Friday, March 11, 2011

Indicium


Several of you have expressed frustration with the direction the comments have been meandering lately. You've requested a more "Freegold oriented" discussion. I aim to please, so here is some Freegold fodder to get you started.

Do any of you remember FOA writing about "K-Rands" and the fact that they are a legal tender gold coin yet they have no indicated face value? Here is one such excerpt:

FOA (8/2/01; 12:52:55MT - usagold.com msg#87)
Walking On Solid Ground

I have tried to point out that the gold concept today is not one of just matching dollar price inflation in the future. If that was all we owned gold for, one could have covered that with several stock market games years ago. If $500, $700 or $800 was the goal, it becomes just another commodity bet and there have been plenty of other leveraged "plays" that already beat that. No, buying gold today is a political move; one that will add political sized returns to this gold advocate's wealth.

For this reason we outline the political "fiat against fiat money nature" of the battle more so than the gold to money battle. In the future, for any currency to compete against the Euro, native gold markets will have to trade at least in equilibrium with a Euro based free gold price. This will further pressure "political money posturing" to relinquish all fixed gold relationships with their moneys; fixed legal tender gold coinage included. This could become a very convoluted affair for gold coin investors. Especially if Euroland eventually mints a free floating gold coin; not dissimilar to the K-Rand! Not to be confused with Robert Ms 100 Euro or Germany's new offering; perhaps it will be called the "Euroland" gold coin? In fact, I bet it will (smile).

Coming to a nice clearing

While I am not unloading any of my various Eagles, maples, etc.,,,,,,,,, I want my involvement with gold to be as free of fiat involvement as possible. As an extension to this, all out of circulation, old gold coins make an excellent contribution to this thought. A powerful thinker once said that old gold coins will one day be treasured as forms of antiques in addition to their gold values. Few enough in circulation to carry extra value, but not rare enough to dissuade one from selling or trading them in the future.

To this end that same gentleman made a statement that embellishes the entire trail of Thought we walk today. It inspires countless large and small private gold advocates with a warning for a future we must prepare for and a call to stand guard!

I'll say the words again to end our hike.
--------
"when a thousand hungry lions fight over one scrap of food, small dogs should hide with what's in their belly"

"we watch this new gold market together, yes?"
-------

The sun is going down and it's time to camp here for the next speaker. Something about burning paper; I won't want to skip that one. Thank you each and every one for walking with me on this very fine day (smile).

TrailGuide

A side note: In the past I have mentioned the concept of "punctuated equilibrium." You can look it up if you don't know what it means. Basically, there are three phases through which we will pass. Our present (dis-)equilibrium, a nearing punctuation and the future equilibrium. It is helpful to understand the (sometimes subtle) distinction I (and FOA) make between these three discrete phases in all of these discussions. It is worth a little extra thought.

Anyway, my point of bringing this K-Rand thing up is to preface a two-minute clip in this video that someone sent me. (h/t HS) It is from 1983, a debate between a young Ron Paul and Fed Governor Charles Partee on the gold standard. The video has been set to start at 19:30. My reference is a little over two minutes, ending around 21:40.



In the video Partee said that he wanted the Gold Eagle coin as an "indicium of public attitudes toward financial conditions in the country" and that "you destroy that 'indicia value' when you have a gold standard." What do you think? Does this sound at all like Robert Zoellick's recommendation to use gold as a "reference point?"

Indicia—plural for indicium—comes from Latin for "sign," "clue" or "indication." In law it is sometimes synonymous with "circumstantial evidence." Partee elaborated saying he wanted gold to be an "indicator" and therefore the price needed to "vary" [Me: float].

Here's another SNIP of FOA speculating a bit about possible ways such floating "indicia coins" might be used in a Freegold world (following punctuation). This one ought to spark a lively discussion:

FOA (10/10/01; 07:07:06MT - usagold.com msg#119)
At the Trail Head parking lot

On most parts of this Trail, I could walk with my eyes closed; while in other areas I would need six maps and two GPSs units just to know north! Right now, I can tell ya what's most likely out there, but in those strange areas; not really sure?

Take this Euroland gold coin thing? My guess is we won't see this anytime soon. I suspect it will be something like a K-Rand, with no marked currency denomination, but different in that it will be a hybrid legal tender. If you look here in the US, gold coins are somewhat a currency as they stand. Just like IBM stock, real estate and most any other asset, we just have to sell it for currency first; pay our taxes and then use the money to buy something. The process only becomes illegal if you use the stock, land or gold to trade directly for something and don't pay your taxes.

Mr. Strauss pointed out that the current trend in motion is that all VAT taxes are being lifted or phased out on gold trading. Eventually, most of the world will have only some form of capital gains taxes on gold. This is fine and is bringing gold into focus as the one and only metal asset the official sector is trying to work with. But I think there is more to it than this.

As I said many times; Europe is looking to bring gold back into use as a very tradable asset. Perhaps "the most very tradable asset" but still outside the fiat money context. They want to keep the government's and socialist's hands off gold and its market function so it will serve everyone as a savings medium. But, they also want it to gain as a trading medium so the combination of the two will create immense demand.

To gain in the "use department" I suspect we will see some push to drop all gains taxes on gold used in official coin (Euroland) form. In place of that, there will be some form of excise tax charged on payments / trades done using these gold coins. Most likely, you will have a choice of paying completely in gold or Euros but not a combination of both. Probably, gold will be used for large purchases because gold will carry a very high price by then. And too, 1 gram coins will be the norm; being the size of our one ounce now, but with alloys. I doubt gold will ever be used in regular store / retail sales. In other words, I could go into my bank and use 50 Eurolands containing, say one ounce fine gold each, and pay off my $200,000 mortgage; minus some 15% excise tax on the deal? I could probably do the same thing with regular bullion, too, but would pay a somewhat higher gains tax rate; instead of the lower excise tax.

Anyway, this is all in the "for what it's worth area". Go ahead and take your hike,,,, I will be here giving the car a tune-up and changing the oil when you return. Then I want to talk some more about the words of Mr. Strauss (smile).

