One of my resolutions for 2012 is to spend some time finding new ways to introduce gold-resistant paperbugs to the powerful arguments for buying and holding physical gold right now. But I never want anyone to invest in anything based merely on a recommendation. I want them to understand the reasons for the purchase themselves. Peace of mind can only come from within, and that's what understanding can provide.
This is tricky ground for me because I'm not a gold activist. The purpose of this blog is stated at the top. It is a tribute to Another and FOA. I'm not here to convert the unwilling. I'm not here to project my thoughts and draw in the masses. But at the same time, I do want to share what I've learned with loved ones. And from the email I receive, so do a lot of other people. That said, you can't just approach the unwilling with stories of decade-old anonymous internet personalities.
So this is my first foray into the frustrating world of the gold-resistant paperbug. With your help, I hope to build a primer on the gold thesis explaining "why gold, and why now," to those who know nothing about The Gold Trail that brought us here. This post is my first baby step.
As most of you already know, you don't get any of the usual hard money, gold standard or gold bug arguments from me. I do not predict a return to the gold standard, I'm not opposed to fiat currency or central banking and I don't think the world is going to end. What you do get is my explanation of the changes that are unfolding right now in the international monetary and financial system, and how they could affect your savings.
That last part is important. How changes in the monetary and financial system could affect your savings. What are your savings? And why do we save the way we do today? Has it always been this way? Are there universal do's and don'ts when it comes to saving for the future or for a rainy day? Do systems ever change or implode, erasing people's savings? Is it ever fair to say "this time it's different"? These are interesting questions to think about.
And now that I'm thinking about it, does anyone even save anymore? If you've got a hundred grand sitting in a bank CD or savings account someone will likely tell you that you should invest it or else you're wasting money. So you invest it in what, mutual funds and bonds? In that case there will be people that will say you should be actively trading, because you're still leaving potentially rich profits on the table.
Have you noticed how many people think they are traders and investors these days? And with all the options to invest in and trade out there, who can blame them? But in reality they are not traders or investors. They are doctors, lawyers, businessmen… and savers. What we call investing today is more like speculating. So why do we "save" the way we do today, by speculating on things we know so little about?
I had an email exchange over the holidays with a reader who was home visiting his parents. He's frustrated because he's been trying to talk to them about gold for at least a year now. Here's what he writes:
"I had to bite my tongue last night because my parents told me of the results of their trip to a financial adviser. My dad has over a million in his retirement account. Thanks to this adviser they went to, 1/2 of that is going into low-yielding Muni-bonds, the other half is going into some mixed fund that my parents really have no idea what it is. I asked about gold and apparently the adviser said it was "too volatile", so zero goes into that. Great!"
I'm guessing this is pretty common, because I received an email from another reader, also during the holidays, that said almost the same thing about his mother's savings: mostly government bonds and no gold thanks to a financial advisor's advice. Is your life's savings so trivial that you will put it somewhere based on a mere recommendation? Do you feel no need to understand, no responsibility to personally protect the fruits of your own life? I'll tell you one thing, it wasn't always done this way.
A saver is different from an investor or a trader/speculator. A saver is one who earns his capital doing whatever it is he does, and then aims to preserve that purchasing power until he needs it later. Investors and traders aim to earn more capital by putting their already-earned capital at risk in one way or another. This takes a certain amount of specialization and focus. But this difference is a big topic for another post. And anyway, it doesn't matter so much in terms of the gold thesis for today.
Today the system is in transition, so you can throw your ideas about these differences out the window. There is no safe medium for simple preservation of purchasing power when the entire system shifts from the old normal to the new normal. When systems implode, the safest place to be pays off big time!
In hindsight, the stock market (represented by the DJIA) would have been a great investment or speculation from the 1970s until 2000. Since 2000 it has gone nowhere:
Likewise, bonds would have been a great trade from about 1981 until now. As I've noted before, you make capital gains in bonds while interest rates are falling. The real pros know all about this. And from 1981 to present, interest rates fell from 20% to 0%. Flipping the interest rate chart upside down shows how the bond king Bill Gross of PIMCO traded his way into a personal $2.2 billion fortune over the last 30 years:
But markets do change. With the stock market now flat and bond yields at zero, the market is about to change again. Those of you with financial advisors putting your money into bonds should pay attention. If you don't believe me, how about the bond king himself, Bill Gross? Here's what he wrote just last week (my emphasis):
How many ways can you say “it’s different this time?” There’s “abnormal,” “subnormal,” “paranormal” and of course “new normal.”…
Interest rates were lowered and assets securitized to the point where they could go no further and in the aftermath of Lehman 2008 markets substituted sovereign for private credit until it appears that that trend can go no further either. Now we are left with zero-bound yields and creditors that trust no one and very few countries. The financial markets are slowly imploding – delevering – because there’s too much paper and too little trust. Goodbye “Old Normal,” standby to redefine “New Normal,” and welcome to 2012’s “paranormal.”
Bill is a billionaire himself. And he also manages more than a trillion dollars of other people's money, including millions of retirement savers, public and private pension plans, educational institutions, central banks, foundations and endowments, among others. So you can be pretty sure he doesn't use words like "imploding" lightly.
Remember, I'm talking about "how changes in the monetary and financial system could affect your savings." I don't want you to buy anything on my (or anyone else's) recommendation. I want you "to understand the reasons for the investment yourself." And I asked, "do systems ever change or implode," and "is it ever fair to say this time is different?" Well, you just heard a mainstream billionaire bond fund manager answer "yes" and "yes."
In fact, history is chock full of stories about financial and monetary crises and change, and there is a part of these stories that often gets only a one-line mention, buried in between the descriptions of the chaos and the subsequent resolution. That line usually reads something like this: "Many elderly investors lost their life savings." That line is from an actual American story. Here's another one: "[Group 2] got lump sum payments that roughly equated to 15% of the actuarial value of their [savings]. Group 3… got nothing."
