This is a new kind of comment forum, similar to an Open Forum, in honor of Wendy and others who suffer in silence, unable to access comments in excess of 200.
And just for the record, do not buy this coin! Believe it or not, it is priced at a post-Freegold price. Your break-even point on this coin is gold at $33,102.47 per ounce (after shipping and handling)! Funny that it says the price can only be guaranteed for 7 days. They must be anticipating Freegold at any moment. This video was posted on YouTube Jan. 13, 2010 and I saw the same commercial on TV last night. The only difference was they have cut the price in half while reducing the gold content by 55% to 14mg:
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176 comments:
FOFOA, i discovered your work a few months ago, let me just say you are the most prolific author on the subject I have had the pleasure to come across, thank you.
Here's a thought: If large commercials (Bullion Banks) were forced into a short squeeze on the Comex by longs standing for delivery - I would imagine, since they ( the BB's) are authorized participants eligible to redeem GLD shares for bullion, that they would do just that. In affect giving them access to bullion at off-market prices. By off market I mean having the ability to buy tonnage and not move the price. I'm therefore anticipating a continued and increasing drawdown in GLD shares/bullion holdings. The BB's have enough money to buy as many GLD shares as needed and since buying GLD is paper gold and doesn't move spot why wouldn't they - buy the paper redeem to physical, serve the longs standing for delivery, escape short squeeze (at least for the moment since in the long run they would be selling off their fractional reserve unallocated gold deposits and such drawdowns can only go on for so long without replenishment/reshuffling). Any thoughts as to why this wouldn't work? is this BB's insurance policy (get out of jail card)?
-v
Good idea FOFOA, although it's always a nice problem to have TOO many comments!
Speaking of which, I'm a long-time reader, first time commenter. Although I've read approximately 99% of FOFOA, 50% of FOA and 25% of Another, my understanding is still nowhere near the point where I feel confident making any kind of comments on Freegold. That said, I do feel qualified to make a comment on some of what has gone on in the comment sections.
While it's important to allow honest discourse, regardless of how ill-founded such commentary may be (I'm looking at Jeff), it is still very important that the comment section not be allowed to devolve into a playground for trolls. There was recently a document posted on reddit (can't find the link), which outlined how to "hi-jack" an internet forum. The propagandic techniques espoused therein seemed to be quite effective, and I'm concerned that such a high-jacking might occur here, which would be a real shame.
Cognitive Dissonance recently posted an article about just this subject over at Zero Hedge, wehre the commentary devolved to the point that I simply don't bother reading it anymore.
So, to summarize, while I love open discussion, I sure hope FOFOA doesn't hesitate to get rid of repeat troublemakers who add nothing to the site.
I should have added: keep up the great work, I look forward to your articles unlike any other in cyberspace.
"Enough"- Thank you for replying to my post in the prior comment section. I am purchasing a small amount of gold as we speak!
To all forum readers: I have one major fear that I'm hoping anyone here can help me with: a huge (albeit temporary) drop in the price of gold.
I'm 100% on board with the idea of owning physical gold with most of my free cash, but I still don't understand one major point regarding Freegold.
If I'm reading FOFOA and other reader posts correctly, in the future the dollar will collapse and there will be a massive price revaluation in the price of gold. BUT, I have read here that when the dollar collapse occurs, the "paper" price of gold will crash dramatically AND THEN skyrocket in "real" price.
Why do you think the price of gold will crash and wouldn't it be better to either buy small amounts of gold each month or even wait until the major price crash happens so that we can scoop up gold when it is much cheaper in price?
I'm sorry if I have completely missed the point regarding Freegold, but I am a gold investment newbie. I'm ready to learn from you gold veterans because I want to protect my family as much as possible.
@Free gold? Yes please!
i think your answers should be found in this post by FOFOA.
http://fofoa.blogspot.com/2010/09/shoeshine-boy.html
Hello FGYP (nice handle)-
Currency collapse (hyperinflation) and Freegold are two discrete events. We don't necessarily have to have a currency collapse to witness Freegold.
So, thinking with this new perspective --
"Why do you think the price of gold will crash and wouldn't it be better to either buy small amounts of gold each month or even wait until the major price crash happens so that we can scoop up gold when it is much cheaper in price?"
When you see the pice of gold go through the floor -- that price is for paper gold only. Think of it in terms of your personal holdings. If you have an ounce of physical gold and you see the price drop to $300/oz, are you going to panic and sell your physical gold thinking it no longer has any value? Neither are the dealers. When you see the price drop like that, everyone will stop selling physical. That's when physical gold goes into hiding.
--Jenn
FOFOA: "... the only difference was they have cut the price in half while reducing the gold content by 55% to 14mg."
Maybe this is the "collapse in gold price" Jeffry Chmielewski was referring to? :)
BTW, it's hard not to notice the momentum this blog has gained in the past year. I think FOFOA will become a quasi-celebrity by mid-2012....
FOFOA and all
Thank you. This is a wonderful resource. I have been following this blog for several months now and decided to come "up on the radar".
Look forward to contributing my 2 cents
Hi Jenn,
thank you for complimenting my "handle." Before today the only handles I had were my "love handles" around my waist...
I appreciate your reply (and Mike's), but I'm still a little freaked out with the possibility of a major crash in gold price. Unfortunately for me I was one of the sheep who invested in fool's gold (the stock market) for the past 10 years instead of buying gold when many of you did. If I had a big stash of bullion that I had purchased at $500/oz I wouldn't be as nervous about buying new gold at nearly $1400/oz.
I can't seem to grasp why it's not better to wait for a huge price crash, or at the very least, to dollar cost average into gold.
Anyone: Please convince me that I'm crazy NOT to pile thousands of $$$ into gold at $1340 instead of waiting for it to drop.
Thank you in advance,
Tom
Victor: I'll take a stab at your question.
"Here's a thought: If large commercials (Bullion Banks) were forced into a short squeeze on the Comex by longs standing for delivery - I would imagine, since they ( the BB's) are authorized participants eligible to redeem GLD shares for bullion, that they would do just that."
What makes you think they aren't already doing that or some variation of it? It's possible they may even be able to naked short the shares and by doing so be able redeem metal from the ETF.
Aside from the recent big drawdown in GLD probably attributable to a "giant" wanting physical, we've often seen metal leave the fund in the midst of an up move in gold and be quickly followed by a sharp decline in price. So it appears some variation of what you are suggesting is already happening.
The end game is when their well runs dry or close to it. After all do you think there is an end less supply of physical gold?
Many believe the GLD was setup to offer the BBs another vehicle to control more gold and manipulate the price with.
We all know the end, it's just a matter of when and since we don't know that (and we certainly won't be privy to inside info) we have to be ready now.
Tom: As someone else more knowledgable than me recently said "you have to be crazy not to own gold."
Anyway don't expect a huge price crash on physical gold. You absolutely must own gold now. You can hold some dry fiat in reserve and keep buying it down. But you have to establish a core position and then you can add to it on dips.
It is much more likely we head much higher from here than down more than another $50.
When the big price crash comes that will be for paper gold and physical may not be available at any price.
@Freegold? Yes please!
If I may add to Jenn’s fine words. The concept is quite simple. You’ve asked:
“…BUT, I have read here that when the dollar collapse occurs, the "paper" price of gold will crash dramatically AND THEN skyrocket in "real" price.”
The idea here is that the paper price crash comes from lack of demand for the paper products. Once people find that they actually want gold metal rather than all the proxies to gold, the demand for paper products will be found worthless – think tulips of old.
It is this realization – new understanding of the function of physical gold metal – that is effectively the trigger for the price variations between paper gold and physical gold. It is in the overwhelming demand for immediate settlement (in gold metal) that kicks off the process.
Paper gold will be found worthless as people discover they can’t convert the paper into physical metal. Today, they think that they can. As understanding changes, so will the demand for paper.
May your days be rich with understanding!
FGYP...there is an option to allay your "price" fears. Buy physical and hedge the price simultaneously with a "short" paper gold vehicle. Creating a long physical/short paper position. One such vehicle is the ETF GLL, double short gold. It takes 1000 shares to fully hedge 50 oz. roughly. I have had this on (50%) since $1388. Covered some at $1316 and put some back on at $1342. It is possible that this could actually be a win/win if paper gold collapses and physical rises, At worst you have capped your upside if gold rises. If you are correct and paper prices fall you have insulated yourself to the extent you desire and at the same time you have physical in the event it goes bid only. Hope this helps and any comments are welcome they see flaw in my logic.
FOFOA,
Thank you for the forum. I don't know why I often can't see comments after 200, but this works great :)
Enough,
Although I woouldn't call it a "flaw" in your logic, these days what appears to be happening, is longs and shorts are closing out of the market together!! Go figure??
costata,
re: weather: I can't believe the weather your country has suffered recently. I was following the news today (your last night), and I'm relieved to hear that no deaths or serious injury has resulted from the cyclone.
Thank you all for your replies!
"Enough"- Your idea about having a small hedge against gold via GLL seems absolutely brilliant to me!!
Wandee, Jenn and Ender- I can clearly see what you mean about physical gold drying up if prices go sky high, but I was more worried about millions of panicked "average Joes" dumping their gold (physical and paper) onto the market if gold tanked in price.
"Enough's" hedging idea hit me like a lightning bolt and I now feel MUCH more comfortable about diving into gold instead of waiting and waiting for a "paper" crash.
I can't thank you guys (and gal) enough for your quick responses and crystal clear thinking!! I tend to be a chronic fence-sitter so I appreciate your help.
FGYP :)
As the friendly giant would say: "Look up FGYP"
;)
FGYP-
"Anyone: Please convince me that I'm crazy NOT to pile thousands of $$$ into gold at $1340 instead of waiting for it to drop."
You are definitely not crazy (well, maybe you are, but your comments seem lucid enough). When we view items in terms of currency -- all of us would prefer to buy low and sell high. We do this because we are looking for profit to offset the falling purchasing power of our currency. However, when we look through the lens of value, things start to change.
Let's suppose for a moment you live in a very cold place; a place where winters are long and dark. Each day you go to work and earn a wage and that wage allows you to buy sufficient coal for your coal fired stove. No problem. You have a job and your wage affords you plenty of coal to stay warm at night. Let's also suppose you recently heard about a new technology -- a mini nuclear power plant that has been on the market for a while (pipe down greenies -- this is just a story). You notice the price of this nuclear power plant is $10,000 but deep in the recesses of your mind you know if you come to really need that mini power plant, $10,000 is a bargain when you think about the alternative – freezing to death! Concerned about the potential loss in purchasing power of the local currency – many people in your town decide to buy some insurance – an option to purchase one of these mini nuclear power plants in the future. Remember those mini power plants might be invaluable one day – but since no one needs it today – no one takes possession. You? You didn’t even buy an option. Seeing as the markets are stable enough if that day of high priced coal were to come along – surely you will be able to get one at market price from your nuclear power plant dealer.
So you decide to wait and have no problem doing so until one day, there’s a coal shortage! In fact, the trains shipping coal to your market are experiencing delivery troubles that may last for months and as such -- lots of people aren't able to buy enough coal to stay warm. The price of coal skyrockets! It is then that you decide you are going to purchase one of those expensive new fangled mini nuclear power plants which can provide enough heat for the rest of your life! Unfortunately a lot of other people get the same idea at the same time and everyone rushes down to the market to buy his/her mini nuclear power plant – some with prepaid options to buy. Oh my, look at the line outside the store! To make things worse it turns out the nuclear power plant manufacturing company only had one power plant to sell -- and they sold 100 options against the same power plant! Uh oh. Ninty-nine people are told they cannot have the power plant and instead will be refunded their cash. Even the people that bought options to buy a plant are screwed! One person gets this wonderful nuclear device and is staring at a lot of very cold people with bundles of cash in hand.
So here we are. Lots of very cold people lined up with cash looking at the one person with the power plant and they all want to buy it. How much do you think the power plant is going to sell for now? $10,000?
Price VS value.
Should you wait to buy your gold? Sure! But what will you do next week when the unexpected coal shortage sets in -- and everyone experiences it at the same time? Will you be able to buy one of those mini power plants – or will you be left out in the cold?
My story has a few flaws in it with respect to Freegold, but perhaps you get the idea all the same.
