Monday, March 21, 2011

Wendy's Open Forum - Part 3

Just got this email notification...
Wendy has left a new comment on your post "More Freegold Fodder":

although you may be able to see me, I can't see anything after the 200th post this morning.

Please FOFOA can you fix this??
:(
So sorry Wendy. Here's your new open forum. I think I hate Blogger's forced spam filter as much as you hate its forced pagination. A little choice in the settings would be nice. Blogger is certainly testing my inertia (resistance to change). So I have included a song dedicated to Blogger's comment and spam-detection system. But Wendy, I hate to think about you missing the 30 excellent comments on page 2. So try clicking on the link to your own comment and see if it takes you to that ever-evasive second page. And now, this song goes out to the spam filter! (If I had my druthers I'd allow an unlimited number of comments on page 1 and disengage the spam filter altogether!)

**** Warning: This song utilizes the F-word! ****

138 comments:

costata said...

FOFOA,

I want to add to the list of gripes about Blogger. I was searching for some comments in earlier posts. It took me half an hour to figure out that you have to select the 'newest' comments over 200 and repeat the key word search for them.

FOFOA said...

Hi Costata,

Thanks for the gripe. Maybe this will turn out to be a "gripe and advice thread." I'll add to yours that the search function at the top of Blogger is useless as far as I can tell. Which is why I added the one on the side bar that reads "Search This Blog, Powered by Google" Just realize that after you click search, you must then scroll back up to the top of the blog to find your results.

Sincerely,
FOFOA

radix46 said...

I have a gripe!

I really don't like the current monetary system. Any advice on what to do to remedy my malady?

;)

Robert Leroy Parker said...

Here are my final gripes. I linked the flow addendum post to many of my friends and colleagues and i'm quite sure not a single one of them read it all the way through. Unbelievable!

Additionally, I am trying to increase my understanding of freegold as fast as I can, but have realized that I still have little if anything of value to contribute to the comments. So I plan to lurk in the shadows going forward, which perhaps is for the best as I have become more reticent the past few weeks, and am fearful of a world in chaos.

Living in fear is not my desire, so I still hope a hyperinflationary outcome can be avoided. But I am more prepared should such an event come to pass, and I for that I owe much to this blog and Fofoa.

Thank you Fofoa for sharing your wisdom with me, and thank you to all the commentors as well.

radix46 said...

I have a question....

Could anyone recommend any books for background reading that might help someone to understand the Freegold concept? Not just economics, but history or politics or psychology or well, whatever.....

radix46 said...

Perhaps FOFOA could put up an Amazon banner with specific books in it and make some extra cash?

Dick Groen said...

He dear,

I'll keep an eye on you, you fucking cowboys. What a country.

Be there be square.

Keep me awake FOA, greet job.

http://www.youtube.com/embed/HMMu0ID1yYI



Fiatmoneyorgold, from the Netherlands

Blondie said...

RLP,

For one who keeps intending to retreat to the non-commenting shadows myself, I am doing poorly. I could not resist responding to your comment, however.

No one else will read FOFOA? I don't know why this surprises you; few people have woken up yet as you have. If you don't get a hungry response from others for your new perspective, don't bother. They will get there, of their own accord, and in their own time.
In the meantime, you are possibly scaring them more than helping (particularly if you are feeling fearful yourself), and they won't necessarily thank you for it. There is growing online discussion such as this which is the natural place for interested people to congregate.

While it is widely acknowledged that you cannot make an omelette without breaking a few eggs, I can assure you that as your understanding of Freegold deepens the future will brighten considerably.

I posted this elsewhere a few minutes ago, but it may be helpful. Freegold is not complex; it is the perspective that gives sense to it, not the mental contortions:

"I believe the Gold Standard was a scam built upon the reputation of gold. It may never have been consciously planned as such, but rather an evolution of debt becoming entangled in the concept of money, but those who found advantage in it drove this advantage as far as they could.

Gold functions properly as it did prior to the issuance of notes redeemable in gold, before it was monetized, when it was traded as a simple asset without encumbrance, and could perform as the ultimate wealth reserve unimpeded.

This is what we are going to return to, in conjunction with our modern digital currencies as the medium of exchange.

It is really an exceptionally simple, and elegant, arrangement.

Perhaps that is why these modern thinkers cannot see it.
Simplicity, elegance, integrity, respect, responsibility; these are ideals with which recent generations have had an ever diminishing involvement, generally speaking."

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

And how could we forget all those lovingly handcrafted comments that we've all spent many an hour knocking up in the comments window, only for Blogger to eat them.

Ore em' said...

Well, seeing as how this was relegated to page 2 of the comments on the last thread, it seemed wise repost it in the hopes that I can have some freegold wisdom pour down upon me!

HELP NEEDED

Hello my fellow freegolders. I am writing to ask the hivemind help me think of the best way to introduce this topic to a current central banker. I just spoke with him for about 10 minutes, and while he didn't laugh me out of the room, he was by no means convinced. He did however say he would accept an email from me explaining my points further. So, I know FOFOA wrote a "reader's digest of freegold" and I was hoping to use it, but am open to any other suggestions. Basically, for everyone out there who always thought "if I can just talk about this with the right people I"m sure they'd understand me", now is your chance to do so with a central banker via proxy. I'm sure some of you have also thought about or developped an initial "pitch", not one which explains freegold in its entirety, but which outlines it in enough understanding to pique the interest of someone predisposed to pursuing such knowledge.

His first question that I couldn't answer satisfactorily was how is freegold/reference point gold any different then what we have where you can already compare the value of currencies by how much they "cost" to buy the same asset (i.e. if its 100 USD per barrell and 200 CAD per barrel, we already know that the USD is 2x as valuable as the CAD).

Thanks to everyone for their help, I look forward to spreading the word and having the answers of Another, FOA and FOFOA put to the test by an "expert" on money and banking.

Michael H said...

Robert Leroy Parker,

Regarding "talking to the wife", I would absolutely reccomend that you discuss things and make sure you are both on board.

If things work out as you expect, then congratulations, you're a hero. If things turn sour for you, then it is important for it to not be all your fault -- you both went into it with eyes open. The worst thing you could do is go 'all-in' secretly. If you must move in secret, unfortunatley the most you should move into gold would be discretionary funds, or perhaps "your share" of your IRA etc.

Chris Martenson's wife, Becca, wrote a relevant piece titled "Dealing With a Reluctant Partner". (I won't post the link because blogger will mark me as spam, but you can easily find it on the google).

costata said...

radix46,

"Perhaps FOFOA could put up an Amazon banner with specific books in it and make some extra cash?"

That IMHO opinion is worth thinking about.

Links to opportunities for self-educational books and other works - moderated by respected thinkers (as a value add not a form of censorship). That just might work as a supplementary income stream to the voluntary subscription streams labelled 'donation'.

At one time newspapers relied on their 'cover price' rather than advertising. They could then 'speak' freely and they attracted writers with something to say, as opposed to a 'master to serve.

People bought these pamphlets to read/hear those voices which often dissented from the mainstream. An activity for which they were persecuted by the armed forces of the government.

Plus ca change, plus c'est la meme chose

mortymer said...

Mervyn King: Do we need an international monetary system?
Speech by Mr Mervyn King, Governor of the Bank of England, at the 2011 Economic Summit, Stanford Institute for Economic Policy Research (SIEPR), Stanford, California, 11 March 2011.

http://www.bis.org/review/r110315a.pdf?frames=0

"...central objective of the G20’s Framework for Strong, Sustainable and Balanced Growth. It would require a shared analysis, seemingly absent at present, of the relative importance of the “good” and “bad” aspects of the imbalances. And it should comprise
(i) an agreed path for the reduction or increase of net exports relative to domestic demand;
(ii) an agreed framework for allowing real exchange rates to support the path for unwinding the imbalances;
(iii) a set of rules governing the circumstances in which countries would be able to limit short-term capital flows;
(iv) macro-prudential policies to limit the build-up of imbalances and add to the instruments available to pursue financial stability; and
(v) structural policies, including fiscal measures, to raise national savings in deficit countries and to lower savings in surplus countries.
Some combination of all of these elements will be necessary in order to chart a path back to sustainability..."

"...The global community showed that it could work together when the world economy was close to the abyss in 2008. The challenge now is to prove that we can also work together when we are no longer in an immediate crisis, but still facing deep-seated problems. Will we create a more stable IMFS? The next few years will provide the answer. And they will, as our Chinese friends say, be interesting."

sirhc said...

FOFOA,

There are comment systems out there that can be installed on your blog without having to switch blogging platforms or lose old comments. Check out:

http://disqus.com/
http://intensedebate.com/

It's funny that this is my first comment - I've been keeping quiet while reading through this blog and the comments for a while now.

I have some gaps in my understanding, but I already reached the point where I was convinced to take action. It was perhaps easier for me though, because I'm young and I don't have much to lose. There was not a whole lot I could do except exchange a small amount of dollar savings for gold and make the decision to save in gold from here on out.

Thank you so much for writing this blog. You definitely have a gift for clear writing and clear thinking. Reading this blog has been an eye-opening and mind-expanding experience.

I look forward to participating in the Freegold conversation and filling in the gaps in my understanding.

Robert said...

@ RLP and Blondie, I too find deeper understanding of Freegold to be difficult and frustrating, and there are arguments against the concept of gold going to $55,000 (Shameful at ZeroHedge argues convincingly against this, I have been unable to shoot him down!).

But, I do think that gold WILL revalue itself way up because of the various issues that FOFOA brings up (too many paper claims on the gold, gold as BEST wealth preserver, etc.).

And since just 1% - 3% of Americans own non-jewelry physical gold, there is no way gold is in a bubble. When physical gold becomes scarce at the coin shop (OR 24hgold.com´s handy eBay tool shows BIG premiums OR TULVING runs out OR China & India & Iran are shown to be buying more gold than admitted, OR...), then you know Freegold is at hand. As FOFOA has said many times.

Let´s just hope that our society remains stable so we can enjoy our wealth.

DP said...

Robert: there are arguments against the concept of gold going to $55,000

Perhaps it would be an interesting exercise for us, if you could bulletpoint these Robert?

costata said...

DP,

Agreed.


RLP,

Shameful at ZeroHedge argues convincingly

I would like to hear these arguments.

Mortymer,

Will we create a more stable IMFS?

Did Mervyn King actually use the abbreviation (IMFS)?

costata said...

Stewart Thomson calculates his wealth in ounces of physical gold.

http://www.safehaven.com/article/20357/the-gold-bull-is-speaking-but-are-you-listening

4. I see you facing a new and extremely exciting range, which is gold $1400-$1700.

8. Yesterday I told subscribers that if we traded to $1435, the one-month top pattern in gold would be destroyed. We did trade there, so the pattern is finished.

15. The silver top callers are about to meet the lone ranger's silver bullet. Silver is not overpriced or overvalued. It is over-top called, and nothing more.

16. Here's the silver bullet chart. I've highlighted the SIVR-NYSE silver bullion fund. Price is gapping higher while the top callers and team silver shorty pants try to figure out what is going wrong, again, with their toilet paper money obsession.

