Friday, March 25, 2011

Reference Point Revolution!


I read a great article from Imprimis, the free publication put out by Hillsdale College in Michigan, titled The Floating Dollar as a Threat to Property Rights. [1] The article started out with the curious case of the incredible shrinking kilo (a problem normally faced only by drug lords that employ users as traffickers). Apparently this one particular metallic cylinder securely housed at the International Bureau of Weights and Measures near Paris, France, is the "reference kilo" for not only the global metric system, but even the U.S. customary system in which 2.2 pounds equals this particular kilo.

The problem is, it's shrinking! So far it has only shrunk by 50 micrograms, about the weight of a fingerprint on Earth. [2] But even so, this is a big problem for scientists that deal in exacting calculations that require global standardization. The problem boils down to the definition of a kilogram. The global standard definition of a kilo is this particular cylinder! It was cast in platinum and iridium by Johnson Matthey in 1879, adopted by the first general conference for weights and measures in 1889, and has been the global reference point for the measurements of mass ever since. But some scientists are now complaining that with the exacting tolerances of today's high-tech world, the 21st century kilo needs a new definition. Modern science needs a better reference point for mass. [3]

This got me thinking about reference points, and how they have all—in every single case; temperature, distance, force, pressure, time, etc.—changed and evolved their definitions throughout history to best fit the cutting-edge needs of the time. [4] This is a trend that always faces the opposing forces of inertia—the resistance to change—and progress—the need for change.

Another obvious trend in the evolution of reference points, when viewed in a long-line historical context, is the expansion from local to national to regional and finally to global standardization. This trend, especially, faces the opposition of inertia as national reference points have become part of the national identity of their people. The remnants can be seen everywhere. For temperature we have Fahrenheit and Celsius. For mass we have avoirdupois ounces, troy ounces and metric grams. The world is littered with national currencies. And even foreign languages are a good example of our innate resistance to global standardization.

This trend toward global reference points is a practical—not a moral—evolution. It will continue whether we like it or not. It is an artifact of the human Superorganism. [5] What ends up happening most times is that nations will keep their old reference point for identity purposes, but they will either adopt the best external reference point as a secondary standard or they will affix (peg) to the definition of the most widely used reference point, also known as the focal point. [6] We see this in almost everything. English has become the global standard among many foreign languages. The Imperial pound is pegged to the metric kilogram, as noted above. And prior to 1971, the world's major national currencies were all pegged to gold through the U.S. dollar, another national currency.

The main point here is that while our symbols of national (or regional) identity will always be with us, the unfolding of future "new and improved" reference points will always be global in scope. Just as time moves in only one direction, it can be no other way. In other words, new global standards will be layered on top of quaint and sentimental artifacts of the past. [7]

But let me be clear about one thing before I move on. It is not sufficient to simply move forward without knowledge of and respect for the path that brought us to the present, which is what "the easy money camp" likes to do. Nor is it advisable to run forward while looking backward, expecting the past to reveal what may be directly in front of us, as we so often see in "the hard money camp." [8] To properly prepare for the future, we must know the past—know the Trail that we are on—while not looking backward to find objects that lie ahead.

And now, onward…

The point of the Imprimis article was that the U.S. dollar, not unlike the kilogram—being an important reference point for value especially in the United States—has gone through a number of definitions punctuated by abrupt, often painful, degradations. In the beginning the U.S. dollar was defined as 371¼ grains of silver, with the U.S. adopting the Spanish dollar's definition because of its widespread use as a reference point for value. Later the dollar was redefined as 1/20th of a troy ounce of gold, and then degraded to 1/35th. Then in 1971 the de facto definition of a dollar was removed and the U.S. dollar began to "float" (or more appropriately, "sink") as a reference point.

Throughout the various definitions above, the dollar was gradually adopted by other nations until it became the de facto global reference point for value. Or so we in America and the West think. In fact, gold was always the global reference point and the U.S. dollar's definition—a definition that was defended at the U.S. Treasury gold window by spewing gold—became a means to the acquisition of the value reference point itself. If the dollar had been that global reference point, the world would have been happy merely accumulating dollars, and Nixon would have never had to close the gold window.

It turns out that the dollar was always a poor reference point for value because its definition could simply be changed or removed altogether for political expedience, over and over, again and again. Yet some in the U.S., some with a patriotic yet myopic perspective, think that all we need to do is redefine the dollar so that it can once again become the global benchmark of value. Something it never was in the first place. And something it never will be. (All the dollar ever did was adopt the reputation of an external reference point and then fail to live up to it. Over and over, again and again.)

Long in the past, before telephones and air travel, before computers and the Internet, local and national reference points were far more important and relevant than what was happening on the other side of the planet. But today, and moving forward, it matters more how the many national currencies will relate to each other, how they will exchange, on what reference point their exchange will be judged, than what any individual locality or nation does to change or manipulate its own currency. As I wrote above, the trend toward global reference points is a practical—not a moral—evolution. It will continue whether we like it or not. It is an artifact of the human Superorganism.

And this got me thinking about the concept of Purchasing Power Parity, or PPP. With the advent of global air travel, I can take $10,000 out of my bank in the morning, get on a plane, and get off in another country in the evening, exchanging my $10,000 at the airport for the local currency. This little exchange should not cost me anything in purchasing power, it should essentially be free, or else I wouldn't do it. Or perhaps if I actually gained purchasing power by flying somewhere, I would do it more often! But the fact of the matter is that while the PPP concept works in principle, it doesn't always work in practice. Especially given a variety of purchasing choices in the marketplace, some of which are more native to one country than another.

The question comes down to the overvaluation or undervaluation of various economic currencies. The way ants—and by ants I mean economists (see footnote #5)—try to deal with this question is by using "baskets" of goods or currencies. But the problem with baskets is that i) they present too many moving parts, and ii) they present the option (temptation) for political manipulation (e.g. CPI "basket" and SDR "basket of currencies"). And for these two (obvious?) reasons, baskets make poor reference points for value.

Just yesterday, Professor Michael Pettis wrote in Is Loan Growth in China Slowing?:

"… a few years ago people suggested that the RMB might be undervalued by 30%. Since then the RMB has appreciated by 20-25%. And yet today people are still arguing that the RMB may be undervalued by 30%. How is it possible that so much appreciation has not seemed to affect the estimates of undervaluation?

"Before answering it is worth pointing out that there is no way that anyone can determine precisely the amount of undervaluation of the RMB, or any other currency, and so any estimate can be nothing more than that – an estimate based on many moving parts. There are plausible reasons for arguing that a currency is undervalued or overvalued, but there is absolutely no way to determine with any precision by how much.

"This difficulty is compounded by the fact that many analysts are simply getting the math wrong. So for example when people say the RMB is undervalued by 30%, they often mean that the dollar is overvalued by 30%. These two claims may sound like the same, but of course they aren’t. If the RMB is undervalued by 30%, it means that the dollar is overvalued by 43%, not 30%. I have seen so much confusion on this issue that I pretty much give up on trying to understand what people mean when they discuss currency changes without seeing their actual numbers."


That's right! We need a single moving part! And by we, I mean not just the ants, but the colony, the Superorganism. The human Superorganism desires to streamline the concept of PPP as much as possible, for its own benefit. And the way that is done is by using a single global reference point. But as I wrote in Life in the Ant Farm, we individuals are not nearly as smart as the Superorganism. Case in point—Reference Point: Big Mac!


At any given point in time every currency has a certain purchasing power inside its own legal tender zone, and then it has a different purchasing power outside the zone. The Economist magazine has been publishing the Big Mac Index every year since 1986. The index is a humorous way of looking at the purchasing power parities of various currencies using the McDonald's Big Mac as the Reference Point.

Other variants of this index have used as the Reference Point, the Apple iPod, a cup of Starbucks coffee, and even Ikea's Billy Bookshelf. The Economist describes its original, ground-breaking index thusly:
The Big Mac index is based upon the theory of purchasing-power parity (PPP), the notion that a dollar should buy the same amount in all countries. Supporters of PPP argue that in the long run, the exchange rate between two currencies should move towards the rate that would equalise the prices of an identical basket of goods and services in each country.

Our “basket” is a McDonald’s Big Mac, produced in 110 countries. The Big Mac PPP is the exchange rate that would leave hamburgers costing the same in America as abroad. Comparing actual rates with PPPs signals whether a currency is under-or overvalued.

Two of the Economist's findings for 2010 were that the most expensive place to buy a Big Mac (with U.S. dollars) was in Norway, where it cost US$7.20 (on 7/21/10 after exchanging your dollars into the local Kroner currency), and the cheapest was in the Ukraine at US$1.84. Interpreting this data is where it gets a little tricky.

Click on images to enlarge


Depending on your cognitive agility, there are any number of mental contortions that you can do with this data while extracting whatever value may be hiding in it. For example, you can imagine that Big Macs are a currency and the local currencies are the object of desire. Or that U.S. dollars purchased with Big Macs transported to foreign countries are the goal. You can pretend that Big Macs have the properties of gold, like durability, divisibility and portability, and imagine the arbitrage opportunity based on these charts, and how that arbitrage would affect the currency exchange.

In fact, there is a bit of real value that can be extracted from this little exercise that I'll get to in a moment. But first, the clearest lesson is that Big Macs make a poor global reference point for value for many obvious reasons.

What makes something a reference point is that everything else in its category is measured against it. Like the cylinder at the top of the page, all mass everywhere is ultimately measured against this one cylinder. For the category of value, the value of anything anywhere would be measured against the value of the reference point. And in the case of value, this reference point should be a thing that can be owned and valued by anyone anywhere, so that it acts properly as a baseline reference point for the value of everything else. It should also, ideally, provide the same utility to anyone anywhere.

The point is that it can't be something that is only found in Asia, or something that is only made in the US. And it can't be a product like a Big Mac that would not be valuable to vegetarians or food snobs. It needs to be something that has the same utility to everyone, that utility being that it is only something valuable to buy and store so that later you can redeem that value in some other way. A reference point can be used in its unit of account function even without the presence of the physical item. But the focal point item for a value reference point needs to be something that CAN actually be gotten and used exactly the same by anyone anywhere.

And as we continue on this train of thought, it becomes clear that the ideal reference point for value is, in fact, the single focal point reserve asset chosen by the human Superorganism. It also becomes clear that today the U.S. dollar is filling this role, somewhat haphazardly, and also under the opposing forces of inertia—the resistance to change—and progress—the need for change. It could be said that we in the West are providing the inertia while the rest of the world is pushing for change. At least that's what I see happening.

Clearly, we in the West still measure the value of anything anywhere against the dollar. Think about it for a second. Can you tell me the value of a condo in Hong Kong? How about the value of a night in a five-star Singapore hotel? And what's the value of a 50' yacht in Dubai? You'd likely quote me all three in dollars, especially if you are a Westerner. As FOA pointed out, we assess the relative values of any two things—like an apple versus a banana—by mentally converting them into dollars.

And while our Western minds have been trained to use the dollar quite efficiently in this way, there are a few technical problems with the dollar being the reference point of value. Not unlike the kilo cylinder at the top which is causing problems for some scientists, the dollar, too, is shrinking.

The main problem, which the Imprimis article points to, is that the dollar is no longer defined as anything other than how the market decides to value it on any given day. This could be called a floating definition. So the article proposes that the needed fix is to redefine the dollar. Perhaps we could redefine the dollar to be equal to one Big Mac! The U.S. Treasury could then buy all McDonald's restaurants everywhere and defend the dollar by globally spewing Big Macs for a buck. Can you think of any problems with this plan?

Okay, let's imagine they redefined the dollar to be 1/5,000th of an ounce of gold. Can you think of any problems with this? I can. What will be the definition of gold? Does this sound like a silly question? Well, today "gold" is trading at around $1,435 per ounce, and this price is discovered through the dynamics of supply and demand in a market that includes claim checks on unallocated pools of gold, shares of funds that are physically non-divisible below 10,000 ounces, and promises of future delivery of gold from a variety of sources including mines (gold that is still underground), hedgefunds (gold that will have to be sourced if demanded) and banks (gold which is fractionally reserved). These markets all trade (fluctuate) in dollars. If the dollar is suddenly defined as a piece of gold, what will happen to these markets?

Maybe they should just define the dollar as 1/500th of a share of GLD! Then the U.S. Treasury could defend the definition by spewing GLD shares! Or they could define the dollar as 1/500,000th of a COMEX contract! Or better yet, they should just define the dollar as 1/5,000th of a Bullion Bank liability for an ounce of gold. The Treasury could partner with JP Morgan and defend the definition by spewing liabilities!

What we have here is not a problem with the definition of the dollar, the quaint and sentimental reference point artifact of the past. What we have is a problem with the definition of gold, the 21st century (and all others too) reference point of value!

I said earlier that there was a bit of real value to be discovered by thinking about the Big Mac index. And that discovery is that a Big Mac hamburger actually has one characteristic or property that makes it a better reference point for value than either the dollar or even the modern definition of "gold." That property is physicality! Big Macs only come in one variety, a discrete, physical hamburger. There are no Big Mac futures or forward sales, no unallocated Big Mac pool accounts, and the only way to deliver a Big Mac is to either make it on the spot or physically transport it to where it is demanded. Can you imagine if they handed you a BB (Big Mac Bank) liability at the drive-thru window?

I wrote above, "pretend that Big Macs have the properties of gold, like durability, divisibility and portability, and imagine the arbitrage opportunity based on these charts, and how that arbitrage would affect the currency exchange." Such an arbitrage would ultimately flatten that first chart, making a Big Mac cost the same number of dollars in any country you traveled to. In fact, gold (under its modern definition) acts just this way.

The definition of "gold" today, at least in financial circles, is completely messed up. Why do you think I have to constantly say physical gold? And not only that, I continuously have to define what I mean by physical whenever I say it! It's ridiculous. Ask any fund's manager how much they have in gold. He'll likely quote you a number around 5-10% that includes mining stocks, paper promises and a host of other precious metal stocks. Ask him about physical gold bullion, specifically, and he'll quote you a much lower percentage that likely includes only PHYS and GLD. Those are the financial definitions of "gold" and "physical gold" today.

The problem is that the arbitrage that makes PPP work with gold today is too easily and asymmetrically achieved, which ends up favoring some currencies over others. What I mean is that hamburgers are actually a "harder currency" today (harder=more difficult) than "gold" under the common Western understanding of "gold investments." [9] Like I said, to be delivered Big Macs must either be produced on the spot or physically delivered from another place. Gold, on the other hand, can be sold into demand with the click of a mouse that creates a new liability on the balance sheet of JP Morgan or one of the other Bullion Banks. This is asymmetric in that most Bullion Bank gold liabilities originate from London and New York, and it is a definitional problem that makes it impossible for the term "gold" to be used to define anything else, like the dollar.

So before we can even consider the definition of the dollar, we must first solve the problem with the definition of "gold." And once solved, we may find the question of redefining the dollar to be a moot point. But whether you believe me or not about it becoming moot, we must still face first things first.

In order for a thing to perform as a reference point for value, when market demand for that thing rises it must be met with the difficulty of the physical, not satiated with the ease of promises. This is the main reason currency makes a poor reference point for value. When demand for currency rises it is hoarded which slows the economy. Value is the output of the economy. It is the opposite of currency. When the demand for currency is collapsing, the demand for value is rising, and vice versa.

This is why Central Banks came into being in the first place; to make sure that rising currency demand does not hurt the economy. This is why the BOJ injected trillions of yen after the earthquake; to protect vital economic activity from the spiking demand for currency.

I know this is a difficult concept to swallow, but value and currency are polar opposites, which is why, if gold is the reference point for value—which it is—it cannot function properly and also be an economic currency—or tied at a fixed parity (price) to currency in any way! To view an economic currency built to function properly alongside the reference point gold, look no further than the architecture of the euro. [10] This is why the first ECB President stated clearly and publicly that the euro "is the first currency that has… severed its link to gold." [11]

I want to mention one more very significant advantage to physical gold being the global reference point for value. In another recent article by Michael Pettis, who I mentioned earlier, titled The dollar, the RMB and the euro?, talking about the struggles ahead for the RMB, he writes:

"Although China will struggle to bring its current account surplus down, there are only two ways it can do so (remember that the current account surplus is equal to savings less investment)."

The two ways he lists are 1) increase internal investment, a non-starter in China right now, or 2) get the people to spend their money (consume) rather than saving it—decrease savings. It's a shame that he can't see that China is already doing this by encouraging its people to buy the physical reference point of value itself. By buying physical gold, Chinese savings don't raise the current account surplus, they LOWER it. It's still very real savings, but it acts like consumption on the balance Pettis describes. More correctly, his "accounting identity" should read, "current account surplus is equal to non-gold monetary savings less investment." Or stated another way, "paper savings = production – consumption (including physical gold purchases)." And surprise-surprise, China is apparently already ahead of the game.

By encouraging savings in gold, this raises demand for gold inside China and uses up some of the dollars that would have otherwise been recycled back to be borrowed and spent by the US Treasury. In other words, every ounce of gold that flows into China today represents $1,430 that Bernanke will have to print via QE rather than borrowing from China.