TrailGuide


Oh boy. I suspect I might have opened a can of political discussion worms here. But like FOA said, "buying gold today is a political move; one that will add political sized returns to this gold advocate's wealth." And let's not forget this recent move in any discussion about future political taxes:

"[Utah] would also exempt the sale of gold from the state capital gains tax."

And also remember the concept of "soft targets" when it comes to government's obeisance to the hungry collective. Here's a little "soft target" fodder to keep the discussion going, just in case the above was not enough. The first is an old comment by Costata. The rest are labeled with the author's name at the top:

Welcome to the FOFOA blog. In case you missed it the heading reads:

FOFOA
A Tribute to the Thoughts of Another and his Friend.


Clearly you haven't found the time to read any of the archived material available in the links on the right hand side of the home page.

As a favour to you I have extracted Another and FOA's predictions from 1997 and 1998 about taxes on gold under Freegold.

As an additional favour I will break it down for you.

1. The gold miners will be the targets for high taxes. For political and practical reasons they are the soft option.

2. Anyone holding paper gold when the transition to Freegold comes will be burned.

3. Personal holdings of physical gold will be encouraged by EU Governments and their allies.

4. No-one knows what the specific tax regimes will be on the sale of gold in other jurisdictions. At present it ranges from Zero to the equivalent of the taxpayers' marginal income tax rate.

If you cannot be bothered to read FOFOA's archive (BTW did I mention that this is his blog) you will bore the s#@t out of most people with your half-baked theories and predictions.


Date: Sun Dec 07 1997 18:45
ANOTHER (THOUGHTS!) ID#60253:

Try to live in this outcome and see how different the world will be. It will not be the end of all things, only the changing of most things in "western thought". The "Digital Currencies" will still trade, but we will value them as not before.

Anyone who has sold gold they do not have will not be allowed to cover that position. Anyone who has bought gold they do not have will not be allowed to cover that position. Many will lose all they have in a world without honor!

Looking back , one will ask, "how could I have thought that no one wanted gold, when more of it was being bought than existed"? Indeed, more gold than exists or will be produced in the next ten years! And some say, "only a fool would say the market was cornered".

During that time, gold in the hand will not trade on an open market! And the government of the country, of the land, of the mine, will no doubt speak with you of new taxes on GOLD!

Date: Sat Mar 07 1998 23:37
ANOTHER (THOUGHTS!) ID#60253:

Mr. Mozel,
The USA placed a special "windfall profits" tax on domestic oil during the last major rise in prices. I do think the oil stocks would have shown a greater value had this tax not been in place. Because gold will soon become a currency, mines will be taxed in a much greater way. Also, domestic mines will be asked to sell directly to the treasury at the "preceived commodity value" value of gold, plus an operating margin. As no private company will be allowed do your treasury job, "produce money". Gold in the hands of the public will be thought of as a good thing, as citizens are asked to "pull own weight" as the government is much under.

Date: Sun Apr 19 1998 15:09
ANOTHER (THOUGHTS!) ID#60253:

REPLY:
Date: Sun Apr 19 1998 14:18
OLD GOLD ( ) ID#238295:
There will be ample time for holders of gold bullion and gold shares to sell their holdings for huge profits. Drifter was right on target here. Let's worry about getting POG to $350 this year. We have a long way to go on the upside before confiscation and/or taxation becomes a realistic concern.


Mr. Drifter and Mr. Old Gold,
If you search the "thoughts" posts provided by Mr. Sharfin, many of your conclusions are addressed. Many do feel that if "the gold mines were safe in the past", "they will be safe in the future". I submit this person's thinking for your consideration:

"The Western public has always thought of gold as money. Even after the 70s and 80s, most private investors held a small side thought, that gold was still, somehow dollar money. It was only during the late 80s and 90s that people started to completely lose the connection of paper spending money and gold.

Clearly, all evidence shows that prior to the 90s and particularly prior to the 50s, the push was to change the public's thinking away from gold money, to paper currency as money. In this political climate, gold mine investments were the correct move, as the business of gold was encouraged over the usage of gold as money! That is why the metal was called in and the mines were untouched.

However, today, the change will be counter to the prevailing public opinion, that gold "is not money". The world debt system and currency exchange, as we have known it will implode and leave little room for political maneuvering.

The governments will revalue gold and "demand" that the public carry it and use it! It will be the source of all gold, the mines, that will be controlled! That's Controlled, with a capitol "C", not confiscated!"

8/10/98 Friend of ANOTHER

Michael Kosares,

Basically, this is the direction the Euro group is taking us. This concept was born with little regard for the economic health of Europe. In the future, any countries' money or economy can totally fail and the world currency operation will continue. What is being built is a new currency system, built on a world market price for gold. Michael, you are absolutely correct in that the USA will see a hyper inflation of its currency and a gold price in dollars that reflects it.

Unfortunately, for most investors, the gold price rise will be sudden and also hyper fast as it will occur just after a rapid plunge in dollar based assets including, stocks, debt and the entire banking system. This action will destroy virtually all gold based paper assets as they are also dependent on a functioning economic system. A local gold mine, in any country, must sell production to realize a profit. The contract system they deal with will not be functioning during this time. Contrary to many hopeful investors, local treasury officials will not allow miners to pay employees or buy equipment with physical gold. When the dust does clear for mining to continue, gold will be recognized worldwide as real money, and the mining of money will, no doubt, carry Extreme taxation. Stock prices of these operations, after being priced to zero, will then double or triple in price. Zero times three equals?

9/3/98 ANOTHER (THOUGHTS!)

Replies (9/3/98):
However, never before in history has gold been cornered in currency terms. Not physical terms. Never before in history, has a world reserve currency, the dollar, been forced from a high gold valuation to a low gold valuation, along with a destruction of world gold market. Because gold is traded today, worldwide in dollar terms, the transition will destroy the capital assets of 99% of all mines. Please place yourself in "context of future events". Physical gold will not reach $30,000/oz because no one is buying it! It will come to this level because the dollar, today, is already inflated to level that will bring this price.

