Friday, February 25, 2011

Wendy's Open Forum - Part 2

@ Wendy – Sorry I short-changed you on your last open forum. So here's another one. Apologies this time for invading your forum with a bit of tripe. (See below)

@ All – A few thoughts on "Black Gold." I hate to draw attention to ridiculous notions with no basis in history or logic. But apparently this notion of massive secret storerooms of gold is still providing some with the comfort they seek in their aversion to taking action to protect their own wealth. So I suppose it is worth a brief comment.

I have noticed that the most cynical among us tend to view the world as an ant might view the giant humans that massacre hard-working legions of his own kind whenever passing by. And while I can, and often do, entertain such perspectives without accepting them, for the purpose of exploring probability, I can find no logical train of thought that leads to the existence of massive stockpiles of gold as the source of power for our evil overlords.

In fact, massive stockpiles of easily printed cash make a lot more logical sense!

The history of gold mining is well documented, as is the amount of gold in existence during various eras in which it was openly used as currency. So the existence of hidden quantities of the stuff has a tremendous logic threshold to clear before Occam's razor can even be considered against the supposed "evidence" rebutting massive quantities of known history.

And because of the non-clearance of this threshold combined with the relative scarcity of time, I find it extremely wasteful to explore the voluminous fiction that exists on this topic. And I am comforted to share this perspective with ANOTHER, FOA and Randy Strauss (see below).

This topic seems to pop up periodically, each time some poor soul stumbles across one conspiracy-oriented site or another. Each time it is presented, again, with the same zest as the last. And each time, logic, history, reality and fine minds stand firmly in the way.

Remember this Foundation X story from last November where a mysterious organization claiming massive secret gold offered to bail out the UK? I wonder why that story just kind of disappeared. You see, when stories are false, there is a lack of "infinite resolution" to be mined. Perhaps this story went nowhere because scam artist Ray C. Dam of the mysterious OITC that claims to have control of millions of TONNES [see pg. 195 in linked pdf] of secret gold was arrested in Cambodia on December 18, 2010.

This is the kind of resolution you find when you dig into fantastical stories like this. What a waste of time! You can learn a lot about the credibility of the Seagraves who wrote "Gold Warriors" by simply reading the negative reviews on Amazon.com, a big time-saver! Here's one:

Many of the earlier reviewers of "Gold Warriors" have admired the voluminous references presented by the Seagraves to support their incredible assertions. However, I'd like to point out that my personal investigations into a sample of their sources have exposed the Seagraves' quite cynical "research" methods. They are prepared to use sources that are laughably insubstantial, and then present these sources as if they are highly credible. The Seagraves also deliberately misrepresent the words of a source to make it fit the story that they wish to convey.

The whole of page 62 of "Gold Warriors" is given over to the Seagraves' theorising that nearly 400 Allied Prisoners of War were massacred after stowing gold bullion in a mine on Sado Island, Japan. This is outrageous. The source that they use, "Betrayal in High Places", is a book that looks extremely unreliable when first picked up, and its claims fail to be confirmed by any other historical source. In any case, "Betrayal in High Places" does not actually claim that any stolen gold was stored by the POWs!
I am one of the authors of a recent historical paper, published in the Journal of Military History, which has proven the Sado Island Massacre story to be pure fiction. The Seagraves are smart enough to have worked this out for themselves, but they have chosen to legitimise this fantasy in order to sell their books and CDs.

The Seagraves further illustrate their manipulative ways when they cite an innocent travel book as the source of their further assertion,
"more than a thousand Korean slave laborers ... on Sado Island also vanished without a trace" (bottom of p62).

This is just another dishonest misquote. The travel book (Waycott: "Sado: Japan's Island of Exile") actually says, "...During these years, forced labor was certainly used: of the tens of thousands of Koreans imported to work for Imperial Japan, more than 1,000 are known to have been sent to Sado. Of these, 145 are said to have 'escaped' (but where to?) and a dozen or so - surely a low estimate - were killed. Their existence became public knowledge in 1991, after records were released of Mitsubishi's distribution of cigarette rations to its workers."

Westcott's travel book is actually quite pleasant and informative, and there is nothing dishonest about his speculation - but it's only a travel book! Historically, it's clear from post-war Korean records that many "escapes" were indeed successful (often into the local community, or by fishing boat back to nearby Korea). It's also true that a relatively small number of Koreans were killed in mining accidents, and that no "massacre" occurred. Waycott doesn't allege a massacre in any case - but the Seagraves do!
(Page 62 of "Gold Warriors" can be previewed online here on Amazon, for those who would care to check for themselves...)

The Seagraves are obviously misusing these sources quite deliberately. I think it's very reprehensible for modern authors to push this type of mean deception masquerading as history. This is not a victimless crime. (My mum's brother died as a prisoner of the Japanese in WW2, and it is upsetting to see authors such as the Seagraves take these liberties with the emotions of dead POWs' families.)

Not content with pocketing their customers' money for this book, the Seagraves also use their book to continually push their privately-sold CDs, which they claim contain the "evidence" to back up their assertions. In fact, most of the documents on the CDs are just correspondence between "treasure hunters" - who also make their money by selling their Treasure Maps to the gullible... These are hardly independent or authoritative people! Many of the "certificates", which have been laboriously translated (possibly to tire out the reader) can easily be seen to be fakes once you look at images of the "originals". They have cut-and-pasted values for the gold on deposit!

The CDs even torpedo the Seagraves' own assertions in some places. On CD#1 (Jones.PDF file, page 65), a 1997 letter from "R. A. Medland, Senior Manager, Commonwealth Bank Group Investigations/Security Dept." [Melbourne, Australia] says that the gold deposit certificates are, "utter rubbish"! There's also a scary-looking photo of a sleazy Indonesian "lawyer" displaying the "certificates", and a hilarious document very reminiscent of a "Nigerian Letter", purportedly from President Suharto of Indonesia, on the same CD.

Gee, it's a pity these Certificates are rubbish - they were for 420 tonnes and 120 tonnes of Gold !
(US total annual production in 1940 was 155 tonnes, just to show how incredibly unrealistic these numbers are.)


With the kind of resolution one finds when only scratching the surface of these fantasies, I have to wonder that the appeal of such stories must come from their ability to assist in the smoothing of the rough edges of some other square peg these cynics are trying to jam into the round hole of reality. But again, it is a big waste of time to go any further than this when even the simple threshold of logic hasn't been cleared.

Before getting to the archived arguments, I would be remiss not to mention Costata's comment from the end of the last thread:

costata said...
Bron,

I have read the book [Gold Warriors] that FGA and TDF are referring to. It is mostly BS. The authors (husband and wife) have written about some interesting people and events in Asia. The husband was a journalist who had some good contacts. Some of the stuff they have written about did step on a few important toes but a lot of it is "ancient history" now. IMO Lords of the Rim is probably their most accurate book. It's the story of the Chinese diaspora.

The Yamashita gold story was actually true up to a point. The Japanese did loot gold in China and SEA.

My source was part of the occupation forces in Japan after WWII. He was an officer in charge of a unit involved in decommissioning chemical weapons and logistics. The Japanese stockpiled a lot of materials and valuables in old mines that had been worked out long ago.

A lot of the valuables the Japanese looted during the war were used to fund their war effort. Apparently gold was held in higher esteem by their suppliers than IOUs from the Emperor (despite his unique lineage). Bear in mind too that Japan had some incredibly rich gold seams in their local mines as well. Nothing like the scale of a Boddington of course.

Here's a WA connection you might be interested in. After Australia began to trade with Japan again post war some of the big Japanese trading houses had maps of promising resource regions in WA that the locals had never seen before. The story goes that prior to, and during WWII, the Japanese put teams of engineers into remote areas of WA to identify promising areas for resource exploration. There could be other ways they acquired the maps but as the saying goes "never let the truth get in the way of a good story".

Cheers

And now I take you back a decade to early 2001, when FOA and Randy "@ The Tower" Strauss took on the reality-challenged cynics of the day with the sharp razor of raw logic and known history. Dismiss these great Freegold minds at your own peril. The comments are presented here in the order they were posted. And as is usually the case, the discussion evolved to the point of depositing the strongest arguments at the very end. My favorite line of the bunch comes from Randy: "…it remains my objective view that such tall tales must have long bodies and necks because they certainly have no evolutionary (historical) legs to support them."

FOA (01/10/01; 17:50:30MD - usagold.com msg#53)
24 hour hike.

Black Gold?
If I understand the reasoning, some people think there is a mass of physical gold out there and it's being used as underground money. This is what explains the low price of gold today, as all that black market gold surfaces?

Well, that may not be the proposition, but if any of you want to know; none of our evil outlaws are so stupid as to use gold for trading when there is literally "TONNES" of cash circulating around the world. Please, give all of us a "logic break" for a minute? Why would I, as a crook, carry even one ounce of gold when three crisp $100 bills can take its place? Even ten $100 bills are easier than gold priced at, say $1000. And there is no shortage of that cash stuff around! Hell, I bet there really is more tonnage of "Black Market Cash" in the world than all the gold still in the ground. Cash for ounce,,,,, gold still priced in the thousands! Believe it!

FOA (1/11/2001; 11:35:06MD - usagold.com msg#54)
The Curve!

OK,,, I had my coffee and morning walk in the woods to see the wildlife,,,,, packs on,,, let's go.
It's always great to spend time out here,,,, away from the city,,,, out on the Gold Trail.

-----------------------

One more point on Black Gold as we walk:

All that gold, more than triple what we think is out there, would have been in existence for some time prior to our life spans,,,,,, given the timeline required to produce the stuff. Remember, Black Market production could not have existed prior to, say 1971, as even public mines were not making cash profits. Also, it takes real cash and investment to produce both White Gold as well as Black gold.

Indeed, simple extension of physics concludes that nowhere near that much "EXCESS" gold could have been dug over the last 25 years. It didn't happen, even with slave labor. Because, as in above, even lawbreakers have to sell most of the gold in the open just to cover the illegal "Cash" they invested in digging the ore in the first place. These guys don't do such a "wash" business when their cash works just as well in the first place?? Get my point?

Also, the gold would have been moved into the open as the majority of goods and services bought with illegal money, to create their evil lifestyle, must involve the White Market Economy too. Black market wealth is mostly in cash, it's just too easy to move and spend. So, there is no reason to go through gold first, just to buy in the real marketplace.

Further;
With all that gold out there, the Dollar powers would not need to create paper gold debits to placate strong dollar backers. In fact, I suspect they would have created channels to flush all that gold into the market. Illegal or not, this action would have suited their end result.

No, the natural trend of easy money humans, both good and bad would be to spend said gold for other consumable wealth and keep cash in the background. Indeed, this is truly what has been happening as regular investors trade physical for non-physical substitute gold. The small amount of physical supply vs the monstrous paper trading denotes how such existing gold has bridged the industrial use gap. It didn't take a vast new unaccounted supply to make paper seem real, just moving the existing into new hands did the trick. OK, we finished burning that story in the fire.

Randy (@ The Tower) (1/16/2001; 4:07:45MT - usagold.com msg#: 45719)
ORO: some of my thoughts on being "not ants"

In your post you make many worthy comments, and certainly the essence of human motivations driven individually by self-interest has not likely changed substantially through time or by geography. This issue of black gold, however, requires an additional depth of understanding suggested earlier this weekend--that we are not ants.

Loosely, I suggest that from the perspective of "antkind" in its struggle for survival, the world is the same as it ever has been...particularly with respect to the "rules of the jungle". And further, seen from the perspective of "the world" itself, the essence of antkind behavior and its impact is also the same as it ever has been (for most practical applications).

In stark contrast to antkind's "same-as-it-ever-was" interaction with Mother Earth, any meaningful assessment of mankind as a whole reveals a performance more akin to the evolving development of a single entity (such as a butterfly) throughout a single lifespan of that entity.

More fully said, as evolving civilization establishes new "rules of the jungle" (laws of the land), men -- like butterflies -- do behave differently depending on the specific "rules" for the stage of the game faced at the given time in life, even while their self-interested motivations remain. Such self-interest may require a body to crawl hidden and eat leaves under one set of rules while exposure to another following set of rules (i.e., opportunity) enables that body to fly forth in a display of nectar-sipping "birth" into the seeing world. And yet, even as the caterpillar's nature is inclined to a hidden existence during a particular stage, a premature and unintended flight into the open can occur even under the old rules of the jungle through discovery/conquest by superior forces (e.g., a bird in this extended metaphor).

Concerning gold and mankind, a rich history of conquest (generally by "official sectors") and of rule changes through time and geography have given ample opportunity for significant gold exposure--by force or by choice. It must certainly be acknowledged that once our civilization's "lifespan" developed to such a point where incentives arose for some gold to be kept hidden at the time of its discovery, clearly the stronger precedent of experience was that such gold was useful when "revealed" (spent) as a suitable alternative to its owners starving in the dark...and this would hold true for any point in this would-be black gold's post-discovery coexistence with mankind.

"Black markets"... "white markets"... go back far enough and you find there were simply "markets". Looking back to one full century after Europe limped through the economically plagued 1300's, estimates from historical evidence suggest there to be found at the time less than 150 tonnes in total gold. Over the next 350 years, and prior to the productive gold rushes of the mid-late 1800's on the several continents, the free and open coinage of precious metals brought to mints for ease of circulation (use as currency) in this more highly sophisticated stage of mankind's existence provided reasonable records and estimates that gold in known use in the civilized world increased by only 3,000 tonnes. Then, the "easy pickins" of the gold rush years prior to the cyanide leaching process instituted from 1890 onward yielded barely a tenth of today's highly scrutinized corporate production totals of roughly 2,500 tonnes per year. (By 1908, the new gold discoveries and extraction techniques had helped companies boost global gold production such that above-ground gold supplies swelled to nearly 18,000 tonnes.)

We must ask, when considering the political backdrop this turn of the previous century, where was the incentive for significant quantities of that newly unearthed gold (or previous hoards) to be kept hidden ("black") from free coinage or other wealth-utilization? Arguably, only with the cyanidation process of the single past century do we get gold production volumes remotely capable of feeding black supplies on a level suggested recently by some posters here.

Equally important, only with our very modern era of fiat currencies and tax policies do we face "rules of the jungle" in this collective lifespan of mankind whereby self-interested motivations would favor a degree of unreported/hidden new production. Certainly too little, too late to provide the levels of black gold cited to exist beyond that which is commonly acknowledged as historically produced totals.

To wrap up this commentary, one other element warrants brief discussion. You said in your #45689:
"The supply of actual gold, not only paper gold, relative to dollar denominated debt had to substantially greater than "officially" stated, else the system would have collapsed long ago as a result of over-leverage."