What it means

What this Reference Point Revolution (RPG/Freegold) means for Western savers like you and me is that at some time this year or next (see footnote #7) perceptions of value will likely be shattered: "like a mirror in pieces on the floor, revealing another mirror standing right behind it, providing another perspective… the perspective will be of necessity, a rude awakening, so to speak… so much value is just perception only, not reality, and that perceived value will go up in flames, to reveal this perspective from which more accurate valuation will spring… the mass of acting humans (aka economy) will better understand money and savings, intuitively, through this perspective… gold will no longer be talked about, treated, and therefore viewed as a commodity, it will cross over to the other side of the fence… most won't care to really understand in any detail, they will just know that it is reality and will approve of its prospects… The value of gold will change as people’s perception of its utility to them changes." [12]

"Can you imagine a gold price of AT LEAST $100,000 per ounce? How about a real purchasing power increase, measured in today's dollar purchasing power, to somewhere between $10,000 and $100,000? In the bell curve below we can see that the most probable PP landing zone is between $25,000 per troy ounce and $85,000 per troy ounce. Can you think of a better reason to invest in physical gold coins right now? How about protection from hyperinflation? $100,000 is the bare minimum in this case. The top is infinite! Imagine $12 trillion per troy ounce... the size of today's US national debt reduced to one single gold coin you could buy tomorrow! Can you imagine it? It doesn't really matter if you can't see it like I do, as long as you buy the coin. As JFK liked to say, 'a rising tide lifts all boats', not just the ones that believe in rising tides." [13]

"So how much of your perceived wealth have you locked into a real, solid, "good as gold" wealth reserve? I shouldn't have to say this because it is so obvious, but it is clearly better to "cash out" of the paper game and "lock in" your profits BEFORE the two biggest bubbles in history pop. That way you beat the rush, so to speak." [14]

The demand necessary to perpetually sustain a revaluation of gold at, say, $55,000 per ounce is already present in the gold market. One only has to understand why Giants—people with enough money to actually move the price of gold—do not find it in their best interest to use their money to move the price of gold. "Gold is neither expensive nor cheap today. It is theoretically free. It is a monetary conversion, like buying a Treasury or a money market fund. To the Giants, do you think gold is a game of "how big is my slice of the pie?" Or is it "how much is my slice of the pie worth?" Is it better to have a 15% slice of a commodity pie, or a .4% slice of the global wealth pie? Is it more likely that all the gold in the world combined, when used as a wealth reserve, will be worth a large percentage of everything? Or that it is worth only 30% of the known oil reserves?" [15]

"But right now, for perhaps the first time in history, individuals can join central bankers and the true Giants of the world by participating in the ultimate hedge fund. One that, like modern hedge funds, focuses on the hedge itself as the key investment with the most leverage, with the expectation of life-changing returns. And the main differences between this and traditional hedge funds are 1) much less risk, and 2) it is open to ALL individuals, including you!" [16]

"Freegold is our destination with or without the euro. Even on the outside chance that an SDR or a similar super-sovereign currency is accepted as the new global reserve currency, it would have to contain gold at Freegold valuations in order to be viable, accepted and trusted, in the same vein as Randy's comment about an EMF. So any way you cut it, the future comes to us with really high value gold by today's standards." [17]

"Anyway, this is what Freegold is all about. It is about deducing the inevitable implications of an unstoppable avalanche. And it is about fiat currency finally finding its natural equilibrium with a parallel physical gold wealth reserve. And trust me, fractional paper gold promises won't work in this new world, so equilibrium will likely be somewhere north of $50,000 per ounce (and that's from just the functional change, don't even ask me about the inflation-adjusted price)." [18]

"Take it for whatever it's worth, which, of course, only you can decide for yourself. The $IMFS is failing. Please don't let the fears, envy or baseless doubts of others obscure this reality. You can choose to participate in the recapitalization of world finance or you can be a victim of it when the lights go out. The choice is right in front of you. So decide what you'd rather be: a participant in the rebuild, or a victim of the collapse. Amazingly you still have this choice available as I type these words." [19]

"As ANOTHER and FOA taught us, a time of systemic transition is completely wrong for trading on technicals. Instead, it is the PERFECT time to consolidate on fundamentals, then sit back and wait. The reward, as ANOTHER put it, will be enough for one's lifetime. And what is gold? Oh yeah, it's the ultimate wealth consolidator." [20]


And now, for all you FOFOA noobs, I will close, as I so often do, with another mind-blowing excerpt from FOA's Gold Trail. [21]

My friends and I are Physical Gold Advocates. We own physical outright and do so employing the same reasoning mankind used in owning gold throughout most of history. However, there is a major difference between our perceptions of this historic reasoning and the current Western perceptions so many of you are attuned to. Our's is not a mission to unseat the current academic culture concerning money teachings; rather it is to present the historic and present day views of the majority of gold owners around the world. Those of simple thought and not of Western education. Plain people that, in bits and pieces, own and use the majority of above ground gold.

Most contemporary Western thought is centered around gold being money. That is; gold inherently has a money use or money function; built into it as part of the original creation. This thought presents a picture of ancient man grasping a nugget of gold, found on the ground, and understanding immediately that this is a defined "medium of exchange"; money to buy something with. This simple picture and analysis mostly grew in concept during the banking renaissance of the middle ages and is used to bastardize the gold story to this day. Even the term "money", as it is used in modern Bible interpretations, is convoluted to fit our current understandings.

Much in the same way we watch social understandings of music, literature, culture and dress evolve to fit current lifestyles, so too did gold have a money concept applied to it as it underwent its own evolution in the minds of political men. This is indeed the long running, background story of our Gold Trail; an evolution, not of gold itself, but of our own perceptions of this wealth of ages. A evolving message of gold that is destined to change world commerce as it has never changed before.

Onward my friends

In ancient times there was no concept of money as we know it today. Let me emphasize; "as we perceive money today". Back then, anywhere and everywhere, all things known to people were in physical form. All trade and commerce was physical and direct; barter was how all trade was done.

If one brought a cart to market, loaded with 20 bowls and 20 gold nuggets, he used those physical items to trade for other valued goods. The bowls and gold had different tradable value; as did every other thing at the market. Indeed, gold brought more in trade than bowls. Also true; if a barrel of olive oil was in short supply, it might bring even more in trade than all the gold in the market square.

The understanding we reach for here is that nothing at the market place was seen as a defined money value. All goods were seen simply as tradable, barterable items. Gold included. Truly, in time, some items found favor for their unique divisible value, greater worth and ease of transport. Gems, gold, silver and copper among others, all fit this description. These items especially, and more so gold, became the most tradable, barterable goods and began to exclusively fill that function.

But the main question is: was there money in that market place? Sure, but it was not in physical form. Money, back then and today, was a remembered value in the minds of men. Cumbersome it may have been, but even back then primitive man had an awesome brain and could retain the memory values of thousands of trades. In every case, able to recall the approximate per item value of each thing traded. That value, on the brain, was the money concept we use today.

Eventually gold climbed to the top of in the most tradable good category. Was gold a medium of exchange? Yes, but to their own degree, so were the bowls. Was gold a store of value? Yes, but to a degree, so were dinner plates. Was gold divisible into equal lesser parts to define lesser barter units? Yes, but to a degree one could make and trade smaller drinking cups and lesser vessels of oil. Perhaps gold became the most favored tradable good because the shear number of goods for good traded made a better imprint on ones memory; the worth of a chunk of gold in trade became the value money unit stored in the brain.

Seeing all of this in our modern basic applications of "money concept", almost every physical item that naturally existed or was produced then also held, to a lesser degree, gold's value in market barter. But most of us would have a hard time remembering a bowls value and thinking of a bowl as money. The reason this is such a stretch for the modern imagination is because bowls, like physical gold, never contained or were used in our "concept of money". Back then, as also today, all physical items are simple barterable, tradable goods; not of the money concept itself. Their remembered tradable value was the money.

Money, or better said "the money concept", and all physical goods occupy two distinct positions in our universe of commerce and trade. They have an arms length relationship with each other, but reside on different sides of the fence and in different portions of the brain.

For example: say I take a bowl to the mint and place an official government money stamp on the underside. The bowl now is stamped at $1.00. Then I take one tiny piece of gold to the mint; one 290th of an ounce or at today's market a dollar's worth. They stamp that gold as $1.00. Which physical item would be money? Answer; neither.

Using ancient historic reasoning and the logic of a simple life; the bowl could be taken to the market square and bartered for another good. Perhaps a dinner plate. In that barter trade, we would most likely reach an understanding; that the "bowl for plate trade" imprinted our memory with what a digital, numeric dollar concept is worth. Again, the 1.00 unit was only stamped on the bottom for reference. While the dollar concept is only a rateable unit number to compare value to; like saying a painting is rated from one to ten when judging appearance.

We could do the exact same thing without 1/ 290th ounce piece of gold as with the bowl above. In the process we again would walk away with the knowledge of what a $1.00 unit of money value was worth in trade. The physical gold itself was not the money in trade; the value of the barter itself created the actual money value relationship. Again, the most important aspect for us to grasp here is this:

----- The use of physical gold in trade is not the use of money in trade. We do not spend or trade a money unit, like the dollar, to define the value of gold and goods: we barter both goods and gold to define the worth of that trade as a remembered association to the dollar money unit. That remembered worth, that value, is not an actual physical thing. A dollar bill nor an ounce of legal tender gold represent money in physical form. Money is a remembered value relationship we assign to any usable money unit. The worth of a money unit is an endless mental computation of countless barter trades done around the world. Money is a remembered value, a concept, that we use to judge physical trading value. -----

Onward

Naturally, for gold to advance as the leading tradable good it had to have a numerical unit for us to associate tradable value with. We needed a unit function to store our mental money value in. In much the same way we use a simple paper dollar today to represent a remembered value only. Dollars have no value at all except for our associating remembered trading value with them. A barrel of oil is worth $22.00, not because the twenty two bills have value equal to that barrel of oil: rather we remember that a barrel of oil will trade for the same amount of natural gas that also relates to those same 22 units. Money is an associated value in our heads. It's not a physical item.

The first numerical money was not paper. Nor was it gold or silver; it was a relation of tradable value to weight. A one ounce unit that we could associate the trading value to. It was in the middle ages that bankers first started thinking that gold itself was a "fixed" money unit. Just because its weight was fixed.

In reality, a one ounce weight of gold was remembered as tradable for thousands of different value items at the market place. The barter value of gold nor the gold itself was our money, it was the tradable value of a weight unit of gold that we could associate with that barter value. We do the very same thing today with our paper money; how many dollar prices can you remember when you think a minute?

This political process of fixing money value with the singular weight of gold locked gold into a never ending money vs gold value battle that has ruined more economies, governments and societies than anything. This is where the very first "Hard Money Socialist" began. Truly, to this day they think their ideas are the saving grace of the money world. It isn't now and never was then.

When investors today speak of using gold coin as their money during a full blown banking breakdown, what are they really speaking of?

In essence, they would be bartering and trading real goods for real goods. The mention of spending gold money is a complete misconception in Western minds. Many would bring their memories of past buying with them and that is where the trading values would begin. Still, it would take millions of trades before the "market place" could associate a real trading value to the various weight units of gold. It took mankind hundreds of years to balance the circulation of gold against its barterable value. Only then could a unit weight value become a known money concept. In that process, in ancient times, gold had a far higher "lifestyle" value than it has seen in a thousand years. This value, in the hands of private owners, is where gold is going next.

If you are following closely, now, we can begin to see how easy it is for the concepts of modern money to convolute our value and understanding of gold. It is here that the thought of a free market in physical was formed. Using the relationship of a free physical market in gold, we will be able to relate gold values to millions to goods and services that are currency traded the world over. Instead of having governments control gold's value to gauge currency creation; world opinion will be free to associate the values of barter gold against barter currency. In this will be born a free money concept in the minds of men and governments. A better knowledge and understanding of the value of all things.
-FOA (2001)

Sincerely,
FOFOA

[1] Hillsdale College is a small liberal arts college with a student body of about 1,300. It does not accept federal or state taxpayer subsidies for any of its operations. Imprimis is dedicated to promoting civil and religious liberty by covering cultural, economic, political and educational issues of enduring significance. The content is drawn from speeches delivered at Hillsdale College events. Imprimis is one of the most widely circulated opinion publications in the nation with over 1.9 million subscribers. That's a lot of readers for this type of monetary article. And this article was the only content in the Feb. edition.
[2] A kilogram is a scientific measure of mass, not weight, because weight is not universal while mass is. An ounce of gold on the moon, for example, would only weigh as much as 5 grams on Earth.
[3] One of the leading alternatives for a 21st-century kilogram is a sphere made out of a Silicon-28 isotope crystal, which would involve a single type of atom and have a fixed mass. Another is to link the kilogram to a fundamental unit of measurement in quantum physics, the Planck constant. This redefinition would bring the kilogram into line with the six other base units that make up the International System of Units (SI) – the metre, the second, the ampere, the kelvin, the mole and the candela. None of these are now based on a physical reference object – the metre is defined in terms of the speed of light, for example, while the second is based on atomic clocks.
[4] An appropriate example is that before the metallic cylinder, a gram was defined as "the absolute weight of a volume of pure water equal to the cube of the hundredth part of a metre, and at the temperature of melting ice."
[5] For an explanation of the term Superorganism, please see my post Life in the Ant Farm.
[6] For an explanation of the term Focal Point, please see my post Focal Point: Gold.
[7] Punctuated Equilibrium is a good description of how monetary evolution proceeds. Here's an example of what I mean. Notice the regularity of the cycle. Your homework assignment is to uncover what the dates represent in the monetary evolutionary cycle:

—Equilibrium—
1893-1897 **Punctuation**
—Equilibrium—
1930-1934 **Punctuation**
—Equilibrium—
1968-1971 **Punctuation**
—Equilibrium—
2008-____ **Punctuation**
—Equilibrium—

From the cyclical pattern above, it seems to me like ____ should be either 2011 or 2012. What do you think? Should we ask Marty?

For an explanation of the term Punctuated Equilibrium, please see my post Evolution.
[8] For an explanation of the terms "hard and easy money camps," please see my post The Debtors and the Savers.
[9] "When we talk about gold money we often use the term "hard money." And one misconception that pops into most people's mind is that "hard" money means hard like a rock, or hard like a piece of metal versus "soft" like a piece of paper that folds nicely into my wallet. Or the ultimate soft, a digital electron that moves at the speed of light.

"This may not seem like a big deal, but I think it is. What is actually meant by "hard" money is that it is difficult, or hard to get. The opposite of hard being easy, not soft. Hard money cannot be expanded easily (without risk) because it has an anchor in the physical world."
From Just Another Hyperinflation Post - Part 2
[10] For more on the euro's architecture, please see my post Reference Point: Gold - Update #1
[11] The full line was, "It is the first currency that has not only severed its link to gold, but also its link to the nation-state." See Acceptance speech by Dr. Willem F. Duisenberg, President of the European Central Bank, Aachen, 9 May 2002
[12] Quoted from Julian's excellent comment.
[13] From Gold is Wealth
[14] From Gold: The Ultimate Un-Bubble
[15] From Gold: The Ultimate Wealth Reserve
[16] From Gold: The Ultimate Hedge Fund
[17] From Synthesis
[18] From Equilibrium
[19] From How Can We Possibly Calculate the Future Value of Gold?
[20] From Gold: The Ultimate Wealth Consolidator
[21] Please see the top of this blog for to whom it is a tribute.

From 44:50 to 47:00 Robert Zoellick discusses his RPG comment. The video will automatically start at 44:50.

225 comments:

1 – 200 of 225   Newer›   Newest»
SilverDoctors said...

We can bring new reference points to the gold and silver markets by removing JPMorgan and HSBC's manipulations, and bringing about free gold and free silver!

Crash JP Morgan, Charge Silver! (Using JP Chase's Own Freedom 0% APR credit card)

http://silverdoctors.blogspot.com/2011/03/crash-jp-morgan-charge-silver.html

Blondie said...

Great post, FOFOA. An instant classic even.

Your mention of punctuated equilibrium gave the following timeline:

—Equilibrium—
1893-1897 **Punctuation**
—Equilibrium—
1930-1934 **Punctuation**
—Equilibrium—
1968-1971 **Punctuation**
—Equilibrium—
2008-____ **Punctuation**
—Equilibrium—

Punctuated equilibrium can easily be seen as a fractal pattern in evidence in everything, at all scales: relative calm (stasis) in contrast to the punctuation.

For example, one's life may not seem calm, but it is in the context of its punctuation (death).

In this light, I suggest that the approaching punctuation is not really applicable to the timeline given, other than also being monetary in nature: it is of a magnitude (think larger scale) which will make the punctuations on the timeline appear as stasis in comparison.

Blondie said...

edit: replace "approaching" with "current".

Indenture said...

"the dollar was gradually adopted by other nations until it became the de facto global reference point for value. Or so we in America and the West think. In fact, gold was always the global reference point and the U.S. dollar's definition—a definition that was defended at the U.S. Treasury gold window by spewing gold—became a means to the acquisition of the value reference point itself. If the dollar had been that global reference point, the world would have been happy merely accumulating dollars, and Nixon would have never had to close the gold window." FOFOA

Newbies should read that paragraph a couple times.

costata said...

FOFOA,

I think this is one of your best posts. As a bonus the sheer length of it will reduce the sound bite brigade to tears.

Cheers

victorthecleaner said...

FOFOA,

thanks for the long and detailed article. I have one comment on the punctuation question. Your 2008-? sounds very plausible, and I am even tempted to believe in the timing. This time.

As a caveat one should mention though that Another thought that the punctuation would be the collapse of the bullion banking system in 1999+x. He was right that they got under tremendous pressure in Sep 1999 (my interpretation: in addition to the Washington Agreement, the bullion banks were told to get their books in order, that the CBs would provide the "gold of the last resort" up to the announced quantities, but not anything beyond that), and then in March 2001 (my guess: investors having spotted a weakness and trying to squeeze the BBs). A long term chart of LBMA GOFO can serve as the "BB stress-o-meter". If GOFO is indeed a good indicator, all BB problems ever since (e.g. Oct 2008, Jan 2010, even silver in Jan-Mar 2011) have been minor compared with what happened in 1999 and in 2001.

Second, when the dotcom bubble popped in 2000-2003, many people thought that this would mark the end of the old financial system. It did not. They escaped again.

What we are rather witnessing is a "slow motion train wreck" as John Authers of the FT calls it. I would add that the expected cleanup is delayed by the gullibility of the mass of institutional investors (including the sovereign wealth funds who could not buy enough US investment banking stocks in late 2007).

If everyone were as sceptical as Another, they would have crashed the system in 1999. But people are not, and so it drags on. Why not even longer?

I have been thinking about what might finally push the dollar over the edge. My conclusion is that it will probably only be rejection domestically in the US because of retail price inflation getting out of control. When will we get there?

Victor

Wejn said...
This comment has been removed by the author.
cetarro said...

Ever since gold has been used as money, those in power have been trying to find a way to debase it to steal from the bourgeois. They have finally landed on the perfect system by which to do that and you think they'll all of a sudden implement free sound money? Why? I think that's nuts. That's like saying the US will return to capitalism, or start honoring the constitution. Or that human nature (greed, immorality, etc.) will cease to exist. I don't get it.

Diamond Jack said...

Free silver
implement free sound money

FOFOA, have you given thought to a subscription service?

Paul said...

and probably lose all the fresh free ideas of commenters worldwide ?

you got to love silver for that one ;-)

Michael H said...

victor, (and Blondie, if I am reading your comment correctly),

I am also not ready to claim certainty on the timing. As you say, victor, some very intelligent people were calling for the end in 1999-2001. What if 2011 is like 2008 -- economic trouble but not total financial upheaval and reset. Maybe they could kick the can down the road another 5 years.

That said, I'd rather have my physical gold than not, since we know not the hour nor the day. Still, not ready to follow SilverDoctors advice and put some metal on the charge card (hasn't anyone learned anything from the Hunt's?).

myanmarinvestor's comment on the previous thread gave an excellent reason for the paper gold market to fail before the dollar does. To paraphrase, small dominoes will knock over bigger dominoes, and the USD is the biggest domino of them all.

In other words, the paper gold market will be sacrificed to keep the dollar functioning just a little bit longer.

Michael H said...

Maybe someone more intelligent than me can help me with this question:

What is different about 2011 that the FED can't repeat the actions from 2010, or at least can't achieve the same results?

In 2010, we had:

- the end of QE1
- a stock market crash that didn't significantly destroy the market capitalization (that was a feat!)
-a flight-to-safety effect that reduced interest rates
- QE light
- QE2 announcement that further lowered interest rates as everyone front-ran the FED
- finally QE2 which supported financial asset prices at the cost of increasing interest rates.

What is different this year that this scenario could not repeat?

I ask with the intuition that something is different, but I just cannot put my finger on it.

Michael H said...

One more question:

Brian Sack and Ben Bernanke say that it is the stock of FED asset purchases that matter, no the flow.

See for example,
http://www.zerohedge.com/article/jan-hatzius-hypothetical-qa-ben-bernanke

"We don’t think so. We believe that the impact of LSAPs works via the stock of securities held by the Federal Reserve, not the flow of purchases. This distinction sounds like a technical detail, but it is actually very important. If it is the flow of purchases that matters for the level of interest rates and asset prices, interest rates will rise as soon as the flow goes from the current $75bn-$80bn per month to zero. But if it is the stock of purchases that matters, rates will only rise once we announce a reduction in our securities holdings."

FOFOA says that, as far as gold is concerned, it is the flow that matters.