--Jenn
Hi Wendy...I'm not sure what you mean? GLL has tracked spot down perfectly. When spot was $1390 GLL was 29 and now with spot at $1336 GLL is 31.50 Now if physical premiums had risen then the trade would have been better than a perfect hedge. Interesting that in "shrimp" size I am not seeing bullion premiums rise in this "selloff". I can still buy 1 oz. maples/Phils/Roos at +50.... I just wonder though if paper promises to sell gold become worthless whether this GLL might be worthless as well? It makes my head hurt trying to figure that one out.
FGYP..there is one obvious issue with this hedge. It eats up capital that could be used to buy more bullion or anything for that matter. To fully hedge 50 oz. using GLL would cost you $31,500.00Now as interested rates are near zero and If one has this excess capital the opportunity loss of using it to hedge a physical gold position is negligable. Not everyone has the luxury of using this technique. My position is quite large as % of assets so I feel it's worth it to me. cheers
Hi enough,
Everything in the Western world is papered over for the sake of appearences. The very foundation to the concept of freegold is in the notion that once freegold/RPG unfolds or erupts all paper related to gold will burn. The speed depends of the depth of deceit and whether we get an unfolding or eruption.
from JSmineset today:
........Gold prices softened in January on the back of positive economic data in the US, but prices for physical gold in Shanghai have been at a premium of about $20 per troy ounce over those in London, underscoring the tightness in Asian markets.......
For all those people in Asia that want the "real deal" it's becoming more difficult and expensive.
Just something to discuss...Liquidity
The liquidity Myth
Paper gold is much more liquid than Physical. It’s convenient and it is easy to sell. Is it really? If we define liquidity by the ability to quickly access cash then what is more liquid..physical gold or paper gold?
When we sell physical we need to go through a painstaking process to access cash, right? We have to locate said gold, get in our car, and drive 20 mins to 2 hours (on average) to the nearest place of exchange. Sounds like an awfully difficult and long process to access cash! Sheesh, I really don’t know why everyone doesn’t substitute their physical for paper.
When we sell paper gold we go through an ultrafast process of logging into our brokerage account, hitting sell, and BAM!!, we are now liquid..right? To a point yes, but how long does it take you to access cash? Do you not have to wait for your brokerage to settle up before you can pull this cash out? It’s been awhile since I’ve used a brokerage account but if I remember correctly it takes 3-5 days before you can access the cash! So what is more liquid, Physical which can take up to 2 hours (on average) or paper which will take you up to 5 days!?
People think during a hyperinflation their paper gold will go sky high and they will be able to cash out, making millions. What happens as you wait for that cash to settle? You cash out and then what? The $’s you sold your gold for become worthless during the time you’re waiting to settle for cash. With Physical the price is soaring as you drive to your local exchange.
Hi again Wendy,
I do not disagree on your points at all. I do know in this "quiet time" the hedge has worked and I "locked in spot" at 1388. I now have made ENOUGH fiat paper to buy 4 more oz. of physical whicH I shall do pronto. For now we can still turn fiat into physical and now 24 hrs. a day I might add. I have plenty of physical. I do really wonder though How this vehicle would act in a paper gold collapse. It is an inverse etf so if paper promises "spot" is falling in theory and practice in this "quiet time" this should and does rise but I'm not sure it will when all hel breaks loose...all thoughts welcome
Jenn,
I like the analogy, whatever imperfections may or may not exist. In the tradition of your Freegold forefathers, explaining the concepts of such a different global viewpoint is best done by way of a compelling narrative, and you've done that. I hope you and all the other "Freegold Apostles" in the comments keep sharing your interpretations with us. It's quite fascinating watching the "Gospel" being written in real-time.
Full-Disclosure: I'm a devout Atheist.
Jenn-
I LOVE your analogy and it makes perfect sense!! THANK YOU!!! BTW where can I buy one of those mini-heaters? I'm freezing my butt off right now and I'm sure there's NO risk in snuggling up to a nuclear power plant!
Enough-
Compared to you and the other "big fish" I'm more like an itty-bitty "plankton" when it comes to my net worth. However, what I DO HAVE I'd like to keep! I will start buying a bunch of small bars of physical gold along with a few shares of GLL to protect myself from any major drops in the gold market.
Again I thank you all for your excellent input!!
Mr. FOFOA,
Hello Sir. As your recent post has been on the topic of gold etf's I wonder if you would weigh in on the idea of being short paper gold via an inverse etf. I think you would say as Wendy does that it would burn with all the other paper but if one could be long physical and short paper in theory it's a home run? no? Certainly just being long physical is a home run so maybe a grand slam being short paper gold as well? Even if I dont hear from you many thanks for the education ! cheers
@ enough
When there is a FreeGold revaluation of gold's value, what will your GLL pay you in?
Paper, right? Paper that you can use to redeem what exactly? Not gold (certainly not much).
What will you do with all the paper?
Also, surely there is someone else on the other side of the GLL trade. Who is that, and will they be able to pay these huge amounts? What is the risk that they can't/won't?
Hi Pete.
This is exactly my question. For now it works. Nowhere have I said it will when freegold erupts. That is precisely my question. Will these inverse etf's work as they do in "orderly" mkt?. My guess is they will for a bit..like the first big down draft in paper gold but you'll want to get out then. Lets say thats true and I have a huge wad of fiat. Maybe gold will be bid only but I've got ample....might be able to buy some other hard asset...land, art etc
@ enough
I understand your point. I guess there is no way to truly tell, except to look at the risks yourself and do a risk assessment.
As someone else mentioned in another comment, you should also consider that the exchange in which you need to make a trade will either not be open, not function correctly or not be available for trade. Imagine if GLL put itself on some form of trading halt for a month?
Oh, and then there's that nasty legislation crap about short-selling bans. I'd say they'd be fairly quick to put those back in place (again) if TSHTF on the markets.
My general thought is that, in any 'extreme' situation, the rules will probably change. The orderly market seems to function okay with a general balance of buyers and sellers, but if that gets thrown into chaos, with say a huge number of sellers and no buyers, I wouldn't be surprised if the market stops functioning correctly.
Also consider other side-effects of the onset of FreeGold. Perhaps a huge drop in the paper gold price would also coincide with some other huge market drops?
I put question marks because of course I don't know the answer. Just hoping to help out with some extra things to ponder as you make your decisions.
Enough- Having just lived through the massive stock market crash of 2008/2009 I can tell you first hand that inverse stock funds did VERY well for a long while.
I could be wrong, but I highly doubt that Freegold will happen overnight or even over the course of a few weeks...why? Because MOST people in Americans still have an undying belief that our US government can magically fix ANYTHING! Therefore, as paper money/paper gold starts to crash in waves, the USG will do exactly what it did a couple of years ago, which is to print massive amounts of new paper money. As WE all know on this blog, there is only one ending to to the government's magic show. But, due to the general public's strong belief that the USG will save the economy there will likely NOT be an instant collapse of the dollar. I believe that it will be like a stair step pattern (or saw pattern for you stock traders). If anyone doesn't believe me, take a quick peek at the US stock market. It's trading at a HIGHER level than before the big crash in 2008. Is this because the financial woes have been magically cured?? Heck no! We're far worse off than 2 years ago. The problem is that there are always "bottom fishers" who step in during market crashes, which TEMPORARILY stops the bleeding before the market drops again. "Enough"- You and I will be LONG GONE out of GLL when the first hint of a collapse occurs and we'll be able to buy physical gold with the profits. If I turn out to be wrong, and Freegold does indeed happen overnight, then I'll just have to take the paper loss in GLL along with all my other worthless fiat paper. I'll just use GLL as if it's any other "insurance" policy. Thank you again for the great idea!!
Enough,
Sorry for the delay, a friend dropped by requiring that I abandon my ass from the computer for a bit.
I beleive RPG is "unfolding" very quickly just under the surface of our reality, when it finally erupts there will be NO market/spot price etc to gauge the value of this paper.
What many view as a quiet time, I see as a time of HUGE seismic shifts. This of course is only my opinion, based on my relatively limited experience.
It sounds like you are well positioned in physical and enjoy "playing". If I were in that position I would enjoy playing the game of it as well.
But if your gaming is based on this logic, understanding its limitations; then calling the time will be the tricky element.
It's a game I cannot afford to play, and most will lose.
Good Luck
Thanks Pete
All this could certainly occur. GLL has saved/made me fiat in this correction which I convert to more physical. I still have some because I feel paper gold could suffer further here. The action in light of egypt unrest and dollar weakness has been poor. Paper gold seems to be working off its oversold condition by trading laterally and not advancing...not good. Even as Egypt is erupting at this moment paper gold is showing weakness. So I will hold my GLL for now but if freegold erupted tomorrow I would close it immediately if possible while hopefully mkt still functioned. I agree it could go bidless as physical goes offerless. Anyway just be long physical gold is ENOUGH
Hi Wendy,
thanks for your input and I agree things are moving quickly. Very exciting. I know on FOFOA's global blog follower map you're the flashing light on canada west coast. I'm the little light in south florida....pleased to meet you !!! and the rest of FOFOA's readers...cheers all !!!
This is probably a stupid question, but does anyone know what ever happened to Another or FOA? Are they still alive to witness their visions come to fruition? Just wondering if anyone had any inside info...
ahhh enough,
it's my pleasure, however you will rarely see my beacon flashing as mostly I am invisable, I prefer it that way ;)
If you haven't read the archives of Another I would encouage you to. It's like sitting at the feet of a master. The first time I read it, I read it like it was "required reading" and I pushed through. The second/third time it was like "discovering gold".
I intend to get back on the gold trail and FOA's work, but earning an income has delayed this for a short time.
When I grow up I hope to get a job at Walmart or a grocery store clerk......a job that is fun when one is too young to retire. Bring on the freegold thing!!
to all: I have very much enjoyed the lively constructive dialogue this evening.
Wendy
Hello Enough,
Your "hedge" is capped at a maximum profit of 200% of your investment. If you've got $30K in GLL, the most you can make is $60K, and that's only if paper gold collapses to zero in one day. Freegold expects 4,000%. That's a 20-bagger you are turning your back on right up front, with 33% of your money. And for what? How many 5% down moves will you need to cash out and convert to physical to break even, to get $30K into physical before Freegold?
When you make your hedge, you are using the dollar as your benchmark, your reference point. As we all know, the dollar is not a fixed benchmark. It is essentially a falling benchmark. So the value of your hedge is always falling as it is fixed to your benchmark. You are falling with it in your gamble, looking straight at it (which is why you want to hedge your gold position in the first place), so focused on this falling benchmark, that you cannot see the ground coming right up at you. Think free fall, as in a sky diver before he pulls his chute, fully focused on his friend who is also in free fall.
Because currency collapse and Freegold are independent movements in the price of gold, you are funnily hedging against Freegold in a currency collapse environment. This is no hedge at all.
Think about it this way. 1. Freegold - an expected 40-bagger on your physical gold (in real, not nominal terms). 2. Your hedge against #1, expected to track nominal movements at half the cost.
If the dollar (your myopic sky diving buddy) falls fast enough, the price of paper gold may not fall as the Freegold transition unfolds. Imagine a situation where the Dow continues up up and away with all that easy money pouring in through the PDs. Yet paper gold just stays range-bound around where it is today, falling relative to inflation, but not nominally. Meanwhile offers to exchange physical for paper are withdrawn. Your hedge is going to do zero for you, meanwhile you just lost your opportunity to ride the rocket with 50% more physical.
So let's say we get a meager 3x devaluation of the dollar. And you get a 40 bagger in real terms on your 50 ounces, a 120 bagger in nominal terms on your 50 ounces, and nothing from your hedge, because inflation/devaluation prevented it. Or what if paper gold is actually rising while physical takes off? You could have had 75 ounces, but instead you lost your hedge money as well.
You see, if the dollar falls fast enough, it can levitate even paper gold during the transition. So your hedge is flawed right off the bat, not to mention the opportunity cost of 50% more physical.
But the problems don't end there. If paper gold doesn't rise, doesn't stay range-bound, but actually falls like you hope, will your hedge even perform as prescribed? Have you read the prospectus for GLL? It is only meant to perform properly for a single day!
Quote: "This ETF seeks a return of -200% of the return of a benchmark (target) for a single day.
