold the Euro reserves will be practically (or completely?) 100% gold anyway.

ciaoant1 said...

What about this:

"India May Settle Iran Oil Imports in Dirham, Yen, Asharq Says"
http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=aNU3viFaf_a8


From here:
http://translate.google.com/translate?hl=en&sl=el&tl=en&u=http%3A%2F%2Ftsak-giorgis.blogspot.com%2F2011%2F01%2Fblog-post_5211.html

mortymer said...

One older Interview with Dr Paul Volcker:
http://www.youtube.com/watch?v=5TlqEWOSRY0
"...I want to go backwards so we have a firmer future..." 3:35
So this option has been clearly ruled out now.

Robert Leroy Parker said...

Thank you for your responses. Finance is not my field of work either and as I am still fairly new to the gold game I am very curious as to how people are using freegold to their advantage. If you are worried about 'painting yourself a target' I will refrain from further questioning on investment strategy. But as you Aleksandar, unless I fall into some windfall profits such as the recent lottery, a 400 oz bar is not in my future. Perhaps especially not if I continue to spend inordinate amounts of time on blogs.

I still have much to read, and maybe it will convince me physical is the only way to go.

Regards

Jenn said...

Hi RLP-

When purchasing gold and silver premiums and familiarity are my biggest concerns.

When I was buying silver I was purchasing $US 90% silver coins (dimes, quarters, halves before 1965). Reason being junk silver carries really low premiums (more bang for the buck when you sell). I also bought some eagles at a higher premium, but that's for the "familiarity" side of things. People look at a 90% silver dime and say, "big deal, it's just a dime" where as you show them an eagle they say, "oh my how pretty".

As for gold for me personally, I want to be sure when I go to sell my gold that most any dealer in the world recognizes what I have and is therefore more likely to buy it at a reasonable rate. In the United States, gold eagles and Canadian maple leafs fit that bill, either as whole or fractionalized ounces.

I can tell you in my area there is one bank in particular (local bank) that sells silver eagles and gold eagles/maple leafs right over the counter and they don't even ask for an ID. The down side? Wicked premium of about 30%. The upside? You walk out of the door with gold in hand.

|> "I still have much to read, and maybe it will convince me physical is the only way to go."

Physical gold IS the only way to go. Keep reading the archives and that point will become exceedingly obvious. Sure, I have a couple of mining stocks, but those are just reckless gambles. I like to have my fingers in a little bit of everything.

--Jenn

The Dork of Cork said...

Could somebody please explain why the French sold 500 tons over the last decade - I know the Atlantist elements are now strong in Paris but has the Paris executive any Gaullists left ?
I also heard recently that for the first time in history the République Française has made a loss - could you confirm this.
Also Is this fiat vs freegold fiat a internal feud between the Scottish and French freemasonary traditions ?

Wendy said...

Rui,

I'll have to retract my remark that nobody or no body is engineering the freegold concept.
After I responded to you I asked myself "where did the derivitizaton of gold start?" Although it has morphed into this huge capital sucking derivatives market, it did get started purposfully with the Europeans leasing and securitization of gold (according to FOA).

See August 09 post Brown's bottom. The whole post is a repost of FOA's remarks, and this is explained in detail.

Sorry for initially dismissing your remarks.

The fact remains, today, regardless of any attempt to maneuvour the market, reference point gold pricing is inevitable.

costata said...

TDOC,

"Could somebody please explain why the French sold 500 tons over the last decade..."

There were substantial changes in the gold reserves of several countries in the lead up to the Euro evolving into a circulating currency. Belgium, Switzerland etc. A/FOA advised that these deals involved the BIS and ECB and that they were opaque. According to A/FOA in many cases the gold did not move. They were merely book entries.

Some of the CB gold sales can also be explained by the need to supply the retail market in the EU following the lifting of the VAT on gold.

According to A/FOA the Washington Agreement was intended to signal that the EMU CBs were ending their involvement in gold leasing while still offering limited support to the Anglo-American faction in managing the price of gold.

Lastly IMO it is safe to assume that some gold was used, in various other ways, to prop up the $IMFS while the Euro was bedded down.

"... I know the Atlantist elements are now strong in Paris but has the Paris executive any Gaullists left?"

