Friday, February 3, 2012

Glimpsing the Hereafter


Welcome back, Ari!! If you don't know ARISTOTLE, that's probably because he took a brief hiatus of 7 years and 3 days from posting comments about Freegold. And that was after 6 years of posts and comments prior. So needless to say, I'm THRILLED to have him back!

Ari wrote me an email the other day including this: "In the meanwhile, I'm happy to note that Bill Gross has (yet again) stepped up to the challenge of carrying some water for us today. Begins folksy and ends golden. Now that's what I call having a worthy waterboy(!),,, he being manager of the largest mutual fund on the planet (i.e., PIMCO's $242 billion Total Return bond fund)."

Here's the quote with which Bill Gross begins his latest and greatest, Life and Death Proposition:

Where do we go when we die?
We go back to where we came from
And where was that?
I don’t know, I can’t remember

Virginia Woolf, “The Hours”

With this lead-in he draws a comparison between death and the hereafter, and the death of our financial system built upon the lending of real savings to debtors with what comes next. He goes on to explain, "The transition from a levering, asset-inflating secular economy to a post bubble delevering era may be as difficult for one to imagine as our departure into the hereafter." But at least he gives it a shot with a little help from Virginia, ending with, "Where does credit go when it dies? It goes back to where it came from."

Now, while I can't help you very much with the pearly gates, I can indeed help you imagine the monetary and financial hereafter. It matters little to me if you believe me or not, because I still think there is value in sharing this vision either way. Someone (who incidentally named his band Third Eye Blind) once remarked, "I don't really believe in crystal balls, but I respond to the need for them." And so now I'll dust off my own very special crystal ball with a wink and a nod to a few of you who understand this need.

I do recommend reading Bill's entire piece as he lays it out nicely how hitting the zero-level floor in USD interest rates is inevitably leading to a "liquidity trap" for earned savings. It sounds to me like the inescapable gravitational pull of a black hole singularity that, perhaps, creates similar difficulty in trying to see through to the other side.

Bill Gross is in the business of helping savers lend their savings to debtors through the use of bonds. And he has done very well in this business, which is why he is acutely tuned in to the implications of zero interest. With zero interest, you can't earn a yield or a capital gain as you can when interest rates are high and falling. And so there is no reason for savers to lend money to debtors for the longer terms necessary in order to run an economy. In fact, it is terribly risky for savers to do so in a zero rate environment.

The New Normal

There is no "fiat management" solution for the problem Bill describes. The savers simply cannot lend their savings to debtors anymore in a way that is beneficial to both the economy and the savers. Even the King of the bonds himself is sounding this alarm. But there's another trend in this new normal that should be even more alarming to savers still holding longer dated debt. Whenever and wherever push comes to shove, the savers will be and are being forced to take losses while the system protects itself on a nominal basis. Just look here:

Obama to Use Pension Funds of Ordinary Americans to Pay for Bank Mortgage "Settlement"
"[P]revious leaks have indicated that the bulk of the supposed settlement would come not in actual monies paid by the banks (the cash portion has been rumored at under $5 billion) but in credits given for mortgage modifications for principal modifications. There are numerous reasons why that stinks. The biggest is that servicers will be able to count modifying first mortgages that were securitized toward the total. Since one of the cardinal rules of finance is to use other people’s money rather than your own, this provision virtually guarantees that investor-owned mortgages will be the ones to be restructured. Why is this a bad idea? The banks are NOT required to write down the second mortgages that they have on their books. This reverses the contractual hierarchy that junior lienholders take losses before senior lenders. So this deal amounts to a transfer from pension funds and other fixed income investors to the banks, at the Administration’s instigation."

Please allow me to translate. If you or your pension fund bought any kind of fixed-income securities (also known as bonds), you loaned some of your savings to debtors. Private debt is created by banks expanding their balance sheets. Some of it remains on the bank balance sheet and some of it is sold to savers like you. Securitized and sovereign/public debt is the $IMFS proxy for gold. But when the debt defaults, the savers take the loss. The system will be protected at all costs. It may make you angry, but that's just the way it is and always has been.

So it appears that the system will write down the debt held by savers before that held by the banks in this case, to protect the system. When debt defaults, SAVINGS are destroyed because debt is the proxy for a store of value in the $IMFS. Wherever possible, earned savings will be forced to take the losses first. But if too many losses happen at once, they will be socialized to protect the system. The system always protects itself, first by sacrificing the low hanging fruit, then by sacrificing the currency itself.

I'm sure that by now you have all learned the two new buzz-terms, "the ISDA" and "the credit event". If not you can read about them here. Basically, a group consisting of bankers has the job of deciding whether the banks or the savers will take the loss on Greek debt. The deck is stacked against us wherever we turn.

I'm not here to cast judgment on this systemic inequity between banks and savers. I have long followed in FOA's (and ARI's) footsteps in pointing out that this is simply the way it has always been. That's a pretty good reason to not save within the system, wouldn't you say? When push comes to shove, the system will protect itself and force losses onto the savers. Ultimately, inevitably, today's dollar will lose so much real value that it will save the banks nominally while putting all systemic losses onto everyone holding dollars, regardless of the default of debtors.

Here's a quote from an article that caught my eye the other day:

"It’s tough for risk averse savers but that is what US monetary policy has been about—forcing them to buy risk, and higher returns. That policy is working but trillions of savings still sit in cash or bonds."

Savers are not investors, traders or speculators

This little concept is something ALL Westerners are going to relearn one way or another. Mark my words right here and now. In The Studebaker Effect I wrote:

"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!"


That second paragraph denotes the difference between stasis and punctuation in monetary evolution. Today we are approaching a period of punctuation, but in the hereafter stasis we will all understand that savers are not investors, traders or speculators.

I have refined my best advice for buying gold over the last few years. Here it is, quoted from a recent email response I wrote to someone asking if his parents, serious savers, would do well to take on as much debt as possible in order to "save" more physical gold:

"Firstly, let me say that I never recommend anyone taking on debt to buy gold. That is what speculators do and savers are generally not equipped with the necessary tools it takes to be a successful speculator. There are too many potential pitfalls for savers to do something like that. In general, my advice is to get out of debt and put at least 5% of your savings into physical gold coins or bars in your possession (or at least under your immediate control). I believe that 5% is a no-brainer. You don’t really need to understand much about gold to go in 5%. But I wouldn’t do it in any kind of paper gold or even paper products claiming full physical backing. Paper gold is for ease in trading, not for saving. I say do it in physical and 5% will at least keep you whole come hell or high water.

Beyond that, I say buy only as much gold as your understanding allows. For many who have read my blog for years, understanding has led them to be 90% to 100% in physical gold. I, myself, am very close to that. And I know a few that have been 100% all in since the late 90s, with $millions in physical gold. But you don’t do that unless you have complete understanding of what you are doing and why. Only buy a percentage of gold equal to your understanding. 5% is a no-brainer and anything less than 5% is reckless pigheadedness with what's happening today. That’s my best advice."


You see, a saver is still just a saver, even today, even when we are in the punctuation phase. And that's not a put-down. The greatest giants in the world are savers. When we look at what it is to be a Capitalist, it is completely separate from the act of saving. The primary definition of a Capitalist is one who has capital invested in business.

There is a difference between preserving purchasing power and trying to increase your purchasing power by navigating your way through risk. As the quote above correctly describes savers, they are "risk averse". That's the very definition of a saver. Any deviation from full risk-aversion and a saver becomes something else; an investor, a trader or a speculator.

My point is that the header for this section is a deep concept, a timeless truth, a little bit of wisdom from the ages. Savers are not investors, traders or speculators. And since this post is about glimpsing the hereafter, give me a few minutes while I consult my crystal ball. Here's some music while you wait…



After The Transition

One of the things I have found that people have a hard time grasping is that ALL savers will want to be in gold after the transition, even though it won't deliver ANY real gains like we've had over the past decade. This is a difficult concept to wrap one's head around. People seem to think that they are in gold only for the big 30-bagger revaluation and then they'll want to find something else in which to put their little dollar soldiers to work earning a yield. Either that or they imagine that Freegold will be an environment of perpetual real gains for gold holders. It will not.

Freegold will be simple purchasing power preservation, and you'll love it! No gain, but also no risk and no loss. That's what savers need and want. And most of us are savers whether we admit it or not. This is a really big idea we need to contemplate if we don't want to be run over in the end.

Any financial advisor in today's $IMFS can explain the reasoning behind investing in fixed income securities also known as bonds. They are for risk-averse investors looking for a constant and secure nominal return on their investment. In theory, the safest bonds will deliver a nominal return equal to the purchasing power your principle investment loses to inflation over time. So, in theory, the safest bonds are supposed to do what gold will in fact do in Freegold, perfectly preserve your purchasing power over time.

How can gold perfect the preservation of purchasing power you ask? It's quite simple really. It will come from a global shift in perception as to the very reference point for purchasing power. What is the benchmark for purchasing power today? The Big Mac? Ha! Think about that one and get back to me. In the meantime, check out my post Reference Point Revolution!

So in today's system, securitized debt is the way various tranches of debtors bid savings away from the savers. And over the three or four decades in which this has been the norm, a strange concept has grown into nearly universal acceptance. That is the idea that savers have a moral obligation to society to lend their savings to the debtors, and that by hoarding gold instead, you are somehow depriving society of your vital net-production. An absolutely ridiculous, bass-ackward notion!

Charlie Munger said it this way:

"Oh, I don't have the slightest interest in gold. I like understanding what works and what doesn't in human systems. To me, that's not optional. That's a moral obligation. If you're capable of understanding the world, you have a moral obligation to become rational. And I don't see how you become rational hoarding gold. Even if it works, you're a jerk."

To Charlie I responded with this:

"So Munger and the Dingbat are wrong wrong wrong! You're a jerk if you save in paper, enabling the destruction of Western Civilization. Rational people everywhere have a moral obligation to buy ONLY physical gold with their savings. If you're capable of understanding the REAL world, you have a moral obligation to become rational. And I don't see how you become rational investing in Charlie Munger's paper. Even if it works, you're a jerk, just like ol' Chuck."

Imagine I produced 50 million iPhones for the marketplace. And through that net-production I was able to save $10 billion. If I buy gold with my $10 billion rather than lending it, am I depriving the economy of my iPhones? Of course not! Have I deprived the economy of my accumulated purchasing power? Nope. I simply gave it to another saver who was ready to end his consumption deferment. And, amazingly, the credit money system still allows the debtors to borrow purchasing power to buy my iPhones. But the best part is that hoarding gold does not deprive the economy of anything. You can read more about this concept and my response to Charlie M. in my post A Winner Takes the Gold.

Before and After

My long-time readers are aware that, beginning with All Paper is STILL a short position on gold in March of '09, I have been refining a conceptual model of the $IMFS stasis and punctuation periods based on the inverted pyramid developed by the deflationist economist John Exter in the 1970s.

Exter put gold at the bottom of the liquidity pyramid, just below the dollar. He said that gold was the most liquid asset. And in the end, he envisaged a rush down the pyramid to liquidity in which we would see the dollar and gold rise together for a time. As Gary North wrote in 2009, "So far, his theory has yet to be tested. We have not seen a rising dollar and a rising price of gold."

But I will note that ANOTHER wrote something in 1997 that seems to back Exter's view:

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

The price of the metal in currency terms will be made for all to see as it moves quickly upward for a very short period of time ( 30 days ) . After that only black market traders and third world noones will understand its price! When is this going to happen? I have no idea. Is there anything to look for that will tell us when the problems have started? At first the US$ and gold will go up together against all other assets!


Interesting, huh?

8 months after the "All Paper" post I wrote Gold is Wealth in which I built an upright pyramid under Exter's, representing the physical plane of goods and services, and forming a kind of hourglass shape:


10 months later, in Just Another Hyperinflation Post - Part 3 I used this model to illustrate the flow of capital during a currency collapse:


And now, what I'd like to do is to take a stab at modeling what this might look like after the transition to Freegold. All modeling up until now has been before and during transition. But presumably things will look a little different hereafter, don't you think? Costata and I have been discussing where gold should go in the "after" model for a while now. Should it be in the monetary plane or the physical plane? Should it be parallel but off to the side of the currency, or what?

While we have not come to an agreement on the nitty gritty details of the "after model", I'd like to put my general thoughts out there because I think that you will find them useful (and my crystal ball says so too). So here's the very basic before and after. I have put gold up where the financial system collapsed in the old $IMFS. But don't worry, I'm not going to leave it there:

The placement of gold in the "before" really doesn’t matter for our purposes right now. It could be in either plane or both. But in the "after" it has filled and replaced the arena formerly occupied by derivatives, securities and paper trading wealth in general (securitized debt).

So what’s the purpose of this exercise? Here’s what I’m thinking. Everyone uses the bottom pyramid, both debtors and savers. And everyone uses the currency portion of the monetary pyramid. But only the savers utilize the top portion of the monetary pyramid. The debtors are no longer the counterparty to the savers so they have no business up there. The only way to get up there is to produce more than you consume so that you have some excess capital with which to buy gold. Then you are a saver. So it looks something like this:

(If you'd like to see these in full size,
right click on the image so you can
open it in a new tab or window)
__________________________________________________________
Side Note:

Yes, I do realize that there will still be investors, traders and speculators willing to risk capital in search of a yield, even in the hereafter. But once you come to terms with how much of that investing and trading world of today is actually filled with savers who think that's the only way to preserve purchasing power, you'll see just how tiny by comparison it will be after the transition.
__________________________________________________________

We ALL exist in the physical plane. That’s where we produce and consume. Currency facilitates the flow of value in the physical plane of production and consumption. Some consume amounts equal to their production, some consume more than they produce, and some consume less than they produce. Only this last group ventures above the currency line. The rest all exist comfortably below it.

Currency’s main purpose is to lubricate the flow of value. Gold’s main purpose is to store or stockpile value. Stock and flow. Gold and currency. Currency will also store value for periods of time, but that is not its main purpose. If currency happens to behave as a temporary store of value, that’s only a secondary effect created by its suitability to its primary role. Mises said as much (which is in my Honest Money post):

Mises: Money is a medium of exchange. It is the most marketable good which people acquire because they want to offer it in later acts of interpersonal exchange. Money is the thing which serves as the generally accepted and commonly used medium of exchange. This is its only function. All the other functions which people ascribe to money are merely particular aspects of its primary and sole function, that of a medium of exchange.

It’s probably best to replace Mises' use of the term "money" with "currency" for the purpose of my new model. It comes down to the whole semantic issue of whether Freegold is DEmonetizing gold as FOA said, or REmonetizing it as Moldbug says. Potato po-tah-toe semantics IMO. FOA's demonetizing really means de-currency-fying, or removing any sort of link between gold and currency that would cause a direct correlation between their prices. Moldbug's remonetizing means gold moving from a commoditized role into a wealth reserve or store of value role, which is commonly thought to be one of the three functions of "money" today (although Mises might disagree as in the above quote).

So that whole gold section of the top pyramid is like an exclusive country club for savers, like the men-only clubs of yesteryear, where we savers all sit around smoking cigars, practicing secret handshakes and agreeing that we'll only buy gold with the excess left over from our net-production and deferred consumption. And if there was an actual club, the savings medium could theoretically be anything we agreed on, like baseball cards. But because there’s not an actual club nor a secret handshake, we rely on the focal point and network effect principles to identify and optimize that singular item.

All gold transactions are essentially from saver to saver. The debtors need not be involved nor concern themselves with our exclusive club interactions. When a saver produces some excess and leaves it on the proverbial table at the economic fair, he buys gold from another saver (either inside or outside of his zone) who has decided to dishoard some of his gold in favor of consumption. It is the changing purchasing power of gold that determines how much gold (by weight) changes hands. (Please review my post The Debtors and the Savers if you are unclear about my novel demarcation.)

Debtors net-consume on a sliding scale ranging from consuming exactly in proportion to their production on down to consuming as much as they can get away with borrowing. So netting it out, all net-exports from a zone come from the savers. The debtors consume their own production plus some of the savers' production, and if there’s anything left over it is exported. That’s what happens in the "surplus ex-gold zone". Gold is flowing into that zone. So the debtor's actions do have an influence on the balance of trade even though they don’t contribute to exports.

But when the debtors are borrowing too much currency and consuming too much in the physical plane, there is a mechanism in Freegold that ultimately slows them down. That mechanism is the purchasing power of the currency. When the debtors are consuming too much they'll experience price inflation which will force them to consume less. So it is the purchasing power of the currency that regulates the debtors. But changes in the purchasing power of gold within the exclusive savers' club is not linked to the mechanism which limits the debtors.

The purchasing power of gold can be rising or falling regardless of whether currency prices are inflating or deflating because gold is like an isolated circuit. Savers choose to hoard or dishoard (produce more or consume more) based on the changing purchasing power of gold, not currency. So the savers' savings is circulating in a closed circuit where it can be experiencing the same or opposite effects as the currency. It is truly an escape option like OBA's Maglev.

So we can cut gold off of the pyramid structure if we want to, and we can put it wherever we want. We can stick it back in the physical plane since gold is physical, just like baseball cards, or we can set it off to the side, or we can just ignore it and cut it off, like this:

Where’s gold? Who cares? It is a closed, isolated circuit for the savers only. Now (above) we are dealing with only the parts that involve everybody. And it is no surprise that the monetary plane is so relatively small. At least it is no surprise here. A little currency goes a long way. From Gold: The Ultimate Wealth Reserve (2009):

Imagine an island of 100 men with a money supply of 1,000 sea shells. That's 10 sea shells for each man. But over the course of a year each man on the island works and earns an annual salary of 100 sea shells. So the total economic power of the island over a year is 10,000 sea shells. We could say that the GDP of the island is 10,000 ss. We could also say that the demand for sea shells is 10,000 over the period of one year and that demand is met by a supply of only 1,000 sea shells.