So why buy gold? Why buy only discrete coins and unambiguous bars of physical gold? And why right now? A historical perspective is necessary for understanding the answers to these questions. Crisis resolutions always involve the sacrifice of someone. And that someone is usually the savers. But there are always winners and losers. Devaluations play out like a seesaw. There is a force (the crisis devaluation), a fulcrum (what is being devalued against), and a load (the beneficiary or the winner).
I think if we are going to try and talk about gold with gold-resistant savers, we first need to think about why they save in the way that they do today, pretending to be investors and traders, and how it wasn't always this way.
The Studebaker Effect
Most of you reading this in the U.S. probably have some sort of an individual retirement account. Maybe you have a Traditional IRA, or a Roth IRA, a SEP IRA, Simple IRA, a 401(k) plan, or even a Self-Directed IRA. Or maybe you don't have your savings tied up in a tax advantaged account but you still invest in the same way, relying on the advice of an RIA, a registered investment advisor.
If this is you, then you probably also have a diversified mix of stocks, bonds and cash or cash equivalents. Perhaps you even have some non-dollar investments, foreign stocks, commodity positions or fancy REITs. Maybe you've got a little in the tech sector, a little in the banking sector, some in the energy sector and the rest in mutual funds. But have you ever stopped to wonder why this is the way we save today? Was it always this way? No, it wasn't.
The 1970s were a pivotal decade of change in so many ways. The 70s were not only a decade of high inflation, it was also the first time the U.S. blew the lid off the idea of a "permanent" debt ceiling by introducing the concept of "temporary" increases (later made permanent) and driving U.S. debt into the $Trillions by the end of the decade. In 1979, the House of Representatives passed a rule to automatically raise the debt ceiling when passing a budget, without the need for a separate vote on the debt ceiling itself. This was just one of many big changes that came out of the 70s.
The 70s decade was also the pivot point at which the U.S. switched from a trade surplus to running a perpetual trade deficit. And it was when we changed from being the world's greatest goods producer into a service-driven economy. And in 1974 Congress passed a bill which President Ford signed into law that forever changed the way we save. A law that eventually exploded into the constellation of investment options I just enumerated.
That bill was the Employee Retirement Income Security Act of 1974, or ERISA. But like all of the systemic changes that occurred in the 1970s, the roots of ERISA can be found in the 1960s, 1963 to be exact.
Before 1974, most people's retirement savings were in the form of a "defined benefit" from their employer. If you worked for a company until a specified age, you were "guaranteed" a defined, nominal benefit for the rest of your life. This system was similar to the pension funds used mostly for union workers today, only back then pensions weren't just for unions. The bottom line was that the burden of saving for retirement was on your employer, not on you.
As a pensioner, the comfort of your future retirement was in the hands of a single counterparty, your employer. Post-ERISA, most people put their hopes for retirement in the hands of a more diversified group of counterparties. With a single counterparty, default, mismanagement or fraud was and is a big risk. Secondary risks were the systemic ones, like a currency collapse, because it was your benefit that was nominally defined. Post-ERISA most companies (and individuals) switched to plans based on employee contributions rather than defined benefits.
This was a dramatic shift of burden. By the simple addition of choice, the burden of retirement savings was shifted from your employer to you. You now had not only the choice of how much to contribute, but also where to put your savings. With the old system, the payoff was a fixed, nominal promise. Through ERISA, your retirement is no longer fixed at a certain number of dollars. It now varies based on the amount you save, how you choose to invest it, and how the market values those investments when it comes time for you to retire. This can be a good thing or a bad thing, depending on what happens between now and your retirement.
In many countries other than the U.S., countries that experienced a currency collapse during the last century, it was mostly the pensioners that were wiped out. Owing only a fixed, defined number of currency units to retirees turned out to be a blessing to pension funds in these countries. Pensioners could easily continue receiving their promised $2,500 per month forever, even well after the price of toilet paper had risen above $10,000 per roll.
But getting back to the roots of ERISA in 1963, it was mismanagement and default that destroyed the retirement hopes of many people. The collapse and ultimate liquidation of the Studebaker Automobile Company was pretty orderly on the surface. Production lines were consolidated, then closed, then sold off and renamed. But it was the loss of Studebaker's employee retirement fund that started a movement toward system-wide pension reform.
By the time Studebaker closed its South Bend plant in 1963, its pension fund was so poorly funded that the effect of its default would reverberate for the next five decades. Of 6,900 Studebaker employees that had not yet retired or at least reached retirement age, 4,000 received only 15% of what was the actuarial present value of their savings, and the other 2,900 got nothing. MF Global anyone?
So the Studebaker effect became a systemic transition shifting both the burden of saving and the responsibility of decision-making onto the people themselves. And out of this transition grew the whole financial services industry as well as the full menu of investment choices listed above. Incidentally, and speaking of MF Global, another child of the transitional 70s and the Studebaker effect was the Securities Investor Protection Corporation, or SIPC.
The SIPC promises up to $500,000 insurance for individual investors against broker-dealers that go bankrupt. That is, unless a loophole can be found. Unfortunately for MF Global's customers, the vibrant commodity futures market came later than the SIPC which was only written to cover financial securities, not futures. So while the 400 securities accounts at MF Global were covered by insurance, the other 50,000 or so commodities accounts were left hoping they'll get back more than 72¢ on the dollar. Oops. Oh, and the CME also decided not to back the accounts. It seems nothing is for sure when it comes to counterparties.
The above is a brief description of how the 70s were a decade of many changes. And also how changes in the 70s led to the way we save today. This is important to understand because I think we are in the midst of another historic transition period right now. I think this present period will be viewed by history as far more dynamic than the 70s. And I think the lessons learned from the experience of the 1970s will ultimately prove to be a poor guide for financially navigating this transition.