Are Bernanke and Sack wrong? Or is the treasury market different from the gold market in this respect?

I ask because I am wondering whether the economy is going to react to Sack/Bernanke's actions in the way that they expect.

myanmarinvestor said...

FOFOA et al.

Interesting post. In particular I was surprised to see the mention of the SDR possibly taking over the role of the EURO under a Freegold system. This is the first time that I have seen this suggestion among these pages, although I may well be wrong on that (?).

I must admit that in recent months, I have been concerned about ECB policies, and the sudden change to the next inline for ECB president.

The ECB appears to me, to have moved much more in line with the Fed policies,eg QE. Additionally, the perpetual bailouts of nations, enforced against the will of the people, that serve solely to prop up banks from the larger nations and are another form of money printing.

In totality it may be possible that the ECB has moved far away from the strategic plan under which the Euro was created, and that excessive money printing is undermining the Euro's supposed future role as the world's foremost currency under Freegold.

I am hoping that this forward looking community, can provide the evidence to either refute or support my speculative charges, the result of which may require a closer examination of SDRs and (free)gold's function as outlined by IMF Chief Robert Zoellick.

Either way it was interesting that Mr Zoellick referred to freegold by another name, whilst also denouncing a return to a gold standard. Looks like their might be some competition for ultimate honors!

Robert said...

A really, really great piece FOFOA. Long may you write!

Re Big Mac index and such, I offer a comment or two. The other evening I went to have a Big Mac near where we are staying (on visit to Lima, Peru). It cost roughly the same as in America (although my math was roughly done in my head). However, I got my haircut by Mappy for $4.50 (which included a generous tip). Costs $25.00 in the town where I live in America. Most stuff in Peru is CHEAP, only imported items are not (yet I want to compare the price of Absolut Raspberry back in the US to see). Yes, Havana Club rum is everywhere down here!

:)

Gold jewelry in Peru is not bought anywhere near as much as before (so expensive). But, the system is different. Most jewelry gold is 18 karat, and (like in Asia) is sold by weight. They put it on the scale, look up the price and do the deal. Hardly anyone wears gold jewelry anymore, too tempting for street thieves...

affedavid said...

Stepping out of the woodwork, I would like to look at the issue of transition to FG/RPG (my original intention was to look at economic metrics as less fundamental reference points whose validity/usefulness would be also impacted by the FG/RPG systemic transformation, but it is easier to first discuss the transition dynamics). I categorize the transition alternatives into three scenarios. FOFOA seems to be anticipating scenario 2. I also find it most likely, although I feel that there is a desire to try scenario 3 as the primary option, leaving scenario 2 as the fallback option if scenario 3 fails. I'm sure the commenters here can improve the below sketches with further insights...

Aaron said...

Posting HTML CODE within Blogger Comments


For those that have been patiently awaiting a brief lesson in how to include cool formatting within your comments such as bold, italics, and hyperlinks, wait no more! Do you have paper and pencil handy? Then let's begin.

Let's say for instance, that just tonight you saw a cool Freegold vending machine downtown by the coffee shop and you can't wait to email your buddy about this new machine. And for whatever reason you also notice that this new gold ATM is run by a company called ToGo GOLD and find this of interest. Furthermore let's imagine that ToGo GOLD has a web site at this URL (http://www.theblogismine.com/wp-content/uploads/2010/05/gold_to_go_atm_dubai_1-570x365.jpg) and you want to pass this along in an email or Blogger post.

Using the A HREF command, you can create a cool link in your post by following my example below. Notice I've placed some underscores (_) in there to stop the browser from interpreting the code. This is so you can see how the code works. The underscores are not part of the code, they break the code and must be removed for it to work. If you remove the two underscores (_) in the code when you paste your comment in you will turn on whatever functionality you are using be it italics, bold, or a hyperlink

Hey everyone, check out this cool web site called <_a href="http://www.theblogismine.com/wp-content/uploads/2010/05/gold_to_go_atm_dubai_1-570x365.jpg">ToGo Gold<_/a>*/

Here's what it looks like when I remove the two underscores.

Hey everyone, check out this cool web site called ToGo Gold

Italics? (remember to remove the underscores)

<_i>"Gimme some Freegold brotha!"<_/i>

And here is the same comment without the underscores:

"Gimme some Freegold brotha!"

Bold?

<_b>"Gimme some Freegold brotha!"<_/b>

Here is the same comment without the underscores:

"Gimme some Freegold brotha!"


"Are you starting to get the picture?"

--Aaron

victorthecleaner said...

Michael H,

> What is different about 2011 that the FED can't repeat the actions from 2010, or at least can't achieve the same results?

I think the limit which they are going to run into is consumer price inflation inside the US. This is now becoming a serious issue:

Inflation in the US

This is an opportunity to talk about the flow:

> Brian Sack and Ben Bernanke say that it is the stock of FED asset purchases that matter, no the flow.

I don't believe this. I think the UK is a good example for what will happen. Between April 2009 and March 2010, the Bank of England monetized about 3/4 of the running government deficit. About 12-18 months later, the UK started to experience 'unexpectedly' high consumer price inflation.

With QE1, the US did not monetize the running deficit. QE1 was a transfer of debt from the commercial banks to the central bank. But this debt was already bank-created credit, and so the volume of credit created by the banking system did not increase. Therefore there was no direct effect on consumer prices.

Only with QE Lite (replacing maturing mortgage debt on the Fed's books by new T-bonds) and QE2, they have started to monetize a large part (again about 3/4) of the running government deficit. By comparison with the UK, I would expect US consumer price inflation to seriously increase in the 4th quarter of 2011.

It is clearly the flow that matters. If you wish to read up on the theory, search for articles by Richard A Werner on the Credit Theory of Money. They have detailed data for Japan after 1989 and can show that the time lag between an increase or decrease in the volume of mortgages in the banking system and its effect on real estate prices is 2-3 quarters. The UK gives us empirical data for the time lag between monetizing government debt and retail price inflation: 4-6 quarters.

Victor

Terry said...

FOFOA, this is my favorite pick of your many creative insights into the world of Another and FOA. Your posts are why I follow this blog.
Paul said "and probably lose all the fresh free ideas of commenters worldwide ?"
I find tenured commenters not so open to new ideas. I can live with it.
Terry

Tyrone said...

Bob Chapman discussing the end of the gold and silver futures markets...

Chapman: paper default

Cheers!

julian said...

Greetings,

I echo Robert's proclamation, FOFOA, "Long may you write!"


I've been meaning to watch Zoellick at Yale, for exactly what you posted, so I finally got to watch that most relevant snippet. I ought watch it all for learning.


FOFOA speaks of observing freegold unfolding (blossoming :)

I found it interesting when Zoellick used that very word, observation

He spoke of observing the market, and its perspective of gold; like he were observing that Superorganism FOFOA depicts in this most recent post

I was waiting for Zoellick to mention the bullion, the physical thing, or preferrably to distinguish the paper claims as not what he's talking about when he mentions "indicator"

I also like how he said gold has informational value not operational value!! Totally fits with the wealth reserve par excellence checklist!

so the market is moving, slowly but surely, with the effect being rpg, or so i am convinced by FOFOA's writing




Aaron,

thanks for the quick and informative tutorial!


Cheers,

- julian

matt said...

@ Victorthecleaner.

Your first comment was excellent. That is only what matters now, When and why will this IMFS finally come to an end...

One thing that must be considered is a new bubble in what is viewed as inflation hedging metals and industries.

A silver/palladium/platinum/rare earth/paper gold bubble. Maybe this will be the last bubble that will fill the vacuum for another 10 years, while preserving the IMFS system. Paper gold could go up to $5000 an oz, mining stocks could go insane and finally, when this one blows, it will all be over.

radix46 said...

RE: What will end the system/what is different this time.

The paper side of the dollar markets is controlled by Mr Bernanke's magic finger and Management of Perspectives Economics (MOPE), delivered via CNBC et al. Mr Bernanke can exercise his magic finger whenever he likes and the MOPE works like a dream ad infinitum. "Western minds" lap it up (in general).

So I think that the issue will not come from there. There won't be a QE induced hyperinflation or run on the Treasury market.

So, where will the action happen? The physical/paper gold racket.

The BBs are struggling to hold it together, but have managed it in the past, as "Western minds" have been happy to accept paper gold. Asian investors, however, prefer the shiny stuff (not Willy Wonker's golden ticket, the cold, hard shiny stuff).

Since 1999, those Eastern fellow have been raking in the cash and have a lot more ammo for draining the physical markets.

This is where the final smash up will manifest. They have thrown a spanner in the works and it is now just a matter of time before the BB fractional gold system cracks and the RPG era begins. Maybe in 2008-?????? (soon, hopefully).

This is the gospel according to radix, amen.

victorthecleaner said...

I have an unrelated comment:

Some time ago, people wondered how the Gold Lease Rate published by the LBMA could become negative. Now there is an investigation into possible rigging of LIBOR by some large banks.

I have written a brief summary here.

Victor

costata said...

Victor,

Interesting angle on lease rates. Thanks for the links and your insights.

Indenture said...

Here are Zoellick words:
"The reference to gold was the following. I was observing... that while Central Bankers hate the concept of gold and it is seen as an anachronism and clearly I wasn't calling for a gold standard... what I was observing was that markets were using gold as an alternative store of value and I think this is reflecting something about their confidence. What it is reflecting is that they have a choice... Gold has informational value not observational value."

The last sentence needs extrapolation.

Blondie said...

The informational value gold supplies is as a benchmark. Information unavailable anywhere else.

Zoellick is still clearly talking about Reference Point Gold, IMO.

victorthecleaner said...

matt,

> A silver/palladium/platinum/rare earth/paper gold bubble. Maybe this will be the last bubble that will fill the vacuum for another 10 years, while preserving the IMFS system.
> Paper gold could go up to $5000 an oz, mining stocks could go insane and finally, when this one blows, it will all be over.

Do you remember George Soros saying in an interview about one year ago that he thinks "gold is the ultimate bubble".

The press understood "gold is the biggest bubble", noticed that Soros was buying GLD, and everyone thought he is a crook just like everyone else.

But depending on when and where you learnt your English, you heard him say "gold is the last bubble".

Victor

Indenture said...

Blondie: And the "observational value" of gold is the paper value? I did a Google search for "Gold has informational value not observational value" because Zoellick said someone else had said it but no results. I find the sentence to be very powerful and it not so covertly describes Reference Point Gold.

I also find it interesting that Zoellick used the word "reference" when he began speaking bout gold. I have used the phrase Reference Point Gold so many times that I find myself using the word "reference" when I am talking about other subjects. It is in my vocabulary now because of FOFOA. Perhaps it is in Zoellicks vocabulary also and that is why he used it first (out of our context) and then used other words to describe what he really understands.

Just a thought but he did use the word 'reference' and linguistically he had other choices.

FOFOA: I believe many people are going to be rethinking their opinions as to why the Chinese are encouraging their citizens to buy gold. I had never heard of your perspective and it is completely logical.

myself said...

For the question of "what is different this time?", one has to marvel at the blindness of bond holders. Perception and confidence is all important. The PPT is working overtime and has reportedly pumped in $ 6 trillion in the stock market.
http://www.thenewamerican.com/index.php/economy/commentary-mainmenu-43/2715-stock-rally-due-to-ppt-conspiracy
The $ 6 trillion is, of course, 10 times the amount of QE II.
If you read the CAFR info from Burien, you come to the conclusion that GOV owns a large part of the equities market. They hold the stock market up to preserve confidence in the bond market. That is supposed to hold the FOREX together.
Oh what a tangled web we weave.
Dan B.

costata said...

Interesting snippet from the latest Jim Rickards interview over at KWN.

According to Rickards his contacts tell him that the Chinese are mining substantial quantities of gold in Myanmar.

If myanmarinvestor drops by I think we should ask him if his choice of name is because he has interests there and, if so, whether he has any idea of the scale of gold mining in Myanmar.

http://kingworldnews.com/kingworldnews/Broadcast/Entries/2011/3/27_Jim_Rickards.html

matt said...

victorthecleaner

Yeah, I remember when Soros said that but I didn't know what to make of it.

What did you think about Soros's comments ?

costata said...

Modern Monetary Theory shot to pieces in two paragraphs by Jesse:

http://jessescrossroadscafe.blogspot.com/2011/03/us-employment-and-wages-modern-monetary.html

One cannot print money at will. The limitation is always and everywhere the willingness of the markets to accept it in exchange for labor and real goods without coercion. To make counter claims is to undermine your own position.

It is a tautology to say that a state that controls its own fiat currency cannot become insolvent in that currency, since they can never lack that which they can create from nothing. The state does not run out of its currency, rather, it runs out of people who will accept it at the official face value.


I would add, whether the people who reject the official valuation are foreign trade partners or citizens of the issuing State.

HOWEVER, if we marry the MMT concept with RPG, as the independent feedback mechanism, then the concept becomes stronger IMHO. We have a natural constraint on the amount, and rate, of currency issuance.

"Tidy up" the banking system and then even if the State is the entity spending the newly issued currency into existence they can only spend each new unit once.

myanmarinvestor said...

Costata,

Jim Rickards is basically correct, however I don't expect the volumes mined in Myanmar to be making a very significant impact on total supply to China. There is also local demand for gold!

Unfortunately it is impossible to get reliable production data, as mining taxes (for all mining types) is 75% of production!! So most gold mining activity, is small scale, minimal investment, so that it can remain at the fringe and out of sight of the gov't. (Environmental consideration do not apply in this type of mining). Another common source of gold is alluvial gold from dredging rivers.

The high taxes plus the country risk, have kept int'l players out of the market, despite the enormous potential for the mining industry. The country has been geologically blessed with almost every mineral under the sun eg copper, uranium, iron ore, zinc, tin, gold, rubies, jade, semi-precious stones, and an abundance of the rare earth elements.

China has been a major supporter, politically and financially, of the Myanmar gov't for many years, as such it has quite a bit of leverage in getting access to resources at a cost that no one else can attain. The full terms of these deals are rarely made public.

The gold market in Myanmar is similar to India, in that people wear their gold as it is safer than keeping money in the banks. Also, the banking sector is isolated from intl financial system, and the currency is not convertible (Official rate: 1USD=6.5Kyat whereas Black market rate: 1USD=870).

In the late 1980's the then socialist gov't under its highly superstitious leader demonetised the higher value notes in circulation i.e. 200, 100 and 50 Kyat notes. These were replaced with 90 and 45 Kyat notes. Despite the insanity of having to trade in multiples of the General's luck number '9', all those who stored their savings in 200Kyat notes, saw their wealth wiped out over night. Since then people have never had much faith in paper money!

Myanmar people like most asians understand that GOLD=MONEY, a point that FOFOA/FOA/Another made on many an occasion.

From a conversation I had with a former Minister here, Myanmar has close to 100 tons of gold, mostly in Switzerland, with some in Singapore. I have never seen this on any list of Nations Gold holdings.

costata said...

myanmarinvestor,

Thank you for that excellent synopsis.

Panelproli said...

@myself:)

> They hold the stock market up to preserve confidence
> in the bond market. That is supposed to hold
> the FOREX together. Oh what a tangled web we weave.

Can you enlighten the supposed relationship between them?

Paul said...

@ Panelproli

Date: Fri Jan 23 1998 19:01
ANOTHER (THOUGHTS!) ID#60253:

I feel this way also:
Do you really hold dollars?

It is important to understand that few persons or governments hold US dollars! Look at any investment portfolio and what you will find "are assets denominated in US$". This sounds simple, but it is not. You have heard the phrase, "money is moving into real estate, land, oil, stocks or bonds". It is a bad meaning, as it does not what it says.

All modern digital currencies do not go into an investment, they move THRU it. The US unit is only an exchange medium to acquire assets valued in dollars. US government bonds are the usual holding. No CB holds any currency! They hold the bonds of that currency. The major problem today, is that digital currencies have erased the currency denominations of all government/nation debt holdings! Even thou a debt is marked as DM, USA, YEN, they are in "real time" / "marked to the market" and cross valued in all currencies! No currency asset, held by CBs today are valued in the light of a single issuing country, rather "all currencies are locked together". To lose one large national currency, is to lose the entire structure as we know it!

Michael H said...

@ matt,

"A silver/palladium/platinum/rare earth/paper gold bubble. Maybe this will be the last bubble that will fill the vacuum for another 10 years, while preserving the IMFS system. Paper gold could go up to $5000 an oz, mining stocks could go insane and finally, when this one blows, it will all be over."

I have thought along the same lines. If there is to be another bubble, the industrial metals, and especially silver, are a sensible prediction of where it will be. But I have doubts that it could happen that way, for the following reasons:

1. The real estate bubble was larger than the stock market bubble. The next bubble needs to be larger still, in order to both paper over the losses of the previous burst and to continue hiding the decline of real wages of the US worker. Can a silver bubble really get THAT big? Could everyone participate? How much silver is in 'grandma's tea set', that will be sold into the market during this bubble?

2. The bubble must inflate without an explosive rise in the gold price. Say silver goes to $600 and gold goes to $3000 -- this bubble will only work if, at that point, physical gold holders IN SIZE are selling their gold to buy silver, so that the gold can flow to where it is needed to keep the dollar game alive for just a bit longer. Should silver holders decide to trade their silver for gold instead, it spells the end of the paper gold markets and 'game over'.

3. The duration of bubbles has been progressively shorter. This one should be shorter still. Even if it happens, it will be over by 2015 for sure.

Still, it is 'bubble or bust' time for the dollar. Are there any other viable alternatives of assets to levitate?

Michael H said...

@ victor (March 26, 2011 7:52 PM)

Can you give me a link to a good starter article from Richard a Werner?

I have to imagine that you are correct that it is the flow of treasuries that matters -- after all, what the FED cares about is the continued funding of the government, which means the flow of new treasuries onto the market. If there wasn't the problem of fungibility, then the FED would probably not care if treasuries became worthless as soon as they were issued.

As for consumer price inflation in the US ... do you think that is connected to foreign holdings of USD? Or perhaps I should say reduced flow of USD into foreign holdings.

If Bernanke and Sack are wrong, and they cut off QE2 cold Turkey, it should set off some nice fireworks.

Edwardo said...

The silver bubble makes little or no sense in prospect because the supply simply isn't there to fuel it. At least it's not there with physical. If I were an investor who wanted to put a mere 50K into silver bullion and/or coins, I would have a difficult time acquiring the supply in anything like a timely fashion.

The appetite for silver shares may be another matter, but, given that so many of these plays are in failed states like Mexico, well, let's just say I have serious doubts about a mega bull market in silver developing given the dynamics of the paper/physical silver market.

Redhill said...

Great Post FOFOA.

FreeGold timing? I believe we need to watch OIL. Basically we are on an OIL standard and if OIL continues to use USD as the only payment, we have status quo, no matter how much QEs, hyper-inflations, market-crashes we have.

Current events in the middle east must be observed with much appreciation in relation to FreeGold, although its tragic that much human lives had been lost.

Watch OIL.

Edwardo said...

I would also like to offer plaudits to FOFOA for, in essence, offering a firm time period within which he believes RPG will manifest in unmistakable fashion.

julian said...