Could it be that you are overlooking an important phenomenon--growth of the (bullion) banks’ operating sophistication through global integration, and with it the growth of the participants’ confidence which counts for everything? For possible validation of this thought, look no further than the similar absence of U.S. bank collapses against the backdrop of meager "physical" vault cash which has been bolstered by sophistication of operation throughout the latter two-thirds of the Twentieth Century. To be sure, now that the banking structure has gone global beyond the safety of any deep-pocketed lender-of-last-resort, only additional time has been bought by the over leverage, and the eventual failure will be all the more spectacular when it occurs. My friends and myself in The Tower hold physical gold in anticipation of that day. The latest shifts in the "rules of the jungle" indicate the day is near at hand.

Randy (@ The Tower) (1/19/2001; 15:55:58MT - usagold.com msg#: 45942)
A simple notion for barnacle bill

Inspired by your comment:
"...until there is a clearer picture on the Marcos Gold situation. If those million tons of gold are really there; and they are in the camp of the enemy, then this manipulation can go on indefinitely."

As can be gleaned from my last post, the most powerful nation on Earth -- blessed with a large and technologically clever populace, abundant natural resources, and a vast network of supportive infrastructure -- is only able to produce 355 tonnes of gold per year through the highly scrutinized efforts of its publically owned mining corporations. Fanciful notions notwithstanding, where in space and time did mankind EVER find either the human inclination or capability to gather a million tonnes of gold from the firm embrace of Mother Earth?

Certainly, do not trust the precision of the conventionally accepted numbers of 130,000 tonnes as sum total of all past accumulations, but they come nearer the mark than the output numbers that could only be achieved through the efforts of Paul Bunyan and Babe, his blue ox. (I have it on good authority that Mr. Bunyan spent his days lumberjacking, not secretly mining or panning.) Let your common sense as born and raised unto the physical world be your guide in this and all things... Numbers are, after all, just numbers.

Randy (@ The Tower) (1/19/2001; 18:18:52MT - usagold.com msg#: 45952)
RossL...fun thoughts

"Randy. 200 tons a year for 5000 years. I don't know how the pyramids were built either. They look impossible to me also."

Sure, any combination of production values over years will provide the fanciful number, but will not provide for the sustained secrecy that must accompany it...otherwise this would not be "black gold" above and beyond the recognized yet still impressive (impossible?) historical production. One would think the history books and archeological evidence would be rich with tales and displays such overwhelming pre-Columbian bounty, no?

What say we ask YGM, our most favorite miner, if such numbers are viable without the aid of modern infrastructure and technology?

Otherwise, we are left only to ponder the grandeur of the black pyramids which as assuredly were built above and beyond those that have been accounted for, and the accomplishments of many moon landings that did not survive the oral traditions of our cave dwelling ancestors reaching back into antiquity...leaving us only with imaginations to fill in the gaps of astronautical marvels of what surely occurred prior to 1969.

Randy (@ The Tower) (01/28/01; 15:38:58MT - usagold.com msg#: 46755)
auspec...another read-through may prove more luminescent

You said:
"Trail Guide has several times mentioned he was going to weigh in on the Black Gold issue, but I have yet to see anything of substance."

Have another look at FOA's latest (msg#56 "The Gold of Troy!") at the Gold trail. While he does not explicitly state that this commentary is to address the "Black Gold" issue among other things, it clearly forms the foundation of thought that more thoroughly builds the necessary historic context that I myself so failed to impress anyone with in several commentaries during recent weeks.

His skill of presentation in this effort greatly exceeded my own attempts, and I was quick to call attention to this fact in my early morning post Friday the 26th. Again, (but perhaps to my rooftop eye only(?)) this post serves to prepare the reader for engaging in critical analysis as to whether such magnificent tales of great storerooms of "black gold" can stand upon their own firm legs in a real world historically shaped by human motivation. For reasons I have previously expressed (however poorly), it remains my objective view that such tall tales must have long bodies and necks because they certainly have no evolutionary (historical) legs to support them.

Randy (@ The Tower) (02/01/01; 16:36:19MT - usagold.com msg#: 47141)

Hello Trail Guide. Thanks once again for providing a well-lit walking tour through the past
In days past, when I finally chose to weigh in on the fanciful debate over the (un)likelihood of copious amounts of stockpiled "black gold" in existence in bunkers somewhere, I tried to put forth a focus on two elements that would satisfy any farmer regarding the veracity of such claims. (Why farmers? It has been my experience that a majority of farmers are endowed with common sense, and more importantly, they do not hesitate to use it!). I talked against the presence of massive black gold stockpiles due to 1) the many technical/logistical obstacles which do not support such levels of production in human history, and 2) the socio-political-economic realities of our ancestors which would not be conducive to the permanent suppression of any such easily and secretly mined wealth against exposure to the light of day--implying that the ancient chain of owners ALL denied themselves the improved life that would have come from spending what it was they held..."money". Not likely.

In conjunction with your #56, I hope that readers of your latest message come away with a clearer sense of the realities of point #2....that gold would not sit idle or hidden in those days if it could (and it COULD!) be used to purchase a better lifestyle. Truly, while human motivations remain similar through time, the socio-economic environment that we shape for ourselves has evolved, and with it, so too has evolved changes in our behaviors as guided by our unchanged human-creature motivations.

I am certain you have opened a door to greater understanding when you explained how the item selected to be spent for other goods was that item which would bring the best trade. For travellers on the road, the necessary convenience of gold dictated its superior performance and hence, its use, whereas in town, one would likely see a flourishing free-for-all "bartering" economy where gold needed not pass from hand to hand for each transaction.

The small parallel we might find helpful to draw is that modern times and commercial banking has given us all the "town" mentality whereby we set our gold aside as the function of our modern currencies allow us to bargain for the best trade for an improved lifestyle. But importantly, we must all recognize that there are distant towns that offer goods to improve our lifestyle, and also recognize that specialization/division of labor has helped to make us each "towns unto ourselves". It is in this sense, therefore, that it remains in our best interest today to hold these golden "hunks of metal" because as travellers in this modern-life environment we are ALWAYS "on the road" figuratively speaking.

But clearly, the problem many people seem to have with this concept is recognizing the necessary transitionary period we are in regarding a shift in popular western thought.

Thanks again for your sharing your considerable talents for elucidation.


It is quite common for unstable, overly cynical persons to seek out extraordinary explanations for ordinary events and conditions that seem to them like giant humans must seem to simple ants. But even so, it is extremely arrogant to believe that such enormous secret stockpiles of, to date, foregone wealth will be deployed in our time, in our "crisis," when it somehow remained hidden through so many generations faced with much more existential challenges than we face. It borders, in my honest opinion, on lunacy.

I highly recommend reading Gold Trail Three - The Scenic Overview which, as Randy noted above, was written by FOA partly in response to all this "Black Gold" talk in the forum. There you may gain a much wider view that actually does have infinite resolution, founded on both logic and history.

Finally, I will close with one last Thought for you. The actual quantity of the gold stock in the world doesn't matter nearly as much as its flow, or velocity, when it comes to storing value. In fact, the greater the stock relative to the same flow, the greater the price stability and therefore the greater the potential value. Again, the greater the stock:flow, the better the store of value. (See: How Can We Possibly Calculate the Future Value of Gold?) So imagine, if you will, a single individual who controls an amount of gold equal to, but separate from, the known stockpile. Mr. X has 160,000 tonnes, and the rest of the world has another 160,000 tonnes. Mr. X is the de facto "King of the World." From a game theory perspective, what would be Mr. X's best move, at any given time in history, with his gold?

Sincerely,
FOFOA

128 comments:

Blondie said...

@ Synarchy said:

”Why diminish the validity of my question with a condescending non-response? “

My apologies; I may have taken your question out of context. This was not my intent, and as such was not an attempt at condescension.
The volume and nature of the comments here is getting to the point where it is a part-time job digesting them. There is very little that can just be “scrolled past”.

------
@ Rui said:

”That's easier said than done. Gold owners will not be very willing to exchange their good gold for the risky, destined to depreciate bad fiat when they smell its weakness.“

Fiat will eventually stop depreciating, being stabilized by RPG, at which point the gold and fiat will by definition be transparent in their relative values, and exchange will be able to be made comfortably in accord with Gresham’s Law.

Gresham’s Law is the underlying causative factor in the entire Freegold/RPG consolidation process; both the deflation against physical gold, and the subsequent stabilization.

Thank you for bringing it up.

------
@Bron,

Your A/B1/B2 split was deft.

Regarding group A (those commentators who think this is an extreme cycle and intend reallocating into cash or another asset class near the peak):
It is possible that many or even most of this group are closet members of group B, but by declaring themselves as group A they have much wider appeal to a broader base of investors, the same investors who subscribe to their services, supplying these individuals with continual means to accrue more gold.
These guys are hedged.
They can easily switch stance to become a B whenever it suits them, and maintain (even enhance) credibility with their subscribers.
They have plenty to lose (subscriber/income wise) with a premature move to group B, but it does not mean they are not already there privately, or at least leaving their options open.

In other words, group A is potentially a subset of B.

Taken to its logical conclusion, the group A stance that gold is a cycle play in an extreme cycle is based on the possibility that the group B stance is correct.
Group A's stance is a derivative af group B's.

The split between B1 and B2 is largely academic.

All three groups agree that if one has not already, then one should BUY PHYSICAL GOLD NOW.

I personally own and recommend Perth Mint products. ;)
They trade at a premium to other lines available locally.

------
@g.

The 'designers' cannot prevent the SHTF scenario, only do what they can to delay it. Why implement RPG only be seen as the proverbial bad guy as the world is forced through the eye of the needle, when the system will collapse under its own weight anyway?

RPG does not need a centrally planned fiat currency, which would be clear to any who read the Hayek quote FOFOA, Costata and I have all repeatedly referenced. Which inward-looking 'B2' contributors have stated otherwise?

I don't see CBs, central planning, or even the existence of separate nation states as prerequisites for RPG to work just fine (which is not to say I believe they will disappear next week, I'm just saying).

That said, I agree wholeheartedly with your final comments on pieces of string and letting the marketplace decide.

cont/

Blondie said...

/cont

@mrbeyond,

The Choices video is very good; shame they spoil it by attempting to subliminally influence the viewers choices at the end, but that is the definition of modern advertising I suppose.

------
@ pinto,

Good clarification re velocity (could use a couple of line breaks for ease of reading).
In summary, V is a derivative of T except in the case of the repayment of debt, and in this case the volume of money is reduced respectively.
In the final analysis, V could then be more accurately described as T?
So we have been mislabeling something (V should be T), but its effects are not in dispute?

Not mentioned is the effect of the dis/hoarding of savings on T and therefore V, except in the acknowledgement that this is a psychological rather than purely mathematical process, something widely recognized in this blog from the beginning.

Being that V/T has a (very) large psychological element, I’m sure you will agree that Credibility Inflation is a very important factor.

Velocity of money is a somewhat elusive but most interesting concept.

------
@DP, -=Dimmed=-,

The issuers of fiat have had the cover of massive productivity increases courtesy of cheap (in fiat) oil with which to mask the detrimental effects of their fiat manipulations? Viewed this way, both angles are simply subsets of the larger picture.

------
@mortymer,

Nice to see BIS making the distinction between the financial and the real sectors.
Most economic analysis uses GDP as a fundamental input, yet this (GDP) is arrived at without any such distinction.

Robert Leroy Parker said...

Blondie,

You ditched the man with no name? Sacrilege!

Fofoa,

So there is no gigantic secret stash of black gold. Seems reasonable, but how big do you estimate the giants stacks to be?

Butch

costata said...

Does anybody remember Shelby, the "silver evangelist"?

I still visit his forums occasionally in order to gain insights into the current thinking of the silverbug fraternity. Here are some snippets, from recent posts by Shelby in his silver forum, that you might find interesting (my emphasis):

"I am looking for 35 gold/silver ratio, before I take profits in silver (into gold), so roughly $45 and $1575."

"You could take some profits around 40 ratio, e.g. $35 and $1400, looking for a pullback to $30, but I think that is very risky."

"We can squeeze a little bit more out of silver before we run to gold"
Shelby on Tue Feb 22, 2011 12:48 pm

http://goldwetrust.up-with.com/t33p300-silver-as-an-investment#4244

"So that is why I will start selling SOME (not all) silver for gold around $39+, then look to repurchase in the high $20s or low $30s."

You might also like to tune into David Morgan talking to Jim Puplava from the 5.00 minute mark here:

http://www.netcastdaily.com/broadcast/fsn2011-0225-1.asx

I listened to the whole broadcast. If you are looking for a contrarian view on silver in the short term (both men are long term bulls) it would be well worth your time.

Dimmed aurum said...

@Blondie
I am glad you showed up.
On the question of black gold. Don`t need to even consider wasting my time on the subject. This fable is stitched together with the stories of people whose actions are inhuman in nature/rationale and allows for a level of secrecy that is impossible to maintain in my view.
On the very much interesting topic of velocity… or “Velocity of money is a somewhat elusive but most interesting concept.” as you put it. :-)
After sifting quickly through a bunch of Austrian theories, M. Armstrong`s writings and what is generally believed here I decided to give it a shot and create an amalgam of a sort encompassing them all. (I even thought I should call it sth. like: V as vendetta or the revenge of velocity.) But then costata fired on the subject and I knew my knowledge is lacking on the matter. The more I delved into the problem the more facetted and shape-shifting V became to me. Here are some considerations:
1. Velocity (in currency, commodities, gold and other forms of wealth flow) is not a uniform in nature.
a.) When constricted to currency (fiat) it is affected by too many variables such as level of savings and savings` composition. Levels of debt, creation-destruction of currency (QE, banks` FRLending etc. vs. default and payment of debts - deleveraging). Regulations and distortions of info. Thanks FED and gov. statistics.
b.) Malinvestment (bad investment), level of speculation (instead of flow to productive purposes) and again regulation are of concern to commodities` velocity whereas
c.) Taxation, socialism, capital flow barriers impede (or in the case the lack of - stimulate) the velocity, flow and accumulation of wealth.
/I am not thorough/
Throw in the mixture some greed, fear, manipulation, entropy, war, resource depletion, social/productive cooperation and trust. As you put it: “Being that V/T has a (very) large psychological element, I’m sure you will agree that Credibility Inflation is a very important factor.”
A mindboggling syncretism!
2. All that have tried to describe velocity fail. Not because they put insufficient effort into this, but because they are victims of the evolution of the “monetary”/social/wealth flow system of their time. In the GStandard time and Saudi Arabia population of 1000 000 000 people, trade and tradable goods and services were different. Productive soil/clean water issues worldwide were of a minor status. The capacity of creative human energy and cooperation expanded in par with its numerical increase. So the velocity and the realities/perceptions behind it were very different at that time. Fiat was young as the population that demanded it. Now the increase in human population (and the demographic structure of it) only puts more strain on mother nature and increases entropy.

@ costata
wake me up when GS ratio reaches 1:500 so that I can convert to silver.a

mrbeyond said...

Dollar knows the time is almost Up. http://www.jonathanferraragallery.com/dynamic/exhibit_artist.asp?ExhibitID=384&Exhibit=Upcoming

Blondie said...