"Each UltraShort Fund seeks to provide daily investment results (before fees and expenses) that correspond to twice (200%) the inverse (opposite) of the daily performance of the corresponding benchmark shown below.
"The UltraShort ProShares do not seek to achieve their stated investment objective over a period of time greater than one day because mathematical compounding prevents the Funds from achieving such results.
Cont...
"In seeking to achieve each Fund’s investment objective, the Sponsor uses a mathematical approach to investing. Using this approach, the Sponsor determines the type, quantity and mix of investment positions that the Sponsor believes in combination should produce daily returns consistent with a Fund’s objective. The Sponsor relies upon a pre-determined model to generate orders that result in repositioning each Fund’s investments in accordance with their investment objectives. Each Geared Fund invests, or will invest, principally in any one of or combinations of Financial Instruments, including swap agreements, futures contracts, options on futures contracts or forward contracts with respect to the applicable Fund’s benchmark to the extent determined appropriate by the Sponsor."
How far are you going to ride your hedge? All the way? Will there be a buyer for it at the other end? And then, assuming you do get paid, what are you going to do with those profits?
Paper gold can only fall a maximum of $1,333 tomorrow, if it goes all the way to zero. Yet the sky is the limit for the physical side. So your maximum profit in the hedge is $2,666 per $1,333 that you put in, and that you could have used to buy more physical. If you have $30K in GLL and Freegold happens tomorrow, and your hedge works perfectly, you will make $60K on your hedge at an opportunity cost of only $1.2 million, and that's only if Freegold happens before the currency collapses. On top of that, you won't even be able to buy gold with the $90K you pull out of GLL (that could have been $1.2 million at this point had you bought gold), so you will be fully exposed to currency collapse at that point, holding a bag with $90K in it.
Sound like a solid plan?
Sincerely,
FOFOA
Reading over Another's archives i was came across his pricing formula for physical gold
"Date: Sat Apr 18 1998 19:18
ANOTHER (THOUGHTS!) ID#60253:
This is why oil can take a small amount of physical gold out of world supply, at current "freely traded", "managed prices", and hold it at a many times valuation. That is what gives this "new world gold market" much value in trade at high levels. Look even at your "Comex", and divide the daily volume by the "eligible stocks for delivery". That number ( perhaps three million ounces divided by 150,000 stocks, deliverable, times the spot close gives close, real world price of physical, $6,000. It follows close to paper trade on LBMA.
"
I wondered what would happen if i plugged in current numbers from comex into the above equation. The only problem was finding out what the current eligible stocks to deliver number. After some digging i got 11million ounces, but Another used "stock" in his calculation, if i assume that a stock is a contract, then 11M oz equates to 110K stocks
Following is my calculation for free gold:
Daily volume = 10M oz
Eligible stocks for Del = 110K
10M / 110K = 90
90 * 1350 = 120K/oz Whaaaaaatttt!!!
I think i don't have the right number for eligible stocks for delivery, could someone please double check this.
Thank you FOFOA for your generosity.
Thank You FOFOA
It is clear that by hedging the max profit on that hedge is limited and that is only IF it acts as its supposed to over the stated short time frame it actually tracks. I also understand that that 30k could have been put into more bullion with much more upside. A few points...firstly it seems you have revealed that you dont know exactly what will happen to paper gold as physical rockets...it may track in positive corrolation, fall to zero or something inbetween. I dont know if you have revealed this before? It seems that most think that paper gold will burn. I wil not attempt to speak for Another or Foa. I have read the archives but to say I understand it all would be a stretch. But I'm pretty sure they felt paper gold would be worthless. Do you feel diferently? Or am I mistaken on their "thought"? I guess my second point would be this. I have been aggressive. I have near 1/3 of my"savings" in physical gold...no silver. Talking about eggs in baskets....I know its for each one of us to decide how firmly we believe in freegold and what is prudent asset allocation. So when you say could have bought another 30k in physical I would jump to near 40%. I ask myslef in the name of diversification and prudent investing isn't this to large a position? I also understand by this "hedge" I am betting against my strongest belief which is kind of skitzo. But yes, with such an oversized position fear creeps in. Especially when the stars are aligned for RPG and a murderous paper stomping ensues and physical goes straight down with it. Hard to hold my nerve. So I take that fiat portion of my savings and use it to reduce my exposure to my strongest conviction....skitzo indeed. I guess I ask and it is none of my biz but I'll ask anyway. As we still live in a fiat world and we need fiat to feed and warm ourselves do you just keep the absolute minimum in fiat and the rest in physical? If not is it due the slightset doubt that the logical and necessaey path the world economy must travel, thru RPG might not occur? IMHO risk paper assets provide so little return and SO MUCH RISK that I sit here with bullion and cash...thats it !! In 66/33 proportion. fearing both the 33 and 66..so I use some of the 66 to hedge the 33. I dont think I would take more from the 66 and add it to the 33. So in my case that 30k would not buy more physical. Unless truly we should keep just enough in fiat to live and the rest should be in gold bullion. Just like after RPG arrives? thank you for your thoughtful answer...cheers ps I know this rambles...sorry !!
Hello Enough,
You write, "I dont know if you have revealed this before?"
I usually write in inflation adjusted terms, "in today's dollars." If you can understand this, then there is nothing new here. "Paper gold" is "claims in the system." Let's say they are 100:1 with the physical backing them, in aggregate, like Jeffrey Christian said. In that case, paper gold will trade at around $500 per "ounce" when physical is around $50,000. Those claims may be worthless to small fish like us, though, because we'll just get that 500 bucks cash and not be able to easily convert it into physical right away.
The claims will be gathered up by a few in the know so that they get that one in a hundred that has actual backing. It's that arbitrage that will keep paper gold trading at $500 rather than zero. I put $200 in the Shoeshine Boy post. That's the range of my guess for paper gold, $200-$500 cash, in today's dollars.
If you want an actual ounce of that gold that was backing the (formerly) fractionally reserved BB system, you'll probably need to gather 100 claim checks. In a few investments, if you are lucky, you'll be able to exchange your small fish "one ounce" claim check for 311mg, or 1/3rd of a gram, 1/100th of an ounce.
5/3/98 Friend of ANOTHER
"Gold is valued by the number of outstanding claims against it. Kind of like a house for sale with ten bidders. Each bidder thinks the house is, in the bag because they have a valid bid ticket. Each one thinks he can have the house at any time,even thought nine others want it to, because all I have to do is bid a little higher and take it! Insane, but that's what is going on! Somehow, the BIS and the major private gold holders know the total claims, as does Another. The Euro group is going to force those claims into real bids instead of just claims!"
If the dollar is collapsing at the same time, those paper claims could "hover" at $1,333/oz. while physical is screaming past $133,300/oz., and your dollar nominal hedge will do nothing.
I have a friend who has around 2,000 ounces of physical gold, in his personal possession. And I mean, in. His. Possession. That fits in a small box. Probably smaller than your biggest Christmas present last year. He also has a bunch more cash. Probably relatively close to your percentages. Like you, he is a bit of a market junkie, using some of that cash to try and churn an ROI which he piles into more physical. But unlike you, he refuses to short gold. I am not recommending this over physical (duh!), but he is playing things like the miners, and miner funds to churn his income. And for the time being, he is doing great. My point being that you might find a long gold investment more rewarding than a short hedge if you are just too addicted to the markets to take payment of your savings in full and then go live your life.
I'll tell you though, payment in full brings a peace of mind unlike anything you've ever felt. If you are retired and living off your savings, well, then you need to decide what balance will bring you the most peace of mind. That's a very personal decision, something I want no part of. ;)
Sincerely,
FOFOA
There is still a lot of confusion over the price and value.
I say:
"Ounce of gold is WORTH an ounce of gold" (somewhere from archives)
"Lets watch this market together, yes?"
Have you realized the correlation in world events - gold market changes and WGAs?
-> Washington Agreement on Gold was signed of 26 September 1999
-> The second version, Joint Statement on Gold, was signed on 8 March 2004.
-> In August 2009, 19 banks extended the agreement and committed to selling no more than a combined 400 millions ounces of gold through September 2014.
I ask:
Will it be extended?
I think 2011 will be a very foggy year for gold.(p.s. I'm a gold bug, wait before to jump on me)
In a post ZH talks about options market that screaming bull for the year end.
But gold has lost 7% from previous height and, if it turns toward 1260 and stays there for a while, an head and shoulder is formed.
Maybe gold is only taking a breath in this decennal bull market, but what scares me is how fast gold bugs build theories to justify this little drop.
In another post ZH talks about a big hedge fund liquidating a leveraged position.
Here http://fofoa.blogspot.com/2011/01/who-is-draining-gld.html Fofoa gives another explanation.
It's indeed interesting. He talks about wealthy people queuing to take delivery on GLD. If this is true, then the implications would be bullish for gold.
GLD indeed is an investment vehicle and speaking in metaphors, it could be a golden tram. Average joes are the passengers. If Joe get on the tram at sea level and get off at the top hill stop, he put in his poket a huge cash gain. If he get on at top hill stop and get off at sea level stop, he will suffer a loss. Wealthy people get on the tram as driver and get off at terminus. It is possible that the road to the terminus is a steep slope and then at the terminus all the passengers get off with a huge loss and the driver keeps the whole golden tram...
If this is the right scenario, it is possible to have affordable data about:
1) big hedge funds deleveraging in gold market
2) very wealthy people taking delivery on GLD?
tnx
Looking now for an investment opportunity for time after transition?
"...It is possible to extract more gold out of a tonne of electronic circuitry than from a tonne of gold-bearing rock. However, this trade operates at the margins of global illegality, due to the fact that e-waste often contains hazardous materials. Despite increased regulation, the informal trade continues...."
http://www.iied.org/sustainable-markets/blog/rubbish-heap-issues
Finally I found what I SEARCHED for :o) Enjoy.
http://pubs.iied.org/pdfs/G00537.pdf
Some time ago the topic to speak about was: gold mining in the future and the role of the state in a freegold environment.
If somebody is interested here there is a good list of documents. :o) Enjoy.
Yeah and the link,.... http://www.iied.org/sustainable-markets/key-issues/business-and-sustainable-development/mmsd-working-papers
Thank you once again FODOA,
My "issue" has become clear to me. I have still not completely freed myself from the brainwashing that "cash" is safety and physical gold is "risk" It is not easy to break an entire life of persuasion. Why should I fear being paid in full which I intellectually understand? I could turn another 20% from fiat and still live within the means I have set for myself in this current fiat structure. It is difficult to disregard the present, the fiat world without RPG and to take the leap of faith which is logical and necessary and translate it in my mind to INEVITABLE ! Then there is certainty and the fear is gone. Intellectually I believe RPG is inevitable but I've been wrong about lots of things before. I never bought into the consumerism. I have no debt. You say being paid in full brings peace. Now I am paid 33%. I could pluck up the courage to go higher but" full" would mean completey throwing of the conditioning of my entire life. I am not free yet. You are a great educator. Not just delivering fact and ideas but helping us to break the conditioning that has been engrained in us since birth. Thank you. ps sorry for 2nd ramble :-)
Sorry Mr. FOFOA....I type poorly. No insult intended by FODOA :-)
Another and FOA wrote about the oil-gold connection. Here are a couple of articles relating to oil that I find interesting:
http://tvnz.co.nz/business-news/libya-welcomes-100-barrel-oil-4011561
"Libya welcomes $100 a barrel oil"
"... (Libya's top oil official) Ghanem went a step further to say that $US100 oil was necessary to offset higher food costs and the reduced purchasing power of a weaker dollar."
"Brent crude hit $US100 a barrel yesterday for the first time since 2008 ... The rally has put pressure on the Organization of the Petroleum Exporting Countries to raise output. "
http://www.financialsense.com/contributors/matthew-millar/a-change-in-saudi-oil-regime
"A Change in Saudi Oil Regime"
" 1. Using a definition of spare capacity as “willing to produce” rather than “capable of producing” Saudi Arabia has less spare capacity than they claim. In fact using the elasticity response of the past 2 years implies that they only have approximately 0.7 mb/d of spare capacity at an oil price up to $125.
2. Saudi Arabia production has decreased for a reason unrelated to price by approximately 0.24 mb/day each year since 2005."