The evidence is already in — physical gold is "the load," set and levered for revaluation, as in the illustration above. The fulcrum is all other hard assets. And financial securities of all types, the nominal promises of counterparties, bonds, cash and cash equivalents are all vulnerable to the devaluation force. It's a three-part dynamic with hard assets—the middle part—acting as the denominator for both a devaluation of paper promises from counterparties and a revaluation of physical gold (it should be telling that we need to qualify such an elemental word as gold) and physical gold only. And from my Euro Gold post, here's the lever in early action:
The way people save today is traceable back to the collapse of the Studebaker pension fund and the reform movement that followed. In its 50 years of making automobiles, Studebaker exploded into a large and diversified company that, by 1960, included a missile and space technology division, a home and office appliance division, a tractor division, a generator division, a refrigeration division, a chemical division, and even an airline division. But within a few years it was collapsed, condensed, consolidated, liquidated and closed. And in the process, the employee savings were erased. The savers were sacrificed.
Similarly, the investment landscape that followed has exploded in supernova fashion yielding nominal credits that number like the stars in the heavens. Today's savers have given their savings to every manner of counterparty who went on a spending spree, leaving only the illusion of a debt that is too big to even be serviced in real terms. We have spent the last 35 years exploring the Milky Way galaxy of investment options, pretending to be investors and traders, when all we really are is savers waiting, once again, to be sacrificed.
It seems to me that we are now in the consolidation phase of change, heading back down to Earth. And where you choose to land, to consolidate your savings, has never been more important than it is today. I believe we are in a new transition period that is necessary, natural and inevitable (unstoppable). And that is why I don't take the quixotic stance of an activist, fighting to change the world. The only action I advocate is personal action, like purchasing power preservation and the personal action of expanding your understanding beyond the standard dogma you hear everywhere else.
And for those of you who are also struggling through the frustrating world of the gold-resistant paperbug, I'm looking for feedback so I can continue this project. What anti-gold arguments are you running into these days? And also, what worked for you? Has anyone had success introducing a Western paperbug to gold? I thought Victor's comment here, on the permanent portfolio, was very good. Those are the kinds of solid arguments I'm looking for. Perhaps, together, we can come up with a few more!
Sincerely,
FOFOA
Now that she’s back in the atmosphere
With drops of Jupiter in her hair, hey, hey, hey, hey
She acts like summer and walks like rain
Reminds me that there’s time to change, hey, hey, hey, hey
Since the return from her stay on the moon
She listens like spring and she talks like June, hey, hey, hey, hey
hey, hey, hey, hey
Tell me did you sail across the sun
Did you make it to the milky way to see the lights all faded
And that heaven is overrated
But tell me, did you fall for a shooting star
One without a permanent scar
And did you miss me while you were looking for yourself out there
Now that she’s back from that soul vacation
Tracing her way through the constellation, hey, hey, hey
mmmm.....
She checks out Mozart while she does tae-bo
Reminds me that there’s room to grow, hey, hey, hey, hey
yea...
Now that she’s back in the atmosphere
I’m afraid that she might think of me as plain ol jane
Told a story about a man who is too afraid to fly so he never did land
Tell me did the wind sweep you off your feet
Did you finally get the chance to dance along the light of day
And head back to the milky way
And tell me, did Venus blow your mind
Was it everything you wanted to find
And did you miss me while you were looking for yourself out there
Can you imagine no love, pride, deep-fried chicken
Your best friend always sticking up for you, even when I know you’re wrong
Can you imagine no first dance, freeze dried romance five-hour phone
Conversation
The best soy latte that you ever had . . . and me
Tell me did the wind sweep you off your feet
Did you finally get the chance to dance along the light of day
And head back toward the milky way
Tell me did you sail across the sun
Did you make it to the milky way to see the lights all faded
And that heaven is overrated
Tell me, did you fall for a shooting star
One without a permanent scar
And did you miss me while you were looking for yourself
nah nah nah nah nah nah nah
nah nah nah nah nah nah nah
And did you finally get the chance to dance along the light of day
nah nah nah nah nah nah
nah nah nah nah nah nah
And did you fall for a shooting star
Fall for a shooting star
nah nah nah nah nah nah
nah nah nah nah nah nah
Are you lonely looking for yourself out there
253 comments:
«Oldest ‹Older 201 – 253 of 253Interesting FT piece via GATA with a h/t to Ed Steer for the link.
This report speculates that demand for gold from China in 2011 may have exceeded demand from India for the first time.
http://www.gata.org/node/10881
Put all the numbers together, and they imply that full-year Chinese demand in 2011 was at least 891 tonnes (and probably a good deal more), while Indian demand was just 868 tonnes. Bingo! China wins.
Now for the caveats. Most importantly, some analysts are sceptical of the Chinese import data. Perhaps the gold is being re-exported (illegally) to Vietnam, they say, perhaps it is the Chinese central bank buying, or perhaps the data are just wrong.
Secondly, there is scepticism about the Indian import data. While all agree Indian demand was tepid in the fourth quarter, not all believe there was such a dramatic decline.
We shall know for sure only when more accurate data come out in the next couple of months. Regardless, though, one thing is sure: It is hard to overstate the significance of the increase in Chinese gold demand.
HANOI Jan 13 (Reuters) - The State Bank of Vietnam has granted quotas to more than 10 companies to import a combined 2.1 tonnes of gold, state television said on Friday.
The companies would be allowed to import the gold for jewellery production only, Vietnam Television quoted customs sources as saying.
Vietnam last allowed banks and gold companies to import the metal last September in an effort to narrow the gap between domestic and world prices.
..
Someone should translate this blog into Vietnamese and show it to the idiots in charge
Someone from this forum emailed me yesterday asking permission to translate it into Chinese.
This article put out in August by the shanghai gold exchange states that the exchange delivered 837 tons of physical in 2010.
lbma publication
I assume much of that goes to the strongest hands and there is a similar rate in 2011. Then extrapolating the WGC stat of 190 ton third quarter domestic demand to 760 tons annually, that totals 1600 tons of physical demand.