Everything I have read on this topic suggests that the French central bankers (eg. Trichet) are from the Gaullist economic mold. Likewise the German central bankers in terms of the Bundesbank mindset.

There appears to be some distance between elements of the political elite in the EU and the Eurosystem CBs + BIS. Another described the politics surrounding the ECB as a "sideshow". He seemed completely confident that the Euro Freegold architects would drive the project forward regardless of the politics.

Wendy said...

Bill Gross is a SKANKY WHORE!!

http://www.cnbc.com/id/15840232/?video=1722656296&play=1

Texan said...

I still don't understand how the euro is "backed" by gold, or how anyone has any claim to it even if is " backed". The PIIGS look pretty irreconcilable to me unless Germany is willing to have the ECB embark on an open- ended " blank check" money printing exercise. The PIIGS are running massive fiscal deficits and cannot print the euro. No one other than the ECB and to a very limited degree China will buy their bonds. So now what? The price of gold could be 10,000 euros/ ounce and still no one would buy Greek bonds because they don't have any EUROS to repay them with. And selling the or gold is no different than privatizing the Parthenon, it's a one- time event and would only buy them time.

DP said...

Hoenig not only likes a "gold standard" (there goes that specific phrase that is usually taken to mean something in particular, but perhaps the speaker didn't mean exactly that, like Zoellick didn't?) but he was also on-theme with The Debtors and the Savers.

Perhaps they're all reading FOFOA...? :)

http://www.usagold.com/cpmforum/2011/01/06/hoenig-monetary-policy-and-the-role-of-dissent

DP said...

@Texan: Let's compare what the statements of the ECB and the Fed say about their reserves and their liabilities.

ECB say "This is how many ounces of gold we have, and by the way this is the current market value of them. Meanwhile, on this other side of the ledger, we have issued X Euros. So, you decide what our currency is worth to you."

What do the US say? "Err... yeah we have a bit of foreign currency knocking about somewhere, oh and some gold but it's worthless trash that is just worth $42.22 per ounce. Don't waste any time looking at that stuff. However, we have all the Dollars you could ever want -- just ask us and you will get them for your goods, no problem. You decide what our currency is worth to you."


Yes, gold is not convertible for Euros at the ECB, the same as they are not convertible for Dollars at the Fed. However, when you look at the numbers behind the reserves and the liabilities, the ECB's balance sheet looks (to anyone that Values gold) more transparent and actually more prudently managed than the Fed's.

Get your US M3 and divide it by the number of ounces of gold in reserves. Do the same with the ECB's numbers. Compare the two. How many more Dollars (Fed liabilities) are there in the world, compared to how many Euros there are (ECB liabilities). Does the ratio come out anywhere close to 1:1.2959 today? Methinks not.

Fed opacity is all that is keeping the Dollar up against the Euro. That and the fact that people all around the world are keeping Dollars tied up in their reserves. Until perhaps they won't any more.

The Dork of Cork said...

@Costata
Thanks for that but I don't quite follow.
Are you suggesting that the Central bank gold released for private storage is still on their balance sheet somehow as private citizens begin to bid up the price for Gold ?
A sort of Gold liquiity if you will over the last decade of tranistion and now we are entering phase 2

DP said...

@TDoC: You might find this post contains an interesting game (or you might not! :-) )

Jeff said...
This comment has been removed by the author.
Jenn said...

Hi Jeff-

If you mean USAGOLD (not Kitco), scroll up and look on the right hand side of this blog -- or you can click here and here.

--Jenn

Franek said...

If Euro's MTM architecture is superior to that of dollar's, what prevents US to adopt the same?

costata said...

DP,

I just visited your blog. I thought presenting the situation as a game was a very clever device for illuminating the moves in this "currency war" between the Euro and the US$.

I thought the discussion in the comments about your post was also very thoughtful and insightful. I think you have created a great forum to focus on specific aspects of this process while FOFOA concentrates on his "big picture" approach.

Cheers

costata said...

TDOC,

My interpretation of A/FOA's remarks (on the published statements about Eurosystem CB and BIS gold movements and sales) is that they will tell you nothing about what is really happening.

I think we have been in "phase 2" for a while. Gold in the savings of citizens of the EU strengthens the whole economy. It doesn't have to be in official reserves to have this effect.

