FOA: "They will not be pushing on a string; rather picking up the ball of twine and throwing it!"
I may be crazy, but if there was a contingency plan/how-to manual on throwing the world's largest ball of twine, it might just look like this:
And here are a few twine throwing excerpts from our brain-trust of central planners:
By the authority vested in me as President by the Constitution and the laws of the United States of America, including the Defense Production Act of 1950 [...] it is hereby ordered as follows:
...
Sec. 103. General Functions. Executive departments and agencies (agencies) responsible for plans and programs relating to national defense (as defined in section 801(j) of this order), or for resources and services needed to support such plans and programs, shall:
(a) identify requirements for the full spectrum of emergencies, including essential military AND civilian demand;
(b) assess on an ongoing basis the capability of the domestic industrial and technological base to satisfy requirements in peacetime AND times of national emergency, specifically evaluating the availability of the most critical resource and production sources, including subcontractors and suppliers, materials, skilled labor, and professional and technical personnel;
...
Sec. 201. Priorities and Allocations Authorities. (a) The authority of the President conferred by section 101 of the Act, 50 U.S.C. App. 2071, to require acceptance and priority performance of contracts or orders (other than contracts of employment) to promote the national defense over performance of any other contracts or orders, and to allocate materials, services, and facilities as deemed necessary...
(b) The Secretary of each agency delegated authority under subsection (a) of this section (resource departments) shall plan for and issue regulations to prioritize and allocate resources and establish standards and procedures by which the authority shall be used to promote the national defense, under both emergency AND non-emergency conditions.
...
PART III - EXPANSION OF PRODUCTIVE CAPACITY AND SUPPLY
Sec. 301. Loan Guarantees. (a) To reduce current or projected shortfalls of resources, critical technology items, or materials essential for the national defense, the head of each agency engaged in procurement for the national defense, as defined in section 801(h) of this order, is authorized pursuant to section 301 of the Act, 50 U.S.C. App. 2091, to guarantee loans by private institutions.
(b) Each guaranteeing agency is designated and authorized to: (1) act as fiscal agent in the making of its own guarantee contracts and in otherwise carrying out the purposes of section 301 of the Act; and (2) contract with any Federal Reserve Bank to assist the agency in serving as fiscal agent.
...
Sec. 302. Loans. To reduce current or projected shortfalls of resources, critical technology items, or materials essential for the national defense, the head of each agency engaged in procurement for the national defense is delegated the authority of the President under section 302 of the Act, 50 U.S.C. App. 2092, to make loans thereunder. Terms and conditions of loans under this authority shall be determined in consultation with the Secretary of the Treasury and the Director of OMB.
...
Sec. 303. Additional Authorities. (a) To create, maintain, protect, expand, or restore domestic industrial base capabilities essential for the national defense, the head of each agency engaged in procurement for the national defense is delegated the authority of the President [...] to make provision for purchases of, or commitments to purchase, an industrial resource or a critical technology item for Government use or resale, and to make provision for the development of production capabilities, and for the increased use of emerging technologies in security program applications, and to enable rapid transition of emerging technologies.
...
Sec. 304. Subsidy Payments. To ensure the supply of raw or nonprocessed materials from high cost sources, or to ensure maximum production or supply in any area at stable prices of any materials in light of a temporary increase in transportation cost, the head of each agency engaged in procurement for the national defense is delegated the authority of the President [...] to make subsidy payments, after consultation with the Secretary of the Treasury and the Director of OMB.
...
Sec. 306. Strategic and Critical Materials. The Secretary of Defense, and the Secretary of the Interior in consultation with the Secretary of Defense as the National Defense Stockpile Manager, are each delegated the authority of the President [...] to encourage the exploration, development, and mining of strategic and critical materials and other materials.
...
Sec. 308. Government-Owned Equipment. The head of each agency engaged in procurement for the national defense is delegated the authority of the President [...] to:
(a) procure and install additional equipment, facilities, processes, or improvements to plants, factories, and other industrial facilities owned by the Federal Government AND to procure and install Government owned equipment in plants, factories, or other industrial facilities owned by private persons;
(b) provide for the modification or expansion of privately owned facilities, including the modification or improvement of production processes...
(c) sell or otherwise transfer equipment owned by the Federal Government and installed under section 303(e) of the Act, 50 U.S.C. App. 2093(e), to the owners of such plants, factories, or other industrial facilities.
...
Sec. 310. Critical Items. The head of each agency engaged in procurement for the national defense is delegated the authority [...] to take appropriate action to ensure that critical components, critical technology items, essential materials, and industrial resources are available from reliable sources when needed to meet defense requirements during peacetime, graduated mobilization, and national emergency. Appropriate action may include restricting contract solicitations to reliable sources, restricting contract solicitations to domestic sources (pursuant to statutory authority), stockpiling critical components, and developing substitutes for critical components or critical technology items.
...
Sec. 312. Modernization of Equipment. The head of each agency engaged in procurement for the national defense [...] may utilize the authority of title III of the Act to guarantee the purchase or lease of advance manufacturing equipment, and any related services with respect to any such equipment for purposes of the Act. In considering title III projects, the head of each agency engaged in procurement for the national defense shall provide a strong preference for proposals submitted by a small business supplier or subcontractor...
You can read the full 11-page Executive Order here.
Sincerely,
FOFOA
Great comment, Jeff!...
You guys don't have to worry about being pressganged into being unpaid 'consultants'. Those jobs will go to Buffett, Jeff Immelt, etc. who want to help the G out of the goodness of their hearts...and to protect their position near the fiat firehose of course.
Honestly, the fascist talk gets in the way of understanding what is going on. Yes, this is the Declaration of Hyperinflation, but did you expect the G to just sit on its hands and collapse?
FOFOA: "In parts two and three of my September hyperinflation posts I explained how the US government MUST respond to a currency collapse by printing more currency in order to keep its stooges doing its bidding...
Gonzalo correctly points to "palliative printing" as a wheelbarrow-enlarging event, which comes at the very end stage of a hyperinflation. And he presents it as palliative to the people. But this printing is usually most palliative to the government and its expanding rank of stooges. Sure, there will be "welfare" along the way, but for the most part the freshly printed cash will buy the most goods and services for the first hands it touches. And then less for the second. And even less for the third and so on. And this prime purchasing power will be mostly reserved for the government that prints it."
This EO, IMO, means that the hour is getting late...
549 comments:
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"I will wash out the stinking rug imediately."
Let's leave your Mother out of this.
I'm sure no one would say you are a piece of trash; because it is plain to see.
Isn't civil discourse fun!?
And of course, no one is answering because they really don't know. But that's fine. I recall an Einstein quote that is apropos, "If you can't explain it to a six year old, you don't understand it yourself."
And I'm sure I won't be gleaming any gems from the likes of our resident bard, Alien. No, that's one dumb MoFo. Oops, I did it again.
I will continue to observe the evolution of FOFOA's (et al) thought processes as I am intrigued by the possibility of Freegold.
Phat,
not possibility - inevitability.
@NS
We can only hope; especially if it is not a disruptive event. I don't want a WW or some other mass conflagration as a result of financial collapse. Fingers crossed. :)
Here's an interesting interview of a guy that knows what he's talking about in term of the issues in Europe at the moment:
http://www.pulse-berlin.com/index.php?id=194
little snip:
"No question, Germany would be worse off without the single market. Exporting would be more difficult in a world where Germany’s neighbors were able to discriminate against its goods and where they were able to manipulate their currencies. The key to Germany’s economic success in the last ten years has been exports, and it is not just China that has been on the demand side."
Phat,
One has nothing to do with the other. The transition ain't gonna be pretty, but circumstance will not prevent the ultimate outcome.
My understanding is this will be the mother of all currency collapses. If you consider the fact that it should have occurred in the early 70's, but was postponed. And not only postponed but, made exponentially worse by fact that the debt balloon has been allowed to grow to a point it could never have under any kind of a system that kept separate the functions of Medium of Exchange and Store of Value.
Freegold is inevitable, simply because Gold has not been abandoned as Store of Value by those that understand it as such.
We can look at all the things that have happened over the past 40 years, but Freegold even being a possibility, let alone an inevitability, comes down to two moments in time.
1) The closing of the $gold window.
2) The launching of the Euro.
Everything else is to be viewed as effect to these two causes.
@NS
Well stated but the optimist in me remains. For now I sit in the South China area; I have my bowl of popcorn, some fried peanuts, and a case of Tsingtao for the big show. We ARE living in interesting times...
No.
NS, I don´t agree with you on that explanation regarding the launch of the Euro.
On the contrary I think that what Another said was that without the Euro freegold would have "jus happened" in the 1998-2000 timeframe, as a result of a sudden and total breakdown of the $IMFS, and i would NOT have been pretty. What the Euro did was open up a possibility of a somewhat orderly transition to Freegold.
The question now to my mind is this: Does anyone at the ECB remember this, or has it (the ECB) been hijacked by can kicking Goldmantype $faction people and/or EU(SSR) politrucksters? In which case the transition will be chaotic anyway.
This remains to be seen I think.
"i would NOT have been pretty" should of course read "it would....". I wouldn´t have been pretty either way... ;-)
@AD: "wenn ich mich richtig erinnere, lebst Du in der Schweiz?"
Stimmt. Ich schaffe in Züri für ein gross Bank, aber meine Mutter Sprache ist Englisch. Ich habe Deutsch nur informel gelernt.
Hildebrandt sold off half of the Swiss gold and was awarded by the other CB's who plotted this with him. Unfortunately his successor is also a CB stooge. It has become totally political with the left (who have ransacked bank secrecy) blaming the right for leaking Hidebrandts name (Blocher beruft sich auf parlamentarische Immunität)
Yes, Switzerland is facing a massive RE bubble, interest rates are soooo low here, you can get a CHF Libor Hypoteke for less than 2%. Did you see that the Zweitewohnung initiative passed in Feb and now they have a Bau-Stopp! Of course it was the Swiss progressives from the big cities that stopped the building of vacation apartments in the remote Alps.
"What is your take, what will happen to Switzerland, once the $IMFS will blow up? Or when the € breaks up?"
I think it all depends on how bad the breakup of the EU is. Switzerland's economy will be crushed with the Euro, what happens afterwards will determine how Switzerland fares. Have you been watching the fire works between Germany and Switzerland concerning the Steuerabkommen (bilateral tax agreement)? Apparently the German elite want to save the agreement. However, the Germans do appear to be making themselves unpopular all across Europe due to their overbearing arrogance.
Wauw, there's is a lot of comments to catch up to after a week away. The tone has become harder here in the comment section, hasn't it?
This aggression will not stand, man!