18. Sadly, this chart is not a buy signal for those who own no silver. Those with no silver bought at vastly lower prices (I'm talking about buying silver at well under $10) need to focus on doing what you failed to do on the buy side in silver in the late 1990s, in natural gas and food, now.


Did I mention that Stewart Thomson takes his profits off the table in ounces of physical gold?

Cheers

Blondie said...

@ The Bearing,

The ZH comment section has presented a sharp diminishment in marginal utility to this reader in recent months, so I have not read Shameful's line of reasoning, but I have noted that his thoughts have always been subject to a negative bias regarding the omnipotence and nefarious motives of TPTB, a bias which I for one do not share.

Those things, as real as they may or may not be, are themselves subject to simple natural law, and it is from these laws in action that a Freegold system evolves.

This is why I am optimistic rather than pessimistic, until someone can demonstrate that natural law can simply be overturned by force or the threat thereof.

Let's watch events in MENA unfold as a realtime case study on this, shall we?

Wendy said...

Thank you FOFOA, it's good to be back :)
Unfortunately the link you provided linked to post #200, hopefully the holy grail was not revealed in the later posts ;)

mortymer said...

costata: "...This highlights the need to focus reform efforts on the international monetary and financial system (IMFS)..."
* Recommending, good read, thought I do not agree with all interpretation/explanation.
* IMO important realization by M.King is that we deal with system risk. e.g.: "...So how should we reform the current system of monetary arrangements?..." OR "...There is much to do. None of the underlying causes of the current crisis have been removed. The problem of “too important to fail” banks is still with us. And even more intractable is the challenge of how to reconcile free trade with a stable international monetary and financial system...."
* I wander what he means by this "...no shortage of proposed solutions ~ suggestions ~ providing new ways of holding currency reserves..."
*This part is I believe crucial: "...What is much less clear, however, is the problem to which these proposed solutions are thought to be the answer. I have suggested that we need to analyse more carefully the imperfections, or frictional costs, which make a regime of floating exchange rates an insufficient answer in itself. The crucial frictional costs, it seems to me, are those associated with a sharp fall in output and employment following an abrupt adjustment in the current account, whether brought about by a sudden movement in exchange rates or the collapse of a financial system. They reflect distortions of the price signals for inter-temporal saving and financing decisions. Both the Asian and the recent financial crisis were vivid illustrations of how large those costs can be. Central to any solution is a problem that has not been resolved since the Bretton Woods conference in 1944, namely the asymmetric pressures on, and responsibilities of, deficit and surplus countries to adjust their spending patterns..."
*"...the IMF and the World Bank – have the legitimacy to represent all of their 187 member countries. But their governance is outdated. At the height of the crisis, the G20 and the G7 provided strong leadership. But legitimacy and leadership should go together. One without the other does not offer a sustainable vehicle for international cooperation. So allowing the G20 to metamorphose into the governing body of the IMF makes a good deal of sense."
[Mrt: connect this last paragraph with what said Zoellick on the conference I posted post ago, there are obviously disagreements in leadership: Zoellick says there is no need to create new body and we should use existing frameworks meanwhile King proposes leadership of G20 body within IMF; there is known issue - more members = harder to decide; also, on few other occasions I have noticed official comments that IMF at present needs a change]

mortymer said...

Here is the video presentation from the event (has 2 parts):

Mervyn King, Stability of the International Monetary and Financial System

http://siepr.stanford.edu/summit_video_2011#2a

mortymer said...

costata: "...This highlights the need to focus reform efforts on the international monetary and financial system (IMFS)..."
* Recommending, good read, thought I do not agree with all interpretation/explanation.
* IMO important realization by M.King is that we deal with system risk. e.g.: "...So how should we reform the current system of monetary arrangements?..." OR "...There is much to do. None of the underlying causes of the current crisis have been removed. The problem of “too important to fail” banks is still with us. And even more intractable is the challenge of how to reconcile free trade with a stable international monetary and financial system...."
* I wander what he means by this "...no shortage of proposed solutions ~ suggestions ~ providing new ways of holding currency reserves..."
*This part is I believe crucial: "...What is much less clear, however, is the problem to which these proposed solutions are thought to be the answer. I have suggested that we need to analyse more carefully the imperfections, or frictional costs, which make a regime of floating exchange rates an insufficient answer in itself. The crucial frictional costs, it seems to me, are those associated with a sharp fall in output and employment following an abrupt adjustment in the current account, whether brought about by a sudden movement in exchange rates or the collapse of a financial system. They reflect distortions of the price signals for inter-temporal saving and financing decisions. Both the Asian and the recent financial crisis were vivid illustrations of how large those costs can be. Central to any solution is a problem that has not been resolved since the Bretton Woods conference in 1944, namely the asymmetric pressures on, and responsibilities of, deficit and surplus countries to adjust their spending patterns..."
*"...the IMF and the World Bank – have the legitimacy to represent all of their 187 member countries. But their governance is outdated. At the height of the crisis, the G20 and the G7 provided strong leadership. But legitimacy and leadership should go together. One without the other does not offer a sustainable vehicle for international cooperation. So allowing the G20 to metamorphose into the governing body of the IMF makes a good deal of sense."
[Mrt: connect this last paragraph with what said Zoellick on the conference I posted post ago, there are obviously disagreements in leadership: Zoellick says there is no need to create new body and we should use existing frameworks meanwhile King proposes leadership of G20 body within IMF; there is known issue - more members = harder to decide; on few other occasions I have noticed official comments that IMF at present needs a change]

sirhc said...

Or em', Robert Leroy Parker and Everyone,

Here is one of the big revelations for me / keys to my understanding. I know it's just one piece of the puzzle, but this piece alone does a lot to illuminate the true value of gold. This is probably understood by most of you already, but I wrote it as a sort of introduction for neophytes - the partners, friends and family we would all like to help:

• Gold Inflation •

The price of gold today does not reflect it's true value.

Let's use dollars as an analogy. Have you ever seen Fight Club? Remember at the end how Project Mayhem blew up those financial buildings in order to eliminate debt records and give everyone a clean slate?

Well imagine that actually happened, but along with their debts everyone lost their savings too. The only remaining money in existence was actual physical dollars. Credit cards and debit cards were useless. The only money you could use was the cash you had in your possession plus the cash you could withdraw if you got to the bank fast enough.

What do you think would happen to the value of each physical dollar?

This is an extreme example of the effect that total supply has on the value of individual dollars, but the principle applies to every degree of change and to both directions. An expansion of the money supply decreases the dollar's value, while a contraction of the money supply increases the dollar's value. These are called inflation and deflation, respectively.

But did you know that there is "Gold Inflation" too?

Obviously you can't create new physical gold, but you can distribute multiple paper claims on the same piece of gold. And as long as there is confidence (or ignorance) in the system and there aren't too many claims redeemed at the same time, then the paper claims can have the same perceived value as physical gold. Creating new gold claims is like creating new gold, thus, Gold Inflation.

The vast majority of activity in the gold market today is the trade of "paper" gold claims within this fractional reserve gold banking system. It's called "fractional reserve" because the stockpile of physical gold in the vault is only a fraction of the claims issued against it.

What if I told you that in today's gold market, for every 100 ounces of gold claims there is actually only one ounce of physical gold to back it. In other words, within this system the supply of gold claims is 100 times the supply of physical gold.

Now imagine if someone were to "Project Mayhem" those gold claims and make them disappear. What do you think would happen to the price of physical gold?

When the paper claims are gone and physical gold is all that's left, then and only then will the price reflect its true value. This is known as Freegold.

oldinvestor said...

Hi Wendy,

I do not seem to have any problem seeing the second page of 200 comments from FOFOA.

However, I may be getting these diferently than you do.

I visit FOFOA directly on the internet web page at http://fofoa.blogspot.com/

When I go to the earlier post, “More Freegold Fodder”, by scroling to the bottom of the comments, I see , for example opposite the “Post a comment” link, the line, “1 – 200 of 235 Newer› Newest»

By click on the “newer” link, it takes me to the second page of comments.

If you are subscribing to the comments (which I do not), you may not be seeing this. I like to go directly to the internet page and keep it open, and refresh it from time to time.

mortymer said...

Portugal

http://www.youtube.com/watch?v=Gs2jZjXrBhc&feature=player_embedded

matt said...

interesting article regarding gold/oil with F. William Engdahl.

-"Today, I think the U.S. is going to do everything in its power to keep oil priced in dollars, but the role of the oil price in dollars is not as strong as it was in the mid 1970′s, because of the emergence of these futures markets controlled by banks such as Goldman Sachs—the advent of so-called “paper oil“. With that control of futures like ICE Futures in London they can ramp up the price of oil, as they did in 2008 with a price of $147 and then crash it down to the high 30′s. For what reason? They knocked the wind out of Russia’s sails at the time when Putin and Medvedev were using oil and gas export to create a major counter-pole to U.S. power in the world."

full article-http://www.theundergroundinvestor.com/2011/03/a-history-of-rigged-fraudulent-oil-prices-and-what-it-can-teach-us-about-gold-silver/

Wendy said...

Thanks oldivestor, I pretty much do what you do: refresh etc, so I'm not sure what the issue is.

Some post I can see the comments past 200, while most I can't.
This inconsistancy makes it most odd.

Oh well! (shrug)

Nick said...

I was reading through some of Another's posts. I noticed this line:

"Who am I? As I will not be around for long so I am noone. But, follow with me as all of this takes place in your time!"

Any one think that sometime between his postings and now the great Another passed away? I always wonder since he hasn't made his Thoughts known, and the reference of this taking place in 'your time.'

Maybe he was an ECB or insider who was of old age, giving us his wisdom before passing on. Thoughts?

holdinmyown said...

I've often wondered if Another could have been Ferdinand Lips who died in 2005. He was the author of Gold Wars and his book as well as the book The Creature from Jeckyl Island had an impact on my early education on gold as money.

Nick said...

Never heard of him but i'll look him up and his book as well. The creature from Jekyll Island is what got me started. Although I find it one of the most complete and compelling histories of money and the Fed, after discovering Freegold, his ideas on how to 'fix' the problem are off (i.e. usually gold-bug 'gold standard'). One of my favorite books though, read it multiple times and still picking up valuable information.

Museice said...

Will JP Morgan Now Make and Take 'Delivery' of Its Own Silver Shorts?



"Until now, JP Morgan did not have a NYMEX/COMEX vault license. They had to send silver, for example, to HSBC, Brinks, Scotia Mocatta and/or the Delaware Depository in order to "deliver" it on COMEX. Those vaults have been NYMEX/COMEX licensed for a very long time. But now J.P. Morgan has its own vault license, and the manner in which it seems to have obtained it, is troubling. The bank can now, potentially, deliver short obligations to itself. Yes, you read that correctly. The bank itself, if it still holds short silver positions, and/or the hedge funds/related financial institutions who may have taken over the positions, can now deliver the alleged metal to J.P. Morgan's own vault."

Robert said...

DP, costata, Blondie,

I do not remember all of ZH-er Shameful´s arguments, but two that I DO remember were;

-- If a small group of people feel that gold will go to $55,000, then they would be buying hand over fist, thus running up the price. I was unable to offer a counterargument.