Now imagine that ownership of a piece of real estate on this island costs about 2 year's salary, and that there are enough pieces of land for each man to either own or rent one. So each piece of property might cost about 200 ss. The entire island's worth of residential real estate would be in the ballpark of 20,000 sea shells, twice the GDP. Yet the money supply still remains at 1,000 sea shells and that limited supply somehow meets demand.

The reason this works is because sea shells are the currency. They circulate and pass from hand to hand over a short timeframe. This is called velocity and it has the exact same effect on the value of a single sea shell as does the size of the money supply. On our island 1,000 sea shells change hands 10 times per year creating an island GDP of 10,000 ss. If they changed hands 20 times a year the GDP would be 20,000 ss. Or if we doubled the money supply to 2,000 sea shells that changed hands 10 times per year it would also yield a 20,000 ss GDP. So velocity and money supply of the currency have exactly the same effect.


So we can have a physical plane whose total net value is much greater than the total amount of cash. That’s because "The pure concept of money is our shared use of some thing as a reference point for expressing the relative value of all other things." (quote from Moneyness, a must-read post IMHO!)

Same goes for gold. All the gold can be worth many multiples of all the currency. There is no need for any correlation. Gold (in size) circulates slower than homes. It circulates on a generational time scale. So the currency denominates the value of everything else without needing to have any quantitative correlation with all that stuff. Can you imagine if there had to be $500,000 cash sitting in a vault somewhere earmarked specifically for your house in order for your house to be worth $500,000? No, of course not! Your house is worth $500,000 because that's its value relative to other things with known prices.

So now let's talk about the debtors.

What they like to do is indenture themselves for the future in order to obtain purchasing power in the present. They can only spend that purchasing power once and then it's gone. It has gone from them to someone who earned it. So the next person who spends that "borrowed into existence currency" is someone who already contributed to the economy and earned it. The borrower gets to spend it once and then he has to work it off by contributing to the economy over a period of time.

In the previous section I told you that price inflation will be the automatic governor of any consumption binges undertaken by the debtors in the hereafter. But while price inflation will limit the debtors' ability to perpetually consume, it will not affect the purchasing power stored in gold by the savers. In fact, my crystal ball informs me that it is the savers lending their excess production directly to the debtors that allows for the perpetual deficits we struggle with today.

I think that if we look closely at how the debtors use the fiat money system with and without the assistance of the savers, it will become clear that we will all be better off with a bifurcated monetary system. And it will certainly be clear that the savers have no business taking debtors on as the counterparty to their savings.

It would certainly be massively inflationary if we went from no debt to all of a sudden everyone borrowing at the same time. But in reality, there is someone working off his past debt whenever a new debtor goes into new debt. Of course old debtors and new ones don’t precisely offset each other, but that’s okay, because gold savings first float against the currency, and then they also float in their isolated circuit of choices made by savers based on the changing purchasing power of gold (not its currency price, but its purchasing power).

So gold has kind of a double float. It floats with the inflation/deflation of everything else. And then it also floats in a closed circuit consisting only of savers (and their "hoard/dishoard" choices), of whom the majority (measured by value stored) are intergenerational giants.

Now that I've hopefully established that in the hereafter a) "a little money (currency) goes a long way" and b) the savers are sufficiently protected against any inflationary mayhem the debtors may cause, let's zoom in on that small "monetary plane" and think about how it works.


In a future post I plan to delve into the vital and delicate relationship and balance between base money and bank credit money and how it affects the value of our money in terms of its ability to lubricate commerce. But for now, I have a couple of questions for you to ponder.

In thinking about the money supply (cash and credit inclusive) that is actually in the economy, would you count cash that is stacked up inside an ATM as part of that supply? Here's a hint: That cash is not in the economy until someone withdraws it from the ATM. If you count it while it's still inside the ATM then you are double counting that money.

Is it a positive sign for the future when there are $Trillions in savings sitting in cash and near cash equivalents? All that money must mean we are loaded, right? It must mean our cash dollar is strong which implies the market thinks it will be that way in the future, right? If $Trillions are good, wouldn't $Quadrillions, $Quintillions or $Sextillions be that much better? And with this thought in mind, does a rising amount of savings crowding into cash and near-cash equivalents represent a positive or negative view of the future?

Those super-low rates at the short end of the yield curve represent really big money, too big for FDIC protection, that just wants to save itself. It is big money that, like Bill Gross says, is far more concerned about the return of money (purchasing power preservation) than the return on money (yield). That short end is an awfully crowded place in the land of ZIRP forever and monetary evolution, especially when you consider the time factor. (H/T OBA)

Of course, what I have described above is a simple model. The reality will be a bit more complex. For instance, gold will have some competition although it will be tiny in comparison to today. Some government debt will likely compete for your savings. But the US government, for example, will have to compete just like the Greeks do today. And we will still have a much more limited menu of investments and trading opportunities to lure you into putting your hard-earned savings at risk.

Like I said at the top, I can't help you much with what it will look like after you die. My crystal ball ain't that kind of crystal ball. But I can tell you that somewhere, some way, some day we will all find out. Fortunately though, my crystal ball does work for the monetary and financial future. It paints a nice, clear picture, yet on timing it's still a little hazy. But one thing it does make perfectly clear is that it's just a question of time.

Sincerely,
FOFOA

378 comments:

«Oldest   ‹Older   201 – 378 of 378
Aiionwatha's Nation said...

MF,

Fully agree with you on the conclusion.

Just trying to make it clear that I would argue most folks at the margin don't prefer paper for their ability to borrow and pay back in inflated currency. I think it's more the same mentality as the savers going wild over the SPX in that tomorrow will deliver more prosperity than today.

Neither side can see that on a long-term basis that they are both losing to government, the FI's, poor capital allocation and massive imbalances caused by unrestricted credit expansion and continually socialized losses.

That gets me to another big problem I have with the current paradigm. Bass ackwards incentive structures that continually cripple the productive economy the longer they continue.

Anonymous said...

AD,

No, the money is not all gone ;) If DP is right (if I were you, I would certainly hope so), then these Euro reserves at the Bundesbank through TARGET2 might well hold their purchasing power. But that depends on how the situation develops, how long the dollar is around for and how the other trading blocks (China, resource countries) act.

Some further thoughts on your complaints. You would be right to complain about the Bundesbank or the German govt that they did not tell their savers not to invest in other peoples' debt, that they regulated their banking system that poorly, and why nobody has advertised gold so far.

If I read FOA correctly, around mid 2001, he was dreaming of the ECB somehow advertising gold as an asset for savings, even issuing official gold coins (apart from the commemorative coins that are sold way over their bullion value that every country seems to have).

I have no idea why nothing like this happened. It may be related to certain events in 2001.

I have also repeatedly said that the ECB (and the other CBs) must have known well in advance that the European trade flows and the debt levels were getting out of control, and that I don't understand why nobody acted and nobody spoke up.

Victor

AdvocatusDiaboli said...

VtC

"You would be right to complain about the Bundesbank or the German govt that they did not tell their savers not to invest in other peoples' debt, that they regulated their banking system that poorly, and why nobody has advertised gold so far."

No it is even worse: The government forced people into that AAA-€-crap by legislation: In order to save for your retirement they called it "riester" and "rürup" retirement accounts and forced it as well promoted it my tax releases. Gov. even obliged companies to get their employees into that, threatening them if they dont (ASK ME!!!). Funny, the person that profited most was new on the scene: our new billionair Carsten Maschmeyer, best friend of Mr.Riester, Mr.Rürup and the chancellor of that time Mr.Schröder.
See, again, f'm all. Bring this on and have the streep lamp party.
Greets, AD

Jeff said...

I saw this:

In the study—entitled Why Is the U.S. Share of World Merchandise Exports Shrinking?—Federal Reserve Bank of New York economist Benjamin R. Mandel examines the factors driving the sharp drop in the U.S. share of world goods trade. Mandel concludes that the reduction does not signal a broad-based decline in the relative competitiveness of U.S. exporters. Rather, much of the 3.5 percentage point fall in U.S. export share between 2000 and 2010 is attributed to a change in the composition of goods traded internationally and the relatively slow growth of the U.S. economy.

http://www.newyorkfed.org/newsevents/news/research/2012/rp120207.html


and it reminded me of this:

FOFOA: The bottom line is that the USG cannot crash its own lifestyle. And when the dollar starts to "sink", that pile of pennies in the video above will be insufficient (not enough money). Luckily, that pile of pennies represents the budget of the currency issuer himself. So he’ll just increase it, to defend his lifestyle, while scratching his head at why the trade deficit has nominally widened rather than narrowing as he thought it would when he trashed the dollar.

ampmfix said...

Alien,

"I`m the best breed, East and Western old continent, I`ve seen totalitarian systems, hated it and now I smell dirt again, here"

You know what they say: "he who smells it first..."

Best breed?, no kidding, I thought it was me! but you must be right, I am just a latin greaseball.

Do you really know what you are saying?

Anonymous said...

AD,

cool. And people say the US government is corrupt ...

Reinhart-Sbrancia call this 'financial repression':

http://www.imf.org/external/np/seminars/eng/2011/res2/pdf/crbs.pdf

Jeff,

the misallocation of capital is absolutely gigantic. Sometimes I am surprised there is still enough food to go around in the industrialized countries.

Victor

AdvocatusDiaboli said...

VtC,
rethinking our discussion, I get more and more to the button of what Desperado says: EVIL down to the very rotten end.
Call it Euro, IMFS, Dollar whatsoever, does not matter. Really absolutely no difference (and PLEASE stop that Euro-Hail-lalalalalala I cant take that any more).
There is a quote, right now I dont remember from whom it is: The monetary system reflects always the condition of the society.
No difference, nowhere you look.
Hey, my wife is once in a while in Iran, people seem to be okay, maybe the last place to be on earth? But....shit, I dont like moslems...so no option.
Sorry, I start to feel really sick.
Greets, AD

Alien said...

ampmfix

some people have even less humour than myself. I should have painted a LOL before publishing. Mea culpa.
Hope you feel better.

Edwardo said...

http://www.zerohedge.com/news/believe-return-gold-standard-you-are-now-officially-extremist-according-fbi

I know folks around here aren't "hard money" types, but this is quite the development in my view. One wonders just how The FBI is going to classify state governments that are in the process of monetizing gold and silver.

Aaron said...

AdvocatusDiaboli @ 4:04pm-

"Hey, my wife is once in a while in Iran, people seem to be okay, maybe the last place to be on earth? But....shit, I dont like moslems."

Let me get this straight. You do not like 20% of the humans on this planet because that 20% holds dear an ideology which you can't sqaure with your own?

You hate the Euro too, yes? And the USD -- all EVIL?

You may as well pick up a battle axe and start swinging at the innumerable constructs of Homo oeconomicus my friend. But lemme tell you, you're going to be one busy dude.

Wendy said...

AD, I would like to ask you about your comment:

"The government forced people into that AAA-€-crap by legislation: In order to save for your retirement they called it "riester" and "rürup" retirement accounts and forced it as well promoted it my tax releases"

I wonder if it's like what we have in Canada?

For decades we have been able to purchase paper called a registered retirement saving plan (RRSP), use the RRSP to invest in many many investment products/vehicles, and deduct the money we invest annually from our income, which reduces the income tax we pay now, deferring it into the future when presumably we'll be drawing on our investments after retirement, and that income will be taxed at a lessor rate than today (presumably).

But we are not "forced" to buy into this, we are rather lured. This business of "investing" in RRSPs has become almost equal to hockey in terms of our canadian culture.

Becaused we are not forced to save in this manner, some of us decide that a program sponsored by the government is probably much better for the government that the people, and choose to not buy RRSPs, pay our income tax on all our income, and then do whatever we want with the money we pull out of the system.

How is your system different?

AdvocatusDiaboli said...

Aaron,
I know I should not have said that, something like that is politically incorrect, anyway I dont care. Let's put it like that: I like my personal choice on how to live, that's the only purpose for me to become and stay financially independent. I'am not saying that others dont have or must not have that choice. Everbody should have the freedom of choice without being oppressed by others. I think that the planet and human cultures are big and wide enough to accomplish that for everybody, without interfering with each other. I accept and respect moslems very much, it is just that I reject to live under that culture, personally, simple as that. Despite from probably most average americans I have seen and expiereanced much more cultures.
Maybe I have to check out Doug Caseys argentinian ranches :)
Greets, AD

AdvocatusDiaboli said...

Hi Wendy,
it is a question of promotion:
1.) "Say good bye to social security retirement! You have to understand that this is/has to be cut down (since you selfish germans dont produce enough children)".
True. Nobody can reject that one.
2.) "There is something NEW for you, thats why WE installed a ADDITIONAL column on retirement preperation, private prevention".
True. Nobody can reject that one.
3.) "and we invented that funny writing off from taxes for these GREAT NEW investments".
True. Tax saving are always good.

To conclude: Social retirement are being cut down, but ongoing monthly payments are still the same. You have the chance to pay into those tax written off stuff additionally, or you get nothing other all.

Okay, it is not a real FORCE, it is just like saying: Take it and we screw you, or dont take it any you dont get anything anyway.

About the company promotion: By law I am obliged to promote similair stuff. In case I dont, employees can sue me for the loss, due to the fact that they might loose if I dont. So in the end companies just give by and say okay, we dont care...
I personally made a form employees have to sign that it is their explicit will that this is the way they want it to be personally and that it is a ripoff if they purchase that stuff, due to their explicit will.
Greets, AD

Wendy said...

AD,

Sounds simular to the system we have which I believe is a huge royal rip-off/scam.
;)

JMan1959 said...

Germany=China
Greece=US

We (US) are next to be teed up by the markets as our liberal/socialist President Obamunist and Keynesian bankers continue to spend/print us into oblivion and use rosy revenue forecasts that will NEVER materialize. To add to Jeff's comments on the accuracy of Fofoa's prognostications, we see the dollar index hit record highs, with massive cash positions building as investors continue to flee bonds as we approach zero (or negative) interest rates, and now the dollar index has started to come off hard. Ninety plus percent of all long dated bond purchases in Operation Twist are the USG, buying(printing) our own BS! I'm sure Jeff or JR can provide the actual quotes, but isn't this what was predicted, almost to a tee? I'm just curious as to what event is going to finally trip the fear trigger on the currency .

Wendy said...

Thank you for your responses Sir Adder and Victor.

Normally when the someone posts and talks about base money/balance sheets/researves/M-whatever .....I zone out and scroll past the comment.

I am resolved to take more time with these post so that I can eventually come to some understanding aboout wft you are talking about.

I'll try!

One Bad Adder said...

Yannick re: T-bills: -

Not SO grim State-side where the 13 week T have clawed it's way back up to 0.08% ..as per here.
The devil is in the detail tho with a times 4.6 over-subscription.
I can't help but feel this is setting up a bit of wriggle-room for something coming in the near future.

All in all it seems to me a bit like fanning the embers of a Camp-fire during a torrential downpour.

Good luck with that!

One Bad Adder said...

Wendy: -
You'll get none of that from me dear Lady. (money-talk)
As my name implies (and contrary to what FOFOA might believe;-) I AM one BAD adder...
...and therein lies my penchant for GOLD.
Simple, uncomplicated ...and eternally sound.

It's NOT about the money, Money, MONEY. --- it's not about the PRI-CE-Tag.
(Had that song in my head all day!)

Anand Srivastava said...

AD,

Just one comment.
So lets say there was no Euro. So Germany was working with DMs. Now Germany is a surplus export state. How would you sell your stuff, and what would you get back?
Wouldn't it be USD?
Do you think that would be a better state of affairs than current?
It would still be like dumping your produce in the ocean.

Euro at least keeps the money in the Europe so at least the money helps other Europeans. Would you prefer helping Americans or Europeans? You have to make a choice or instead of good fiscal measures you could also live on debt like most of the rest of the western world.

Wendy said...

Sir Adder,

What a relief, thank you and goodnight
:)

Anonymous said...

Hi everyone,

I have a technical issue with this one:

Date: Sat Apr 18 1998 19:18
ANOTHER (THOUGHTS!) ID#60253:


[...] Look even at your “Comex”, and divide the daily volume by the “eligible stocks for delivery”. That number ( perhaps three million ounces divided by 150,000 stocks, deliverable, times the spot close gives close, real world price of physical, $6,000. It follows close to paper trade on LBMA.

I do not understand how he is calculating this. He says COMEX daily volume in 1998 was 3mm ounces (30000 contracts). A year ago it was around 200000 contracts and today, after MF Global, around 140000. I am willing to believe this.

Then he says COMEX "eligible stocks for delivery". Today this is around 9 million ounces. He says "150000 stocks". What does this mean? I am absolutely sure COMEX was never down to 150000 ounces (which would be just 4.6 tonnes).

So what is he calculating???

Victor

Motley Fool said...

Aiionwatha's Nation

Agreed. :)

@VtC

Old post of mine : Calculating the shadow gold price

TF

costata said...

VTC,

Could it be bars?

FOFOA said...

Hello Victor,

ANOTHER: "perhaps three million ounces divided by 150,000 stocks, deliverable"

What's that, 20:1? 3mm/150K? Here's a recent email that might help:

"Dec. 12, 2011

Hello FOFOA, hope you are well.