The perception that this dollar is "no longer a good reserve", it will bring the flood of buying. This "already printed and in circulation today" currency will seek gold!

Governments will tax mines for the right to produce money and force them to sell production in terms of whatever "the new world reserve currency" is at that time. Euro? Because gold mines are the "unique" circumstance in world of investments, their owners will suffer a "unique" problem of defining what they really own!

Also, remember, gold will rise soon as world trading continues this course of change. However, at some point, when the dollar market is destroyed, no one will know the currency value of gold thru an official market. Paper gold will not do well as the currency world is at war! The true surge of gold in dollar terms will not show until perhaps a year has gone by. During this time of trouble, physical gold will prove to be "the investment and holding for a lifetime".

ANOTHER: Gw, I would say, all forms of physical gold is good to own. Even the rare ones offer the "art form", yes? Even in war, the art work is looted first, then the jewels, and always food. I prepare for not the war of men, but the war of currencies! This conflict will bring forth a new concept for many: "western governments will encourage people to hold physical gold"! When the Euro has defeated the Dollar, citizens will be asked to use gold as a savings, for holding the Euro will be frowned on. Gold will not bring your "capital gains tax" as the mines will be taxed to compensate.

Yes, rare gold will be good, but not as liquid as "bullion type" gold.

Thank You

Date: Sun Oct 19 1997 09:42
ANOTHER (THOUGHTS!) ID#60253:

You see, gold is not a commodity. The CBs have used every weapon to keep its price low . Understand me, Gold is now, today, a devalued currency being used in world trade!

Do you think the CBs are selling gold to keep the dollar strong? They don't have to sell to accomplish that feat! CB gold (one billion ozs.?) valued at its current commodity price is only worth 300 billion, it's nothing in that price range! They know what its US$ price is worth in terms of oil! They are not stupid as they show.

You should not think they are dumb! Invest in gold mines, will you? Notice how quick the Australian CB hinted at taking "gold in the ground" if needed. This was said after their sale! The nature of the coming crisis will make the taking of investor property a piece of cake. You see, because gold is a commodity, you will be compensated at the commodity price of return + a fair profit, of course.

How much further can they take this? The world private stockpiles that could be sold have been. The CBs are heavy into their own stuff now and are over their heads if they had to make good on all the private deals (read my other posts). The economic game is ending now and has been from the start of 1997! Watch closely as the world currencies and markets fall one by one. Watch in absolute wonder as the demand for oil plunges and its price goes thru the roof. Yes, oil stocks will crash with the markets. And gold? You will never know its price. It will stop all trading as it slices thru $10,000+.

Sincerely,
FOFOA



I remember when, I remember
I remember when I lost my mind
There was something so pleasant about that place
Even your emotions have an echo in so much space

And when you're out there without a care
Yeah, I was out of touch
But it wasn't because I didn't know enough
I just knew too much

Does that make me crazy?
Does that make me crazy?
Does that make me crazy?
Possibly

And I hope that you are
Having the time of your life
But think twice
That's my only advice

Come on now, who do you
Who do you, who do you think you are?
Ha ha ha, bless your soul
You really think you're in control?
___ no!

I think you're crazy
I think you're crazy
I think you're crazy
Just like me

My heroes had the heart
To lose their lives out on a limb
And all I remember
Is thinking, I want to be like them

Ever since I was little
Ever since I was little
It looked like fun
And it's no coincidence I've come
I'll die when I'm done
But I'm not done

Crazy
Maybe you're crazy
Maybe we're crazy
Possibly

54 comments:

intuitivereason said...

Interesting thoughts. I suspect that gold will remain generally outside the realm of currency ( in the sense of being used to pay for goods. ).

Exceptions to this would be the settlement of international trade and possibly, as mentioned, very large purchases of items of real and enduring value.

DP said...

Nice. I thought I would pick out a few notes as I went along reading, and chip in my $0.00 comments on them.

(1) I could go into my bank and use 50 Eurolands
>> At the currency exchange window I guess. Or maybe for gold any teller window will be pleased to welcome you. I'm interested to know if any German friends in da house can say what types of coin are offered to you when you go to change your euros into gold at your bank? How about those gold ATMs, are they specially-branded bars or something like that perhaps?

(2) I could probably do the same thing with regular bullion, too, but would pay a somewhat higher gains tax rate; instead of the lower excise tax
>> Interesting, feels like a legal tender distinction.

(3) Anyone who has sold gold they do not have will not be allowed to cover that position. Anyone who has bought gold they do not have will not be allowed to cover that position. Many will lose all they have in a world without honor!
>> Don't get caught with paper of any sort, but especially any that is a "gold related investment".

(4) Gold will not bring your "capital gains tax" as the mines will be taxed to compensate.
>> Interesting (see also: (2) above). I guess in this instance when referring to "Gold", "Eurolands" was meant? Eurolands seeming to be the future defined legal tender within the Eurozone.

(5) The nature of the coming crisis will make the taking of investor property a piece of cake.
>> Are you listening, my friend pipe, with your "25% in gold related investments"? ;)

(6) Watch in absolute wonder as the demand for oil plunges and its price goes thru the roof.
>> No other 'commodity' but gold is going to see an increase in demand at that point, everything else will see a decrease as people scramble to somehow simply survive this Greater Depression transition. Not nominally, but the value of that nominal currency will be tanked - against gold.

@radix, I am being good and specifically not using the S word above.

If anyone does, however, feel they are roused to pick up the silver/gold discussion as a result of any implication they read into this comment, please would you consider the option of taking your further comments to the Kicking the Hornets' Nest post, rather than here, as a courtesy to other readers who are bored with it. Many thanks. :-)

tina said...

I hope this will end of boring the s#@t out of most people with half-baked theories and predictions.

costata said...

Best music video blog on the planet.