-- ONE GUY (Carlos Slim) could jack the gold market on his own with his billions of $, so if HE wanted in physical in a big way, he alone would move the POG way up. I could not counter him there either.

Shameful holds gold. He also is a law student I believe, so he would be able to out-argue a Bearing! Since I was unable to argue Freegold effectively, I would VERY MUCH like your views on Shameful´s above two arguments.

I need ammo, because at ZH I freely and oftenly promote Freegold and FOFOA.

Terry said...

The mention of "The Creature from Jekyll Island" has been one of my reference sources as well, for which I have been chastised severely. How can you discuss gold without refering to politics. That seems silly. Does anyone out there think Ben is in control of the Fed? And who controls the BIS? Oh sorry, that is stepping on anti conspiracy toes :-)

julian said...

Robert,

my thoughts:


-- If a small group of people feel that gold will go to $55,000, then they would be buying hand over fist, thus running up the price. I was unable to offer a counterargument.


more than a small group of people feel that gold will (and is quite aways into the process of) revaluate in the minds of man through the economic necessity for stable reference point. much more could be said about this sort of thing, by people who know better than i. FOFOA writes convincingly of GLD's physical outflows as evidence of the hands reaching over the fists for whatever is available.

which kind of leads to point two



-- ONE GUY (Carlos Slim) could jack the gold market on his own with his billions of $, so if HE wanted in physical in a big way, he alone would move the POG way up. I could not counter him there either.


The way it works presently, price of gold is much diluted. Regardless, in my meager opinion, it's all about mass of Au and flow. Where will billions of $ in today's Au come from? Who controls such things anyway? I think if anybody's actions would threaten the mafioso humans in power positions in this gold market, they would seriously feel their lives or the lives of loved ones threatened by the intimidation that would ensue should such a "giant" pursue in ways unacceptable to tptb (in the true cause/effect sense, not a conspiratorial sense, i just think the gold market, if any market out there would, would be the market to have some serious channels to go through for massive Au flow.

Perhaps though, this billionaire could easily move the paper price with paper claims. Then he'd have to call up some foreign exchange desk, and i think that's just the beginning, no?

Anyway, I'm still not convinced that silver won't do something special. ZeroHedge is definitely silverbug town, but i think that's a good indicator of the fanaticism to do with this Ag market. Any psy-ops at all there? Are people being led by the hype? Silver is pretty darned commoderific, with that money history which is already being brought back by the states talking about and passing directives to reintroduce them as monetary in some form. i don't know much about that either.


NOTE TO ALL,

perhaps those tried and true goldies have seen this before. great facts just in the first 10 minutes alone. i haven't watched it all but i'm impressed so far, talking about kopanang in south africa

i don't know the source, but it looks aged enough, its youtube title is simply "gold"

here is the link for copy paste

http://www.youtube.com/watch?v=h6Yeid2C7tc

enjoy!


- julian

Casper said...

Robert,

do you remember that Sprott wanted to buy some chunk of IMF gold a few months back and was told to "go away".

This was a clear sign that if you wanted physical gold go to the market and get you some there if you really, really wanted it...stand in line with Joe6pack and buy all you want.

Can you imagine Carlos Slim do that.. I don't, so he goes where there's no line... to JPMorgan and the paper gold market.

Then again, Mr. Slim may be a good businessman and knows all about paper gold and that noone comes to the gold dealer shop with guns blazing... so he does what most with vast amount of wealth do... slow transition from one asset to the other so the price doesn't move to fast.

But if you look at the chart of paper gold price from 2000 till now you can clearly see that we're in a process of making a parabolic blow off and there may already be a few Carlos Slims that bandied together and are running up the price, buying hand over fist.

It just doesn't feel that way since, as the chart suggests, it's measured in weeks, months.

Casper

costata said...

mortymer,

Thank you for the clarification of the Mervyn King comment and the additional links.

Muse,

Very interesting info about the fast tracking of JPM's vault application. It's the timing that intrigues me. It must have taken a long time to construct and fit-out the vault operation.

Assuming that the author is correct and JPM were allowed to self-assess they obviously had some discretion over the timing of the announcement. Is there a deadline looming, some event etc? Thoughts on this anyone?

costata said...

Robert,

I think that the responses to your Shameful 'problem' were on the money.

I would add that 30,000 m/t of the 160,000 m/t of gold in aboveground is in CB vaults. That leaves 130,000 m/t at large. You might ask Shameful: "Where is that gold, right now?"

A/FOA did say that the gold was already cornered over 10 years ago. If Carlos Slim doesn't have his own stash of gold then who would he approach to buy off-market? And why would they sell at current prices?

As others have pointed out he cannot buy from the open market without running the price.

Lastly I would add that there was a specific context surrounding A/FOA's references to 'Giants' ie. gold, Euro-Freegold etc. There are mega-rich Giants in many fields with their own "gold mines". If every bearing sold on the planet brought DoChen a royalty would he need to worry about having gold?

I concede DoChen might elect to do so but the security of his wealth would not necessarily depend upon gold. Rather it would depend on his bearing franchise. Perhaps his money would be better spent on buying politicians rather than gold.

costata said...

Hi All,

Could this indicate 157 m/t of gold was settled outside Comex since early December?

A long extract because I wanted to give you all the context. I have been perplexed by the hot demand for gold in Asia since December not showing up at all in the Comex paper gold price. I realise that Comex data is just a small piece of the overall picture.

Gene Arensburg reports a Comex position change that has him baffled.

http://www.gotgoldreport.com/2011/03/gold-gold-report-excerpt-gold-cot-bargain-hunt-underway-.html

Perhaps the most interesting category of traders to view this week are the traders the CFTC classes as “Other Reportables” (OR). This is the category of large traders that trades in large enough size to have to report their trades, but these traders do not fall into the Managed Money, PM or the SD category. It includes some Commodity Trading Advisors (CTAs) and every other large reporting trader that does not fit into the other three reporting categories.

Please see the graph just below showing the positioning of the Other Reportable traders. Notice please the very dramatic change in their positioning over the past three months. What in the world are we to make of this graph? Consider that as recently as December 7, 2010 (3 months ago) the Other Reportable traders reported a net long gold position of 52,994 contracts.

Now, seemingly suddenly, they have all but exited the net long side of gold futures entirely. The OR traders reported holding 56,057 contracts long and 53,737 contracts short this week, for a net long position of just 2,320 contracts. That is a reduction in their net long positioning of 50,674 contracts or a stunning 96% in three months. Meanwhile gold barely moved on a net basis ($1,401.79 to $1,428.61).

We know of no extraneous reason that the OR traders would have chosen to get out of their long positions, but if any of our more dialed in Vultures knows the score, we’d appreciate a note about it.
(My emphasis)

Of course we know nothing about the OR traders positions in the OTC markets, other exchanges etc. All we know is that this change occured between December 7th and March 8th. AFAIK none of the Comex reports in the interim explains this change. I suppose if we had a huge upleg in gold during this period it might be explained by profit taking.

However, it might be consistent with a co-operative effort to deliver physical gold without gunning the price.

Blondie said...

Running the price of gold while buying it is stupid, and only a small time amateur would do this (if they actually had access to sufficient liquidity, which by definition of their small-timeishness they don't).

Did these mega-wealthy like Slim get wealthy by being stupid?

If one believes something is too cheap, and will be revalued massively in the future, one takes advantage by buying quietly on the dips (BTFD) and not running the price. Like China has been doing these last few years.

Let's try to think like the wealthy do, not like a pauper.

Carlos Slim is already wealthy. That was probably his gold-plated toilet in FOFOA's last post.
Being very wealthy, its a reasonable assumption he already has a decent stash of gold. Paupers don't own it, so someone besides CBs must account for 100,000m/t or so. I'll go out on a limb and say the majority of really wealthy folks already have some.

If Slim believes it will be greatly revalued upward, he likely also understands that fiat currency will be simultaneously going the other direction, but...

Wealthy folk don't sit around with their billions in cash. I believe Slim for example owns... assets! Lots of them! His Mexican telecommunications interests for example are not going to run to zero, unless telecommunications suddenly become obsolete. Neither are his other productive assets. Even his house will still be useful for living in, etc, etc. His current net worth has value, and this isn't about to disappear in the consolidation - he has no need, not to mention no means, to go all in on gold.

Robert, are you selling your bearing business to invest in gold? Why not? What's that, your business has value to you? I'll bet it does! The world is not going to suddenly no longer need bearings! The value of this asset is not threatened by the consolidation either, so where is the motivation to liquidate it for gold?

These large holdings in valuable assets as owned by the wealthy are not particularly liquid... Slim would run the price of his stock down whilst trying to exit it, in order to run the price of gold up whilst trying to enter... yeah right. Bill Gates selling out of MS would do what to the price, and to his net worth? Giants must ease in and out of positions they own a large percentage of, or risk destroying much of their own wealth in the process.

How long would it take to reach settlement on your own business, should you place it on the market right now... and what may happen to the price of physical in the meantime? And you would need to do this (get fully into gold) because? That's right. You don't need to, and you are just a large shrimp... so why would a giant?

For a giant, owning physical gold is a hedge against possible losses in the value and productivity of their other assets, a way to stay wealthy, let's call it wealth insurance. It is not a speculation. A giant has no need to speculate with their entire net worth.

If such a giant wants to be reallocated some more wealth, they would be buying in tranches, on the dips, with a portion of their existing wealth, just like all other successful investors, in exactly the same way you have with 10% (did I recall correctly?) of your liquid wealth.

mortymer said...

*costata [A side step back top Hunt bros to compare settlement arrangements.
*A small note became suddenly a little bit interesting

Hunt Brothers Demanded Physical Delivery Too
By Jon Matonis

http://themonetaryfuture.blogspot.com/2009/01/hunt-brothers-demanded-physical.html

"If you want to know what happens when multiple long positions demand PHYSICAL delivery of a commodity all at once, you need look no further than the Hunt brothers silver saga of 1979-1980..."

"...Khalid bin Mahfouz became intrigued, but since he had close ties to the Saudi royal family, Crown Prince Fahd and Prince Abdullah, and since the plan involved the potential elevation of silver to RESERVE ASSET status within the Saudi Arabian Monetary Authority, bin Mahfouz wished to be discreet..."

mortymer said...

costata, do you remember how Another said that at one stage official selling will no more work on price down but will support uphill moves? I see the slow change already before the time when 1,5y ago at 1050 USD the IMF moved 200t to India -> that did a huge upside. Now such announcements are politically dangerous, also for upside trend, and thus have to be made offline. News about confirmed big physical movements/selling side disappeared (we just know buyers: Iran, China, Vietnam, Middle East, North Africa... there is huge buying here but where from is the outflow?).
Maybe Bron could elaborate on arbitrage and differences in Locos in those areas?
http://goldchat.blogspot.com/2008/07/gold-value-chain-part-v-trading-loco.html
IMO the JPM vault confirms reconfiguration on field of big players. We do not know how it will be played but it means one: "Physical"! I also wander about the timing and the haste plus why on Earth they hurry and do it with "self-assessment" when they need trust from investors?

Anthemius said...