Sorry to trouble you, but hoping you may be able to help me out, and I didn't think it appropriate to ask the blog.

You've maybe seen the Kyle Bass interview, as the link was posted recently on your blog.

http://www.youtube.com/watch?v=5V3kpKzd-Yw
(gold discussion at around 42 minutes).

I wonder if you can answer a query for me please?

I have found these 2 links:

http://www.cftc.gov/marketreports/commitmentsoftraders/index.htm
and
http://www.cmegroup.com/trading/energy/nymex-daily-reports.html
(which has the warehouse stocks link down at the bottom...sure you already use this!)

I am trying to ascertain the difference currently between warehouse stocks, and outstanding long interest (futures & options).

I reckon the figures only show a 5.8 x mismatch, with 655,854 x 100 ounce contracts, versus 11,293,669 ounces in the warehouse.

So, I think I must be misunderstanding something here, as I can't believe it has dropped from a 29x mismatch back in April when Kyle did his deal.

Thanks very much.

Best wishes"


My reply:

"Hello ____,

The answer is simple! Do not count the eligible stocks in the warehouse. They are as good as not there. Only count the registered. Then we’re looking at a 19.5x mismatch which is a lot closer to what Kyle said.

Sincerely,
FOFOA"


And pretty close to what ANOTHER said as well! ;) What's 19.5 x $1,750? Ooh… $34,125. "That number … gives close, real world price of physical,…

Anonymous said...

Thanks, FOFOA.

I was confused because Another wrote 'eligible', but it does make sense to consider only 'registered' since that the proportion held be the market makers on which there are warehouse receipts in circulation.

When I redo the calculation with current COMEX data, I get a price of $14000 per ounce and 1500 tonnes of unallocated waiting for allocation in London. Either the COMEX data seriously diverge from the LBMA data, or they are indeed successful at winding the scheme down.

Victor

Anonymous said...

I forgot to say that Another wrote daily volume divided by inventory available for delivery. Your email friend is taking open interest.

Victor

One Bad Adder said...

comment

Winters said...

All - In reading this last post and noting the links to other FOFOA authored content, I thought I might make a graph of the links between FOFOA posts ie: where FOFOA describes a big concept in once sentence and then links to a whole prior entry for further detail.

It was just for fun and the result was quite a messy jumble of links! I'm not claiming this has any particular utility although it is a bit of fun to drag a heavily linked article around and watch the particle system take effect.

Screenshot here: http://imgur.com/e7WVM

Reproduction steps here: http://pastebin.com/BG6QXQVt

Different colours represent different levels of linkages.
Gray articles aren’t linked to.
Blue, Orange, Red indicate successively higher references.

Ie: Credibility Inflation is one of the most often referred to posts (by other FOFOA posts).

Notes:
1) The following posts had to be removed as they contained season end recaps and added too much noise
"forum", "happy new year", "freegold-in-proper-perspective", "the old hyperinflation question", "reflection", "three", "in praise and support of fofoa"

2) I didn’t include any orphan posts that didn’t link to anything or get linked by anything (again to help reduce noise).

3) Links contained in comments are ignored.

4) Links by FOFOA to comments in a prior post are ignored. Arguably valid but its just a big mud pie with them included.

DP said...

Those kind of numbers as implied by the current total volume:registered inventory ratio are all very nice. But that only speaks to the notion of the current market participants simply making a switch from buying "gold" to buying gold.

That isn't gold undergoing a fundamental functional transformation, it's a few smart people realising they have previously been played for fools.

What happens to those numbers when not only do the few people already buying gold start actually buying gold, but gold undergoes a radical transformation* - finding itself restored to the centrepiece of the global financial system, as the premier global store of value.

Of course, assuming you subscribe to the notion that this change of thinking will inevitably happen, as a result of a wholesale abandonment of the $IMFS system — of holding hands while buying each other's debts. Which, it so happens, I for one do.


* my apologies to all you YT-haterz among FOFOA's readership...

DP said...

Here's our FOFOA, with a quick reminder:

http://2.bp.blogspot.com/-ZmY43anTRvk/TyucYFisqmI/AAAAAAAACIU/BmmDbMqW0J0/s400/Dual_Pyramids_After.jpg

cyclecooler said...

comments...

Motley Fool said...

VtC

The 150k is daily volume.

TF

sean said...

That's kinda cool, Winters!
I notice that "Focal point gold" is one of the, er, focal points.

Michael H said...

victor,

You probably noticed it, but A (or maybe FOA) first alluded to those numbers in:

Date: Mon Feb 16 1998 14:40
ANOTHER (THOUGHTS!) ID#60253:

So where are we now? I'm' not sure! How much gold paper is out there? If you look at the comex ratio of average daily volume to open interest, it's sometimes around 8. Funny thing that ratio is close to the gold commitments traded in London. Multiply, say 40 million ozs by the ratio of 8 and we get 320,000,000 ozs. of gold. Now, the money is in this gold paper, paid up. Just no gold yet, I think? That's about 10 tons, I'll be dam! That's a lot of IOU gold, don't you think? Add to this, that between the IMF and what CBs could sell, only about 1/3 of it is available at a much higher price, if at all! Then again, I'm not in any position to know this, am I?

DP said...

Since it appears to be 'bring your fingerpaintings in' day...

Here's one I made earlier

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

AdvocatusDiaboli said...

About those paper ratios:
I simply dont get it (please dont give me this RTFB, I just finished rereading the "Bankrun"-Posts). If the people just simply account in nominal terms, it does not matter if the ratio is 1:1 or 1:10000000. You can add as many zeros as you like, does not change a thing.
Especially since we are talking about institutions. You think JoeAckerman flies over to London to watch if DeutscheBank's purchased gold is shining? WAKE UP!!!
Oh I forgot "The giants". Can we agree that the CB have absolutely no interest to blow up the show?
Sure, we have other "Giants", the only one who got his gold was Hugo, the other once are dead or have quite other problems these days than to visite and polish their gold, simple as that.
Greets, AD

P.S. Or you just change the rules, MF some people, or play the Hunt brother game. Oh, or you just make it 200% margins....options to play to infinity.

AdvocatusDiaboli said...

Wait, talking about giants like Hugo: Do you remember who also got his gold? Yep, that's right, IRAN. Flew that stuff in their own planes out of Switzerland, AFAIR two(?) years ago.

JR said...

From 3.5 years ago - Sept. 2008

If you remember from the story of the Hunt Brothers, the big Wall Street banks held the short side of the Hunt's long on silver. And just when they were about to lose their shirts, the exchanges helped them out and changed the rules which killed the Hunt's position. The Hunt's weakness was that they had bought on margin. And if you notice right now, it is the "margin investors" that are getting killed, forced out of their positions at huge losses.

But as I said, that is the most obvious lesson. I still think there are deeper lessons. For one thing, if the Hunt's had had the advantage of reading ANOTHER (THOUGHTS!), they would have probably switched from silver to gold in 1974. They would have focused on taking possession of physical gold only. And you can't very easily do that on margin.


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

Some fun posts to read in follow-up to the idea that "They would have focused on taking possession of physical gold only. And you can't very easily do that on margin" include:

Who is Draining GLD?

The View: A Classic Bank Run

Cheers, J.R.

Gary said...

Still delving through 2009's posts.

A link Fofoa posted there in a comment was so interesting I thought I'd just repost it today, some deep thoughts from 1966's Alan Greenspan:

http://www.constitution.org/mon/greenspan_gold.htm

And then another snippet re Mr Greenspan I found from more recently dated Sept 2010, where he is basically calling for freegold it would seem:

http://www.nysun.com/editorials/greenspans-warning-on-gold/87080/

The line in question:

“If all currencies are moving up or down together, the question is: relative to what? Gold is the canary in the coal mine. It signals problems with respect to currency markets. Central banks should pay attention to it.”

Too right!

AdvocatusDiaboli said...

JR,
as I said, I read it before. But thanks for proving me your worshipping of a cult by repeating the word of the lord.
Greets, AD

Max De Niro said...

AD,

If I firmly adhere to Darwin's theory of evolution after having fully investigated it, thought about it and observed its effects; and I then quote Darwin in exposition of my opinions - does that make me a follower of The Cult of Darwin?

Zenscreamer said...

Max --

You are being nicer to AD than he deserves. Some people just like the attention that comes from making ad hominem attacks.

Gary said...

AD, with regard to your anguish regarding German assets in TARGET, the point has already been made that Germany would just be holding dollar-based assets instead, or UK crap, it's all the same, the world over.

I would ask though, when you look at the world, do you see the same problems exist the world over?

It isn't just Europe, it is Japan, it is the UK, China, lierally the whole world is wrapped up in the same mess, for one simple reason: savers are coerced into placing their wealth into the debts of others.

This is in the process of changing (whether you see it or not). It is most easily displayed in the gold price, but also in the actions and words of the major global players, with many examples provided on this blog, both in posts and in the comments. Again, if you want to further your knowledge, just frickin read them!

So, my simple suggestion to you is this: all of your complaining here about the Euro elite is pointless for 2 reasons (in my opinion):

1)I doubt anyone here cares much about your thoughts on the Euro political set-up and how you think it has hurt damaged Germany.

2) (and much more importantly)..it is pointless, an utter waste of your time, and indeed ours, to waste time and mental energy complaining about things you cannot change.

So, if you feel that strongly about the Eurosystem, why not write some letters to politicians, or go camp outside the Bundesbank for a few days with a placard?

Do something!

Apart from repeating the same stuff here, whilst also abusing the host and other posters, who are simply trying to help and educate.

Danke schon.

Peter said...

http://www.youtube.com/watch?v=pgUwpb3I98M

Max De Niro said...

ZS,

I think that AD's vitriolic attacks are based in frustration with the European project as a whole. I think that the disagreements arise from a fundamentally different framework for viewing events.

I know that AD thinks he understands say JR's point of view, but his arguments belie that fact. He consistently fails to address and reason from fundamental premises held here. This is, after all, a blog dedicated to the thoughts of Another and his friend, not a gold/financial crisis discussion forum. If one wants to join in the discussion, perhaps it would be a good idea to properly understand the subject. No one would barge into a Shakespeare reading group after having seen MacBeth on TV, then start berating them for not discussing Dickens enough.

So, either I agree with you, ZS, or I don't and AD's vision is impaired by the red mist, or he is down in the valley, floundering in a boggy marshland, unable to appreciate the view from the high mountain pass (I wonder what it's like up there?) whilst he thinks that he is also a goodly way up the trail.

Max De Niro said...

AD,

Many here have investigated the facts and agree with A/FOA/FOFOA's theory. Others have turned up, had a look, not liked what they saw and left. Obviously, those remaining tend to be (but are not exclusively) the ones who agree.
The difference between a cult and a group in agreement is the act of independent thought.

A cult involves slavish, unthinking following of a leader. I think you'll find that this place involves some of the highest quality independent thinking in public on the web. It does not follow that it is a cult just because some people here are in agreement.

Remember the purpose of this blog - it is not to determine the fate of the euro, it is to examine the thoughts of Another and FOA. Having examined these thoughts and having agreed with their validity, it is necessary to follow the reasoning and attempt to observe the fractal effects bubbling up into the manifested reality which surrounds us. What is your opinion of the basic framework put forward by A and FOA, the lense through which we, here, are examining the events as they unfold?

I suggest it is your skewed perception which leads to the conclusion of the existence of a cult. Perhaps it would be a good idea for you to state the fundamental axioms and premises for your arguments. You might as well define your most important terms whilst you are at it. That way, we might be able to get to the bottom of this discussion, rather than going round and round like cat in a washing machine.

Nickelsaver said...

http://youtu.be/Na675QXAtS4

JR said...

Hi AD,

JR,
as I said, I read it before. But thanks for proving me your worshipping of a cult by repeating the word of the lord.
Greets, AD


Keep saying stuff like "cult" and the "word of the lord," I hope that works out for you. Its a good bait and switch strategy.

Its certainly a better strategy that reading what FOFOA's arguments are and trying to respond to them. That might not work out so well for you.

Which is why I keep posting FOFOA's arguments. :)

Cheers, J.R.

Anonymous said...

All,

From AD we get:

JR,
as I said, I read it before. But thanks for proving me your worshipping of a cult by repeating the word of the lord.
Greets, AD


This after more than a few of us in a subtle manner suggested that he is wondering onto a wrong path, and we're not talking about the path this blog is dedicated to following either. His manner, in addition to being rude, is not consistent with someone who is interested in furthering the discussion as much as it intends to transform it to something more palatable to him.

I will be the first to suggest he simply does not belong here and will not find any satisfaction in his present course of action. In fact, to continue beyond this point will qualify him as a troll. The best way to handle a troll is to ignore him, then he will simply get bored and will leave.

Nickelsaver said...

Bait and switch is correct. He comes in humble and gets more abrasive and contentious with each comment. The language barrier is a ruse.

One need not look past his pseudonym as to his purpose.

Unlike some of us, who do not agree with EVERYTHING that FOFOA proffer, he agrees and concedes to nothing.

DON'T FEED THE TROLL!

Anonymous said...

Motley Fool,

please check your calculation again - I had the impression you have one of the fractions upside down.

Michael H,

yes, thanks, I know. This was the way of guessing the LBMA 'open interest', i.e. the amount of unallocated that is lined up for allocation. Depending on exactly which numbers I use, I get between 1800 and 5500 tonnes as of today.

The first figure is obtained by taking the COMEX ratio of open interest/daily volume and extrapolating it to the LBMA (as Another suggested). The latter figure by taking the old ratio of 8 and just applying it today.

I find that range plausible, but don't see how we could get a better estimate. As I said, I still suspect there may have been a large physical seller, and that might explain the smaller figure. If LBMA has just undergone gradual but slow deleveraging, I get the second figure.

But this does not resolve my original question(s) about his price estimate. And yes, DP, a change of function would not even be captured by that estimate.

Victor

AdvocatusDiaboli said...

Hi Gary,

yes, I know it is me stupid. But amazingly to some questions and observations here you get no answers, except some Copy&Paste (with stuff that sometimes has nothing to do with the core).

e.g.
my earlier post:
Puzzles me a little bit:
http://goldnews.bullionvault.com/gold_reserves_012620128
Looking at the chart, overall gold reserves are not rising, still shrinking...
Explanations? How can those charts look like in 1,5 or 10 years? How much deeper can gold fall?

NADA, RIEN... looks like JRs google search is this running, what to copy paste for that one. :D

So excuse me, if my posts are not so educated like some YT links.

Zenscreamer said...

On the whole, I agree with Matrix (although Nickle got there first with with the video -- Trollololo!)

That said, I understand the frustration. I was raised with what we here in New England call the Protestant Ethic: work hard and you will be rewarded. It took a lot of unlearning to get to a place of peace with "what is" rather than lamenting what "should be."

Intelligent sociopaths have always been able to manipulate vulnerable others and change the rules of the game to suit themselves, without conscience. Such is the way of the world. It's all a person of ethics can do to try and help reduce their scope of influence.

If only there were a tool to employ to help level the playing field! If only there were SOMETHING that human societies had repeatedly chosen as a measure to limit the ability of one to take from another without his consent.

If it existed, what would that thing look like?

Anonymous said...

Now that I wrote about the estimate of LBMA 'open interest', I had the following though.

We were wondering when oil will switch from dollar use to something else. How about this: As long as they still have a considerable amount of outstanding unallocated waiting for allocation, they might prefer to wait in order not to crash the system as long as they benefit from it. Once the major part of allocation is done, they are free to rethink their strategy.

Victor

Michael H said...

AD,

Try reading FOFOA's 'Euro Gold' post:

http://fofoa.blogspot.com/2011/07/euro-gold.html

Value and Volume

Now, the ECB puts out a ConFinStat every single week, 52 weeks out of the year. And every week it makes quantitative volume adjustments, like net increases or decreases in both gold and foreign currency reserves. But it only makes qualitative or value adjustments on four of those 52 statements. This is when the ECB marks its reserves to what the market says they're worth. The MTM party! And for the last 12 ½ years the trend has been that, proportionally, the Eurosystem's gold reserves have been rising while their foreign currency reserves (mostly dollars) have been falling. Here's the chart:


http://2.bp.blogspot.com/-PQ46e1lYFPc/ThlRUGZGmXI/AAAAAAAABy0/vXQLh9cTckE/s1600/Eurosystem_Reserves.jpg

Yet if we look at those reserves only quantitatively by volume, the opposite is true. Foreign currency reserves (again, mostly dollars) have grown over 12 ½ years in volume, from roughly $260 billion to $310 billion from a dollar-denominated perspective. Meanwhile the Eurosystem's gold reserves have fallen, again, only quantitatively, from 402 million ounces to 347 million ounces in volume.

This view, the volume-only view, is the fundamental modus operandi of the $IMFS that praises quantitative (voluminous) expansion and "growth" while ignoring qualitative (value) degradation. The reason is that governments and central banks can only print volume, not value. Think about this for a moment.

Motley Fool said...

VtC

It's a simple calculation. If I had had a fraction inverted then the resulting answer would be nowhere near the 60k ballpark, an immediate giveaway.

If you disagree, please point out what you have an issue with.

TF

Motley Fool said...

VtC

It's a simple calculation. If I had had a fraction inverted then the resulting answer would be nowhere near the 60k ballpark, an immediate giveaway.

If you disagree, please point out what you have an issue with.

TF

Motley Fool said...

VtC

Fwiw the current calculation ( for yesterday) gives ~ $96-104k. (Using estimated 160k, and actual 145k volumes of yesterday on COMEX).

TF

Motley Fool said...