@ -=Dimmed=-

A mindboggling syncretism indeed!

Whether we understand its mechanics or not, V really is the thing that brings change.

mrbeyond,

It was superb; I just had to pinch it.

mortymer said...

@Thanks Blondie that you have noticed my previous, I had the same train of thoughts when I have noticed that.

@All: Here we have another nice BIS document.

*** "Freegold, here we go" ***

...or if you want it in an official language:

"Duvvuri Subbarao: The Reserve Bank of India making a difference in your daily life"

*Convocation address by Dr Duvvuri Subbarao, Governor of the Reserve Bank of India, at the Sambalpur University, Sambalpur, 24 February 2011.

http://www.bis.org/review/r110224c.pdf

"...In November 2009, we bought 200 metric tonnes of gold from the International Monetary Fund. This triggered a lot of public and media interest on the rationale of the transaction. In recent years, although there has been significant accretion to our RESERVES, our gold holdings have remained stagnant. This purchase from the IMF helped in raising the proportion of gold in our reserves. Secondly, you will recall how, at the height of the balance of payments crisis in 1991, we had to pledge gold to raise resources. In view of the strategic importance of gold as a RESERVE ASSET, we exploited the opportunity that came our way to buy a sizeable quantity of gold from a reliable, multilateral financial institution at market prices in a single deal...."

"...An important issue we need to decide on is HOW MUCH currency to print. We need to print ENOUGH currency to replace soiled and mutilated notes. On top of that we also need to print ADDITIONAL currency to meet the needs of economic GROWTH. The currency expansion required to support growth depends on a number of variables including the growth rate, inflation rate, the growth elasticity of money and the velocity of money. This is a complex formula, but the important point to understand is that the AMOUNT of currency we need to print IS DETERMINED by the replacement requirement and the economic growth requirement.
As much as the amount of currency to be printed is formula driven in the first instance, the Reserve Bank cannot just “issue” currency. The currency we issue is a LIABILITY of the Reserve Bank. It has, therefore, to be backed by assets. EARLIER ON, the Reserve Bank too WAS part of the theology of the gold standard – the belief that issue of currency should be backed by the gold holdings of the central bank. In fact, the original Reserve Bank Act prescribed a proportional reserve system whereby of the total note issue, at least 40 per cent was to be backed by gold bullion and sterling. Like other central banks, WE TOO HAVED MOVED AWAY FROM THE GOLD STANDARD, and today the ASSET backing for note issue comprises both domestic and foreign securities including gold held by the Reserve Bank...."

mortymer said...

@Uomo senza nome
What do you say about this:

I often follow later development and discoveries in biology (but I am not an expert in this area by no means). With new methods we can now see more clearly how things evolve, change, shape, reconfigure...
IMO we clearly see/feel/are_experiencing the evolution on the go. But what form is it taking?

*http://en.wikipedia.org/wiki/Speciation ... ("Speciation is the process where a species diverges into two or more descendant species.")

*http://en.wikipedia.org/wiki/Co-operation_%28evolution%29

*or is it just a simple re-combination?

Oh, and I almost forgot...! :o)

~Gold, educate yourself.

mortymer said...

One one cherry on the top of today´s cake :o) Mortymer presents you with:

Masaaki Shirakawa: Global imbalances and current account imbalances

Speech by Mr Masaaki Shirakawa, Governor of the Bank of Japan, at the Banque de France FINANCIAL STABILITY LAUNCH Event, Paris, 18 February 2011.

http://www.bis.org/review/r110222a.pdf

"...The global imbalance debate contains a host of issues. How much emphasis should be put on adjusting current account imbalances per se? What are the causes of current account imbalances? Does the fact that the largest deficit country provides the key reserve currency delay the adjustment process, as the incentive to reduce deficits is weaker? How much does the fact that some current account surplus countries have fixed or relatively inflexible exchange rate systems influence current account imbalances? THE INTRODUCTION OF NEW RESERVE ASSETS would likely reduce the DEMAND for US dollars, but would it reduce the precautionary DEMAND for reserves, thereby reducing current account IMBALANCES? These issues are closely linked to the broader discussions on the international monetary system and remind us of the original Bretton Woods debate between White and Keynes almost 70 years ago..."

"...In the run up to the recent global financial crisis in the mid-2000s, concerns were raised that a disorderly adjustment would occur through a sharp fall in the value of the dollar and a jump in long-term US interest rates...."

"...This experience, similar to the Japanese experience, also highlights the need to look beyond current account balances and identify what constitutes underlying imbalances. Then the question becomes “How can we identify the imbalances or distortions which could lead to unsustainable global imbalances?..."

~Gold, educate yourself.

mortymer said...

I hope you will not mind that I post so much, one more here, same place, different person:

http://www.federalreserve.gov/newsevents/speech/bernanke20110218a.htm

"...In the late 1920s and early 1930s, the U.S. dollar and French franc were undervalued, with the result that both countries experienced current account surpluses and strong capital inflows. Under the unwritten but long-standing rules of the gold standard, those two countries would have been expected to allow the inflows to feed through to domestic money supplies and prices, leading to real appreciations of their currencies and, with time, to a narrowing of their external surpluses. Instead, the two nations sterilized the effects of these capital inflows on their money supplies, so that their currencies remained persistently undervalued. Under the constraints imposed by the gold standard, these policies in turn increased deflationary pressures and banking-sector strains in deficit countries such as Germany, which were losing gold and foreign deposits. Ultimately, the unwillingness of the United States and France to conduct their domestic policies by the rules of the game, together with structural vulnerabilities in financial systems and in the gold standard itself, helped destabilize the global economic and financial system and bring on the Great Depression. ..."

~Monetary issues, educate yourself.

costata said...

mortymer,

The comments from the RBI are gold. Thanks.

Bron said...

Blondie

“It is possible that many or even most of this group are closet members of group B”

Most possible. Agree that taking a B stance is far too negative and commercially make more sense to appeal to people's greed and getting them to buy gold even if they don't really realise what good it is going to do for them.

The question about the “Bs in A clothing” is whether they believe in B but just pretend to be an A (lets call them BpA) or they believe in A but aren't sure whether B will happen - “hedged” their bets as you say (lets call them AhB). The beauty of gold is that it is a hedge against B events but it allows you to publicly take an A stance.

“They can easily switch stance to become a B whenever it suits them, and maintain (even enhance) credibility with their subscribers.”

Ahh, now this is what interests me. The BpA will have no problem making the switch at some point but what will be interesting is to see what the AhB do.

Keep in mind that many commentators, to justify to the mainstream (defined as those to whom the B scenario is too confronting) why they should continue to hold or buy into gold at these levels after a 10 year bull market, resort to inflation adjusted peaks, price to fully back paper money on issue and other rationales. These arguments set hard dollar figures - $2300, $5000 etc.

It will be interesting to see what they do in the face of large gold prices that exceed their previous (at the time outrageous) price predictions. Will they have the nerve to advise holding on to gold or will they advise their followers to “take profit” in fiat?

Upcoming events will flush out the A from the BpA from the AhB. Those who make the wrong call will earn the ire of their followers. On the other side of all this there will be nowhere to hide, those who are wrong will be unequivocally wrong.

“In other words, group A is potentially a subset of B. ... the group A stance that gold is a cycle play in an extreme cycle is based on the possibility that the group B stance is correct.”

I don't agree in that the mainstream financial media/advisors taking an A position can do so without, and indeed deriding, the B stance.

“The split between B1 and B2 is largely academic.”

In the sense that if you have gold, you are covered either way. But it is a very passionate topic nonetheless.

“All three groups agree that if one has not already, then one should BUY PHYSICAL GOLD NOW.”

It is not the advice to buy that I'm focused on with the A/ApB/BhA/B1/B2 categories, its the fact that the As will be telling their followers to sell for fiat at some point.

mrbeyond said...

@Blondie: Fits great into context!

Do You think You are Safe with Gold? Changing Your current paradigm into a new one - freegold - may after a while get You feeling very unsecure holding fiat when Your paradigm shifts.

Before I read Fofoa I felt like Jack in the Shining. After reading a while I got a new perspective.

New paradigm Jack - holds gold
http://www.youtube.com/watch?v=Pqrx_FEv_hM

Old paradigm Jack - exploited by the fiat system:
http://www.youtube.com/watch?v=fNvGyNrWZG0

I think Fofoa is very successful trying to pull people into this new Dream called Freegold. What it gets Us to Live the Dream? Time?

mortymer said...

This is hilarious if true and if the statement about the two tier market between CBs is correct: ..."we exploited the opportunity that came our way to buy a sizeable quantity of gold from a reliable, multilateral financial institution AT MARKET PRICES in a single deal....""

Diamond Jack said...

I saw this last week but became distracted, The rest of the words below are taken from the article, save the last one; my entrant for one-liner of the day.

http://www.safehaven.com/article/20037/the-edge-of-chaos

The Road to Serfdom is Hayek's case against central planning, something he viewed as a product of human design as opposed to human action.

Hayek also made major contributions to complex systems theory, specifically related to what he called the spontaneous order of markets. He does not always get credit for his advanced thinking on complex systems theory. This oversight may change in the future, as the recognition that global markets are dynamic complex systems is certain to experience a renaissance in the near future.

Spontaneous order is the natural emergence of order out of seeming chaos. Complex systems and spontaneous order go hand in hand.

Central planning is not self-interested; it is falsely presented as representing the collective interest, but in fact typically just watches out for special interest

Decades of the suppression of human freedom and liberty has undermined spontaneous order in the global economy and is making many countries far more unstable than their leadership or analysts realize. Chaos is the result of the inherent instability of central planing.


The reason is that central planning does not have a valid pricing mechanism. A good example is that the market cannot properly price risk when central banks step in and arbitrarily purchase bad debts

Beyond the unfolding global crisis, a new golden age of spontaneous order and global prosperity will dawn. A global human action driven free market revolution has begun. It is sweeping the world...

BOO-YA!

julian said...

Hello All,

I don't know if anybody has posted this yet.

The title is what caught my attention.

http://www.youtube.com/watch?v=9G9PEirzgdo

Coming from a basic understanding of Freegold, for me this was a very interesting dialogue.

Freegold by any other name seems ever more to be the organic solution to our economic ecosystem being discussed by some significant voices.

Perhaps some astute thinker among us might comment on what these men are saying?

Cheers,

Julian

Jeff said...

KWN has a new Jim Rickards interview. His view seems to be that SDRs will be the freegold of the future.

Costata,

Silverbugs seem to be of two varieties; timers who want to convert to gold and the silver standard bugs who believe silver (and gold) will be money again.

Wendy said...

Thank you again FOFOA for keeping me in the loop :D

costata said...

DA,

Agreed. Velocity is one of the most difficult concepts in economics.


Jeff,

I appreciate that many of the silverbugs are open and honest in their views about silver. I never go into their silver forums and pick fights with them. I respect their right to their opinions and beliefs.

There are also silverbugs who store most of their wealth in gold. Styling themselves as pundits they shout "silver to the moon" while they say, in unguarded moments, if they had to run they would grab their gold and abandon the silver eg. Shelby.

There are others who allegedly amass tonnes of silver in LBMA good delivery bars (at single digit prices), have it fabricated into generic rounds and then gradually offload it onto their "followers" eg. Hommel.

Diamond Jack said...

Julian,

That was painful to watch. Laurel says he has no idea what he is talking about 5 min into a 5.5 min clip, then Hardy schools him about the two roles of gold/money.

But to silver bugs, do you want people like Laurel shilling your last oz.?

FOFOA said...

Hello Julian,

In your video it almost sounds to me like Ned Naylor-Leyland, who was the organizer of that conference last month, was trying to describe Freegold to James Turk without mentioning Freegold or FOFOA. Of course I might be biased, but it makes one wonder if Ned has ever heard of Freegold.

Oh wait! I just remembered...

November 17, 2010 3:40 AM:

"hello - i am putting on a sound money conferenece at the guildhall in london on jan 27th with turk, salinas-price, andrew maguire, david morgan, chris powell etc all speaking about practical solutions....i kow this is an anonymous blog but i would love someone to come and speak about freegold and its viability - what are my chances?
best
Ned Naylor-Leyland
ned.naylor@cheviot.co.uk"


Unfortunately, FOFOA politely declined by email. Ned responded with:

"Fair enough! I thought as much but am keen to get as many competing concepts of practical application aired in public in front of financiers/hedgefund managers. Went and saw the room at the Guildhall yesterday – right in the belly of the beast, 300-400 attending a sound money conference – the worm is turning.... especially excited that Maguire has agreed to speak.

If you would like to come along i would love that although imagine you may be across the pond – i would be v happy for you to come under john smith or whoever and only you and i would be any the wiser!

Very Best
Ned"


I wonder if there were any "John Smiths" at the Cheviot conference.

Sincerely,
FOFOA

Dr Strangelove said...

Are you all under the impression freegold will be valued somewhere in-between M3 and all wealth in the world or that freegold will roughly equal the value the wealth of all other things in the world?

Of course, though demonetized, gold has a value similar to our former broad based money supply (RIP 2006) and in effect acts as a reserve currency now.

What amount of total wealth in the world should gold be able to purchase?

All?

1/2?

1/4?

FOFOA said...

Hello Dr. Strangelove,

You ask: "What amount of total wealth in the world should gold be able to purchase?"

I'm afraid you are looking at it the wrong way.

A large part of the above-ground stock of gold has an inter-generational velocity. That means a very slow velocity, spanning generations, which equates to a high demand among those with inter-generational-sized wealth. This is why "total gold's" value cannot be equated to any given snapshot of global wealth. These giants know something Another told to us shrimps: "Hear me now, what the wealthy and powerful know: "real value does not have to always be stated or converted throughout time. It need only be priced once during the experience of life, that will be much more than enough!"

See also my post How Can We Possibly Calculate the Future Value of Gold? which talks about how gold stretches its value out in the time dimension without limitation, unlike paper wealth which has always been self-limiting:

"In aggregate, a faulty storage medium is self-limiting... So the next step is to ask ourselves the obvious question. How much "stored purchasing power" exists in the world today? ...this confidence is a self-reinforcing, self-sustaining feedback loop in the same way that a faulty store of purchasing power is self-limiting by its intrinsic lack of infinite durability..."

Sincerely,
FOFOA

Oliver said...

No 'John Smith' that I can see.

http://www.cheviot.co.uk/sound-money-conference/brochure.pdf

Interestingly however, Scrooge McDuck made an appearance.

julian said...

@ FOFOA,

That is very awesome!

Thanks for sharing,


- Julian

p.s. cheers to mortymer for that bank of india snippet, and the other ones

i appreciate all those who put in so much time and effort to research information and share it

Dr Strangelove said...

Thanks FOFOA, I am just looking to potentially quantify the IDEAL percentage of total wealth gold would be equal to. Of course prices of the world's assets fluctuate greatly while there is no real answer, for there is no "ideal" amount of wealth gold would represent, back or be able to purchase.