Aaron said...

Gimme that Freegold! (Tyrone, where have you been?)

--Aaron

Chris said...
This comment has been removed by the author.
Over said...

China picking up Pimco's paper leaves me a little disconcerted...


http://blogs.forbes.com/robertlenzner/2011/03/10/china-buys-pimcos-treasuries-and-a-great-deal-more/

David said...

Here is an article at Forbes advocating "a currency board linked to gold" as the world's new monetary navigation system. Completely consistent with Freegold.

http://www.forbes.com/2011/03/09/gold-standard-dollar-opinions-nathan-lewis.html

David S

John said...

What will be used transactionally for the (approximate) year that gold goes into hiding? What will people flock to considering that their paper will be on fire? Do we go to barter? Thoughts?

- JohnW

radix46 said...

DP, Nice.

Whenever I refresh this page, I get a flash of Krugerrand. This subliminal advertising is making me wanna buy more!

victorthecleaner said...

I am also not going to use the S-word in this thread. Promise.

> 3. Personal holdings of physical gold will be encouraged by EU Governments and their allies.

But here is the E-word as in 'EU', 'Euro' or 'ECB'. I do agree it is a good move to encourage your citizens to hold some of their savings in precious metals. China is doing it. I would also recommend it to Japan, the UK, the US and the Euro area (in this order of urgency - ask me why if you don't find this obvious).

What exactly is the basis for your confidence that the ECB and the governments of the Euro area will act reasonably and not simply copy the mistakes of the US.

Victor

Klaverius said...

Victor,

I share many of your thoughts. Treatment of the euro here has also puzzled me greatly. When Another and FOA were writing, perhaps the euro seemed different, but today, how is it any different than every other fiat currency?

DP said...

@V/K: Look @ ECB balance sheet, then look at Fed/BoJ/BoE's.

thedeadfauvi said...

Sorry folks, you are not well informed. Nobody encourages the people to buy Au in the EU except that it is tax exempted. That’s the only “symptom”. MSM preaches 5 - 15% and even paper gold is recommended. I’m still waiting for Merkel to tell us to buy gold.

Victor, why do you put the EU last on your list? Only Germany has now about 2 trillions debt and all banks are broke. And the unemployment is double the official numbers.
Do you guys know that that unemployed people work in Merkelland for 1 euro/h in order to get the second step of unemployment benefits?

victorthecleaner said...

DP,

> @V/K: Look @ ECB balance sheet, then look at Fed/BoJ/BoE's.

Yes. We do this once a quarter. It is part of our routine doomsday watch.

They look rather similar these days, don't they? Well, the Fed has bought all the junk bonds outright whereas the ECB got the commercial banks do the dirty job and then recycle them in repos. But when the dominoes fall, the effect is the same, isn't it? The monetary base will be diluted irreversibly.

So what? Why are you saying the ECB looks better or is better? (Watch out, this question is a trap)

thedeadfauvi,

> Nobody encourages the people to buy Au in the EU except that it is tax exempted.

In Germany and Switzerland, Au is exempt from sales tax, but Ag, Pt, Pl, Rh (apologies for the S-word) are subject to 19% (bars in Germany) or 7% (bars and coins in Switzerland or coins in Germany) sales tax. In Canada, all of Au, Ag, Pt are exempt from GST.

In Germany, any bullion and even base metals and rare earths are exempt from capital gains tax if held for more than 1 year. For shorter periods, your marginal income tax rate matters. In the UK, the legal tender coins are exempt from Capital Gains Tax whereas any other bullion or base metal investment is subject to CGT. This is the reason why there are no Sovereigns available anywhere in Europe - the Brits have bought them all because of their tax laws.

To me this looks as if none of the governments has thought about this very carefully. This is plausible because bullion investments play only a marginal role.

Wait how quickly the tax laws will change once PMs become a more popular investment and the masses start making money from speculation with PMs.

> Victor, why do you put the EU last on your list?

My list was Japan, UK, US, Euroland. If you assume a haircut on their sovereign debt large enough to get the debt/GDP ratio to 50% GDP and guess what will be the resulting dilution of the monetary base if all government bonds repo'ed and held outright by the central bank experience this haircut, then this would be the order in which the dominoes fall.

Of course, this does not guarantee that this will be the actual order of events.

Victor

u1ew2zee said...

a note about the euro commentary, as many views are clearly us centric, one point to remember:

the tax laws may still make a difference in euroland at this point, but once this big, delicious cake finally blows, i can tell you with assurance that most euro citizens won't give a rats ass about government bullion taxation laws.

And if they ever accept a centrally issued unbacked currency again in our lifetimes, which i highly doubt, ppl will pay all taxes voluntarily and be proud of it, because they themselves would have for some reason decided that a tax is absolutely necessary to prevent certain death.

That's how the europeans will react

DP said...

If I was able to newly issue tomorrow €1,000,000,000 and use them to bid up and buy in the market and add to my reserves 500,000oz Au, would I have diluted my currency, or would my entire MTM reserve assets now have increased in value far more than €1,000,000,000?

Would I even consider buying any other asset, that isn't on my balance sheet already?

Would the nominal price of anything but Au have changed by my action?

Wishing you all a great weekend...

victorthecleaner said...

Tim: Hey, Ben, I suppose you remember that the gold belongs to the treasury? I'd like to take if off your books.

Ben: But it's our reserve. It is in our books at 42$/oz for a total of 11 billion $.

Tim: That's negligible compared with the other junk on your books. Let me take the gold and you get another 11 billion $ worth of T-bonds. With the current running deficit, it will take us just under a week to issue them.

Ben: Alright.

Tim: (after he swapped his paper for the gold with Ben) Well, actually, when I look at what the Europeans are thinking, our gold is worth far more. Mark to market, it is 360 billion $. So let's mark to market.

Ben: If you do it, then do it thoroughly.

Tim: ?

Ben: !

Tim: Aaah. I see. How about it is worth 55000$/oz. It will then just cover our debt outstanding at approx 14 trillion $.