----------------------------
So Libya likes higher oil prices because food has gotten more expensive. But modern agriculture is essentially a way to turn oil into food -- if Libya raises oil prices because of the higher cost of food, it will increase the input costs to produce food, leading to a spiral. Will food inflation deal the death blow to the dollar?
I find the second article interesting from an oil production perspective. If Saudi Arabia prefers oil in the 70-80 range, why haven't they further ramped up production?
It looks like "Mona Lisa or Ben Franklin" a great post by FOFOA is getting a massive amount of traffic at the moment. Where was this posted?
Here's the link to Mona Lisa or Ben Franklin:
http://fofoa.blogspot.com/2009/05/mona-lisa-or-ben-franklin.html
Written May 30/09. Not sure where it was posted on the net that is driving traffic to it.
Michael H - I, for one, certainly think food can and will be the spark that hits the tinder of what is the rotting corpse of the $IMFS. Of course, given what's just happened in the world, this isn't exactly brilliant insight on my part.
It's also basic human behaviour: people will take and take and take "shit" from their leaders, until all of a sudden they won't. And nothing precipitates the "we won't take it anymore" attitude than increased food prices when resources are already stretched to the limit to meet current demand needs.
Taking this thought even further, in North America I think the SHTF moment would be when they try to take away the internet. Nothing will galvanize Westerners to resistance more quickly or more effectively than trying to hinder the interwebs. I can just see the slogan of my fellow gen X'ers: You can rob us, rape us and pillage us, but don't you dare go f-ing around with my NetFlix!
I also would take even odds that at some point in the next 5 years some Western government is going to do exactly this, and they will get a little taste of the full force of the Streisand Effect, writ large.
Also, I"m the flashing bulb in Fredericton, NB. Hello to my fellow New Brunswickers, it's nice to know I'm not the only one out there drinking the FreeGold koolaid! I'd also say hello to all the other FOFOA visitors around the world - I love the map, it really shows just how far the message can be spread.
@ ore em' "Oops! Terrified by a critical mass of enraged broadband consumers, Canada's government is telling its telecom regulator to rescind its approval of metered or "usage based" billing, or else. Industry Minister Tony Clement is now insisting that Canada's Radio-television and Telecommunications Commission (CRTC) has to undo the ruling."
http://arstechnica.com/tech-policy/news/2011/02/sorry-about-that-canada-rushes-to-reverse-metered-billing-decision.ars
I guess they didn't want to see riots in Canada
Good morning all!
Quick question: Do you suggest gold coins (eagles, buffs, maples, etc..) or gold bullion bars with an assay card?
Do either have any advantage/disadvantage when the paper world blows up? Does it not matter??
Thank you in advance!!
Hi FOFOA
sold my GLL this morning....very timely conversation!!!! thanks again
FGYP...coins are more fun as long as premiums are low.... apmex has some 1 oz. 24k .9999 pure austrian philharmonics at +50 jump on them
Nice move getting out of GLL Enough :)
Here is why I LOVE financial news reports:
This morning gold spot price was DOWN about $7. On Kitco.com the news headline said something like "Gold price down due to Middle East UNREST!"
Now that gold has reversed and spiked UP $18, guess what ol' Kitco says now: "Comex gold rallies on SAFE HAVEN BUYING."
LMFAO! They don't know their head from their butt! Thank heavens Kitco isn't run by a dentist... he'd tell you to bend over so he could check your teeth :)
Enough, have you ever used Apmex? Are they legit or do they try to "up-sell" you on pricier graded coins?
MANY transactions...perfect...if you want to buy gold now and you can afford 1oz. coins...go buy those phils from apmex before theyre gone
Great! Thank you for the tip :)
A little history lesson:
"European Parliament Fact Sheets - 5.1.0. The historical development of monetary integration"
http://www.europarl.europa.eu/factsheets/5_1_0_en.htm
http://ec.europa.eu/economy_finance/euro/emu/road/werner_report_en.htm
http://ec.europa.eu/economy_finance/euro/emu/road/ems_en.htm
http://ec.europa.eu/economy_finance/euro/emu/road/delors_report_en.htm
http://ec.europa.eu/economy_finance/euro/emu/road/three_stages_en.htm
And:
CHAPTER IV - MONETARY FUNCTIONS AND OPERATIONS OF THE ESCB
Article 14
Open market and credit operations
18.1. In order to achieve the objectives of the ESCB and to carry out its tasks, the ECB and the national central banks may:
– operate in the financial markets by buying and selling outright (spot and forward) or under repurchase agreement and by lending or borrowing claims and marketable instruments, whether in Community or in non-Community currencies, as well as precious metals;
http://ec.europa.eu/economy_finance/legal_texts/pdf/compendium_en.pdf
(I hope you do not bash me for posting too much)
Even though this has been discussed before between Fauvi and I last may As someone sat in on history classes on the EU back in 1997 (and my memory of all the details may be a bit fuzzy), I think it's important to note that monetary integration may have officially begun only in the 1950s and 1960s, but the plan for a united Europe go back much further.
There is evidence for calls for a united Europe gong back to the early 19th century.
Moreover, there was a concerted effort of significant power on the eve of WWI by important academics, industrialists, bankers, media, and the like to create a United States of Europe.
This plan was documented in teh New York Times and disclosed with review By Dr. Nick Butler, then president of the now Ivy-league Columbia University.
Some may not consider this event relevant, but our professor had said that despite it's getting little respect it was THE key moment in which the US of Europe was hatched.
Moreover, as any student of history knows, many historical trends may take decades and centuries to develop and mature.
If any of you cares to read about this, you can view the document here.
I will also say this, because politics and economics have been taught separately in the West, the essence of their intertwined nature of politcs and economics is obscured.
Thus, political union is feeble without economic/monetary union and vice versa.
Dr. Nicholas Murray Butler says a US of Europe is Certain to Come
Satya
Yes SatayaPranava the wish to build went very deep in history, one could say even to here: http://en.wikipedia.org/wiki/George_of_Pod%C4%9Bbrady
"...George attempted to secure peace with Rome by a radical suggestion, which some consider to have been a proposal before its time of a European Union.[1] He proposed a treaty among all Christian powers, with Germany (including, then, Bohemia), France, and Italy and its princes the founding members, but others, especially the Hispanic powers, joining later. The member states would pledge to settle all differences by exclusively peaceful means. There was to be a common parliament and other common institutions and supranational insignia. George couched the proposal in Christian terms ("Europe" is not explicitly mentioned) as a way to stop the "abominable Turk" who had conquered Constantinople in 1453. He sent Leo of Rozmital on a tour of European courts with a draft treaty of The message of peace to promote this idea. George hoped that the treaty would come into effect in 1464...."
But this part is important I believe:
"Werner Plan (or Werner Report) - at the European Summit in The Hague in 1969, the Heads of State and Government of the European Community agreed to prepare a plan for economic and monetary union. The Werner Report was drawn up by a working group chaired by Pierre Werner, Luxembourg's Prime Minister and Minister for Finances, and presented in October 1970.
The three stage plan proposed gradual, institutional reform leading to the irrevocable fixing of exchange rates and the adoption of a single currency within a decade, though it did not re-commend the establishment of a central bank. The plan was never implemented, due to pressure of the United States (France retired its support after a France-USA meeting in the Azores at the end of 1971)..." -wiki
And if you like deep archive readings about EU roots:
http://ec.europa.eu/economy_finance/emu_history/index_en.htm
...e.g.: these HISTORICAL DOCUMENTATION OF EMU AND THE EURO sum it all:
http://ec.europa.eu/economy_finance/emu_history/documentation.htm
Kind of off-topic, but I was looking at the flashing map and noticed that there is an odd little outlier located just of the coast of Ghana/Ivory Coast/Togo, in the Gulf of Guinea. When you run the mouse over the yellow dot it comes up "APO/US, Canada, EU military". Given that it appears to be coming from the middle of the ocean, I'm assuming it's on a Navy ship of some sort. What also caught my eye? The fact that it says there has been over 48,000 visits from there! Methinks perhaps someone is watching little ole FOFOA and his crazy ramblings....or maybe I'm completely way off. Either way, I thought I'd raise it to see what everyone's thoughts are on the matter.
OH, wait, I see that it's 48k from the entire U.S. That makes more sense. Still, kind of interesting I thought.
I'm sure it's been said before, but if you want to diversify your portfolio, it's easy - there's gold coins, gold bullion, gold jewelery, allocated gold investment (such as goldmoney)... and if you're feeling adventurous, then some gold mining shares! ;-)
But seriously, each of the above has advantages and disadvantages which you may wish to consider (eg: safety, liquidity, possible tax considerations and of course... bling) ;-)
PS: the GLL idea was an interesting one which I wasn't aware of - and thanks for your clear comments on that FOFOA
Hi J,
While Mona Lisa or Ben Franklin? is a good post worth reading if you haven't yet, those visits you see are coming from a Google image search of Mona Lisa. Google seems to rotate my picture up to the top line every once in a while.
mortymer,
I'll take a shot:
2004: Rothschild's exit paper gold, and GLD is launched
2009: CBs become net puchasers of gold inspite of WAG. Also Tungston bars discovered at a LBMA warehouse in singapore!
here's an interesting article re: quality of gold held for GLD:
....Gold bars allocated to the Trust in connection with the creation of a Basket may not meet the London Good Delivery Standards and, if a Basket is issued against such gold, the Trust may suffer a loss.....
http://buying-gold.goldprice.org/2010/04/gold-etfs-real-mccoy-or-just-paper-in.html
Will the WAG be extended in 2014? hmmmm.....if RPG has not come on FULL force, I would say no. That could send a message to the market that they're (CBs) are going to resume selling.
If we have full on RPG I think the WAG becomes redundant.
Thanks for the link to the Orellana article on WAG.
Very interesting
".....The WAG is not an international treaty governed by international law......"
It is nothing more than a "gentleman's agreement" really!
This suggests to me that it was put together FAST (as in response to a humongous crisis)
mortymer,
re electronics recycling. I happen to know that very large entities have spent a ton of time and money developing this technology.
In addition legislation has been put into place that imposes a recycling fee n electronics at the point of sale.
This is a HUGE cash cow in the future..... it will become uneconomical to reroute this trash to Asia.
I started thinking a bit about those tungstun bars today......
Interesting that they were "discovered" in a region of the world that very much favours "physical".
Might that have caused some big money hoarders to get scared and dump physical in favour of ETFs??
Anyone with ideas?
I must be incredibly risk-averse, because holding US Dollars is plenty hedge against bullion in my book.
costata,
Where are you when we need you. I think it's high time you toss your new year's promise :D
Mantis,
I followed the link to your blog, but the only thing that came up for me is a picture of MK's book. Am I not loading text?
Wendy,
Mantis is a man of few words ;)
Blondie,
I did wonder if there was a riddle to solve. I'm tired tonight therefore I was willing to expose my dumbness for the sake of simplicity, and transparency.
BTW, I do appreciate those that use few words. Many people BLAH, BLAH way too much, I find myself lost in the noise.
Well as long as I'm just BLAHing to myself, as I often do at this time of night, I will add that what I appreciated the most about Another was his ability to find the common denominator .... to simplify, but in a fractal sort of way. There will always be Another layer open for the observation of those inclined. No dead ends!!
Before the Hunt Brothers were James Fisk and Jay Gould.
"I did not see the profit in buying gold unless you have got into a position where you can command the market."
http://anatocism.blogspot.com/2011/02/original-black-friday.html
Interesting news today, bad for the Euro zone. Irish CB now "printing money," They made electronic Euro deposits in a desperate attempt to rescue their banks, without floating any bonds or borrowing money. Euro sponsors like Germany are on TILT! Looks like the Saudi's may soon have no other form of stable payment for oil except gold, as it seems the entire world is in a race to hyper-inflate their currencies into oblivion. Unfortunately, I am betting we (USA) win the race.
Have been researching our states woes, there is another 41 billion dollars of unfunded liabilities (overpaid govt. worker pensions) on top of what is being reported in their huge budget deficits. More hide the ball, as usual, just like our Social Security and Medicare at the Fed level. California and Illinois had to pay a higher than the country of Mexico in their last bond floats. Mark my words, our Federal Reserve will soon start buying muni bonds (QE 3), bypassing Congress to bail out the states' unions with yet even more taxpayer money.