I guess by the time everyone figures out gold IS really money... it won't be.

Blondie said...

@ Bron,

AhB:" Will they have the nerve to advise holding on to gold or will they advise their followers to “take profit” in fiat?"

By then they may all have come to see things just like former Merrill Lynch investment advisor Stewart Thomson, and find the whole idea of "taking profits" in fiat laughable:

"In one corner, of your boxing ring, stands the Western investor. He’s pretty tough. He clenches his fists ready to fight. Well, ok, he doesn’t clench a fist. He clenches a photocopier and a calculator.

The Western investor fighter has gold. But all he thinks about is pricing that gold, over and over, and over and over again, in…. dollars.

In the other corner stands the Indian man. The investor from India doesn’t think he got richer over the past 4 months.

He knows he got richer. He knows he got richer because he has more gold now than he did 4 months ago. In his corner, he clenches his weapon of choice.

The scale. The Indian is 100% prepared not just to fight, but 100% prepared for victory. What about you?

Wealth is weight. No man or woman has increased wealth by valuing a fixed amount of gold over and over again in paper currency. I’m not here to watch Team India take you apart, like a tank takes out a kid with a water gun, as entertaining as that may be. I’m here to make you… richer. Let’s do it. The Western investor, the Western man, has a long road to haul, to achieve what the Indian man has achieved as a permanent mindset in the wealth-building arena. Maybe it takes you a day, maybe a month, maybe a year, or just maybe it takes thousands of years, which is the consistent time that the Indian wealth-builder has put in on this all-critical job. My suggestion: Let’s start the job, with ounce number one, today.

All things must pass. The US dollar is a broken entity. I hear non-stop analysis of why the US dollar will collapse against gold, or at least fall hard. I agree, but no wealth for you is built by bragging how a fixed amount of gold is punishing and beating the US dollar into the ground. It’s almost the case of the bully beating on the child. The gold punisher will eventually destroy the dollar, but bragging about existing beat-downs and coming golden beat-downs on the dollar won’t make you any richer. Just a bully. The dollar is a child holding a photocopier. Gold is a man holding a machine gun.

Measure your wealth in the currency of men, ounces, not the currency of delinquent kiddies with toybox measuring kits, dollars.

Embrace the word, “real”, or embrace wealth destruction. Let’s apply that word, “real”, here and now, to make you richer: The choice is really…yours. Growing your real wealth in ounces, versus living an emotional death ride of marked to USD toilet paper currency model, is your key to gold market victory. Indian investors really got richer over the past 4 months, and they really know it. Most important, they are really happy about it. Now you know the real job you really have, to really be happy in the real gold market. The job is really required because you are really in a real fight ring with a real Indian opponent. I would suggest you really start fighting. Really drop the photocopier water gun as your real weapon of choice, and really get into the scale (tank) and really open fire. Or really lose against that very real Indian, by very real… knockout."

cont./

Blondie said...

/cont.

Bron said:
”...the fact that the As will be telling their followers to sell for fiat at some point.“
That’s a fact on this side of the focal point, but not necessarily on the other, IMO.

------
slightly o/t:
I find it really rich that there are those who entrust their wealth management to others, and would then bitch and blame about taking a loss should one ensue. If you value it so highly you assign its safekeeping to others, you don’t really value it that highly at all. Pigs get slaughtered, and in this analogy rightly so, IMHO.

------
@mrbeyond said:

”Changing Your current paradigm into a new one - freegold - may after a while get You feeling very unsecure holding fiat when Your paradigm shifts.“

If said paradigm continues the shift, you may look back and laugh at this.
Another: ”It need only be priced once during the experience of life, that will be much more than enough!
------

Black Silver

Blondie said...

@ Dr Strangelove,

There is most certainly an "ideal" amount of wealth gold would represent, but this percentage is subjectively assigned by the entire market in aggregate, being the level at which stability/security/equilibrium is achieved.

Good luck working it out. Let's just call it higher?

------
@ Mortymer,

Great quotes, esp RBI.

This still clearly boils down to IMF vs BIS,
aka Anglosphere vs Rest of World.

Analogy could be made with Gaddafi vs Libyans.
[can of warms opened]

mortymer said...

Thanks Blondie, from above, I wandered also why they called this as they called it: "Banque de France FINANCIAL STABILITY LAUNCH Event, Paris, 18 February 2011."

thedeadfauvi said...

Thanks for the explanations regarding Seagraves. You really dissipated my worries.

Of course is mea culpa as I didn’t start my own research about that book and I have been induced to believe something might be true in their analysis. Unfortunately even some “names” spread this faux “information”. Yes, poor souls can easily be tormented but this question mark didn’t influence my first choice and decision.

Anyway for me it doesn’t matter that much because I’ve made my decision (100% savings transfer) some time ago. This decision came out of my guts without academic theories, just like the Indians do. All my worries and angst started later on after discovering that I, little shrimp, go against CBs, MMT, fiat conception as credit money etc. Quite overwhelming for someone who only wishes to save himself and his family!

Only thing I am now worried about is HOW it’s going to happen and WHEN. Social unrest is also a chapter I am very afraid of and I think this might really take place, is expected and even provoked.
Thanks FOFOA and all.
Black silver. LOL!

carpenter said...

From what I understand:
The fiat legal tender supply must fluctuate in relation to the GDP to control inflation and deflation while physical gold separated from a fractional reserve market is a reference point for the purchasing power of the fiat currency.

Question: If the GDP increases by 5% and the fiat money supply adjusts by +5% no inflation will occur. During the same time period the gold supply only increases by 2%.
Will gold increase in price during zero % inflation?

I want to apologize to this forum for not donating to a worthy cause. Work is getting harder to find in my aria and the bills, well I hope you understand.

sobione said...

Mortymer - ... and so it happens that the head of BoF is no other then Christian Noyer - an ex-vice president of ECB, who was a "gold man" (a quote of the late W. Duisenberg).

mortymer said...

@ Jeff + others, I offer your a view about SDR-versus-Gold by another blogger (Ivo Cerckel) who also sometimes comments here.

*Honest Money*
*Gold is Wealth Hiding in Oil*

http://bphouse.com/honest_money/freegold-versus-imf/

[This is just my wild fast cooked speculation but anyway. I was thinking for a long time about this: I looked into IMF news and they are/were flying in quite a hurry all around the globe for all to sign the ArticleIV...
http://www.imf.org/external/news/default.aspx
So for the new SDR to work somehow (if they come with some kind of workable solution) there must be something about handling/sterilizing/immunization of gold. CBs agreeing not to hoard anymore? For example: not obtaining gold for their asset reserves from private markets so they are not disrupted, unless it is new gold from their in-country sources (as is the case of Russia - it it all from internal? (mining, prospecting, from private banks or friendly satellite states)- So are they allowed/able to get gold from international markets or are those frozen?
On above lines what I wander (and IMO it is in general a good question) about freegold environment: Is public to compete with CBs for storing their wealth?]

So, however those Rhetoric Qs are answered, it is still a gray area until it is somehow cleared, a speculation here is the same Paris event from the IMF perspective:

"Transcript of a Press Conference by IMF Managing Director Dominique Strauss-Kahn following the Group of 20 Finance Ministers and Central Bank Governors Meeting, Paris, France "

http://www.imf.org/external/np/tr/2011/tr021911.htm

mortymer said...

2/2 (from the above link)
"....Now the second point, which has been addressed, is the reform of the IMS, the international monetary system. It’s a French tradition since the ‘50s to be at the forefront of the reform of the international monetary system. And from Pierre Mendès France to de Gaulle to others, many French statesmen had their will to try to push to have an international monetary system, which will not be so imbalanced, which means it will be more fair the set of countries dealing with international questions, meaning multi-country reserves, role of the dollar -- which is still going to be very strong, but maybe a bit challenged by others and so on. That’s a very old story..."

"...But all this has to do with the role of the IMF, because if there is one institution which is at the center of this reform, after the international monetary system, of course, is the IMF...."
"...And last but not least, the role we may play in helping to reorganize -- even if it’s a long-term process -- the international monetary system for a more effective system, which will provide and deliver more stable and sustainable growth. Really create a new International Monetary Fund. We are far, far from the view that many may have from the Fund years ago: We are the center of all the questions -- monetary, economic, financial questions...."

"...I used to say two years ago that my goal was to go from IMF 1.0 to IMF 2.0, and I think that’s done. Now the problem ahead -- the problem looking forward -- is IMF 3.0, which is to provide the world -- in globalization we need this -- with an organization which will not be only focused, or mostly focused, on monetary questions, but on all financial questions. Probably it may involve in the long term some changes in the treaty, which is the foundation of the IMF. Some say it will require a new name for the institution. I don’t know. If branding is so important, then what is sure that the more you have a globalized world -- you may like it or not -- but the more you have a globalized world, the more you need multilateral institutions to try to organize the way the world is working."

=> So Blondie, maybe the IMF is on-board?

mortymer said...

Joint IEA-IEF-OPEC Report on the Workshop
"Understanding the New Dynamic: How do the Physical and Financial Markets for Energy Interact?"
& the Forum
"Energy Market Regulation: Clarity and Coordination" ~22 & 23 November 2010, LondonB

http://www.ief.org/whatsnew/Documents/Report%20on%20IEA_IEF_OPEC_Workshop_on%20Physical_and_Financial_Markets_and_Forum_on_Regulation_London_November_2010.pdf

"Major fluctuations in energy prices in general and oil prices in particular have attracted heightened attention to the functioning of energy markets. The Jeddah and London Ministerial ad hoc energy meetings, held in June and December 2008, respectively, led to a collaborative effort aimed at exploring ways and means to enhance the process of producer-consumer dialogue and address the issue of extreme volatility in energy markets.
In this connection, and given the DUAL ROLE that crude oil now plays as both a PHYSICAL commodity and a FINANCIAL ASSET, the International Energy Agency (IEA), the International Energy Forum (IEF) and the Organization of the Petroleum Exporting Countries (OPEC) recognized the need to improve understanding of the interlinkages between the physical and financial markets for energy, and agreed to jointly hold workshops on energy markets functioning and meetings of energy regulators..."

"...The first day‟s Workshop was organized around four sessions that looked at i) the recent evolution of physical markets, including crude benchmarks; ii) the evolution of energy-related financial markets; iii) “over-the-counter” trading and its impact on price discovery and volatility; and iv) the relationship between oil products and paper markets...."

"The second day‟s Forum of regulators examined the current framework of regulation for commodity futures and derivatives markets and the objectives and extent of the proposed reforms. The potential impacts of regulation on hedging and risk management, as well as on improving the transparency of regulated exchanges and OTC transactions, were discussed. The last session covered international coordination for market regulation..."

"...The diversity of the opinion expressed in the two events reflected, to a large extent, the differences of opinion regarding the linkages between physical and financial markets, the relative impacts of physical and financial markets on the price of oil and its volatility and the complexity of the different market layers for price discovery and risk transfer, from spot to derivatives...."

Mrt: and the above was just from the beginning of the file. Btw: check panelists. :o)

Edwardo said...

"I find it really rich that there are those who entrust their wealth management to others, and would then bitch and blame about taking a loss should one ensue. If you value it so highly you assign its safekeeping to others, you don’t really value it that highly at all."

Entrusting does not, by definition, equate to engaging in benign neglect and irresponsibility as, presumably, was the case with the majority of investors in Bernie Madoff's Ponzi scheme - or other much larger Ponzi schemes one could name.

One "entrusts" under the condition that one enters into the investor/manager relationship possessed of a certain level of knowledge and sophistication that allows one to choose wisely and monitor well.

I hasten to add that most folks value their physical health very highly, and, yet, we are limited in our ability to make highly informed decisions about complex medical procedures.

matt said...

Even though I am an understander, I have a few questions for FOFOA myself.

What do you think was going on in ANOTHER's head during the dollar rally of 2008 ?

why was ANOTHER's timing off so much ?

sean said...

Just a quick comment to matt - I can't comment for Another but I think that this graph shows the significance of dollar rally of 2008 quite well!
http://goldprice.org/charts/history/gold_all_data_o_usd.png

J said...

"Egypt has issued a ministerial decree immediately banning the export of gold in all its forms, including jewellery and ornaments, until June 30, the official news agency MENA said on Sunday. "This decision, which comes in light of the exceptional circumstances the country is passing through ..., is to preserve the country's wealth until the situation stabilises,"

http://www.zerohedge.com/article/egypt-bans-export-gold-any-form

Wendy said...

Matt this article pretty much sums up your question regarding timing.

http://www.usagold.com/goldenchalkboard/gc_monetary_system.html

Warren said...

I found a smoking gun for evidence of Scrooge McDuck's attendance at the Cheviot conference. Check out the video here:
http://www.cheviot.co.uk/sound-money-conference/presentations/panel-discussion-with-audience-q-and-a

At 3.40 in the video, the presenter asks the audience 'who would like to see a return to using Gold and Silver as money?' to which most of the audience raise their hand. The presenter then inverts the question: 'who would not like to see ... a return to using Gold and Silver as money'. One hand in the audience shoots up suspiciously fast, taking the presenter by surprise. (The identity of the super-fast-hand-raiser is obscured by the crowd, but for me, that's a match!. More power to you Sir!)

costata said...

matt,

I would like to jump in on the timing issue if you don't mind.

Another thought the "wheels were about to fall off" when he spoke out in '97. His reasons for believing this to be the case included:

- The gold price had been driven below the cost of production;

- Technological developments had not produced the substantial increase in gold production anticipated by the Euro Freegold-RPG sponsors

- Asians had gatecrashed the cheap oil for cheap gold deal with the House of Saud and were buying up gold in size;

- The Euro was not ready yet (to step in as a new oil currency);

- Another apparently had reason to believe that the House of Saud was close to demanding gold for their oil (perhaps as a top up payment over the currency component).

A discussion about how the crisis was averted would need to cover a fair bit of ground. I'll leave the points above with you for now. If you want to explore the "how" I'm happy to contribute to that discussion as time permits.

Cheers

matt said...

Thanks Wendy and Costata

I will study those points.

97 was even pre internet bubble, pre LTCM crash, Russian default and right in the middle of the Asian financial crisis.

And now we have interest rates at 0% for years on end. I am truly getting sick of waiting. My dad told me when I was 18 years old, not to buy a house in 1998 because he thought interest rates had to go up soon. I have been waiting for a trend changing event my whole adult life. I have not lived a day on this earth where interest rates where going up.

Now I have substantial bullion holdings and gold mining stocks. As Doug Casey said, if the Fed is successful at creating another bubble, it will probably be in mining stocks. I want to go 100% bullion but I am hedging for another bubble in mining stocks.

Joel said...

A quick question to test the conviction of the bloggers: How many here have been willing to go ahead and pay the penalty and taxes to take early distributions of their IRA's or other retirement plans to convert their retirement cash to physical gold? If currency will be seriously devalued or even worthless in the end, it seems taxes and penalties are irrelevant (you save the taxes and penalties because your portfolio is worthless, lol). Thoughts?

sean said...