Guessing around 400 tons of mine production and maybe 300 tons of double counting on the exchange, then 900 tons of import seems pretty feasible.
If you tend toward dark humour this ZH update on SK Options Trading's "proposal" for a long overnight and short intra-day gold play makes for amusing reading.
http://www.zerohedge.com/news/overnight-longintraday-short-gold-fund-more-doubles-just-over-year-generates-43-annualized-retu
Best 10 year return compared to almost anything else you can imagine.
costata,
this effect was published in August 2010 by Adrian Douglas (GATA):
https://marketforceanalysis.com/articles/latest_article_081310.html
and
http://gata.org/node/10883
I remember that I looked at the data and confirmed that his charts are correct. Although the cumulative effect is rather obvious, intra-day, however, the effect is statistically not significant. When I looked at it, I decided that the effect, based on the AM and the PM fix, was not tradeable (because of transaction costs and losing streaks).
By the way, platinum shows the same behaviour in all years except for 2008, but palladium never does. Silver has only one official fixing per day, and I did not check for a similar effect using intra-day prices.
Victor
How much gold kept among Vietnamese people? 2010-11-10 - VietNamNet
"The information about the 1000 tons of gold imported in the last 20 years was released by Le Duc Thuy, former Governor of the State Bank of Vietnam, now Chair of the National Finance Supervision Council. The head of the council did not confirm the existence of 1000 tons of gold among the public, but he said: “I am sure that a large volume of gold is being kept in people’s homes”..."
"...However, a senior official of the State Bank of Vietnam has denied the fact that 1000 tons of gold is now lying under people’s pillows. “To date, no one can say for sure how much gold is being kept among people,” he said.
The figure cited by the former Governor of the State Bank is sourced from the World Gold Council and the figure does not include the illegal imports and the import volume through other unofficial channels that the organization still cannot reckon up.
Meanwhile, the general director of a famous gold trading company guesses that people are only keeping 200 tons of gold because when the world’s gold prices were higher than the domestic prices, a substantial volume of gold was illegally exported,. However, he stressed that 200 tons of gold would also be a large volume of capital, worth $10 billion and the capital should be put into business rather than sitting idle..."
"Meanwhile, the central bank, while trying to protect its view that it is necessary to prohibit transactions in gold, said that the massive mobilization and lending in gold have been making the dollarization in the national economy more serious and encouraging speculation.
Governor of the State Bank of Vietnam once declared that in case the market has gold in excess, the central bank may spend money to purchase gold to increase gold reserves."
http://gold.vietnammarkets.com/index.php?nid=6702
[Mrt: Now this news]
Vietnam allows gold imports of 2.1 tons
"The State Bank of Vietnam has allowed more than 10 companies to import a total 2.1 tons of gold for jewelry production, local media reported Friday.
Some of the companies, including DI, Jewelpark Vina, Son Duong Vang, have been granted quotas to import more than 300 kilograms of gold each; others have only been given permission to bring in 6 to 20 kilograms, Saigon Tiep Thi reported, citing customs data. "
http://www.vnnnews.net/vietnam-allows-gold-imports-of-2-1-tons
http://finance.fortune.cnn.com/2012/01/12/german-bonds-negative/
Here's the first of many (expected) softly-softly articles on Negative Yields.IMHO the article ...and associated comments all miss the point entirely.
The REASON short Yields are negative (particularly UST's) is that, in the US$ amounts involved, the FDIC bank deposit guarantee of $200K is PEANUTS. This is a flight to the here and now ...guaranteed "in-bulk" by the issuer - pure and simple.
We watch!
Michael H,
I agree, Cordain's Paleo Diet is an awful prescription. Totally ignores the variability. And the Starch is bad crowd totally doesn't make sense. I personally follow Perfect Health Diet.
Dr. Weston A Price was THE pioneer. Chris Masterjohn of WAPF makes so much sense, and is very neutral. Same can't be said about the VLC paleo crowd. They sometimes sound like Vegans.
"...JEAN-PIERRE ELKABBACH
But as the Governor of the Banque de France and member of the ECB’s governing council, you are aware that the euro is currently subject to growing scepticism. Do you think it will still exist in let’s say one year, two years, or three years time?
CHRISTIAN NOYER
I have no doubt that it will still exist. The euro is an irreversible choice. The euro is a currency based on a system that can function perfectly well. We have a temporary problem not related to the currency, that of Member State budget control over the first ten years of the euro’s existence which simply needs to be resolved. And the Member States have already taken the right decisions... they simply need to implement them.
JEAN-PIERRE ELKABBACH
But you are perhaps saying that in order to maintain confidence… you’re an optimist... But the reality, for us? Is it definitive? Are you saying that the euro is irreversible just to reassure us?
CHRISTIAN NOYER
The euro is absolutely irreversible, I have no doubt about it. We are not turning back the clock. People should stop fantasising about the demise of the euro. It is really an irreversible reality, it is OUR currency for the future..."
http://anotherfreegoldblog.blogspot.com/2012/01/bdf-interview-with-christian-noyer.html
Hi costata,
thanks for you explanation of "Market Makers". Gives an interesting perspective.
Except I have some serious doubts if it will be handled like that: Does the ECB actually have/own the physical gold? As far as I understood the ECB is just accounting the total of the seperate gold of its member states, but does not hold it physical as an exclusive owner for sales. So when it comes to a real physical sell, whos gold of the memembers will it sell? Are there any definitions about that?
Looking at the overall situation here in Europe, that's why I am holding gold, because Euro is not as good as gold. Maybe in the beginning it was attempted to be, now the politicians and lobbyists have taken over. Looks like the giants are dead.
VTC,
Dark humour on several levels.
Cheers
The REASON short Yields are negative (particularly UST's) is that, in the US$ amounts involved, the FDIC bank deposit guarantee of $200K is PEANUTS. This is a flight to the here and now ...guaranteed "in-bulk" by the issuer - pure and simple.