Ben: Good boy.

Tim: Alright. After we revalued it, we can put it back on your books, Ben, if you wish.

Ben: Thanks. Have you thought about the implications for our national security? Can you imagine that TSHTF when we revalue like that? You need to talk to Obe and Bob first.

Tim: I'll do. (some phone calls) Ben, there is also all this stuff in the vault under Liberty Street for which Bill Dudley is the custodian. Obe and Bob say, we should prevent the Europens from doing the same trick to their books - Russians and Chinese we can ignore they say. At Liberty street, we have another 6000 tonnes that belong to the Europeans. Bob says we ought to remove that stuff from Liberty Street and drive it to Kentucky. We can issue the Europeans paper receipts instead.

Ben: Are you sure this is legal?

Tim: What do you mean? Legal?

... and the US$ became the world reserve currency again.

Cheers,

Victor

Aaron said...

Hi Victor-

What exactly is the basis for your confidence that the ECB and the governments of the Euro area will act reasonably and not simply copy the mistakes of the US?

I could be wrong here as I’m not a very deep thinker, but I don’t believe FOA was telling us the ECB is immune to abuse -- and remember the Euro is not the world reserve currency. The dollar finds its value in network use and little else and CBs have more of this paper than they know what to do with (actually, they know what to do with it – they print more of their own currency to match it).

One of the strengths that underlies a given currency is that currency’s ability to purchase items in many different markets. Take the Ghanaian Cedi for example. Put one of those in your wallet, board a plane to anywhere outside of Africa, and see if you can spend it. Now pull out a US dollar – did the seller’s response change?

In my mind Network Use is another way of saying Free Market selection. The Euro doesn’t rely so much on the ECB’s actions as it does on the design of the currency – that is a currency issued by an institution with assets marked to market on a physical world rather than the surreal fantasy $IMFS we live within today.

At Liberty street, we have another 6000 tonnes that belong to the Europeans. Bob says we ought to remove that stuff from Liberty Street and drive it to Kentucky.

Sweet Jesus. I don’t want to even think about it. Can you imagine how you’d react if someone stole your gold? I don’t think Bundesbank would be very happy.

--Aaron

Jeff said...

Victor,

FOFOA has a post that addresses your revaluation scenario called 'it's the flow stupid'.

Cheers.

Nick said...
This comment has been removed by the author.
costata said...

IMHO this is a must read from Jim Rickards.

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/3/11_Jim_Rickards_-_QE_is_dead%2C_long_live_QE!.html

He estimates that there can be around $750 billion of QE per year for the next two years without a formal announcement of QE3 etc just through recycling maturing debt and cash flows to the Fed from MBS etc on their balance sheet.

Wendy said...

Is any one else missing the embedded video? Just a little X in a big square for me.....
Might be my security settings, but I thought I'd check first :)

julian said...

Thought-provoking post yet again.(Smile!)

That video of the Fed's Partee is a great find, and that 2 minute snippet is a sparkling insight into durations of historic change, and how coordinated the rpg dialogue must have been for much time !!

FOA, what a communicator!! His use of literary device is an artist's treasure! What a lofty Thinker indeed!!

This tax talk is quite interesting too.

There are some quality quotes in this post.

A powerful thought for me for a long time has been "Looking back , one will ask, "how could I have thought that no one wanted gold, when more of it was being bought than existed"?

It acts like a zen koan.

Anyway. I should get me some gold one of these days soon. Don't want to miss the coming punctuation. This post has got me thinking of government bullion coin for future tax purposes?! Instead of, say, J&M bar.

Happy Hunting!

- Julian

Wendy said...

Figured it out ... apparently there is not a flash player for explorer 64 bit, which I guess I was running. But explorer (32 bit?) runs everything just fine.

3824af10-4c79-11e0-b9bd-000bcdca4d7a said...

When the Euro has defeated the Dollar, citizens will be asked to use gold as a savings, for holding the Euro will be frowned on.

Given all the money printing by the ECB, isn't the "euro" just another piece of colored paper? In the past, the ECB was differentiated from "the Fed" in it's commitment towards currency preservation (tough inflation stance, etc) but in the approach to the PIIGS it has been demonstrated that the ECB is just as bad as "the Fed". Therefore, it seems that elevation of the Euro seems dated. However, I am open to the criticism that my interpretation of what FOA was saying might be wrong-headed ;) I am very much a student of freegold and have the bulk of my savings in bullion form.

My point is that I just am not sympathetic to any credence given to the "euro" or any other "printed" (very much so, yes?) piece of paper.

thatmayn

Robert Leroy Parker said...

I don't buy the premise that the mine production will be "controlled" through taxation. The miners will have a ridiculous black market available to them in wealthy savers looking to aquire gold for less than 50k an ounce. Are they going to work at the point of a gun? Work for us at 99% taxation or else? Hell no, they'll say fuck it and mine other raw materials instead. Then the government is left incharge and the whole gold mining industry is fucked.

Now, someone explain to me why i am wrong.

Brad said...

If gold was $50,000/oz a person could make a living as an individual miner.

victorthecleaner said...

Aaron,

> The Euro doesn’t rely so much on the ECB’s actions as it does on the design of the currency –
> that is a currency issued by an institution with assets marked to market on a physical world
> rather than the surreal fantasy $IMFS we live within today.

Assets marked to market on a physical world?

Take a look at the balance sheet of the eurosystem before the crisis (here Jan 2007) and compare it with today (Mar 2011).

Rather than watching Assets, Section 1 "Gold and gold receivables", I recommend taking a look at Section 7 "Securities of euro area residents denominated in euro".

Do you know what this means? Greek, Irish, Portugese government bonds. On top of this, the Irish National Bank has monetized Irish mortgages securitized by one Irish bank and then repo'ed by another because they were short of Irish government bonds that the ECB would accept as collateral. The balance sheet of the Irish National Bank is consolidated in the balance sheet of the eurosystem.