I always wondered why there was no mention of the powerful "West" in Revelations. Now I know why: Socialist politics.
Average fiat currency lifespan: 40 yrs.
Average democracy lifespan: 200 yrs.
A Socialist President:Priceless
We can still get gold coins at 3% over spot here though, with size. WOOHOO! Anyone seeing their spreads to spot blowing out on non numismatic coins? I think that will be one of the first indicators of the squeeze.
At which point is gold overpriced? I'm a gold bug but I've had recent doubts. Priced with global M0, it's overpriced. If you price the total mined quantity relative to global M1 or more, it's underpriced.
No one seems to agree on what actually is the money supply.
Anyone ?
Also, market gold price for the last 100 years has been following the M0 price....I'm confused.
Repost: ARCHIVED DISCUSSION FROM 7/8/2004
Aristotle (7/8/04; 17:35:48MT - usagold.com msg#: 122879) See the world through a Gold-filtered lens
"-------------WASHINGTON, July 8 (Reuters) - The International Monetary Fund said on Thursday it had warned Madagascar to bring its inflation under control ......... Cyclones, rising oil prices and the sliding currency have incited street protests in recent months in Madagascar, the world's fourth-largest island. ......... More than 75 percent of Madagascar's 16 million population lives on less than a dollar a day, in an emerging economy struggling to withstand the series of economic shocks.------------
When our currency is taken and used our of our own context, our sense of it's value becomes all distorted. On the one hand, we might say, "A dollar a day??? That's some serious poverty!" And we'd be fairly right in that assessment. But it also needs to be recognized that a dollar overthere counts for more than a dollar overhere. (In the same way a single dollar means more to most rural western-Americans than it does to Californians who can bid up land prices willy-nilly.) To the extent that parts of the world are subsisting (poorly, yes, but still subsisting) on a "dollar" a day, we would do well to restate their "individual GDP" through a universal translator that will appear less warped for us than trying to see any recognizable meaning in our dollars used so much farther away from California.
Translated through Gold, these people are living on 1/400th of an ounce in economic activity per day. Think about that. Maybe one day soon the rest of us will perceive Gold's value as mightily.
Gold. Get you some. --- Ari"
That's very interesting, mortymer.
Let's say the freegold revaluation brings gold to 50k. 1/400th of an ounce of gold per day is then:
$50k / 400 * 360 = $45k per year, which is about the current US per capita income.
"Enough"- when you bought coins at Apmex.com did you use your credit card or a direct bank transfer? Apmex charges an extra 3% to use a credit card (which adds up to a lot when buying gold), but I'm always very leery of doing any kind of bank transfers online.
Thanks for your advice!
Just waiting for the paradigm shift to hit the global fan. World needs gravitational center for its offset economy. Spin on the RPG !
http://www.youtube.com/watch?v=5fRaPZtJKgQ
"Kind of off-topic, but I was looking at the flashing map and noticed that there is an odd little outlier located just of the coast of Ghana/Ivory Coast/Togo, in the Gulf of Guinea. When you run the mouse over the yellow dot it comes up "APO/US, Canada, EU military". Given that it appears to be coming from the middle of the ocean, I'm assuming it's on a Navy ship of some sort. What also caught my eye? The fact that it says there has been over 48,000 visits from there! Methinks perhaps someone is watching little ole FOFOA and his crazy ramblings....or maybe I'm completely way off. Either way, I thought I'd raise it to see what everyone's thoughts are on the matter."
The traffic coming from the beacon in the ocean does not originate there. The users are surfing from a far away place. I won't go into details but I'm sure you can figure out the how and why.
FGYP - APMEX is top notch. I would not(and I don't) worry when sending them a wire transfer.
Thank you "J"!
I just wanted to make sure they were safe :)
FGYP
just write a personal check....CC costs more...I think they charge +3%
FGYP....they have one 1/2 oz panda spot+15....not sealed...good deal...I thought about it but just one is too small for me...if they had 10 they'd be gone
FGYP...sorry its at +20
FGYP....actually they have some cheap .999 fractional rounds and scruffy 1oz. maples at +35 check the "clearance" tab
any recommendations on kitco?
Thank you Enough! I somehow missed the "clearance" section! I'll start there. Thanks again!
Greenie...I think kitco has very limited selection and high prices...I'm not sure I should be making these comments here so this is last one
@ enough & FGYP...
I'd recommend Tulving....always cheaper than APMEX by miles; and most importantly, they only deal from stock that they have on the shelf....much of APMEX merchandise is on when/if delivered basis (to them from their suppliers) FWIW
John...dont agree....apmex only deals from stock unless stated otherwise and when they want to reduce inventory they prectically give it away 1/2oz. pandas at +15 cant beat that anywhere !!! bought a rather large amt of 1/2 oz. of 2009 "Roos" still in perth mint sealed rolls of 20 at +15 !!! I scour for product...have all dealers in saved favorites
FGYP.....I personally like the 1/2oz. size best. They are large enough that one can fully appreciate the fine detail of the coin. It feels weighty as a gold coin should and many times you can buy them at half the premium of the 1oz. coin where smaller fractiona coins are normally dearer in terms of premium on an "ounced up" basis. The australian lunar ll series is special. The coins are thinner with a very large diameter. The 1/2 coin has a larger diameter than most 1 oz. coins. with wonderful craftsmanship and prooflike finish
@enough...
I think you'll find that for everyday pricing, particularly on highest volume mainstream items:
(one ounce Eagles, MapleLeafs, Krugerrands); 10 ounce bars from Perth, RCM, JM, or Pamp, and Kilo Bars...APMEX is not competitive with Tulving...Tulving does have higher minimums but Apmex has volume pricing as well except that they often lack sufficient stock to order that quantity with the lowest unit cost....and almost always, that lowest unit cost is higher than Tulving. I'm completely agnostic towards reputable dealers that offer identicle fungible stock but there is rarely a dealer that out prices Tulving on mainstream items. Just my own personal experience, FWIW
@ enough....
Everyone has a personal preference as to specific form/coin...and I can appreciate your aesthetic taste for the Lunar design...for me personally, I prefer the coin form particularly lowest denomination legal tender to gold weight ratio (Mexican 50 Peso being one such coin)- I like to take these coins to "other" jurisdicitions and legally be able to carry "money" as opposed to "gold"..always mindful of being able to legally and truthfully declare that I am within legal limits of transporting "monetary instruments".
Hi John,
If one is going to keep their "savings" in gold and convert as much as needed to fiat to purchase those things that one needs to live, you're going to be getting alot of fiat with those 10oz. and kilo bars... I have bought 1/20oz.'s at spot +5 . Ounced up thats spot +100 at freegold price of $50,000 per oz. each one will fetch $3500...just enough to tide one over for a month. Are you planning on getting "bullion change" when selling that kilo? The smaller premium of +25 to 30 you save on huge pieces will be insignificant in freegolds time. Having easily divisible pieces that you may need to give to family and friends to get them thru as well as not havng to convert thuge amts at a time make buying low premium fractionals the way to go IMHO. One does not have to pay significantly more for small denominations if you look around. AND you can take them and spread them around to prevent theft of your entire stash. The defense rests!
I believe that only .999 and .9999 are LBMA and Shanghia exhange deliverable fineness....Mexican peso coins are .90 I believe....I dont buy that finess as I wont buy .92 american eagles as well
@ enough....
And if you like fractional legal tender and low cost coins....I'd steer you to the British Sovereigns(AGW= 0.2356 ounces)...to a UK resident, these are bought without VAT and because they are the "coin of the Realm" there is no Capital Gains Tax owing to UK residents....think of the premium these beauties may fetch in a Freegold world!
HI John....Interesting topic.....maybe wendy can shed light on this. I believe you can transport .999 bullion between the usa to canda with no limit even if they are legal tender coins. This is from CBSA guidelines. BUT ANY FINNESS LOWER THAN .999 is taxed !!!! whoops on those pesos !!! Would never take bullion across to mexico period !!
John again sovereigns are .92 and would be taxed between usa and canada and are not sufficient finness for LBMA delivery...this may very well be an issue in the future...not taking chances...best E.
@ enough....
Forgive me if I care not what the LBMA considers "good deliverable"....seems to me that soon the LBMA should be more pre-occupied with "any deliverable"...same with Canada issue...don't live there, don't travel there...Best
Enough and John, can you please give me your thoughts on fractional gold bars (i.e. 1 to 10 grams each)?
For the past couple weeks I have been mainly purchasing these smaller types of bars instead of coins or 1 oz bars because #1: I like that they are small and cheap, which is the same reason Enough likes the 1/20s and #2: they are sealed in a assay card for proof of authenticity.
Is there any flaw in my strategy? I'm just getting started buying gold so any advice is greatly appreciated.
John...how about if the gold/fiat liqiudity provided by the banks backstopped by the CB's is based on LBMA and Shanhai bullion exchange finness of .999 ? I'm not saying it will be but if it is you might have a problem with .90 and .92 just food for though> I am just playing it safe with .999 and .9999
FYYP...jusy dont pay monsterous premiums for them...my guideline would be no more than +$5 per gram which is about +150 per oz. over spot...that is doable with 1/20's at spot +$5 - +$7.5 per coin
@ FGYP...
To me the small bars with assay cards are crtainly a worthy product subject to your own personal preferences. I would only encourage you to compare these with the smaller
fractional gold coins that also represent "money". They won't have an assay card but they don't need one either as they are readily recognized for what they are... It comes down to price and the premium paid for such. There is obviously a manufacturing cost to any bar and the smaller the bar the greater percentage premium generally paid. You may find your "objective" accomplished at a lower or equivalent cost premium through one of the many smaller coins of various sizes and grades, each consisting of and being valued for their gold content....the fact that some of these are also considered "legal tender" is worth something (to me) IMHO.
I can definitely understand what you guys are saying about the spot premiums...the smaller gold bars are a lot pricier, especially on Ebay...
But, don't you worry about fake gold coins from China for example? I don't have that much money to invest so I'd hate to get "taken" by buying fakes by accident. Should I wait to buy coins until I get more experience with gold? Thanks again!
@ enough...
I respect your point about the LBMA and having a product endorsed/accepted by them...but I differ in how much I would bow to their "guidebook". Gold is gold and also money...but I like my gold stamped as money by the very people that say it isn't...and as far as whatever "backstops" may exist between the CB's and the Central Banks...these are all "artifices" that are part of failed system that is in a dying state. Will we even need an LBMA post Freegold?? I'd be more concerned about things like capital controls...particularly in places like the US that would have been by definition the biggest beneficiary of this failed $IMFS..just my 2 cents
Hi again John and certainly dont want to belabor the point. This blog is about freegold. If I understand correctly at some point in the future the CB's directly or thru middlemen of some sort (dealers/reformed banking system) will stand ready to bid for gold and provide fiat and vice versa. The question is will there be a minimum finness that the central banks accept? I dont know !!! When you say the central banks are part of a failed system, I may be wrong but i believe under freegold it is these very central banks that will cause RPG and be the buyers. By saying the central banks are relics you are not in the flow of this blog...I think? The central banks will be the very core of a floating gold/fiat system and you had better hope .90 and .92 finness is good ENOUGH for them...best E.
FGYP...all reputable dealers know fakes and would not buy them or sell them on
Hi FOFOA,
I know you see all and respond only to what is important and this current discussion probably does not qualify but could the finness of gold be an issue in freegold's time? Could some of us buying .90 and .92 finness american eagles, mexican onzas, krugs etc. find ourselves in the position of having to have our less fine coins melted down to meet a strict finness requirement set by the Giants? If we dont hear from you then the answer will be clear. It will not be relevent under freegold. thank you sir and cheers !!
enough,
With gold at $50k, would you turn it away because a lump of it is 8% copper or whatever? Physical will be incredibly rare, any gold will be snapped out of your hands so fast you better watch out they don't take your fingers with it.
Radix,
Firstly< I am asking the question and not providing an answer. Will there be a tiered system of pricing based on finess. Currently there are standards of good delivery at LBMA. 22 karat is not acceptable. Will some kind of std. be established in freegold? Your arguement of a price adjustment making this question moot I believe is not a solid arguemnt. I am not saying there will be a standard but maybe? There is now ! And where to draw the line..How about this coin FOFOA put at the top of this post. Will that be acceptable to the CB's cheers !
enough,
The LBMA is not the only market for selling your gold now and with a higher price, opportunities for selling could only increase. In fact, I have bought and sold physical gold plenty of times and never gone with 100 miles of the LBMA.