Wendy, that's a great link. I don't think I've read it before, or if I have then I didn't understand it at the time (when was it written?)! It helped answer one confusion in my mind about how gold can actually give strength to a currency such as the Euro without actually backing it. The answer given in that text is that in order to obtain gold, competing currencies will be forced "to buy the Euro in order to buy the abundance of gold that now sits in the Eurozone. Having to buy a currency gives strength to that currency, which is a simple supply and demand issue."

If I understand correctly it also seems to be suggesting that it is the CBs that have been actively suppressing the gold price, awaiting the "right time" to release it, when it has become enough of a focal point to work as reserve currency. Meanwhile they are forced to occasionally lift the lid off the boiling pot (of gold price), to keep commodities flowing.

Interestingly, even "non-gold bug" commentators today seem to be coming to somewhat similar conclusions. eg: Soverein man blog(apart from the last unfortunate sentence!). I wonder if this means the flow of wealth is entering the last stage of the inverse pyramid FOFOA has mentioned before, ie: from Fed reserve notes into gold. I guess this would be an indicator that Freegold has appeared on the horizon.

matt said...

Joel

I highly doubt that the people around here have any typical mainstream asset allocation.

Not me anyway.

If buying physical gold is a big gamble to you then you have some reading to do. The amount of cash I have is what worries me, certainly not the amount of gold.

I bought 10 ounces in one day once. It was the last COMEX options expiration day of last summer.

Museice said...

Higher Inflation Is On The Way


"The actual cause of the looming crisis is the same as the cause of the Great Inflation of the 1970’s: a too easy monetary policy that has devalued the dollar by 40% against gold during the past two years.

I choose gold as the reference point for the dollar’s value because it has the remarkable characteristic of maintaining its buying power in terms of other goods and services over long periods of time."

Diamond Jack said...

Hello, thedeadfavi

I was not aware of black gold, thank you for the education. Your comment made me think about my own small pool of black gold. And while very small, it is also very real. Black Gold is defined here as elemental physical gold held outside the official count.

Placer gold is elemental physical gold that has broken away from its lode source perhaps eons ago, finding its way to where-ever one may find it. Is finding gold and putting it away in a mayo jar the same as not finding gold? To everyone but the finder, nothing has changed. Not the stock, not the flow, Gold bead counters the world over haven't a clue, there is no event that changes their data sheets. Only when that jar is taken for refinement, barred, jeweled or stamped with a smiling oligarch are there events that trigger a spreadsheet refresh.

The Mining Law of 1872 grants both citizens and companies the right to explore for hard-rock minerals and establish rights to federal lands without authorization from any governmental agency. These standards of free access are the basis of the Mining Law, which remains the law of the land today. And it is true law, the simple codification of a system developed voluntarily by the miners themselves so that the rush for gold could commence in an orderly fashion,

Many people today gold prospect as a hobby, some have sophisticated equipment At some price they will quit day jobs and make their hobby into a cash cow. And behind them, the unemployed and anyone seeking honest work in the great outdoors. Others might be those who have no other choice. Dig or die-ers. And there is plenty of digging for everyone!

Diamond Jack said...

(Cont)

Returning personnel from the wars will require just the kind of physical labor small scale mining needs to operate. Let the returning waves of adrenaline and , testosterone crash against the hard-rock - giving in return capital to start a new life of peace and production.

Today there is still time to make a mining claim. It costs very little money. At worst you have a nice vacation spot. Perhaps mining claims will be a bubble and you can sell later for a pile of fiat. I don't see where small claims will be stripped away from rightful owners and converted to a communal treasure of some sort. Being branded a defiler and frog - marched from your legal claim is not on par with civil society and without precedence in law, history, or reason.

Instead, let us travel in Mr. Peabody's Way Back Machine and see how thing were and (more importunately) how they will be again...

In all the large diggings, which had been worked for some
time, there were established regulations, which were
faithfully observed. ...When a new placer or gulch was
discovered, the first thing done was to elect officers and
extend the area of order. The result was that in a district
five hundred miles long, and inhabited by 100,000 people,
who had neither government, regular laws, rules, military
protection, not even locks or bolts, and a great part of whom
possessed wealth enough to tempt the vicious and depraved,
there was as much security to life and property as in any
part of the Union, and as small a proportion of crime. The
capacity of a people for self-government was never so triumphantly
illustrated, never, perhaps, was there a
community formed of more unpropitious elements; yet from
all this seeming chaos grew a harmony beyond what the
most sanguine apostle of Progress could have expected.



While some may wince at the thought of positioning oneself leveraged to the phase change itself, the opportunity is too great. I may be wrong and end up throwing away tens of dollars staking my claims. But think carefully before you reject a mining claim as just more paper that will burn come the Fire. Is it really just that, or does this paper claim symbolize and become physical expression of man's capacity for self rule, and therefore as incombustible as any idea. If so, what the miners of yore discovered and practiced is much more valuable than the gold itself.


Quoted from The Voluntaryist Whole Number 41
Bayard Taylor, ELDORADO OR, ADVENTURES IN THE PATH OF
EMPIRE COMPRISING A VOYAGE TO CALIFORNIA..., New York:
George Putnam, l85O,pp. 100-101.

mortymer said...

(1/3) And today´s meal is from the IMF kitchen:

*Article IV of the Fund’s Articles of Agreement: An Overview of the Legal Framework*

Prepared by the Legal Department In consultation with the Policy Development and Review Department
Approved by Sean Hagan ~June 28, 2006

"...2. The present version of Article IV was incorporated into the Articles by the Second Amendment of the Articles of Agreement in 1978. It established a new CODE OF CONDUCT for exchange arrangements in the wake of the COLLAPSE PF THE PAR VALUE SYSTEM. Under the original par value system, a member’s choice as to HOW IT VALUED its currency against the currency of other members was very limited: the value GAD TO be expressed in terms of gold, either directly or through the U.S. dollar. A member’s ability to modify the value of its currency against this common denominator was also limited: beyond a specified limit, a member that changed the par value of its currency without the concurrence of the Fund became ineligible to use the Fund’s resources, and the Fund would concur only if it was satisfied that the change was necessary to correct a “fundamental disequilibrium”. An important purpose of Fund financial assistance was to enable members to maintain the PAR VALUE of their currencies in circumstances where they were subject to balance of payments pressures..."

mortymer said...

(2/3)
"...3. By LEGALIZING a member’s freedom to choose whatever exchange arrangement it wished—including floating—the Second Amendment represented a complete DEPARTURE from the par value system, which had been the central feature of the Articles. While the provisions of the present Article IV continue to reflect the view that a country’s exchange rate policies are a MATTER OF INTERNATIONAL CONCERN, the approach taken is of a fundamentally different nature...."

"First, there is a recognition that a member should not resist an adjustment to its exchange rate if such an adjustment is needed in response to underlying conditions..."

"Second, given the important relationship between a member’s domestic policies and its exchange rate, the stability of the overall system of exchange rates is enhanced by the pursuit of domestic policies that create the underlying conditions for economic and financial stability... "

"Finally, with respect to members’ exchange rate policies, members should avoid pursuing policies that are designed to either interfere with the adjustment process or gain an unfair competitive advantage over other members...."

***
Box 1. Article IV, Section 2 of the Fund’s Articles of Agreement (b) Under an international monetary system of the kind prevailing on January 1, 1976, exchange arrangements may include (i) the maintenance by a member of a VALUE for its currency in terms of the SPECIAL DRAWING RIGHT or ANOTHER DENOMINATOR, OTHER THAN GOLD, selected by the member, or (ii) cooperative arrangements by which members maintain the VALUE of their currencies IN RELATION to the value of the currency or currencies of OTHER MEMBERS, or (iii) other exchange arrangements of a member’s choice.
***

mortymer said...

(3/3)
"...10. Article IV, Section 2 gives members considerable FREEDOM OF CHOICE of their exchange arrangements. Of the types of exchange arrangements that members may choose, Article IV, Section 2 expressly contemplates the pegging of a member’s currency to the SDR, the pegging to another denominator, and “cooperative arrangements under which members maintain the VALUE of their currencies in relation to the value of ANOTHER member’s currency or a group of currencies”. However, the list set forth in Article IV, Section 2 is illustrative rather than exhaustive and it is specifically provided that a member may use “other exchange arrangements of a member’s choice”."

"...11. THE ONLY type of exchange arrangement that is specifically PRECLUDED under Article IV, Section 2 is one that RELIES ON GOLD AS THE DENOMINATOR. This PROHIBITION reflects a principal OBJECTIVE of the Second Amendment, which was TO REDUCE the role of gold in the
international monetary system..."

"...With respect to members’ exchange arrangements, while this term is not specifically defined under the Articles, its use in Article IV, Section 2 confirms that it is intended to include the overall method that a member uses to DETERMINE the VALUE of its CURRENCY against OTHER CURRENCIES (e.g. PEGGING vs. FLOATING). While the Articles confirm that members MAY CHOOSE whichever exchange arrangement they wish (OTHER THAN ONE THAT RELIES ON GOLD AS THE DENOMINATOR), members must exercise this FREEDOM in a manner that is consistent with their OBLIGATIONS under the Articles. First, members must provide an accurate notification to the Fund regarding their exchange arrangements and any changes to those arrangements. Second, in circumstances where a member has actually specified the exchange rate that it will use when implementing its exchange arrangement and this forms part of the member’s notification, the rate specified is subject to members’ obligations regarding their exchange rate policies, discussed above. Finally, a member’s exchange arrangement must be consistent with its general obligation under Article IV “to collaborate with the Fund to assure orderly exchange arrangements”..."

Mrt: Fofoa, could this IMF 2006 one [+ WHAT COUNTRIES SIGNED (available at imf.org)] and the Sri Lanka announcement + India CB statement one get its own post perhaps?

mortymer said...

Since I am withholding to comment, I will be happy if others will. The document is located here:
www.imf.org/external/np/pp/eng/2006/062806.pdf

mortymer said...

[*small correction about imf Article IV - "signed"->repl.->"what is the progress in Article IV consultations" you can see here:
List of Recent Article IV Consultations (View list by Country) http://www.imf.org/external/np/sec/aiv/index.htm#2008]

mortymer said...

http://www.imf.org/external/pubs/ft/bl/rr06.htm
Rules and Regulations of the International Monetary Fund
F--GOLD

F-1. Gold depositories of the Fund shall be established in the United States, the United Kingdom, France, and India. The gold of the Fund shall be held with the depositories designated by the members in whose territories they are located at places agreed with the Fund.

Adopted September 25, 1946, amended November 29, 1956, and April 1, 1978

F-2. The Fund may hold gold under earmark for members.

Adopted April 1, 1978

mortymer said...

http://www.imf.org/external/pubs/ft/sd/index.asp?decision=170-3

Selected Decisions and Selected Documents of the IMF, Thirty- Fourth Issue -- Gold and Currency Subscribed to the Fund and Accounting by Members for Transactions with the Fund
Prepared by the Legal Department of the IMF
As updated as of September 1, 2010


ARTICLE III
Quotas and Subscriptions

GOLD AND CURRENCY SUBSCRIBED TO THE FUND AND ACCOUNTING BY MEMBERS FOR TRANSACTIONS WITH THE FUND

The following principles should be observed by members in reflecting their participation in the Fund in their accounts:

1. Gold and currency subscribed to the Fund are clearly within its unrestricted ownership. They do not belong in any way to the subscriber.

2. Although the accounting practices of a member are primarily its own concern, each member should prepare its accounts in such a way that misconceptions as to the ownership of the gold and currency subscribed to the Fund would be avoided. …

Decision No. 170-3,
May 20, 1947

mortymer said...

http://www.imf.org/external/pubs/ft/sd/index.asp?decision=54-10

Selected Decisions and Selected Documents of the IMF, Thirty- Fourth Issue -- E. Off-Market Transactions in Gold by the Fund
Prepared by the Legal Department of the IMF
As updated as of September 1, 2010

OTHER SELECTED RESOLUTIONS AND RELATED DOCUMENTS

E. Off-Market Transactions in Gold by the Fund

RESOLUTION

Whereas the Executive Board is considering off-market transactions in gold consisting of sales of up to 14 million ounces of fine gold on the basis of prices in the market to cooperating members with repurchase obligations to the Fund falling due, and acceptance of the same amount of gold from those members in payments of their repurchase obligations falling due to the Fund; and

Whereas those off-market transactions will enable the Fund to place an amount of the sales proceeds equivalent to SDR 35 per ounce of fine gold in the General Resources Account and the balance in the Special Disbursement Account for investments for the benefit of the ESAF-HIPC Trust; and

Whereas the Interim Committee has requested the endorsement by the Board of Governors of this approach as a one-time operation of a highly exceptional nature,

Now, therefore, the Board of Governors hereby resolves that:

The off-market transactions of up to 14 million ounces of fine gold by the Fund that are envisaged will be a one-time operation of a highly exceptional nature that is a part of a broader financing package to allow the Fund to contribute to the resolution of the debt problems of the HIPCs at the turn of the millennium and to the continuation of concessional operations to support countries’ efforts to achieve sustained growth and poverty reduction.
Resolution No. 54-10,
September 24, 1999

mortymer said...

http://www.imf.org/external/pubs/ft/sd/index.asp?decision=63-3

ARTICLE XII, SECTION 6
Reserves, Distribution of Net Income, and Investment

PROPOSED AMENDMENT OF THE ARTICLES OF AGREEMENT OF THE INTERNATIONAL MONETARY FUND TO EXPAND THE INVESTMENT AUTHORITY OF THE INTERNATIONAL MONETARY FUND

..."4. A new Article V, Section 12(k) shall be added to the Articles to read as follows:

“(k) Whenever under (c) above the Fund sells gold acquired by it after the date of the second amendment of this Agreement, an amount of the proceeds equivalent to the acquisition price of the gold shall be placed in the General Resources Account, and any excess shall be placed in the Investment Account for use pursuant to the provisions of Article XII, Section 6(f). If any gold acquired by the Fund after the date of the second amendment of this Agreement is sold after April 7, 2008 but prior to the date of entry into force of this provision, then, upon the entry into force of this provision, and notwithstanding the limit set forth in Article XII, Section 6(f)(ii), the Fund shall transfer to the Investment Account from the General Resources Account an amount equal to the proceeds of such sale less (i) the acquisition price of the gold sold, and (ii) any amount of such proceeds in excess of the acquisition price that may have already been transferred to the Investment Account prior to the date of entry into force of this provision.”
Resolution 63-3,
May 5, 2008"

costata said...

Hi matt,

Great line.

"The amount of cash I have is what worries me, certainly not the amount of gold."

Cheers

costata said...

Off topic but IMO very interesting.