Make that 97-107k. :P

Anonymous said...

Here is something for the oil watchers among the FOFOFOAs:

http://m.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/price-of-canadian-crude-falls-over-backlog/article2330013/?service=mobile

Canadian select heavy crude was selling for $31.25 (U.S.) a barrel below the benchmark West Texas intermediate, nearly double the spread of a month ago. At the same time, WTI – which sets the trend for Canadian prices – is selling at a steep discount to international traded crude like North Sea Brent.

To say it with Aristotle:

Crude oil - get you some.

Victor

Anonymous said...

Max sez:

I think that AD's vitriolic attacks are based in frustration with the European project as a whole. I think that the disagreements arise from a fundamentally different framework for viewing events.

It seems as though this is the case with most of A/FOA/FOFOA's critics, that they have some clear predisposition or emotional bias against what is presented here. The deflationists/Marxists hate capitalism and can't take the idea of any wealth surviving the crisis. Silver and bitcoin proponents are more like politically-motivated "clubs" obsessed with "sticking it to the man". I even recall one guy on ZH commenting that FOFOA was some kind of traitor to the cause because he doesn't like silver.

Likewise Desperado and AD clearly hate the EU and seem to want it to collapse. However, wanting something to happen really bad does not provide actionable guidance as to how to protect one's wealth. What I think distinguishes FOFOA from these others is that FOFOA is using logic to predict what actually will happen, without emotional attachment to any particular result. I think a lot of readers who come here don't get that. I've been following this blog for years and I've never seen any good rebuttals to anything FOFOA has presented.

Aquilus said...

From my time spent here, and unless our host(s) disagree with me:

This is what this blog is not about:
- it is not about social justice
- it is not about the morality of monetary matters
- it is not about actively (as in violent activism) bringing about societal change

What this blog is about:
- first and foremost about what it says at the top of the page - examining, validating and extending the thoughts presented by A/FOA, including their continuing relevance
- examination of current monetary policy and determination of likely outcome(s)
- front-running such outcome(s) if possible (on longer time frames not day-trading ones).


There is a quote someplace that I cannot find right now also to the effect that if you don't like the current system, you will really hate the next one.

In my opinion, trying to make participants to this blog angry at the system, is pointless - the whole point of the blog is as far from anger at the system or activism as can be.

Anonymous said...

MF,

in your blog post on the 'shadow price', you are writing

This gives us : 9,589,794/192,612 which is 49.8 , which if timed by $1600 gives us about $80,000

This is two mistakes in one line. Firstly, 192612 as daily volume is the number of contracts, but not the number of ounces. It is 19.2mm ounces as each contract ist for 100 ounces.

Secondly, Another said you should divide daily volume by inventory, but you are using the reciprocal fraction.

Victor

Motley Fool said...

VtC

"Look even at your "Comex", and divide the daily volume by the "eligible stocks for delivery". That number ( perhaps three million ounces divided by 150,000 stocks, deliverable, times the spot close gives close, real world price of physical, $6,000. It follows close to paper trade on LBMA."

Have you never made a mistake in explaining something? :P

Is it perhaps possible that Another made a mistake in his explanation, if not his thoughts? :P

Let's start from the end.

" times the spot close gives close, real world price of physical, $6,000."

At that time the spot close was about $300. So. Some number times $300 = $6000. That some number must then be twenty by simple arithmetic.

Let's move on the the beginning.

Now we have two numbers. 3 million and 150k. After we do something with these numbers, he computes the answer is twenty.

Well. 150k 3 million isnt 20. 150k/3mil isnt twenty. 150k + 3million isnt twenty. The word divided here is crucial. 3 mil divided by 150k is however 20.

So assuming his estimate of $6,000 made sense to him as an answer. We must conclude this was his method.

(Oh and I checked the records for the eligible stocks for delivery and volumes for that time to be sure they were roughly 3 mil and 150k respectively).

All of which I covered in my post.

*TF being a smartass.

TF

Zenscreamer said...

I was getting lost in the weeds with the numbers flying back and forth between MF and VtC when I realized....

I'm not a trader, I'm a saver!

And trotted down to my local coin shop. As the nice guy who owns the shop says, "Every day is a good day to buy metals." ^-^

Thanks Aristotle & FOFOA! Without your seemingly infinite patience and calm reasoning I would have been in the looney bin long ago. Instead, I'm on the Trail. :)

Motley Fool said...

VtC

Apologies, I'm irritable from having quit smoking a few days ago. I'm trying actively not to take it out on other people. My tone was unnecessary.

Let's fix ANOTHER's post :

Look at the "Comex", and divide the "eligible stocks for delivery" by the daily volume. That number ( perhaps three million ounces divided by 150,000 , times the spot close gives approximately the real world price of physical, $6,000. This calculation closely mirrors the trade on the LBMA.

Peace

TF

JR said...

FOA:

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

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

"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."

The Studebaker Effect

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

"The only action I advocate is personal action, like purchasing power preservation. I also advocate the personal action of expanding your understanding beyond the standard dogma you find everywhere else, which I suppose makes me quite unique."

Windmills, Paper Tigers, Straw Men and Fallacious Fallacies

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

"There are plenty of blogs about what we should do as a society. About how we need to start a new gold standard; a return to honest money. How we must return to a hard, commodity-based currency that will restrain the profligate governments and their greedy bankers from inflating the money supply at will. But what we must understand, what is often difficult to understand, is that there is a big difference between what SHOULD happen and what WILL happen. There is a difference between FIGHTING for something and simply OBSERVING the real world to plan your next move. There is a difference between being an ADVOCATE or PROPONENT and being a PASSIVE OBSERVER of the changes we are actually living through.

This blog takes the latter position in all of these cases. If you would like to be an activist for a better world, this may not be the blog for you. But if you are a hard working producer and a saver worried about how to protect your purchasing power from the hungry collective, this blog may be just what you are looking for!"


Your Own, Personal, Freegold

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

"I do believe that we are in the process of returning to honest money. I believe this transition is necessary, natural and inevitable (unstoppable). And that last part is why I sit back as an observer, rather than getting all worked up as an activist. To my way of thinking, all you can do now is take action to preserve your own wealth as we roll onward into this brave new world."

The Return to Honest Money

Anonymous said...

MF,

Why would you divide eligible inventory (in ounces) by daily volume (in contracts)?

Another's back-of-the-envelope calculation in order to estimate LBMA 'open interest' does make some sense - just computing one ratio for COMEX and then using it to estimate the quantity at the LBMA. Fine.

But everything that was written so far about his estimate of the shadow price, is highly suspect to me.

If the basic idea were to ask "What would happen if everyone who presently owns a long future contract would demand delivery, and the entire nominal sum of all futures contracts would bid for the little deliverable inventory, driving the price up" - basically what FOFOA and DP suggest - then you have to divide open interest in ounces by deliverable inventory (that is 'registered' not 'eligible' as FOFOA says). Daily volume does not matter.

But this is neither what Another says in plain English nor does it correspond to the numbers he is writing down. 150000 ounces inventory is just over 4.5 tonnes or $45 million (at $300/ounce). That's not plausible for the inventory level as of 1998.

Victor

Nickelsaver said...

Anyone,

I have a question about ECB MTM that has been bothering me for some time.

How is MTM every quarter in the current paradigm (cp) significant IF the PoG in the cp is based on market forces that will cease to exist in the new paradigm (np), also recognizing that the PoG will plummet before the revaluation into the np?

In my mind, I have been looking at MTM as merely symbolic, since price discovery in the cp does not matter. Moreover, that the amount of gold holdings is the important figure, not the MTM value.

Am I missing something?

AdvocatusDiaboli said...

Aquilus

well said. May I extended this:
If you want to believe, go to your church.
If you want to see what is happening, open your own eyes.
If you want to see the future, wait.

If you want to learn to understand, read FOFOA most perfect for that, but for none of the above. Thanks again @FOFOA for providing that.
Greets, AD

P.S. Exciting times right now for Greece, I wonder how they cook the books when that now finally blows up :D

Jeff said...

Nickelsaver, it's all about credibility.

FOFOA: You see, the European gold reserves are far better, far more credible than the US gold reserve, simply because they engage in a two-way gold market, and have for decades. The US gold has been hoarded and locked away for more than 30 years, never deployed in case of emergency. The European CB's took a lot of flak for selling gold over the past two decades, but that action is precisely what makes them so much more credible (and valuable!) than the US gold hoard. Any trading partner knows full well that if all else fails, gold will be paid."...

The reality is, and always has been, that the real reserves behind any currency are primarily the physical gold held in private ownership within that currency zone's physical boundaries, and secondarily the collective reserves held on public display. Those collectively-owned (official) reserves are only for the management (or mismanagement) of the currency until and unless they are finally used in defense of a full-blown collapse of the currency, the ultimate end of a mismanagement timeline, or in times of all-out war when gold becomes the ultimate (and only) transactional currency among distrusting neighbors.

Dr. Octagon said...

Nickelsaver - you say "Moreover, that the amount of gold holdings is the important figure, not the MTM value.".

This is the reserve portion of the balance sheet. Some reserves are other currencies, some are gold. The ECB wants to use those reserves to manage the value of the Euro, not the number of Euros, so the reserves need to be seen in terms of value, not volume. As time goes on, we can watch the value in the ECB balance sheet shift from the foreign currencies into gold. And in the event of a collapse of any of their reserve currencies, the ECB can immediately show that the value of their assets have not collapsed along with those currencies. If they didn't mark the gold to market, then the asset side would appear to be dropping along with the currency reserves, but assuming that the value of their gold assets go up in proportion as the foreign currency drops, the ECB has as much value (if not more) available to manage the value of the Euro. I believe this is why FOFOA says that the Euro is designed for RPG, or something to that effect.

JR said...

How is MTM every quarter in the current paradigm (cp) significant IF the PoG in the cp is based on market forces that will cease to exist in the new paradigm (np), also recognizing that the PoG will plummet before the revaluation into the np?


Lots of ideas come to mind, but here is just one - a way of viewing it is the ECB is saying MTM gold is very important to us!

So guess what the ECB will do if the price discovery mechanism (aka the paper market) stops working? Might they "make a market" to MtM their gold?

In my mind, this ties in with the WAG and euro gold sales, all of which provide credibility for the big reason why the Euro will not hyperinfalte - the Euro has gold and they will deploy it defend their currency.

Motley Fool said...

VtC

Let us see if we can first get some basis for agreement.

And as a reminder for those unfamiliar, here is a distinction between "registered" (real) and "eligible" (somewhat "questionable"), courtesy of SilverAxis

"For those who aren’t familiar with the terminology, the registered category of COMEX warehouse bullion stocks generally refers to gold and silver bars against which COMEX warehouse receipts are outstanding. The COMEX publishes these stocks on a daily basis and they can be found here: Silver | Gold. The registered category is the total pool of gold and silver available at any time to meet delivery requirements under expiring futures contracts or to establish initial futures contract positions through a transaction called exchange-for-physicals (I’ll explain this another time). It is important to realize, however, that many parties holding COMEX gold and silver in registered form have no intention of making their holdings available for delivery. By this I mean that such parties are neither (1) holding a short futures position against the warehouse receipt nor (2) willing to sell their registered metal (warehouse receipts) to a party with a short futures position. Indeed, a substantial portion of those holding registered metal would have acquired the COMEX warehouse receipts by holding long futures positions for delivery. In other words, these registered stocks are held for investment and not for commercial purposes.

In comparison, the eligible category of COMEX warehouse bullion stocks generally refers to bullion held in the warehouses that meets the specifications of an acceptable COMEX bar (proper weight, size, purity and refiner) but does not have a COMEX warehouse receipt issued against it. For example, an investor might purchase several 1,000 oz. bars of silver from a dealer and then deliver the bars for allocated storage at a COMEX warehouse. This is a private arrangement and has nothing to do with the COMEX. Unless these bars are officially registered (the easiest way to do this is through the aforementioned exchange-for-physicals), they will remain in the eligible category until withdrawn from the warehouse by the investor. Thus, the appropriate way to treat eligible COMEX warehouse bullion stocks is that they represent metal that could potentially be registered at some point in the future but cannot presently be used to make delivery under a short futures contract."

Alright. So the eligible part is the part that can be delivered. You happy with this?

TF

Motley Fool said...

eek.

Make that :

Alright. So the registered part is the part that can be delivered (under a short futures contract). You happy with this?

Motley Fool said...

VtC

"Why would you divide eligible inventory (in ounces) by daily volume (in contracts)?"

I will give this some serious thought. Haha. But tomorrow, for now I have to rest.

Thus far your position seems reasonable to consider. Inclusive of suspicion. Seemingly (as with most of my posts) not much thought went into my calculations. :P

TF

Anonymous said...

MF,

yes, basically happy with this. I should add that (1) the 'eligible' stock might be available for delivery or not. I suppose that UTIMCO (Kyle Bass advised) have received title to their gold, and so theirs is no longer 'registered' but 'eligible' (since the electronic warehouse receipts do not imply legal title as we have leant thanks to MF Global). So theirs is not available for delivery. But some other part of 'eligible' might be owned by a short-seller and thus eventually become available. It is intransparent.

And (2) there may be 'dark pools' of COMEX-ready 100oz bars in nearby or even the same warehouses which have just not been checked into COMEX yet. Nobody knows how much stuff is out there and who owns it.

Nickelsaver,

here is another point of view on the ECB MTM. When the transition finally happens, they just need to take the (new) physical gold price in Euros for their calculation, and the entire institution will automatically function in the new environment. No need to change any regulations, charter, by-laws. No opportunity for politicians to mess with the operation of the ECB.

Let's watch what happens in those countries in which the gold is officially held by the government and in which politicians immediately decide about how it is accounted for.

Victor

Bogey said...

Regarding COMEX inventory...there are also these fine words written by Aristotle himself.

Nickelsaver said...

Ty all replies, I'll pick on JR,

"Lots of ideas come to mind, but here is just one - a way of viewing it is the ECB is saying MTM gold is very important to us!

So guess what the ECB will do if the price discovery mechanism (aka the paper market) stops working? Might they "make a market" to MtM their gold?


I'm still trying to understand why it is important to MTM quarterly though? If anything, it would make more sense to MTM annually.

That way, if during the year, the market crashes, they don't have to show a loss. And if it collapses, well then they can make the market at that time.

To me it seems more like MTM gives support to the current PoG by its relentless reference to it.

By showing gains in the cp PoG, it really just keeps the cp going. Does this make sense?

Matt said...

Aquilus, it took me a while to get to that realisation particularly in regard to the comments section (I can understand FOFOAs chosen view but couldn't understand that the same focus also carried to the comments) but I'd still like to add to your points on what this blog IS about:

A large part of what A/FOA says has NOT come to pass (as yet) if A/FOA was as informed as claimed - then why did his projections NOT come to pass? The problem for me is that Mortymer was backing up A/FOAs point with independently verifiable information and was given a hard time. If you follow that A/FOA offered deeply wise opinion but was proven wrong by history, what then of FOFOAs oh-so-wise postulations? Considering this, how does FOFOA stack up on the euro, bit coin, debt free money (remember that one - i think the counter argument ran the gamut of saying it was 'simplified to the point of being canonised' and then posting a link about a protectionist marxist communist dictatorship - I mean, really?! Come off it.)

Yet despite the above there is a strict unquestioning adherence to the words of A/FOA/FOFOA as if they are somehow prima facie evidence by themselves!

I can certainly see how AD got frustrated trying to point this out.

Cheers I get a lot from FOFOA but I question just as much.

Biju said...

Good one "Bogey" refering to Aristotle's link on COMEX.

LD said...

comments > 200 are not displayed

Aristotle said...

To Nickelsaver (12:50 PM)

You've asked of its (MTM) significance in light of anticipated ructions in price discovery during the transition from the current paradigm to a new paradigm.

At its foundation the significance resides insofar as marking gold reserves to a floating market price represents a profound departure from the old (i.e., pre-euro) international accounting practices.

You do indeed nod to this, even if calling it "merely symbolic", but I assure you, it is truly a profound step forward in the realignment of an old world order -- and if I may be so bold as to render a multi-lateral value judgement, that step is a positive one.

While you are quick to say that the price discovery in the current paradigm "does not matter" -- citing instead the importance of the "amount of gold holdings", I would encourage taking a broader perspective. They (i.e. price and quantity) do function in tandem! But in regard to the diminished scale of price as exists under the derivative-influenced price discovery of the current paradigm, it is fair to nod to your rough assessment that "price does not matter" as currently compared to the anticipated future.

Regarding your concern for that future, specifically, that the current paradigm's "market forces will cease to exist" and that "the PoG will plummet before the revaluation into the new paradigm"... don't be. From an ECB accounting standpoint, you need not worry that the street-level chatter and disarray that may prevail between your neighborhood gold dealer and the neighborhood futures broker will give rise to a dysfunctional paralysis that transcends to the bank's venerable balance sheet. Do not omit from your reckoning that the ECB itself is a legitimate market participant, not a helpless outsider. At any such revaluation benchmark moment that they can't obtain a valid market snapshot from their present old school photographer (i.e., the London Fix via the LBMA), you can reasonably expect them to pursue rational recourse -- dip their own toe in the water with a bid to sample the deepest currents moving with a firm purpose at great price and small quantity as might then be found among their peers within the trading pool of the BIS, for example.

Either that... or else perhaps the world stops turning? Is there really a choice?

For now, however, as you observe, the MTM gold accounting within the current paradigm seems feeble at best, but it serves as an important placeholder -- underemployed presently yet poised for duty as a pillar of support on-demand at such time that the dollar fails to be respected as a viable parameter -- a non-zero denominator for our circus life under the Big Top.