I think it is worth noting that as well as slowing their sales to virtually zero over the last few years the Eurosystem CBs and ECB have NOT been buying either. The field has been left open for others such as Russia and China.

After the transition to a free market RPG regime if the Euro is undervalued private citizens can bid for Euro with their gold and vice versa. The Eurosystem CBs may simply play the role of market maker or the ECB itself could perform this function on its own.

costata said...

Texan,

A/FOA cited two circumstances where the ECB Eurosystem CB gold reserves would come into play in "backing" (supporting) the Euro - war and a demand from the oil producers for Euro+gold in payment for oil.

The asset reserves of gold are insurance.

costata said...

Franek,

"If Euro's MTM architecture is superior to that of dollar's, what prevents US to adopt the same?"

A/FOA were convinced that the USA would adopt this architecture in the end.

However to those who benefit from US dollar hegemony this will be seen as a very high price to pay.

costata said...

I think the article linked below provides a good summary of the current situation. It also adds another voice (highlighted) to Hoenig and Zoellick's recent statements.

http://www.kitco.com/ind/AuthenticMoney/jan072011.html

"As for gold price collapse likelihood, we have to look at its exceptional ability to measure value and ignore any means of exchange role.

With the head of the World Bank suggesting that the gold price be used as a reference point on which to measure a currency’s value, we see why the head of Germany’s Bundesbank called gold a ‘useful counter to the swings of the dollar.’

Using basic logic then we can only see a collapse in the gold price if the inherent value of both the euro and the dollar soar to unseen heights against the broad spectrum of assets, including gold. Is this happening? Is it likely to happen? Would you place your trust in the euro or the dollar as an investment likely to take your wealth to new heights?

More to the point, could we expect the Indian, Asian and Chinese investors to place their faith in these two currencies and away from gold? Therein lies the answer to whether there will be a gold price collapse!"


Makes sense to this simpleton!

scepticus said...

"As for gold price collapse likelihood, we have to look at its exceptional ability to measure value and ignore any means of exchange role.

With the head of the World Bank suggesting that the gold price be used as a reference point on which to measure a currency’s value, we see why the head of Germany’s Bundesbank called gold a ‘useful counter to the swings of the dollar."

What you need to do here is compare gold's store of value function against land and equities. If gold is not to be an electronic medium of exchange, then you can't cite its monetary attributes.

Gold collapse is baked in as a result, but that's not to say it can't have a last hurrah, that could I suppose last another decade or so.

Syafrin Djohan said...

Honesty is not found in the Dictionary of Freegold terminologies.

Eventually Euro (the hailed Freegold currency) will be printed into oblivion, to defend the rampant spending of the new world reserve currency so much like the era of colonialism.

The REAL THREAT to the whole world is here comes the new Empire of Pillagers (A joint force of old colonialist powers). There will come a new form of European CIA that will print toilet paper Euro to bribe and terrorize the whole world and buy all water and electricity companies and lands in the whole world.

The stability within EU will cost the whole world a huge inflation import, and gold eventually will all go to EU.

Bimetallism is the only sound monetary policy to present real peace to the world. It allows the expansion of silver to cope with economic growth without going into extreme dilution that benefits the debtors.

Freegold is fiat-without-shy, as the pillage is done in the open daylight, while Dollar Gold-Standard is fiat-with-style, as they still care about public's mockery and they still hail about Liberty, so they actually still have some shyness.

Aleksandar said...

@Syafrin

The only one doing the printing is the Fed with naked QE. ECB sterlizes bond purchases.

Rui said...

Exactly, Syafrin. You are the one consistently getting the flaw of freegold: Thou cannot have an effective gold standard when debt is allowed to be settled in bad fiat money. What we need is a fixed-rate standard w/o the rampant bad money interruption.

Freegold in the form FOA proposed achieves two things: Free debt + hoarded gold, and there's no better example to demostrate the flaw than the current Euro zone situation where PIIGS are flying in the sky.

W/o hard gold standard imposed disciplines, fractional reserve lending goes out of control and debt erupts until countries like Greece cannot pay it back. By then the system is so leveraged it cannot allow PIIGS to default otherwise banks lending money to them would go bust and start a chain reaction.