The graph linked below puts food prices into a longer term perspective (from around 1910 to 2010).

http://www.rba.gov.au/speeches/2011/images/sp-ag-170211-graph04.gif

Notice how the cheap food era corresponds to the cheap oil and cheap gold period A/FOA explained.

This graph comes from a conference paper delivered by an Assistant Governor of the Reserve Bank of Australia. There are a number of interesting data points in his presentation with global implications.

http://www.rba.gov.au/speeches/2011/sp-ag-170211.html

h/t Macrobusiness.com.au

mysticmeg said...

Never posted before, though I am an avid follower. FOFOA in the interest of simplicity have a read of this quote:

"Look, this stuff is pretty simple-

the currency is based on debt. ALL debt's "value" is assessed on its ability to be repaid plus interest. The money IS debt and it's clear that the future cannot repay today's debts, the fundamental nature of our monetary system is what is imperiled. It's not a matter of this currency or that currency, it is aggregate confidence in the growth system and the future's ability to repay today's debt/money."

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

First some disclosure: 95% of my wealth is in physical gold which I consider to be the only real money, and some speculative investments in silver which I believe is an undervalued and unique commodity. I measure my wealth in grams not dollars.

With greatest respects to FOFA for educating us, he and others espouse that smart gold holders sit quietly for generations, while not believing that holders of black gold do exactly the same?

I agree there is a lot of fiction and few publicly available hard facts about black gold. If the hard undisputable evidence were publicly available it would no longer be black gold.

Long before modern leach mining enabled us to recover grams per ton economically, ancient miners were picking the low hanging fruit (rich lodes) for many thousands of years. Do some research, do the math. (Pause for thought).

As governments rise then fall, sometimes their treasury gold goes black.

costata said...

FGA,

In antiquity when metal was money the governments and/or the monarchs controlled the source of the metal.

The amounts of various types of metal extracted from mines over at least two thousand years have been meticulously documented. The metals were either money, strategic military assets or both.

It's a good story, nothing more.

Blondie said...

@ Mortymer,

From my understanding of the IMF material you have posted above, it appears that the IMF has, since the late '90s, been making a concerted and consistent effort to sign all sovereign nations to an agreement (Article IV) stipulating how they (the sovereign nation) can and will internationally value their currency in relation to all other currencies, whether by peg or float, and what shall be used as the denominator.

The pertinent point here being that while the SDR is the suggested denominator, it seems that any reasonable alternative will be entertained, except gold.

The IMF's efforts on this issue seem to be to get sovereign nations to sign Article IV to bring the international monetary system into legal harmony with the IMF's Second Amendment of the Articles of Agreement 1978, of which they state:

"This prohibition [of gold as denominator] reflects a principal objective of the Second Amendment, which was to reduce the role of gold in the international monetary system..."

This can only be seen to be a legal attempt on the part of the IMF to stymie any transition to the return of gold as the monetary reference point.

This document you linked above shows this is a matter of no small import to the IMF: they have had hundreds of meetings with the majority of sovereign nations for over a decade.

Demonstrating an odd double standard however, the IMF's Article III makes it known in an unambiguous fashion that all gold subscribed to it by its members is under absolutely no future claim by said members: it belongs to the IMF.
Surely this 1947 Article needs amending?

Why does the IMF hold any gold, if it has no monetary role?

This seems to undermine the preclusion of gold as a monetary "denominator", does it not, when the International Monetary Fund holds reserves?



Then a 1999 resolution to dishoard up to 14 million fine oz, at market price, to "cooperating members with repurchase obligations to the Fund falling due, and acceptance of the same amount of gold from those members in payments of their repurchase obligations falling due to the Fund".
"cooperating"?
Who is selling to whom in this cryptically worded passage?

mortymer said...

To follow up on (1/2):

http://www.imf.org/external/np/sec/memdir/members.htm

"IMF Members' Quotas and Voting Power, and IMF Board of Governors"

Notes:
*1At the present time all 187 MEMBERS are participants in the Special Drawing Rights Department.

*2Voting power varies on certain matters pertaining to the General Department with use of the Fund's resources in that Department.

*3These countries have accepted the obligations of Article VIII, Sections 2, 3, and 4 of the Articles of Agreement.

mortymer said...

To follow up on (2/2):

So, lets again have a look into *3:

< Now we know what is the - "Article VIII, Sections 2, 3, and 4 of the Articles of Agreement" >

http://www.imf.org/external/pubs/ft/aa/aa08.htm

mortymer said...

And then lets have a look into what is the SDR:

http://www.imf.org/external/np/exr/facts/sdr.htm

The role of the SDR

"The SDR was created by the IMF in 1969 to support the Bretton Woods fixed exchange rate system. A country participating in this system needed official reserves—government or central bank holdings of gold and widely accepted foreign currencies—that could be used to purchase the domestic currency in foreign exchange markets, as required to maintain its exchange rate. But the international supply of two key reserve assets—gold and the U.S. dollar—proved INADEQUATE for supporting the EXPANSION of world trade and financial development that was taking place. Therefore, the international community decided to create a new international RESERVE ASSET under the auspices of the IMF.

However, only a few years later, the Bretton Woods system collapsed and the major currencies shifted to a floating exchange rate regime. In addition, the growth in international capital markets facilitated borrowing by creditworthy governments. Both of these developments lessened the need for SDRs.

The SDR is NEITHER a currency, nor a CLAIM on the IMF. Rather, it is a POTENTIAL CLAIM on the freely usable CURRENCIES of IMF members. Holders of SDRs can obtain these currencies in exchange for their SDRs in two ways: first, through the arrangement of voluntary exchanges between members; and second, by the IMF designating members with strong external positions to purchase SDRs from members with weak external positions. In addition to its role as a SUPPLEMENTARY RESERVE ASSET, the SDR, serves as the UNIT OF ACCOUNT of the IMF and some other international organizations..."

mortymer said...

So, how do I see it?...

Let´s read between the lines:

*If the SDR is just a supplementary asset, what is THE RESERVE ASSET?*

mortymer said...

So and is this part is "agreed on", "implemented", "hope", "road plan" or is this just a wish list item?

http://www.imf.org/external/pubs/ft/aa/aa08.htm

"Section 7. Obligation to collaborate regarding policies on reserve assets

Each member undertakes to collaborate with the Fund and with other members in order to ENSURE that the policies of the member WITH RESPECT TO reserve assets shall be consistent with the OBJECTIVES of PROMOTING better international surveillance of international LIQUIDITY and MAKING the special drawing right the PRINCIPAL RESERVE ASSET in the international monetary system."

@ IMF, Sovereign States: Why are you making me so confused? So, I ask again, once again, as simple as it can only get:

*WHAT IS THE RESERVE ASSET?*

mortymer said...

And here we go, IMF offers one possibility, or not?

(As mentioned above in *3: those obligations are agreed 2; 3; 4; but what about the "Section 5"? Did CBs followed on this one? There is no info I think about this one.)

http://www.imf.org/external/pubs/ft/aa/aa08.htm

Section 5. Furnishing of information

"(a) The Fund may require members to furnish it with such information as it deems necessary for its activities, including, as the minimum necessary for the effective discharge of the Fund's duties, national data on the following matters:

(i)

official holdings at home and abroad of (1) GOLD, (2) foreign exchange;

(ii)

holdings at home and abroad by banking and financial agencies, other than official agencies, of (1) GOLD, (2) foreign exchange;

(iii)

production of GOLD;

(iv)

GOLD exports and imports according to countries of destination and origin;..."

=> From above I would make a weak claim that states and their CBs are still in a certain way sovereign and a conclusion that we should follow IN THE STEPS OF THE GIANTS: "Get The reserve asset into your private ownership."

FreeGoldAdvocate said...

I agree that gold will become freegold when the fractional paper gold scam is defeated. I agree that in theory a way to defeat the scam is to buy and hold all the physical gold. I recognize however that there is too much physical gold out there for this plan to work in a reasonable timeframe. It takes 500 times more currency to buy and hold all the physical gold than it would take to buy and hold all the physical silver. It is much easier and cheaper to defeat the paper silver scam. I am hopeful that once the fractional paper silver scam is defeated, the paper gold scam will also fall.

FreeGoldAdvocate said...

Also the fractional paper gold (and silver) scam can be broken more easily if the CFTC implements position limits. They are currently taking comments from the public on this issue.

PLEASE take a moment to submit your comment. To defeat them we need to comment/implement something like this:

"Fair and appropriate position limits in silver should be NO MORE than 1,500 contracts or 7.5M ounces. The current proposed limit of over 5,000 contracts WILL NOT SOLVE THE PROBLEM OF MANIPULATION IN SILVER! The 1,500 contract limit is the correct amount and is STILL greater than any other current concentration in physical commodities traded on the COMEX."

And here is the link to the form:

http://comments.cftc.gov/PublicComments/CommentForm.aspx?id=965

It will take less than a minute and it WILL make a HUGE difference. The CFTC WANTS to implement the 1,500 contract limit BUT they can only do it with the support of WE THE PEOPLE!

One more thing...

I have heard that a few of the bigger "mainstream silver analysts" commented that it won't make a difference and the COMEX will stay rigged forever so why bother.

THIS DOES MATTER AND IT WILL MAKE A HUGE DIFFERENCE!

This is just one of many battles going on behind the scenes so PLEASE join the cause.

Remember, when we break silver manipulation, we also free gold.

Please feel free to junk away at these comments, but this is my opinion. Your comments are welcome.

costata said...

Blondie,

Agreed.

IMF dinosaur meet meteorite. Meteorite meet IMF.

IMO mortymer, you are putting an excessive amount of your energies into this area.

Cheers

Jeff said...

FGA,

On ancient gold: "What we are finding, in the form of molecular fragments at battle sights, leads us to believe that most wars were fought with most wealth possessions worn or in pockets. Gold included. To make a long story short, we now believe that a great deal of early gold was scattered on trails, in the sea and during every war. In fact, rubbed, scraped and powdered to the four winds." (FOA 04/18/01)

On silver:

The political Western stand is "Give the citizens silver and let that price rise, but, keep the gold low and we purchace it for our well being". It would seem that those of the "democratic power" want to hold the gold for "insurance" (as Mr. TYoung rightly does) and never allow it's good effects to pass to the "little person", as you say...History will be written as this: "we now know that in times of major financial change, real gold increases in value and holds that value far greater than any paper gold derivative" also " no other form of commodity (silver and platinum included), even food, was valued as gold". Even in times of past war, soldiers and citizens were found starving for food, but still, gold was found in the pockets, not food!

ANOTHER (9/21/98)

Jeff said...

(Financial Times) -- Italian banks go for gold in move to transform core capital ratios
Italian banks, which by a quirk of law are shareholders in the country’s central bank, are lobbying to have their stakes in the Bank of Italy marked-to-market on the back of surging gold prices in an attempt to ease regulatory pressure on them to raise capital in advance of this summer’s stress tests.

Senior bankers say taking into account the surge in gold prices the Bank of Italy could have a mark-to-market value of about €30 billion.

The move would mark a further remonetisation of gold in the world financial and monetary systems and may be a prelude to similar actions (revaluation of gold reserves or possible devaluation of currencies versus gold reserves) being done by other central banks.

Michael H said...

@costata, mortymer:

"IMO mortymer, you are putting an excessive amount of your energies into this area."

I disagree! I'm glad someone is looking at what is coming straight from the horse's mouth. If anything, I sincerely hope that someone can summarize these documents and keep the links/originals as references and footnotes.

@FGA:

I don't think anyone would disagree with the statement that there is gold that has been hidden away from the financial system. The real question is: does it matter? I believe it does not, for two reasons:

First, the quantity of 'black gold' is most likely within the confidence interval of the known above-ground gold reserves. In other words, if the range of gold reserves is 130,000-190,000 tons of gold above-ground, and there are 20,000 tons of 'black gold', then the black gold doesn't really matter because it is within our band of uncertainty.

Second, if there is black gold out there, why would it start mattering now, when it has been invisible for so long? What would change its behavior?

Thank you FOFOA for putting this post together.

@Mailon,

Regarding your first post:

Welcome to FOFOA's blog. If that was you being sympathetic to the ideas here, then I would hate to read your adversarial comments. If you would like your criticisms to be taken seriously, you might try to not insult the author with an 'EPIC FAIL' to start your comment.

Regarding the simplification of Freegold:

Short, concise definitions are all well and good for people who are already familiar with a concept. Such definitions require very precise language. Someone new to the concept invariably misses the nuances of the words and so misses the point of the concept.

For an introduction to a concept, what is needed is not a 'short' definition, but one that is in 'layman's terms'. FOFOA's entire writings falls into the latter category.

Jeff said...

LONDON, March 1 (Reuters) - Holdings of the world's largest gold-backed exchange-traded fund, the SPDR Gold Trust (GLD), fell for a fifth consecutive month in February, data from the New York-based fund showed, the longest run of outflows since the trust's inception.

The hefty decline seen in January slackened, however. The fund's gold holdings dropped by 520,580 ounces last month to 38.934 million ounces, compared to a 1.722 million ounce fall in January, the second largest outflow in its history. [GOL/SPDR]

FreeGoldAdvocate said...

I feel the need to elaborate on the following statement:

“It takes 500 times more currency to buy and hold all the physical gold than it would take to buy and hold all the physical silver.”

This appears outrageous and is the extreme case. It is more accurately stated as follows:

“It takes between 50 and 500 times more currency to buy and hold all the physical gold than it would take to buy and hold all the physical silver.” The amount depends on how much black gold falls into the hands of fractional paper gold dealers. I hope for the best but feel we should at least be aware of the potential downside.

I do not know if the buyers will be “strong hands”, “weak hands”, or “fractional paper hands” who will resell 100 times more than they purchased. I agree with FOFA that the smartest move for the blackgold seller is to not sell.

Edwardo said...

"Italian banks, which by a quirk of law are shareholders in the country’s central bank."

Quirk of law my Aunt Minnie.

Blondie said...

The IMF are the ultimate banksters, and their legal maneuvering and obvious double-standard regarding Gold, as uncovered by Mortymer's research, can be neatly read into this quote from Stewart Thomson:

" Remember that the banksters want to be the ones holding your gold at high noon on Friday after terrifying you out of it, between today and high noon Friday. Buy any and all weakness between now and then, regardless of any bear analysis you read, so you are standing with your Golden Gun in hand at high noon on Friday, as the market victor!"

gideonmandoma said...

FOFOA,
What do you think will happen after RPG occurs? I theorize that after a short while the world's problems will dissipate, and then soon enough, a huge stocks bull market will begin. In EW terms, it will be grand super cycle 5. At the same time, gold would undergo it's own super cycle wave 4 correction, which should be not nearly as deep as the 1980/90s correction, but still fairly deep, maybe 50% or so even. This would mean that the appropriate thing to do after gold's revaluation would be to soon sell some gold and buy stocks. Do you think this sounds reasonable?

enough said...