Gold. Get you some. --- Aristotle

JR said...

1) Compare and contrast an entity who MtMs to an entity who holds gold at a fixed currency price.

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

Reference Point: Gold - Update #1

In the past, whenever any metal has been used in a monetary function during the presence of a government or monetary authority, the metal itself has endured a trade-value distortion that is always in conflict with the market forces present at that time. This market distortion is what has melded metal into money during these past systems. Not its free market floating value, but just the opposite; the suppression of free market forces on that specific monetary metal.

For example, you can stamp a metal into coins and declare that your coin form of the metal is of higher value than uncoined metal in payments you make and those made back to you. This is a way to overvalue a portion of a commodity metal's above-ground supply to your advantage. You are marking your specially stamped metal above the rest of the market metal, or "marking it to your model."

But over time, this method of monetizing a metal has always run into the same problem. The market for uncoined commodity metal always seems to catch up and overtake the face value of your coined metal and you are forced to dilute your currency into ultimate collapse, occasionally on a civilizational scale.

So then you might declare that all of a certain metal, coined or uncoined, is the monetary base or standardized unit of another money that you can print very easily. This method becomes more of a confidence trick because you are attempting to undervalue that metal (the entire quantity of it) out in the free market, relative to the easy money that you can print.

In order to support this confidence trick you must become both the buyer and seller of last resort of both your metal and your easy money. You must buy your easy money back with your metal and vice versa. This trick can last until you run out of one or the other.

[...]

In a sense, or perhaps in essence, today's paper gold market is not very different from this second monetary scheme. The banks that create paper contracts for "counterparty gold" by simply writing them become the buyer and seller of last resort for both their own paper promises and real physical gold. This can continue until one or the other runs out.

[...]

There are many variations of these schemes in which the value of various metals had to be distorted by authorities in order for them to fulfill any useful monetary function. And there are also many examples where monetary authorities were forced to adjust or abandon their preferred money to avoid drowning in the unstoppable tide that is the market force.

[...]

All of these market/monetary shenanigans of the past stand in stark contrast to what is being performed today in broad daylight, once every three months, on the Consolidated Financial Statement of the youngest major monetary authority in the world. Once per quarter, the ECB openly marks the Eurosystem's monetary reserve assets, including the physical gold asset, to the last market price of the previous quarter. This is marked to market (MTM) monetary authority gold in the specific role of reserve asset, aka store of value. And while the implications of this 180 degree shift in any major monetary authority's regard for gold is not widely discussed, it is immensely significant. (See: FOFOA)

DiverCity said...

Right there with you, Matt. I've been here lurking -- but commenting very little -- since the essential beginning of the blog. I like to hear dissenting opinions, even if they misstate or misunderstand the thesis. Why? Because it helps to chrystalize my thinking.

And while I'm at it, I'm not the least bit pleased that Mortymer was shown the door, so to speak. AD's post are a little too caustic, but he does at times ask good questions.

Of course, I've been persuaded to buy more gold based on FOFOA's writings. I particularly enjoyed this most recent post as I'm far from all in on Freegold whilst simultaneously I do recognize the value of real savings.

JR said...

There seems to be a fundamental point of confusion:

The problem for me is that Mortymer was backing up A/FOAs point with independently verifiable information and was given a hard time.

No, Mortymer was decidedly not doing this, but advancing his own thesis which is at odds with A/FOA/FOFOA. Which anyone is of course free to do.

Mortymer got pissed because I made clear to him that I and others could see what he was up to and would call him out on it. So he ran like a coward.

A/FOA/FOFOA's tale is hard and complex. If you want to dispute it, go ahead. But be honest. Don't pretend you agree with it while spamming stuff with the express intention of undermining it.

At least we knew were Ash stood. People honestly believed (and still do) Mortymer was trying to advance A/FOA/FOFOA's story. I hope its obvious how destructive and undermining such falsehoods can be.

Victory said...

it is the mark of an educated mind to be able to entertain a thought without accepting it

-Aristotle (the original)

notatwin said...

Family's NZD 340K in "Gold" lost


http://www.nzherald.co.nz/personal-finance/news/article.cfm?c_id=12&objectid=10784326

...oh..paper gold...

Wendy said...

OK JR I'll bite. You said:

"No, Mortymer was decidedly not doing this, but advancing his own thesis which is at odds with A/FOA/FOFOA. Which anyone is of course free to do."

My impression of mortymer's research was that he was trying to validate and substantiate the writings of A/FOA.

He did not claim to know anything. He made no claim!! He simply provided the results of his research with very little commentary.

AGAIN...........he made no claim. Until he was prodded into making remarks on the links he posted.

So, what is this "thesis" you consider at odds with A/FOA/FOFOA?

Clearly I do not understand your thoughts.

Wendy said...

I forgot to mention this:

"I hope its obvious how destructive and undermining such falsehoods can be."

Destructive??? are you kidding me?

The last time I checked we were all adults here, and quite capable of rooting through the crap! We don't need a cop!

FOFOA said...

Hello Victor,

You wrote: "If the basic idea were to ask "What would happen if everyone who presently owns a long future contract would demand delivery, and the entire nominal sum of all futures contracts would bid for the little deliverable inventory, driving the price up" - basically what FOFOA and DP suggest"

No, that is not what I suggest. Nor is it my reading of what ANOTHER was suggesting. Victor, you are clearly a smart guy, and so I try to stand back and watch your understanding develop on its own. But it is frustrating to me when you wrongly summarize my points as if your understanding is obviously correct. You also did this recently on January 31, 2012 9:53 PM in your "three scenarios" comment.

"My scenario" you summarized as "2) Insiders who smell the problem start to dump paper gold." That's not my scenario. ALL TRADERS dump ALL gold, paper, physical, whatever, in my scenario. It has nothing to do with insiders. It has to do with traders and weak hands. So this leads me to think that you either struggle with understanding concepts or else you are intentionally trying to undermine me with subtle straw men. Either way, it is frustrating to watch.

As for your latest straw man/misunderstanding, what ANOTHER was suggesting and what I explained in Relativity: What is Physical Gold REALLY Worth? is that physical reserves have this higher value de facto, not in the case of a run. $6,000 was the interbank value of limited reserves only as long as there WASN'T a run from paper. The "hereafter value" was always estimated at $10,000+ from the beginning. "It will stop all trading as it slices thru $10,000+." (10/19/97) Here is what ANOTHER actually wrote, in context:

Date: Sat Apr 18 1998 19:18
ANOTHER (THOUGHTS!) ID#60253:

…But, how can this be, you ask? It is done, "right before your eyes" and we see it not! I ask you, if you have one ounce of gold, and sell it on the market for $300, it is worth $300, yes? Now, what if CB hold one ounce of gold, and sell it twenty times, that one ounce is now worth $6,000, no? The difference between you and CB? The persons that hold "interbank" IOU for gold, value it at the multiple of leases/sales made against reserves. This leverage, it is held for performance on bank part. The BIS, it force performance, on any economy! You ask Korea about gold, yes?

This is why oil can take a small amount of physical gold out of world supply, at current "freely traded", "managed prices", and hold it at a many times valuation. That is what gives this "new world gold market" much value in trade at high levels. Look even at your "Comex", and divide the daily volume by the "eligible stocks for delivery". That number ( perhaps three million ounces divided by 150,000 stocks, deliverable, times the spot close gives close, real world price of physical, $6,000. It follows close to paper trade on LBMA.

You see, "physical gold is of much greater value than public traders can move it for"! In your world, this cannot be, but it is, and will show for all to see in your time.


Cont…

costata said...

DiverCity,

And while I'm at it, I'm not the least bit pleased that Mortymer was shown the door, so to speak.

Mortymer was not shown the door he slammed it on the way out in a huff. A little background before I explain my comment to mortymer. On more than one occasion he was politely requested to stop doing massive data dumps here. (The papers he was linking were often very large.) As I'm sure you know mortymer has his own blogs where he can post his material and then post a comment here with a link.

Along with any links he posted here he was asked to include an explanation of the relevance and importance of the material at the link. He was also asked to provide relevant quotes from papers that only contained a gem or two so that people would not have to wade through them and risk disappointment.

Now let me explain to everyone why mortymer gave me the "screaming shits". Aside from reading every comment posted here I also attempt to read every article, post and paper that is linked in a comment here. From my perspective mortymer's material has a grade around 2g per m/t.

No argument from me that this 2g is pure gold but many of the thousands of readers of this blog can barely keep up with the posts let alone the comments. He was asked to 'refine' his material and he obstinately refused to do so.

At the time I made that comment mortymer had posted around 12 comments in rapid succession with links to a large amount of material. He did, yet again, precisely what he was asked not to do.

And as JR intimated mortymer also has his own thesis about the history and evolution of the Euro Freegold-RPG architecture. He wants to prove that thesis. So be it, but as JR said:

A/FOA/FOFOA's tale is hard and complex. If you want to dispute it, go ahead. But be honest. Don't pretend you agree with it while spamming stuff with the express intention of undermining it.

Anonymous said...

JR,

Matt wrote: The problem for me is that Mortymer was backing up A/FOAs point with independently verifiable information and was given a hard time.

You said: No, Mortymer was decidedly not doing this, but advancing his own thesis which is at odds with A/FOA/FOFOA.

I don't know what you have been smoking, but this is utter bullshit. Mortymer found what is probably the origin of the gold-for-oil deals in the negotiations of the 1970s, first as a fix to an emergency because countries such as Italy had a lot of gold, but immediately after 1971 only little US$ by which they could buy oil. So they wanted to use their gold and do so at market price. It was the Bundesbank who was given the job of figuring out how to arrange this without visibly violating IMF rules which the US did not want in order not to set a precedent.

Secondly, Mortymer found what is probably the origin of the mark-to-market policy of the ECB. At first, the French simply enacted it (without consulting the others) and they did not spend the revaluation gains. The US saw this and Burns or Volcker recommended not to mark-to-market because Congress would want to spend the revaluation gains. At first Germany did not have a strong opinion on mark-to-market, but when the US pushed them trying to split the Europeans, Germany aligned with France rather than with the US. From that point on, with France and Germany speaking with one voice, the Europeans basically had a common position in all negotiations on the future of the IMFS.

Mortymer also found the original documents in preparation of the Jamaica conference and some hints on how that was rather a failure from the point of view of the US and, perhaps, this is already what frustrated the Europeans so much that they started planning for the Euro seriously. Mortymer also figured out who on the European side did the negotiations with the US, at a time at which the Europeans did not (yet) have the official institutions for this: they sent Wim Duisenberg. This is, by the way, some detail that FOA seems not to know and where he guessed wrong when he said that the Dutch Duisenberg was appeasement to the US who would have gotten upset if a Frenchman had been the first ECB president. No, Duisenberg was the tough one who had regularly driven the US nuts over their attempts at getting gold out of the IMFS in the 1970s. Having Duisenberg lead the ECB in 1999 was a frontal attack against the US. Trichet was appeasement compared with that.

If you don't want to know the cool stuff, I am perfectly happy if you remain ignorant. But never ever again mob someone who contributes little nuggets of gold to this forum. Now you can creep back into your basement and continue copy-pasting FOFOA.

Cheers,

Victor

FOFOA said...

2/3

Victor, you wrote: "But this is neither what Another says in plain English nor does it correspond to the numbers he is writing down. 150000 ounces inventory is just over 4.5 tonnes or $45 million (at $300/ounce). That's not plausible for the inventory level as of 1998."

Not plausible why? Because the total today is 11.4 million ounces and registered is 2.5 million ounces? So an order of magnitude is implausible, esp. at a lower price? Victor, you wrote: "But everything that was written so far about his estimate of the shadow price, is highly suspect to me." Maybe this is part of your problem. You are so stuck on ANOTHER's use of the word "eligible" and the implausibility of Comex inventory that you cannot see clearly.

It was totally clear to me on the first read that ANOTHER was talking about physical "available for delivery" that stood behind the paper. That would be "registered" gold, not eligible, ldo. But semantically, "eligible" makes a little more sense when used in combination with the words "for delivery" inside quotation marks when explaining the point he was making. So your nittery again reveals that you either struggle with thinking in concepts or else you are intentionally trying to undermine ANOTHER with straw men.

Which reminds me of when you recently labeled Another a traitor to the BIS after telling JR to "shut up for a moment and stop trashing this discussion with pieces of FOFOA that everyone here read and understood long ago." ORLY? Everyone understands what JR posts? To me, your intentions here have been in question since that comment. As JR just said today, "A/FOA/FOFOA's tale is hard and complex. If you want to dispute it, go ahead. But be honest."

Now I don't have the actual Comex stock numbers from 1998 thanks to the migration of the NYMEX/COMEX web domain over to the new space at CME Group (maybe Ari does), but I did find the following. It's from 1997 (7 mo. before Another started posting) and it demonstrates both a misuse of "eligible" versus "registered" by someone in the biz, as well as a "registered" inventory of only 259,651 ounces at the Comex (only 8 tonnes or $91 million at that day's price). That's a full order of magnitude smaller than today (by weight… two orders by value!), which puts ANOTHER's numbers from 14 months later back in the realm of the plausible:

Cont…

FOFOA said...

3/3

"Posted on the Internet February 22, 1997 by arden

Comex warehouse stocks are composed of two parts, eligible and registered. The total between the two is reported here almost daily by myself as a courtesy to my Kitco friends. If I do not make a post, it is either the fact that they are unchanged or that I am in the field (I am a geologist and do have to find gold once in a while!) If I do not post the numbers they can be found on Steve Kaplan's excellent web site or delayed from Bart's prices page. Look under FWN (which is Futures World News). This info is delayed six hours which used to really irritate me so I subscribed to the service, thus I get the info about 4:00 p.m. eastern time. Since I paid for it, I feel it is OK to pass it on to Kitco.

[…]

That leads us to our present situation. Currently there is 582,762 ounces of gold on deposit in Comex warehouses. Of this ONLY 323,111 OUNCES ARE 'ELIGIBLE' against an open interest of roughly 20 million ounces worth of contracts. In addition to the outright contracts outstanding, there are a huge number of calls at various strike prices. It is not uncommon for someone to write an out-of-the-money call without having the call covered by physical metal. The theory ( called delta hedging I believe ) is that you can always buy more metal as the price gets closer to the strike price. You can see how well this worked in the copper market last year with 'delta hedged' puts."
LINK

Note that this concept was commonly discussed on USAGold back in the day. Here's TownCrier from 9/23/99 which I found through a quick Google search: "The total OI for all COMEX gold contracts is 207,560. To refresh your memory, each contract, depending upon whether delivery intentions are exercised, *potentially* represents the fate of 100 ounces of gold. Currently residing in COMEX storage is 908,165 ounces. If you do the comparative math, you'll start to see what we mean by counterparty risk." So I'm not quite sure why a smart guy like you, Victor, is struggling so, unless it is intentional.

I also found times when "eligible" was much smaller than "registered" (opposite of today) so perhaps that amount above was mostly registered. Here's TownCrier again on 3/4/99: "In total, the day started with 604,406 Registered ounces, and after the Registered stock at S.M. was reduced by HALF, the day ended with 535,288 ounces of Registered Gold all asking the not-so-rhetorical question, "When will I have my day in the sun?" Reduced by the now legendary Daring Thirty-two, who proved that it pays to "Dream big, Grasshopper," the Eligible stock stands at a wistful 126,508 troy ounces."

Victor again: "But everything that was written so far about his estimate of the shadow price, is highly suspect to me."

Victor, what is highly suspect to me is your present posturing. But I will give you the benefit of the doubt because you're smart, you clearly understand a lot of this, and I like you.

Sincerely,
FOFOA

Nickelsaver said...

JR,

Thanks for the predictable unleashing of FOFOA.

Ari,

I am not worried about a plummet in gold. If I have learned one thing from FOFOA, it is that the strength of hands will be put to the test.

And I don't question why the ECB MTM's, only the significance of it, particularly with regard to doing it quarterly.

If we view it in terms of a currency war, perhaps it would look like this.

$IMFS--------/--------MTM Gold

Where $IMFS has on its side all paper, dollars, euros, yuan etc.

And MTM has all gold

Then the Euro and Yuan are basically tugging on both sides, and the dollar is tugging on just the one side.

So I was thinking in terms of MTM at current PoG as tugging both sides.

The rope gets pulled towards $IMFS causing an increase in PoG, until the rope breaks because of the increase in total tension on the rope from both sides.

So maybe the quarterly MTM is like regripping the rope. Just wondering about the frequency.

Anonymous said...

FOFOA,

Now I don't have the actual Comex stock numbers from 1998 thanks to the migration of the NYMEX/COMEX web domain over to the new space at CME Group (maybe Ari does), but I did find the following. It's from 1997 (7 mo. before Another started posting) and it demonstrates both a misuse of "eligible" versus "registered" by someone in the biz, as well as a "registered" inventory of only 259,651 ounces at the Comex (only 8 tonnes or $91 million at that day's price). That's a full order of magnitude smaller than today (by weight… two orders by value!)

Thanks. That was the relevant piece of information. If you have it, why not share it with us. No need to get worked up.

Have an appointment and will be off-line, but thinking about it.

Victor

Michael said...