As a very rough estimate, the euro has been diluted by a factor of 2 to 2.5. Yes, this is still better than the US$.

Victor

victorthecleaner said...

DP,

> If I was able to newly issue tomorrow €1,000,000,000 and use them to bid up and buy in
> the market and add to my reserves 500,000oz Au, would I have diluted my currency,
> or would my entire MTM reserve assets now have increased in value far more than €1,000,000,000?
> [...]
> Would the nominal price of anything but Au have changed by my action?

Yes, it would. And seriously so. You can create an arbitrary amount of inflation this way. It is less brutal than the outright buying of T-bonds though. You see this if you think this through up to the 55000$/oz target.

Who do you think would buy at 55000$/oz? Ordinary citizens would be lucky to pick up a few grams during their career. The central bank has already bought.

Who do you think would sell at 55000$/oz. Now that would be attractive. Say, you are a wealthy family with 5mm oz in the vault. Now you could spend 2mm oz and purchase a whole large multinational company such as BHP. That would be worth some though, wouldn't it?

So you would immediately get some selling pressure. And these sellers do take other real assets off the market. You would cause a hell of consumer and asset price inflation.

This is why I think the phone call between Tim and Bill is only the nuclear option once they are sure they cannot prevent the US$ from collapsing.

Victor

Dante_Eu said...

@Brad:

I really hope it's not going to look like this:
http://www.youtube.com/watch?v=7ubJp6rmUYM

costata said...

Robert Leroy Parker,

Mining gold will be an extremely profitable excercise. They will make a guarranteed 100% on cost (at least). Perhaps they will make 200% on cost. Then their equation will look like this: Cost = $1,000 per ounce, Mark up on sale to Treasury @ 200% = Cost to Treasury of $3,000. Value of gold = $50,000. Miner gets $3,000 while government gets $47,000.

Diamond Jack said...

Brad said...

If gold was $50,000/oz a person could make a living as an individual miner.

Concur. A three person crew working a dredge will kick butt.

But the leveraged play of the yr would be to take Gold Prospectors of America private. they hold thousands of claims and a list of enthusiastic physical gold advocates that are already paying dues; tomorrow's new rich.


Some seem to think that post freegold, the first thing people will do is line up to pay taxes. To whom, exactly, and for what? We'll be looking at serious credibility deflation. 400 politicians were killed in the Wiemar aftermath. New institutions based on voluntary participation will replace the failed coercion model.

Diamond Jack said...

No, buying gold today is a political move; one that will add political sized returns to this gold advocate's wealth.

Political move, political in what sense?

This will further pressure "political money posturing" to relinquish all fixed gold relationships with their moneys;

Oh, political class must relinquish control


It inspires countless large and small private gold advocates with a warning for a future we must prepare for and a call to stand guard!

Warning - Prepare - Stand Guard

Buy gold = political class relinquish control = future

The politics of no politic

Freegold as engine of Voluntaryist Society.

David said...

Recent conversation is blowing my mind. I'm forming an impression that Freegold, as discussed, is likely to happen only if the US federal government decides not to default on its debt obligations. 

Whereas, a partial Freegold assessment, say to only $10,000 of today's US dollars, would occur only if the US turned out to default on some of its debt. 

Therefore, in our Freegold future, the size of the massively-upward one-time reevaluation of gold that FOFOA has spoken of would be subject to, say, how effectively the Fed or the US Government communicated beforehand its intentions to stiff many of its creditors. 

Does a projected gold price of $55,000USD (today's dollars) strike you as being ridiculously high? 

Solution: The US embarks on debt defaults/haircuts strategically. 

DavidS

Robert Leroy Parker said...

Costata, if they get paid 3k per ounce that does nothing to stop the black market from taking over.

Blondie said...

David said:

"Recent conversation is blowing my mind."

Until the last few comments, it had been numbing mine.

Diamond Jack said:

"New institutions based on voluntary participation will replace the failed coercion model."

Hole in one, IMHO.

Robert Leroy Parker said...

"Until the last few comments, it had been numbing mine."

How do elitest undirected remarks help to educate anyone? That is the purpose of this blog and comment forum right? To help people understand what may or may not happen according to another and foa.

If people don't have a clear understanding of freegold is that surprising? It may seem simple to people that have been reading fofoa for years, but its not to newcomers. You have to abandon "western thought" right? Not a simple procedure for people that have been ingrained with it their entire lives.

The oldtimers at this blog seem to be very upset with its growing popularity and new faces. Instead of disparaging newcomers as ignorant and worthless, you could help people understand what they currently do not. If the oldtimers don't want to deal with the noobs like myself, why not just make a private comment forum that requires an invite. This is not hard to do.

Otherwise I would suggest you get used to new questions from new people, because fofoa is gaining more popularity all of the time as far as I can tell.

Blondie said...

@ RobertLeroyParker,

It is not elitist, merely a statement of fact.

If "people don't have a clear understanding of freegold", it may be because of their approach?

I encourage its growing popularity; indeed this is proof of its integrity, of its infinite resolution.

It is frustrating to see however the comments returned to square one continually by those who freely admit to not having read the archives.
This ground, which may be new to some, has been covered repeatedly.

Yet I am elitist? I would say those who expect to be spoonfed are elitist, myself.

------

Silver is (hopefully for its owners) a leveraged play on the function of gold.

That is all. Only of particular interest to silver owners.

The Euro is European central bankers device to go with the flow of gold's inevitable reinstatement as the objective reference point of value, rather than be destroyed by it.

That is all. Only of particular interest to (possibly begrudging?) Euro users.

Continual discussion of these is to have missed the entire thrust of this blog, IMO.

FOFOA has made many points, and even entire posts, on related topics with which to achieve a greater perspective over not just Freegold, but the human society from which it evolves.

Topics such as: Fractals; Punctuated Equilibrium; infinite Resolution; Superorganisms; Flow; Value; Game Theory etc.