Can anyone suggest some reading for me? Say I wanted to understand the mechanics of Comex inventories and understand what, for example, you read here

http://harveyorgan.blogspot.com/

For example, what is a "Delivery month"? I'm guessing that there are once every 3 months, and that you only get multiples of 100 Oz etc. But these are all educated guesses based on the texts. Is there a good "Comex for Dummies" site anyone can recommend?

victorthecleaner said...

Will JP Morgan Now Make and Take Delivery Of Its Own Silver Shorts

> plus why on Earth they hurry and do it with "self-assessment"
> when they need trust from investors?

Here is a potential reason for a hurry: 4.375 million ounces (136 tonnes) of silver still need to be delivered against the COMEX March 2011 futures contract, i.e. by Thursday next week.

Interpretation 1: JPM have the silver in their own vault. They do not want to truck it to another registered COMEX vault (even though there are some in Manhattan), and so they simply declare their own vault to be an official COMEX vault.

Interpretation 2: They do not have the silver, and they do not want to purchase it in the market because they do not want to run up the price. If they have to deliver, they need to give the counterparty the serial numbers and fine weights of the bars located in a COMEX vault. They want to double-count existing bars. If they run the vault themselves, they simply gain some time until the buyer shows up at the front door and asks for the metal. Usually, many investors never do - they simply leave it in the COMEX vaults for years, just in case they might wish to sell it at some point.

Watching the LBMA SIFO rate go back into contango over the last couple of days, I thought that they had secured all the silver they needed to deliver. Now it is getting interesting.

Victor

victorthecleaner said...

Anthemius,

try the Comex 101

and do not believe anything claimed on that blog you cite unless you have verified it yourself.

Victor

Blondie said...

Anthemius,

Most Futures brokers have extensive coverage of such tedium on their websites.

FOFOA also gave an excellent description of COMEX operations here, which I felt was worthy of its own post, but garnered no comment from anyone else, so maybe I was trippin'.

You may need the futures market crash course you are looking for first, in order to understand it, of course.

Anthemius said...

Victor

Thanks a lot, that looks about the right level - this will indeed help me come to my own conclusions. I'm somewhat worried by your insistence that I should be wary of what I read there though - he is on the suggested reading of a LOT of PM bloggers...

Anthemius said...

Blondie - ok thanks, I will read that too. This all started with me trying to understand fofoa's post about GLD a month or two back - I think I have to just bite the bullet and start from the beginning.

jc said...

Here is some information on the Comex which helps understand what Harvey is talking about.

http://forums.silverseek.com/showthread.php?18970-How-the-Comex-works

mortymer said...

Victor, what is your take about almost "no or minimal movements" in gold comex inventories? (compared to e.g. 1y ago average)

Edwardo said...

Regarding Mr. Slim (customer):

If he wants physical gold, he'd be well advised to acquire a controlling interest in some producing Mexican mines, and/or working out deals to take possession of the raw product directly from some other mines. He could then arrange to have the raw product subsequently refined, assayed, and stored. Mr. Slim holdings must be vast, and I imagine he could easily keep the entire operation, from soup to nuts, in house.

Joel said...

Robert,
what the zerohedge guy describes is a circumstance that I have witnessed many times as an energy trader. There ARE times when giants and others who are bullish on a particular commodity DO want to run the price up when buying. Those instances occur in PAPER MARKETS after they have already patiently put their long position on, and they are simply trying to jack the market to make their position even more valuable or take profit on some portion of that position. It happens frequently, as they manipulate (buy sloppy) often illiquid paper (futures) markets for a week or so, and get the market to the level that they want to sell at. They then simply find a counterparty to do a large volume OTC (over the counter) swap at some slight discount to the "prevailing market", and make millions. All of the major players use the paper markets as their price discovery mechanism, and until that false leverage based price discovery is removed from the system, there will continue to be manipulation. This should a counter argument, that it is the paper markets that allow for the manipulation, and that Freegold (an unleveraged, physical only market) protects against that. If a giant wants to "buy stupid" to coin a phrase from Costata, he will simply own overpriced gold.

Bron said...

mortymer,

From the bullion bank distribution point of view, a lot of reported "premiums" in Asia fail to take into account import/export duties, freight costs, fabrication cost ex-refinery, etc. Only after all that is taken off do you have a real profit the BB is making.

Central bank trading can be physical shipped to that country (as reported, Gaddafi/Libya's gold is in the country) or just allocated held with a bullion bank outside the country. Latter is common because then no shipment cost.

victorthecleaner said...

Anthemius,

here is how you get the 'raw' data:

COMEX gold inventory
COMEX silver inventory (already showing the new JPM vault - presently empty) - Each day one new Excel file under the same URL

LBMA Statistics (for gold and silver forward offered rates)

COMEX silver futures prices

COMEX volumes and open interest (scroll down to pg 62) - One new PDF file every day under a different URL

CFTC Commitment of Traders Reports

CFTC Bank Participation Reports

That blog whose name I do not mention here, got both the figures and the delivery dates wrong in the past.

Victor

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

julian, Casper, costata, Blondie and Joel!

Thanks for the intellectual arming up. I will re-read and digest your thoughts to prepare for the next encounter.

I do like the fact that those of us who own gold have ALREADY front-run those who do not.

GREAT comment about not liquidating our bearing business, even if it will not go up 15 x in value as we think gold might...

Panelproli said...

This really surprised me:

http://preciousmetalnews.com/tag/utah-accepts-gold-and-silver-as-currency/

Or not really?
I wonder when the other states follow.

Museice said...

Cautioning that the federal dollars in your wallet could soon be little more than green paper backed by broken promises, state Rep. Glen Bradley wants North Carolina to issue its own legal tender backed by silver and gold.

Museice said...
This comment has been removed by the author.
DP said...

@Musice: Walden, the economics professor, said the views espoused by adherents of the Austrian School are well outside the mainstream of modern economic thought.

DP, a nobody, know-nothin blogger, said 'so what? so was the view that the world wasn't flat.'

The people of NC better hope this dude doesn't get his way, because I for one will come and open a shop selling anything they want to buy, and I'll take their gold. [They can keep their shitty silver though. It won't be a dime store.]

DP said...

@Robert: go up 15 x

Interested to hear your algorithm to come up with this 15x? Perhaps you were just trying to be conservative...

Anthemius said...

Victor - thanks, those links are great.

So, it would be possible to go through all of the funds listed on, say, here

http://en.wikipedia.org/wiki/Gold_exchange-traded_product

and look up the gold reserves and liabilites in the form of paper gold of each (or guess if not available) and put them in a big spreadsheet.

Assume there are 160,000 tonnes above ground. Then everyone who owns - or thinks they own - gold would then be on this spreadsheet except for the "unknowns with physical" that would account for the (160,000 - total reserves of comex, LBMA etc.)

My wild guess is that I'm not the first person to have suggested this. Who has already done this exercise?

Joel said...

I would love to see someone discuss revaluation multiples and attendant justifications for them. Asked about it earlier, someone step up!

DP said...

Is this a new all-time high
I see before me?
Or is it just an all-time high
of the mind?

radix46 said...

No all-time high in GBP

zenscreamer said...

Joel --

FOFOA has tried, in many posts, to provide an answer to the question you pose about "revaluation multiples". The thing is, it's not the right question.

When you start asking the right questions, the answers will take care of themselves. I'm not being condescending, and I have no illusions that my powers of perception are in any way greater than anyone else's. As many others have said, it's a matter of perspective.

DP said...

No radix, you're right. Still, all bad things come to he who waits - we'll soon have our all time low of the GBP too I'm sure.

radix46 said...

DP,

I have officially ceased to care about day-to-day, month-to-month, etc movements. I have met my target for what I consider to be "enough" gold and I am now only interested out of intellectual curiosity.

Until the system changes, gold could go from £10,000 to £0 and back again and my stash would stay right where it is. There's living to be done!

DP said...

@Joel: I think zenscreamer is suggesting that you might change your way of thinking from "revaluation multiples" to "devaluation multiples".

i.e.: Gold isn't going up, it's going nowhere. The currencies are going down, at varying rates.

So Robert's algorithm that spits out 15 for him, for example, is stood on its head and examines instead how the $ goes to 1/15th of present value rather than gold going up in value by a factor of 15. As I implied earlier, I think this is a highly conservative forecast, personally, but I don't have any numbers to put into an algorithm though myself, and this is why I am interested to know how he arrives at 15 today. I'd like to see some numbers.

DP said...

@radix: amen

DP said...

@Anthemius: You're overlooking the unallocated gold account customers of the BBs*, who are not on your ETF list. These are the people who don't have the gold they think they do, and where all those paper fictions lie. The gold that the various ETFs say they have, it really is there in the vault (just not everyone can take it out of that vault!).

The gold that the "unknowns with physical" have, it really is there too of course.

The only gold that isn't really there, is the BB unallocated*. Now, if you can come up with a way to find out this number, and also the reserve ratio that the BBs have to cover it, then we'll be onto something.

* I am including anyone with any kind of certificated gold, or pool account gold, or whatever, whether that be with a BB, Kitco, Perth Mint, etc. Promises to deliver in the future if you pay to convert to another product, but no actual gold.

Michael H said...

DP,

On your comment "i.e.: Gold isn't going up, it's going nowhere. The currencies are going down, at varying rates," I may disagree.

If you mean that this is what is currently happening, then we agree.

But the freegold revaluation is not a matter of currencies going down and gold staying put -- otherwise, gold would retain a constant purchasing power in today's dollars.

This is not the outcome we expect. We expect gold to increase in purchasing power as paper burns. The particular revaluation to pay attention to is not 'gold vs. dollars', but instead 'gold vs. oil'. In rebalancing the gold:oil ratio from the current 1:14.5 to FOFOA's predicted 1:550, gold will likewise be revalued against all other goods, services, and commodities in the economy.

Edwardo said...

DP asserted,

"we'll soon have our all time low of the GBP too I'm sure."

Okay, how low and how soon?

DP said...

Will it not be the case that there will be a lower relative demand for goods and services compared to gold, which will have infinite demand as the universally accepted premiere wealth store, and that this supply/demand imbalance will drive a reset in relative values of all things?

I see it that people will be desperate to get gold to protect their accumulated wealth, and will lower their price demanded for all other goods and services to compete for the limited gold that is available.

Or to put that another way, the value of all things, except gold, will go down to varying extents.

Yes, I can see this the way you put it too. But, for example, I think people will stop thinking say houses have such greater value than gold. This might be seen as you say, that gold became more valuable, or a collective realisation that houses were not worth what was previously thought.

julian said...

@ Joel

to further zenscreamer's point, and perhaps Michael H's too...

i just finished reading FOFOA's post from 12/2009, Gold: The Ultimate Wealth Reserve

http://fofoa.blogspot.com/2009_12_01_archive.html

perhaps you have also read it already

here is a key quote for me:

"In my last post, Gold: The Ultimate Un-Bubble, I made a few predictions about the purchasing power of gold after the restoration of its ancient role. But probably the most important line in that post was this:

The price of gold is completely arbitrary.