AD
Most of us did not arrive here in search of the compfort of a cult or religion. We came because we felt a disturbance in the force. We read of debts that could never be paid and feared hyperinflation and societal disruption. We looked for ways to save ourselves.


yes if you wish to look at it (or use it that way) Freegold has the characteristics of a cult. We have prophecies, high priests, prophets and even prayers.
Unlike a cult I think most of us come here to see if there is a hole in our logic. Are we still good getting deep into gold investment? Is there a flaw in the logic? Should we retrench? Does the narative still hold true?
You may have noticed that unlike other cults there is no pressure to stay, no call to arms. there is no trying to get your money.
By all means pick apart the story. Examine the entrails and if you can find multiple problems in the multiple threads and observations and theories you may convince some to look deeper. What I am reading in some of your posts however is anger and insult. Sure you can say the prophets are wrong but your anger proves little....off now to polish my FOFOA icon...solid gold it is...

One Bad Adder said...

Re: - Comex etc.
The problem I've always had with the US Gold Exchange ( Co, Ny,-mex etc) is that they actually use as the Unit - 100 Oz Tokens of dubious heritage ...as compared to the LBMA standard 400 OzT + or - "Good-Delivery" Bar.

Unless something has changed over the last 10 odd Years, the Comex Tokens simply don't cut the mustard Internationally speaking ...and essentially are little more than (expensive) Poker-chips.

Ari, FOFOA, All ...can someone confirm or otherwise svp?

Michael said...

"We have prophecies, high priests, prophets and even prayers." ....by this I mean one could interpret certain aspects as such...

Peter said...

Dear Lord,
Please make it stop.
Amen

Gary said...

What you get in China for fraud.

It's amazing how the MBS-fraud is headed for settlement for a piffling sum (at the behest of Obama), when compared to this example in China. WTF happened to the world? WTF happened to America?

http://english.peopledaily.com.cn/90882/7722660.html

AdvocatusDiaboli said...

Hi Michael,

it is just between boring and annoying to get as a reasoning for todays stuff always the same reposts and CopyPaste of somebody's statement who was completely with his predictions off grid 15 years ago.
And when I say "off grid" I mean wrong predictions BIG TIME.
Take a look at 1997, gold at $325 + physical spread 2-10%(?). almost five years just to get even in nominal terms, not talking about opportunity costs: Missed Dotcom bubble, platinum&paladium, housing bubble... But, okay I know, it's about "saving", just put at 1997 into whatever save account, it would have taken probably also 7-8yrs to get even.

Okay, forget about that, that's "just" about nominal losses, if you would have gotten gold at 1997. Let's look at one of the core prediction: CB RESERVES.
http://goldnews.bullionvault.com/gold_reserves_012620128
Straight downward at the same speed from 1997 until 2007. Okay, today stablelizing but still almost shrinking.

About the "golden old economcy" (aka EUROpe, I better keep my mouth shut), not to start with that one again...

So what is it good for, to over and over quote A/FOA for REASONING? Predictions 15yrs completly WRONG but still taking those as the absolute truth and reasoning for tomorrow?

Anyway, I would be much more interested about people here, how long can you wait with 80-100% gotten in lately, without being pissed? 15years? And dont gimme that YOU JUST DONT UNDERSTAND, THIS TIME EVERYTHING IS DIFFERENT, READ A/FOA/FOFOA. It just would be interesting to hear the number of years.
Regards, AD

P.S.
As I said earlier, I am not opposed against gold, I think, it is speculative not to have any physical gold, but that's not the point here.

Motley Fool said...

VtC

(1 of 2)

Your question is valid. My calculation shows no sign of critical thinking, beyond the convenience of arriving at a predetermined answer. Thanks for pointing this out (so politely).

It's good to live up to my moniker from time to time. Haha.

Now let us consider the question of Another's calculations (with some critical thinking this time).

Before I do so, I would like to point out some general relevant things.

1. The current debt based $IMFS system is failing.
2. Some thing needs to replace debt as a reserve.
3. Gold is most likely that thing (for a multitude of reasons).
4. For gold to be the reserve it's price needs to increase significantly.

I hope that we are in agreement on these thoughts and can keep them in mind as we continue.

Now.

I think you will concur that the current suppression of the price of physical gold is largely systemic in nature.

The reality being that many more claims on gold than actual physical exist.

In terms of suppression, every paper promise that can be issued Credibly, assuages some demand and therefore suppresses the actual price of physical gold.

The idea has 'always' been to assure that there is enough free physical gold to satisfy crucial demand (oil demand).

Fundamentally we have the supply and demand of Physical gold to consider, this being flow. On the supply side, weight is the main consideration, on the demand side price is primary.

Additionally we need to look at the two factors that can influence supply and demand, being price and the ratio of credible paper gold to physical gold; the paper-gold ratio (PGR) if you will.

It is useful to consider the latter two factor in trying to determine how the former is managed.

Let's start with price. Considering those who gain and lose from price changes is crucial. If price increases then those who hold physical, those who speculate ( long) on paper gold, and CB's that use the MTM mechanism benefit. The losers here is the USD, which loses credibility, and those who have not yet exchanged fiat savings for physical gold. It should be noted that a benefit to the exists when the price rises, being that this lessens the weight demand from supply required to satisfy flow needs. A decrease in price has the exact opposite effect for all parties involved.

Due consideration should also be given to the benefactors and losers from changes in the PGR. If the PGR increases, and does so while maintaining credibility, then demand is satisfied (sic) and more physical is available to satisfy physical only demand. A credible increase in the PGR thus benefits the $IMFS due to it's simultaneous price suppression, satisfaction of demand (sic) and greater availability of physical to flow. The losers of course are the owners of that paper-gold, the suppliers of physical, the owners of physical....and essentially every individual who must suffer under the $IMFS system. A reduction in the credible PGR has, of course, the exact opposite effect.

Motley Fool said...

(2 of 2)

As you speculate, Another's calculation (of open interest versus registered stock) was likely an estimation of the state of the market as regards the ratio of physical gold versus credible (in the minds of the owners) gold-paper.

Given the opacity of the market it is remarkably difficult to get an accurate view of the PGR.

Of course while the market is semi-functional the PGR could be said to be irrelevant, and it is only in extremis where credibility needs to transform into reality where consideration needs to be taken as regards the PGR; such as during the FreeGold Event.

All sorts of numbers are thrown around on the Internet for the PGR, with very little factual backing.

Consideration of the different types of stocks of physical gold, with estimates for their respective PGR's, is a method for determining the total PGR.

Working with the official figure of 170,000 metric tonnes in existence, we know the following. Around 30,000 tonnes is on CB books officially; the various funds (GLD, goldmoney, etc) hold perhaps 10,000 tonnes; Comex has about 12 million ounces (370 tonnes Registered + Eligible), the OTC market is opaque; and the remainder is in private hands.

The last two items are the most difficult, but let us say of the 130,000 tonnes comprising this category that 30,000 tonnes resides in the OTC markets, and that the remaining 100,000 tonnes is in private hands.

The last 100,000 tonnes is interesting in that essentially it is not liable to multiple paper claims. Which leaves 70,000 tonnes for our consideration.

What follows is mere speculation on my part.

I would say the OTC market is covered at a 100-to-1 ratio ( a number uncovered by GATA and in line with the multiples for other commodities in this market).

The CB gold is likely at a lower PGR of perhaps 10.

Finally the visible gold market (controlled by the BB's) has a likely PGR of 20.

A weighted average PGR gives : (100,000x1 + 30,000x100 + 30,000x10 + 10,000x20)/170,000 = 21.17 .

This is remarkably close to the calculation provided by Another on the COMEX, if done lately.

As per my post I initially linked I would argue that since the market is semi-functional today with this PGR, in a systemic break down the price would need to increase( in real terms) by that multiple to keep the system semi-functional, with the caveat as FOFOA says that it is not like pouring one pitcher of water into anther pitcher.

It must be mentioned that the PGR is in the current semi-functional system where gold is nearly universally hated. A change to a FreeGold system would alter this mentality drastically, meaning a much greater demand for physical, translating into a further multiple of the current PGR.

How big a multiple? Who can say. But a conservative estimate of gold being appreciated 3-5 times more seems reasonable. This implies a PGR of 60-100 from a pre- to a post-Freegold transition in order to preserve stability.

Peace

TF

JMan1959 said...

AD,

Even if TPTB can kick the can down the road a few more years, which I doubt, do you not agree that gold will provide the best inflation adjusted return out there? Where else do you want to store your wealth when virtually ALL of the CBs are printing and spending like drunken sailors. What specifically can be done to stop the currency wars? Austerity programs? Not gonna happen. Entitlement reductions? Nope. "Grow" our way out of it? I'll take the under on that one too. So maybe our "prophets missed the Chinese' willingness to extend our timeline by soaking up our debt, and it pushed the timeline out fifteen years. So what? The first question is, is it eventually going to blow up, and from reading your posts, I think even you answer yes to that. The second question is how are they going to right the ship to regain confidence in the fiat system, and I can see no other plausible alternatives to freegold. They will be forced to deploy their last weapon in defense. What do you see, specifically, as the answer these two questions, as an alternative to Freegold?

AdvocatusDiaboli said...

Jman1959,

although your post did not address ANY point or question I made, more the opposite, I am happy to answer your question:
YOU ARE RIGHT.
But in this cult, it appears the question is not to be right, but to be right for the RIGHT or WRONG reasons ;)
Regards, AD

P.S. Maybe we end up in "soft RPG" (5, 10, 50yrs.?), but not in Hardcore-Freegold, but that's just my personal guess.

Motley Fool said...

AD

By analogy. If ANOTHER had predicted that after jumping out of a plane without a parachute you would hit the ground in X amount of time and make a big splat, but had neglected to factor in terminal velocity...does that imply that one does not hit the ground?

TF

AdvocatusDiaboli said...

MF,

if he would have had a heart attack just right after jumping out of the plane I wounder if that would have mattered.
So, the people reading books in the 60ies about "The Day The Dollar died" might as well be also dead by now.

BTW: Remember my question: How many years for you, before being pissed? Honestly.
Greets, AD

Motley Fool said...

AD

I'm fairly young. What are our assumptions? Continued growth at 17% -ish per year to keep the system functional? No growth in price? Growth equaling official inflation? A drop in the price?

That matters.

But say 10 years.

TF

Zenscreamer said...

Let me echo Michael (12:12):

We came because we felt a disturbance in the force.... We looked for ways to save ourselves.

Maybe it's just me, but more than just myself, I am looking for ways to save others.

I know I can be a bit flip on this board, and maybe it makes me seem like a bit of an intellectual lightweight, but trust me I do a lot of reality-testing of my own, as do the others here.

I had a fear/panic phase, and also an anger phase; I think I was grieving for the imaginary world I was raised to believe already existed. But being here helped; Blondie's links to chaos theory and fractals and the human superorganism helped me realize that my anger and fear were not helping me understand the terrain.

I realize that for some merely citing FOFOA discounts my perspective; to the extent that is true, I am sorry for them. I read FOFOA "religiously" because, if I am lucky, and I open my mind enough, I catch a glimmer of a shift in perspective which helps me grow to grow intellectually, and the more I grow the more help I can be to others.

Peace, ZS

Zenscreamer said...

Ack! Some of my comment was lost. I meant to say:

Blondie's links to The Century of the Self and FOFOA's discussions of chaos theory and fractals and the human superorganism helped me realize that my anger and fear were not helping me understand the terrain.

Sorry for any confusion this may have caused. :-)

Nickelsaver said...

A/FOA/FOFOA is not a cult. It is more akin to a religion.

I made this observation in an email exchange with FOFOA after first visiting this site.

With in any religion you are going to have followers that lean toward a very legalistic approach, such that ANY straying from the path amounts to anathema. On the flip side, you will also have followers that are so liberal in their thinking that they stray from the faith and find themselves off the path entirely.

For me, the key points are not the timing or the finite technical details of how we are transitioning from the current paradigm into the next. But rather the fundamentals, those facts which are indisputable.

* $PoG is on a 19% incline from the time of Euro launch.

* Paper claims on Gold are many times greater (30:1?) than physical.

* Interest rates have been brought low and can NEVER be increased in the current paradigm, as sovereign debt is increasing exponentially.

* The oil for gold dynamic coupled with the currency wars is a powder keg.

All in all, I could care less about the specific timing of Another's predictions, only that we see that they are mostly coming true over time. For if they were that far off base, this "religion" would not exist.

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

AD - If the Germans hadn't bombed Pearl Harbor
maybe they would've stayed out of the Euro.

JR said...

The Architects

In my opinion, there are two things we learned from ANOTHER via his mouthpiece FOA that outweighed all the other great insights they shared. Those two things are:

1. The true purpose behind the euro and its architecture, and
2. The effect the approaching euro launch would have on gold.

[...]

What we learned from ANOTHER thirty years later was:

1. The purpose of the euro was to provide an international transactional alternative to the dollar.
2. The consequence of the launch of the euro would be that gold would undergo "the most visible transformation since it was first used as money."

Quote - Monday, August 6, 2001 - GOLD @ $267.20 - FOA: "The result will be a massive dollar price rise in gold that performs over several years."

Tuesday, January 1, 2002 - Launch of euro notes and coins
Friday, February 8, 2002 - GOLD ABOVE $300
Monday, December 1, 2003 - GOLD ABOVE $400
Thursday December 1, 2005 - GOLD ABOVE $500
Monday, April 17, 2006 - GOLD ABOVE $600
Tuesday, May 9, 2006 - GOLD ABOVE $700
Friday, November 2, 2007 - GOLD ABOVE $800
Monday, January 14, 2008 - GOLD ABOVE $900
Monday, March 17, 2008 - GOLD ABOVE $1000
Monday, November 9, 2009 - GOLD ABOVE $1100
Tuesday, December 1, 2009 - GOLD ABOVE $1200
Tuesday, September 28, 2010 - GOLD ABOVE $1300
Wednesday, November 9, 2010 - GOLD ABOVE $1400
Wednesday, April 20, 2011 - GOLD ABOVE $1500
Monday, July 18, 2011 - GOLD ABOVE $1600
Monday, August 8, 2011 - GOLD ABOVE $1700
Thursday, August 18, 2011 - GOLD ABOVE $1800

What I can tell you with full confidence is that this is only the very beginning of gold's functional transformation.


Once Upon a Time

JR said...

The whole ECB/Euro architecture was built to turn Genoa 1922 on its head, to reverse the damage done and to restore the function of gold which Jacques Rueff knew all too well. The ECB has one plain and simple mandate, to act with regard to a target CPI that is statistically harmonized across different economies dealing with different economic factors. In other words, the job of the ECB is to maintain stability in the purchasing power of a common currency against the general price level in many different countries.

This simple architecture is designed to work best in Freegold, where the price and flow of physical gold will automatically regulate and relieve the pressure of economic differences between member states. If the ECB had been designed to assist the European economies, it would likely have been given the second mandate, same as the US Fed. The Fed has two mandated targets: CPI and full employment. These dual mandates are like fair weather friends, because when the heat is on—like it is today—they actually become dueling mandates. The ECB, on the other hand, is not mandated to assist the economy like the Fed is. In fact, FOA wrote back in 2000:

"Basically, this is the direction the Euro group is taking us. This concept was born with little regard for the economic health of Europe. In the future, any countries money or economy can totally fail and the world currency operation will continue. What is being built is a new currency system, built on a world market price for gold."

Like I said earlier, the monetary plane, which includes all that nominal sovereign debt in Europe, is only connected to the physical plane by two things, the price of goods and services (CPI or the general price level, on which the ECB has a mandate) and the price of gold (which the ECB happily floats). I think we can all agree that the aggregate debt is doomed at today's prices. It is fictional, imaginary capital. But those of you predicting the imminent collapse of the euro as a medium of exchange need to explain how nominal euro debt is more likely to break its connection with goods and services than its imaginary connection to gold at today's prices.

I'll give you a few hints. Unlike the US, where the expenses of the same government that calculates CPI rise along with CPI, and where the CB has conflicting mandates that benefit from a statistically-lowered CPI, the ECB has not only met its mandate, but done so credibly. And unlike Indonesia, the ECB does not count gold in its CPI (HICP). Instead, the ECB floats its gold publicly and without worry. So while you're wondering in which of the two choices the disconnect will happen in Europe, consider this: Over the last decade, the general price level has performed more or less as expected while the gold price in euro broke off in 2005 and rose 325% in six years:

January 1, 2002 – GOLD @ €310.50
Tuesday, November 15, 2005 - GOLD ABOVE €400
Tuesday, April 18, 2006 - GOLD ABOVE €500
Thursday, January 10, 2008 - GOLD ABOVE €600
Friday, January 30, 2009 - GOLD ABOVE €700
Wednesday, December 2, 2009 - GOLD ABOVE €800
Tuesday, May 4, 2010 - GOLD ABOVE €900
Monday, May 17, 2010 - GOLD ABOVE €1000
Monday, July 11, 2011 - GOLD ABOVE €1100
Tuesday, August 9, 2011 - GOLD ABOVE €1200
Monday, August 22, 2011 - GOLD ABOVE €1300

AdvocatusDiaboli said...

@JR AMEN!!!!!!!!!1111

KJ said...

http://finance.fortune.cnn.com/2012/02/09/warren-buffett-berkshire-shareholder-letter/

"Investing is often described as the process of laying out money now in the expectation of receiving more money in the future."

Son of Howard, what if I choose not to invest? Where can I put my paper dollars? Currency-based investments? No thanks. Paper stocks. No thanks. Must I store my savings in dollars and within the current system? Is physical gold really like a physical tulip?

Son of Howard, again, attempts to narrow the discussion to the current system. No doubt Berkshire will hold paper shares through the transition but would love to see Son of Howard's personal physical gold stocks.

btw, what's up with the much stronger than usual push to get everyone into paper stocks? :)

JR said...