FOFOA,

Your homework assignment is to uncover what the dates represent in the monetary evolutionary cycle:

—Equilibrium—
1893-1897 **Punctuation**
—Equilibrium—
1930-1934 **Punctuation**
—Equilibrium—
1968-1971 **Punctuation**
—Equilibrium—
2008-____ **Punctuation**
—Equilibrium—



my thoughts,

1893-1897, was the largest/deepest of its kind prior to The Great Depression

had something to do with building infrastructure (railways) and financing

i read that off wikipedia, so it's just hearsay to me


is the big point, in this punctuation, that in the monetary evolution, humans chose gold over silver, or perhaps more universally put, people chose a focal point, a single moving part (in a sense)?


1930-1934, is this representing The Great Depression? And what was the significance to "money" in this puctuation in monetary evolution?

is it the Keynesian Coup?!


1968-1971, is this the closing of the window? Finally had to admit the claims were too many, the physical reserves not enough to satisfy them sustainably?

This left nothing backing the promises to pay promises, and tied all the different issuance of promise together, so that if (significant enough) one falls, it drags the rest with it?

Leaving an opening for a new breed of promise? One which references the focal point, and reserves a significant amount for credibility?


2008-____, is this RPG/Freegold? (duh!) The acceptance of necessity had already been adopted philosophically by those who "call the shots", and since there was no other way to go, no intermediate solution, the curtain was raised on the concept, and the people who needed to, adjusted.

First a whole bunch of paper had to burn somehow. The distinct spark that set it off is unknown at this time, but there were plenty of remote influences daily.



I sympathize strongly with Blondie's words, which I quote below, with the author's edit. But first, I just want to acknowledge the relative nature of which Blondie speaks a few sentences earlier. Relativity, and perspectives, the Fractal.

I'm seeing the timeline as fractal.

In this light, I suggest that the current punctuation is not really applicable to the timeline given, other than also being monetary in nature: it is of a magnitude (think larger scale) which will make the punctuations on the timeline appear as stasis in comparison.

This reminds me of the Mandelbrot set, because its pattern is more complex than a simple shape (triangle) of Sierpinski, so when watching the animations of the Mandelbrot set, I see it going, going, going, zooming, until the zoom completely forces my perspective to shift, funnily enough, to another focus. Sometimes the new focus is much like the previous ones, but every so often, it's like a whole new world again, from a different angle, or different perspective. (I guess that makes sense because when zooming in, you have to choose one path, but there are myriad options)

- Julian

julian said...

Redhill,

that's a really well-connected Thought!!

I will keep my eye on Oil, thanks for the reminder :)

DP said...

Bron, a dickie bird tells me that the Perth Mint has announced it is discontinuing its unallocated silver program from May 1st. It felt a little like it might be incomplete information. So I figure I should just come to the source and ask! :-) What gives?

If it is just as stated to me, do you anticipate a similar announcement is ahead for your unallocated gold program?

DP said...

@Julian: Can you smell a debt collapse? Perhaps it's just my neighbour is having another bonfire this evening...

victorthecleaner said...

Michael H,

> Can you give me a link to a good starter article from Richard a Werner?

I suppose this book

Richard A Werner: The New Paradigm in Macroeconomics

is a good starting point (I should say, I have read a number of articles, but not this book). You can also have a look at what's available online:

Richard A Werner website
Richard A Werner on wikipedia

Here is an extremely brief outline of his idea:

1. The appropriate definition of money supply is not M0,M1,M2,... but rather the total volume of credit created in the commercial banking system.

2. If you use this definition of money supply, many things that Milton Friedman eventually gave up, still work. In particular, assuming constant velocity is still quite a good approximation.

3. Werner looks at detailed statistics about what is the purpose of the various loans in the banking system: mortgages (i.e. real estate), credit cards or government debt (i.e. consumption), corporate loans (i.e. investment), loans to other financial entities (others inclusing speculation). Then he subdivides the National Income Equation into these sectors and reconsiders all the basics sector per sector.

This way, he can predict how changes of the credit volume in the banking system affect GNP, asset prices and consumer prices. Originally, he applied it to the Japanese data of the 90s, and you can find detailed statistics in his technical articles.

Ideally, every central banker should know this stuff. The reality is a bit more sobering I suppose.

Victor

Edwardo said...

A word about the Depression of 1893. It involved, among other things, the repeal of The Sherman Silver Purchase Act as President Grover Cleveland was convinced that it led to The Depression of 1893.

William Jennings Bryan's famous "Cross of Gold" speech came out of this period.

myself said...

@ Panelproli, I wasn't claiming a specific connection between Stocks, bonds and the FOREX. It was a comment on investor confidence. Everywhere you look, GOV has altered the numbers to boost confidence. The CPI is tortured to look good. Same for unemployment, bond sales, and the DJIA. It is no longer the DJIndustrialA. They took out Industrials and inserted financials to make it look good.
The more important a market, the more that it is pumped up. The DJA is probably the most watched market even though it isn't the largest by cap.

The world GDP is reckoned to be about $ 50 trillion. There are supposed to be about $ 2.6 quadrillion worth of contracts denominated in dollars and about $ 10 quadrillion total.

Any panic that caused a flight from instruments to tangibles would cause a complete shutdown of all markets. Another, FOA and FOFOA have stated that all paper would burn. It's difficult to project if "ALL" includes ALL instruments or just paper-gold, or Fiat currencies.

Whatever eventually feeds the conflagration, I'm sure that GOV wants to extinguish any sparks.
There was an incident about 2 years ago where there was a run on the money-markets. GOV shut them down and said that if it had continued for the rest of the day, $ 5,5 trillion would have been withdrawn.
This is the kind of sentiment / contagion that everybody wants to avoid. We all have our suspicions about the 'flash crash".
If the PPT has truly injected $ 6 trillion into the stock-market, this goes beyond "stabilizing".
There is little doubt about how much the FED has force-fed into the bond market. Confidence is the name of the game. Everything is connected

Edwardo said...

"There was an incident about 2 years ago where there was a run on the money-markets."

That's a myth. See this quote from a piece by David Stockman.

"...But the only thing that even faintly hints of this fiction is the commercial paper market dislocation. Upon examination, however, it is evident that what actually evaporated in this sector was not the cash needed for payrolls, but billions in phony book profits which banks had previously obtained through yield curve arbitrages which were now violently unwinding."

http://www.lewrockwell.com/orig11/stockman5.1.1.html

costata said...

Edwardo,

Would you mind checking on liquidity in the physical silver market among your dealer contacts and giving me an update?

mortymer said...

(random visit alas old habits die hard)

Session VI: The International Monetary System; March 8, 2011

Session VI of Research conference on "Macro and Growth Policies in the Wake of the Crisis"

http://www.imf.org/external/mmedia/view.aspx?vid=818613134001
---
Notes:
*An important event approaching, 31.3 starts the exceptional conference in China organized by France as a head of G7.
*The time for MTM for ECB its gold reserve is also in few days.
*A spring is a time when many flowers wake up to blossom and revolutions spark.

Blondie said...

I realize that this comment may seem off topic to a number of readers, so please just ignore it if that is the case. There are also a number for whom this topic is seen to be very much on point.

All dependent upon one's perspective.
------

Julian,

My comment was merely an observation that the current punctuation is of a scale that means that it does not really belong in that particular timeline, as to do so understates the magnitude, although for numerous other reasons it fits there perfectly.

History does not repeat, but it does rhyme.

This is an accurate (but unknowing) description of every fractal system, where the pattern repeats (iterates/repeats via recursive feedback) not exactly the same, but recognizably similar, in never-ending cycles (if the pattern in question has infinite resolution).
History is but another fractal system.

Everything can be seen as fractal, and if one does so the perspective is improved as it introduces a relativity otherwise absent.

FOFOA's Life in the Antfarm referred to above is a perfect example of such an improved perspective when alluding to the superorganism.

We as individuals are already superorganisms on another scale: our bodies are composed of (individual) cells which are interdependent, producing, consuming and exchanging value within their system (an individual human body).

Self-similarity at all scales. Cells are made up of constituent parts themselves. As the global human superorganism becomes self-aware, it may eventually discover it is itself a tiny "cell-like" member of an organism of another scale again, and so on.

This being the case, we could assert that evolution tends toward inclusiveness rather than separateness.

We could then place the breakdown of the current monetary system into this context:

The $IMFS promotes separateness, the feeling of being an isolated individual in competition with others, motivated primarily toward our own self-interest. It sanctions, creates and disguises the existence of synthetic value in the value exchange system of our superorganism, comparable to the dilution of the blood supply. Such systems have only finite resolution, as they eventually kill the larger organism or are abandoned for a more equitable option with better resolution, one with a tendency toward inclusiveness.

The system your body's cells use is an inclusive one in comparison; not competition, but cooperation.

Continuing further in this context, Freegold is a system which ultimately promotes inclusiveness, as opposed to the existing separateness, one in which the underlying mood of the participants will tend toward application of the Golden Rule.

Just as in the case of the current $IMFS, this resulting "human nature" is simply the result of the system, and not due to the inherent biases of individuals.

DP said...

Thank you, Blondie, for choosing to put your perspective out there in public. [handclap] :-)

In a fractal, you can see a pattern is repeated within the same pattern at a larger scale as you zoom out. So, while we can look back through the series of cycles over the last dozen or so decades, who can say this cycle isn't actually different -- that it isn't a punctuation of something at a higher cycle level? Are we looking far enough back into history, to cycles of large enough scale, to see what is before us?

Will we just once again apply some chemo to the system, hoping it is enough to kill the cancer and let us live on to fight another day, but knowing that it might well return because we probably won't get rid of all of it? Or will we get serious and cut out the financial cancer once and for all this go around? Tough love.

DP said...

"Golden Rule": Treat others as you would hope to be treated.

Without the need to compete with each other in a desperate attempt to stand still within the non-zero-sum game, we are more likely to follow this rule.

radix46 said...

DP,

"Are we looking far enough back into history, to cycles of large enough scale, to see what is before us?"

Very good point!

How do we know that the monetary system is the root cause of the boom busts?

Perhaps, if we look, we might see that we have some deeper, more intransigent philosophical fallacies as the true cause, which if left as they are will rear their ugly heads in the monetary system or perhaps in another way if that avenue is temporarily capped - like a huge metaphysical game of whack-a-mole.

DP said...

radix: How do we know that the monetary system is the root cause of the boom busts?

The current, post-1971 monetary system we have all come to know and hate, was just an evolution of the pre-1971 monetary system. Which was in turn an evolution of the pre-1933 one, which was, which was, which was.... At some point, there was a REvolutionary change. When was that? What was left behind then? What was it left behind and replaced with?

These aren't rhetorical questions by the way; I don't know the answers (but I have a hunch about some nuance of the answer to the last!). Do you? They might tell us something interesting. They might give a more concrete perspective on the future.

mortymer said...

(random visit alas old habits die hard II)

"A monetary regime for a multipolar world"; By Robert Zoellick

http://www.ft.com/cms/s/0/a5ce4900-3ad0-11e0-9c1a-00144feabdc0.html#axzz1HzF1JcLw

...The US dollar will remain the predominant reserve currency, but over time the world economy will need to manage a system of multiple major currencies. We need to modernise multilateralism to steer towards a new monetary system...
...The economies whose currencies constitute the reserve asset known as special drawing rights – the US, the eurozone, Japan and Britain – should meet in an SDR forum with the IMF to review monetary and currency issues. This group should offer China the incentive to join the forum and eventually the SDR after it takes steps to internationalise the renminbi and moves towards an open capital account...
...China has recognised the need for this transition, and it has accepted that membership in multilateral bodies requires shared rules and obligations....
...Leading powers are not going to accept the SDR as a new global reserve currency, nor the IMF as a global central bank...
...The IMF should be directed to sharpen the multilateral review of “capital account” policies, as part of the G20’s new mutual assessment process (MAP). This review should compare national policies with international information indicators, including commodity prices such as gold...

radix46 said...

DP,

"At some point, there was a REvolutionary change. When was that? What was left behind then?"

I do not know when this happened, or even if this has happened, perhaps it is the next iteration, but I think that at present we live under a philosophy which believes that we get something for nothing. A subjective reality, rather than an objective one. The phrase du jour is "how can one be sure of anything?" when it should be "I know this because it is self-evident in objective reality".

Keynesianism has grown out of the Kantian line of philosophy which advocates a world without objective reference points, such as our current monetary system. Perhaps what we have lost is this foundation in objective reality, lost since the Renaissance and it is to this that we need to return. If it is the case that we had this in the Renaissance, then the time it was lost was between 16th and 18th centuries. If it did not exist there, perhaps it is the next stop?

Here, the prevailing monetary system would be a symptom, not a cause of the various ills. Indeed, the various ills would be symptoms themselves (iterative feedback loops from the cause to the symptoms and amongst the symptoms themselves) of the true underlying cause - a philosophy which is incongruent with objective reality.

radix46 said...

Converting paper to gold is a bet on objective reality and against subjective reality.

Trust your mind and your reasoning faculty.

In the words of famous philosopher.

BUY. PHYSICAL. GOLD. NOW.

costata said...

mortymer,

Zoellick:
...Leading powers are not going to accept the SDR as a new global reserve currency, nor the IMF as a global central bank...

That's what the IMF was set up to be the "global central bank". Damn right they're not going to accept the "SDR as a new global reserve currency". The basket was recently ratified for another 5 years as basically the same basket of the past 5 years.

Has anything changed in the last five years? This isn't sarcasm on my part, the last five years covers the period 2006 to 2011. Of course we recognise that the timeframe is self evident, I point it out because the aware will cry to the question "What has changed?" Everything and nothing.

Indenture said...

World Gold Council to CFTC: Don't mess with paper gold

'Deliverable Supply' works wonders in the paper market doesn't it? Tick Tock on the Physical.

Michael H said...

victor,

Thanks for the links and the book suggestion. I will check them out.

DP,

"Are we looking far enough back into history, to cycles of large enough scale, to see what is before us?"

radix46,

"How do we know that the monetary system is the root cause of the boom busts?"

I think you are both right. Since one of the aspects of emerging freegold would be the end of gold borrowing, then we should at least go back to the beginning of gold borrowing to get an idea of the timeline. In other words, to the beginning of fractional-reserve lending in the renaissance.

As for the 'root cause', not just of the boom and busts, but of the entire 'malaise' ... I would argue that the current monetary system is just the latest evolution of the concentrated, hierarchichal power structure; it evolved from feudalism and retains many of its properties, only cleverly hidden from plain view.

Others here might feel differently, but I don't know if freegold will significantly alter the concentration of power. It might only change who is on top. I fear that the next step might even further concentrate even more power into fewer hands.

To paraphrase FOA, "you'll hate the next monetary system" ... why would he say that?

DP said...

I'm not quite sure we'd even then be looking back far enough, going to the Renaissance? Could we somehow stand even further away than this, to get an even better view?

I can't help having the Mayans and Nostradamus keep popping into my head. Did they get to experience a much, MUCH bigger cycle's punctuation, and work out the forward project of the next punctuation of that one should be 2012..?

The great mystery that is life. Where do you draw the line and stop thinking about things? Or start.

radix46 said...

DP,

"I can't help having the Mayans and Nostradamus keep popping into my head. Did they get to experience a much, MUCH bigger cycle's punctuation, and work out the forward project of the next punctuation of that one should be 2012..?"

You lost me at Mayan and I became irretreivable at Nostradamus.

radix46 said...

Michael H,

"To paraphrase FOA, "you'll hate the next monetary system" ... why would he say that?"

In what context did he say that?

If he was talking to easy-money people about the availability to of credit it could mean one thing, if he was having a discussion with a group of Anarchists about personal freedom it might mean another....

pipe said...

No need to go back to the Mayans. The USA defaulted on her obligations in 1971, when Nixon closed the gold window, so that is the end date. Think of the last 40 years as a sort of receivership period after a bankruptcy, where a company attempts to reorganize. That it has taken 40 years to bring this to a head is somewhat surprising, but we are not dealing with a 3rd world podunk country, but the printer of the world's reserve currency, so the stakes are orders of magnitude higher.

Unfortunately, rather than attempting to get our financial house in order, we have decided to test the upward boundary of our credit limit. Apparently it is at hand.

Michael H said...

radix46,

that comment is from the Gold Trail archive V,

FOA (08/09/01; 10:27:19MT - usagold.com msg#93)
"everything to do with a gold bull market"

Unfortunately, reading his comment only does not really put it in full context. I'd have to see others' comments that preceded FOA's post to understand who he was talking to.

DP said...

@Terry: Now THAT is how to be self-indulgent and hard done by, eh? ;~D

Edwardo said...

Costata,

I've looked into this, as of today, and there is very little available from dealers in my neck of the woods. What is there is being bid up to, and I quote from a local dealer, "absurd prices." Not surprisingly, it's a sellers market all the way, but there are very few selling.

Redhill said...

@julian

Thanks for picking up my humble Thought!!

Of the G.O.D. relation, most of us focus on Gold & Dollar and often miss out Oil. But our economic world runs on Oil doesn't it? Humbly, I believe Oil IS the determining factor.

This article here by Anthony Wile from The Daily Bell, titled "Mid-East Conflict Not Exactly About Oil" threw some light on the current chaos in middle east.

He wrote:
"But it isn't the necessity of oil in today's economy that makes it worth battling for. No. It is the control and maintenance over the pricing mechanism of oil, which is essential to funding and ongoing advance towards global governance."

Source: http://www.thedailybell.com/1851/Anthony-Wile-Mid-East-Conflict-Not-Exactly-About-Oil.html

For me, there is a sense of Déjà vu all over again in the sense that whenever the world seems to be very near a financial meltdown, the middle east gets chaotic, military goes in, and the world financial system gets another couple of years' time extension.

Hope I am wrong this time.

Michael H said...

Redhill,

If we're to watch the oil market, what is it we are we watching for?

Blondie said...

DP, Radix, Michael H,

DP said:
”At some point, there was a REvolutionary change. When was that? What was left behind then? What was it left behind and replaced with?”

Radix said:
”I do not know when... or even if this has happened... but... at present... we get something for nothing. A subjective reality, rather than an objective one... the Kantian line of philosophy which advocates a world without objective reference points... what we have lost is this foundation in objective reality... and it is to this that we need to return... the true underlying cause - a philosophy which is incongruent with objective reality.“

Michael H said:
”we should at least go back to the beginning of gold borrowing to get an idea of the timeline.“

I wrote here:

”Gold historically served in the store of value function... as a simple physical asset, just like any other asset... the only practical function of gold as an asset was as an excellent store of value. It rose in prominence in this role simply because it performed it better, for a long list of well documented reasons. Gold was the supreme physical wealth reserve, sheltering surplus value."

Objective reference point in reality, and thus congruent with objective philosophy.

"It stopped performing so well as a store of value once it was brought inside the monetary system.

... changed when gold lending began, and particularly when notes were lent in lieu of the physical metal... the quantity of gold (or at least notes that traded at par with gold, and were accepted to be “as good as gold”) had been inflated beyond the actual physical reserve. There are now more claims on value than there is value currently available. Promises priced at par with the real thing.“


The objective, physical gold, has now been rendered subjective, but almost everyone (except perhaps the banker) has missed this paradigm shift, and continue to act as if no change has occurred.

”Secondly, in an effort to divert some of this surplus value into their own possession, the exchange rate of gold with paper currency issued by Government Treasuries was fixed by decree, giving value to said currency.

The Gold Standard.
A scam, utilizing the reputation of gold.