No draining of SLV

SINGAPORE, March 2 (Reuters) - Holdings in the world's
largest silver-backed exchange-traded fund, iShares Silver Trust
rose to 10,693.68 tonnes by March 1, their highest since
Jan. 14, from 10,666.35 tonnes on Feb 24.

matt said...

@ Freegoldadvocate

I agree with your comments, that is why I don't have a problem with guys like Max Kieser.

I know FOFOA himself might take issue with some of these things but it has been a long wait. Too long of wait. We need to break the COMEX

Wendy said...

sean said...
Wendy, that's a great link. I don't think I've read it before, or if I have then I didn't understand it at the time (when was it written?)!

sean, I agree it's a great article. It suggests answers to alot of questions particularly in terms of timing. I don't know when it was written, I posed the same question myself a couple of weeks ago. I believe FOFOA linked it a couple of posts ago, but I don't remember for sure.

@mortymer

keep at it, I am enjoying your discoveries and yours and blondie's critique ;)

Robert Leroy Parker said...

Heres a video I think people may want to watch. Ned Naylor-Leyland and James Turk talking about freegold, I think...

http://www.goldmoney.com/video/naylor-leyland-turk.html?gmrefcode=dollarc

FOFOA,

I still would love to get your take on import certificates.

mortymer said...

Well, one thing to note is that pegging currencies STRAIGHT on some level to gold should NOT BE allowed (as is in Article IV) but MTM of reserves is allowed as it is not specified. IMO the issue is really the reserve asset. In one moment it is gold in another it is not. It is funny how they walk around it.
Btw, there was one interesting discovery concerning new form of sulfur. Could be important for mining. (Géosciences Environnement Toulouse, CNRS)
~Gold, educate yourself

mortymer said...

Thinking aloud :o)

* Concerning The Denominator...
-> IMO it is now - at these gold price levels - not possible/or not yet/"hard to" to change the denominator of currencies to gold/wealth reserve on MTM.
-> Imagine the mess it could initiate during the going up. Gold has to stabilize first on much higher level if this is where we are heading.
-> This could go along the Another´s note about bankers supporting at some point the rising price.

* Concerning SDRs...
-> On the other hand I also see a possible attempt for some kind of "free-SDR" a floating price of SDR (note Sarkosy´s surprising comment from few weeks ago).
-> See back above this part: "The SDR is neither a currency, nor a claim on the IMF. Rather, it is a potential claim on the FREELY usable CURRENCIES of IMF members. Holders of SDRs can obtain these currencies in exchange for their SDRs in two ways: first, through the arrangement of VOLUNTARY exchanges between members; and second, by the IMF DESIGNATING members with STRONG external positions to purchase SDRs from members with WEAK external positions."
-> "VOLUNTARY + DESIGNATING" = this could be aiming to past when France and USA in gold standard kept their currencies too long too low. To keep its price as is, keeping and controlling the demand side perhaps? :o)
-> "STRONG + WEAK" = In order not to create more SDRs and to keep SDR circulating. Who is to decide who has strong and who has weak position?
=> It all breaks down into how is SDR priced? By decree or by market? To confirm how it is one has to look first into how is derived the price of SDR and how it will be affected when new issuance will be agreed by members.

* Back to: Concerning reserve assets... IMO The SDR could work well on short to medium term for liquidity purposes (Like some kind of standardized bilateral swap agreements?) to support currencies to rise/decline smoothly (so there is some buyer) but it can not fulfill too many functions at the same time as it seems IMF wishes.
-> As we already know unit of account and saving medium are splitting before our own eyes. There could be only one reserve asset, right?
-------------
Underlined, summarized:

So from above, TO ME the SDR is not viable and could play only some complementary role. Freegold is more elegant, simple, easy to maintain solution. A result of, not an aim to go. :o)

And about IMF? It must either find itself in the new world or it will be killed by its members canceling their subscriptions for better solution :o)

[Please correct me somebody, FOFOA?, this is just "on the envelop thinking", not a statement]

mortymer said...

Phases of Secret Gold Policy

http://www.financialsense.com/contributors/dimitri-speck/phases-of-secret-gold-policy

mortymer said...

Today´s continuing on the IMF saga. Yesterday we looked into IMF kitchen, lets have look today into some of its other details (OLDER DOC WITH SOME UPDATES):

(1/3)
Article V - Operations and Transactions of the Fund

http://www.imf.org/external/pubs/ft/aa/aa05.htm#11

"...Section 11. Maintenance of value

(a) The VALUE of the CURRENCIES of members held in the General Resources Account shall be maintained in terms of the SPECIAL DRAWING RIGHT in accordance with exchange rates under Article XIX, Section 7(a)..."

[Mrt: => so, let the denominator be SDR. Nothing new so far.]

"...Section 12. Other operations and transactions

(a) The Fund shall be guided in ALL its policies and decisions under this Section by the OBJECTIVES set forth in Article VIII, SECTION 7 and by the objective of AVOIDING the MANAGEMENT of the PRICE, or the establishment of a FIXED PRICE, IN THE GOLD MARKET.

mortymer said...

(2/3)
(b) Decisions of the Fund to engage in operations or transactions under (c), (d), and (e) below shall be made by an eighty-five percent majority of the total voting power.

(c) The Fund may SELL GOLD for the currency of any member after consulting the member for whose currency the gold is sold, provided that the Fund's holdings of a member's currency held in the General Resources Account shall not be increased by the sale above the level at which they would be subject to charges under Section 8(b)(ii) of this Article without the concurrence of the member, and provided that, at the request of the member, the Fund at the time of sale shall exchange for the currency of another member such part of the currency received as would prevent such an increase. The exchange of a currency for the currency of another member shall be made after consultation with that member, and shall not increase the Fund's holdings of that member's currency above the level at which they would be subject to charges under Section 8(b)(ii) of this Article. The Fund shall adopt policies and procedures with regard to exchanges that take into account the principles applied under Section 7(i) of this Article. Sales under this provision to a member shall be at a price agreed for each transaction on the basis of prices in the market.

(d) The Fund MAY ACCEPT payments from a member IN GOLD instead of special drawing rights or currency in any operations or transactions under this Agreement. Payments to the Fund under this provision shall be AT A PRICE AGREED for each operation or transaction ON THE BASIS of prices in the MARKET.

mortymer said...

(3/3)
[Mrt: It is interesting that selling and accepting gold is not considered management of price, perhaps because it is not direct one? Oh, those double standards.]

(e) The Fund may SELL GOLD held by it on the date of the second amendment of this Agreement to those members that were members on August 31, 1975 and that agree to buy it, in proportion to their quotas on that date. If the Fund intends to sell gold under (c) above for the purpose of (f)(ii) below, it may sell to each developing member that agrees to buy it that portion of the gold which, if sold under (c) above, would have produced the excess that could have been distributed to it under (f)(iii) below. The gold that would be sold under this provision to a member that has been declared ineligible to use the general resources of the Fund under Section 5 of this Article shall be sold to it when the ineligibility ceases, unless the Fund decides to make the sale sooner. The sale of gold to a member under this subsection (e) shall be made in exchange for its currency and at a price equivalent at the time of sale to one special drawing right per 0.888 671 gram of fine gold.

(f) Whenever under (c) above the Fund sells gold held by it on the date of the second amendment of this Agreement, an amount of the proceeds equivalent at the time of sale to one special drawing right per 0.888 671 gram of fine gold shall be placed in the General Resources Account and, except as the Fund may decide otherwise under (g) below, any excess shall be held in the Special Disbursement Account. The assets held in the Special Disbursement Account shall be held separately from the other accounts of the General Department, and may be used at any time:

[Mrt: It is interesting that IMF tries to avoid and manage "the establishment of a FIXED PRICE, IN THE GOLD MARKET." but then It quotes selling price of SDR in grams]
...

(k) Whenever under (c) above the Fund sells gold acquired by it after the date of the second amendment of this Agreement, an amount of the proceeds equivalent to the acquisition price of the gold shall be placed in the General Resources Account, and any excess shall be placed in the Investment Account for use pursuant to the provisions of Article XII, Section 6(f). If any gold acquired by the Fund after the date of the second amendment of this Agreement is sold after April 7, 2008 but prior to the date of entry into force of this provision, then, upon the entry into force of this provision, and notwithstanding the limit set forth in Article XII, Section 6(f)(ii), the Fund shall transfer to the Investment Account from the General Resources Account an amount equal to the proceeds of such sale less (i) the acquisition price of the gold sold, and (ii) any amount of such proceeds in excess of the acquisition price that may have already been transferred to the Investment Account prior to the date of entry into force of this provision."

mortymer said...

[Mrt: This is the main reason I do not like IMF.]

http://www.imf.org/external/pubs/ft/aa/aa09.htm

Article IX - Status, Immunities, and Privileges

Section 5. Immunity of archives

The archives of the Fund shall be inviolable.

http://www.imf.org/external/np/exr/facts/glance.htm

Transparency: In 2009, over 90 percent of Article IV and program-related staff reports and policy papers were published

[Mrt: So those highly important documents were kept in secret until 2009? Whoah! After quite an interesting discoveries we made here lets just imagine what could be in those 10% of Article IV + assorted unpublished material, notes, what is in another unpublished Articles. Or just where we would be if those issues were publicly known a bit sooner.]

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

As reinforcement to A/FOA/FOFOA judgments this Thunder Road report on GATA’s site is underpinning those opinions. Well worth the read. Couple of snips below:


Gresham’s Law Squared – gearing up for Game Over

It’s getting serious, Gresham’s Law is kicking in and this isn’t any “run-of-the-mill” Gresham’s Law either – it’s “Gresham’s Law Squared”. Not only is there huge
hoarding of gold and silver, but it is being compounded by the simultaneous transformation of the gold and silver markets themselves. Having been dominated by paper claims to bullion, all that matters now is ownership of the physical etal itself. The price of gold and silver on your
Bloomberg screen is actually a HYBRID price of physical
bullion and a larger amount of “paper” bullion, e.g.
unallocated gold and silver, exchange traded futures, OTC
derivatives and some ETFs. The paper bullion price and the
metal price are still the same, but this market structure
(which had successfully channeled much of the demand away from physical metal) is now breaking down.

When the screen price accurately reflects the prices of physical gold and silver per se, they will need to be FAR higher than you see today. Right now, the frontline in the battle between “real” money and paper currency is in the silver market, but most remain blissfully unaware of the
significance of what is taking place. The world’s financial
system, as currently configured, is falling apart.

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

As reinforcement to A/FOA/FOFOA judgments this Thunder Road report on GATA’s site is underpinning those opinions. Well worth the read. Couple of snips below:


Gresham’s Law Squared – gearing up for Game Over

It’s getting serious, Gresham’s Law is kicking in and this isn’t any “run-of-the-mill” Gresham’s Law either – it’s “Gresham’s Law Squared”. Not only is there huge
hoarding of gold and silver, but it is being compounded by the simultaneous transformation of the gold and silver markets themselves. Having been dominated by paper claims to bullion, all that matters now is ownership of the physical etal itself. The price of gold and silver on your
Bloomberg screen is actually a HYBRID price of physical
bullion and a larger amount of “paper” bullion, e.g.
unallocated gold and silver, exchange traded futures, OTC
derivatives and some ETFs. The paper bullion price and the
metal price are still the same, but this market structure
(which had successfully channeled much of the demand away from physical metal) is now breaking down.

When the screen price accurately reflects the prices of physical gold and silver per se, they will need to be FAR higher than you see today. Right now, the frontline in the battle between “real” money and paper currency is in the silver market, but most remain blissfully unaware of the
significance of what is taking place. The world’s financial
system, as currently configured, is falling apart.

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

Sorry, forget the link.

http://www.gata.org/files/ThunderRoadReport-02-24-2011.pdf


Buy. Physical. Yesterday.

Blondie said...

@ Greyfox,

You noticed that Mylchreest had only one unattributed quote in his entire report?

He did cite that he regarded the quote to be "profound wisdom", and it was of course originally written by FOFOA in Just Another Hyperinflation Post 3.

So he reveals himself as a BpA.

Blondie said...

As a general observation, many commenters are reposting links and asking the same questions as those further up the same thread, demonstrating that they have not read the thread.

This should be the least one does before posting their own comments, shouldn't it?

mortymer said...

Interesting look at 1933 FDR event:

"FDR’s 1933 Gold Confiscation was a Bailout of the Federal Reserve Bank"

http://www.moonlightmint.com/bailout.htm

radix46 said...

One thing that has been troubling me about freegold lately....

Essentially it rests on the history of a series of massive conspiracies - oil for gold and the two-tier gold price being huge ones. How have these conspiracies gone decades without becoming common knowledge?

ad said...

There is a definite 2 tier system for gold; monetary and non monetary. From a recent paper I have been reading written in about ’68.

In the gold crisis of last March the
world took a step away from gold in setting
up a two-price system for gold. Monetary gold
is still traded among central banks at a fixed
price of $35 an ounce, and this monetary gold
is segregated from the private market where
the price is free to fluctuate.


From the EU website there is this on monetary gold:

Monetary gold (F.11)
5.26 . Definition:
The sub-category monetary gold (F.11) consists of all transactions in monetary gold (AF.11) that is gold held as a component of foreign reserves by monetary authorities or by others who are subject to the effective control of the authorities.
5.27 . The monetary authorities sector, which is based on a functional concept, consists of the sub-sector the central bank (S.121) and central government institutions, which carry out operations usually attributed to the central bank. Such operations include the issue of currency, maintenance and management of international reserves and the operation of exchange stabilisation funds.
Therefore, gold can normally be a financial asset only for the central bank or central government. However, in some circumstances, other financial corporations may hold title to gold that can only be sold with the specific consent of the monetary authorities. In such restricted circumstances, the concept of effective control can be applied to the gold holdings of financial corporations other than the central bank.
5.28 . Monetary gold normally takes the form of bars with a purity of at least 995/1000.
5.29 . Transactions in monetary gold consist predominantly of sales and purchases of monetary gold among monetary authorities. Purchases of monetary gold are recorded in the financial accounts of the domestic monetary authorities as increases in financial assets. The counterpart entries are decreases in financial assets of the rest of the world.
5.30 . Transactions in non-monetary gold, that is in gold other than monetary gold, are treated as acquisitions less disposals of valuables (if the sole purpose is to provide a store of wealth) and otherwise as final or intermediate consumption and/or change in inventories. Transactions in non-monetary gold include transactions by the monetary authorities in gold that is not a component of their foreign reserves.
5.31 . If monetary authorities add non-monetary gold to their holdings of monetary gold or release monetary gold from their holdings for non-monetary purposes, they are deemed to have monetised or demonetised gold, respectively. Monetisation or demonetisation of gold does not give rise to entries in the financial accounts; instead, the change in balance sheet positions is accounted for by entries in the other changes in the volume of assets account as a reclassification, i.e. the reclassification of gold as valuables (AN.13) to monetary gold (AF.11) (see paragraph 6.32.). Demonetisation of gold is recorded symmetrically.
5.32 . Deposits, securities and loans denominated in gold are treated as financial assets other than monetary gold and are classified along with similar financial assets in foreign currency in the appropriate category.
Non-monetary gold swaps, that is arrangements involving the temporary exchange of non-monetary gold for deposits, are treated as collateralized loans (see paragraph 5.81. e).