Its good to know you are slwoly starting to comprehend what Another's big insights were so I can stop re-posting this stuff in response to OMG ANOTHER, WHERE IS TEH FREEGOLDS??

Dr. Octagon said...

AD - I think the main purpose here is to give people an understanding of what FOFOA/FOA/A believe will happen. It's up to each person to decide if they believe it or not. So if anyone decides to go "all in", and finds that 10 years have passed without a significant rise in the value of gold, they have no right to be pissed at FOFOA, IMHO. Their decision is their own.

Personally, I have a 30+ year waiting period before I expect a need to sell the few ounces of gold I have been able to purchase in the past few years since I found this blog.

AdvocatusDiaboli said...

JR,
maybe you stop posting those wrong predictions, once you lived for a year in some PIGS country, preferable starting right now in Greece.
Sincerely, AD

P.S.
Oh, I forgot, and take that Trichet with you: He can front run you explaining the mob the Euro is the best currency and it is just for their best interest.

Peter said...

Oh, I forgot, and take that Trichet with you: He can front run you explaining the mob the Euro is the best currency and it is just for their best interest.

Hands up who thinks the Greeks would have a sweeter economy right now if they were pushing around gold to each other as their currency?

Or put up your other hand if you think they would be better off with the drachma, or the dollar, than the euro?

Really, let's hear it if you have a better solution than the euro, which won't make them still have to get off their asses and stop slipping their hands in and out of each other's pockets all the time.

Jeff said...

We talk about counterparties and MF global a lot. Seems the rot in the system is going mainstream.

"There is no sanctity of contracts in the United States. Only fools meet their financial commitments.

http://www.zerohedge.com/news/dick-bove-foreclosure-settlement-there-no-sanctity-contracts-only-fools-meet-their-financial-co

burningfiat said...

Hi Peter,

As long as physical gold isn't valued properly and used to balance trading, I actually believe that Drachma's are the better solution.

A floating Drachma could devalue enough to get the Greek competitiveness up again, thereby improving the trade balance.
The Greeks need to import less foreign stuff, and export more Greek stuff. A devaluing Drachma would achieve that a lot easier than pay-cuts and smaller minimum wage.

If Freegold takes too long to manifest, the Freegold-ready Euro could ironically be gone before Freegold ultimately arrives.

/Burning

Anonymous said...

AD - Again, your comments are gettin' old... The cult comparison you try to make only serves to make you look like an ignorant fool. Go here -

http://www.csj.org/infoserv_cult101/checklis.htm

Okay, now tell me how the people here fit in. Seriously. I don't need some kind of smart-ass, hot-head response from you. Man up and make a serious effort to contribute something useful! I appreciate a skeptic or an EDUCATED contrarian opinion, but your attitude and approach is wearing on my patience. Everyone here has made an effort to provide you with what you need to counter your fears, assumptions and lack of understanding. Now do us and yourself a favor and do some reading and thinking, and less talking until you're prepared.

John Fry said...

@ Michael H (2/8/2012 - 6:38 am)

Slight correction to that post from ANOTHER just for clarity.

>>>Multiply, say 40 million ozs by the ratio of 8 and we get 320,000,000 ozs. of gold. Now, the money is in this gold paper, paid up. Just no gold yet, I think? That's about 10 tons, I'll be dam! That's a lot of IOU gold, don't you think? <<<

Make that 10,000 tons.

Cheers (from the bleachers)

Ryan said...

Burning -

Aren't you arguing for the same things when you say

A floating Drachma could devalue enough to get the Greek competitiveness up again, thereby improving the trade balance.
The Greeks need to import less foreign stuff, and export more Greek stuff. A devaluing Drachma would achieve that a lot easier than pay-cuts and smaller minimum wage


Doesn't a devalued currency de facto mean pay-cuts and smaller minimum wage? AD et al. are arguing to be treated like grown ups, isn't that what the Euro is treating Greece like? Greece is being told they are not productive enough - devauling their own currency would allow politicians to pretend Greece is productive. The Euro (Germany) is just laying it all out there for the common person to grasp by forcing austerity. From my perspective, the Euro is saying actions have consequences.

Dr. Octagon said...
This comment has been removed by the author.
DP said...

Doesn't a devalued currency de facto mean pay-cuts and smaller minimum wage?

Yes, but not in the visible kind of way that an actual, nominal pay cut does. People don't tend to riot when they all get a uniform say 5% paycut and nobody tells them.

From my perspective, the Euro is saying actions have consequences.

Or, perhaps, inactions have consequences? #CanKickingStopsHere

Motley Fool said...

I voted for gold as money..cause when you don't have it you cannot pay, and it cannot be printed. :P

On a serious note...

Ryan & others

Austerity and devaluation of a Drachma is the same thing, in real terms. Psychologically people prefer the latter approach because then it is easier to lie to themselves.

@AD

You are being very rude, on several levels.

One of those is that you asked me a direct question to which I replied whilst asking a question of my own. Show me the courtesy I am showing you by actually answering my questions too.

You also seem to be willfully ignoring some comments directed at you, such as the fine comments yesterday by poopyjim and Aquilus.

I am very close to concluding you are simply a troll myself and ignoring further posts.

TF

Dr. Octagon said...

burningfiat is correct on the Drachma. It's simply human nature for the population of a country to accept a devalued currency more readily than pay cuts, even though they amount to the same thing.

But that's not important now, as Greece left the Drachma long ago.

Gary said...

AD,

Do you think anyone on earth can predict the future? Of course not. Not Another, nor Fofoa.

But it is useful to have some 'inside info' to guage what is happening. Another had such info, and he shared it. And it is very useful to have Fofoa and other contributors here delving deeper into the many issues realting to the global monetary syste.

So, Another didn't foresee that Chinese buying of US debt would delay matters by 10 years. I don't care. All that he predicted is now happening.

It is not obvious to some (like you), because they haven't even bothered to read the archives here or Another/Foa's thoughts.

I don't care whether it takes 5 years, 10 years, or 30 years, or even if it never happens exactly as predicted.

I just care that I have my wealth in physical gold, I know why I do, and whatever crap comes along my wealth will be fine.

FYI...I was going to post a request that everyone just ignores your manic posts, seems silly not to mention it whilst I am here. I am just waiting for you to ask 'hmm, is gold shiny enough? or inevitably 'what about silver'.

burningfiat said...

Ryan,

For sure. The effect (pay-cuts vis-a-vis devaluation) is the same with respect to the competitiveness of Greece. But what is more efficient in controlling this competitiveness? Government (centrally planned pay-cuts) or the brutal forex market?

I would argue that the currency exchange markets would reach a sustainable Drachma exchange rate, sooner than the Greek politicians and labor market participants would make the sustainable pay-cuts. Have you heard of unions?

Also, the pain on the Greeks would perhaps be more emotionally acceptable by devaluation, because the number on their pay-check would stay the same.

/Burning

Ryan said...

*To really annoy those that hate when the owner of the blog, please skip this comment.*

Thanks for the responses from all.

I'm reminded of this comment from FOFOA:

If you think austerity riots are bad, you should see hyperinflation riots!

With where they are actually at fiscally, HI would not be very far away for the Drachma I'm afraid. Especially after the politicians try to walk a fine balance between devaluing but trying to keep the world interested in buying debt from a country that is already woefully under producing.

Burning -
If FOFOA is correct, the politicians will pay the ultimate price for over-promising - regardless of how scary unions are.

Ryan said...

Bad english

It was supposed to read:

*Please skip this comment to all it annoys when the owner of the blog is quoted*

Peter said...

So everybody just goes back to their own $IMFS currencies and we all hold hands while drifting into the fire together again. Peachy.

And I thought it was MY milkshake that brought all the boys to the yard. Go $IMFS!

burningfiat said...

Ryan,

I for one welcome our new overlord-quote hating overlords.

Seriously though, I think the politicians are going to pay whatever the outcome.

Best case scenario for politicians who would otherwise be hung at lamp-posts, is maybe soon to come Freegold?

/Burning

burningfiat said...

Peter said:

So everybody just goes back to their own $IMFS currencies and we all hold hands while drifting into the fire together again. Peachy.

Haha, yeah, I can see that would also be lame :P
But if $IMFS is going to be around for the next 5-10 years, that is maybe the least painful path. If Freegold emerges within the next couple of years it is maybe better to keep the Euro-zone intact despite the bailout costs...

Hey, maybe we can use Greece's coming Euro/Drachma choice as an indicator on how imminent Freegold is?
If Greece stays in the Euro-zone (with the help/acceptance of the other PTB), expect Freegold soon!

/Burning

Aristotle said...

victorthecleaner comments (Feb 8, 11:23 PM)

"...who on the European side did the negotiations with the US, at a time at which the Europeans did not (yet) have the official institutions for this: they sent Wim Duisenberg. This is, by the way, some detail that FOA seems not to know and where he guessed wrong when he said that the Dutch Duisenberg was appeasement to the US who would have gotten upset if a Frenchman had been the first ECB president."

VtC,

I must admit, that counts as news to me.

The way I remember the Duisenberg decision at the time -- or to put it more accurately, the way I remember my PERCEPTION of the Duisenberg selection -- was that it was done (as versus a French/Trichet inaugural) as a concession to conciliate the ever-wary (anti-inflation) Germans. Whatever the American administration may or may not have felt about the choice was not at issue.

And on that note, I'd be especially curious to see the post and the context in which FOA said, or even intimated (as you claim he said) that the Wim designation was meant to be an "appeasement to the US". I just can't imagine it, nor is it any part of my recollection.

Thanks for your time.

Gold. Get you some. --- Aristotle

sean said...

"what everyone is getting wrong is that a shared currency is simply a standard. Like a meter or a foot, or a minute. It's how you use that standard that matters. If you have less "standards" flowing in then you spend less "standards."

"Expenditure is the adjustment mechanism in a fixed exchange rate zone like the eurozone. It is Goldman Sachs and the 66-year old $IMFS that has enabled the circumvention of the adjustment mechanism in Europe, not the euro. The same goes for the US states. FOFOA

"Of course there is a huge imbalance inside Europe between the states running a large surplus and those running a large deficit. But with a shared currency the adjustment pressure for such an imbalance is foisted elsewhere, not on the currency. It lands squarely on the politicians, who, like Costata said, couldn't be a more deserving bunch of Aholes.
...The economic flow of goods and services within Europe will of course have to contract as the imbalance retreats.
...To the euro, just like FOA said, the politics of the PIIGS and Germany are little more than a sideshow.
...And notice I didn't even mention gold yet. Anything that would appear to seriously threatens the euro, like an outright sov. debt default, would explode the price of gold which would simultaneously rescue the euro balance sheet and kill the dollar. "
FOFOA forum 1600 comment

Anonymous said...

The solution is that on 14 February 1998, "daily trading volume" means daily trading volume, but on 18 April 1998, "daily volume" means "open interest".

Victor

mr pinnion said...

Hi Aristotle.Great seeing you in the comments at last.


Wendy

The last time I checked we were all adults here, and quite capable of rooting through the crap! We don't need a cop!

Yes, but the less crap the better i would have thought.
http://www.youtube.com/watch?v=neO5fnwQjqg

Think less cop and more
http://www.youtube.com/watch?v=ZDlmQgQB52Y

Regards
Ozzy

Anonymous said...

Aristotle,

FOA (08/22/01; 09:25:51MT - usagold.com msg#99)
Part 1

[...] As this reserve currency transition, or perhaps war is a better term, moves on; the ECB must shift it's thrust with a leadership statement. Wim Duisenberg provided an excellent political cover for selling into the American paper gold market; as it exists around the world today. His national pedigree demonstrated a distinct flavor against gold as a monetary reserve. Truly, the ECB could not be seen prompting all their big bullion banks to short American paper gold, if they ECB / BIS were serious gold advocates.[...]

The entire posting is worth reading.

By the way, Trichet was hated for his hard money policy when he headed the Banque de France. So much that when he finally retired from the ECB last November, Édouard Carmignac paid the Financial Times to publish and ad which was basically a hate letter against Trichet

http://ftalphaville.ft.com/blog/tag/edouard-carmignac/

Nothing is what it seems. Original sources - get you some.

Victor

Motley Fool said...

Closest data I could find :

17 April 1998

Close - $309.40 ; Volume - 9928 ; Open Interest - 181,840 ; COMEX total stock 644,441. ( and O/I 20 day M/A - 174,432)

TF

Motley Fool said...

Curiously COMEX total stock seems to have hit a low on about 17 Feb 1998 @ 440,439.

TF

Motley Fool said...

Previous time comex gold stock was lower than that is 1977 May. Prior stock peak was 5.1 mil ounces in 1980. Semi-constant decline from there till Feb 1998.

TF

Aristotle said...

One Bad Adder comments (12:26 AM)

"...can someone confirm or otherwise svp?"

On the "dubiousness" of the trading unit, with regard to heritage they try to instill credibility through the chain of custody from approved assayers/refiners/producers outside the exchange system and by official weighmasters, warrants and warehouses (chain of custody) within. So much for the question of quality (i.e. "what you see is what you get") if indeed quality is what you meant by tokens of "dubious heritage".

If, however, you were referring more to the oddball SIZE (100 oz specification) of the standard contract trading unit as dubious compared to the very popular Loco London standard of 400 oz bars from assayers/refiners vetted by the LBMA Physical Committee, then I see your point of contention, and can only offer this bit of info by way of "cutting the mustard, internationally speaking" to aid in your appeasement.

Since the grand ol' days when those gloriously large LGD bars dominated the gold trading sector, we've witnessed an evolution toward ever smaller trading units -- the 100 oz NYMEX/COMEX/CME contract being the middle ground at 1974/1975 to the current time where TOCOM (1982) and Dubai (2005) came on the scene at a third the size (standard contract being 1 kilogram). And most recently, we've seen introduction of the ten (10) ounce micro futures through CME (2010) -- all this while not forgetting the introduction within the past decade of the gold ETFs that offer mere tenth (0.1) ounce trading units.

But getting back to the standard U.S. 100 oz contract that you rightly find so curious, I suppose you'll agree that one aspect might in some small measure help mitigate the odd fit on the international scene -- that the Exchange will accept three individual kilo bars (totaling 96 oz) as satisfactory to meet the physical terms of fulfillment for a 100 oz warrant. (Cost adjusted, of course.) So, getting back to your interest in cutting international mustard, if rendered in the form of three kilo bars, this otherwise odd lot can lend itself to a degree of consistency with Tokyo and Dubai.

I don't have a point here except to "... confirm or otherwise SVP" as you've requested.

Cheers to you.

Gold. Get you some. --- Aristotle

Anonymous said...

MF,

thanks - these are the best figures so far. So the 150000 ounces of "eligible to deliver" in April 1998 was in fact registered inventory. And the 3 million ounces of "daily volume" was in fact open interest. These figures are now plausible.

Victor

Anonymous said...

MF,

would you be so kind and give us the references where you found these numbers?

Victor

Motley Fool said...

VtC

A derivation of this Gold Market data

TF

Edwardo said...

The Comex would appear a tad desperate today having lowered margin requirements on the PMs and Dr. Copper. The proper response to this
act should be, eff off and die.

Aristotle said...

victorthecleaner (1:17 PM)

Ha ha! Consider me a total nitwit if you must, but I am entirely unable to equate FOA's actual words to the meaning that you've attempted ascribing to them.

So hey, here's a random thought... if you (i.e., anybody) want to develop and maintain amicable relations with a friend (or even a friend of a friend), aspire not to twist their words. It's a perilously common downfall for those who favor the illusion of "winning" a discussion over more noble objectives such as 1) effective communication and, ultimately, 2) truth seeking.

Gold. Get you some. --- Aristotle

Anonymous said...

Aristotle,

I am entirely unable to equate FOA's actual words to the meaning that you've attempted ascribing to them.

Then let's read these words again together:

His [VtC: Duisenberg's] national pedigree demonstrated a distinct flavor against gold as a monetary reserve.

Fact is Duisenberg had been the one who had been on the European side in the negotiations with the US in the 1970s. I suppose you need to kindly ask Mortymer [you can hope he is still reading here] to point you to the relevant document that shows you which were the European demands that Duisenberg had served the US at that time, just before the Jamaica conference. They knew him well indeed.

Victor

Ryan said...

VTC,

I'm trying to follow what you are saying

vtc:Mortymer also found the original documents in preparation of the Jamaica conference and some hints on how that was rather a failure from the point of view of the US and, perhaps, this is already what frustrated the Europeans so much that they started planning for the Euro seriously. Mortymer also figured out who on the European side did the negotiations with the US, at a time at which the Europeans did not (yet) have the official institutions for this: they sent Wim Duisenberg. This is, by the way, some detail that FOA seems not to know and where he guessed wrong when he said that the Dutch Duisenberg was appeasement to the US who would have gotten upset if a Frenchman had been the first ECB president. No, Duisenberg was the tough one who had regularly driven the US nuts over their attempts at getting gold out of the IMFS in the 1970s. Having Duisenberg lead the ECB in 1999 was a frontal attack against the US. Trichet was appeasement compared with that.


And your quote for Aristotle, reposted with a little more info
FOA:In a recent Financial Times article out of Paris, Jacques Chirac (French Precident) and Lionel Jospin (prime minister) were both noted for talking about the coming ECB succession. One of the few points they agree on (few indeed) centers around the fact that a Frenchman will head it next. Still, more so than knowing who will lead; understanding the political strategy that's unfolding is what counts. Seeing all this with my eyes, we can envision the posturing very clearly.