He does not make these points arbitrarily. This is where minds will be blown, and the perspective from which to make sense of it all can be found. The tools have been supplied; avail yourself of them.

Freegold is of particular interest to everyone, if only they could get out of their own way to see it.

costata said...

RLP,

Timely reminder in your last comment.

Regarding the black market for mined gold, that is a real possibility for small operators such as the placer folks.

For a large scale gold mining operation it would be very difficult to hide production. Provided the value of gold is high enough the level of security and oversight is simply a question of ROI for the tax man.

Consider also that a business with a guarranteed purchaser for all output at a high profit margin would be a sought after investment. Granted it would be more like a utility than a traditional mining company.

pipe said...

Robert Leroy Parker,

You are quite correct on your black market comments. Nobody works for free. And if governments try to run the mines, there won't be any mines, to speak of.

The xau (Philly Index of large gold producers) is up 10% in the last three years, while gold is up 40%. The hui (gold bugs index) isn't much better, up 15% over the span. If you look at individual stocks such as Newmont (nem), the world's largest gold stock, the share price is where it was 7 years ago, $52/share, despite a gold price rise of $1000/oz!!!

The only logical conclusion is that the cost to mine gold, including taxes, regulations,, etc. is rising significantly faster than the pog (price of gold). This is supressing gold production, which will make gold all the more valuable, once the price is set 'free', lol.

The comment from Mar 07, 1998, "Also, domestic mines will be asked to sell directly to the treasury at the "preceived commodity value" value of gold, plus an operating margin."
makes sense. That way, goverments can semi-nationalize mines without destroying the miners and taking advantage of the miners' knowledge. But you will still get a lot of leakage out to the black market.

In fact, this is the present system in China, where all producers must sell to the gubmint, but I don't know the price.

costata said...

DavidS,

Generally when figures for a post-transition gold "price" are thrown around here they are merely points on a probability curve.

As you point out it depends on the amount of debt that is defaulted. It also depends on the amount of currency overvaluation and debt built into the $IMFS over the past 40 years.

Robert Leroy Parker said...

Blondie,

You said:

If "people don't have a clear understanding of freegold", it may be because of their approach?

Or it may have something to do with the damn hard to interpret language that is used to describe it. Remember the peter schiff clip?
Remember the back and forth with mish.

Dismissing the student as being at fault for not understanding doesn't make a good teacher.

Who is asking to be spoonfed? Do you think we have not used the search function? Pouring through hundreds of hours of difficult reading is not always realistic. Time constraints are real and the complete archive of another/foa/fofoa is enormous.

I have read and reread material as often as I can, but I still have only dented the total. Before I ask a question, I use the search function and often come up without a clear answer. And if there is an answer and I want more opinions, I'll ask anyway.

Your comment might be a statement of fact, but it is still disparaging, undirected, and more importantly, not useful.

I understand you don't find it useful to answer the same questions over and over. But being a teacher requires answering the same questions over and over, especially when the subject matter is difficult to understand. If you don't want to do it, why not ignore the questions instead of disparaging them?

Or why not create a "teacher's lounge" where you can have your uninterrupted discussion at a higher level of thought?

Clearly you have one of the best understandings of freegold, you can choose to spread your knowledge or not. But don't make people feel like idiots for not being up to your level.

Bogey said...

So...back on point (I think?) with respect to the subject of the latest article.

Should we be concerned/bothered that our eagles have 50 dollars stamped on them? Would it be better to have coins, like the Krugerrand, that have no face value stamped on them?

Is it conceivable that (after the last dollar gold window is closed/ dollar hyperinflation ensues/ revaluation all gold in a physical-only market occurs) I walk into a bank to sell an eagle (because I trust in the bank's discretion in dealing with larger sums of currency) and, instead of giving me $10,000+ dollars back, they hand me a $50 bill?

Or would it be more likely that I would receive the expected number of dollars in return ($10,000+) but not be required to pay capital gains tax on an eagle whereas I would pay capital gains tax on a Krugerrand, Maple Leaf, etc?

Aaron said...

Hello Bogey-

"Should we be concerned/bothered that our eagles have 50 dollars stamped on them? Would it be better to have coins, like the Krugerrand, that have no face value stamped on them?"

I wouldn't worry about it. Thinking in terms of legalese, it's easy to see where someone might consider drafting legislation to declare, "if one sells gold stamped with a currency equivalent -- we will treat this coin differently and levy additional fees." But if you think of Freegold in a much lager perspective, a physical market used for settling trade imbalances, attempting such legislation would be futile. Eventually those laws would be overturned to ensure liquidity.

--Aaron


(disclosure: I own eagles and k-rands)

Edwardo said...

Bogey wrote:

"I walk into a bank to sell an eagle (because I trust in the bank's discretion in dealing with larger sums of currency) and, instead of giving me $10,000+ dollars back, they hand me a $50 bill?"

Perhaps I misunderstand this aspect of Freegold, but, prospectively, as a shrimp, one will not be selling to a bank, as such, but, rather, to a private dealer in bullion and coins.

One of the key features of Freegold will be that gold, functioning as the sole reference point for all currency regimes, exists outside the banking system, excepting, of course, that banks will hold physical gold on the asset side of their ledgers.

Edwardo said...

My apologies for not including this in my last post, but, the idea that a gold coin stamped with a "legal tender" amount would be treated differently than coins without such an attribute is, upon just a bit of reflection, a non starter.

Blondie said...

RLP said (all quoted italics),

"Clearly you have one of the best understandings of freegold, you can choose to spread your knowledge or not. "

I don't know how my understanding rates, and it is not really of interest to me anyway, nor my place to judge; I simply want to see things as best I can within my own intellectual constraints.
Seems to me that the loosening of said constraints is the more valuable endeavour, and it is to this end that I pointed out various topics which FOFOA has raised which I suspect have been overlooked by many readers as being a little "off topic", but which I found extremely helpful in developing my understanding.