Love the dude-theme, Jeff :o)
/Burning
Björn,
Maybe you're right. But my understanding is that collapse was insured by closing the gold window and not re-pegging. While Freegold is insured by the launch of the Euro via it's collective position in physical gold and use of it as a reserve asset; its separation from a nation state making it the only real suitable currency replacement for the dollar as the world reserve currency.
Good discussion. What do others think? Would we have Freegold right now without the Euro?
NS
Well yes, perhaps I was oversimplifying it a bit too much. "Freegold" as we think of it would probably not have happened right away,(I think it would have been rather chaotic) But I do think that 12-14 years later (now), the world would have worked it out with or without the euro.
@AD: My nearly new Compaq laptop from 2011 still doesn't even have a € on the Swiss keyboard, and since it doesn't have a number keypad I can't even type in the ascii code for it. Does your German keyboard have a €? I'll bet the American's still don't have a € on their keyboards, only a $. That's the kind of thing that being the reserve currency buys you.
Well my Toshiba from 2007 really have big € to the right of the letter E. It is really easy to spot...it stands out and it is easy to use.
On the other hand £ and $ are hard to spot...in the same row as " % & / { [ ] }...not so easy to use.
Hm...I thought the Japanese were $ friendly?
I'd like to pose a question to the board (and to Fofoa of course):
We have already heard from a Fed board member that they have dipped their toe in the water by buying some European sovereign debt.
Do we think that the next and future QEs will extend this measure, maybe outside of Europe to Japan and the UK too? Or will it just be Europe because the ECB is largely allowing bond yields to be dictated by the markets?
And if it is extended, what implications does that have to the risk of currency collapses around the world? I think it increases the risk in the US, but maybe decreases it elsewhere?
I suspect we will see a lot more of this, maybe later this year. A definite sign of the ponzi reaching the last resort.
http://euobserver.com/media/src/331203707053334d7bd3a00b3ca3e85f.jpg
If they were to stop accepting USD denominated contracts today -- given the opaqueness of the OTC market -- any idea on when large orders (sovereign size) would cease to flow?
victorthecleaner said...
I don't know. The FT article said, just related to charters of supertankers from SA to the US, that usually one ship goes every two months, but now they have nine lined up to go asap. That would make it 18 months.
But this is probably only a part of the volume. Also, what is stopping now is perhaps just the price fixing operation Chris Cook alluded to.
Continuing with that train of thought for a moment, lets assume SA is settling in the here and now. The US contracted for future oil going out 18 months and SA is now settling those contracts by delivering the goods.
What happens next?
I have a few guesses on the receiving end. If the oil is to be used for USG consumption, it could be stored for future use in the (guaranteed?) event of supply disruptions. If it is speculators buying the oil, it could be dumped on the market killing the price allowing for profit taking on the down side.
But as far as where SA goes moving forward this obviously provides them space for evolving their trade policy. Do they then write future oil contracts in Euros from the get go? Do they continue to accept US dollars, but with one caveat -- "We are going to price oil in a few different currencies -- if you want the dollar included we would like dollars+X gold from the US Treasury at a floating price". The US unlocks her gold sucking the brunt of hyperinflation away from the stuff her population really needs like food, water, etc. The ECB and its member banks are recapitalized. Oil continues to flow to the US. ???
Sounds like the smoothest transition one could hope for.
The one thing I think SA really fears is not having a customer waiting in the wings with a stable currency to pick up sales right after settling future sales with the US -- for if they were to lack such an internationally accepted currency SA would realize a huge gap in funding their domestic budgets causing wicked disruptions in their own markets (paying employees, getting food to their supermarkets, etc, etc).
Something I find of interest is how articles from various 'news' sites are frequently referenced here. And while I believe that most are just trying to glean a nugget or two from those articles, I am reminded of a quote by Mark Twain to the effect of "those who don't read the news are uninformed, those that do read the news are misinformed."
I wonder if 'we' might be better served by establishing some kind of mechanism whereby individual board members research and then disseminate findings as BOG in their respective countries? Question to the board then is, what information would be useful in developing this map of when the transition to Freegold happens?
I harp on this because, while the build-up to Freegold has been drawn and deliberate, as many opine, the implementation might be rather sudden. I don't believe this will be visible through the media and will require BOG to fully develop this picture. What say you?
Greece is the Word
This is not to say that the euro will not devalue against gold right along with the dollar. All infinite, symbolic, transactional currencies will, which is to say all currencies will. And to a lesser extent, all currencies will have to devalue against the rest of the finite real world as well. But they will not all hyperinflate to infinity in the aftermath as the dollar will be forced to. Some will. Others will not. The euro probably will not.
This is freegold. It is coming whether or not the euro uses its secret weapon. Like I said, they would prefer not to be seen destroying the paper gold market proactively. They would rather just wait until it destroy itself (which, by the way, it is doing pretty well).
==========================
Synthesis
The euro architects were not trying to force a reserve currency on the world. There is a big difference between creating a government product with sovereign-monopoly backing that everyone must use, and creating a product that the marketplace must freely choose. In this case, the marketplace consisted of sovereign nations that chose to give up the privilege of printing their own money in order to join in the benefits of the euro.
[...]
The European plan was to support the $IMFS at least until a new fiat "reserve" currency could be established, one large enough to absorb the shock of a failing reserve currency, to avoid being forced back 100 years into a physical gold-based economy which would have been very traumatic. This effort took 20 years from 1980.
[...]
The Yuan
The yuan will not be the next global reserve currency because it has not only NOT severed its link to the state, it is actually printed by Communists. Those who are predicting this are still viewing the world through $IMFS goggles that see the yuan currently undervalued. They think in dollar terms and conclude that whenever China finally agrees to let the yuan trade on foreign currency exchanges, they would like to buy it! Being undervalued (against other fiats only) they see the opportunity to make fiat profits when it rises. They view it as a "store of value par excellence" compared to other fiats.
Things are not always as they seem.
Conclusion
Freegold is our destination with or without the euro. Even on the outside chance that an SDR or a similar super-sovereign currency is accepted as the new global reserve currency, it would have to contain gold at Freegold valuations in order to be viable, accepted and trusted, in the same vein as Randy's comment about an EMF. So any way you cut it, the future comes to us with really high value gold by today's standards.
5/22/98 ANOTHER (THOUGHTS!)
If the Euro does fail, gold will become the "world oil currency". We do know this full well, "the Central Banks will hoard all gold and buy any offered if this new European currency does not work" and "debt currencies fail". If this does come, no paper asset of world economic system will survive, nothing! Not a good thought, no? Thank You
=================================
6/4/98 ANOTHER ( THOUGHTS! )
The last small gold war ended in the early 1980s, as the choice was to use the US$ or go to a gold based economy. No other reserve currency existed, and gold lost the war as all continued to buy dollar reserves.
But by 1980, Europe was working with the BIS to implement a new "reserve currency".
=================================
5/3/98 ANOTHER (THOUGHTS!)
The urgent drive to create a new "reserve currency" began in the early 80s, after the last small "gold war". The road to making this new Euro did never include gold in large amounts, until the last few years! Even one year ago, the news would say, 5% or less. Today, we speak of a much greater amount! This is interesting, yes? The BIS did "hatch" this deal in a very late fashion! The future of the Euro was found to be "weak", as the Middle East oil imports onto the continent would continue in dollars! This was so, from the dollar being made strong in gold. Gold priced in dollars at near production cost offered a "no switch currency" position, for oil. This position has been unstable for the last year, and the alternative of a switch to gold was in progress! You have read my "Thoughts" before. Now the BIS does offer to "change the rules of engagement", a real reserve currency is offered!
Few do grasp what is happening and why! They think the holding of gold reserves by the Euro is of a little point, as to what good are gold reserves? One cannot use gold as Marks or Yen to intervene in currency market to support the Euro. My friend, the BIS has played the, as you say, "big poker hand"! The holding of large reserves by the ECB and the withholding of sales from the market will not only bring the end of the London paper gold market, it will, thru a high USD gold price, "make the dollar weak in gold"! From this position, the dollar will lose the "oil backing" from the Middle East! At first, all oil for Europe will be in Euro's, then all producers want "strong currency"!
There is more: Many say, how to defend Euro without much currency reserves? If gold go to many thousands US, what will be used to bid for Euro as defense? I say, these persons will find a problem on their computer screens! You see, the Euro will start as "nothing", no holdings of size, anywhere! The dollar is held as reserves as "the stars in heaven"! It is to say, "the dollar will bid for the Euro", not "the Euro will bid for the dollar"! All currencies will "flow into the Euro for trade". But, if the Euro becomes so strong, how to compete in world trade? It will be the price of oil that will make the "trading field" level! The soaring US$ price of gold will make even a 10% Euro reserve be as 100% today, in USD! Oil will become, very, very cheap in Euros and allow that economy to do well! Many other countries will see this and also want to join the new "world reserve currency" that has become"the new world oil currency"!
The politics of the ECB? It is as a "side show". We watch this new market, yes?
"What is your take, what will happen to Switzerland, once the $IMFS will blow up? Or when the € breaks up?"
I think it all depends on how bad the breakup of the EU is. Switzerland's economy will be crushed with the Euro, what happens afterwards will determine how Switzerland fares....
We shadowdance the silent war within.
The shadowdance, it never ends...
Never ends, never ends.
Shadowboxing the Apocalypse, yet again...
Yet again.
Shadowboxing the Apocalypse,
And wandering the land.
VTC,
(My emphasis) No wonder GS calls these folks muppets.
I firstly outlined how passive ‘inflation hedger’ investors in Exchange Traded Funds and Index Funds essentially lent dollars to oil producers, and were able to borrow oil in return. In doing so, they not only perversely caused the very inflation they aim to avoid, but also eroded the foundations of the crude oil derivative markets as a risk management mechanism.
Secondly, I explained how much of this flow of medium and long term risk averse investment which has financialized the oil market has used the very same Prepay technique which Enron used to defraud investors and creditors.
By creating what is essentially Paper Oil the investment banks who come between the funds and the producers have been able to inflate and distort the market price of physical oil, and hence the derivative contracts based upon that price.
http://www.nakedcapitalism.com/2012/03/chris-cook-spikes-and-speculation-in-the-oil-market-%E2%80%93-flash-crash-part-deux.html
It makes sense to me that there has to be paper oil in order to manipulate the physical oil price. Given the BBs long experience in using paper to manipulate the price of gold it devolves to a co-ordination excercise for them.
Also from a Saudi perspective this deal is a no-brainer. By continuing to support the $IMFS (if oil is overpriced) they receive free dollars that they can spend. I doubt they are trying to funnel any of these dollars into gold these days. That would upset the game pronto IMHO.