So what do they do next? Well they call in the ECB to print Euros to settle PIIGS' debt, which is typically the first step toward hyperinflaiton. So debtors get outta jail free while savers be damned. Meanwhile people across Germany are stashing their safety box with gold and silver seeing how EUROs are trashed.

See? Free Debt + Hoarded Gold.

We have actually been on freegold since 1971 at least. Fiat money is "floating" (or like I pointed out several times sinking) against gold. Debt can be settled in bad fiat.

Has it achieved a stable system? No, b/c as Syafrin pointed out "Honesty is not found in the Dictionary of Freegold terminologies." Government and bankers love bad money as it expands the money supply to further their agendas. They do not want gold price to reflect the true health of fiat money so they cheat with London Gold Pool, CRIMEX, paper gold, tangsten bars and everything.

Money should be what savers and producers dictate to use. They don't want debt to be settled in bad fiat. Only debtors like it that way.

A sound monetary system should use good money, AND GOOD MONEY ONLY. What you need are three elements: a fixed-rate hard money standard, removal or severe restriction on fractional reserve lending and strong bankruptcy law enforcement to liquidate debt.

DP said...

@costata: Thanks for your kind words, and I appreciate your blessing/endorsement of my occasional unconventional approach around here lately.

I put up posts on my blog about whatever I think is interesting, usually related to economics, but lately the posts are often indeed specific details that I found interesting or perhaps requiring of more detail/discussion among the comments over here. I also put up relevant links on the Facebook page, which appear in the panel at the right of the blog pages, where I think there is something interesting to note, but I don't have anything worth adding via a post of my own. I want to make it clear I have no desire to attempt competing with FOFOA, which would clearly be futile, but I do hope that from time to time I can offer something complementary and hopefully relevant.

I always feel a little guilt and hesitance when I've placed any links to my own posts here, so your comment provides me a little relief. Cheers! ;-)

Tekin said...

@ Franek

It appears as if there are various institutional creditors with claims at 20.67, 35 & 42.22 dollars. See:

http://fofoa.blogspot.com/2009/08/confiscation-anatomy-different-view.html

"...Well, if the US ever put gold back on the table through another confiscation of its citizens' gold, the BIS would call in all of its outstanding claims in gold at the rate of $42 per ounce. And the BIS would not be alone. Other entities would have legal claims for gold at $20.67 per ounce, and others at $35 per ounce. How much gold was either confiscated or defaulted on without due process of law? Claims of perpetual entities never go away. If the US government ever exposed its own gold (or its citizens' gold through confiscation) to the light of day, it would expose itself to all kinds of claims and an international legal mess. Under international law, the US is still an OUTLAW when it comes to gold!

This is why gold is off the table. This is why we can never go back to a gold backed dollar. It is also why they cannot call in gold AGAIN under the same dollar that they did in 1933. To call in gold at a specific exchange rate now, the US would first have to back the dollar with gold at that rate and then call it in. That would expose the US gold to international legal challenges for redemption. If they simply called in the gold without backing the dollar, the US government would be exposed to thousands of internal law suits. These law suits would rightfully demand a retroactive reversal of 1933 before any new confiscation could take place. They would demand that US official gold be distributed to all citizens at $20 per ounce BEFORE it could be turned back in to the government.

The US government will never take this risk! It will never expose itself to this legal nightmare! The US is already a golden outlaw!..."

www.gregor.us said...

FOFOA et al,

Any thoughts on the possibility that the dislocation which FOFOA has explained previously--a breakdown in the paper market as that market becomes unable to deliver physical metal--could be seen first in Silver? As we know, there appears to be a small scale flash mob phenomenon unfolding in the retail silver market, which this week *may* be related to SIFO rates going negative. AKA backwardation. It would be unsurprising to me if the global retail investor became the catalyst for the following set of events, specifically in the silver market: backwardation, physical silver shortages, cash-settlement only on silver contracts at the exchanges, abandonment of the futures market by silver players, ascent of the price of physical silver on a rapid pathway.

My question here is less about silver as a preferred or less preferred choice within the ongoing discussion of Gold vs Silver. Instead, my question is about tipping points, cascades, and feedback effects. I'm looking for trigger points more broadly, in the global precious metal markets.

G

Post a Comment