Understanding this concept is the key to understanding coming events that will confound almost any observer. So let's expand it:

The value of gold relative to the value of anything and everything on the planet Earth is completely arbitrary.

Or:

The value of gold is completely arbitrary."

Honestly, my perspective is not clear enough to grasp this concept at its essence. I kind of sort of get it, but kind of sort of don't.

Later in the same post FOFOA quotes FOA, and therein lies a gem for understanding the essence of Money. Brilliance! Even that one, I understand it intuitively, but at a discursive level I am not so sure that I get it.

Overall, my thoughts regarding your question of revaluation multiples were in the back of mind while reading FOFOA's post, and what i took away is that gold will be like a perfect weight to balance the scale of wealth against assets/goods/services

sounds too vague though, for my Western mind :)

- julian

Anthemius said...

Thanks for the replies, I've been reading this blog for a while - and I know a fair bit about money and banking in general - but I just thought eventually all this would become clear. It isn't though and I want to understand more of the posts!

"The gold that the various ETFs say they have, it really is there in the vault (just not everyone can take it out of that vault!)."

OK, then there is something about this process that I don't understand, I'll read a bit more.

"The only gold that isn't really there, is the BB unallocated*."

When I buy gold, I buy gold from a gold bullion dealer and take delivery. He can also store it for me in an "allocated account" - as does someone like bullionvault here in the UK.

But you are saying people buy gold from a BB but don't take delivery and also don't have the serial numbers of the bars (or any other auditable information) and, further, that we don't know how much gold these bullion banks have "sold" like this, nor how much gold they hold in reserve? They are not required to publish this information.

I can't really believe this, it's absurd. Who the hell is buying it?

Michael H said...

DP,

"Will it not be the case that there will be a lower relative demand for goods and services compared to gold" -- I look at it differently, though maybe its only semantics.

While you specify lower RELATIVE demand for goods and services, I'd be sure to not mean lower ABSOLUTE demand, as in reality the flows of the 'real' economy should continue even after the financial 'matrix' is stripped away.

Another aspect of your wording that I have trouble with, is that "I see it that people will be desperate to get gold to protect their accumulated wealth" makes it seem like a one-time price spike a la 1980. So people rush to gold -- then what? And if they do not rush in before hyperinflation takes its toll, then what 'wealth' will they have left to protect?

Why would the value of all things go down? Why would a tractor be worth less after freegold than before, as long as one has the other inputs necessary (fuel, land, seed, etc) to make it produce?

Houses are a special case, since part of their price stems from the real asset and part of their price is from the financialization that comes from debt.

DP said...

I can't really believe this, it's absurd.

Yes, it is rather, isn't it.

Who the hell is buying it?

Traders/speculators. People looking for a short term profit in currency terms, and who see gold as nothing special, just another commodity like any other, to be played up and down for profit no matter who gets hurt in the process. They see the expenses of allocated or delivered gold as an unnecessary and stupid overhead, which they can avoid by buying much more convenient paper gold rather than actual gold. Besides, paper gold is much more liquid [until it isn't?].

No wonder we will have the politicians of the world, starting already now with Sarkozy the second he got his turn at the mike recently, decrying the hideous speculation in commodity markets and vowing to bring a stop to it. What's taken them so long?

I don't doubt the numbers we would like to see are published, but not where you or I can find them.

DP said...

Michael H: I'd be sure to not mean lower ABSOLUTE demand, as in reality the flows of the 'real' economy should continue even after the financial 'matrix' is stripped away.

I'm not as sure as you on this, sadly. I see people getting paid less and less, in inflation-adjusted terms, and therefore demand for goods and services falling away. Whether people would like to have the same standard of living or not is immaterial, if they simply have no way to afford the luxuries they take for granted as things stand today. Certainly, this dynamic will vary in different currency zones I think. None of the currencies will be as good as gold, in the eyes of the average person by then though, I imagine.

Michael H said...

DP,

"I see people getting paid less and less, in inflation-adjusted terms, and therefore demand for goods and services falling away"

On a local level in the US (and perhaps western Europe), yes, absolutely.

On a global level, demand for goods and services will remain stable provided 1) population is stable or increasing and 2) oil flow is stable or increasing to match. Essentially, goods and services produced are proportional to oil and labor, and everything produced will be consumed.

We can debate points 1) and 2) above but they are not necessarily linked to a gold revaluation.

Indenture said...

DP said, "I don't doubt the numbers we would like to see are published, but not where you or I can find them."

This is one of the core concepts of Freegold or Reference Point Gold that helped me along my journey. As soon as you accept that there is a paper price of gold (the physical price us shrimps pay) and there is a true price of gold that Giants use for their transactions your journey to understanding FOFOA is one step closer.

Indenture said...

@Blondie

You're right. FOFOA Describes The Comex deserves to be a post on it own.

Michael H said...

DP,

I am thinking further about a 'flash revaluation' of gold.

Perhaps it will not happen as a sudden shift up to $55k/ounce in purchasing power. Why not? Because that purchasing power is rooted in the oil:gold ratio. So while oil might be instantly repriced in gold, it will take a while for that repricing to work its way through the economy to affect the gold:goods ratio.

No doubt gold:goods will shoot up instantly as well, just not the full expected amount. Oil used directly in the production and transport of goods will drive their price up. But the 'embedded oil' represented in capital equipment might not be immediately appreciated. Only after equipment needs to be replaced, or added to, or repaired, will the gold:oil implications fully work their way through to the gold:goods ratio.

Blondie said...

DP, MH,

How about we frame the discussion differently?

Examining everything in terms of VALUE, rather than currency may help.

Defining value, to see what it actually is, we find UTILITY.

If it has a use to you, it has a value to you.

So.... continuing this line of reasoning, people value everything in terms of utility, which is to say how much use it has for them, AT THAT POINT IN TIME. So utility, while being anything but arbitrary, most certainly fluctuates with the fluctuations in ones perception from moment to moment, and it fluctuates most during punctuations of equilibrium, rather than during stasis of equilibrium.

The value of gold will change as people’s perception of its utility to them changes, and this change in perception will be driven by the stripping away of the “financialization”, of the debt. The value, relatively speaking, of a tractor will be subject to the same forces, which is “how much utility does this thing have?”.



Our exchange of value with one another is facilitated by our medium of exchange, but a problem arises when debt is issued and circulates at par, because debt represents value not yet created, but only promised, yet once circulating it inflates the supply of medium of exchange. This is the “financialization”. It is a distortion of value, and it flows in size into all sorts of things as “hot money”, sometimes creating quite visible bubbles, but always blowing the ultimate bubble/balloon of debt ever larger, and ever more distorting value, of which we perceive this debt to be part of our medium of exchange of. There is no new value in aggregate, just new medium of exchange.

The debt balloon is expanding within the value balloon, so we assume there is more value than there really is. Our perceptions of the relative values of everything are fantasy. The benchmark (gold) of value has been monetized specifically to allow the existence of this fantasy, to undermine its functioning as that benchmark.


We need to examine our aggregate perceptions of the world, and ask if they are likely to remain in stasis (fantasyland), or will they be forced to undergo a punctuation (a return to reality)?
If stasis is the more likely, continue dreaming.
If punctuation is more likely, consider what will, and what will not have utility afterwards, not just in assets, but attitudes too.

My perception is that as separate self-sufficient beings, gold has no utility, but that as part of a larger interconnected human super-organism gold has the highest utility.


Not all value is available from others.

Perception and perspective are everything, and though they are of infinite value, they can be hard to even give away sometimes.

Nick said...

Random thought-

When freegold occurs (and paper burns) I can't help but picturing a dichotomy of wealth worse than the world has now. If we know that many giants, governments, and politicians are some of the main hoarders of gold, with the exception of some shrimp like us, I can't see the transition going smoothly. For the rest of the world will they just have to start from scratch, and will they put up with that?

I can't seem to completely rule out the masses 'blaming' anyone holding gold, as it would appear to them that they just 'stole' their wealth.

Paul said...

did you blame early microsoft stockholderds Mike ?

Paul said...

Mike ?
I ment Nick, don't know why I just typed Mike ?? lol

Nick said...

A lot of people may have made a ton of money on MS but did anyone else lose a lot?

Imagine if MS stock became the only store of wealth and all cash and other stocks plummeted.

Edwardo said...

Nick, you are, in my view, on to something when you observe how the already financially well endowed will likely maintain their great advantage. And, equally, it is well worth asking, as you have, if there will be illl will among the many have nots post a gold revaluation.

costata said...

Nick, Edwardo,

I agree. I think the PTB will be looking for scapegoats.

Blending in with the crowd might be a very good idea even if that means living well below your means for a while.

;)

ad said...

DP, MH, Blondie

"I see people getting paid less and less, in inflation-adjusted terms, and therefore demand for goods and services falling away"

On a local level in the US (and perhaps western Europe), yes, absolutely.


I think one has to grasp how the world changes as the dollar as reserve falls away. This alone will effect a "rebalancing of the world" that has far reaching implications. Whether or not you have gold, the meritocracy is the important change.

On utility I'm thinking along the lines of...will the coffee farmer in Ethiopia or Guatemala then get a fair price for his coffee according to the value he gives you daily? Or will his value still be determined on the C market thousands of miles away by computer algorithms written by some phd in physics?

I guarantee you the value the phd and his employers gained from drinking the coffee while doing the damn math for that algorithm is a lot greater than the 0.02 a cup that a farmer gets.

costata said...

Dr Copper

Very short must read IMO.

http://www.financialsense.com/contributors/russ-winter/copper-stretched-to-the-breaking-point

In what can only be described as mindless, wild crack up boom speculation, copper inventories in the three big exchange warehouses have hit extremely high levels, even higher than what was seen in the pre-financial crisis 2008 commodity bubble Numero Uno.

All this is happening at the same time that China, the consumer of 40% of the red metal, is seeing a well telegraphed (but largely ignored) slowdown. I have reported on this at length [Chinese Exporters Going Down]. Indeed as reported over a week ago, China copper imports for February dropped 19% compared to last year and were 35% less than January [China Copper Imports Drop Again]. That’s the lowest since November, 2008.
(My emphasis)

costata said...

Dr Copper II

Way to go India!!! (Governments - is there any problem they cannot make worse?)

If Asian platforms think they can bridge the gap by exploiting cheap labor in India, guess again as New Delhi pushed through 17-30% wage increases for 50 million workers because of inflation.

There is a link in that short piece I posted titled "Dr Copper" to an earlier post from this analyst about a crunch on Chinese exporters and their Western customers.

http://www.wallstreetexaminer.com/blogs/winter/?p=3667

A few snippets:

The twist on the story is that Chinese suppliers are in a triple world of hurt. American buyers resisted attempts to pass on price increases of 20-50%.

At the same time, the Chinese export sector scrambled to try and save its labor force with hikes of 20-30% in wages and benefits [Reuters].

In addition to intense labor pressures, Chinese exporters have been completely crushed by the massive input goods hyperinflation supposedly created by Chinese “demand” and “growth.” One of the more revealing quotes about this “demand” came from Sharon Johnson of Penson Futures on the latest big spike in cotton: “I cannot say this clearly enough…this is not mill buying, mills cannot buy at these prices.”