On a positive note my greeny friends should be cheering. It would appear we already have a global carbon tax (called oil).
Cheers
Though price is a relative thing these days (especially in light of future FG valuations) a technical analyst I watch is expecting a springboard move in Au; bought some more ahead of the advance (less fiat for more Au; priceless). Caveat Emptor.
Ref: http://www.321gold.com/editorials/hoye/hoye040112.html
Apparently the global April fool's joke is on me, and it's call the weather:
http://i1255.photobucket.com/albums/hh631/watherley/IMG_0439.jpg
it's been puking snow all day AGAIN!
it's time to slit my wrist or head south.
Sorry for wandering off topic FOFOA :) I needed to rant..............
I hear ya Wendy. We went from 85F two weeks ago to 35F last week. The trees in our back yard that so eagerly pushed out their blossoms are now paying the price for their early enthusiasm -- and so are our honeybees for wont of collecting pollen.
Aaron,
I've thrown in the towell, my birthday present to myself is Vegas next weekend. The weather forcast is sunny and warm :D
It's the obvious alternative to slitting my wrists ;)
I have a question for everyone concerning:
7/19/98 ANOTHER (THOUGHTS!)
The Middle East nations, in particular, have shown their reserves to be much greater than ever thought possible. These “new/ larger” reserves have come to be known about, only in the last eight years. It was the “possible existence” of this oil that created much fear in the American Capitol, prior to the 1970s.[...] The reserves in this region were, and now even more so, are the lowest cost to produce in the world. As all oil was sold in dollars, and US$s were then, still somewhat attached to gold, the ME producers had “no need” to raise prices! The political forces in the West needed much higher oil prices to “stimulate exploration” to avoid the “strategic problem” of “all oil supply from one region”. Make no mistake, there is enough oil reserves in the ME to supply “all world” for “many grandchildren”! [...]
Last eight years before 1998 is about 1990. Indeed, the following OPEC countries reported suddenly increased proven reserves (in bn bbl):
Kuwait from 64 to 90 (1985), Venezuela from 25 to 56 (1988), UAE from 31 to 92 (1988), Iran from 49 to 93 (1988), Iraq from 47 to 100 (1988), Saudi Arabia from 170 to 257 (1990).
Source: "Statistical Review of World Energy 2003", Oil and Gas Journal, reprinted in a certain book.
In it obvious that this does not correlate with any significant new discoveries. It is basically a restating of reserves, and so is a political step.
Some people said that during that period, OPEC production quota depended on proven reserves, and so there was an incentive to report higher figures, but several analysts imply that this is "fiction" and that most of this new oil is not there.
Another seems to be quite sure that this oil is indeed there, and that the ME has huge cheap reserves. Who is right?
Victor
My understand was that under OPEC regulation -- proven reserves dictated production quotas in which case by upwardly restating reserves producing nations could increase sales (the race to the bottom in cost and the race to the top in sales).
I remember a story a while back from theoildrum where the author used Google Earth to count wellheads in the Riyadh III project. He came to the conclusion the Sauds required twice the wellheads and gas injectors publicly stated to bring planned production to the surface.
From what I've read Peak Oil appears to be a geologically driven event although I personally believe any short term shortages will likely be politically driven.
--Aaron
Saudi Aramco Loses Count, Drills Too Many Wells In Ghawar
Hmmm -- perhaps I'm remembering the Haradh III.
Hi Victor-
Here's a chart I pulled up from theoildrum on Mexico's Cantarell field. There are many fields which have similar curves but this was the one that came to mind when I read your comment. In 1995 they were producing 1 million barrels per day. Between 2003-2006 Cantarell ramped up production to 2 millions barrels per day. Since then they've dropped back below 1 million barrels per day and the field is now approaching 650 thousand barrels per day.
An economic event? I'm listening.
What me naive dont get:
One thesis that appears here all the time, that gold vs. oil always flow into opposite direction.
Nice thesis, but what real life data/facts support that thesis?
I mean, what are the oil producers are doing with all those useless yellow stones? Hoard them?
How is it transported from whom to where, what kind of entities are involved in that? What kind of WGC numbers show me or at least indicate this?
Greets, AD
AD,
Re: ME gold
As A/FOA remarked the ME royalty don't maintain homes in London (and Switzerland?) because of the pleasant weather.
VTC,
If memory serves me in the Sheik Yamani interview that FOFOA featured in one of his earlier posts (The Flow?) the former Saudi oil minister pointed out that Saudi recoverable reserves were/are estimated at around 35 per cent whereas the North Sea recovery is around 70 per cent.
If Iraq can ramp up to 12.5 mbd what does that say about their true potential reserve position?
As I mentioned in a discussion on an earlier thread. None of the PTB seem to be acting in a manner that indicates nervousness about the amount of oil they can access. All of the efforts I see from the ME producers in the recent past seem to be geared to maximising consumption and their sales.
There is a mountain of material from sites such as the Oil Drum which supports the peak cheap oil thesis yet the PTB have been relaxed about shutting millions of barrels out of the market over the past decade - Venezuela, Libya, Iraq and now Iran to name a few.
IMHO something is not kosher here. Perhaps Another was dead right.
costata,
"As A/FOA remarked the ME royalty don't maintain homes in London (and Switzerland?) because of the pleasant weather."
That tells us what? That they buy those homes in London just to stack yellow stones in the basement?
You're joking me, right?
Greets, AD
Perhaps it was not that they (OPEC) went from reporting actual to overstated reserves as has been assumed but rather went from reporting understated to actual reserves?
AD,
The BOE has around 4,500 m/t of gold in its custody. London is the centre of the global gold market. Some business you do face-to-face.
I imagine that ME interests in Switzerland aren't held because they love camel racing on ice.
That they buy those homes in London just to stack yellow stones in the basement?
Nice to see you excercising that critical thinking we have come to appreciate so much.
Bjorn,
Or perhaps a mix of the two. In the case of Venezuela today they are claiming vastly higher reserves than the increases from the 80s/90s that VTC quoted.
Like I said something is not kosher here.
costata,
"The BOE has around 4,500 m/t of gold in its custody."
you are selfcontradicting. If you say, that it's held at the BOE custody, why buy a home in London?
My bank is located in Berlin and Munich, still I never considered to buy an appartment there...
Greets, AD
AD,
How many of your loyal subjects would like to see your head on the end of a lance?
Costata,
you made a good point against London as a buck out place. Ask Hussein, Gaddafi, BenAli or Mubarak :P
Greets, AD
Hello JR:
If FOFOA is the Shakespeare of the "relevant passage" in A, FOA,
then you are at least the "Goethe". Thank you for the posts of
April 1. Would you be so kind, as I am a computer illiterate, to
post my ALL TIME favorite, the one which has meant the most to
me in my understanding of A, FOA's message? It is FOA 3/14/99.
11:17:14MD, Msg ID 3351. I would be most grateful.
1/2
Woland - hopefully this works :) Lisa
Here it is
FOA (3/14/99; 11:17:14MDT - Msg ID:3351)
REALITY?
Good day to all! I offer this as a means to consider the world, in perhaps a way not seen before. It makes use of private discussions with Another, taken place during my absence from world affairs. His words are clearly separate from mine. Will anyone recognize from where the title
came? Please do interpret these words as indeed, I do also interpret yours!
"ON THE FRINGE OF REALITY"
We travel through this world with our own notions of value and worth. Often giving little thought as to what part external forces play to impact our final conclusions upon these ideals. Nor do we fully understand the concepts that shape these same ideals in the minds of others.
"Another: My friend, "this game of chess" you play it well, yes? As do I. Truly, we understand the "rules of contact" concerning gold. If one player does touch his "most valuable piece", he must move it! But, in what direction will the "king of gold" or the "queen of Euros" be moved?
Each positioning, it does create different perception of "value" for opponent."
Truly, in this light we can see that our concepts of value and worth are clearly governed through the positioning of assets by political players. They move a strategic asset to the right and all other things on the board are reevaluated. To the left, a different worth is considered. Consider now, that all pieces, in this chess game of worth, hold a changing value in the minds of people in all world economies. Oil, copper, steel, currencies, they are, everyday, priced as to their usefulness not only to the owners, but also in the strategic value they hold in the eyes of our opponents. Those with whom we wish to trade! Only the King is held as the final player. When an opposing political entity posses your king in checkmate, we lose the strategic advantage to play the game. A king of gold gives the government the ability to declare this money game void
and start completely over. A move not taken lightly by the opponents.
Now consider the currencies ONLY, their daily changing worth, the value they hold in daily world trade and their value to us in our business of living life? A clear thinking person must agree with the conclusion that this is only a game. Do these paper security contracts really hold any
value for your life, except in their acceptance by others in trade? If our government moved an important chess player only one space, our native currency could lose all value to others! In such an event would this item still hold value for you?
Because the trading of paper securities (stocks, bonds, currencies, etc.) have become the only avenue for world economic activity, we are all compelled to play this game of chess. Like it or not, your very net worth is every day, in play! And, as such, we all watch for the next move on the board. Each, in his own quiet way, ready to act quickly and purchase the "next paper asset" that appears to hold value in trade. That is, before our neighbor beats us to it. Think now, is this the way of the free market and the democratic order that one was brought up to expect? Your life savings, not at risk of being lost, just at risk of being reevaluated to a lower level of importance in commerce.
2/3
But people, what if? What if this game of Dollar chess was quietly, out of sight, being lost? How will you know to move before others do if you cannot see the entire board? Confidence is a strange human emotion. It is fragile beyond compare. Many confuse "confidence in ones holdings" with "confidence in our judgment of others confidence"! There is a big difference. In other words, we depend on the judgment of others to protect the maintain the value of our assets. In seeking real security, our position of wealth is safe and fair as long as we can grasp how others are valuing our holdings! Openly, in the interaction of daily markets that we see "how others value what we have", thereby instilling our own confidence. But, In doing such, we take for granted one major premise, "we can see the entire playing field and all of it's players in the same light as others see it"! It is here that we approach a truth that, paper wealth today does occupy "the very edge of reality"!