Savers feel secure saving in “gold-backed” currency, and as such they exchange their surplus value for these notes, printed by the Treasury. The surplus value that once accrued in physical gold, now, by virtue of the fixing of the exchange rate with the currency, accrues instead to the currency. Gold has been monetized, brought inside the monetary system.

The supreme physical wealth reserve was neutered, firstly by the inflation of gold receipts higher than the actual physical reserve (unofficial monetization), and secondly by official monetization. Both are (relatively opaque) misappropriations of the value stored in it.“


Michael H said:
”I would argue that the current monetary system is just the latest evolution of the concentrated, hierarchical power structure...I don't know if freegold will significantly alter the concentration of power.“

I suggest reasoning will conclude Freegold will cause significant alteration to the concentration of power. IMO you have confused cause with effect in your statement.

”To paraphrase FOA, "you'll hate the next monetary system" ... why would he say that?“

Because savers will have refuge from borrowers, and thus borrowers will have nothing to borrow.
It’s the VALUE.
The production of real goods and services involves the consumption of real value. If you borrow to purchase said goods and services, value was still consumed in their production, just not yours.

The thing that we cannot eat is promises. We are at the stage in our monetary system we are because that is all we have left; all the real value in our collective savings has been borrowed and consumed.

Blondie said...

Further:

DP, this is only an aspect of my perspective, not the entire thing.
------

Radix, I suggest the cause is a subjective system (reality) which is incongruent with objective philosophy, thus only the system need change to have affected self-correction.

DP said...

Blondie, you've really packed a punch into two posts today. smiley_76.gif

DP said...

(and apologies for inadvertently implying this was all you had!)

smiley_128.gif

enough said...

I have just been phoned by dealers to participate in a $394mm follow on offering for CEF, the Central Fund of Canadas. Its a closed end PHYSICAL G&S backed fund....so they will be issuing additional shares and buying physical G&S with nearly 400 mil in proceeds from the market asap....prices tomorrow morning

John said...

Blondie, are you referring to the paper gold market here?
'The objective, physical gold, has now been rendered subjective'

Funny, after doing quite a lot of reading (admittedly only partially understanding a good chunk of the more esoteric stuff that's discussed here and elsewhere) I very recently had a mini-epiphany along the lines of "Ah, the value of gold is as a REFERENCE POINT...'

radix46 said...

Blondie,

....Bravo!

Terry said...

DP " Now THAT is how to be self-indulgent and hard done by, eh? ;~D"

I saw that! :-) I was heading further back. You were right, this isn't the place. Thanks.

costata said...

Thanks Edwardo.

Bravo Blondine.

DP,

News on the Perth Mint. They are saying that the unallocated silver program has been cancelled because they now hold too much silver for their production needs. Apparently holding costs are impacting their profitability.

They are replacing this program with a Pool Allocated silver program. Instead of free storage there will be an annual fee of 0.95 per cent. Bar lists will be published but pool certificate holders will not have title to specific bars.

Certificates may be redeemed in cash or metal. Best of both worlds for the Perth Mint. Free carry on their silver inventory and fees from the pool certificate holders.

FWIW I read this move as net positive for the silverbugs' cause. It suggests confidence in the demand for silver but argues against the claim that there are shortages in the supply of LBMA good delivery bars.

Cheers

costata said...

From Stewart Thomson's latest newsletter:

6. While my competitors, and most investors, get better and better at predicting the next theoretical valuation of their fixed amount of gold, I get richer. Every day, sadly, I watch my competitors hoist their fixed amount of gold up the dollar valuation flagpole, and salute their toilet paper flag. You need to decide whether standing at attention at the flagpole for hours every day, or getting yourself into the gold grocery to take buy action, today, is going to make you richer. Focus on that key word, "today".... (My emphasis)

http://www.safehaven.com/article/20441/gold-wealth-building-fundamentals-and-technicals

JR said...

Hi Michael H.,

”To paraphrase FOA, "you'll hate the next monetary system" ... why would he say that?“

FOA sez:

"This not only has "everything to do with a gold bull market", it has everything to do with a changing world financial architecture. And I have to admit: if you hated our last one, you will no doubt hate this new one, too. However, everyone that is positioned in physical gold will carry this storm in fantastic shape. This is because the ECB has no intentions of backing their currency with gold and every intention of using gold as a "free trading" financial reserve. None of the other metals will play a part in this."

=============

In discussing "return to a gold standard" advocates like Peter Schiff in How is that different from Freegold?, FOFOA too noted:

"This is not a dream or utopia. It is simply the swing of the pendulum. If this list seems to you to be too good to be true, then I suggest you spend some time in the archives and give it a little more Thought. As FOA wrote, "This not only has everything to do with a gold bull market, it has everything to do with a changing world financial architecture. And I have to admit: if you hated our last one, you will no doubt hate this new one, too."

"Return to a gold standard" advocates like Peter Schiff have a really hard time wrapping their heads around Freegold because they are so focused on monetary currency that circulates when what really matters is monetary wealth that lies very still. I think the simplest way to express the separation of these two monetary roles to the gold standard advocate is the application of Gresham's law. "Bad money drives good money out of circulation." In other words, the bad (fiat) money circulates while the good (gold) money lies very still… and floats in value relative to the circulating bad money."


IMO FOA was commenting on so called hard money socialists:

"a term FOA used for those he viewed as typical Western "gold bugs". It referred to people who both promoted the return of gold into the transactional currency realm and also supported the status quo by investing in "leveraged" paper gold and mining stock"

See Some thoughts from FOA for more context to FOA's comment.

Cheers, J.R.

Blondie said...

John said:

"Blondie, are you referring to the paper gold market here?
'The objective, physical gold, has now been rendered subjective'"


Yes.
What was previously a simple physical asset, gold, has been encumbered from that point onward with promises and obligations which trade at par with the real thing. The claims outnumber the gold, so to value them equally is not being objective, is it?

ad said...

MH, JR

FOA meant US citizens will hate the new monetary system in which the dollar doesnt have supremacy. ROW will undoubtedly prefer it.

What changes is the recognition of what we do produce for ourselves and what we require from others to maintain our current standard of living. In the US this function will be a reverse example from these others. We will come to know just how "above" our capabilities we have been living. Receiving free support by way of an over valued dollar that we spent without the pain of work...

Redhill said...

@Michael H

Thanks for picking up my humble Thoughts too!!

I believe what we should look for is the control and maintenance over the pricing mechanism of oil.

Here's what ANOTHER wrote in one of his last few posts in reply to some questions:

9/3/98 ANOTHER (THOUGHTS!)
The potential exists for the return of gold as the "only" reserve currency. This may result from a failure of the Euro, due to a massive upheaval. Oil states, they have the ability to force this outcome. During this result, all paper will burn and the world economy will start over. (Emphasis mine)

Oil has the ability to force the change but so long as Oil continues to be priced in USD, there is still some time before FreeGold is near.

The current turmoil in the middle east may lead to something. We'll just have to watch and wait.

Paul said...

when viewing oil as a currency, perspective changes where obvious relations don't seem that obvious anymore.
I am trying to grasp peak oil in terms of value instead of production.
anybody has some thoughts there ?

I remember Another speaking of no shortages of supplies in this lifetime ...

Casper said...

Hi Paul,

regarding "peak oil" theory... I've read an interesting interview with William Engdahl published on "The Dailybell" a few weeks ago. I can't find the link to that interview but here is a piece from mr. Engdahl from 2007 making his case against "peak oil". It's a short read so it won't take much time.

http://www.engdahl.oilgeopolitics.net/Geopolitics___Eurasia/Peak_Oil___Russia/peak_oil___russia.html


I'm inclined to believe him since this would support the notion Another mentioned in his thoughts that gold would be revalued in oil after the transition. If peak oil theorists were right that most probably wouldn't happen.

Casper

DP said...

@costata: Makes sense -- cheers ;)

Paul said...

casper

this russian view of oil is completely new to me, and when true would implicate revaluations on massive scale. have to think about that one for a while.

I was questioning value of dollar instead of value of oil :-)

radix46 said...

Casper, Paul,

Would the Russian view of oil not make it a considerably less scarce resource and hence a considerably less valuable resource? This would then make gold considerably less valuable too no?

Paul said...

radix

agree

Edwardo said...

I've read William Engdahl, and others, on the alleged existence of abiotic oil, and it is, to put it not so kindly, balderdash. Peak oil is real, and it doesn't mean that oil is "running out", but, rather, that the best grades of readily extractable oil are in decline and will become more and more difficult to come by as the years pass. All resources are finite on planet earth, and the core of the earth is not some creamy nougat-as per the theory of abiotic oil- that simply replenishes itself and the planet with ready made fuel.

ad said...

Even if abiotic oil is correct it doesnt necessarily mean that creation matches consumption. Production statistics seem to support this.

Terry said...

Headlines in Before it's the news,
"Wow That Was Fast! Libyan Rebels Have Already Established A New Central Bank Of Libya
Tuesday, March 29, 2011 12:07"
Looks like Griffin was right, again!

DP said...

beforeitsnews:Wow That Was Fast! Libyan Rebels Have Already Established A New Central Bank Of Libya
(Thanks, Terry)

matt said...

Peak oil is a scam, so is the theroy that all this oil came from dead dinasours.

I posted that Engdahl article here a week ago.

matt said...

Ad

No. They always manage to find more oil. Look at Brazil. The Russian view makes more logical sense then the "fosil" view

Casper said...

Radix, Paul,


the sudden hike in availability of oil lowers it's price yes, but not it's value to the global economy.

If 50% of global economy directly depends on oil availability then to this economy it doesn't matter if there are 1.000 barrels of oil pumped out of the ground or 1.000.000. Oil's value stays the same but the price drops (in dollars and gold!!). Provided of course there isn't some mad central banker printing dollars like there's no tomorrow or a mine spewing gold like candys. (I know the first one exists but what about the second one?) :)


Edwardo,

It all comes down to whom you believe/trust regarding competitative theories.


Casper

enough said...

almost time for another quarterly snapshot by the ECB

Midnight Gardener said...

@ Edwardo,

I have had doubts about some of William Engdahl's writings, but it can not be ignored that Russia has gone from a, barely, also ran regarding energy production to having much of Europe dependent upon their production. Also, much of this energy now seemingly comes from areas where conventional theory held that there was no oil.

I do not know the truth regarding the source of oil, but I'm not ready to dismiss a-biotic oil just yet. Peak oil servers too many purposes for me to accept it as fact when there are alternative theories that could be true. Peak oil supports higher prices and, for some, the need to kill those brown people who happen to own the land where much oil is located. Also, what better excuse to expand WWlll?

I agree with Radix46 in that it would make oil less valuable, but am not sure it would make it less expensive when priced in dollars...in freegold it would, I think, be much less expensive, i.e. after freegold and a-biotic oil, there would be much more oil but much less “perceived” gold.

Michael H said...

Blondie,

Thank you for your detailed and insightful responses.

You reply that "... reasoning will conclude Freegold will cause significant alteration to the concentration of power. IMO you have confused cause with effect in your statement."

Just to make sure I understand you correctly: are you saying that the current monetary system is a result of concentrated power, and not vice versa?

I also assume that by "alteration" to the concentration of power you mean "reduction" in the concentration, and not just redistribution of who holds the power. I will think more on your point.

J.R.,

Thank you for interpreting that FOA passage. It makes sense now.

Redhill,

"I believe what we should look for is the control and maintenance over the pricing mechanism of oil."

Might this be why there are two US carrier groups in the Straight of Hormuz?

DP said...

Michael H: "I believe what we should look for is the control and maintenance over the pricing mechanism of oil."


Might this be why there are two US carrier groups in the Straight of Hormuz?


And (thanks, again, Terry) why there is a new Libyan CB and NOC already, even though the regime is not even changed... yet.

ad said...

MH you wrote:

”The current system of commodity agriculture subsidies in the industrialized world partially serves to undersell peasant farmers in the third world, to force them into either low-wage factory work or cash-crop export agriculture... will this system continue after freegold?“

Blondie replied:

No. Everyone will have an objective reference point from which to assess relative value (the utility found in a good or service), and as such will go about producing the highest value/utility they can, in accord with this new objective data.

Continuing with the "other" black gold example; many coffee farmers in Ethiopia now grow chat instead of coffee as this drug crop earns more for them. Thus they are already doing what Blondie describes. Perhaps I am missing something here?

Although the price finding mechanism in the markets may change under freegold, as well as perceptions of value/utility, it is factors beyond the markets i.e. policy and government intervention through subsidies or legal restrictions that distort the market as well. Another view of subsidies is as a way to ensure a certain amount of food security for a nation.

henq said...

@victorthecleaner, @Micheal H and others:

I send a mail to Richard Werner and asked if he had a summary of his credit theory, I go this nice reply:

>>Many thanks for your mail. I appreciate your interest.

>>[..]please find a recent submission of mine to the Independent Comission on Banking. [...] posted on my Centre for Banking, Finance and Sustainable Development website:
http://www.management.soton.ac.uk/research/Towards-Stable-Banking-2010.pdf

>>I realise it is too long for your immediate purposes. But it is an easy to read summary of core ideas, not too technical.

>>Many thanks and warm regards,
>>Richard

DP said...

ad: Continuing with the "other" black gold example; many coffee farmers in Ethiopia now grow chat instead of coffee as this drug crop earns more for them. Thus they are already doing what Blondie describes. Perhaps I am missing something here?

If I think about the coffee market, I see a whole lot of coffee moving around the world as it is bought. But I see that probably the same amount of "coffee" that is bought, never goes anywhere and in fact never exists. The speculative demand for "coffee" is adequately satisfied with "coffee" that doesn't exist. In fact, the price of "coffee" is smothered right down to the lowest it can possibly go while someone, somewhere is actually commercially able to produce it and deliver to the few people that really do, actually, want to have some coffee.

Similarly, but to different extents, in other commodity markets. Many of them are mostly paper, not actual real demand. You or I might decide we see pork bellies should go up in price soon, due to some circumstance that is about to affect supply and demand. Do we actually go out and buy some huge refrigerators, and actually drive to the market in a truck to collect a buttload of pork bellies, bring them back and lock them in the fridges? I don't know about you, but I don't want to keep more pig flesh at my house than I can eat before it goes rotten, or find a buyer who actually wants to have some secondhand partially rotting pig flesh.

Personally, I would never have wanted to speculate on pork bellies anyway, but if I had then I would absolutely have done it all paper. Me and everyone else that wasn't in the food industry somehow.

I think we can see this effect is pushing down on the price of many things. Not least gold, even though gold never rots and nobody is bothered how many hands have held it.

If I were to look at the chat market as you describe, I suspect I will find there is very little paper speculation, probably none in fact. If chat doesn't rot and you can divide it into tiny bits and still sell it... maybe it's nearly as good as gold? :-)

JR said...

Hi Ad,

You are correct in noting “US citizens will hate the new monetary system in which the dollar doesnt have supremacy”.

But FOA wrote: if you hated our last one, you will no doubt hate this new one, too.

Most US citizens are of Western minds, what could affectionately be called “paperbugs.” They, as you note, drink the cool aid of the current dollar international monetary and financial system ($IMFS). They don't care much for gold talk and Freegold is an essentially inaccessible intellectual concept. IMO our humble host is again spot on in pointing out that it is not the paperbugs who but the hard money socialists to whom FOA referred:

a term FOA used for those he viewed as typical Western "gold bugs". It referred to people who both promoted the return of gold into the transactional currency realm and also supported the status quo by investing in "leveraged" paper gold and mining stock

These folks “hate” the current “fiat system” and are excited about “gold discussion.” The paperbugs don't entertain gold, but hard money socialists do. Unfortunately, hard money socialists are quite often highly certain of their economic beliefs, such as gold fitting in with their subjective definitions of “money” or in its role as a transactional currency. This tethering makes it difficult to open up to other ideas about gold and such. FOFOA has observed:

As FOA wrote, "This not only has everything to do with a gold bull market, it has everything to do with a changing world financial architecture. And I have to admit: if you hated our last one, you will no doubt hate this new one, too." "Return to a gold standard" advocates like Peter Schiff have a really hard time wrapping their heads around Freegold because they are so focused on monetary currency that circulates when what really matters is monetary wealth that lies very still.

****

As FOA wrote, hard money socialists hate the $IMFS and no doubt the next one too. They have intellectual resistance to Freegold; however, everyone that is positioned in physical gold will carry this storm in fantastic shape.

Cheers, J.R.

Edwardo said...

Midnight Gardener,

I'm not sure that dubbing Russia a onetime also ran where energy production is concerned is quite accurate. And I think it should be pointed out that what Russia produces the most of vis a vis energy is natural gas, which, as it happens, is the primary energy product they sell to their neighbors in Europe.

Edwardo said...

Make of this what you will. At the very least dollar holders should be forewarned for the umpteenth time.

http://www.huffingtonpost.com/2011/03/30/china-economist-dollar-criticism_n_842377.html

Biju said...

I am mostly a spectator of comments section here, understanding the wisdom of commentators here. The comments section here is very civilized unlike many other places.

I have a few things in mind especially after reading couple of statements from GEORGE SOROS and Robert Zoellick's comment about Reference point Gold.

http://search.japantimes.co.jp/cgi-bin/eo20091108a1.html

- SDR will include new currencies.
- SDR bonds to be held as reserves.
- contracts can be settled in SDR
- companies and Government can buy these SDR bonds
- Currently the benefit of dollar is beneficial to only USA, but in SDR setup all the component nations can benefit(but rest of world will be serve and export to these countries)

Issues with this setup :
========================

- Who issues and control's SDR.
- What happens when a component currency depreciates, How will this be measured ? Will Gold be a reference point for such a measurement ?


This SDR can really help in providing credit so that Worlds economy can continue to grow.

Following article by Chinese Academic also helpful to know the future direction.

http://news.yahoo.com/s/nm/20110330/bs_nm/us_china_g20_dollar
[He said the International Monetary Fund should also play a policing role.

"If any international reserve currency depreciates, the IMF would be responsible for issuing a timely alert, increasing international pressure to force the country in question to take measures to stabilize its currency," he said.]

ad said...

JR, thanks I see that view now.

DP

The paper C price is the benchmark yes so it does play a large role. There has been a complaint recently that now more than 50% of coffee trading is speculation due to the recent commodities boom, it was not that ratio before and the price is rising with no supply issues present. The increased profit is not accruing to the farmers [who are a world away from the markets] but rather to the dealers.

Most coffee is not actually sold on the open markets but through a network of dealers and traders as quality is a big issue and contracts can last for many many years.

I know Freegold is not a panacea for all ills but I'm trying to test the meritocracy hypothesis using a real world example to see the mechanics involved.

victorthecleaner said...

henq,

> I send a mail to Richard Werner and asked if he had a summary of his credit theory, I go this nice reply

Very nice. Right on page one, he is quite outspoken. I hope they listen to him.

Victor

littlepeople said...

Edwardo:
You said, "The silver bubble makes little or no sense in prospect because the supply simply isn't there to fuel it. At least it's not there with physical. If I were an investor who wanted to put a mere 50K into silver bullion and/or coins, I would have a difficult time acquiring the supply in anything like a timely fashion."

I beg to differ. At say, $200-$500/oz., literally 10 billion ounces of silver could be unearthed across the world from teapots, silverware, etc. Where we now see gold buyers on every other corner, silver buyers would take their place. Silver could certainly be the "penultimate bubble" before the "ultimate bubble" gold (thanks G. Soros).