Midnight Gardener said...

FOFOA asked at the end of this blog post, "So imagine, if you will, a single individual who controls an amount of gold equal to, but separate from, the known stockpile. Mr. X has 160,000 tonnes, and the rest of the world has another 160,000 tonnes. Mr. X is the de facto "King of the World." From a game theory perspective, what would be Mr. X's best move, at any given time in history, with his gold?"

I have read through all the comments and do not recall a response to this question. IMHO, be right and sit tight!

Blondie said...

@ Midnight Gardener,

I believe the question was rhetorical.

Tyler said...

Hello everyone,

Apologies for my ignorance. I came across this website and am intrigued by the idea. It seems to be simple but complex at the same time, and I'm having a little trouble following everything from the beginning.

If someone wouldn't mind posting a link to the place where I could get started that would be much appreciated. I looked at the first post but it seemed even there wasn't really the right place to begin.

Thank you!

Wendy said...

Tyler,

If you look at the links on the right hand side, I would suggest the first 3 (Another, FOA, Trail guide), that is prepatory for the beginning of FOFOA's blog.

It's a huge amount of reading ....

The short cut would be to start at the beginning of FOFOA's blog and read all the blogs, in addition to all the comments.

That alone is a huge volume of work. Good luck, I'm afraid I can't offer much in the way of a fast track.

As you read you will come to understand when to just scroll past some comments versus those worth considering at length.

costata said...

For US hyper-inflation and China watchers:

http://www.zerohedge.com/article/china-moves-making-renminbi-reserve-currency

China "Attacks The Dollar" - Moves To Further Cement Renminbi Reserve Currency Status

Personally I don't buy the line that China is seeking "reserve" status for their currency in order to replace the US$. It would be self-defeating in the end, as it has been for the USA's economy. This move appears to be aimed at developing the Yuan/Renminbi's role as an international trade currency.

FWIW I consider this move as the natural progression from the currency swaps with trade partners. It could also be seen as legitimising the use of Yuan in neighbouring countries as an alternative "hard" currency where the local currency is not sound.

So this development should expand use of China's currency in trade and heralds a further significant reduction in the use of the US$ in international trade. To explore the implications of this issue it might be helpful to review FOFOA's posts "Dilemma" and "Dilemma 2 - Homeless Dollars" from November, 2010.

This also strengthen's the theory that the hyper-inflation, which many here believe is coming to the USA, will be triggered exogenously (rather than by domestic forces and events). It is also a further development in a progression that points to a high probability of a free float of the Chinese currency. In the short term it could also help to alleviate inflationary pressures in China caused by over issuing of their currency.

mortymer said...

@ ad: Great find with huge implications! Congratulations. Do you remember what I posted above?

http://www.imf.org/external/pubs/ft/bl/rr06.htm

"F--GOLD
F-1. Gold depositories of the Fund... "

[Mrt:
*So here we have a cross reference about classification of the MONETIZED GOLD held on those locations.
*As I said before I have a feeling it all makes sense now. Next London pool to get busted? :o)
*Funny and I do not like to play puzzles, can you believe? :o).
*Does "F" mean "financial" perhaps?]

~Gold, educate yourself!

mortymer said...

Today´s IMF dessert:
About "Post-Second Amendment Gold"

http://www.imf.org/external/np/pp/eng/2008/040908b.pdf

(1/2)
"...Establishing an Endowment: The Committee recommended that an endowment
funded by the profits from the sale of a strictly limited portion of the Fund’s gold holdings be
established, with the objective of generating income while preserving the long-term real
value of these resources. Consistent with this recommendation, there is broad support within
the Executive Board for the sale of the 403 metric tons of gold acquired by the Fund after the
date of the Second Amendment of the Articles of Agreement (“post-Second Amendment
gold”). While no decision has yet been taken to sell post-Second Amendment gold, all
Executive Directors have indicated either that they are ready to vote in favor of such a
decision, or that they will seek approval from their domestic legislature to enable them to
vote in favor of such a decision. With respect to the modalities for future gold sales, the
Executive Board has reaffirmed the long-standing principle that the Fund has a systemic
responsibility to avoid causing disruptions that would adversely impact gold holders and gold
producers, as well as the functioning of the gold market. To that end, the Executive Board
has reached agreement on a number of guidelines to govern the envisaged gold sales.2
---
1 Report to the Managing Director by the Committee of Eminent Persons on the Sustainable Long-Term
Financing of the Fund, http://www.imf.org/external/np/oth/2007/013107.pdf.
----
2 Specifically, it has been agreed that: (i) sales should be strictly limited to the current stock of post-Second
Amendment gold; (ii) the Fund’s sales should not add to the announced volume of sales from official sources;
(iii) the scope for sales of gold to one or more official holders should be explored, given the advantages of this
approach; (iv) absent sufficient interest from other official holders to purchase gold directly from the Fund,
phased on-market sales would represent the most appropriate modality for gold sales; and (v) gold sales
---
Finally, and consistent with the recommendations of the Committee, the Executive Board has
agreed that all profits arising from sales of post-Second Amendment gold should be placed in
the Investment Account and, taking advantage of the Fund’s expanded investment authority,
invested in an endowment with the objective of generating investment returns to contribute to
the Fund’s income while preserving the long-term real value of these resources. As is
described in Part II, the proposed amendment is being designed to ensure that all profits from
such sales would be transferred to the Investment Account...."

mortymer said...

(2/2)
"...Accordingly, if the Fund were to sell GOLD at a time when its RESERVES continue to be lower than their level at end-April 2006, a portion of the profits would need to be retained in the General Resources Account to build up RESERVES, and transfers to the Investment Account could only take place when—and to the extent that—reserves exceed the end-April 2006 level..."

[Mrt1: Interesting that IMF keeps/MAINTAINS and calls what is what correctly here: "gold=reserves; gold reserves"]

[Mrt2: See above my one previous comment about:
..."(a) The Fund shall be guided in ALL its policies and decisions under this Section by the OBJECTIVES set forth in Article VIII, SECTION 7 and by the objective of AVOIDING the MANAGEMENT of the PRICE, or the establishment of a FIXED PRICE, IN THE GOLD MARKET."...
-> Buying and selling - "de/monetizing" to the market is not breaking the above rule?]

Bron said...

Consider this quote from http://londonbanker.blogspot.com/2011/03/insurance-and-banking-risk-resiliency.html in regards to bullion banking:

"Banks undertake risks on their books that they can only cover so long as they continue to have access to liquidity (funding, deposits, repos or central bank support). Bank capital is never enough to ensure performance without market liquidity for reserve assets. Banks are generally much less cautious about taking on risk, rely overmuch on incomplete models to price risk, and manage capital to optimise returns rather than ensure survival."

Blondie said...

@Mortymer,

re: "official holders" - of what? Financial gold?
Does this mean give the original subscribers/suppliers of said gold first option?

These official holders cannot have been interested (in this form of transaction at least), as the entire 403mt was sold in "phased on-market sales", the "most appropriate modality for gold sales".

IMF gold sales, like BIS gold "swaps", cannot be taken at face value, due to their incredible opacity.

mortymer said...

Ok, Blondie, good point, to be honest this time today I am busy and I am reading meanwhile doing something else. Was not thinking, need to re-read once few times :o)
There is still quite a fog on those swap/accounts/movements. But we are getting closer i think. :o)
To answer your question, I have no idea. I know and understand very little :o)

DP said...

@Mortymer/Blondie:

Whereas the Executive Board is considering off-market transactions in gold consisting of sales of up to 14 million ounces of fine gold on the basis of prices in the market to cooperating members with repurchase obligations to the Fund falling due, and acceptance of the same amount of gold from those members in payments of their repurchase obligations falling due to the Fund; and

Do my eyes deceive me, or does this say certain party(ies) would be offered to pay their way out of repurchase commitments to deliver gold? Someone is offered a deal to buy gold at market price, and to return the same gold in settlement of earlier commitment. (IOW: "Cancelling their subscriptions for a better arrangement", perhaps?)

mortymer said...

I would just add DP found it in this one, full text:

http://www.imf.org/external/pubs/ft/sd/index.asp?decision=54-10

[See above: Mrt February 28, 2011 3:52 PM]

"E. Off-Market Transactions in Gold by the Fund"

RESOLUTION

[Mrt: please note the days, when was doc created and when updated]

Resolution No. 54-10,
September 24, 1999

DP said...

"As updated as of September 1, 2010"

DP said...

The Ministry of Truth seems like it might be alive and well, and paying visits to The Ministry of Plenty... :-\

Who else can get away with making a resolution, and then rewriting it a decade later?

ad said...

@Mortymer

I think you are right on the F classification

CLASSIFICATION OF FINANCIAL TRANSACTIONS

5.19 . The financial transactions are classified in categories subdivided into sub-categories and some of which are further subdivided into sub-positions. The classification of the transactions in financial assets and liabilities corresponds to the classification of financial assets and liabilities (see paragraphs 5.06. - 5.08.). Therefore, the definitions of the categories, sub-categories and sub-positions and the supplementary explanations are provided only once in the ESA - in this section of the financial transactions chapter. The balance sheets chapter does not repeat the definitions and their explanations in its main text but it provides in its Annex 7.1 a summary of all assets and liabilities defined in the system.

5.20 . The classification of financial transactions and of financial assets and liabilities is based primarily on the liquidity and the legal characteristics of the financial assets. The classification does not contain functional categories with the exception of a memorandum item related to direct foreign investment. The definitions of the categories, sub-categories and sub-positions are in general independent of the classification of institutional units. As the need arises, however, the classification of financial assets and liabilities can be further detailed by a cross classification with the classification of institutional units. The class deposits between monetary financial institutions would be an example. The detail in which the classification of financial assets and liabilities may be employed depends on the institutional sector to be analysed.

Monetary gold and special drawing rights (SDRs) F.1
Monetary Gold F.11
Special drawing rights (SD_Rs) F.12

Currency and deposits F.2
Currency F.21
Transferable deposits F.22
Other deposits F.29


....etc

Monetary Gold and special drawing rights (SDRs) (F.1)

5.24 . Category F.1 consists of two sub-categories of financial transactions:

a) monetary gold (F.11);
b) special drawing rights (SDRs) (F.12).

5.25 . The financial assets classified in the category monetary gold and SDRs (AF.1) are the only financial assets for which there are no counterpart liabilities in the system. Therefore, transactions in monetary gold and SDRs (F.1) always involve changes in ownership of financial assets (see paragraph 5.02.).


I might be missing something here, but as SDR's are just a basket of the 4 major currencies, how do they have no counterpart liabilities?

Anyhow I was not aware that there was such a specific distinction in gold held by central banks. Did the fixed price per oz fall away at some point in favour of MTM, or does the monetary gold have a higher "value" than the non monetary gold?

ad said...

This is possibly the source of the distinction

Monetary and Non-Monetary Gold

Paradoxically and poignantly, the hasty measures taken by the U.S. and its Allies to distinguish between monetary gold supposedly taken from central banks, and non-monetary gold supposedly taken from individuals, were motivated in part by a decision by the Paris Reparations Conference in January 1946 to ensure that non-monetary gold would be used to provide immediate assistance to Jews and other stateless refugees.

Disposal by the United States of Captured Gold Looted by Germany From Individual Victims of Nazi Persecution and From European Central Banks

In discussing what qualified as "monetary" gold to be distributed to the TGC, the FED noted that James W. Angell, U.S. Representative to the Paris Reparations Conference, defined monetary gold as "gold bullion and gold coins found in Germany" in a form of a "medium of exchange." Gold in a form "as to indicate its use for dental, artistic and adornment purposes" and coins of numismatic or historical value were excepted from this definition of monetary gold. Given this definition, the FED concluded that "it is possible that the term includes gold in such form even if found among the effects removed from racial and political victims of the Nazis. For example, in the portion of the Merkers Mine shipment described as S.S. loot removed from concentration camp inmates gold coins, unidentifiable as to ownership, have already been found to the approximate value of $65,000. In another concentration camp shipment the valuables are in separate envelopes bearing names and nationalities of inmates. The definition of monetary gold apparently leaves no alternative if the inventory reveals the presence of gold bars and coins in these envelopes, even tho claims in the names of surviving inmates or their legal heirs are subsequently received through governmental channels. In short the source has no bearing; it is the form that decides the category. If it is in the form [o]f a gold bar acceptable as a medium of exchange or if it is in gold coin form then it is monetary gold for disposal via the gold pot [emphasis in original]."

The FED recommended the following policy with respect to gold that, although "monetary" in current form, had been looted from Nazi persecutees:

"It would not be wise to apply the U.S. expanded definition of non-monetary gold to gold coins and thus encroach on the Gold Pot to the detriment of other nations. Therefore it is believed that gold coins and gold bullion, even though falling squarely within the scope of WX-85682 [the Non-Monetary Gold Directive], should be retained for the Gold Pot and not be delivered to IGCR. Furthermore since no country is on a free gold standard no individual lawful owners exist, other than a government. No Nazi victim could have been the lawful holder of monetary gold coins or bullion [emphasis in original].

sean said...

Welcome Tyler.
it depends a bit on what background knowledge you have of finance and economics. If you have too much you might have to unlearn some first! ;-)
But seriously, try some of these posts:
Freegold foundations
Gold is Money (and subsequent 2 posts in series)
The Debtors and the savers (and subsequent 2 posts)
and following the trail with FOA and Another:
It's the flow stupid
and if you get stuck try: here

Edwardo said...

FYI, the word from Harvey Organ is that Blythe/JPM are settling contracts (at least with some players) at 80% premium. See the comments section

http://truthingold.blogspot.com/2011/03/some-general-analytic-commentarytodays.html#comments

Edwardo said...

And here is a rebuttal of the claims made above.

http://northeastbullion.tumblr.com/post/3629010780/more-absurd-claims-coming-out-of-the-silver-camp

Blondie said...

I believe Roosevelt made a fairly clear distinction between monetary and non-monetary gold in 1933.
Perhaps not the same as the IMF, but a practical precedent was set, if nothing else.

costata said...

Edwardo,

Thanks for the links.

Cheers

ad said...

@Blondie,

Quite right, I see it was issues around industrial and medical gold after the confiscation.

Midnight Gardener said...

@ Blondie,

Thanks, I guess I thought of it as an invitation to discuss the issue.

Michael said...

wow the silver bulls are out in full force.
i wonder how many of them will keep the momentum going by buying silver at north of $40. i can bet there will be more unloading their position rather or hanging still.
its going to be tough for the silver investors to keep demanding at these prices.

i am more comfortable being in gold knowing it is bought at ANY price.

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