"Another: It is asked that a dollar be strong in gold? It is done. These many years gold price is lowered. Brokers stand tall and say "we bring gold down" and "our judgment be correct". They hold the mind of "young boys" in early years, yes? Know them not their work was a biding for the central banks. They will come to know "good judgment" in short time. It is asked for another knight in the game? It is done better. A powerful queen comes for our use, this new Euro. Now they ask this Euro be strong in Oil. It will be done! Need dollar continue be held strong in gold? "my friend, old trees die long deaths, but die they will if water comes not" " this rain of oil will no
longer find your Washington Oak"
Today, we have come to the "edge of reality" in believing that our paper contracts (cash included) are actually more valuable than the the THINGS we buy with them! For most individuals and national governments, our net worth is denominated in contracts of Delivery. The cash in your pocket is a receipt for the delivery of one dollar. Your stocks are contracts for a share of the profits in a company. Bonds, cash in the bank (CDs included) are contracts for delivery of future cash. The only value found in all of these securities comes from selling them to
someone else. A game that is played using the value judgment of another. Take your time and think slowly through this. The laws of supply and demand are muted by the accepted concept that "paper securities can all be converted into real things at the present price of real things". In the
end, this is the value judgment that everyone basis their holdings of paper wealth on. The Thought that, "someone else wants my paper assets because THEY can convert them into the things THEY need at today's prices". How easily would this fragile confidence be shattered if suddenly the payment for these Things required "Things in payment"? Would this not create a realignment of the value judgment of paper, worldwide?
Consider oil? Supply and demand rules the price, you say? I say, that is your value judgment based on the supply and demand of oil as seen in dollar payment. Now, see the settlement of oil trades denominated in Euros only and require a payment of things to augment dollar settlements.
Suddenly, the price of oil changes radically even as the supply and demand stays the same! Because of this and at the same time, worldwide, the judgment of the value of Things as
expressed in paper contracts will changes! In this light we find that the excess capacity of our life's work, as stored in the value of paper assets is no longer worth the Real Things it could be traded for.
3/3
Here, one confronts the Reality that during our long life, we did not create as much excess worth from our endeavors as we thought. Truly, all these years the Western economies produced no more assets than many Third World Countries! I ask you, for the future, in what world class
money will you hold the savings of a lifetime? And more importantly, will others judge it to have value? Will you continue to "trade gold to make more paper currency" or "will you trade paper assets to acquire more gold"? Most will agree, the choice will impact one's net worth for the rest of their life!
"Another: It is to say, "these westerners are not as rich as there currency say they are"!"
Some day you will read in the financial pages: "It is in the value judgment of paper assets that
people found the lies."
"Gold, yesterday, today and tomorrow"
Thank You for reading, FOA
Woland
Looks like part 1 and 2 are stuck in Blogger prison. FOFOA will probably let them out.
If not, here is the link to the comment you wanted
<a href="http://www.usagold.com/cpmforum/archives/1419993/>11:17:14MD, Msg ID 3351</a>
It would appear that FOA's question re: the title, "Reality" comes
from a TV series, "Eerie, Indiana" and an episode, "Reality takes a
holiday", where, as in an earlier "twilight zone" episode, members
of a town find that they are unwitting actors in a script written
by others. I believe that once, when Another was asked to supply
the facts to support his prognostications, he replied, "When minds
with power "execute strategic plans", you will later discover the
"facts" you need to see". (or something like that}
My apologies - last try for link. The actual comment is at 11:17:14 Msg ID 3351
last try
Estimating mideastern oil reserves is an art form. Saudi reserves are unverified by independent geologists as they kicked out foreign firms decades ago. Many consider OPEC reserves to be overstated; Saddam once declared that Iraqi reserves were a billion barrels, a nice round number. So let it be written, so let it be done.
Peak oil can only be observed in the rearview mirror. It's an even more contentious subject than freegold, and I don't bother discussing it with anyone. Time will prove all things, they say. Oil drum is the FOFOAblog of oil, lots of reading there. Personally I agree with Dmitri Orlov that the slide down the peak will be more stepwise than smooth.
http://cluborlov.blogspot.com/2010/11/peak-oil-is-history.html
Two FT pieces showing further evidence that the BRIC nations are forging their own path, away from the $IMFS cliff-top dead ahead:
http://www.ft.com/cms/s/0/99ed485e-7209-11e1-90b5-00144feab49a.html#axzz1qt7B04kB
http://www.ft.com/cms/s/0/961513b6-7bc7-11e1-9100-00144feab49a.html#axzz1qt7B04kB
The view is clear up here on the mountain top!
A classic demonstration of AD's character:
First, the lazy and rude question, actually mocking gold itself, also demonstrating his inability to use google, and with no real intent to further his knowledge:
'I mean, what are the oil producers are doing with all those useless yellow stones? Hoard them?
How is it transported from whom to where, what kind of entities are involved in that? What kind of WGC numbers show me or at least indicate this?'
He gets a polite response from Costata, indicating London and Switzerland (something AD would have already known, if he could be assed to read the subject matter of this blog.
AD responds in his usual rude manner, whilst also showing how tiny his mind is:
'That tells us what? That they buy those homes in London just to stack yellow stones in the basement?
You're joking me, right?'
Costata humours him by pointing out why the Saudis feel the need to kep their gold away from their country, whereas AD doesn't (as he is not a member of the House of Saud).
AD finishes the exchange with his usual polite style, by attempting to mock Costata's reasoning with some straw men examples:
'Costata,
you made a good point against London as a buck out place. Ask Hussein, Gaddafi, BenAli or Mubarak'
To AD (again) just go and read Another, FOA, and all of FOFOA, then think for a few years, and then feel free to come back.
Otherwise, stop wasting our time, you're an obnoxious dullard.
To those that are still enagaging with him.....why? You just make the board a lesser place.
I wonder if blogger allows the host to delete posters comments? Fofoa, save us from this madness please!
Jeff,
I'm starting to think we will look back on "peak oil" as being the era when we were more bullshitted than any anyother time in our lives.
Time for some Bob Seger:
http://www.youtube.com/watch?v=HjDpKeiYxOU
costata,
”There is a mountain of material from sites such as the Oil Drum which supports the peak cheap oil thesis yet the PTB have been relaxed about shutting millions of barrels out of the market over the past decade - Venezuela, Libya, Iraq and now Iran to name a few.”
I don’t necessarily see a contradiction here. In fact, in the face of impending peak oil, it would make sense for the PTB to ensure they maintain $-pricing (and thus US control) over oil resources. If their own economy has to take a hit, it is a small price to pay to keep the oil producers in line. Control over the oil market is more important than access to oil.
Peak Bullshit! I like it! Unfortunately, I´m having a hard time envisioning supply constraints... Only thing for it is trying your best to calibrate your own BS detector.
Gary,
looking for a real nice hideout?
http://online.wsj.com/article/SB10001424052748703720004575476953617163656.html
That dude f-ed my favorite skyline with his dumb palace on top of the mountains.
And the most annoying thing on my last holidays had been his gunship doing shooting training just next to the islands.
That's where you stay, not in some London house.
But Gray, think of it like that: While I was watching that skyline, at least you have fun with the FO(FO(A))-archives.
Greets, AD
costata,
Further, about the lack of worry about impending shortages, and the perpetual drive to increase consumption:
I think this is a feature of our current currency system, combined with our economic / political / management system whereby the results of the next quarterly statement / election / P&L is what matters, and in a few years it's "I'll be gone, you'll be gone".
There is zero incentive in today's political economy to do anything about conserving resources.
And perhaps, in the face of impending or actual resource shortages, the expected response in our system would be to re-double the efforts to increase consumption, to keep the party going just a little longer so one can collect the next bonus.
Gary,
"To those that are still enagaging with him.....why? ..."
Perhaps it is time to heed your own advice?
Actually Michael, I posted about him, not to him.(He's probably a 13 year old anyway).
Gary,
The bears feed on food whether it is intended for them or not. But hey, don't let it stop you from having a pick-nick. I for one enjoy a nice sTROLL through the woods.
(-;
costata,
yes, indeed, the entire oil story in the popular media is somehow fishy.
There has been almost no exploration and development in Iraq since the first gulf war (Iran-Iraq) in 1980 - there have been repeated wars and periods of sanctions. Also, after the last gulf war (2003), the US-UK block have not made any huge effort at getting the pumps running.
Similar with Iran. After the Khomeini revolution in 1979, there has only been limited investment and exploration. Now again, they are trying to remove the Iranian oil from the market. Similarly in Libya last year.
Many indications point to the idea that the US-UK block wants to keep ME oil output low in order to raise the price. - It is perhaps rather convenient that the leftish public accuses them of oil imperialism thinking that they rather want to conquer the oil fields in order to get _cheap_ oil. Nice cover, isn't nit?
If you are the U.S. and you believe in peak oil and suspect it happens around 2005-2015 (I guess this is what most cheap peak-oil proponents expect), what would you do? Wouldn't you prefer a policy in which the oil that you don't easily control (Russia, ME) is consumed first and the oil that you do control (US, Canada, Mexico, Venezuela) is no touched until the every end. But what they actually do is sometimes just the opposite.
Well, an alternative explanation is that US oil policy was hijacked long ago by some corrupt American oil firms. They just want to make the quick money and don't care about what happens to their country in the long run.
Finally, in Ali Naimi's letter in the Financial Times last week, he repeatedly said that (1) the high oil price was not justified and (2) that Europe should have a lower oil price.
Victor
Well, an alternative explanation is that US oil policy was hijacked long ago by some corrupt American oil firms. They just want to make the quick money and don't care about what happens to their country in the long run.
You mean like in that Clooney movie with the ensemble cast of Hollywood stars? ;)
Biologist E.O. Wilson on Why Humans, Like Ants, Need a Tribe
...The answer is that everyone, no exception, must have a tribe, an alliance with which to jockey for power and territory, to demonize the enemy, to organize rallies and raise flags.
And so it has ever been. In ancient history and prehistory, tribes gave visceral comfort and pride from familiar fellowship, and a way to defend the group enthusiastically against rival groups. It gave people a name in addition to their own and social meaning in a chaotic world. It made the environment less disorienting and dangerous. Human nature has not changed. Modern groups are psychologically equivalent to the tribes of ancient history. As such, these groups are directly descended from the bands of primitive humans and prehumans.
The drive to join is deeply ingrained, a result of a complicated evolution that has led our species to a condition that biologists call eusociality...
===============================================
Debtors v. Savers II - FOA Retro House Mix
Trail Guide [FOA] (2/12/2000; 9:52:36MDT - Msg ID:25137)
Reality
[...]
ORO,
On a larger scale there was always more to it than this. Human society has from the very beginnings formed tribes and picked sides against each other. When we are not battling nation against nation, we jockey for position within our own groups. Right down to "me and my neighbour against the three houses down the street. As a tribe ,,, as a nation ,,,,,, as a group ,,,,,, our war is really a human problem with each other and always has been. In better context; the problems are in the way we use our laws and governments to gain advantage over the next in line.