We watch!
Welcome back!
A Leg (and others),
Unlike the experience of many here, I have never had difficulty persuading people that it is a good idea to buy and hold physical gold. Admittedly, I do not raise the issue too frequently, and maybe on a subconscious level I only raise it with people who I think will be receptive to the message. But here are some principles I keep in mind when raising the subject:
(i) Present it as a no-brainer, talk slowly, and make sure there is no crazed look in your eye.
(ii) Don't suggest that people should move all or nearly all of their wealth into physical gold. They won't be ready for anything so radical, and in fact it is not necessary that they do anything so radical to protect themselves.
(iii) Keep in mind that if people only move a small fraction their wealth into physical gold, they will be drastically better off in a freegold world than if they did nothing at all before the change. They do not need to be 100% convinced to take action. The insurance argument is much more effective than the chicken little argument! Convince them to buy one coin, and that seed will grow into a giant oak.
Virtually every time I raise the issue, the only objection anyone ever raises is that they do not know how to buy bullion safely and at low margin. That is an easy concern to address. In some cases I have even sold coins at or slightly over spot. The other objection that sometimes comes up is safety and storage. But people generally agree that if nobody knows they have gold coins at home, a thief is much more likely to take the TV and stereo than go digging around for a tiny hidden gold coin.
Is there anyone here whose experiences match mine, where it seems very easy to convince people?
Just to add regarding Indian Gold. There is around 100Tonnes of gold that comes via smuggling to India every year. Also last year we found around 400Tonnes of gold in a temple.
http://www.commodityonline.com/news/gold-treasure-at-india-temple-could-be-the-largest-in-the-world-40475-3-1.html
(ii) Don't suggest that people should move all or nearly all of their wealth into physical gold. They won't be ready for anything so radical, and in fact it is not necessary that they do anything so radical to protect themselves.
+1
Cheers, Robert. ;-)
Just some spam music:
http://www.youtube.com/watch?v=gDndZn0YPdI&feature=relmfu
Musical chairs..., broken records..., attention..., are you in...?
Congratulations, FOFOA. However, you may consider trying to find a third party to verify quality of the translation.
Regarding Christian Noyer's comments, it's interesting how the doesn't say how or why The Euro has the staying power that he asserts. C'mon Christian, out with it.
can't put a price tag on peace and understanding and like Aaron, do what I can around but around the 1st of the month :)
milamber,
For some perspective on gold post-1980, read Aristotle's "The Five Part Series on Gold, Oil, and Money in the Free Market" at
http://www.usagold.com/halloffame.html#anchor318280
costata,
quoting Mauldin,
"Many governments around the world have tied pensions and salaries to inflation measures, so increases in government spending would rise with inflation. Nearly half of federal outlays are linked to inflation, so higher inflation means higher deficits. … Any increase in inflation will erode the value of existing debt, but it will make deficits much larger going forward and even possibly increase the real burden of debt as a percentage of GDP.”
Taken out of context, I'm not sure what he's getting at, and if you agree or not. But, if he is saying that inlfation is not a viable way for the US to reduce the debtload and the deficits, the I think he's wrong.
On the argument that expenditures are inflation-indexed:
1. The inflation index is understated by the government to try to negate this disadvantage.
2. In high-inflation situations one would think it easier to significantly mis-state the index, so that the erosion of real purchashing power of SS, pensions, etc. is even greater.
3. There is a time lag between the rise of prices and the adjustment of benefits / government expenditures. The higher the rate of inflation, the more significant this time-lag becomes in eroding the real value of the expenditure.
Another argument I often see is that the US has significant short-term debt that "cannot be inflated away". Rubbish.
Short-term debt can be inflated away just like all other debt. What is required is an *accelerating* rate of inflation.
If rates are 10%, inflate by 20%. Rates adjust in the next period to 20%. So you inflate by 40%. This time rates adjust to 80%. No matter, inflate by 300%.
Of course, in both these situations the real trick will be to bring inflation back under control once the debt burden has been sufficiently erased.
I just donated. After reading this I decided I would rather pay tax and use what is left over to by gold, land or some other asset than see it evaporate with the dollar. Thanks and never stop posting. I get as much knowledge from the comments as from the post!
Dr. O and Robert, I think that you are right on in talking about help with the sources and procedures for actually purchasing of gold.
I think that all the reasons and rationale for purchasing gold put forth here are excellent. But in my experience, the chief barrier to actually following through and purchasing gold is not the “why” but the “how”
Most people know that the money system is toast. After a brief explanation, they probably would also kind of get it about gold.
As Texan and Zenscreemer have said, most people feel actually buying gold is somewhat scary and unsafe. Think about the first time you actually walked into a coin shop and walked out with a gold coin in your pocket. How did you feel? Were you somewhat nervous? Did you feel vulnerable? I know I did.
Those of us who have purchased gold for some time tend to forget this large barrier to action for the normal person.
So I would concentrate a significant portion of the education agenda to the “How” as well as the “Why”
For instance, most people do not know that you can take your pay check down to either your bank, or the bank that the check was drawn on, and convert it into cash, with no records being kept (under $10,000)
Most people do not know that there are coin dealers in every good sized city.
Most people do not know that you can walk into these coin stores and convert your cash into gold coins and walk out without any records being kept. Most people do not know that one million dollars in gold at current value can be kept in a shoe box sized container. Most people do not know that if NO ONE knows you have gold, then the likelihood of theft is effectively zero.
So I would keep the why simple, and concentrate more on the how, making that easy, simple, and safe. Perhaps even going to the extent of going on a “shopping trip” with someone to your local coin shop, casually buying a coin, and doing a little “show” as well as “tell’ Of course, this brings up the risk of revealing to someone else that you actually own gold. There are very few, if any, people that I would reveal this to.
Costata - Thanks mate.