Already, the slowdown in American orders has forced some container shipping lines to cancel up to a quarter of their trips to the United States this spring from Hong Kong and other Chinese ports.

costata said...

One more snippet:

(If you have ceiling fans in your home it might be a good idea to leave them off for a while. At least until June 30th IMHO.)

In the U.S., retailers are definitely hard at work pushing through price increases with 3-month inflation running at 5% annualized, according to MIT’s “Billion Prices Project.” The problem is that the new price list out of China is not 5%, higher but a large multiple of that, thus explaining the parabolic look to this index, up 0.7% in the last month. American firms rely on short, just-in-time inventories and are therefore looking at diminished supply, actual disruptions and large margin compression. (My emphasis)

Sounds like a combination that could send inflation expectations much higher and erode confidence in one's local currency unit.

It's a good thing the oil market is so Unicorny and Rainbowy* right now. Otherwise we could be looking at a world of hurt in the global economy (soonish).

That might test the steely resolve of our friends, the silver afficionados, and their new lycra-clad, mini-skirted, head cheerleader Max Keiser. I recall that he was a staunch (farsighted?) physical gold advocate some years ago.

FWIW my earlier 'pump and dump' call for silver stands.

(*h/t Tyler Durden of ZH fame for the descripter.)

Nick said...

costata,

The other thing i worry about it the few people i have tried to convince or at least engage in conversation on the topic of gold. none listened. maybe next time i see them i should tell them i sold it ;) before it happens.

Terry said...

Is anybody here familiar with 100% pure gold. This is a test to see if i can get this by the filters.

julian said...

Nick said,

I can't see the transition going smoothly. For the rest of the world will they just have to start from scratch, and will they put up with that?

I can't seem to completely rule out the masses 'blaming' anyone holding gold, as it would appear to them that they just 'stole' their wealth.


my thoughts,

what do you mean by rest of world? i think people in india already believe (and practise?) freegold essentially

i don't think the punctuation will be smooth in all places, but it will come, of necessity

it will be a punctuation of shattered perceptions, like a mirror in pieces on the floor, revealing another mirror standing right behind it, providing another perception

There is much to be said of the 'political will' (referring to that "energy" of the combined "actions" of human population mass)

There is no freegold without the corresponding political will, i reckon, which would come from the new perspective

the perspective will be of necessity, a rude awakening, so to speak, as paper burns

all the true value that exists in the world would largely remain intact?

it's just that 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 thanks to the political will

most won't care to really understand in any detail, they will just know that it is reality and will approve of its prospects

blondie said,

The value of gold will change as people’s perception of its utility to them changes

i think that sums it up nicely

and that's why i don't think they will "blame" anybody for holding gold

they will be thankful for them for adding value to the community, just like no one will fault people who already grow some of their own food or have other self-sufficiencies if there were to be food shortages/ other "emergencies"




on another note, i finally watched that krassimir petrov video, posted by FOFOA? (credit to whomever shared it if i'm wrong), "investment analysis - gold"

i'm buzzing from that informative talk! that infinite resolution again!

I recommend it to anybody who was thinking of the whole revaluation idea earlier

He makes great points to compare gold with various things, showing some interesting charts and numbers/ratios, and it's interesting how he calls it commodity, but still distinguishes it as the ultimate barometer of things!

Onward and upward

- julian

costata said...

Hi julian,

You wrote:
... i finally watched that krassimir petrov video...

Could you post a link?

Thanking you in anticipation.

Nick said...

Good points Julian. I should have specified 'Americans' instead of 'the rest of the world' as this group has had the luxury of living beyond their means over the past several decades and is in for a rude awakening IMO. I was actually thinking of India earlier and I agree the changes will be vastly different depending on where you live.

"it's just that 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."

Couldn't agree more with that statement.

costata said...

julian,

In my eagerness to request that link I neglected to compliment you on this wonderful analogy:

it will be a punctuation of shattered perceptions, like a mirror in pieces on the floor, revealing another mirror standing right behind it, providing another perception

Your other points were spot on as well IMO.

Terry said...

Bron,

I know there are patents in England, France, abd Australia on 100% pure gold. The patent in America was denied but nobody can patent it here because someone applied. The patent also applies to the 13 platinum group of metals known as exotic metals. Are you aware of this?

Terry

michael said...

latest video the silver bugs are having orgasims to tonight.

as FOA said, they are running forward while looking backwards. its the 70's all over again.

http://www.youtube.com/watch?v=KHySVnAi9g8&feature=player_embedded

Joel said...

@ DP, Michael H, Julian: Great comments the relative value of gold scenarios. Special kudos to Michael H. for getting that my question was more directed to the relative value of gold to commodities and other assets(the question we all try to get our arms around when making decisions about what portion of our net worth to invest in gold). It matters not the price of gold in US dollars if US dollars are worthless. It is the value of gold relative to other commonly purchased assets (houses, land, cars, energy) that matters, and that is what I was trying to address. I believe FOFOA made the comment that it will be kind of a double whammy, in that not only do you preserve your wealth, but you gain in relative wealth to everyone else that did not preserve theirs, so you move up the scale exponentially, relatively speaking. I am certain he said it much more clearly and eloquently, but you get the gist. But do none of the ideas for calculating the ranges, i.e. taking all of the current money supply divided by the est. 160,000 metric tons of gold, or dividing each individual currency by their CB gold holdings, etc…have any merit to get one’s arms around the ranges of “relative value” of gold? There has to be some kind of algorithm that will give us the answer, right? After all, I saw a computer demolish the Jeopardy champ...

@ Zenscreamer: Lame, egocentric response. I am not asking the right questions? Read the above authors’ responses and learn. If you have to lead with the words, “I’m not trying to be condescending, but…,” then you likely are.

@Nick: I agree with you on the scary nature of being one of the few who survive the financial disaster. You will definitely have to live humbly (like a bank robber). One possible mitigating factor: Many of the people who are most likely to riot (debtors with very little savings) will be getting a get out of jail free card in a jubilee/currency collapse scenario. Their standard of living may go down, but at least they will own a free house. The potential for middle class riots may be a different experience altogether (see recent events in Wisconsin) when the unionistas see their pensions become worthless.

Blondie said...

Re: “Revaluation multiples”

This is the initial attraction attraction for most to this blog, isn’t it?

If one has read most of FOFOA’s posts, and their accompanying comments, the evolution in the understanding of some of the longtime commenters is apparent.

Zenscreamer didn’t just blow in on the last upleg.

costata said...

I hate Blogger. 30 minutes down the tube. But it lets the 30 second comment through. I'll try again later.

costata said...

Hi Joel,

I don't want to interfere in the interesting exchange you are engaged in but I think it might be useful to remind people who are following it that we are talking about two separate events here, one-time gold revaluation and US$ hyper-inflation.

Gold Trail 4
FOA (06/12/01; 11:23:21MT - usagold.com msg#77)
A discussion


(NB: These passages appear toward the end of "A discussion". My emphasis.)

Back to gold's paper pricing breakdown:

It will not lead to the collapse of world banking so much as it will lead to a reallocation of value between assets vs reserves. Which are and which are not. Further, a loss of paper exchange trading will drive gold to it's true physically traded price. Gold in the tens of thousands per ounce will represent:

First
,,,, it's real currency value in today's expanded fiat world,,,,,,, then later it will advance further on the price inflation coming to the USA. This is where so many thinkers cannot see super priced gold. They are seeing the present illusion of gold value as it's base. Later, a gold move from say, $10,000 to $20,000++ will only represent a 50% rise. Liken to an oh so understandable $300 to $600 today.

Second
,,,,, the total rejection of owning gold in any form except the real thing,,,, no amount of gold supply will come close to equalizing this current ownership imbalance built up over many decades. If anything, sellers will be confounded as nothing keeps pace with the gold rise. Once sold, it only costs double to rebuy.

Third
,,,,, a return of old world values in that gold is worth owning as a lifetime wealth asset beside your cash and other investments,,,,,, While the US will experience a massive retrenchment of it's wealth perceptions, our move into gold will be chaotic and traumatic. Other parts of the globe will fare well. Life will go on. Remember, people talk about how the US makes a quarter of the worlds products and services and say the rest of the world cannot do without our operating as usual. But, they forget that we consume all of it (that 25%) and then import more. Our production fall away will mostly be at the mercy of our own slow down. As the dollar tumbles on exchange markets, so too will our cost rise to produce anything (massive hyper price inflation). Rendering a net / net non gain in world trade advantage. In other words, our goods may very well rise in price faster than our dollar falls. If anything, we become even less competitive with Euro based production.

DP said...

Blondie: The debt balloon is expanding within the value balloon, so we assume there is more value than there really is.

I like your analogy of the balloons, which is very similar of course to FOFOA's balloons that are side by side. But I am picturing it instead that the monetary balloon surrounds the value balloon. Which is of course similar to FOFOA's other analogy of the monetary matrix plane sitting outside of the real world within, awaiting some day when the power is switched off and people can see the puny planet that is really there.

The vacuum created inside the monetary balloon, by the expansion of credit that pulls demand from the future into the present, pulls on the inner value balloon to force its expansion to follow. In an ideal world, there would be no leakage, and the value balloon would always expand to keep pace with the expansion of the monetary balloon.

But the outer monetary balloon has to deflate at some point, if the inner value balloon cannot keep pace of expansion - which clearly it cannot due to the leakage that takes place in the form of interest, transaction fees, etc - to match the size of the inner balloon: the real world of things, of real value.

So we do to some extent get "progress" in the "present" (well, in the "present" of the past...) by expanding debt, because the vacuum of the credit pumped into the monetary balloon pulls to expand value inside the inner balloon. But, due to the leaks in the monetary system, the cost is less progress (in fact negative progress) at some point in the future (today's present is the past's "some point in the future"), when resources that would at that future time (now) ordinarily have been used in that "present", but which are instead then (now) paying the cost of earlier credit (the monetary balloon is deflated).

Since the dollar system necessarily must expand or die because the money to pay the interest wasn't simultaneously created at the time the debt was created... Bernanke, we have a problem.

We could have had a nice little system, if it wasn't for those pesky interest and transaction fee leaks. Bummer.

radix46 said...

DP,

Could you explain a little more about how your value and monetary balloons interact?

In your analogy, I would see that only people who understand the workings of the system would experience an expanding value balloon persuant from an expanding monetary balloon in that they see that a deflation will occur in the future and real things will become more valuable (scarcer, due to a scramble to grab *real* value) in the future.

Is this how you meant it?

Outside of outsized value accruing to people in-the-know during a transition event, I don't understand how a non-real system (monetary balloon) can ever have any material effect on a real system (value balloon), during normal working parameters of the system.

Does an apple have more utility (more calories, more vitamins, more *real stuff*) in a world with $100 in it than in a world with $10 in it?

Is it not the case that the monetary balloon expands but the value balloon stays where it is, but suddenly goes through a short term super nova then contraction event at the tipping point?

Edwardo said...

Confuse us say,

"Running forward while looking backward lead to smacking face first right into hard object"

On a more serious note, it's amazing how a little speculative froth leads to these preposterous price targets.
Monkey mind meet linear thinking.

radix46 said...