Whether through force (war) or democratic means, we subject ourselves to the order of governments. We rightly perceive that,,,,,, the order gained from this action ,,,,,,, the security of a group, overcomes the rights and property lost on a individual level that living in a tribe requires. It's been this way through the ages. It's a political process that has always had its in-house battles ,,,,, namely portions of society try to circumvent their percentage of lost rights and property by maneuvering the rules (laws) in their favor. Yes,,,,,if I can gain the advantages of tribe life and still keep my "lost portions",,,,, I'm gaining wealth to the disadvantage of the group. Truly, the most obvious action of not paying your taxes,,,,, and that's only a small item when viewing the world battle as a whole...
Bitcoin Open Forum - Part 3
It is my contention that all the problems that emerge in this type of centralized system that we have today, are rooted in the fact that we save in the same units we transact in. In other words, it's our own fault, all the problems. By saving in financial products denominated in that same unit, we lend precious support to those that would abuse their control over it to gain advantage. It is my contention that all those problems are actually only mere symptoms of the disease, and not the disease itself. And yes, those problems are cut off at the root with Freegold. Freegold doesn't so much stop the bad printing as it simply renders it useless, or at least self-defeating.
I know we (in our precious metals online community) complain a lot about central planning. But I think, as a society, we do demand it. I don't personally, but I can recognize that "we" do (can you see the difference?). Of course central planning is often wrong, it is stupid by design (see here) and it always blows up, and in the end, as savers, we hate it when it blows up. We think it would be much better if we just had a totally free market system whereby no powerful entity could meddle in our business. I agree. But as a society, as a tribe, that's not what we want. We want a powerful central figure we can run to and complain, and to point the finger at when things go bad. We don't want to be all on our own like allinvain.
So what we (savers) actually need is a monetary refuge from the bad effects of that which the tribe demands. And this refuge, physical gold, is actually decentralized, private and anonymous just like Bitcoin. And it is enacted in a decentralized manner, by the choice of the saver. And I believe that in choosing to save in gold, we'll remove the exorbitant privilege that we've always in the past given to that central figure.
VtC,
"Many indications point to the idea that the US-UK block wants to keep ME oil output low in order to raise the price."
or vice versa? but yes, thats always a point in FG: so who want the price low, or who wants it high.....
Let's face the facts: In the EU you have a ~+100% tax on fuel (so americans, stop moaning), since a long time (even longer than the EU?). How does that fit in this context?
Greets, AD
VTC proffered (and was seconded, or so it seems, by JR)
"They (unspecified oil majors-my emphasis) just want to make the quick money and don't care about what happens to their country in the long run."
Bingo! You da winner. Now pardon the following soapbox oratory, but, as I'm sure you are well aware, corporations (especially corporations of size) with few exceptions, are, by definition, only concerned with one thing, maximizing profit aka the bottom line. All other considerations pale in importance. If, for example, one witnesses "concessions" being made toward the local community, the environment, and/or hallowed national interests, ye olde corporation is only doing so because such concessions are deemed unavoidable.
Oil majors have a long and storied history of the profoundest sort of corruption. And though the following comparison is, to some extent, of the apples to oranges sort, when it comes to flouting the law, and/or conspiring to have the law remain silent in the face of myriad outrages, outfits like The Vampire Squid, have little, if anything, on, for example, BP.
And I'll repeat, at the risk of irritating certain board participants, that PO is a geologic certainty. Peak cheap high grade crude is probably already in the rear view mirror. Peak resources are, no doubt, coming into view as well, though, there are very complex crosscurrents and massive amounts of jiggery pokery apt to obfuscate this immutable fact.
Are you all of the view that U.S. foreign politics is just guided by short-term profit motives, and that they have no long-term strategic vision at all?
Then try to use this 'knowledge' to predict what will happen in the Iran question:
1) will the U.S. find a way for Iran to back down, and then there will be a political solution, no new oil crisis, and eventually the price will crash as Chris Cook predicts?
2) will the U.S. try to create as much chaos in the ME as possible?
Victor
Hi Edwardo,
I was making fun of the manner in which "the entire oil story in the popular media is somehow fishy" is also exemplified by pop culture, ala the silly Syrianna.
The corporate-state symbiotic relationship is no sweetheart love story, but to posit that oil policy is run by companies and not the US is to take a position directly at odds with Another, who explained how the oil story is the foundation of our monetary system. So yeah, to think this is just about corporate profits misses the bigger fish - the is is about the $IMFs (of which corporate profits are a part). But the $IMFS wants you to think its about big greedy corporations and not the foundations of the dollar's continued hegemony.
==========================================
Jeff's earlier link to Dimitri Orlov's analysis was spot on - http://cluborlov.blogspot.com/2010/11/peak-oil-is-history.html. Peak oil maybe be geologic certainty, but what most people pass off as what peak oil portends is the crux of the issue, and that has much to do with non-geologic issues. So to frame it in geologic issues is wrong.
Basically, peak oil theorists are quite like the HMS community and its fixation on metal price manipulation through paper (what they often call "naked shorting," even though it isn't). Unfortunately for them, prices aren't dictated solely by supply.
Lisa; Thank you. Hope you liked it. I certainly don't mind if
you are the only other one who does. Cheers!
Well, JR, the reference to Orlov may be spot on, but the link is dead.
Sorry, the period at the end of the sentence is not part of the link:
http://cluborlov.blogspot.com/2010/11/peak-oil-is-history.html
JR,
yes, it is not just the short term profits of some, but rather the fate of the US$.
Again, what does the US$ need?
1) all oil prices in US$ gives usage demand
2) even given (1), the price probably needs to be 'right'
Now Chris Cook says there is a price fixing operation going on through which the speculators will get screwed. He bets that the price crash will happen this quarter. Also Ali Naimi said in the Financial Times that he thought the price did not reflect supply and demand and that the price was too high for Europe.
So if the price goes down from $120 (Brent) today to, say, $60, half of the usage demand through the oil trade is gone. Well, there are other goods and services traded internationally, but oil is a major factor, and so it should have an effect on the US$, no?
Next question. When gold started its ascent around 2001, oil also turned around and went up (more volatile though, but the gold/oil ratio is still in the historic band). Why? Was it
1) Because oil was still receiving partial payment in gold, say converted 1/10 of their revenue into gold and wanted to get the same weight of gold?
2) Because the US$ needed usage demand and the US somehow asked OPEC or used speculators to raise the price?
I am not sure I like (1) because the Saudis seem to be spending all the dollars they get these days. Also, I thought, the infamous forward contracts had the purpose of securing the gold flow even well into the future (viewed from the mid 1990s)?
Finally a question for everyone. What should I read or where should I look in order to understand why oil is still traded in US$. After August 1971 and then when the major exchange rates floated officially (Smithsonian Agreement?), why did Saudi Arabia and OPEC still trade oil in US$. Next, when the Jamaica conference failed (from the US point of view) and each CB could officially hold whatever they wanted as their reserves, this would be the second natural point to switch to a basket, say US$, Deutschmark, Yen, perhaps sterling.
Why is Saudi Arabia still continuing exclusively with the US$? What are the relevant agreements, conferences, and events?
Victor
Hello JR,
Interesting post about tribalism. I have something I'd like to add.
Over the course of time, humans have evolved in the way they choose to assimilate and the way in which the hierarchy is structured. We started out as tribes and clans, then we moved toward kingdoms and monarchies, then to nation-states and democracies.
On this blog, we talk a lot about the changing role of gold in our economy. How it's reverting back to its original role as a pure wealth asset once the monetary shackles have been removed. The Superorganism will eventually force this to occur. But gold is reverting back to its original role with a variable involved: the modern, digital age. This implies an evolution instead of a reversion. A little of the old mixed in with the new.
The current role of gold in the $IMFS is a remnant of the role gold has played under kingdoms, monarchies, and nation-states. It was used to lend credibility to the "official" money.
Just as gold is evolving back to its original role in our tribal days, I think the way in which humans assimilate is evolving more toward our tribal roots as well. As nation-states and their credibility continue to deteriorate, humans will still desire some type of collective representation. (the Superorganism at work again)
Like gold, the way we're evolving back to our tribal roots in assimilation has the same variable involved: the modern, digital age. I believe the way in which our tribes are formed will become completely different from the tribes of old. With the advent of the Internet, we're no longer restricted to forming our relationships based on geography. In the modern era, we can assimilate based on similar ideas. This Freegold community we have here is a perfect example of that.
As a result of governments going bankrupt and no longer having the ability to provide certain services, something will have to fill that void. I believe that over time, something similar to the services provided by labor unions will evolve. Except it won't necessarily be connected to your labor. This collective representation will be connected to like-minded ideas and they'll represent you in multiple areas. I would liken it to web-based Mafias that will provide protection, healthcare, and various other services for their members.
Most of these ideas I've ripped off from futurists and sci/fi novelists. But one thing I've noticed is these writers don't know anything about gold. They don't factor the role of gold in any of their predictions for the future. As honest money and honest information are colliding with this world at relatively the same time, I think it's important to see the correlation.
Hopefully, as we walk this Trail toward a more tribal-based world, we won't end up like another tribe that went against the grain:
http://www.youtube.com/watch?v=RzpRU347BDU&ob=av2e
RJP
Via Dilemma
Why is crude oil predominantly invoiced in one currency? The next section attempts to answer this question.
Network effects arise when the utility a consumer derives from a particular good is dependent upon the number of other individuals also consuming that good. The network property of a good has the following four implications for the market for that good. First, a minimum level of agents using the good (critical mass) is necessary for the initial adoption of a network good. Second, the demand for network commodities is associated with a bandwagon effect, i.e. the more individuals use the good, the more incentive there will be for other individuals to use it as well. Third, network effects may give rise to multiple and unstable equilibria related to the interplay of information, expectations and coordination. Finally, there are two problems linked to network goods, which may result in market failures: excess inertia, i.e. resistance by individuals to using a “superior” network commodity, and excess momentum, i.e. a rush by individuals to an “inferior” network good. Treating money as a network good is a recent development in economics and has led to interesting results concerning the origin of money, fiat currency and monetary integration.
This section develops a model that captures network effects in the oil market, extending the models developed by Stenkula (2003) and Oomes (2003). The market consists of many buyers (B) and sellers (S) of crude oil. While the oil producers are sellers in this game, they have an incentive to invoice their oil contracts in the currency with which they will pay for their (non-oil) imports of goods and services from the rest of the world. In short, we will call these (non-oil) goods and services food.
Similarly, the rest of the world are buyers of oil and sellers of food. Both parties aim to minimize foreign exchange risk and costs associated with the use of a specific currency for trade. In an environment where buyers and sellers are matched randomly and are subject to cash-in-advance constraints, both types of agents may choose between two currencies, i.e. euro (e) or US dollars (d), as the invoicing currency for their contracts. Each contract is fully invoiced in a single currency. In addition, the price of each contract is assumed to be constant and normalised to one. At time t, the sellers sell oil to the buyers, while at time t + 1, the buyers of oil sell food to the oil sellers. Hence, all agents try to anticipate the currency they will need for purchases in the next period.