Robert - On the contrary Sir - When i first came to the realisation that PGiP was where one needed to be (c1999), I took a similar approach ...but virtually to no avail.
I'm now regarded as somewhat of a Guru given the performance of PoG over the last 12 Years.
Curiously, if I NOW felt there was still upside in $PoG and encouraged my circle to buy in on that basis, they would be far more receptive.
Unfortunately, the reasons to NOW acquire and hold PGiP are far more complicated than they were 10 odd Years ago ...and quite frankly, I simply can't be bothered explaining the neuances of this monetary mess we're in to justify a P-Gold acquisition.
A few observations, from our point of view:
- as Krishnamurti has pointed out, "the conditioned mind refuses to face facts"
- as Morpheus said to Neo in The Matrix, "most people are not ready to 'see' the real world, as they depend too much on the matrix" (fiat system)
- it takes some fair degree of personal power/'work' on ones mind to effectively go against the PTB conditioning we have all been subjected to. Gold has been/is denigrated in consort w/support of fiat, as we here all are aware, but most are not.
So one could deduce therefore that only those with enough of the 'right stuff' will seek out the proper (in this case economic /financial) information and action it. This happens automatically, IMO, and therefore all that is necessary is to provide the means/access, as FOFOA does here so elegantly, and let the cards fall where they may.
The Universe is just, unlike the 'system' which resides within it, and therefore Gold will seek out those who justly 'deserve' to hold it, surely. One thing I like to point out to others is that it isn't how many ounces one holds that is important, but what percentage of your savings you allocate to it. We ourselves have long seen the evil, criminal (danger to themselves and others) nature of the PTB and 'their system of enslavement', but it is thanks to FOFOA's work here that we have been able to deepen our awareness of the absolute necessity for possession of physical Gold during this amazingly rare opportunity provided by the currently ongoing global fiat endgame.
Robert.
Alas, i wish all my friends and relations were as intelligent as yours ,where the mere mention of what a good idea it would be to buy gold, sent them skipping merrily down to the coin shop with cash in hand.
But there not.
"(i) Present it as a no-brainer, talk slowly, and make sure there is no crazed look in your eye."
PML.
Thats where we all go wrong.The speedy incoherent speech and mad ,crazy looks in our eyes.
Back to the drawing board for me.
Regards
Ozzy
I'm glad you have decided to take on this challenge FOFOA. I've been sending your articles to my dad for months now. Unlike me, he's actually got a lot to lose.
Here are some thoughts on what has / hasn't worked for me:
Hasn't Worked
• The Gold for Oil / Middle East Connection
I know that this is a key part of the FOFOA/FOA/Another teachings, but I've never been able to explain it in such away that it didn't end up sounding like conspiracy theory.
• Disaster / Apocalypse / Shit Hits Fan / End of the World as We Know It
For some reason, focusing on the full on systemic collapse aspect does not motivate most people towards life-affirming, hope-for-the-future actions like buying gold in hopes of a brighter future. Several people have responded to this by saying things like, "If this is true, then things will get so bad and so chaotic that it won't even matter if I have gold."
Ironically, you might help people consider this revolutionary change by affirming the ways in which life will remain the same.
Has Worked
• Giants Got Gold
People I talked to have been surprised to find out just how important gold is in the world of central banking and investing for the super rich. As much as you can, shift the perception of gold away from jewelry, pawn shops & Goldline endorsements from Glenn Beck and towards the serious and important world of central banking and Fort Knox-style national savings.
If gold is in a bubble why haven't central banks sold their gold? Don't they know a thing or two about finance? How could gold be snake oil when central bank authorities are betting on gold with huge portions of the accumulated wealth entire nations?
• Little to Lose, Lots to Gain
Like others mentioned, one of the best selling points of the One Gold Coin Campaign is that they have so little to lose and so much to gain.
Fire insurance is a great analogy. Chances are good you'll never have to use your fire insurance. But you figure it's worth the price because if you don't have it and your house burns down you are completely screwed. The small loss while things stay normal is worth it for the huge, life-saving gain if things go wrong.
What if FOFOA's right? What if the dollar goes to zero and you lose your entire life savings? Just one ounce of gold will go from being 1.7% of your $100k savings to 100% of your $55,000 post-freegold savings. Just two ounces (2.4% of your current savings) will completely make up for the loss of 100% of your savings!
If you buy gold, worst case scenario is that you "wasted" a few thousand on "insurance." If you don't buy gold, worst case scenario is that you literally lose your entire life savings!
C'mon, paperbugs, won't you consider just One Gold Coin?
Michael H,
I interpreted Mauldin to mean that those passages were arguments against the USG being able to use inflation to reduce its debt on a business as usual basis.
I think he "gets" the fact that HI would do the job. For other readers the USG would devalue existing bonds, and pay out maturing bonds with currency of ever decreasing purchasing power.
AdvocatusDiaboli,
I'm not suggesting that becoming a market maker would play out that way precisely. Merely that it would not require much gold to change hands in order to discover a physical market price in the absence of a functioning paper gold market.
My understanding is that the ECB has a few hundred m/t itself. See FOFOA's posts on the MMT "parties". The gold reserves of the Eurosystem CBs and Treasuries are controlled by their treaty obligations under the laws that established the EMU, ECB, Eurosystem, Euro etc.
Latest from our favorite Euroland-biased future-tellers:
http://www.leap2020.eu/GEAB-N-61-is-available-Global-Systemic-Crisis-2012-The-year-of-the-world-s-great-geopolitical-swing_a8770.html
/Burning
Oldinvestor, that would be one heavy shoe box! Around 40 pounds!
But yes, I don't know anyone with whom I have discussed gold with who is comfortable buying online. Which leaves the coin shop, which often feels like a specialized pawn shop and so not a very comfortable environment for the manyof the well-to-do.
The deeper issue here is simply open-mindedness. Most people are not willing / able to believe that the Authority and the Majority could be so fundamentally mistaken about something so important.