Edwardo,

What method/specific line of thinking would you use for setting price targets?

DP said...

Good morning, radix.

My balloons were intended to represent the system as a whole, rather than everyone having their own individual set that they are carrying around with them. But, I guess now you mention it, yes everyone does have their own set don't they, and the ratios for each person's set aren't all as in the case of the system as a whole... but collectively they must of course all add up to the sums of the whole by definition. Our little monetary and real value balloons are all stuffed inside of the ones representing the whole system.

People who understand the big picture of the whole system, or more to the point who understand the system is likely reaching the point of debt collapse, that's you and I, are stepping further inside the inner balloon. We're selling (have largely sold - phew! :-) ) the "paper things" and reduced debt levels, instead buying "real things". We're just putting ourselves ahead of the crowd, before everyone catches on. Each one of us going through this process, brings the collapse closer.

I don't know that it's so much that the real things will become more valuable, as there will be a collective realisation that if you have paper anything, you have nothing. The credibility of paper will wither and die, leaving only the real behind. Will people be scrambling to have the real things, or to get rid of the toxic paper? Is this the valuation of the real going higher, or just not falling like paper? I don't know and I don't suppose it really matters either way to me, personally.

Would I really value an actual tractor more later than I would have valued a paper tractor in the past? Probably not in this example TBH, but that's just me - I don't want to be a farmer and never did. In fact, now I think on it, I would hate having a real tractor -- where would I put this stupid ornament that will take up a large part of my garden and I have no purpose for? Where will the kids play? Oh christ, now I'll have to waste precious petrol driving them to the park! Man! Get rid of this stupid bloody tractor, take it away! You. Boy. Yes, you. Here's 20p for you, now take this tractor away and do what you like with it. There, that was cheaper than keeping the stupid thing here just to go rusty and get in the way.

I do know for a fact though, because it's already the case, that I will in the future value real gold more than I valued paper gold in the past. I also know that in the past I valued silver, and now I just look at what still remains of it with a slightly bitter taste in my mouth, knowing that there is only so much buying power that is interested in propelling the price of this metal going forward, while in contrast there are buyers of gold lined up around the block who will just keep buying all of it that comes to market, until the cows come home. But I do see real silver as much better than the cash sitting not very far away from it. (Sorry to use the S word. :) I was trying to use it as the best example of something that will still be valued, but the emphasis really will be on gold above all else. The only thing with infinite demand and buying power to support it.)


I stand by my assertion that the past expansion of the monetary balloon did pull on and expand the value balloon. It didn't keep pace because of all those leaks, but demand was definitely pulled from the future and supply was expanded to meet it. Look at the world of the 60's and 70's even, then look at the pace of change over the subsequent decades and the general standard of living in the countries where the debt was expanded the most. The world is a very different place I think (well, a lot of it then...). I didn't say a better place, but some might.

Sadly, for every action there is an opposite and equal reaction. If you didn't get any of the action, you'll probably escape the reaction too.

DP said...

Edwardo: "we'll soon have our all time low of the GBP too I'm sure."

Okay, how low and how soon?


Now if I knew that, I'd be a very happy boy and I would be sure to tell you all. :-)

DP said...

Michael H: Another aspect of your wording that I have trouble with, is that "I see it that people will be desperate to get gold to protect their accumulated wealth" makes it seem like a one-time price spike a la 1980. So people rush to gold -- then what? And if they do not rush in before hyperinflation takes its toll, then what 'wealth' will they have left to protect?

If the world cannot exist without access to oil, and oil is only interested in saving its surplus in gold, then you have the recipe for infinite demand, no? So, that being the case, no "peak" in demand.

What else will have the same level of demand as oil, and therefore by extention gold? We'll find ways to get by with less oil by hook or by crook, through simple bare necessity, but they will continue to provide the demand for all the gold offered. If they can't have gold for their oil, they'll just leave it in the ground.

Tractors? Houses?

I can't see one thing, personally. If you got something, let me know.

Paul said...

just sold my last silver, getting some more gold. want to be ready before june.

and tractors ?
well, I used to ride one through the centre of Rotterdam. tractors are just as rare as cows in citycentres. the looks of the people were priceless. and the looks of the parking police also.

You can't get a ticket since a tractor doens't have a license plate :-D

DP said...

A typical silverbug prepares for the big weekend ride into town to impress those fine city chicks an hopefully get him some action. Ig yig yig yig

I particularly like his "pile of extra junk", which clearly I look forward to buying from him when he needs some more cash for silver...

Indenture said...
This comment has been removed by the author.
DP said...

@Julian: Did you mean this video, or a different one?

julian said...

Hello,

sorry for the delayed response

here is a copy paste link to part 1, there are 3 parts total, if i'm not mistaken

http://video.google.com/videoplay?docid=-4020393826410739752#


@ Joel and others, in his talk petrov does discuss historical ratios between gold and other commodities and indices (sp?), and how gold behaves/performs during certain types of economic conditions

i think it is definitely worth watching just for that, even though today's conditions are quite unprecedented

enjoy!

- julian

Michael H said...

Blondie (March 24, 2011 12:51 PM),

I appreciate your alternative viewpoint in terms of value. Even though I am attempting to use currency prices as 'units of account' only, and only in relative terms, I believe your point is that our current currency prices are so far out of kilter due to the circulation of 'value not yet created' at par with current value, that the true relative values to be revealed may have little, if anything, to do with current prices.

"My perception is that as separate self-sufficient beings, gold has no utility, but that as part of a larger interconnected human super-organism gold has the highest utility."

That is an excellent rebuttal to the "but you can't eat it!" crowd.

ad (March 24, 2011 3:28 PM),

"On utility I'm thinking along the lines of...will the coffee farmer in Ethiopia or Guatemala then get a fair price for his coffee according to the value he gives you daily?"

Furthermore, will his highest productivity still be growing coffee for the world commodity markets, or will he instead grow food for himself, his community, and his countrymen?

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.

Your question is a good one -- will this system continue after freegold?

costata (March 24, 2011 5:21 PM),

What does this phrase mean?
"(If you have ceiling fans in your home it might be a good idea to leave them off for a while. At least until June 30th IMHO.)"

Nick (March 24, 2011 5:27 PM),

I wonder if the solution to the problem of 'how do you pass on the word about gold, without tipping people off that you have gold' is to talk in more general terms about wealth vs. paper, the ponzi economy, etc. Describe the problem without using the 'g' word.

Joel (March 24, 2011 9:35 PM),

FOFOA discusses "the ideas for calculating the ranges, i.e. taking all of the current money supply divided by the est. 160,000 metric tons of gold, or dividing each individual currency by their CB gold holdings, etc…" in his Saturday, June 19, 2010 post, "How Can We Possibly Calculate the Future Value of Gold?" (No link posted to avoid the spam filters).

costata (March 24, 2011 11:48 PM ),

I find it interesting that FOA seems to expect high-priced gold first, and USD hyperinflation second.

My expectation is for the reverse -- USD hyperinflates and then gold gets repriced as the rest of the world adjusts to a financial system without a reserve currency.

I will have to think about why he had the order the way he did. I would expect the rest of the world would much rather have the high priced gold BEFORE the dollar self-destructs, although the dollar faction might not like that, and might fight it tooth and nail.

DP (March 25, 2011 2:57 AM),

"when resources that would at that future time (now) ordinarily have been used in that "present", but which are instead then (now) paying the cost of earlier credit (the monetary balloon is deflated)."

I believe this view is an illusion created by the current system. If you shut off the 'financial matrix', it is evident that the real values created in the name of 'servicing interest' are transferred to the banks, in current time -- not transferred to the past.

Edwardo (March 25, 2011 4:06 AM),

Confuse us must be confused himself -- how is it possible to smack one's face while running forwards while looking backwards?

julian said...

@DP

It sounds very similar, but it migth actually be different, i'm not sure - it starts differently, without the introduction, so i don't know

The description dates your video April 10, 2008, in a different location than the one i'm referring to, which is said to have taken place April 9, 2008, in Stockholm

In fact, here is the site that I think FOFOA (?) posted for us initially

Scroll down to the bottom (Investment Conferences) and click on Investment Analysis of Gold

http://www.petrovfinancial.com/?page_id=46

DP said...

Michael H: I believe this view is an illusion created by the current system. If you shut off the 'financial matrix', it is evident that the real values created in the name of 'servicing interest' are transferred to the banks, in current time -- not transferred to the past.

No real value was created in the name of servicing interest. Interest is one of the leaks, where value that might have been created now rather than perhaps later, if at all, wasn't.

If I build a tractor for someone because they ordered it, and the monetary system subsequently implodes, the tractor still exists. If the tractor was bought on credit and the loan had not been repaid by the time the implosion takes places, then yes the bank will probably repossess the tractor - and then pay some boy 20p to get rid of it, because they have no use for a tractor and therefore do not assign any worth to it. Likewise if it had been a house they had to foreclose on, or anything else that plays no part in the monetary domain that they operate within. These things they will try to dispose of, they will be adding to supply and not increasing the "price" of them.

Gold? Hmmmm, now that might have some utility to them. (taps index finger to side of mouth, while looking up and to the left...) They might value that, and try to keep hold of it. That might impact the price differently than disposal would.

Aaron said...

Re: Investment Legends: “Dollar Collapse Inevitable”

Awesome read, Indenture. That's a nice cross-section. They missed FOFOA's comment on that last question:

BG: What’s your best investment advice for 2011?

FOFOA: Buy Physical Gold Now!

--Aaron

Michael H said...

DP,

Poor choice of words on my part. How about this?

Real values are transferred to the banks, in current time, in the name of 'servicing interest' -- not transferred to the past.

Right, no value is created in the name of servicing interest, any more than you labor in order to pay your taxes.

While the bank may have no use for a tractor, won't it be possible for the bank to sell it to someone who does have use for it?

DP said...

Yes. But, since The Boy doesn't especially care about holding out to get the very best price (he just wants to turn it around real quick; it's probably costing him to store this piece of junk) the buyer, who clearly does value the utility of a tractor I guess, will probably get it for a nice price.

This will set the bar for the next tractor sale (where there will in all likelihood be one less buyer, and the price might go lower still).

Given that there will be infinite demand for gold, the price won't fall at the next sale. There will still be more buyers than sellers.

DP said...

Maybe we will have the governments start plowing-under tractors, to drive down the supply and prop up the price?

On a seperate note, does anyone else have The Grapes of Wrath in their top 10 books? (Or any of those Steinbeck novels for that matter, but this one is especially awesome, for me.) Every time I go and read it again, it feels like a window into the past. And future.

DP said...

DP: Maybe we will have the governments start plowing-under tractors, to drive down the supply and prop up the price?

Or have them pour sugar into the running engines of perfectly serviceable cars?

costata said...

Michael H,

You asked:
What does this phrase mean?
"(If you have ceiling fans in your home it might be a good idea to leave them off for a while. At least until June 30th IMHO.)"


Are you familiar with the phrase "the shit hits the fan"? I think shit (trouble) on the scale of 2008 is coming very soon.