Selling of physical gold is impossible to regulate and so even an 'official' exchange wouldn't be enforceable. My mate Dave will sort you out no worries geezer ;)
RAD.....I only use LBMA as an example....Dont understand why that isn't clear...I'm not selling gold to the LBMA either. Question is In freegold as we will be selling gold to CB's thru intermediaries the question is will they set a minimum std of finness as the LBMA currently does? ps. I only buy .9999 so this would not effect me personally.....cheers again
When FOFOA talks about gold being infinitely divisible, he mainly refers to FOA's comments such as these:
FOA:
"The point made here is that gold has no set currency price and never has. In fact, we don't even need any more gold produced! All the gold in the world could easily convert all the currency, bank accounts and wealth in existence into gold value,,,,,,, at some currency price. As pointed out above, it will always be available for wealth replacement even if we have to put just one atom of gold in a one ounce coin. Don't laugh, it may happen (big logical smile)!"
-------------
"Once the trading is done, before walking away from the flea barn, we will square the books by trading any left over silver and currency for ("single atom" if needed) gold coins that have then become the world's secondary saving accounts."
.999 fineness, .990 fineness, .001 fineness. As long as the gold content is known and verifiable, who cares what it is? The value and premium on that particular bullion item would be set by the freegold marketplace.
enough,
(Andy +100)
According to reports I have read the Tesco supermarket chain in the UK is rolling out in-store booths that will buy 9 carat gold.
All grades, forms and quantities of gold will increase in value under the Freegold-RPG regime. The cost of refining lower grades will have a small impact on the "price'.
Arbitrage will ensure that prices become closely aligned. IMO there will be a premium for the most demanded "products" but it will narrow over time.
Enough/John
I really can't see fineness being an issue. It only costs 20$ per ounce to refine gold into .999 bars. Come freegold that will represent such a tiny proportion of the bar value the only issue would be logistics and perhaps the need to sell in a hurry.
February 4, 2011 2:24 PM
J wrote, in response to my query about the "blinking lights in the gulf of guinea":
The traffic coming from the beacon in the ocean does not originate there. The users are surfing from a far away place. I won't go into details but I'm sure you can figure out the how and why
Well, actually, that's kind of why I posted: I can figure out neither the how nor the why (though I do have an opinion on the latter).
As for how, I suppose there is some way to "spoof" your IP address that is about ten levels beyond my tech skills. The fact that said users chose the coast of Africa is kind of funny, although I suppose it's entirely possible that decision was made by the map program being completely unable to deduce the location of the viewer and just choosing "middle of ocean".
As for why, I suppose some people just don't want anyone who may or may not be watching FOFOA to know where they are. Also, understandable.
For those that don't care, I'd love to hear from the users in NB, PEI and NS. I see someone in St. Stephen, someone else in Woodstock, Westville, Antigonowhere, Hali, Sydney, Grand Falls, and even a person in Cornwall, PEI (very close to my ancestral stomping grounds). I'd love to hear from any of you to discuss FOFOA, you can find my email by clicking on my name. Again, it's nice to know I"m not the ONLY "crazy" person in all of Atlantic Canada. In fact, it's kind of refreshing! Cheers, and a great weekend to all.
All,
This interview with Jim Rickards is worth reading IMHO.
http://www.financialsense.com/contributors/ron-hera/interview-jim-rickards-on-inflation-and-currency-wars
Cheers
To All,
thank you! just asking the question as its better to do that then to find out later you've made a grave error....great weekend to all..thanks !!
enough,
With Freegold, places to buy and sell physical gold will likely pop up anywhere the service is profitable.
It may be supplied by banks, supermarkets, coin dealers, internet sites, whatever.
This is fundamentally just a savings exchange service, after all.
The rate of exchange will fluctuate just like any FX pair does currently, so all service providers will need to be part of this interconnected system. Your bid or ask will then impact the current rate instantly, as any truly free-market transaction should (physical only, of course, "cash 'n' carry", not future delivery, gold is gold and you have it in your hand or you do not, no terms or conditions).
There should be a small fee to cover assay cost if required, or expect discount when transacting in items that are not immediately identifiable/verifiable.
Any facility would be as popular as it is both convenient and trusted.
Your national CB will likely have no involvement. They certainly won't be opening a kiosk out front.
All IMO, of course.
Ore em',
When Statcounter or similar cannot ascertain the geographical location of an IP address, they allocate it to an unused location, in this case the middle of the Atlantic. Obviously plenty have their reasons for choosing to do so.
I am in NZ.
Hello Ore em'
Hopefully J doesn't mind me posting these. They are old comments on this blog from early '09 (so somewhat public information) and I expect that the information contained in them is well out of date now anyway. But I think they will help clear up your confusion:
J said...
… I am sitting here in Iraq.
I don't expect you to answer these questions I'm just starting to think of Saudi Arabia as a bigger player now
I'll give the article you posted a read now
March 31, 2009 2:58 PM
FOFOA said...
Are you in Iraq now?
March 31, 2009 3:09 PM
J said...
Yes, I'm in Iraq.
Great article. I've read about most of that before but that puts it all together nicely in one article.
March 31, 2009 4:00 PM
FOFOA said...
That's interesting, because your IP address is saying you are in Italy. I am only able to pinpoint you out of about 400 visitors today because we are on an old post, and you are the only person other than me that has come to this post multiple times. The government must be bouncing IP addresses for secrecy.
March 31, 2009 7:21 PM
J said...
I'm on a Civilian Sat connection. it hops off of Italy somewhere.
March 31, 2009 7:58 PM
I may have had a few shiny little reasons to stay hidden in the past, but since a recent unfortunate boating accident, it doesn't matter anymore.
While I am busy posting my perspectives:
It is obvious that all who find themselves here reading FOFOA do so for more or less similar motivations - the preservation of their wealth in the face of an increasingly uncertain future, and in a large proportion of cases, once they have done a little reading at least, the possibility of a once in a lifetime "capital gain", relative to all else.
Both of these reasons are completely normal and understandable, and applied to myself initially too. Now, not so much for me, but that is another (long and perhaps boring) story.
The bulk of the comments posted here relate to understanding gold and its function as the store of value par excellence; when we can expect the current monetary system to stall and gold's function to automatically fill the void; mechanisms currently employed to stymie this understanding and this stalling; ways and means of acquiring and storing gold; the possible future performance of silver.
A personal observation: in the future, after a Freegold revaluation, and when the dust has settled, I posit that it may well be that you feel that the greater value, for you, from Freegold was not the personal "capital gain" you enjoyed (as nice as that may be), but the positive changes engendered in everyone, gold owners and non gold owners alike, and the way in which we all find ourselves interacting with each other and the world around us.
A complete paradigm shift in the human experience, one that would be seen as a veritable "Golden Age" in comparison with the "Dark Age" we will realize we were inhabiting today.
Just a topic I think could use a little more consideration, and a few more comments, relatively speaking.
Perhaps this suggestion will not generate any comments, but I hope it will cause at least one person to consider this possibility.
There is a lot of confusion in the world, and it is easy to feel insecure and to fear for the worst, but I feel this is simply a narrow perspective. Cast your mind ahead into a Freegold future, and it follows that much of what we currently take as givens cease to be. These are ideas worth exploring.
While coming events may be the breaking of humanity, I think they will be the making.
It is the consideration of all the things that will change as we pass through the eye of this golden needle from one paradigm to the next that leads me to this conclusion.
I'm glad you brought up this perspective Blondie as I have been thinking about this quite a bit lately.
FOFOA made this comment in the post Your own personal freegold
I view freegold as a sea change to a fairer system based on merit. Call it a "meritocracy". This phenomenon will be global in scale, and gold will rise in purchasing power in all countries, regaining that which has been suppressed by the $-system.
In this meritocracy you will have to produce in proportion to what you consume. If you consume more than you produce, you will have to part with some hard treasure. Paper promises will no longer do. And if you produce more than you consume, you will find that real treasure comes to you instead of empty promises of future treasure.
Local currency management will determine whether that currency zone with thrive or not. This will change the politics of currency management for the better, the world over.
Those that already have treasure will have credibility. Those that don't, will have to earn it. Credit will still exist, but it will be given out on the basis of credibility and merit. This will be true on all scales.
Hi Blondie,
thank you for your response. Maybe you are right and pawn shops will become freegold emporiums but I cant help feel that something more structured might emerge. The banks still have much control of politics/politicians and monetary policy thru direct influence of monetary authorities. Could they not be given a monopoly on floating fiat/gold exchange to enrich the financial institutions much as the CB's do for the banks now? I dont expect a kiosk in front of the BIS trading gold and selling cigarettes:-) As for your comment regarding freegolds benefits toward lifting the human spirit and how we treat each other and our planet......I dont understand how freegold will change the hearts of men? I do not have a high regard of man's stewardship of our planet or compassion for our own kind. Cant see how freegold will change him. Really would like to hear your thoughts. cheers E.
Pardon me if I missed any posts on the action in the long bond of late. I've read all prior posts and have not seen any comments on what is, in my view, portentous action in longer term rates.
Breakouts of trend lines are not to be trusted until a successful re-test of the trend line occurs, however, at present, the long bond, has, at least by my runes, signaled a major change by breaking out above the upper trend of a decades long bull market in bonds.
If one is inclined to follow the utterances of certain monetary authorities and their minions, the action in long rates of late is the result of an expected incipient rebound in the economy.
If, on the other hand, one subscribes to the argument of folks like former Reagan budget honcho David Stockman, the implications of the recent action in the long bond are decidedly less than pleasant, and that is putting it mildly. Long (bond) story short, the ability of the U.S. government to fund its profligacy is going to become severely constrained in the not too distant future. I expect that the rise in rates is also a function of the market sussing out that the debt ceiling is going to be raised yet again. In any event, the action in bonds spells trouble.
I am limited as to time, but I thought this development was newsworthy since, in my view, it ultimately advances the prospects of physical For now, I'll leave it to others to expound on why this should be so.
Edwardo
a short time ago the Chinese central bank had 1 trillion in treasuries and now the federal reserve has over 1 trillion in treasuries paid for with money created out of thin air. In normal times holders of such large amounts would spook the mkt with such large sales as would a large buyer of physical gold would spook the mkt upward. But the Fed has been the bid and for a moment in time the size of even the largest holders can be offloaded. This has been a once time chance for china to offload and I'm sure they have. The rise in rates implies to me that the fed is being overun by all those who see this one opportunity to dump treasuries while there is a constant bid. Meaning..there are no other buyer for U.S. debt but the Fed.....QE to infinitum !!!
blondie,
I coulddn't agree more. No doubt future history lessons will define the 20th century 2nd dark age. As a society (global) we will be remembered with shock, awe and confusion.
Shock and awe for our technological advances, and confusion for our utter stupidity at the same time.
Unload unmanageable debt, revoke exhorbinant privelages and the whole world becomes lighter.
enough said:
"Maybe you are right and pawn shops will become freegold emporiums but I cant help feel that something more structured might emerge."
I said previously:
"The rate of exchange will fluctuate just like any FX pair does currently, so all service providers will need to be part of this interconnected system."
Which implies something pretty structured to me. It would be an above average pawn shop credibility-wise to be part of that, but I don't suppose it's beyond the realm of possibility.
"I dont understand how freegold will change the hearts of men?... Really would like to hear your thoughts."
Sure.
Louis Menand wrote:
"It's all in the genes": an explanation for the way things are that does not threaten the way things are. Why should someone feel unhappy or engage in antisocial behavior when the person is living in the freest and most prosperous nation on earth? It can't be the system! There must be a flaw in the wiring somewhere."
I have made statements regarding this perspective previously here:
"The monetary system is the fractal formula around which society crystalizes, the DNA code if you will. Change the formula, and the structure alters radically. Society does not organize itself, the monetary system we collectively agree upon and utilize supplies the motivations and thus incentivizes some aspects of "human nature", while disincentivizing others, organizing the structure of society as a result.
We then treat the resulting behaviours as "unalterable intrinsic human nature", which is not true at all. If our monetary system did not create scarcity, competition etc, we would all behave quite differently. The use of force is incentivized by the current system..."