Edwardo said...

What an interesting conjecture about family heirloom silver- let's call it littlepeople's teapot dome- coming out of the woodwork at $200-$500/oz.

That's a rather large price band, the lower part of which is approximately 5.5 times today's close. I wonder how and why you chose that wide band to engender a great dis-hoarding of silverware, and, equally, and how you arrived at the 10 billion oz number? I do hope I think to front run the silver service avalanche.

Redhill said...

@ Michael H

Exactly. Not just the two US carrier groups in the Straight of Hormuz, but other US bases all around the middle east, known or unknown.

The USD, as it seems, is backed by its military. "Use USD! or else...!" seems to be the message to OIL.

Diamond Jack said...

I have given thought to hoarding. A few weeks ago I went on a trial hoarding run. Perplexed at just what to hoard, I spent just half my cash wad.

Coffee is a no brainer, a years worth of beans stored in the next room isn't likely to increase my coffee habit. Case of Gentlemen Jack purring softly in the dark will sooner or later be consumed and not likely replaced. So it is with chocolate and candy in general. Oatmeal may be hoarded, potato chips and wax lips, no.

Sooner or later the would- be hoarder must ask if a generator will be available. perhaps generators themselves should be hoarded. But unless the juice is out and there is constant availability of gasoline, generators are somewhat useless. Then the answer struck like a firework.

Get a still. What is most in demand in Japan today? Food fuel water, the still provides all, plus medicine and romance as one can distill essential oils and make perfumes. Distill water for drinking, make alcohol fuels and spirits. A five star contraption.

Whiskey was once a currency in this country and it will always be prized in barter.

Light enough to take to your claim site. The selling shovels to miners play might be croweded this time around. I'm selling hootch.

Forget freegold, this is fun gold.

Indenture said...

Biju:

Welcome. An SDR or Special Drawing Right' is just a fancy name for another piece of paper. "The SDR is an international reserve asset, created by the IMF in 1969 to supplement its member countries' official reserves. Its value is based on a basket of..."

"International reserve asset" Just like that a piece of paper (or even better an idea or concept) is an accepted worldwide asset. Snap your fingers and it's done.

Adding another layer of paper does what?

Terry said...

So, nobody here in FOFOAville, wants to discuss the Cartel alluded to by Mr. Griffin. And yet, in 1994, in "The Creature from Jekyll Island", Mr. Griffin outlined the Cartels plan to a world currency, by debauching the dollar. The cartel seems to be in control to me. The near East are last holdouts to, and finally getting, CBs. China is not showing a strong reluctance to the IMF's SPDR, if they get the Renmembi included in the basket. France is trying to act as though it is their idea, as usual. But we don't talk conspiracies? Please set me straight!

Terry said...

Oops, I meant the IMF's SDR

matt said...

@ Terry

The US could have debauched the dollar in 2008 if they didn't bail anyone out. If there was no bailouts in 2008, who would be left to service the debt that backs the dollar ? I know it sounds odd but Bernanke printed money and bailed out the US to temporarily prevent hyperinflation.

The run out of the dollar would have been as fast as the run into the dollar.

No GM no GE no JPM no Morgan no Goldman no AIG no Berksire Hathway no Harley Davidson no Fanny/fredie no nothing. The US govt would have been bust, along with the dollar.

Terry said...

Matt, I think you debauch a currency using inflation.

costata said...

Terry,

Mr. Griffin outlined the Cartels plan to a world currency, by debauching the dollar.

FWIW I think that a "world currency" was created at Bretton Woods ie. the US$ (through the pegs to other currencies). Ultimately who dictated the exchange rate for the pegs? Who set the conversion rate for gold? Obviously the USA.

The US$ was/is World No. 1 by any measure you could name: trade, debt denomination, ease of convertability, reserve holding etcetera.

To challenge the mighty buck the EMU needed to consolidate the currency float of a dozen countries grouped around the German Mark. Individually none of these currencies could have challenged the dominance of the US$.

If you want to put Freegold-RPG into a conspiracy context consider this. If (when) we make the transition then gold will be the ultimate reserve "currency" globally - the No. 1 world asset reserve. The Giants who hold big positions will see their wealth expand many times over.

Many here would argue these Giants saw the writing on the wall and positioned themselves for a natural evolution. The USA had cornered gold by the end of WWII. That was one of the reasons they were able to impose "dollar hegemony". As they spent or bled gold the signs were there to be read of a terminal illness in USG policy and the US$.

If you want to look at it from a conspiracy perspective the Euro Freegold-RPG Giants engineered the whole thing.

Terry said...

I guess I was wrong, I thought the Rothschild's controlled the West's banking with their estimated fortune of 20 trillion dollars, and their controlling interest in the Fed Reserve, the IMF, and most of the large banks of Europe.

Terry said...

I just don't see any evidence that Another and FOA were accurate, but I do see where the Cartel is proceding according to a plan laid out for us in 1994. I prefer to be wrong about this.

Wendy said...

Redhill,

That message was sent loud and clear to Iraq and the world in 2003. Saddam Hussein had made his intention clear that Iraq planned to price and sell it's oil in Euros.

Control of price discovery regadless of currency?? I don't know!

costata said...

Wendy,

Saddam Hussein had already switched to euro before the end of the year preceding the invasion. I think it came into effect in November, 2002.

It was portrayed as blackmail of the UN. Payment in euro or no oil. There were a number of well known European names involved in administering the Oil For Food program.

A suspicious mind could wonder if they used Saddam to test the will of the USG or the Euro PTB wanted to goad the dollar bloc countries into a second debilitating war.

The following is all on the public record. When the US ground forces reached Baghdad two of the first points secured were the (Central) Bank of Baghdad and the Oil ministry building.

The Americans made it known that reserves of (if memory serves me) 50 billion euro from the CB were exchanged for US dollars. JP Morgan was given the job of supervising the BOB and immediately switched Iraqi oil sales back to US dollars. exclusively.

costata said...

Wendy,

As the "inaccurate" Another said wars are fought over oil not gold. Although sinister cartels may have a different set of priorities.

Cheers

Redhill said...

@Wendy

Exactly. Just like you have said, Iraq was made an example for OIL to see. Many in the rest of the world are still hazy about why Iraq was invaded except for the propagated WMD.

That was in 2003, and the current financial system got its time extension.

This is why I have my Déjà vu moment.

"Control of price discovery regadless of currency?? I don't know!"

There is no price discovery in oil. Oil is priced by OPEC, nothing to do with demand/supply.

ANOTHER mentioned this when he shared about the "Beirut Resolution titled XXI. 122":

7/19/98 ANOTHER (THOUGHTS!)
"Shortly after the gold window was closed in August 1971, OPEC called an emergency meeting with U.S. and other nations' finance ministers in Beirut. The result of the meeting was the Beirut Resolution titled XXI. 122. It called for adjustments to OPEC's crude oil pricing whenever the dollar had been devalued. The resolution called for OPEC's price adjustments to be triggered whether or not dollar devaluation was caused by government action or by market forces. If the dollar lost purchasing power, OPEC could raise its prices."

It is about the control of what Oil is priced in. Currently is in USD. In the future? EUR? RMB? SDR? FreeGold?!

This is crux because should Oil be priced other than USD, the whole world need no longer hold USD to buy oil. USD's world utility goes to zero (except in USA) and then we can have a chance of FreeGold!

Redhill said...

@Wendy

Exactly. Just like you have said, Iraq was made an example for OIL to see. Many in the rest of the world are still hazy about why Iraq was invaded except for the propagated WMD.

That was in 2003, and the current financial system got its time extension.

This is why I have my Déjà vu moment.

"Control of price discovery regadless of currency?? I don't know!"

There is no price discovery in oil. Oil is priced by OPEC, nothing to do with demand/supply.

ANOTHER mentioned this when he shared about the "Beirut Resolution titled XXI. 122":

7/19/98 ANOTHER (THOUGHTS!)
"Shortly after the gold window was closed in August 1971, OPEC called an emergency meeting with U.S. and other nations' finance ministers in Beirut. The result of the meeting was the Beirut Resolution titled XXI. 122. It called for adjustments to OPEC's crude oil pricing whenever the dollar had been devalued. The resolution called for OPEC's price adjustments to be triggered whether or not dollar devaluation was caused by government action or by market forces. If the dollar lost purchasing power, OPEC could raise its prices."

It is about the control of what Oil is priced in. Currently is in USD. In the future? EUR? RMB? SDR? FreeGold?!

This is crux because should Oil be priced other than USD, the whole world need no longer hold USD to buy oil. USD's world utility goes to zero (except in USA) and then we can have a chance of FreeGold!

Redhill said...

@Wendy

I had tried to post my comments 3 times but to no avail. I wonder if its something to do with some words I used. I assure you they are civil words used by ANOTHER. I shall try again after re-working my original comments.

Redhill said...

@Wendy

Exactly. Just like you have said, Iraq was made an example for OIL to see. Many in the rest of the world are still hazy about why Iraq was invaded except for the propagated WMD.

That was in 2003, and the current financial system got its time extension.

This is why I have my Déjà vu moment.

"Control of price discovery regadless of currency?? I don't know!"

There is no price discovery in oil. Oil is priced by OPEC, nothing to do with demand/supply.

ANOTHER mentioned this when he shared about the "B.e.i.r.u.t. R.e.s.o.l.u.t.i.o.n. titled X.X.I. 1.2.2.":

7/19/98 ANOTHER (THOUGHTS!)
"Shortly after the gold window was closed in August 1971, OPEC called an emergency meeting with U.S. and other nations' finance ministers in B.e.i.r.u.t. The result of the meeting was the B.e.i.r.u.t. R.e.s.o.l.u.t.i.o.n. titled X.X.I. 1.2.2. It called for adjustments to OPEC's crude oil pricing whenever the dollar had been devalued. The resolution called for OPEC's price adjustments to be triggered whether or not dollar devaluation was caused by government action or by market forces. If the dollar lost purchasing power, OPEC could raise its prices."

It is about the control of what Oil is priced in. Currently is in USD. In the future? EUR? RMB? SDR? FreeGold?!

This is crux because should Oil be priced other than USD, the whole world need no longer hold USD to buy oil. USD's world utility goes to zero (except in USA) and then we can have a chance of FreeGold!

radix46 said...

Perhaps paper currency is not meant to facilitate transactions as its primary purpose. Perhaps really it has a special tracking device in it to monitor and track DNA changes in humans from all the spraying being done and just at the right moment, when everyone's DNA has lined up, it will signifiy a huge invisible mother ship, currently cloaked over the White House, which activate Project Yogi and turn everyone into a lovable picnicer-friendly bear to make us all more docile and controllable.

This the true purpose of the Fed! My mate Dave told me after he'd had a revelation from an angel, who was friends with Alan Greenspan, during a LSD trip.

Redhill said...

@Wendy

Finally! Looks like "B.e.i.r.u.t. R.e.s.o.l.u.t.i.o.n. titled X.X.I. 1.2.2." is a no no word at Blogger!

Paul said...

he better stockpiled that :-D

Redhill said...

Test

Beirut Resolution titled XXI 122

Redhill said...

Oops... I'm wrong. My bad. Sorry. Looks like just a technical glitch at Blogger. My apologies.

DP said...

I've found it! My new car: the Shrimpmobile!

@Redhill: The Blogger SPAM detector is very unpredictable. But ALL of your messages are present and awaiting FOFOA's release.

Redhill said...

@DP

Ahh... thanks for the explanation... and thanks for the nice Shrimpmobile share!

Terry said...

Xu urged a shift to use of SDRs, or Special Drawing Rights, a quasi-currency used by the International Monetary Fund in its dealings with member governments, as a substitute for the U.S. dollar as the world's dominant reserve currency. Beijing has invested more than $800 billion of its $2 trillion in foreign reserves in U.S. Treasuries but is uneasy about the dollar's stability and says the world financial system should be more diversified.

Per Houston Chronicle on the current G20 meeting underway.

mortymer said...

(random visit alas old habits die hard III)

Pages in category "Oil market timelines"

http://en.wikipedia.org/wiki/Category:Oil_market_timelines

***********

1970-1979 world oil market chronology

http://en.wikipedia.org/wiki/1970-1979_world_oil_market_chronology

Chronology of world oil market events (1970–2005)

http://en.wikipedia.org/wiki/Chronology_of_world_oil_market_events_%281970-2005%29

1990-1999 world oil market chronology

http://en.wikipedia.org/wiki/1990-1999_world_oil_market_chronology

2003 to 2008 world oil market chronology

http://en.wikipedia.org/wiki/2003_to_2008_world_oil_market_chronology

[@Redhill: What about to compare world oil events and Another´s posts about oil? :o)]

Edwardo said...

Matt wrote:

"The US could have debauched the dollar in 2008 if they didn't bail anyone out. If there was no bailouts in 2008, who would be left to service the debt that backs the dollar?"

Exactly. This is precisely the argument one needs to make when asserting why Q ease will not end. They may change its name, deny that it's happening, alter some details, and otherwise disguise it, but runaway currency implosion will happen far more quickly without it then with it, since, without The Fed and it's PDs acting as the bond market, there is nothing under the bond market and (for that matter) the share market.

QE is the managed death of a terminally ill patient, and while it should never have occurred in the first place, it is, as the song goes, "To late to turn back now."

I will also add that the rumblings from certain quarters that QE should be terminated are, in my view, merely sops to those who would like QE to voluntarily be put to rest. In the meantime, I wouldn't hold my breath waiting for Ron Paul to actually achieve anything beyond boring monetary authorities to tears with his brow beating prattle.

Edwardo said...

Make that, "too late to turn back now."

matt said...

@ Terry

The dollar would have lost all credibility without the bailouts. Notice how the Euro was falling hard last summer and people where calling for it to go to zero ?(hyperinflation)

The Euro starting falling(incipient hyperinflation) before there was any money printed, or talk of any bailouts.

The Fed is just buying time and hoping for a miracle. They are not trying to destroy the dollar.

mortymer said...

[Mrt: Just some random pick I]

"The Asian financial crisis was a period of financial crisis that gripped much of Asia beginning in July 1997, and raised fears of a worldwide economic meltdown due to financial contagion...The crisis started in Thailand with the financial collapse of the Thai baht caused by the decision of the Thai government to float the baht, cutting its peg to the USD, after exhaustive efforts to support it in the face of a severe financial overextension that was in part real estate driven." ~wiki

"The October 27, 1997 mini-crash is the name of a global stock market crash that was caused by an economic crisis in Asia. The points loss that the Dow Jones Industrial Average suffered on this day still ranks as the seventh biggest point loss in its 114-year existence." ~wiki

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

"There is only one oil state that counts! Only one! They have made it very clear how important gold is to them. If they had started buying outright, gold would have gone to $5,000+ in days. And only a very few million ozs. would have been purchased! The message has been for some years, "we will accumulate thru the back door, using paper deals if you keep the price at or below the cost of production". Do this and oil will remain THE driving force of the world economy!"

"FAIL THIS AND WE WILL PRICE GOLD IN DOLLARS AT THE TRUE VALUE OF OIL TO THE WORLD!"

2/
Date: Sat Nov 01 1997 22:43; ANOTHER (THOUGHTS!) ID#60253:

"Asia put an end to a sweet deal for the West!"

3/
Date: Wed Nov 05 1997 20:33; ANOTHER (THOUGHTS!) ID#60253:

"I said that some thing was going to change". It is changing now!
...
"To close: The oil and gold connection looks to be changing now! After all these years we hear of an end to foolish thought. This should get very interesting."

4/
Date: Fri Nov 07 1997 21:59; ANOTHER (THOUGHTS!) ID#60253:

"Nations will defend the system at all cost They will never sell US$ treasury debt as that debt is their currency! The dollar will soar as a final defense! As part of this defense they will allow oil to rise as oil is priced in dollars. How do you get oil to rise? Today, we stop our CBs from selling gold!"

5/
"November 29: For the first time in four years, OPEC agrees to an increase in its production ceiling." ~wiki

[@Redhill: What about now inserting in the timeline changes in Gold market? :o)]

http://www.kitco.com/scripts/hist_charts/monthly_graphs.plx

Anthemius said...

Redhill

When you say

"This is crux because should Oil be priced other than USD, the whole world need no longer hold USD to buy oil. USD's world utility goes to zero (except in USA) and then we can have a chance of FreeGold! "

Can I be ask, what you mean is: every day, a certain amount of oil is bought and each buyer must, at that moment and for some time before the exact purchase time, have at his disposal the required number of dollars. And so this provides a "home" for the dollars.

Can I expand on this so that I can be sure I understand this completely (I'm not sure I do).

Say I have Euros and want oil. I tell some "intermediary" that I want oil and want to pay in Euros. He gives me a price in Euros for 1000 barrels - I can accept or decline. I accept and he takes my euros, he immediately exchanges these for dollars on the forex market, then he immediately exchanges the dollars for oil - he had dollars for no time. If the seller immediately were to change the dollars into gold or his own currency or whatever, then the amount of dollars required would be much lower than if not - the "velocity" would I believe be higher (people hold them only for very short amounts of time).

What I'm getting at is that it seems to me that it is people's desire to hold on to dollars for longer than they need that is the "home" for the dollars, not the fact that oil is priced in dollars, which is a secondary factor. The standard explanation here seem circular to me. Am I explaining myself sufficiently?

mortymer said...

[Mrt: Just some random pick I, cont...]

4.1/
Date: Wed Nov 12 1997 14:08; ANOTHER (THOUGHTS!) ID#60253:

"The House of Saud will not have to reprice it's oil in dollars, the rest of the world will do it for them!"

5.1/
November 29 1997:
...The new ceiling represents a 10 percent increase over the current ceiling. The new quotas are as follows: Saudi Arabia 8.76 million barrels per day (1,393,000 m3/d) (bbl/d), Iran 3.942 Mbbl/d (626,700 m3/d), Iraq 1.314 Mbbl/d (208,900 m3/d), Venezuela 2.583 Mbbl/d (410,700 m3/d), Nigeria 2.042 Mbbl/d (324,700 m3/d), Indonesia 1.456 Mbbl/d (231,500 m3/d), Kuwait 2.19 Mbbl/d (348,000 m3/d), Libya 1.522 Mbbl/d (242,000 m3/d), United Arab Emirates 2.366 Mbbl/d (376,200 m3/d), Algeria 0.909 Mbbl/d (144,500 m3/d), and Qatar 0.414 Mbbl/d (65,800 m3/d).(NYT)

6/
December 11: Delegates from 150 industrial nations attending a United Nations climate conference in Kyoto, Japan reach agreement on a protocol to control heat-trapping greenhouse gases. The protocol, if ratified, would commit nations to roll back emissions of six greenhouse gases (carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride) below 1990 levels. Under the protocol, the United States would be required to reduce its greenhouse gas emissions by 7 percent below 1990 levels, while Europe and Japan would make cuts of 8 percent and 9 percent, respectively. Developing countries are exempt from the emissions ceilings for the time being. (DJ)

mortymer said...

[Mrt: Just some random pick II]

1997

Date: Wed Nov 12 1997 14:08; ANOTHER (THOUGHTS!) ID#60253:

"...Someday the CBs will say, "we stop now, as value has all". In that day we will all understand "what is real and who is real"!