Asking someone to believe in Freegold is asking him to swim away from the mainstream, to voluntarily abandon the comfort and security of being a member of the Tribe – of fitting in. It's actually a giant, scary leap to even begin to consider ideas, beliefs and actions that fall outside of the mainstream.
It's amazing how quickly people forget that the many of our currently accepted ideas, beliefs and discoveries were initially considered fringe, stupid, crazy or heretical.
The Earth is round.
The Earth revolves around the Sun.
Evolution.
Flight.
Electricity.
And so on...
This kind of open-mindedness and indpendent-thinking may not be something that can even be taught, but a little bit of historical perspective certainly can't hurt.
These guys knew what was up:
Mark Twain: "Whenever you find yourself on the side of the majority, it's time to pause and reflect."
Schopenhauer: "All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident."
Jonathan Swift: "When a true genius appears in this world, you may know him by this sign, that the dunces are all in confederacy against him."
Here is the breakdown of gold within the eurozone:
ECB link
The ECB has about 500 tons. Malta and Estonia are not in such good shape. A good reason to latch on.
To supplement my previous comment, here is a nice compilation of quotes from people who were wrong about some pretty important discoveries:
http://www.lhup.edu/~dsimanek/neverwrk.htm
Some highlights from recent history:
When the Paris Exhibition closes electric light will close with it and no more be heard of.
- Erasmus Wilson (1878) Professor at Oxford University
Well informed people know it is impossible to transmit the voice over wires and that were it possible to do so, the thing would be of no practical value.
- Editorial in the Boston Post (1865)
[Television] won't be able to hold on to any market it captures after the first six months. People will soon get tired of staring at a plywood box every night.
- Darryl F. Zanuck, head of 20th Century-Fox, 1946.
The horse is here to stay, but the automobile is only a novelty—a fad.
- Advice from a president of the Michigan Savings Bank to Henry Ford's lawyer Horace Rackham. Rackham ignored the advice and invested $5000 in Ford stock, selling it later for $12.5 million.
---
Will quotes of gold / dollar collapse be laughed at in the same way in the near future?
burningfiat,
Thanks for the link to that GEAB paper.
Interesting that they focus on 2012 as the year when events begin to pivot toward a new regime with 2013 nominated as a year when things begin to move forward.
For the China watchers there is a very interesting link in the footnotes of the GEAB paper to a piece on the rate of job creation in China. It also discusses China's efforts to install a modestly generous social welfare safety net.
That could pay big dividends for the country provided it is funded out of income and investment returns as it appears from the figures quoted.
Unlike most other areas of government spending I suspect that there is potential for a multiplier effect on job creation from this type of program at China's current stage of economic development.
http://europe.chinadaily.com.cn/china/2011-12/30/content_14355505.htm
The State Council this year adopted a string of measures, including offering tax breaks, subsidizing vocational training and offering small loan guarantees, to help 5.2 million laid-off workers get back to work.
The government also boosted support to university graduates, who make up a large portion of the new labor force each year.
Aside from the improved employment sector, the country's pension insurance system was extended to cover 300 million people in rural and urban areas by the end of this year, with about 85 million senior citizens claiming their pensions every month, Yin said.
China's social security funds that insure pension, medicare, unemployment benefits, work-related injury compensation and maternity pay collected 2.35 trillion yuan ($372 billion) in revenues this year, up 24.7 percent year-on-year.
Meanwhile, spending by social security funds will rise 21.5 percent from a year ago to 1.8 trillion yuan this year, according to ministry data.
Thanks to the extension of the social security net, 468 million urban residents now enjoy medicare insurance, with 280 million residents receiving a pension, 142 million getting unemployment benefits, 174 million work-related injury compensation and 138 million maternity pay, according to the ministry.
BTW, the previous five GLD pukes were kind of lame (Aug 11,23,24 and Dec 15,17). Where is the action?
"Barret Capital Management, a commodities dealer that specializes in purchasing physical gold and silver for clients, is on the verge of being shut down by regulators.
Following an investigation that started in March 2011, the Investment Industry Regulatory Organization of Canada alleges that Barret has been using client funds for its own purposes “in complete disregard of securities regulation.” An expedited hearing is scheduled for Tuesday morning."
Gold dealer Barret under threat of shut down
This could get interesting
+1 for sock drawer gold
"When you purchase gold through Barret Capital, you can be sure that your investment is kept safe. Your gold is guaranteed for weight and purity by the Royal Canadian Mint, and is stored for safe-keeping at the Brinks location in Ontario, Canada's largest Brinks location."
@VTC, "Where is the action?"
Connecting pukes with the link about night/day trades - there was the divergence in summer - did something happen and the Gold market has changed? Could this be? The indicator is just not so reliable anymore.
PRESS RELEASE
16 January 2012 - The number of monetary financial institutions in the euro area and in the EU decreased further in 2011
"On 1 January 2012 the total number of monetary financial institutions (MFIs) [1] in the euro area stood at 7,533. This is a net decrease of 332 units (4%) in comparison with the situation a year ago. With a few minor exceptions, the decline was spread across the whole of the euro area. There were 9,587 MFIs in the European Union (EU) as a whole, a net decrease of 334 units..."
http://anotherfreegoldblog.blogspot.com/2012/01/ecb-number-of-monetary-financial.html
http://www.ecb.int/press/pr/date/2012/html/pr120116_1.en.html
Perhaps. Since the day of the Swiss Franc to Euro peg. The chart you are mentioning is really striking
http://www.skoptionstrading.com/storage/short%20intraday%20long%20overnight%20vs%20gold%20since%202011.jpg
Are the Americans eating their last bag of M&Ms? Perhaps now the idea is tradeable.
But they must be selling proper physical gold - there has always been such a nice contango. I wonder whose gold?
Victor
Victor - seen my yesterday´s post? I thought The Vietnam case was interesting. Was BIS able to push some states to puke some?