I see this argument very well presented recently in the opening section of Zeitgeist Moving Forward (link here), a movie I found to present some interesting views and questions, although I do not think the solutions ZMF presented are going to materialize myself, and wish to make that clear.( The other video on the same linked page points out a few shortcomings.)
I think we will retain a monetary system, this system will use gold as its objective reference point, and the changes will flow from there.
The movie did a very good job of demonstrating how the monetary system influences "human nature" though, which is why I have placed the link.
Blondie,
Exodus...god made his people wander in the desert for 4o years so that each person with the memory of slavery in Egypt has passed on. Even Moses could not enter the promised land for he had experienced slavery. As long as there are individuals with the memory of the injustice and greed of the prior "me vs you" system where the concept that if I do not take then someone else will is at its core. This concept that depletes our oceans and other resources at alarming speed. With this knowledge and fear still in man's head and heart a change in the monetary enviroment will not change man. Over time, maybe generations, as the memory of that disgraceful concept that pits us all against each other fades, then maybe. A sudden change in the monetary system will not corrospond to a sudden change in man's heart without a serious time lag. If you believe there could be a serious maybe generational lag time then we agree. all this IMHO of course
enough,
blondie mentioned when the dust settles ....... and there will be tons of dust ;)
hi Wendy,
lets hope they dont take all that dust and sweep it under the rug which seems to be standard parctice currently :-)
enough,
I believe the sweeping under the rug is shortly coming to an abrupt close.
I believe we will continue to see rioting resulting in the overthrow of many governments including the US. I think we are at the beginning. ME then EU then US. Civil wars ..... and who the hell knows what else!
Blondie and FOFOA, thanks for your clarification on the map.
Enough - I agree that the current unlimited bid from the Fed is being viewed by a lot of a people as a "get out of jail free" card on their long-term Treasury holdings. And, if you're China, it's completely understandable that you would take tomorrow's future (questionable at best) promises to return "value" given to the West by the Chinese people over the last X number of years, and instead turn it into something that is going to hold that value into the future.
In many ways, this "early exit" before the seemingly-inevitable death of long-term US debt will allow the ultimate net "debt" of "value imbalance" accumulated over that X years between the US and China to be minimized.
It also would explain why the Chinese didn't mind holding that long-dated debt for the past 15-20 years: it's not a worry, so long as they can find a greater fool to take the "future promises" off their hands BEFORE the "implosion".
In this case the greater fool is the US taxpayer and the Bernank, although I can never decide if The Bernank is a) a complete insider who actually really knows what is going to happen and just chooses to lie, ie. he's not really as dumb or ignorant as he appears, or b) he's really every bit as dumb, ignorant, self-absorbed, cocksure, ego-maniacal and narcisistic as he appears, and really actually BELIEVES in his own BS.
In the spirit of Freegold, I wonder if this "end" was "baked right into" the cake of the Chimerican Dream (copyright Niall Ferguson)?
Hi Again Wendy
tomorrow I'm going to pickup an RV...seriously and if what you say occurs I'll be heading north to your country in it. I have been contacting CBSA (canada border security agency) and it is perfectly legal to transport .999 bullion into canada and is non taxable. It must be declared though. Even legal tender gold coins. It is not considered money not even face value. Furthermore from the USA perespective it does not fall under the $10,000 limit as it is not money under US law either. I have read that bullion under .999 is taxable from canada perspective. I cant understand why that would be? any ideas if its true and why? thanks
Wendy said - I believe the sweeping under the rug is shortly coming to an abrupt close.
Firstly, very, very well-said. Secondly, let's hope so.
radix??
All does not sound well with you.
Were you recently in a boating accident?
Blondie said: The monetary system is the fractal formula around which society crystalizes, the DNA code if you will. Change the formula, and the structure alters radically. Society does not organize itself, the monetary system we collectively agree upon and utilize supplies the motivations and thus incentivizes some aspects of "human nature", while disincentivizing others, organizing the structure of society as a result.
So Blondie, I suppose you've answered the question of which came first, the chicken or the egg. Thanks for clearing that up for us!
On a more serious note, you're absolutely, 100% correct on this point. Money is THE "feudal overlord" of the world, and it, and it alone, guides and determines human behaviour and action. Now, I'm not saying we'll ever be able to get rid of teh "overlord" and do away with money; hardly. But, moving from the $IMFS to Freegold is like moving from a ramshackle inner-city ghetto apartment owned by a slumlord to a Beverly Hills Condo (pre-2008 market crash, of course).
Ore em"
I believe the fed thru QE has intended all along to let the chinese get out of their treasuries. Some deal must have been arranged. What we get or got in return is the question. The fed has stuck the US taxpayer withe the bill in the form of loss of purchasing power. Bernanke is not stupid. He knows what he's doing and why. It's just that we dont........... good night all...getting up early to go get the armor plated RV :-)
BTW Ore,
the CRTC did not overturn it's decision to allow ISP to charge for useage, but they did say that they would take 2 months to review their decision.
The biggest pile of BS I've seen in along time.
If they try to screw with service, and charging more for what we are already overcharged for.........
I'm fed up, but not surprised. This sort of "deregulation" happened to radio, then television, and not surprising internet is on the agenda.
Expect reduced access at higher costs, unless people get really p..sed off.
I'm going to find their site this weekend, and voice my concern.
Regarding US treasuries:
If I were a seller of these bonds (to FED or whomever) I would be getting dollars in return. So from the liquidity perspective I'm in a bit better position but still owning a large pile of "unsecured" debt.
Nothing has changed really since I need to spend them in order to get real wealth (gold, etc). Just as "Another" alluded... the holders (China, SWFs, CBs,...) of this bonds won't sell anything and will ride those bonds to the ground (zero?). In the meantime their GOLD holdings will be going "to the moon" as FED prints dollars to save deposits/savings. And this "to the moon" shot of gold will more than compensate any losses in bonds and then some.
Casper
Casper
>>Just as "Another" alluded... the holders (China, SWFs, CBs,...) of this bonds won't sell anything and will ride those bonds to the ground (zero?)
The rise of Sovereign wealth funds might explain where these dollars are going Casper. In a financial collapse it's better to be in equity than debt. If they can redeem their bonds for dollars then they can invest them easily in dollar denominated securities without crashing the dollar ....
I was just thinking FOFOA, Freegold is such a confusing name because nobody knows what is free about it until you explain for the 100th time.
How about renaming it REALGOLD as it's pretty obvious what that means :)))
@ Wendy: 2004 - the change in status of US-goldreserves (deep storage)
Wendy,
Oh yes, a terrible tragedy, I was taking my shiny things out for a spin in the boat and along came a freakish wave and knocked them from their hallowed perch on the poop deck. It's OK though, I marked the spot with GPS and no doubt at some fortuitous moment in the future I will be re-united with my shiny things (maybe after freegold) thanks to a miraculous scuba diving incident ;)
Ben Davies a FOFOA/FOA/Another reader? He's talking about GLD redemptions being bullish....
I don't know how to put a link in, so google his King World News interview. Very FOFOAesque.....
Miked,
They don't have to sell the treasuries to buy equity... they can do that right now just by pledging them as collateral.
You say:
"In a financial collapse it's better to be in equity than debt."
That may be true unless you're the world reserve currency. When those bonds go there's not much that can stop the collapse of the dollar and as a world reserve currency the whole world is going to seek shelter in ..... Apple, Facebook?! Those shares are going to be redeemable in the same dollars which are collapsing before their own eyes.
I think that SWFs were created to manage the "wealth" of a nation and to support/extend the dollar's life so they can redeem all those dollars for more gold. When the dollar stops to function (real wealth for real gold) those SWFs are most probably sit still and watch the FED destroy the dollar. Nobody is prepared to play the scapegoat (and make oneself a target) by selling dollars.
Casper
@Radix, Ben Davies, at 6:00 says this:
When people talk about net outflows in GLD and SLV they are completely wrong... When you have a seller you have a buyer on the other side, so there is just a transferrence of that tracking of gold, per se. When you see a fall in the actual backing in gold, that is an actual redemption in a basket of shares for physical gold by the authorized participants for example the bullion banks. Now to my mind that reflects the shortages there in the market. This is not about liquidation of gold that people are not interested in the gold market, this is about a shortage, ie that gold is needed elsewhere. So when you have a redemption of a basket of shares the bullion bank is probably using that gold to make commitments elsewhere or ... one of the funds, maybe a Paulson fund, may be redeeming their shares to take phyical possession. So we need to be looking out the form 13f reporting schedules on Feb 14 for Q4 16 May for Q1 reporting... I think the regulatory reporting changes... SEC regulations... funds see a sea change with Frank/Dodd regulatory environment getting more difficult... So why would you want to be in an instrument with counter party risk and regulatory risk when you can have physical gold somewhere like Zurich...
Yes. this closely mirrors what Fofoa was saying in "Who is Draining GLD?".
Blondie, I agree the financial/monetary system has enormous (fundamental) influence on society and behaviour. FOFOA's Credibility Inflation (http://fofoa.blogspot.com/2010/08/credibility-inflation.html) post seems relevent to this point. With "easy money" spending is, evidently, easier... for the rich. Inflation is "wired in" to the system. Due to interest rates, the rich get richer and poor get poorer. Consequently, the rich drive the upper end of the economy, consuming, investing their wealth, buying "luxury" items, taking holidays. These have secondary effects - vacation destinations become service economies as the best money comes from tourists. The reinvesting of wealth may appear to have some benefits (in stoking the ever-hungry economy), but also results in bubbles, and overpricing of goods - Tunisia and Egypt (and many others) demonstrate what that can lead to.
I do wonder if the rate of technological progress will decrease in a "hard money" Freegold system. I also believe that this may not be such a bad thing. Do we really need a new phone every two years? Would it perhaps be better to take more time and develop one which will last longer and still be able to be serviced (ie: spare parts still exist) after a couple years? One of the worst effects of the current system is the myopia it induces: Anything for a quick buck. The only way to force long-term investment at the moment seems to be Government legislation, and even they are only interested in 2-3 years at max. Might it not be more sensible to invest in the long-term survival of humanity, eg: with alternative energy?
Perhaps our ancestors were not so ignorant as we tend to think, having outlawed usury (in the Bible, the Torah, the Qur'an).
It's also true that people's behaviour doesn't change overnight. Perhaps it will be up to the Youth who grow up in Freegold and accept is as natural and the only sensisble system who will progress Society the most. But within any system, people always strive to profit the most with the least effot. By safeguarding savings, Freegold changes the rules, meaning no country can get away (forever) by cheating by inflating their money supply. At least intuitively it seems a much more stable and fair system than the current one. I look forward to being part of its awakening.
Hi FOFOA and others,
I have read all kinds of revaluation theories on gold. Can somebody walk through the math of the various revaluation theories in a freehold scenario, i.e. Gold revalued at all currency/all current gold supply @$50k/oz., US currency/US gold stocks@ $6k/oz., etc.. And the merits/plausibility of each possibility? I don't even know if my examples are correct, going from memory.
miked,
"Freegold is such a confusing name because nobody knows what is free about it until you explain for the 100th time."
This why Reference Point Gold may become the mainstream name. Gold will be repriced as it becomes a reference point for fiat currencies.
Others have seen problems with the Freegold name, including FOFOA who wondered if Crackwhore gold might be a less (confusing?) name. I like Shoeshine Boy Gold, but mostly I get by without using a name except lately when a certain Katy Perry song comes on the radio.
But for the record, Freegold is when physical gold trading is free of the legacy fractional reserve banking structure. 2 or 3 times should get that point across.
Diamond Jack,
I think the "free" in Freegold stands for free to float in price, vs. a fixed gold standard price of old. It is also a description of the current price of gold in US dollars, given upcoming events, lol...
Hello Diamond Jack
>>But for the record, Freegold is when physical gold trading is free of the legacy fractional reserve banking structure. 2 or 3 times should get that point across.
Yes, that's why I thought Realgold was a nice name. It's obvious you are taking delivery and it's not a promissory note.
I'd take issue with your statement that people get it after 2 or 3 explanations. There are people who have been here in the comments section for months who still don't know what it means.