"All CBs will now slowly stop all leasing operations and allow the market to size itself. The important players, the oil states, will have their paper covered without question! But, for all others, the great scramble is about to begin!

Oil now must rise if the US$ and the currency system is to survive..."

"Big Trader has vanished from view, but he and his gold still exist. At the time of their accumulation traders did not understand the nature of "Low gold for oil" and what would happen. Many traders have lost much in paper gold but the large physical buyers know that it's value in terms of oil has risen. Time will prove all things."

1999

Note: August 9 1999: The United States Department of Commerce dismisses a petition filed by Save Domestic Oil, Inc. under anti-dumping statutes. The petition alleged that Saudi Arabia, Venezuela, Mexico, and Iraq had sold crude oil to the United States at artificially low prices.

1/
September 22 1999: OPEC, at a meeting of its member states' oil ministers, decides to maintain current production cuts until March 2000, despite the fact the crude oil prices have doubled since early 1999.

2/
The Washington Agreement on Gold was signed of 26 September 1999 in Washington DC during the IMF annual meeting

3/
September 28: Iranian Oil Minister Bijan Zanganeh announces that the National Iranian Oil Company has discovered a new oilfield, Azadegan, with 26 billion barrels (4.1×109 m3) of crude oil in Khuzestan province. The discovery is the largest new find in Iran in the last three decades.

sean said...

A small comment on the "perpetual" availability of oil: there may appear to be ever-extending oil-fields in the Amazon, beneath the Arctic tundra, and in Canadian tar-sands, but exploitation of those resources is increasingly damaging to the environment. There will always be some oil somewhere, but it's a question of what you're prepared to sacrifice to obtain it.

Michael H said...

henq,

Thank you for posting Werner's response.

littlepeople, Edwardo,

From "Stick with Silver, but Don’t Sell Your Gold,"
By Richard Russell, posted 3/30/2011 on Financial Sense:

"Back in October 2009 one ounce of gold would buy over 80 ounces of silver. From that point on the ratio of gold to silver changed in favor of silver. ... The obvious professional play since late-2009 was to sell gold short and buy silver."

Food for thought.

Terry said...

Thanks Matt, I think we have different perspectives of the same events. I think the cartel is achieving it's goal of forcing the world to WANT a world currency.

Michael H said...

FWIW, I agree with Edwardo that the silver market is too small to sustain a bubble of the magnitude required to kick the can down the road even a few years. Even at $500/oz, and even if 10 billion additional oz materialize from personal holdings, would it be enough to paper over the losses of the housing bubble bust, and create additional 'wealth effect' to boot?

Bron said...

Sorry been FOFOA blog AWOL, which I miss as often good comments and thoughts.

In response to Perth Mint closing unallocated silver, see http://goldchat.blogspot.com/2011/03/closing-unallocated.html

It is getting out on that interwebby thing and I've spent all today responding in various forums to a lot of misunderstandings.

From freegold point of view, our move doesn't indicate much because we don't run our unallocated like the bullion banks do.

You will never see them closing their fractional system down, it will just keep on going until it blows up IMO. However, this will only happen if holders see sense and ask for delivery or proof of 100% physical backing.

thedeadfauvi said...

http://www.lidl.de/de/Goldmuenzen

lidl is a discounter!

Jeff said...

Gold nearing all time high at quarter-end again, regular as clockwork.

Casper said...

@ Fauvi

Mein Gott!! Unglaublich.

This is the ultimate sell signal if there was ever going to be one! :-)
Can't wait to check the local Lidl store tomorrow.

Casper

Paul said...

I was going to the lidl also :-)

littlepeople said...

Michael H., Edwardo:
Michael H., you don't think silver at 10B oz. and $500/oz. can fuel the "penultimate bubble."

Then, how can gold be the "ultimate bubble" when there is only 5B oz??

Answer:
as per FOFOA, FOA, Another--a great repricing. We need silver at $1,000/oz to set the stage for the ultimate (gold) bubble? So be it. How about $2500/oz silver--no problemo!

You see, anything can be repriced, given the right people to make it so. Silver is not el fin, though--that is reserved for gold.

Yes, Edwardo, there is at least 10B oz of silver left, though at current prices, there is no incentive to monetize it from its current uses. It will take much higher prices to do that--and to fuel a new bubble.

Gabriel said...

Breaking news:
Lidl, a large German discount food retailer, now sells gold bullions in all types and forms.

[url="http://www.lidl.de/de/Goldmuenzen"]

Jose Castro said...

FOFOA,

Can you comment on this "Dolar Bill" new kind of gold standard system? Do you think it could work?

http://blogs.forbes.com/louiswoodhill/2011/03/30/stop-the-madness-make-the-dollar-as-good-as-gold/#respond

"The fourth type of gold standard could be called the “Dollar Bill” system. The name comes from the title of the bill that Congressman Ted Poe (TX-02) is planning to introduce into the 112th Congress for the purpose of fulfilling Congress’ Constitutional mandate to “…coin money, (and) regulate the value thereof…” (Article I, Section 8).

Under a Dollar Bill system, the monetary base consists of fiat dollars (both currency and bank reserves) created by the Federal Reserve. The Fed is not allowed to set interest rates, and it is relieved of responsibility for promoting full employment. Instead, the Fed is tasked with employing its Open Market operations to adjust the size of the monetary base so as to keep the COMEX price of gold as close as operationally practical to a target gold price. Fractional reserve banking is allowed.

The target gold price is set by naming a “date and time certain” sometime in the near future, and then fixing the target price at the market price on the COMEX at that moment. This is similar to the approach that was used to establish the final exchange rates for the currencies that were replaced by the euro.

A Dollar Bill system could work. Unlike a Bretton Woods system, it cannot be “attacked” in an effort to drain Fort Knox and panic the Fed. And, because the Fed is not involved in setting short-term interest rates, it creates no opportunities for arbitrage. The mechanism used for setting the target gold price would force the markets to disclose “what gold is really worth”, thus avoiding both inflation and deflation at startup."

Indenture said...

Jose Castro:

Stop The Madness: Make The Dollar As Good As Gold
is a very interesting article except there is no mention of Freegold /Reference Point Gold.

If anyone is a member of Forbes website they can comment. Some representation from a long time FOFOA commenter could be in order.

Edwardo said...

littlepeople asked,

"Then, how can gold be the "ultimate bubble" when there is only 5B oz??"

There's no gold bubble, but rather a fiat bubble that gold is ineluctably responding to.

Edwardo said...

Jose, I left an e-mail message at the author's place of employ-some institute or other- and invited him to visit this blog. I'll wager he surreptitiously does.

julian said...

Hello All,

my thoughts,

Freegold is Socratic; Pure in Thought.

Socratic in that it strives for the definition. The reference. It asks the question, "To what are we referring"? "What is the thing itself?"

This purifies Thought, refines it.


Blondie said:

What was previously a simple physical asset, gold, has been encumbered from that point onward with promises and obligations which trade at par with the real thing. The claims outnumber the gold, so to value them equally is not being objective, is it?

Having read this posting's comments in a disorder, missing some I'm sure, I was reminded of the Big Idea, or Theme of FOFOA's Reference Point Revaluation!. --> How do we define "gold"?

What do we allow "gold" to be?

What will we allow "gold" to be?

If paper burns, I guess we'll have no choice then.

FOFOA writes:

Okay, let's imagine they redefined the dollar to be 1/5,000th of an ounce of gold. Can you think of any problems with this? I can. What will be the definition of gold? Does this sound like a silly question? Well, today "gold" is trading at around $1,435 per ounce, and this price is discovered through the dynamics of supply and demand in a market that includes claim checks on unallocated pools of gold, shares of funds that are physically non-divisible below 10,000 ounces, and promises of future delivery of gold from a variety of sources including mines (gold that is still underground), hedgefunds (gold that will have to be sourced if demanded) and banks (gold which is fractionally reserved). These markets all trade (fluctuate) in dollars. If the dollar is suddenly defined as a piece of gold, what will happen to these markets?


That's so brilliant. I'm floored by this Thought. How simple a thought, yet how simple to miss, for lay minds like mine and people in media, business, government, etc.

What we have is a problem with the definition of gold, the 21st century (and all others too) reference point of value!

"What is gold"?! This is my new favorite question :)

I think we all agree on the definition over here, yes?


Finally, I have a lot to learn. I could use some clarification on the following:

FOFOA writes:

I wrote above, "pretend that Big Macs have the properties of gold, like durability, divisibility and portability, and imagine the arbitrage opportunity based on these charts, and how that arbitrage would affect the currency exchange." Such an arbitrage would ultimately flatten that first chart, making a Big Mac cost the same number of dollars in any country you traveled to. In fact, gold (under its modern definition) acts just this way


Kindly,

- Julian

julian said...

Edit: "When" paper burns. Not "If".


It's inevitable, isn't it? I don't know. I perceive it is.

Wendy said...

Thanks you Costata and Redhill for your comments. I don't know what I was thinking when I mentioned "price discovery for oil" ............. DUH!

=8o)

Mortymer, thanks for the timeline, it's very interesting to say the least.

JR said...

RS view: Facebook, your future bank

(Bloomberg Businessweek) — … Nongamers may have missed Facebook’s clever foray into the world of “virtual currency,” where Facebook Credits cost 10 cents each and can be exchanged for game points or cartoony gifts. Those dimes are adding up — the U.S. market for virtual goods will reach $2.1 billion in 2011, according to research firm Inside Network. Facebook’s currency, while just part of that market, is getting real. You can now purchase gift cards for Facebook Credits at Wal-Mart, Target, and Best Buy.
So why couldn’t Facebook use them as real currency, too? In fact, why couldn’t Facebook become your bank? At first blush, this seems like a crazy idea. Facebook would need to overcome consumer privacy concerns, expand its Credits into a payment system that works everywhere, and surmount regulatory hurdles to handle businesses such as deposits and mortgage servicing. Crazy, until you realize how smartphones are changing the world of money. … The next payment platform is no farther than that glass gadget in your pocket.



RS View:

"Squarely bagged, tagged, and identified, the critter that runs amok and answers to the name ‘Money’ is truly little more than an ethereal form of economic communication. No wonder that smartphones and the web-dominating Facebook are well positioned to make inroads on the domain previously dominated by the traditional banks and financial houses. But no matter which entity emerges from the contest as the prevailing monetary messenger, the fact remains that notions of money, being mere words on the wind, can aid in the coordination of the immediate transaction or business at hand, but it can never do adequate service in conveying true wealth across time and space (i.e., geography). For that purpose you need tangible savings, a role for which physical gold is uniquely well-suited and already performing its part."

victorthecleaner said...

Hi,

I have a question for everyone. Zero Hedge report on the recent data released by the Fed.
Zero Hedge claim that they systematically redacted the currency swaps with the Bank of Canada. But apparently not any other transactions.
Is it because they lost money on it? Something bigger? What do you think?

Victor

costata said...

JR,

Per your post from Randy Strauss.

(My emphasis)

http://www.voxeu.org/index.php?q=node/6216

The success of mobile money has been driven by two complementary infrastructure networks.

The first is a network of cell phone towers and transmitters that facilitates unprecedented connectivity and communication, and that was already established and set to expand further at the time of M-PESA’s commercial launch in March 2007.1 But unless, and until, mobile money replaces cash as a medium of exchange, its value will only be used fully if electronic balances can be reliably converted into cash.

The second driver of M-PESA’s success has thus been the network of retail outlets, or agents, at which cash and electronic balances can be interchanged. Starting from scratch, about 4,000 agents were operating within a year of the product’s launch. Now, after less than four years, there are close to 25,000. In a country with just 850 bank branches, Kenyans appear to have gained unprecedented access to financial services in the blink of an eye.

sean said...

Very interesting to read the Forbes article - he realises the significance of gold as a reference point, and the necessity of a flexible fiat system, but the part that seems to be lacking is the requirement for the reference point to be unencumbered, ie: the "free" in freegold. If you are going to adjust the monetary base in corresponance to the value of gold, you must know what the real value of gold is, without there being multiple claims on it. COMEX price is not that price.
I hope the author visits these pages and is interested in discussing ideas further.

DP said...

Julian: FOFOA:I wrote above, "pretend that Big Macs have the properties of gold, like durability, divisibility and portability, and imagine the arbitrage opportunity based on these charts, and how that arbitrage would affect the currency exchange." Such an arbitrage would ultimately flatten that first chart, making a Big Mac cost the same number of dollars in any country you traveled to. In fact, gold (under its modern definition) acts just this way

Gold's modern definition is largely a financial asset that is traded as a concept only, in order to speculate on the price movements — either up or down — to scalp short term currency profits (and losses! :) ). Not an actual, real-world, physical asset as it was traded in the distant past.

Big Macs are actual, real-world, physical assets that are not traded as a concept with a view to scalp a short term currency profit from someone else; someone who really is hungry and, right now, values the consumption of a physical burger. Not a financial asset that is speculatively traded on global exchanges.

The lack of financialisation — of global exchange trading of speculative conceptual burgers, enabling arbitrage — allows the local price of burgers in different markets to accurately reflect the underlying real demand for burgers within that local economy. Meanwhile, gold is a globally controlled market, where the price is the same in, say, New York — where very few people really want any of it — and, say, Beijing — where people are falling over themselves to buy.

In the case of gold — fortunately for us today, but I don't suppose for much longer — the price is suppressed to meet the demands in the highest volume but lowest price market; the market where conceptual gold is preferred. In some other globally traded markets the dynamics are slightly different and the price is artificially raised rather than artificially suppressed. There is far higher demand for the conceptual, cheap and easy to produce gold, than for the real-world gold someone has to find and dig out of the ground.

In the case of, say, Pork Bellies (to go back to my earlier randomly selected example) perhaps the real-world demand far outweighs the conceptual demand. The addition of relatively little speculative interest drives the price up, rather than down.

There is a greater flow of conceptual gold than real gold.

There is a greater flow of real Pork Bellies than conceptual Pork Bellies.

If the market-makers want to influence the price of any global exchange-traded commodity where there are a high percentage of speculators, buying and selling conceptual paper items, they can drive it either up or down — whichever suits their purposes, through adjusting the volume of paper that is issued and thereby influencing the supply-and-demand dynamics.

If the speculation in markets is curbed in some way — perhaps by the Sarkozy-chaired G20 adjusting regulations to require speculators put down large up front margins and commit to delivery rather than settlement in certain markets — valuations anchored in real-world demand will quickly return in those markets.

Redhill said...

@Anthemius

Thank you for your inquiring thought. My initial guess is you may not have fully read or comprehend postings by ANOTHER. There are definitely more able people within this FreeGold community who can best satisfy your inquiring thoughts but I shall try.

If you can see within your own stated oil purchase example, there is still USD involved, right? Are you able to visualize another oil purchase example totally without USD involved? I present a real world scenario for you where Russia changed its pricing for its oil from USD to RUB.

November 24, 2010
China-Russia currency agreement further threatens U.S. dollar
"This latest move -- a continuation in a series of efforts by both countries to move away from  U.S. dollar usage in international trade -- further threatens the dollar's reserve currency status."
Source: http://www.ibtimes.com/articles/85424/20101124/china-russia-drop-dollar.htm


The thinking here is not about "Velocity". It is about "Usage". Try replacing "home" in your question to "usage":

• And so this provides a "home usage" for the dollars.

• … longer than they need that is the "home usage" for the dollars...


Some relating comments by ANOTHER:

Date: Sun Nov 02 1997 21:52 ANOTHER (THOUGHTS!) ID#60253:
You see, all currencies now compete with each other, not for value of wealth but for "USAGE". The game has now become "whose currency gets used the most for trading" not for value against goods! It was easy to know the currency that got used for oil would win this game. Today, all currencies are traded against the dollar for it's usage as a medium of oil exchange! Take away that link and the entire currency/ debt exchange system, as we know it will collapse! The US$ must be maintained as the "most used" if the other currencies are to have a chance to survive.

6/14/98 ANOTHER (THOUGHTS!)
Outside your country, small persons, large traders and Central Banks hold the dollar, not for spending, but for the "reserves" and "store of value". It is held in much more quantity than exists inside your borders. Many of these persons think and know, that in last resort, the dollar, it can buy "oil" or "Gold" anywhere in world. In the real world, this is the "real backing" behind the dollar held in many lands!


You see, so long as OIL is priced in USD, the rest of the world is held "ransom" to use USD, and this arrangement gives "Usage" to the USD. Both Russia and China in my quoted article chose to slowly free themselves from this "USD ransom", simply because they are now slowly gaining the economic, military and golden strength to do so.

Thus, when I say:
"This is crux because should Oil be priced other than USD, the whole world need no longer hold USD to buy oil. USD's world utility goes to zero (except in USA) and then we can have a chance of FreeGold! "

What I mean is:
When OIL is no longer priced in USD, the rest of the world will be free from the "USD ransom", international usage for USD will decline to zero and we can have a chance of FreeGold!

ad said...

Congressman Ted Poe who is introducing the bill calls for $500 gold to be targeted. Good luck with that Ted. He has written a number of articles on the subject over the past couple of years.

I see Forbes himself is quite a proponent of the gold standard. Perhaps FOFOA would consider submitting a short article...uh maybe a feature :)

Redhill said...

@mortymer

Thank you! Interesting. Great work, great effort.

One line caught my eye:

Date: Wed Nov 12 1997 14:08; ANOTHER (THOUGHTS!) ID#60253:
"The House of Saud will not have to reprice it's oil in dollars, the rest of the world will do it for them!"

And placing this thought from ANOTHER side by side:

6/29/98 ANOTHER (THOUGHTS!)
China and Arabia can force this outcome, as the Euro group will trade with China as the Japan has with America. China will devalue in time and break the American/Pacific economy as oil finds a "good price for commerce" in Euros. This is done as "intervention" into the oil markets, in dollar terms forces the oil price up! In this time the entire Euro Group /China / Middle Eastern economy will heat up to form the greatest demand for oil. All producers will rush to sell oil for Euros and dump dollars.

I have missed out CHINA! The awakened dragon hoarding physical gold was the reason ANOTHER wrote what he wrote, and why we are all excited about FreeGold ain't it?

Date: Sun Nov 02 1997 21:52 ANOTHER (THOUGHTS!) ID#60253:
The great mistake by the BIS was in underestimating the Asians. Some big traders said they would buy it all below $365+/- and they did. That's what forced LBMA to go on a spree of paper selling! Now, it's a mess. At some point the fire in Asia will drive all of them into gold. It will end at that time.

Now my thoughts need to evolve. Not just OIL I need to watch but CHINA too!

Thank you @mortymer! 谢谢!

Redhill said...

@Anthemius (2nd attempt @ posting)

Thank you for your inquiring thought. My initial guess is you may not have fully read or comprehend postings by ANOTHER. There are definitely more able people within this FreeGold community who can best satisfy your inquiring thoughts but I shall try.

If you can see within your own stated oil purchase example, there is still USD involved, right? Are you able to visualize another oil purchase example totally without USD involved? I present a real world scenario for you where Russia changed its pricing for its oil from USD to RUB.

November 24, 2010
China-Russia currency agreement further threatens U.S. dollar
"This latest move -- a continuation in a series of efforts by both countries to move away from  U.S. dollar usage in international trade -- further threatens the dollar's reserve currency status."
Source: http://www.ibtimes.com/articles/85424/20101124/china-russia-drop-dollar.htm


The thinking here is not about "Velocity". It is about "Usage". Try replacing "home" in your question to "usage":

• And so this provides a "usage" for the dollars.