As this reserve currency transition, or perhaps war is a better term, moves on; the ECB must shift it's thrust with a leadership statement. Wim Duisenberg provided an excellent political cover for selling into the American paper gold market; as it exists around the world today. His national pedigree demonstrated a distinct flavor against gold as a monetary reserve. Truly, the ECB could not be seen prompting all their big bullion banks to short American paper gold, if they ECB / BIS were serious gold advocates. In our time of Western thinking, who could understand such a contradiction? But, politically, the game was to serve two goals; temporally support the dollar for trade settlement until the Euro was on its feet (sending gold prices down); and inflating the American lead gold market until it burst from over issuance. A good chuck of this ties into the SDR
issue that I'll get to later.

Now,,,, with the US vs Europe economic war in full bloom today; and Euro money policy in a position of leadership; and Euro circulating currency about to begin; it's time for a shift of thrust. Jean-Claude Trichet, or at least someone of his same pedigree, will usher in a new position;



FOA's was posted 8/22/01 and I'm confused what you are reading about appeasement with Duisenberg. FOA is talking about the next president in this context if I trust my eyeballs. So this
This is, by the way, some detail that FOA seems not to know and where he guessed wrong when he said that the Dutch Duisenberg was appeasement to the US who would have gotten upset if a Frenchman had been the first ECB president.
is what I'm looking for more clarity on currently.

The letter from Edouard Carmignac in the full page ad about Trichet just screamed what FO/FO/A have been writing about, so thank you for linking that.

Anonymous said...

and

aspire not to twist their words. It's a perilously common downfall for those who favor the illusion of "winning" a discussion over more noble objectives such as 1) effective communication and, ultimately, 2) truth seeking.

Well said. Did I really have to hold up the mirror before this was acknowledged here?

Alright then. Let there be peace, and let us focus on the sources.

Victor

KJ said...

attempting to understand vtc's comments at 11:23pm and FOA's post on 08/22/01.

my understanding from FOA's post is the choice of Duisenberg was brilliantly tactical and strategic without any direct appeasement to the US. If I understand correctly, the choice of Duisenberg would have been the opposite of a concession and was not made to maintain peace.

http://www.thefreedictionary.com/appeasement

"The policy of granting concessions to potential enemies to maintain peace"

Aristotle said...

victorthecleaner (3:40 PM)

You ought to know well enough that the small piece about national pedigree vs gold disposition has nothing to do with your mischaracterization about "appeasement".

The national pedigree vs gold disposition made by FOA was in the interest of bearing in mind the setting of the stage. And by that I mean that the Netherlands in the final decade under Duisenberg had sold gold in two significant tranches of 400t (announced January 1993) and 300t (announced January 1997), and had by decade's end allowed for lending of up to 15% (150t) of CB gold reserves.

So then, when FOA spoke of "providing excellent political cover", in the proper context of his message we are meant to think in terms of a magician's trick -- distracting the target audience with something quite obvious like a bright white glove on the left hand, and thus the audience doesn't anticipate or perceive the legerdemain being simultaneously perpetrated by the right hand with an entirely different motive.

FOA was speaking of strategically expedient smoke and mirrors ("political tact" is perhaps the more diplomatically appropriate term) in Wim's opening performance.

This is a far cry from saying it was done specifically to appease the US (who apparently didn't want a Frenchman), as you claim he is somehow saying and at the same time wrong about it.

Less twisting and more intellectual integrity, please.

Gold. Get you some. --- Aristotle

Aristotle said...

KJ (3:51 PM)

Very nice -- strategic and tactful are the key words indeed. I must learn to compose my comments more quickly, or else (preferably) defer to your timely words of wisdom!

--- Ari

costata said...

Edwardo et al,

Interesting Q&A on energy and economics with Gregor Macdonald here:

http://www.goldmoney.com/gold-research/q-and-a-with-gregor-macdonald-part-1.html?gmrefcode=dollarc

Q. Do you see emerging markets continuing to suffer on account of their reliance on western demand?

Gregor: That's a concern which had more relevance 10 years ago. The five billion people in the Non-OECD are now trading with each other. They are trading energy resources, food resources, and are starting to accumulate each other's currencies.

In a way, the emerging markets have now fully emerged. The street scenes in Shanghai, Sao Paolo, and Moscow now look like London, Paris, New York. These economies have accumulated tremendous savings. They are spending on themselves.

In short, I think the emerging market crash meme is antiquated. It's still flogged among money managers in New York, but it's an idea that's now outdated.


The thought in the back of my mind as I read this is:

How do you cope with the loss of purchasing power by 2 billion over-indebted consumers?

Perhaps by creating 5 billion new consumers with savings to spend. That would justify, in some people's minds, kicking a few cans down the road over the past decade.

KJ said...

Ari, this recent exchange to attempt to understand one FOA paragraph reminds me of JR's comments earlier:

"A/FOA/FOFOA's tale is hard and complex"

Indeed and an understatement to state there's many many layers to the cake.

And this most recent snippet (albeit a pretty big snippet imo) of understanding has now provided another perspective/insight and look forward to further study.

Edwardo said...

Thanks for the link, Costata.

Regarding your comments and observations below:

"How do you cope with the loss of purchasing power by 2 billion over-indebted consumers?"

"Perhaps by creating 5 billion new consumers with savings to spend. That would justify, in some people's minds, kicking a few cans down the road over the past decade."

I think that your supposition, regarding the purpose behind all the can kicking has merit, though I also suspect some portion of the can kicking can be attributed to a certain number of key policy makers simply being inveterate can kickers. In the meantime it seems to me that only a relatively small percentage of the five billion in question need to be saving in physical, let's say 15 to 20 percent, to effect, upon the proper emergence of a physical only market, the most dramatic wealth transfer the world has ever seen and is likely to ever experience.

It's also of interest, at least to me, that Mr. MacDonald is clearly an adherent to the "theory" of Peak Oil.

Anonymous said...

I am just reminded of my history classes long ago. It is about the medieval Roman Catholic Church.

The bible was available only in classical Greek and in Latin. Only the monks and the priests could read the book of all books. Ordinary people were not educated, and the only option they had was to listen to the clerics. In fact, ordinary people were not supposed to ask questions about the original source.

Now if your goal is to keep your flock of sheep in line, this is understandably a strategy that works.

If your goal is, however, to understand how the bible relates to the real world, this is quite obviously a huge waste of resources.

Since nobody here is trying to sell some product for cash, but everyone who drops by, does so entirely voluntarily, just for curiosity, I ask "Why?"

Victor

Franco said...

The "theory" of peak oil? I take it that the quote marks indicate your lack of agreement with the "theory" of peak oil? If peak oil is an incorrect theory, what then? What happens when you continue to extract petroleum from the ground? It magically regenerates forever so ithat it will never be exhausted. Is it a renewable resource? What is there to disagree with regarding peak oil, or peak anything non-renewable for that matter?

costata said...

Hi Edwardo,

Gregor has written about PO and PCO for quite a few years.

One observation about that Q&A. His interpretation of the a-typical rebound in oil after the typical recession induced fall in price. I'm still dubious about the explanations being proffered for the V-shaped price recovery.

In relation to your comment about a wealth transfer there are some interesting developmental aspects to this emerging nation process. Technology transfer can also function like a wealth transfer.

For example countries by-passing the fixed line stage of telecommunications and going straight to wireless. A leapfrogging style of development that shortens the time frame dramatically. I think this also explains some of the desperation to maintain the status quo in the West.

Schumpeter's "creative destruction" is no fun at all if you are the one holding the stranded assets. Analogous to the can kicking to maintain the $IMFS. Attempting to prevent (delay?) the paper becoming a stranded asset.

Cheers

Aaron said...

@victorthecleaner (7:16)

I am a simple person Victor, so please forgive my simple comment. But it seems to me times have changed. Information is all around us. The information controllers have long lost grasp of the wheel. Post birth World Wide Web those in both East and West with passion and perseverance have equally been granted access to the highest education possible for the few that choose for such things -- insight into anything one can dream of within the confines of documented human consciousness is quickly presenting itself. We are no longer restricted to the interpretations of the clerics within our local church.

It seems to me that FOFOA has been quite gracious in allowing folks to express their differing views. More than gracious! But it would do us all good to remember this blog, FOFOA’s blog, is A Tribute to the Thoughts of Another and his Friend – it is not a tribute to Thoughts of Victor (or Aaron). ;-)

--Aaron

RJPadavona said...

AD,

I understand the sour taste you have in your mouth when it comes to the centralizing ways of the Eurocrats. As a proud resident of Dixie and a self-taught student of history, I'm well aware of what can happen when sovereignty is lost. However, I'm of the opinion that you should be happy the Eurocrats are achieving more integration through the carrot and stick approach as opposed to slaughtering 2% of the population as was done by the mass-murdering war criminal Abraham Lincoln. His quest for more political/economic integration and centralization of power was much bloodier than the methods used by the European elites of today.

Nothing would make me happier than if these notes were still circulating as a medium of exchange in my neck of the woods:

http://www.goldrushgallery.com/confederate-currency/photos/IMG_3928.JPG

However, that ship sailed long ago and I've accepted it. And I hope you realize the euro ship sailed long ago as well. It's here to stay whether you like it or not. There is nothing we can do now except insulate ourselves from hard times. The best way to do that is by owning physical gold.

Furthermore, why should you care what is the currency? Currency is only the utility that deploys your surplus production into the marketplace. You shouldn't care what is the currency anymore than you care if the water that deploys your turds into the sewer comes from the pristine springs of Mt Fuji or the murky swamps of the Florida Everglades.

Currency is only a delivery mechanism like water. Just be glad the "plumbing" of the eurosystem isn't clogged up with "shitty paper" like the $IMFS!

Nickelsaver said...

"slaughtering 2% of the population...was done by the mass-murdering war criminal Abraham Lincoln. His quest for more political/economic integration and centralization of power was much bloodier than the methods used by the European elites of today."

Revisionist poppy-cock!!

You wanna talk mass murder, how about the genocide of hundreds of thousands of Africans throughout the entire slave-era.

RJPadavona said...

Nickelsaver,

You are correct. Slavery was a horrible institution and much worse genocide occurred in Africa. However, all other civilized nations abolished slavery without a war.

Although this is not the forum for this discussion, its late and I have nothing better to do.

Although slavery later became an issue, it was not the catalyst that started The Civil War. 80% tariffs on anything imported from abroad into Southern ports was the catalyst.

The fact that the Emancipation Proclamation did not apply to slave-holding states in the Union and the following quote from Dishonest Abe in a letter to Horace Greeley should tell you all you need to know:

"If I could save the Union without freeing any slave I would do it, and if I could save it by freeing all the slaves I would do it."

Lincoln's motives were about Federal rule and nothing else.

BTW, Although I'm not a Christian, I loved your "The Best Thing In Life" video. It's not often I get to come across something positive while reading all the negative news in the economic world.

One Bad Adder said...

Ari: - Thanks for that.

Franco: -
Scrolled half way up the page trying to locate to whom your comment was directed ...without success, so if I may: -

There's a theory relating to Abiotic Oil (mainly the Russians) that suggests Oil reservoirs can and do regenerate (given time) from within the Mantle ...which is at variance to the accepted Fossil Fuel / Peak-Oil theory.

costata said...

Some commenters at ZH seem to grasp the implications of this better than Tyler Durden. Perhaps this is fallout from the failure to protect the customers of MF Global. Are traders voting with their feet and moving to other exchanges and trading platforms?

CME Cuts Gold, Silver, Platinum And Copper Margins

http://www.zerohedge.com/news/cme-cuts-gold-silver-platinum-and-copper-margins

It has been so long since the CME cut gold and silver margins that frankly we are a little bit stunned... In an extended announcement, which saw outright margins for virtually every commodity get cut, the CME just lowered Initial and Maintenance margins of gold (by 12%) and silver (13%), to $7500 maintenance for GC and $16000 maintenance for SI.

Did the paper bull trap season just open? And how long before these are re-hiked by 15%, 20% or more? For now, however, this is certainly near-term bullish.


Bullish for paper gold? Perhaps not.

RJPadavona said...

I should also add that the point I was trying to make was that if the Greeks, Irish, etc decide to leave the EU or the eurozone, no one's going to come in with guns and force them to stay in a "voluntary" union.

The EU and the euro currency were partly born out of a desire to avoid more fratricidal wars. This is something AD should be thankful for. When state sovereignty was destroyed by Lincoln, this was not the case.

Nickelsaver, I was only trying to give AD a positive aspect in which to view the eurozone. Please don't paint me as pro-slavery. I love black people. I was bangin' black chicks back when it was still considered a sin in my part of the world.

costata said...

A very interesting analysis of the deal with Greece from 'London Banker'.

http://londonbanker.blogspot.com.au/2012/02/greece-cutting-out-middle-man.html

A must read IMHO.

Wendy said...

Ad,

To answer you question about how long it might take to get freegold values before one gets "pissed":

I didn't buy gold to cash out at a "feegold" price. I bought gold because I thought 420 oz of silver (at the time) was enough silver.

I suppose in the past I``ve thought about my holdings as a retirement fund, so to speak. Now I kinda see it as my kid`s inheritence.

I really don`t see myself selling unless something really bad happened.

I honestly don`t have a time frame on the `really bad`. no one does!

Final answer = I am happy with the capital appreciation of gold (and silver) vs paper!

Nickelsaver said...

RJP,

I am not going to engage you in debate on the subject of the civil war. You made a polarizing statement. I responded with one. I am certain that we could go back and forth and never come to an agreement as to our perceptions of that period of history.

This yankee will stand down.

AdvocatusDiaboli said...

Hi RJP,
the problem is and what the ANOTHER worshippers and technocrats dont get:
THE EURO CAN NOT WORK.
Instead of uniting Europe it brings hatred between the nations. Just look at the newspapers.
Debtors&savers living peacefully with each other? That farytale Freegold is about? No, with abondoning the EMU and installing the Euro THIS IS EXACTLY the OPPOSITE.
I wounder why ANOTHER worshippers dont want to see the most obvious just what is in front of everybodies eyes, but instead climaxing about some stuff somebody wrote 15yrs ago. Not capable of seeing or completely diluted just because some technocrat told them and they love their cult?
Now all those storries about ANOTHER have been told. And now? What you suggest to do in the EURO zone? Even with a 100% default in Europes PIGS bonds does not matter, in five years it will be the same (if the financial system survives such a default).
Two years ago we already had the same problem. What has been done? Promises, promises, this is the last time lalalalala... nothing happend, AND NOTHING WILL HAPPEN, CAN NOT HAPPEN. Okay, we got in the meantime a new printing machine the EFSF, next time we call the bigger modell the ESM. The PIGS will continue to do it their way (which I can perfectly understand) and the hatred between debtors and savers will grow. The sooner this is over the better for the nations or Europe.
Greets, AD

AdvocatusDiaboli said...

...and what wonders me most is what happens once the german population wakes up how they got royally screwed:
http://www.youtube.com/watch?v=0zDUD9ZgPe0
(This is about the great new private retirement accounts introduced 2001).

If somebody wonders how the PIGS came to the money, or who is buying the bonds?
Germans work to lend the earned money packed in form of financial products to the PIGS, so those can purchase further goods from Germany. Now PIGS run out of other people money, Germans have to work harder, to earn more money to lend to the PIGS to by their products... Really great idea.
The european mob just screams kill the banks, funny (and maybe a good idea besides that), but no bank has own money, it had been the money of the working people put into these "products"...
Guess what happens once that mechanism really comes aware to the public.

Oh, and in the meantime Ben and his children and children children on the island has completely forgotten on how to fish for themself (Peter Schiff calls that: Give'm more rope to hang themself).

This is great, and the Euro-Advocates stand next to it cheering: Look what ANOTHER wrote...

Too bad there are no more MonthyPhyton movies made: ANOTHER would be a great new title.

Franco said...

One Bad Adder:

My response was to Edwardo's post made at 6:23 PM. One useful resource I found on this subject is Chris Martenson's Crash Course, specifically the chapter on the environment. It seems clear to me (but aparently not to everybody) that if petroleum were regenerating at nearly the same pace as it being extracted, there wouldn't be a need to be drilling thousands of meters deep in the oceans, at great cost and risk. The story of extracting petroleum is the same as with any other non-renewable resource, first you go for the cheap and easy, and when you exhaust that you move on to more difficult and expensive. The metric EROEI tells the story unambiguously. That number has been shrinking over the decades, and it keeps creeping up toward unity. There is plenty of hard data that backs this so called "theory" of peak oil.

sean said...

Costata, the London Banker thesis sounds quite feasible.
I have the impression that this is to be a currency war of attrition. The EU is trying to kick the can down the road (while simultaneously keeping the hedge funds well-fed and keeping their constituencies from eachother's throats), until the US collapses under its own weight. No easy task with such insatiable hedge funds, ignorant hostilities, and ex-superpowers determined to fight to the death.

AdvocatusDiaboli said...

Oh, if somebody argues that in the great awesome EURO-area you can not kick the can down further, because there is a limit to debt selling, null problemo, you can raise the trade balance by selling debts much further, AFTER YOU'RE DEAD:
http://www.mmnews.de/index.php/politik/9453-rente-mit-72
Quick english explanation:
"Studies" show, that gov. shall raise the retirement age in Germany to 72, but keeping social retirement/compensation still as low and cutting it as they have been before. Allianz(Pimco) now argues: Consequently you have to save more in private AAA-€-crap even more for you retirement, preferably enforcing it.

«Oldest ‹Older   201 – 378 of 378   Newer› Newest»

Post a Comment