Depending on whether or not the currency they accept for payment for oil is the same as the currency they use for their imports, the oil producers (S) may incur three types of cost, related to the three functions of money – medium of exchange, unit of account and store of value.14
14 Note that, although for the remainder of the paper we refer to oil exporting countries, the analysis for oil companies is similar: they are either buyers or sellers of oil, or both; and they too incur costs when they invoice oil in one currency and have to record profits and pay taxes and dividends in another.
The theoretical literature on trade invoicing explains the almost universal use of the US dollar in international trade in crude oil by means of the fact that petroleum is a homogeneous good traded in organized exchanges. Apart from serving as a medium of exchange, the US dollar fulfills the function of a unit of account by providing price transparency in the oil market. Thirdly, the macroeconomic stability of the United States and the depth of the US financial markets explain the role of the US dollar as a store of value and the low liquidity costs associated with holding the currency.
Terrific link Woland!
So refreshing to read people who take the time to think about what they are saying...
Hi Victor,
You asked "Why is Saudi Arabia still continuing exclusively with the US$?"
My 2 cents is:
1/.. there must be a long term defense agreement between S.Arabia and USA whereby The House of Saud is protected by USA against allcomers.
2/.. in return, oil is settled in US$ plus some gold. One SOV for another? S.Arabia acts as the swing producer and does what USA wants.
3/.. this explains most of what has been going on in the region for the last 20-30 years including the Gulf wars, the difficulty USA had in quickly supporting the Egyptian people against Mubarak (how would this be seen in S.Arabia?), the mutual antagonism between Iran and USA, the position of China tending to support Iran etc ...
4/.. it also explains TPTB need to keep a lid on the $POG by all means necessary which is why I have previously asked this forum what the future ratio of oil/gold (in bbls/ounce) will be in the expected Freegold scenario. 200 bbls/ounce ?? instead of today's c. 20 bbls/ounce.
The Saudis will have some difficulties accepting the new ratio, I assume. It may also violate the terms of the secret long term defense treaty ...
[thinks]
... maybe ChrisF should be thinking about some other commodity ratios, rather then focusing on the oil:gold ratio?
After all, virtually nobody needs "an ounce of gold". What they really need is like a ton of copper, or a bushel of wheat/corn, etc. When it comes to gold, they just need "however much I can buy today with what I have left over after getting all that other stuff I actually needed".
Hmm...
[/thinks]
Clyde,
Yes.
Commodities, bitchez!
Woland, yes, that FOA link was a gem, and makes me realise I want and need to read all of the Another/FOA writings (but will finish Fofoa first).
This quote hammers home the main point:
'Because the trading of paper securities (stocks, bonds, currencies, etc.) have become the only avenue for world economic activity, we are all compelled to play this game of chess. Like it or not, your very net worth is every day, in play!'
I wonder how few wealthy people even consider that?
VTC, re Saudi Arabia, would they still be dealing in Dollars so that when Iraq invaded 10 years ago, the US rode to their rescue? A with most agreements, they both get something out of it. Also, based on the invasions of Iraq and Libya (maybe more to come) would Saudi Arabia be allowed to move away from the Dollar by the US..I think they'd suddenly have a popular uprising, and human rights issues would be fretted about by the likes of Hilary Clinton, and the House of Saud would be history.
The US, it seems to me, have no morals, and will destroy anything in its path to maintain its standard of living. Hence the support the Eurozone and others have given to paper gold, as the rope by which the US will eventually hang itself.
Golden justice, served cold.
Wasn't the main point of the story that the $IMFS' (black) king had chased the (white) king of the "old world, gold economy" into a corner and had white very close to checkmate. But while all eyes were watching this dance of the kings in one corner of the board, a white pawn had quietly made it to the far side of the board and been promoted to queen? The black king now only has limited moves available to him, because he cannot move into any path of this new white queen. So the black king is once again free to make good his escape. Black is now the one struggling with an existential challenge.
Most people are ankle deep in the shallows splashing minor nominal gains and losses at each other. We look on and wonder when they realise they're risking everything in real terms.
When playing a 40 year game of chess against opponents Reuff,
Jean monnet, Alexandre de Lamfalussy et al, as one approaches
the end game, it should perhaps not be a surprise that, what
you thought were your own self directed actions, were merely
moves in a script written by others. Hence the title, REALITY,
from "Eerie, Indiana"," Reality takes a holiday". It should also
not be surprising if there are only a few pieces left on the board.
What happened to the others? They were SACRIFICED! OOH!
SCARY! So if you happen to be viewing this 40 year game when
one side loses a bishop or queen, if you don't know the deep
strategy, things could look veddy veddy bad indeed!
"Why is Saudi Arabia still continuing exclusively with the US$?"
Why is Saudi Arabia still continuing to be paid exclusively with the overvalued world reserve currency?
Thanks for the link and refresher Woland. From another part of that thread (FOA (3/14/99; 16:17:55MDT - Msg ID:3362):
"The US started the free trade movement but quickly backed away when it was realized that the US currency, backed by debt through the fractional reserve system, would suffer sever inflation in the transition. Government guarantees would require the treasury (and Fed) to print unbelievable amounts of new currency to cover the unserviceable debt that Free Trade would create! Now, Europe is going to finish the job using a new currency to supplant "dollar settlement". The ECB has agreed to allow their gold to be "marked to the market" quarterly. IN doing so, oil will slowly be transitioned to settle in Euros as the dollar is lowered in value against gold. The benefit to oil will be the increased world demand that a Euro settlement Free Trade will create. Once this train begins, everyone will jump on it. Why? Because it will benefit the largest part of the world population. The dollar will implode and gold will soar in dollar terms."
This intrigues me:
"Because it will benefit the largest part of the world population."
Hmmm... That might be the intent but, I highly doubt, the outcome.
victor,
Maybe John Perkins's book "Confessions of an Economic Hit Man" is what you are looking for, at least regarding how the Saudi backing for USD oil came about in the 70's.
I don't think he has the full picture, but his anecdotal experience adds some color to what we already know.
victor (and others),
In case you didn't click through to the 'Dilemma' post that JR linked, the full paper from which JR's posted quote is excerpted is at:
http://www.ecb.int/pub/pdf/scpops/ecbocp77.pdf
Victor said 'I am not sure I like (1) because the Saudis seem to be spending all the dollars they get these days.'
If I couldn't choose to be paid in gold prior to revaluation, I would probably choose to be paid in the most currently overvalued currency, and spend it as quickly as possible.
Hi All,
The biggest threat to the Euro IMHO is the separate regulation of the banks in the EMU who create 95 per cent of the overall Euro currency (total money supply).
Discuss if you will to do so.
Old man music - John Fogerty
http://www.youtube.com/watch?v=SCQ6XmsJ8tE&feature=related
Hi Phat Export,
One angle is that I think he was thinking more balanced international consumption patterns. The US still lives quite extravagantly, overconsuming its far share and shipping U.S. paper in return while hunger and poverty are still pretty big issues. For hungry people, food > paper, yes?
The Gold Must Flow
Here's the way to look at it. Today the US is running a trade deficit of 21%. We import $2.34T worth of goods and services but we only export $1.84T for a deficit of $500B or 21%. What this means is that we pay for only 79% of our imports with goods and services in return. The other 21% we borrow and then consume. Every day, every month, every year, we are borrowing and then consuming 21% of our imports. And even though the private sector has cut back on its consumption since 2008, government sponsored consumption has increased so the total hasn't changed much. And 21% is about the average for the last 30 years.
All those goods and services that we borrowed and consumed for decades on end can never be paid back. And they never will be paid back. This is a certainty.
[...]
Spur and Brake
Once gold is flowing at a high enough price to balance international trade, it will start accumulating in countries that run a trade surplus excluding gold (including gold, trade will balance). Likewise, it will start disappearing from those countries running a trade deficit ex-gold (excluding gold). This is how the spur and brake forces work on an economy in Freegold.
As the gold supply within a "deficit ex-gold" nation dwindles (think: USA), each piece remaining will become more and more dear in terms of other goods and services within that zone. In other words, the purchasing power of gold will rise in the "deficit ex-gold" zone vis-à-vis goods and services in that zone. Likewise, the purchasing power of gold will begin to fall in the "surplus ex-gold" zone (think Germany or China) versus goods and services in that zone because of the large and growing accumulation of gold.
At this point the large quantity of gold in the "surplus zone" will have a lower purchasing power against goods in its own zone, but a higher purchasing power abroad in the "deficit zone" and demand for imported goods will grow while exports will start to fall. This growing demand from abroad will be felt in the "deficit zone" and will be met with new supply. Likewise, the falling demand for imports from the zone with a declining volume of gold will be felt in the "surplus zone" and be met with decreasing supply. Incrementally, the "surplus zone" will slow production and increase consumption while the "deficit zone" experiences the opposite effect. Excluding gold, the balance of trade will shift back and gold will start to flow in the other direction.
FOA: Collectively, net / net, using our own attributes and requiring the use of other nation's as well. Not unlike Black Blade's Kalifornians sucking up their neighbors energy supplies (smile). We cannot place [our tremendous resources] up as example of our worth to other nations unless we crash our lifestyle to a level that will allow their export! Something our currency management policy will confront with dollar printing to avert.
"Because it will benefit the largest part of the world population."
If the US stops "using our own attributes and requiring the use of other nation's as well," then perhaps someone else gets the chance to consume it, yes?
Another:
It was once said that "gold and oil can never flow in the same direction". If the current price of oil doesn't change soon we will no doubt run out of gold...
We know that oil is a consumed wealth of a momentary value that is lost in the heat of fire.
The stars blink and it is oil wealth no more!
It has become "the debt of nations" now owed to you [if you hold Treasury's in exchange for your real oil]. Gold on the other hand is not a commodity as many assume, as it is truly "the wealth of nations " meant to last thru the ages! A wise oil nation can strike a deal with the paper printers and in doing so come out on top. Go back a few years to the early 90s. Oil is very high, you offer to lower the US$ price in return for X amount of gold purchasing power. You don't care what the current commodity price of gold is, your future generations will keep it as real wealth to replace the oil that is lost. Before the future arrives gold will be, once again valued as money and can be truly counted on to appropriately represent all oil wealth!
[...]
ANOTHER: As for the old agreement of oil/gold ratio, it went out the window... a mismatch in value of epic proportions!... Indeed, oil will become very cheap for those that can supply physical gold...
This would require a high value for gold. For gold to trade with oil on a physical basis would also require perhaps a small fraction of gold/bbl.
All would gain from this. The intent is not to destroy the oil market.