Realgold will still have to be explained. And you're right, it may take a hundred times. I stopped trying to convince anyone. One of the most important insights FOFOA delivered to me was that fact that RealFreeGold is in·ev·i·ta·ble. No further effort necessary.
As part of catching-up on my economics, I've been reading some articles about the Real Bills Doctrine (RBD). The following reminded me of Freegold and FOFOA:
http://goldstandardinstitute.org/GSI/
Participants of the debate [of RBD and gold] are utterly unprepared for the event when all offers to sell gold against irredeemable paper currency are abruptly and simultaneously withdrawn. To deal with the present financial crisis and its aftermath we have to develop the prerequisite linguistic tools. In this effort Carl Menger’s work is the only help we have. Menger had no use for the language of equilibrium analysis. According to him what makes gold special among marketable goods is its unsurpassed liquidity. This means that the spread between the asked and bid price of gold increases more slowly than that of any other marketable good, as ever larger quantities of are thrown on the market. This is the property that makes gold superbly qualified to play the role of the ultimate extinguisher of debt: the asset into which all credit instruments must mature if the credit system is to last.
In a sense credit can still be said to mature into gold, albeit at a variable price. But if the gold basis goes negative and stays negative, in other words permanent backwardation of gold strikes, it will herald the advent of Armageddon. The overwhelming majority of working economists don’t see that gold still plays an indispensable role in the credit system. The U.S. Treasury bond market has a sine qua non adjunct in the gold futures market. Without it bonds would be irredeemable: they would be promises maturing into more promises. But once permanent gold backwardation strikes, the prop of gold futures is removed, and the U.S. Treasury bond market will succumb to the sudden death syndrome. For the time being it is supported by speculative demand, but the demise of the gold futures market will make the bond speculators scurry for cover.
As long as confidence in the monetary system is unimpaired, gold will be widely available and the credit system will work properly. Increasing unavailability of gold indicates the threat of a breakdown of the credit system. Gold is going into hiding. Watch for the day when it will not be for sale at any price. When this happens, the credit system and along with it trade will collapse. It is not a matter of equilibrium or the lack of it. It is a matter of life or sudden death.
Joel,
Feel free to hold your beliefs, and it makes sense to me, too. I was just referring to a recent statement by FOFOA. Makes sense that the price of gold is distorted because the number of claims made on the same oz. Once the same gold oz. is no longer sold 50-100 times, it is free to find its true price.
Freegold is gold freed from all the bullsh*t.
...continued from above
Detractors of the RBD do a great disservice to society when they try to force their narrow parochial and cultist viewpoint, the quantity theory of money and the supply/demand equilibrium theory of price, on everybody at a time when the problem is the relentless drying-up of liquidity. What we need is a theory of hoarding to supplement the theory of marketability. The theory of interest describes how gold is exempted in part from serving as a medium for saving. There is a complementary theory: that of discount, describing how gold is exempted in part from serving as a medium of exchange. That economy is best where gold is hoarded least. In such an economy gold is not needed in the cash balances of traders and, for that reason, is widely available to serve as the ultimate extinguisher of debt.
Time has long since passed when bickering about the number of angels that can simultaneously dance on the point of a needle has added anything material to our knowledge. Fractional reserve banking is a red herring. Tinkering at the edges with 100 percent reserve requirement leads nowhere. You will never understand RBD if you try to approach it through abuses of banks. What needs to be explained is why real bills can circulate on their own wings and under their own steam — banks or no banks.
Real bill circulation will start spontaneously after the total prostration of the world’s banking system. Yes, there is life after the sudden death of the banking system. People are not going to commit collective suicide at the altar of fiat currencies. People want to live. They will use whatever little gold is available to them to trade by drawing real bills against the production and distribution of goods they want to consume. It will be a repetition of the miracle at the end of the Middle Ages, when the bill of exchange was invented in Italian city-states such as Florence, Venice, Genoa. It will happen again. The world will do very well with real bills and without banks, thank you very much.
When contract law will once again reach the level of highest respect, and promises to pay gold can once again be believed, banks may once again be in vogue. When that day dawns, the best earning assets of the new banks will be real bills drawn on consumer goods in most urgent demand maturing into gold coins. The criterion by which banks are judged is not going to be the prohibition against less than 100 percent gold reserves. It will be the prohibition against borrowing short in order to lend long.
Antal E. Fekete
sean said:
"I do wonder if the rate of technological progress will decrease in a "hard money" Freegold system."
Perhaps only where that progress is driven by consumption, as this demand could be expected to decline. Malinvestment will decline, but that cannot be expected to create bona fide progress by definition, so I don't see that there would necessarily be a decline at all. there may even be an increase, as investors due diligence increases significantly.
Gold As Pure Equity addresses these issues, and the ones below.
sean also said:
"It's also true that people's behaviour doesn't change overnight. "
Agreed. People's behaviour does not change overnight.
It changes when the people in question decide they need to change it, and not a moment earlier.
How long this takes depends upon when they get their first good "ass kicking" after following old habits that suddenly start yielding different (and less satisfactory) results, and how long they can sustain continual "ass kicking" by repeating this behaviour in the new paradigm.
Some would see others being punished wealthwise and change pre-emptively. Some would need more than one loss to change, some may never change.
Being such a fundamental issue for everyone though (their ways and means to everything), and considering the simplification that will have occurred, I think the bulk of people can and will adapt pretty fast. This is evolution in action, after all.
Some possible changes that may create new carrots and new sticks:
-Gold becoming the undisputed perfect store of value.
-Gold acting as pure equity, and delivering capital gain.
-Fiat denominated wealth destruction through the transition.
-The increased due diligence the new paradigm will require.
-The fact that gold will be hard (work for it, not borrow to buy it) will mean people will think very hard before parting with any.
Consequently, from all these things and more that could undoubtably be added to this quick list:
Freegold will result in security and peace of mind for everyone, as they all have new objectivity in the creation, exchange, storage and consumption of value.
The result will be simple transparent equality in the understanding of and participation in The Flow of Value.
I think almost everyone would be most happy to change their behaviour to participate in that.
Freegold is humanity freed from all the bullsh*t.
"humanity freed from all the bullsh*t"
Planet Utopia, Blondie!
If I had read such speculations years ago before you came to FOFOA and before I understood the idea of Freegold I would have abandoned the site long ago!
There is no reason for a mentality change.Gold has been store of wealth times before and the humanity didn't morphed into an idealistic entity. Criminals and thieves haven't been invented by fiat. Think Rotsch...
mortymer,
I've read that the "deep storage gold" refers to gold not yet mined, but London also has deep storage gold that is "inferior gold" Initially only a portion of US gold was reclassified from custodial gold to "deep storage", and then all of the gold was reclassified in this way.
I've also read said that instead of bullion, treasury vaults are full of GLD, maybe GLD is considered deep storage gold (shitty gold). It wouldn't be surprising if this was also the state of BOE vaults as well. (They were not signatories to WAG2)
I think it's fair to guess that by 2004 the US had become desperate. The mining companies were closing their hedges on mass. Hence GLD and gold swaps via ESF??
ideas?
This article is excellent btw, it talks about deep storage at about the 1/2 way down:
http://www.goldensextant.com/GLD.html
Here is FOA writing about the reclassified gold...
FOA (04/23/01; 20:30:04MT - usagold.com msg#67)
Replies and Custodial Gold
Hello Gentlemen,
I suspect the gold in West Point was reclassified in a show of good faith to those that own some international gold paper. I'm talking about people who's reasonably priced product you cannot live without. I doubt the gold has outright swaps written against it or was swapped into the enemy's camp (so to speak). While the ESF has the right to trade currency swaps against other's gold (and they do do this). Our gold has yet to be possessed by others. Just as in 1971, when many dollar holders thought US gold was "in custody" for them, so to does the current world dollar gold markets. However, this open certification shows just how tight the system has become...
Hi Blondie et al,
I have been following the conversations about the post-transition period with interest. If I had to select just one advantage of the new Freegold-RPG IMFS it would be the adoption of a market based, politically neutral, benchmark price for fiat currencies.
The effects of not having an effective pricing mechanism have been far reaching and immensely damaging on many levels.
IMO Mises was correct in his analysis of socialism's (and communism?) fundamental, self-destructive flaw - the lack of market derived price signals in the economies operating under this doctrine. The world has been suffering under an even worse disability for decades, currency exchange rates based on sentiment, guesswork and manipulation.
We had an FX market where the units of account and exchange had arbitrary values but at least they could be priced in an open market to some degree. With the advent of OTC derivatives and dark pools we managed to create a system on top of this flawed foundation that allows financial market players to create unlimited money substitutes and leverage.
Try to imagine a world where there were no standard units of measurement. IMO that is the destination we have reached in the $IMFS.
The new system will correct this fundamental problem (valuing and then pricing the unit of account and exchange) and allow for the emergence of the system that you envisage. Whether it will emerge to a greater or lesser extent probably depends on a number of factors but it will be possible IMO whereas it is impossible under the $IMFS.
Interesting FOFOA, however FOA's remarks were before the introduction of GLD, and although it was introduced in 2004, you can bet it had been in the making for quite some time.
I wonder if FOA's Thoughts might be different today?
The more I think about it, the more I wonder if, in fact deep storage gold (not good for delivery) is GLD.
I have no trouble imagining a group of men all belonging to the "lifelong geek club", feeling oh so superior in their intellect and position, creating code like: "strong dollar policy" or "deep storage gold", and pattiing each other on their backs for their clever deceptivness. :D
I can hear them now:
Gordon: listen hear my good fellows, we have what we call DEEP storage gold in London (wink), how about the same name for project G.L.D. (gold lacking demand). By George I think we’ve got it (sly grin)
George Jr.: (bouncing in his chair) HUH??? Did you just ask me something Gordo?
George Sr.: Now George calm down, I’ll explain it all to you later.
Hank: Good god Gordo, I think you’ve nailed it. Brilliant!! What says you Al?
Greenie? For Christ sake, WAKE UP!
Al: (rubbing his eyes), my deepest apologies gentlemen, I’ll have to excuse myself to the little boys room. I might be a length of time, so please attached the minutes and send them to me. Oh, you guys decide ok?
Wendy: Oh my I think it's time for a glass of wine ;)
Wendy,
That was outright hilarious!! More Please!
Ok fgyp, the conclusion:
Greenie doddles to the little boys room, unzips and pisses everywhere. I mean on the floor, on the walls: he just can ‘t direct the stream and the whole room STINKS.
But he’s not done.
He waddles into a stall, drops his drawers, and MISSES the toilet!! There is shit everywhere. He panics because someone might enter and learn of his “lack of control”
Back in the oval office, George Sr trying to coach Georgie out.: It’s not an easy task as Georgie is enthralled by the booger he has extracted ….it’s soo elastic…………it will stretch everywhere, even to Afgansitan or Iraq?
Big george pushes little george outa the room as clearly Gordo and Hank have another agenda ………………who had the sorriest ass?
To be continued…………
ROFLMAO!! You should be writing TV sitcoms!
Yes, "improving the allocation of resources" is a much better way of summarising the effects of Freegold that I was attempting to describe. :) Since much of the West's "wealth" and "progress" comes by exploiting the world's poor, then a world-wide rebalancing may produce some uncomfortable shocks for the paper-wealthy. Perhaps we can optimistically expect technological advances to be refocussed to areas that are most needed, and consumer items to start reflecting their real value of production, which they certainly don't now. No more phones for free, I'm afraid...
Assuming freegold arrives within the next few years, it arrives at a curious inflection point in the evolution of our society, when many other types of items are being drastically revalued, i.e.: music, films, books, and anything else that can be digitized and shared for "free". I don't pretend to know what this might mean, though perhaps it will increase the "value" of artisanal works, physicial creations and live performances, interactive or crowd-produced things.
We may live in interesting times!
FGYP
Below is a quote from Larry Edelson [Real Wealth Report] dated Feb 7, 2011:
My cycle studies for gold now show a decline into March 28, as you can see from this gold daily cycle forecast chart. Notice how nicely gold has followed the forecast. Expect some sideways action, and even a bounce higher into late February, but then a steep slide into March. I expect by March we will see gold bottom at around the $1,225 level, and silver at just below $23.
At that point in time and price, the precious metals will become one hell of a buy — as they prepare for their next leg up in their greatest bull market, ever.
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