...Japan comes to my mind.
Musical chairs? But would That be enough for the flow?
Is the amount of the flow which was previously going to honor the Leasing deals available now/included?
We also do not know/see in where the gold from the CB sales went so it could be re-sold in the 2-tier intra-CB/BIS market.
Again today we see articles referencing "Bond" investments ...with nary a mention or reference to the status of the curve.
Clearly - (or so it seems to me) whilst the long end remains almost exclusively the domain of "management" - across the Globe punters are flocking to the short end and driving yields into negative territory.
This is where GOLD stands as a stark naked alternative asset ...unaffected by time (whether 3 months ...or 2000 Years) and in the right hands, ready to re-take the strategic monetary high-ground.
Unfortunately (for those Goldhearts with a Fiat-centric mind-set) the pricing mechanism isn't (yet) capable of discovering Golds true worth in this new paradigm ...and in all probability the "price" will (initially) plummet.
Caviat Emptor.
As regards gold pukes. I have noticed that when 'new' metrics for predicting gold spikes become available in the public domain they become less functional.
Backwardation comes to mind.
Manipulation or efficient markets? Who knows.
TF
Sirch,
Excellent couple of posts. I enjoyed your quotes and and the link.
The subject of open-mindedness is one in which I have considerable interest. The roots or causes of the phenomenon are as interesting a study topic as Freegold, IMO.
Keep those perspectives coming!
Max
as my name implies, I also like to look at the opposite side:
We are all here probably gold advocates, true, some are have different arguments and views for their gold engagement.
So to look at the opposite side: At what price target (from todays perspective), would you reduce additional spending in gold? So I the question would be: Putting further additional personal savings into gold, do YOU the have a price target that would calm you down in adding further and maybe start catching the falling knife of the stock market? Are you truely convinced to just skip diversification and rely on 100% in just one asset class? Or should I say how convinced are you really?
AD,
I don't have a price target.
My am not holding gold for the reason of increasing my nominal wealth within the current system.
I am holding it as I think the system itself will change.
My sell signal will be very obvious - when the IMFS has changed into a sustainable one.
I have vacillated on this issue, thinking of various ratios to use as potential dis-hoarding signals, but they all violate the underlying premiss for holding the yellow stuff in the first place.
If I can't rely on my own reason then I am swallowed by the shifting sands of external opinion.
As my understanding has become clearer, my wobbles have become fewer and less violent. When they do happen, I return to my core principles and premisses and check to see if they still hold.
They always do, and hence I continue to hold too and will do until these premisses have been violated.
One of my core principles is the current system is unsustainable. What can't be sustained, won't be sustained. It's pretty difficult to get away from that one.
If I get new information or increased understanding which changes the premisses for my conclusions then perhaps I will change my decisions, until then, I'm resting easy at the All Inn.
@max
Well said. :)
You are wrong about Studebaker. The employees who received only a percentage of full retirement were the ones not fully vested. And I have that from the president of their UAW local.
The company did not collapse; they made a strategic decision to leave the manufacturing business. Other holdings did very well, and the stockholders were not wiped out, as senior debtholders of GM were. Kirk Kerkorian was a Vice President at Studebaker.
http://en.wikipedia.org/wiki/Studebaker
Closure of South Bend plant, 1963
After continued poor sales of the 1964 models and the ousting of president Sherwood Egbert, the company announced the closure of the South Bend plant on December 9, 1963, and produced its last car in South Bend on December 20.
They strategically closed the plant? The company collapsed.
Studebaker left the automobile business on March 16, 1966
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=290812
Abstract:
The Studebaker-Packard Corporation occupies a distinctive place in the lore of the Employee Retirement Income Security Act of 1974. No single event is more closely associated with ERISA than the shutdown of the Studebaker plant in South Bend, Indiana. Soon after the plant closed in December 1963, Studebaker terminated the retirement plan for hourly workers, and the plan defaulted on its obligations. The plight of Studebaker employees quickly emerged as a symbol of the need for pension reform. This article examines the history of the Studebaker-Packard Corporation to understand why and how the shutdown came to play a role in the political history of ERISA. Briefly, the shutdown played an important role in pension reform because the United Auto Workers union was prepared to take advantage of the political opportunity the shutdown created. By the time the plant closed, the UAW was well aware that "default risk" - the risk that a pension plan will terminate without enough funds to meet its obligations - threatened union members. Studebaker-Packard had terminated the retirement plan for employees of the former Packard Motor Car Company in 1958. Packard workers got even less than their counterparts at Studebaker would receive in 1964. The Packard termination convinced UAW president Walter Reuther that the union needed to protect its members from default risk. In the early 1960s, the UAW devised a remedy - a proposal for "pension reinsurance" - that is a precursor of the termination-insurance program created by Title IV of ERISA. The Studebaker shutdown gave the union an opportunity to move default risk and termination insurance onto the legislative agenda. The success of this effort in agenda-setting indelibly linked Studebaker to the cause of pension reform.
For me the switch happened very quickly ~2008 a coworker of mine mentioned he was buying gold for a long time. It was at a time when I was just starting to read economic news and learn things, there was couple of clips explaining the history of money, you've probably seen it.
I already lived trough a 300% devaluation ~10y ago (and knew/know it is possible ;))...
and it just clicked... I have never had a credit card or loans before 2006, so after I investigated a bit it was pretty logical what should I do.
I think my biggest "click/ouch" moment was when I understood how Fractional banking combined with the Fed&Treasury fathom-circle works, when I set a goal to figure out a way to escape this ponzy.
Thanks for the eye-opening information, FOFOA and regulars!
I keep running across references to a 100 to 1 ratio of paper to physical gold (eg. LBMA), but haven't found what I would call a fully credible source for the figure.
Can anyone point me to said source?
Best,
Thom
Post a Comment
Comments are set on moderate, so they may or may not get through.