As far as “spreading my own knowledge”, I do have two blogs dealing pretty much exclusively with my thoughts on Freegold already, as well as choking up this comment section with my opinions, and commenting regularly on a couple of other forums, as well as regular email exchanges.

All under the presumption I have something of value to add.

” But don't make people feel like idiots for not being up to your level.“

I’m certainly not attempting to do anything of the sort. I simply stated that I found the comments to have become mind numbing - meaning I felt they were dealing with things that were really superfluous to Freegold. Silver and the Euro have less relevance than the space they occupy here.

”Your comment... is... disparaging, undirected, and more importantly, not useful.“

If you rate my understanding of the topic, as you have indicated, then this comment should have more meaning than the personal slight you have taken it for. If it is not useful, that is only because you are not using it.

” Time constraints are real “

... and they do not just apply to you. I have a spouse, small children, and run my own business. I have spent thousands of hours in the last 2 1/2 years learning about a monetary system which I previously, like most here I suspect (even FOFOA), took for granted until the events of 2008.
Most of what I initially learned about gold in particular needed to be unlearned, because it was BS, so technically many of those hours were wasted.
eg.
The Gold Standard appears virtuous until you understand Freegold.
Fiat currency appears evil until you understand Freegold.
The hard money/goldbug types who make up a large part of the readership of this blog are in many respects the furthest from being able to make sense of it.

cont/

Blondie said...

/contd

”...it [lack of understanding Freegold] may have something to do with the damn hard to interpret language that is used to describe it.“

FOFOA will confirm that I badgered him on this “how about summing it up, a master post, a simplification?” for ages, whereas now I completely agree with him: the language used is actually extremely precise. It is the perspective of the reader that distorts that language.
Perspective is everything.
Seemingly unrelated topics such as fractals are aids in gaining the perspective.
Simplification allows the reader to move straight past the points of most significance without understanding them, and that is a disservice to both the reader and the writer, IMO.

FOFOA wrote in “Defending the Precious”:

”After reading The View: A Classic Bank Run, Blondie wrote a comment that knocked my socks off. He wrote:

"I read this to find FOFOA has cut the Gordian Knot which was the cryptic words of Another. Seems he was simply telling it as is all the while, but the ascent to the spot from which to see it was the difficulty, and yet the view is relatively simple.


It blew me away to find that Another had stated it so plainly, and yet how many had understood? I hadn’t until FOFOA pointed it out. But there was Another’s description, in plain English, the same description I (and FOFOA too until relatively recently I’d wager) had regarded as most certainly “cryptic”. It wasn’t cryptic at all; my perspective wasn’t capable. Few people’s are.

If I could offer some advice to newbies, it would be to not try so hard. Generally speaking, the $IMFS was never configured to be understood; if it was easy to, we would have collectively rejected it in horror long ago. It is a Ponzi scheme. That is one of the few aspects of it that is relevant. Fractally, it has only finite resolution.

What is important is VALUE.

What it is, what you do with it, what you exchange yours for. If you regard money through a lens where you only see value, its assignment, its flow, its unequal exchange, you see what is going on quite clearly in a more conceptual way, and this is liberating, but not particularly challenging intellectually.

As the master proxy for value, unencumbered physical gold is the monetary denominator.
Wealth, the stock of value, is measured by weight (ozs), not in currency.
Currency is valued by gold, not the other way around.

Understanding Freegold has infinitely more to do with dropping baggage than with performing mental contortions.

The reality is the mental contortions are the baggage to be shed.

People like Peter Schiff and Mish have become adept and admired for their understanding and performing of said contortions, so they see the need to drop them least of all.

”Dismissing the student as being at fault for not understanding doesn't make a good teacher.“

I was not attempting to be a teacher. I was not even aware that anyone would view me as such.
Often these comments seem more a dynamic conversation, and that is how I approach them.

I'll go back to silently ignoring all the comments I find superfluous, and we can co-exist in harmony, eh?

This is a frustrating format to a degree for all participants I think.

@ Bogey,

Melt value is the bottom line IMO.

Robert Leroy Parker said...

Frustration is a key point. Thanks for your reply and i apologize for being flippant.

Its just damn hard not knowing what the right decision is to protect my family.

Blondie said...

edit:

I said above, twice, "understand Freegold", which would be more accurately stated "develop an understanding of Freegold".

This is clearly a process, rather than an event.

Bogey said...

Aaron/Edwardo/Blondie,

Thanks for the responses.

Good point about trading directly with a coin dealer instead of a bank. I think this is consistent with FOA's writings.

julian said...

Blondie said, (in italics)

The Gold Standard appears virtuous until you understand Freegold.
Fiat currency appears evil until you understand Freegold.


Excellent point! This is a great measure for one's degree of understanding of the Freegold concept (or any such RP monetary concept). I knew my understanding was developing appropriately when I could perceive this point plainly, and since then I do my best to interject whenever either of those two points are made without qualification. In fact, they are a common way to enter into a meaningful discussion of RPG with others.

the language used is actually extremely precise. It is the perspective of the reader that distorts that language.
Perspective is everything.


Perspective IS everything. To me that's makes the development of "Freegold" understanding also a magnificent journey into one's own self. So much baggage to cast aside, in order to truly See! This is analagous to the metaphors and similes used in spiritual development, the language of self-cultivation. Walking that Trail of Freegold is as much if not moreso a spiritual exercise as it is an intellectual one. And just like self-cultivation, it tends to be a constant process of development. It must be the infinite resolution of RPG's fractal nature.

You can taste it in FOA's (Trail Guide) juicy language.

Still, I wonder what it is about RPG that makes it fractal, giving it that infinite resolution. I still can't wrap my head around that one. (oops, I just noticed my "contortionist" language there!)

- Julian

Blondie said...

Julian,

I wrote you a very long reply, and when I previewed it, blogger lost it. I can't retrieve it. I will type all comments on a word processor in future, then copy and paste.

No time to repeat it now, but you can find my email address in my profile if you want.

My reply may well have conflicted with a lot of readers' baggage anyway.

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