• … longer than they need that is the "usage" for the dollars...


Some relating comments by ANOTHER:

Date: Sun Nov 02 1997 21:52 ANOTHER (THOUGHTS!) ID#60253:
You see, all currencies now compete with each other, not for value of wealth but for "USAGE". The game has now become "whose currency gets used the most for trading" not for value against goods! It was easy to know the currency that got used for oil would win this game. Today, all currencies are traded against the dollar for it's usage as a medium of oil exchange! Take away that link and the entire currency/ debt exchange system, as we know it will collapse! The US$ must be maintained as the "most used" if the other currencies are to have a chance to survive.

6/14/98 ANOTHER (THOUGHTS!)
Outside your country, small persons, large traders and Central Banks hold the dollar, not for spending, but for the "reserves" and "store of value". It is held in much more quantity than exists inside your borders. Many of these persons think and know, that in last resort, the dollar, it can buy "oil" or "Gold" anywhere in world. In the real world, this is the "real backing" behind the dollar held in many lands!


You see, so long as OIL is priced in USD, the rest of the world is held "ransom" to use USD, and this arrangement gives "Usage" to the USD. Both Russia and China in my quoted article chose to slowly free themselves from this "USD ransom", simply because they are now slowly gaining the economic, military and golden strength to do so.

Thus, when I say:
"This is crux because should Oil be priced other than USD, the whole world need no longer hold USD to buy oil. USD's world utility goes to zero (except in USA) and then we can have a chance of FreeGold! "

What I mean is:
When OIL is no longer priced in USD, the rest of the world will be free from the "USD ransom", international usage for USD will decline to zero and we can have a chance of FreeGold!

DP said...

@me: Just a reminder...

IBTimes:Sarkozy wants tax to discourage speculation in currency/commodity markets

victorthecleaner said...

How about this one:

Google Translation of an Article in "Der Spiegel" (in German)

Summary: German Central Bank (Bundesbank) handles Indian oil payment to Iran. Central Bank of India pays Bundesbank who pay the European Iranian Trade Bank (EIHB which is based in Germany) who then send the money home.

Spiegel says that this deal is linked with the release of two German journalists who had been detained in Iran. Government says they neither confirm nor deny any rumours.

Victor
PS: I know it's April 1st, but I don't think the German press would find this one funny.

mortymer said...

@VTC:
Remember?
http://www.zerohedge.com/article/india-offers-pay-iran-oil-gold; 01/10/2011
Interesting the time lag in your story to this one.
...and it is not so far from Frankfurt to Basel.
It is a weak speculation but could make sense... Remember also how Another mentioned that all gold is linked via BIS and they can via gold-oil-loans put economy to work?

Blondie said...

Redhill,

A video clip you may be particularly interested in regarding Chinese gold demand from last week: click here.

"...[Chinese] gold sales are going through the roof, that's led to a shortage now of raw gold...

...our recent sales have been growing by 20% a month...

...so many are bidding for raw gold that they won't sell it to those who haven't got it in the past, and stock is only available for large quantity sales...

...we have a big shortage of raw gold; we have been forced to impose rationing...

...experts expect only 27,000 tonnes of raw gold can be delivered, that's way below the estimated demand of 50,000 tonnes... "

costata said...

http://traderdannorcini.blogspot.com/

Trader Dan Norcini writes:

Once the specs become convinced the Fed might move to end QE, the bond market will be massacred. If the market becomes convinced that the Fed will not only keep QE2 going but engage in a QE3, then the Dollar will be obliterated.

Checkmate

Edwardo said...

Here is the final paragraph from Dan Norcini's blog commentary as posted by Costata,

"The Fed created its own box and now they can deal with it. One thing is certain - they are not going to be able to have their cake and eat it too. What they will eventually have to come to grips with is that they are going to either have to sacrifice the Dollar or sacrifice the long bond."

To date it has been the dollar that has been the sacrificial lamb. I see no reason, as yet, for that protocol to change. However, ultimately both the dollar and bonds will fail since as the dollar continues to lose ground, The Fed and its handmaidens will be forced to buy even more bond issuance since the rest of the world will further shun increasingly mis-priced government securities.

In the meantime, if The Fed needs to shore up the bond market expect bloodletting in shares. One has to rob Peter to pay Paul.

Midnight Gardener said...

About 6 hours ago blogger eat my post, so if it somehow shows now, I'm sorry for the repeat.

I want to take this opportunity to thank you FOFOA and your predecessors for laying out a map/trail to a better understanding of what I thought I had a grasp of back in the late eighties when I started buying gold and, gasp, silver. I did not question my long time metals purchases so much as I felt the need to dig in here to see if I was missing something.

Thanks also to those of you who provide enlightening comments that often help with clarifying things that I often caught myself making more complicated than they really are. I also appreciate those of you who post informative links, ask probing questions and toss out an occasional challenge. I've been hanging around here off and on for several months, more lately than in the beginning.

Bottom line, for a long time I have stored my excess production in gold and silver. I have now come to the understanding that I am holding more silver than is appropriate, for me. I also now understand that, while both gold and silver helped me store excess production, it is gold that will give me a leg up in my remaining years and help my progeny through the crisis should the current system out live me.

I actually had an alternative reason for my silver purchases. I was using it to educate the public by offering to exchange it, in the form of Liberty Dollars, for products and services. I realize that silver is too valuable as a commodity and gold too valuable as a store of wealth to use either as money now that I have a somewhat firm grip on Free/RP gold. Since my Liberty Dollars now have some collector value thanks to the criminals in the FBI and the injustice department; hopefully, I will be able to get a better exchange rate than my local coin shop offered.

Again, thanks to all for the, no longer free, education. Hint for other newbies, make a contribution and then you will likely spend more time here. At least it worked for me. I'm very glad I could provide a bit of support to help protect the precious. More to follow when the exchange of my silver Liberty Dollars for gold dries up and forces me to resort to accepting FRN. The yellow brick/coin road will set you free.

Indenture said...

Well said 'Midnight Gardener' and I'm sure the precious is grateful.

costata & Edwardo: So to shore up the bond market the PPT just sacrifices the DOW? and.. If the ECB raises their interest rate do you think it will quicken the 'finale'?

costata said...

Hi Midnight Gardener,

You wrote:
I realize that silver is too valuable as a commodity and gold too valuable as a store of wealth to use either as money now that I have a somewhat firm grip on Free/RP gold.

I think this is an astute and insightful observation: "silver is too valuable as a commodity and gold too valuable as a store of wealth". Thank you.

costata said...

Indenture,

FWIW I think that if the ECB makes good on its word and raises interest rates it will increase their credibility as managers of the Euro in the eyes of mainstream economists and investors.

Will it hasten the end? I doubt that a small increase will have a huge impact at this stage.

Personally I don't believe that it is desirable to have CBs attempting to manipulate interest rates. That said, it doesn't matter what I think. What matters is the perception of those who do matter and I think they would react positively.

Incidentally, did you notice that the Euro sailed through the issuing of 50 billion Euro by Ireland. That success could lend support to the view that the ECB has the latitude to issue a lot more Euro without cratering the currency.

A/FOA said that the ECB/Euro group would accept some inflation as part of the price of making the transition from the $IMFS to the new regime.

Wendy said...

Costata,

without reefing through the archives to provide a direct quote, I remember that they said inflation WOULD accompany the transition from USD researve (to what today? I have no idea)

Blondie said...

I‘m surprised no one has commented upon those fantastic Chinese raw gold supply and demand estimates... being lost in translation doesn’t matter much if no one hears you I guess!

------

Regarding the sacrifice of one or other of the dollar or the bond, obviously the dollar has been the chosen victim to date due to its role as the monetary standard of deferred payment, but there is a highly visible corollary to this: the fact that all other currencies are closely tied to the value of the dollar means that commodity prices are soaring worldwide.

People all over are finding it hard to put food on the table. When this is the case, they really have nothing left to lose, and the threat of force becomes a lot less of a threat.
Recent events in North Africa and the Middle East are just the start of this.

The problem at its root comes back to value. The typical (for example) Egyptian who has until recently been able to feed his/her family with the value they exchange their daily efforts for, upon finding this no longer possible is forced to confront their previous ignorance in a fashion those living in the first world have not (yet):

Either
1) one’s daily efforts are diminishing in value,
2) food's value is soaring because it is becoming much harder/more costly to produce or demand for it is rising rapidly, or
3) value is being liberated by a third party somewhere in the process.

Because options 1 & 2 do not stand up to reasoned examination, the third is found to be the cause, at the very least intuitively.

We know option 3 is the case, where value is reallocated into the propping up of the monetary system, at the expense of many users of said systems’ ability to eat.

The big crash of 2008, prior to which food riots were rampant over real food costs lower than today, temporarily deflated commodity prices and seems to have purchased 3 further years of a (barely) functioning $IMFS, when combined with massive statistical manipulation, unrestrained spin, outright fraud, and the unwillingness of the masses to face reality until forced.

This unwillingness is based upon selfishness, because most of the first world’s citizens are quite accustomed to receiving something for nothing, and thus corrupted are most amenable to looking the other way. That our friends, family and neighbors should be less than enthusiastic to hear an objective account of reality shouldn't be a surprise, as everyone intuits that there are big problems of some description in the world, and that being participants in the systems of the world we must all be culpable to some degree... ignorance is offered as defense... witness the epidemic of "addiction" with which to affect this ignorance.

It’s checkmate alright, but that doesn’t mean all the moves have been made... there are lots of recent indicators that extreme monetary measures can and will be taken in the near future.

The exchange of surplus value for physical gold is revolutionary action first world citizens can take... withdrawing claims on the system is the withdrawal of support for the system... being no one's liability, gold is outside the system.

The end of this system will herald the end of a lot of related things of which we will be grateful to be rid... the future is bright... on the other side of the focal point.

costata said...

Wendy,

Thanks for the confirmation.

Blondie,

Those raw gold numbers looked extremely odd to me. I couldn't find any corroboration after a couple of searches so I decided to wait and see.

Good post as always. FWIW I agree this game isn't over and we are not at checkmate yet (even though I think the final move is fairly clear).

Blondie said...

Midnight Gardener said:

”I realize that silver is too valuable as a commodity and gold too valuable as a store of wealth to use either as money...”

They are, when simple paper or even electrons perform as currency (most people’s definition of money) far more effectively, backed simply by whatever payment in full they can be freely exchanged for... usage demand spontaneously valuing currency in a free market.
Silver has more utility as a commodity, and gold as a store of value/monetary reference point.

”... for a long time I have stored my excess production in gold and silver. I have now come to the understanding that I am holding more silver than is appropriate, for me.”

Congratulations on the continued evolution of your understanding. As you can no doubt attest, this knowledge is in many respects hard won; not because it is complicated, but because so few recognize its existence. The unknown requires fortitude.

We have all spent time on that particular plateau during the ascent of the Gold Trail, and many linger there still in the "Hard Money Socialist" camp, unaware that the cloud obscures the very existence of the trail to the Physical Gold Advocate camp further on (as well as the warm fire and good company at the All Inn)... the exchange of silver for gold at this juncture also lightens the load, making the climb easier to negotiate.

Many mistake this plateau for the summit, making the HMS camp by now a relatively large one: just look at the plethora of regular contributors to Kitco, Goldseek, Dollar Collapse et al., and their legion subscribers... a thriving little frontier outpost... but full of the same issues as the big cities.

As a "hard money socialist" (aka goldbug), silver is purchased as a leveraged play on gold, as are gold and silver mining stocks.


The PGA understands this is folly.

It is the leverage on gold that will be annihilated as a matter of necessity. You don't leverage gold as that defeats its entire function. For gold to actually perform its function as financial "insurance", it by definition sheds itself of all leverage.

Leveraging gold is an oxymoron.

I too am thankful that Another pointed out the further trail, and that both FOA and FOFOA have gone to such lengths to illuminate it for everyone else... as far as I know there is no other publicly available map.

Paul said...

When one simply looks at the chinese physical supply and demand, that gold will be done for little before half of this year.

13/14 june might be right on the spot ;-)

sean said...

Nice post Blondie. I really like your observation that "Leveraging gold is an oxymoron" - probably the most succinct definition of Freegold yet!

An interesting comment here from Jeff Clark of Casey Research on the gold and silver plateau:
"When disaster strikes, it’s almost certainly too late to buy. Not only will you pay a higher premium, you may have difficulty getting your hands on bullion. You have to purchase your insurance before adversity hits."

sean said...

PS: How do you find the http address to go directly to a specific comment in Blogger (ie: not the entire comment page). I'm sure this is possible somehow...

sean said...

Sorry, found it... you can get the link by hovering over the date, but only when viewing a single blogpost, and not if you open comments in a separate window!! Argh!

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

@ Blondie
Excellent couple of posts as much knowledge/experience exhibited from having reached the gold trail “peak”. Especially love that statement “..... the exchange of silver for gold at this juncture also lightens the load, making the climb easier to negotiate”.

@ All
David Sokol says Buffett should have sold stocks and purchased gold.

A World of Leaks and Full Disclosures

Here's a shocking disclosure. Somehow, WikiLeaks got a copy of private memos - diary entries, really - written by David Sokol. As you know, Sokol was the man who was the front-runner to replace Warren Buffett at Berkshire Hathaway. He was also the man who made $3 million by front running Berkshire's latest purchase. Both Sokol and Buffett denied that the purchase of Lubrizol shares had anything to do with the former's departure. The diaries confirm the claim.

"I'm leaving. I've had it. I just can't stand the guy's folksy wisdom," wrote Sokol to himself. "Yes, the decision will probably cost me some money. But it's worth it not to have to spend another day in Omaha listening to the so-called 'Sage of the Plains.' Sage? The guy is a boring, old finger-wagger. And if he had dumped all those value stocks and bought gold when I told him to, we'd be a lot richer now."


@ All
Appreciate the humor/reality of Ireland’s Premier, Enda Kenny.


*** And here's another shocker. Ireland's premier, Enda Kenny, has appeared to break down under the strain of trying to avoid bankruptcy. He called a press conference yesterday, after Anglo-Irish Bank announced losses of more than 17 billion euros - the largest corporate loss in Irish history.

"I think this has gone on long enough. We tried in good faith to save the system from default and to avoid national humiliation. Instead, the situation just grows more humiliating with each passing week.


"It's time we called a spade a spade...and be done with it. We all know the banks are controlled by the English. And we all know English speculators were behind all of Ireland's recent property problems. They drove up prices. They lent money to Irish people. They built houses that were both ugly and unaffordable. And then, when the bottom fell out of the market, they expected Irish taxpayers to make up their losses.

"Well, that's it. That's the end. Henceforth, all banks and all bank assets are to become the property of the Republic of Ireland. Bank premises will be turned into useful resources for the people, such as pubs or pizza parlors.

"If a bank owes you money...you are out of luck. You should have known better than to put your money in a bank anyway. Everyone knows you can't trust them. Especially when the English are involved with them.

"And don't come running to me telling me that Ireland's default will trigger a wave of defaults across Europe...and possibly bring down the euro and the European Union. I don't want to hear it. It was the European Union that got us into this mess. The frogs and the krauts can go f*** themselves."

Regards,

Bill Bonner,
for The Daily Reckoning

Wejn said...
This comment has been removed by the author.
Midnight Gardener said...

Blogger eat my post again. This time I'm not waiting 6 hours to try again.

@ Indenture,
Thanks!

@ Costata,
Thank you. Regarding the demand for gold from China: When Chris Powell sent that video out to the GATA list he commented that, paraphrasing here, the figures at the end are obviously incorrect... I have since read a blurb somewhere, do not remember where, arguing that the figures were correct, but not showing anything but conjecture so like you, I decided to wait and see.

@ Blondie,
Thanks for expanding upon my silver commodity/gold wealth comment.

You wrote, “...this knowledge is in many respects hard won;...” Indeed, and it has complicated my life a bit, but I'm hoping that soon the exchanges will have me down to my comfort level. It was not all that long ago that I was a “Hard Money” guy.

Your comments regarding food value/riots were also enlightening, Thanks.

My comments regarding the demand for gold from China are addressed to Costata above. Have you seen any confirming information or do your back of the envelope calculations tell you that the figures are correct?

I have to go do some gardening now. Not that kind, it is about noon here.

thedeadfauvi said...

„Fund managers look beyond the dollar for a base”

I bet they do! The whole FT article from GATA : http://www.gata.org/node/9763

Blondie said...

@ Greyfox,

The PGA camp appears to be at the summit, but I won't be taking it for granted (lesson learned from same mistake in the HMS camp not forgotten).
Gotta stay open to further resolution.

As an aside, I noted another large camp at a similar altitude to the HMS, but seemingly permanently rained in... looked really depressing, people occasionally falling off various precipices... all doom and gloom.

I see, based upon this comment of yours (esp. the line inside the speech marks) that you managed to bypass that despondent location.

Do you have a link for the Sokol revelations? Sounds like an April fools too...

@Midnight Gardener,

Make sure you are logged into Blogger and your identity is showing below the comment box before commenting. Although it says "You will be asked to sign in after submitting your comment." this is a good place to lose your comment when following this instruction.

You can however retrieve the comment if you have a "back" button or shortcut on your keyboard (the comment pop-up window has no "back" function), and use it after login results in the disappearance of your comment.

Best results:
1) sign/log in in the comment window before composing,
2) use "back" keyboard shortcut,
3) compose comment in word processor then copy n paste

If your comment saves and then does not appear when comments are refreshed, it has been intercepted into FOFOA's blogger ruled spambox, so don't repost it, but send FOFOA an email to alert him (click on his profile), or wait until he periodically clears the box.

Placing a hotlink in your comment appears to increase the chances of your comment being spammed, but not guarantee it. A large number of my comments meet this fate (some might like them to stay there too) and there is no common thread in Blogger's spambox reasoning that I have discerned.

costata said...

Re: Japan Gold

h/t Perth Mint website - News

http://www.reuters.com/article/2011/03/21/us-gold-japan-idUSTRE72K1BJ20110321

Japan was a net exporter of 78 m/t of gold in 2010 (= to Mexico)

Gold holders dis-hoarded 50 m/t of gold in 2010 (IMHO this is precisely the trend their demographics would suggest.)

There was a sell off on TOCOM after the quake and margin calls on equities leading to selling.

PM dealers in Japan seem to think that the damage to infrastructure and people remaining indoors in Tokyo suppressed underlying demand. They are seeking to build inventory to meet anticipated demand.

The article reports that gold scrap supplies are tight in Singapore and Hong Kong as sellers wait for higher prices.

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

@ Blondie
I received the Sokol article directly from The Daily Reckoning via an email. After a little research found a link for you listed below. Haven’t drunk any cool aid since the Jim Jones episode in Guyana. Take care.

http://dailyreckoning.com/a-world-of-leaks-and-full-disclosures/

matt said...

@ Blondie

You are right, the hard money socialists dont make much sense in the end, but they are miles ahead of the keynesian mainstream world.

Rumor has it that the Swiss want to join the Euro because they think the Euro will fall in value more then the Franc in the future..I mean.....you cant make this stuff up.

One would have thought that the bankruptcies of 2008 would have caused the dollar to fall but instead it rose. That is allot like the Ruble rising as the Soviet Union collapsed.

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