[...]
In a very real "currency sense", oil will be devalued in terms of gold. As one makes a currency weaker by increasing the money units per ounce of gold. Oil will become very cheap in gold, as the amount of gold paid per barrel will fall dramatically as compared to today's ratio. There will be much more than enough gold worldwide to quantify a "world oil currency".
[...]
A Noble Purpose, This Oil For Gold
When one considers the merits of a specialized world oil currency, the thought usually turns immediately to "send in the military and stop them". I must ask, why? If an oil currency is born before or out of the shambles of an financial meltdown, and it offers great benefit to all, again I ask, why stop it? Look at the merits of such a move:
In a very real "currency sense", oil will be devalued in terms of gold. As one makes a currency weaker by increasing the money units per ounce of gold. Oil will become very cheap in gold, as the amount of gold paid per barrel will fall dramatically as compared to today's ratio.
[...]
Why is it the oil nation would not just buy at market? Same as above. Their effect in the open market would basically shut down the market thereby frustrating their efforts to buy gold. Conversely, why would they then make the "proposal"? Because either they have enough gold to buy the world at the new price, there is a crisis in which they feel it is to their advantage to do this ( such as a US$ crisis ) or they might have a geopolitical rational. In the new valuation the US$ would still be intact. But its monopoly role would be altered. Its not that currencies would become worthless but that gold would become worth much more in relationship to paper currencies.
To answer the "military" question, asked at the begining of this article, I say:
The massive increase in the "reserve currency" price of gold would, no doubt be ushered into the USA house of congress as a godsend answer to Americas debt problems. With the "full production" of oil, now viewed as a sure thing, The world may well see the USA send the military into the Middle East just to ensure that this "deal" is not disturbed. After all, it is oil that will be massively devalued by gold.
Thank you
From the Treasure Chest
Someone asked me last week:
"You’ve said hyperinflation and freegold are separate events. I can only imagine them all rolled up in one messy ball. Would love to know how you see the separate events relate to each other as they unfold separately, if you haven’t already covered it."
I replied:
"They will most likely be rolled up in one messy ball. But thinking about it in that way makes people miss that they are distinct, discrete events that will be happening at the same time. For example, if hyperinflation takes the price of everything up 1,000,000%, gold will go up 40,000,000%. But only gold. Everything else, silver, cans of peas, etc... goes up 1,000,000%. So gold's FREEGOLD rise (that extra 40x rise) is in REAL TERMS because it is relative to everything else REAL. While everything else only rises in NOMINAL terms. Can you see the difference?"
On Peas:
Moneyness
If we look at the specific etymology I highlighted, we are pretty close to the pure concept which I will confirm from a couple different angles. 'Money' is a "unique unit" that we use as a kind of language for expressing the relative value of things other than money. The modern example would be "dollar". Not "a dollar," not a physical dollar, but the word "dollar" as it is used to say a can of peas costs a dollar, or my house is worth 100,000 dollars, or you owe me a hundred dollars. If you give me two grams of gold you won't owe me a hundred dollars anymore. You don't have to give me actual dollars. That's just the unit I used to express the amount of value you owed me. That's the pure concept of money.
This is where it gets a little tricky and mind-bending. The actual physical dollar, that physical item we call "a dollar," is not money in and of itself. In other words, it is not intrinsically "money". It is only money because we reference it when expressing the relative value of goods, services and credit. If we stopped referring to it, it would cease to be money even though it would still be a dollar. Can you see the difference? Like I said, it's tricky.
A dollar is just a thing, a tradable item. And it will continue being that same thing even if we stop referring to it when expressing relative values. It will still be a dollar, it just won't be money anymore. Therefore it is not money in and of itself. It is just a thing.
[...]
Well, there you have it! 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. Money is the referencing of the thing, not the thing itself. As FOA said, money is "a value stored in your head!" Money is not something you save. "Money in its purest form is a mental association of values in trade; a concept in memory not a real item… the value is in your association abilities. This is the money concept, my friends.
=======================
comment to The Waterfall Effect
This is all very logical. You need to think it through on your own. Try letting go of dollar pricing. Understand that the value of any given thing "floats" against all other things in a giant pool. Right now, some things are held down lower than their buoyancy would take them, and other things are held higher. Imagine the dollar is also in the pool. But it is a lead weight that is about to be dropped.
Try pricing a house in cans of peas. How many cans of peas does a house cost right now? If the housing bubble has popped, where is the price of houses heading in terms of peas? And if food becomes scarce, where will the price of peas head in terms of houses? And what if both happen at the same time?
=======================
Now what about the Euro?
Synthesis
Here is an important question: Is it theoretically possible for a fiat currency to devalue, or more precisely, to hyper-depreciate against only one single asset without affecting the price of a can of peas?
Of course it is!
Hi ampmfix,
La Furia Roja makes me smile too!
06
06
10
10
costata,
”The biggest threat to the Euro IMHO is the separate regulation of the banks in the EMU who create 95 per cent of the overall Euro currency (total money supply).”
The implication is:
1. Banks across the EU countries operate under different regulations
2. Therefore banks under some countries will be riskier than others, and be more aggressive in making loans / expanding the money supply.
3. These aggressive banks will be more likely to fail and need bailouts for depositor funds.
4. Bailouts of banks in one country may not be fair to the banks in another country.
Now, this seems to me the same problem of ‘monetary union without fiscal union‘ that is cited in terms of sovereign debt. The solution to that is to let shaky sovereign debt default, as much as is possible without destroying the system.
Will banks be allowed to fail? Will depositors lose their savings? Probably yes for the former and no for the latter.
The second issue would be on ‘the way up’: the ECB is mandated with maintaining a modest inflation rate, and if it can’t regulate the money creation by the banks, how can it maintain its target?
FOFOA et al
This inane NY Times piece by Krugman generated some amusing comments that are themselves worth the read.
http://krugman.blogs.nytimes.com/2011/07/19/the-glenn-beck-debeers-connection/
Example from Iris (speaking of gold coin):
"They also can be stolen, which strong people like in predatory times. The fact that debt is much harder, and sometimes impossible, to steal is in turn the reason it is preferred in times of peace. The gold standard was a product of the age of imperialism, and now that it's over we've naturally moved to fiat money. Even if the United States defaults, the odds of warfare and depredation breaking out on a mass scale and continuing for a long time are quite low, so investing in gold is not a smart move."
I don't know about myself sometimes, but the concept of debt be harder to steal sent me rolling....
Hi JR,
They take soccer very seriously here... I like a good world class match, with a beer and friends, sometimes.
I often doubt what's best: sports or no sports. If sports, the masses are subdued and quiet, if no sports, the masses stand a chance of self education and maybe revolution..., we better stick with sports... :0)
"Més que un club" got some revolution, no? ;) "Visca el Barca, Visca el Catalonia"
Chiding aside, I know and I understand your point, but IMO its not always at so inapposite. Meh, whatever. At the end of the day, we save gold not for the sake of gold itself, but for the purchasing power it represents.
RS:
Hence, it is best that you work to actively establish your desired gold position without undue delay, and then with peace of mind you can turn your full attention to the business of living your life as it was meant to be. Spending significantly further time obsessing over currencies and investments is a fool’s errand.""
Thanks for reminding this: "...living your life as it was meant to be..."
FOFOA,
i've been following the blog for a few years....how close are we to Freegold?
FOFOA,
i've been following the blog for a few years....how close are we to Freegold?
costata,
The biggest threat to the Euro IMHO is the separate regulation of the banks in the EMU
I thought this might be one reason for the huge LTRO. Rather than monetizing the debt directly (and forcing the interest rates lower), the ECB lets the commercial banks take this risk (but the interest rates creep up again and again). This way, the banks do not trust each other, the interbank-market is substantially less liquid than before the crisis, and every single bank becomes dependent on the ECB. That's the best way of controlling the pack, isn't it?
Victor
Here is something to think about: Who do you think wrote this (the email was written in February 2004)?
Dear Sir,
You overlooked the most important element in the whole euro-dollar-oil equation : GOLD !!!
Arabian oil is the receiver of Physical Gold-flows (commitments through ECB/BIS) in exchange for cheap, dollar-priced, oil flows.
Behind the euro, there is a modern, new Gold concept standing and will make the euro, the oil-currency.
Note and think deep about the ECB's * marking to market * of its Gold "exchange" (!!!) reserves !!!
Saudi Arabia is a BIS-member !!!
Underground gold from goldmines' forward sales (3,000 tonnes) for underground oil !!!
European CB-goldsales are gold-commitments via ECB and BIS as to pull China/Russia/ME into the euro (concept) block, associated with a coming new, modern, Physical Only, euro-goldmarket !!!
Thanks for your excellent essay. Much appreciated.
(signed)
Victor
Credits are due to Mortymer for discovering the message.
Euroxxx? ;-)
Data dump, part 2.
I had asked FOFOA about the transcript of the CNN interview with retired Saudi oil minister Sheikh Ahmed Zaki Yamani that features in It's The Flow Stupid. FOFOA was so kind to point me to the transcript:
http://www.bi-me.com/main.php?c=3&cg=4&t=1&id=48966
Note that Yamani mentions the book A Century of War by William Engdahl
http://www.amazon.com/Century-War-Anglo-American-Politics-World/dp/074532309X
as a reference to support the claim that it was the U.S. (Kissinger) who wanted the oil price high in the early 1970s. Note also that Sheikh Yamani endorses Engdahl's book in the blurb saying
This is the only accurate account I have seen of what really happened with the price of oil in 1973. I strongly recommend reading it.
There is also an earlier interview with Yamani in the Guardian:
http://www.guardian.co.uk/business/2001/jan/14/globalrecession.oilandpetrol
In both interviews, Yamani mentions a 'secret meeting in Sweden' as a reference for Kissinger's plot to increase the oil price.
Engdahl claims this was one of the meetings of the Bilderberg group. In Engdahl's book, you can find the list of participants (!):
http://is.gd/IOpUl9
I am impressed that Yamani endorses both Engdahl and the relevance of that Bilderberg meeting.
Victor
Aaron,
was I supposed to know this?
Victor
Hi Victor-
I'm not sure. I don't think so. I did a little Googling and came up with this link. It certainly sounds like Another. The person that posted the email (GoreN4) at democraticunderground claimed he was the recipient and the letter was signed by Euroxxx at that link. In all honesty I thought you were asking a rhetorical question just for fun. Did Mort not find the same information I did?