You wrote:
I find it interesting that FOA seems to expect high-priced gold first, and USD hyperinflation second.

So did I. I'm not sure whether this is still the likely order of events.

You wrote:
My expectation is for the reverse -- USD hyperinflates and then gold gets repriced as the rest of the world adjusts to a financial system without a reserve currency.

I think this is something to think about and discuss.

You wrote:
I would expect the rest of the world would much rather have the high priced gold BEFORE the dollar self-destructs, although the dollar faction might not like that, and might fight it tooth and nail.

I think they have fought it "tooth and nail". Perhaps the "uber-shitheads"* have compressed two tumultuous events into one even more tumultuous event.

Alternatively perhaps the sequence can be controlled as FOA seemed to suggest.

*costatapedia defines an "uber-shithead" as a homo sapien member of a group often termed "the powers that be" (TPTB). The uber-shithead surrounds himself with others of his own species who tell him/her, at all times, what he/she wants to hear. The uber-shithead can often be found in government, the media and corporate offices.

The uber-shithead is believed to have evolved from WWII Nazi research into the selective breeding of small men (with a strong attraction to high heels) and trophy wives in the poisonous atmosphere of exclusive private schools.

There is debate among scientists as to whether this Nazi research represents a period in human evolution sometimes termed 'Peak Shithead'. (citation required) Opponents of the Peak Shithead theory argue that the species has unlimited potential for shitheadedness. ('is this a real word' citation required)

Michael H said...

costata,

'Are you familiar with the phrase "the shit hits the fan"?'

Duh. Yes I am. Thanks.

Indenture said...

costata: Because of the historical reference the use of slang is permitted in this instance.

and the "ceiling fan" threw me off as well. I think it's because I have never tossed feces straight up in the air because the result is kind of like a Ponzi Scheme. Inevitably it will come back and hit you in the face.

Indenture said...

julian's Krassimir Petrov - Investment Analysis (part 1)

mortymer said...

Julian, I believe it was me few posts back.
If you would like more here is an excellent list of his other educational videos... (&much more):
http://www.neuralnetwriter.cylo42.com/node/1
(Silent humble thanks for The one who collected them)

I would also recommend you this article:
"The Road to Hyperinflation"
by Alar Tamming, Tavex, Estonia and Dr. Krassimir Petrov, Ahlia University, Bahrain; March 16, 2010
http://www.financialsensearchive.com/editorials/petrov/2010/0316.html

Here is one thing to know about Alar Tamming
(Important for people in Finland, Sweden, Denmark, Estonia, Latvia, Bulgaria)
http://www.tavex.fi/index.php?main=445

And now it is time for 1m min offsite. I might be reading-following randomly.
I got yesterday 3.3kg of rare beauty; more pure that 100% gold, 47cm of happiness.
So I hope you apologize me from not posting to take care of the best of treasures. :o)
The future worth living for we experience now.
***Log off***

myanmarinvestor said...

QUOTING COSTATA & MICHAEL H
You wrote:
I find it interesting that FOA seems to expect high-priced gold first, and USD hyperinflation second.



So did I. I'm not sure whether this is still the likely order of events.



You wrote:
My expectation is for the reverse -- USD hyperinflates and then gold gets repriced as the rest of the world adjusts to a financial system without a reserve currency.



I think this is something to think about and discuss.



ME: Hyper-inflation is simply a 'loss of confidence' in the currency (that we anticipate will 'soon' occur to the USD). However hyper-inflation does not happen overnight, it is a process that accelerates over time. Therefore, the loss of confidence is a process, whereby the 'smarter money' loses confidence ahead of the 'masses', and as more people become aware (and also lose confidence) the acceleration happens faster ultimately leading to a collapse of that currency, and a re-set.

In these forums we are part of an enlightened few that have already 'lost confidence' in the USD, and as a consequence have secured some gold. As part of that decision making process we also learnt about two separate gold markets, and consequently lost confidence in the paper gold market due to the massive leverage that exists. So which breaks first the USD or the paper gold market?

Well, given the relative size of each market and the nature of financial crises, it certainly seems logical that a seemingly inconsequential event, such as a failure to deliver a relatively small amount of physical gold or silver via the comex or lbma, will be the spark that ignites the paper (derivative) gold market. With these derivatives failing, contagion will spread to other derivatives etc etc, before ultimately raising the confidence question in the biggest derivative of them all, the USD.

RETURNING TO THE COSTATA & MICHAEL H POST:
You wrote:
I would expect the rest of the world would much rather have the high priced gold BEFORE the dollar self-destructs, although the dollar faction might not like that, and might fight it tooth and nail.

ME: The spark that ignites the paper gold market will result in the 'temporary' unavailability of Physical Gold at any price, which will clearly give you high priced gold before the dollar destructs, and this will lead to the final believers losing their last shred of confidence in the USD, and the further inflation led rise of Gold in USD terms.

The opposite scenario i.e hyper-inflation first and paper gold destruction requires a situation whereby the widest used unit of account i.e. the USD, singularly suffers a sudden and catastrophic loss of confidence such that a series of ever smaller USD denominated sub-sets would effectively implode on top of each other, and in these terms seems highly improbable.

Finally, regarding the potential Freegold price of gold in USD terms; I would just like to say how excited I was when I first read (over 2yrs ago) that gold is going to USD55,000 per ounce. I thought wow I will be rich! and whilst I do expect that gold will re-value higher, it doesn't really matter whether it goes to USD55K or USD955K, as this is more a reflection of the hyper inflated state of the USD. Furthermore, as COSTATA so eloquently pointed out "gold is worth owning as a lifetime wealth asset" under Freegold. So even once we get there will you see your gold as something that you will give up for a nice car, or holiday? Well I think the answer is NO, as by then we will value everything in terms of Ounces including how much we need for your retirement, and as inheritance for your children. So I'm no longer counting on an early retirement, and in many ways many things will remain the same.

Blondie said...

Michael H said:

”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?“

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.

”Real values are transferred to the banks, in current time, in the name of 'servicing interest' -- not transferred to the past.

Right, no value is created in the name of servicing interest, any more than you labor in order to pay your taxes.“

The value is partially transferred upon the issuance of more medium of exchange in whatever proportion is required to keep all medium at par. Interest has nothing to do with this process.

Issuance of medium of exchange yields far more power than the collection of interest.

------
Myanmarinvestor,

That was roughly my thinking too, though probably better expressed.

costata said...

Myanmarinvestor,

Well said. It was interesting to experience the evolution in our attitude to this ultimate wealth reserve.

We bought our first gold purely as an insurance holding - before being exposed to the A/FOA archive and FOFOA's writing.

This has been quite a journey for us.

Cheers

julian said...

mortymer,

credit to you for dr.k.petrov video, and all your other great shares

and congratulations to you for your freshest Precious! Many Blessings :)



On another note,

davincij15 gets credit for this link

it's about silver, gold

http://finance.yahoo.com/blogs/breakout/michael-purves-hi-yo-silver-20110324-120653-195.html;_ylt=AutQR6BvIvdT_8FhyxKUxn27YWsA;_ylu=X3oDMTE2c243dWRjBHBvcwMxMgRzZWMDdG9wU3RvcmllcwRzbGsDbWljaGFlbHB1cnZl?sec=topStories&pos=9&asset=&ccode

(apologies for the long copy paste code; if someone wants to spare me a quick tutorial of how to embed the link into a fancy blue phrase, thanks in advance)


what interests me is that michael purves (never heard of him) makes it a point to mention he calls silver a currency, not a commodity

he later mentions the "hybrid" nature of silver, but still insists on calling it a currency

i find this interesting in light of the bullion bank currency trading desk and what other "commodity" trades as currency at that desk, from what i hear

i would never have picked up on this nuance without the great education from FOFOA et al

then a misunderstanding made me laugh:

at one point purves gives some of the usual logic on why to buy silver, and he starts off by saying it's not because of possible new industrial use to buy silver, it's because it's a cheap form of gold, he then goes on to mention some more stats or facts or points pushing silve's favour as a desirable asset, pretty much all of them relating to gold

(no that's not what made me laugh, although i definitely thought of this blog and the thoughts and arguments that fortify it while these points were being made) - and keep in mind this is all within a few second span

after he's done, one of the hosts says "so should I buy bricks and stock pile them in my bomb shelter?"

and for an instant, i thought he meant actual bricks, like the "tonnes of dirt so cheap" and all those others used as some counterarguments in archives (perhaps bricks were also used in one of the examples?)

anyhow, when i realized i misunderstood, he meant bricks of metal, i chuckled because i realized that i only made that initial association because of some of the things posted here

...

so, silver treated by BB as a currency?

i'm not convinced it can't happen, under the right conditions

but what would be those right conditions? or perhaps no such conditions are possible for whatever reason

please enlighten me

and before anybody complains that this is about silver in a freegold thread, for me it is more about philosophy of money, and learning, since i'm still quite a beginner with all this international monetary and financial mechanics, the vocabulary and concepts and the like

plus, talking about silver is sometimes more about gold than about silver, if that makes any sense

good day,

- julian

costata said...

julian,

FWIW I agree with this statement:

and before anybody complains that this is about silver in a freegold thread, for me it is more about philosophy of money, and learning, since i'm still quite a beginner with all this international monetary and financial mechanics, the vocabulary and concepts and the like

My gripe with the silverbugs is their inability and/or unwillingness to defend objections to their 'facts' which are often nothing more than assumptions. And ill-informed, poorly conceived assumptions at that.

I don't think anyone can fully grasp the RPG-Freegold thesis, monetary history and so on until they understand why silver is not 'another kind of gold'.

As a veteran of hundreds of exchanges with silverbugs my experience has been that unless you acknowledge upfront that their core premises about silver are true they will treat every argument as if it is a personal insult or an attack motivated by some hidden NWO agenda.

Boopstir said...

For what its worth. Disclosure: This is the post that put me "all in" in fall '08. My first 'gold nugget'!

Date: Tue Nov 25 1997 08:24
ANOTHER (THOUGHTS!) ID#60253: ...
…Checkmate is the end of a game, but in life checkmate is the beginning of freedom! I submit that all of history is full of war. From nations to single persons we all do battle over ownership of things. Some support not war but would kill to keep what is theirs! It would seem that from the day of birth our financial chaos begins. The end of our struggle is reached but for a moment in time as "checkmate" becomes "stalemate" and fortunate and free are the few who find this time in life!
Am I misleading? I submit to you that all of creation is misleading. It is only in the pages of history that we find those who thought the truth! The "facts" of the present are but a wonder to all. Only time will prove all things.
Sir, you write, "Your gold coins in your pocket will become the target of persecution and arrests and you will be forced to accept the world's standard currency. There will be no alternative...you will be unable to trade with your gold because they will have long outlawed both gold and old paper currency...."
In the past many world governments and leaders, far greater than those today have embraced these thoughts. I and my fathers have done battle with such evil and won! For we have 6,000 years of history as our armor!
For those who say gold is not an asset and is dead! I offer you a fact: "Today, as you read this more gold is traded and purchased than at any time in the history of the world." This ancient, world class money from the distant past is now to be the most fought over asset of the future. In war and life, gold will be your "CHECKMATE"!

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