--Aaron
Victorthecleaner:
How does this gibe with Aristotle (10/118/00) Msg ID 23135
"You're absolutely right. As I, too, mentioned in my long post,
Kissinger was not there at Camp David as the momentous
decision was made to terminate the Gold convertibility of the
dollar under the "New Economic Policy" Along with the absence
of Kissinger's National Security Council , neither was William P
Rogers's State Department invited to participate in this final
development. They were completely in the dark and taken by
surprise...... This text (you can read the rest in the archives)
appears to imply that on this subject, Nixon and Kissinger are
not on the same page. FWIW
Hey Victor,
You're right about the ECB taking over the european banking sector. In the end the commercial banks dealing in paper are just subsidiaries of the Central bank. In my opinion there's absolutelly no reason to believe that credit creation can explode in the EMU without the OK from the ECB.
On the other hand the ECB has so much bonds on their balance sheet that they can discipline the most problematic EMU members in case they refuse to fall in line.
That said, I belive the time of the actual transition isn't far away because many in Europe believe that the democracy is being eroded by these steps and I agree. The clock began ticking when Italian bonds imploded. I find confirmation of this also in the FED's decision to buy european goverrnment bonds. If truemof course and that it doesn't stem from the international trade.
Casper
Woland,
It appears people decided to take the dollar off gold in 1971.
Separate from this, two years later, we have the issue of Kissinger working with the ME to raise the price of oil 400% in 1973. A description of the Swedish meeting via Century of War:
In May 1973 ... a group of 84 of the world's top financial and political insiders met at Saltsjöbaden, Sweden, the secluded island resort of the Swedish Wallenberg banking family. This gathering of Prince Bernhard's Bilderberg group heard an American participant, Walter Levy, outline a 'scenario' for an imminent 400 per cent increase in OPEC petroleum revenues. The purpose of the secret Saltsjobaden meeting was not to prevent the expected oil price shock, but rather to plan how to manage the about-to-be-created flood of oil dollars, a process U.S. Secretary of State Kissinger later called 'recycling the petrodollar flows.'
The American speaker to the Bilderberg on Atlantic-Japanese energy policy, was clear enough. After stating the prospect that future world oil needs would be supplied by a small number of Middle East producing countries, the speaker declared, prophetically: 'The cost of these oil imports would rise tremendously, with difficult implications for the balance of payments of consuming countries. Serious problems would be caused by unprecedented foreign exchange accumulations of countries such as Saudi Arabia and Abu Dhabi.' The speaker added, 'A complete change was underway in the political, strategic and power relationships between the oil producing, importing and home countries of international oil companies and national oil companies of producing and importing countries.' He then projected an OPEC Middle East oil revenue rise, which would translate into just over 400 per cent.
... in order to tilt the balance of power back to the advantage of Anglo-American financial interests and the dollar ... they determined to use their most prized weapon - control of the world's oil flows. Bilderberg policy was to trigger a global oil embargo, in order to force a dramatic increase in world oil prices. Since 1945, world oil had by international custom been priced in dollars, since American oil companies dominated the postwar market. A sudden sharp increase in the world price of oil, therefore, meant an equally dramatic increase in world demand for U.S. dollars to pay for that necessary oil.
Never in history had such a small circle of interests, centered in London and New York, controlled so much of the entire world's economic destiny. The Anglo-American financial establishment had resolved to use their oil power in a manner no one could have imagined possible. The very outrageousness of their scheme was to their advantage, they clearly reckoned.
Woland,
I am not sure it is relevant who was at Camp David on that day.
Nixon's Secretary of the Treasury, John Connally, was in Europe in 1971, for example, in Munich in May and at the BIS in June. It must have been during these trips that Connally told the Europeans "The Dollar is our currency, but your problem".
Anyway, the Europeans refused to go along with the US proposals and rather wanted the official gold price in US$ raised. Connally told them basically that the US would rather move unilaterally.
So the decision about the oil price and the de-pegging of the dollar must have been made well before August 1971. Eichengreen writes that Kissinger was against Connally's bullying tactics. Anyway, either the decision had already been made and Kissinger already knew what was going on, or, perhaps they told Kissinger after the fact, and then Kissinger had to defend this position internationally.
By the way, on Friday, August 13, 1971, they received a request from the Bank of England to convert $3bn into gold (some 2600 tons). That they didn't convert anymore. Perhaps they already had the plan, but the BoE forced them to act immediately? Then the Camp David meeting was about how to spin it for consumption by the public.
Victor
PS: the Brits are always the poor saps in monetary matters, aren't they?
FWIW wiki sez:
The European Banking Authority (EBA) is a regulatory agency of the European Union headquartered in London, United Kingdom. Its activities include conducting stress tests on European banks to increase transparency in the European financial system by identifying weaknesses in banks' capital structures.[1] The EBA was established on 1 January 2011, upon which date it inherited all of the tasks and responsibilities of the Committee of European Banking Supervisors (CEBS).
The EBA has the power to overrule national regulators if they fail to properly regulate their banks. The EBA is able to prevent regulatory arbitrage and should allow banks to compete fairly throughout the E.U. The EBA will prevent a race to the bottom because banks established in jurisdictions with less regulation will no longer be at a competitive advantage compared to ones based in jurisdictions with more regulations since henceforth all banks will have to comply with the higher pan European standard.
The ECB also has a board that is on the ESFS along with the EBA, EIOPA, and ESMA - European System of Financial Supervisors
Aaron,
sure, this is where Mortymer got the email from. You are getting closer. Just keep digging.
Victor
Perhaps our expert with the B Th. degree (Being There) AKA
Aristotle, could weigh in on this subject? (BTW, FWIW, Ari
says Connelly was at Camp David) NOT trying to be picky,
as this is WAY above my pay grade, but we DO have a resident
expert. We had been led to believe, IMHO, that 1971 was part
of a PLAN to raise oil prices, as US production had peaked, and
STRATEGIC western hemisphere production could only be raised
with higher prices, so we would not become DEPENDENT on ME
oil, with the political consequences of that dependence. This
comes from A/FOA, not me.
Here is what Eichengreen writes about Connally:
Nixon selected former Texan governor John Connally to play "bullyboy on the manicured playing fields of international finance" (Connally's words). [...] it was learned that Connally, while nominally stumping for Hubert Humphrey in the 1968 presidential campaign, had helped to identify oil and gas titans who might contribute to the Republican candidate.
In the 2001 interview, Yamani says
I am 100 per cent sure that the Americans were behind the increase in the price of oil. The oil companies were in in real trouble at that time, they had borrowed a lot of money and they needed a high oil price to save them.
Victor
Woland,
Kissinger working with the Middle East to raise the price of oil 400% is entirely consistent with
1) Kissinger not being at Camp David or wherever in 1971 and
2) Another's claim the US took the dollar off gold to raise the price of oil.
Ari wrote this - from Flow Addendum
Part 1 --- Stormclouds Gather...
The estimable economist Milton Friedman stated his forgettable opinion in 1974 that OPEC would collapse and oil would never get up to $10 per barrel. In all fairness to Professor Friedman, we must recognize his position as coming from a staunch monetarist, emphasizing money supply as the "true religion" for the Federal Reserve to keep the US Dollar as good as Gold. At times, he half-seriously argued for the abolition of the Federal Reserve in light of the simple monetary policy guidelines that could serve in its stead, with the economy returning to a state of self-regulation. (In the past sound-money days, economic hardships were far from unnatural, and they were not necessarily attributable to acts of government. However, modern attempts to centrally manage the economy ensures that any blame for systemic difficulties today may be clearly laid at government's feet.)
Milton's mistake was two-fold. First was his knowledge that Arabian oil could be produced for one dime of real money, and that inevitable competition among OPEC members would surely keep the price close to cost of production. Second, and most importantly, Milton failed to account for the possibility that the government would abandon such reasonable monetary management to keep the dollar nearly as good as Gold. This fact was NOT lost, however, on the oil producing countries. Ask yourself, what would YOU do if your business or trading partners suddenly started offering you payment with Monopoly money instead of "real" money? Would you shun real money as though it were the plague, and embrace Monopoly money as the greatest thing since sliced bread? If you would, then I have got a job for you!! Bring your shovel and some work-clothes, you have been hired for life...
Upon the 1971 declaration by the United States that redemption of dollars for Gold would be terminated, the entities in receipt of dollars for balance of trade settlements had no difficulty recognizing this as an outright default on payment contracts. The scramble was on to make sense of this new payment system in which the dollar was no longer a THING of value (a small amount of Gold), but was now reduced to a CONCEPT of value; an undefined unit with which the world would denominate the amount of value in contracts for goods and services. The problem ever since has been in coming to terms with the meaning of value for this shifting and undefined unit, and its vulnerability for mismanagement and abuse.
Jelle Zijlstra, who became head of the Bank for International Settlements, said while with the Bank of the Netherlands in regard to the 1971 severing of Gold from the dollar, "When we left the pound, we could go to the dollar. But where could we go from the dollar? To the moon?"
As I continue this tale, I hope it becomes clear that not only have we gone to the moon, but that Gold is going there also.
[...]
The U.S. economy steamed along nicely in the 1950's, producing half of the world's oil as I've already stated, and half of the cars that burned up this oil. By the arrival of the 1960's, American industry was buying foreign factories, equipment and raw materials. In addition, the government was spending for its foreign bases and troops, and Vietnam was funded largely in the red.
An overhang of dollars was developing overseas--and while at first the foreigners were reassured that the Gold guarantee of the dollar was solid, as ever more dollars piled up, ever more of them cashed in the dollars for Gold. General de Gaulle summed up the sentiment, saying that America had "an exorbitant privilege" in ownership of the key-currency. By that he meant that the dollars America was able to issue via simple printing carried the same value in trade as the dollars that had to be earned by other nations through meaningful productivity. It quickly became clear that too many claims had been issued on the limited Gold, and President Nixon was prompted to close the Gold exchange window in the face of a certain run on the Treasury.
In a quick repeat from Part 1: " Upon the 1971 declaration by the United States that redemption of dollars for Gold would be terminated, the entities in receipt of dollars for balance of trade settlements had no difficulty recognizing this as an outright default on payment contracts. The scramble was on to make sense of this new payment system in which the dollar was no longer a THING of value (a small amount of Gold), but was now reduced to a CONCEPT of value; an undefined unit with which the world would denominate the amount of value in contracts for goods and services. The problem ever since has been in coming to terms with the meaning of value for this shifting and undefined unit, and its vulnerability for mismanagement and abuse."
[...]
In 1978, the U.S. issued 10 billion dollars worth of bonds denominated in foreign currencies (marks or yen) to milk extra life out of a dying dollar system, and the fix lasted until the 1979 Oil Crisis made mincemeat of it. It was an acknowledgment that some foreign investors wouldn't hold U.S. government obligations that would be repaid in dollars worth less than originally spent on the bond. Further, it was at this time that the U.S. promised to sell Money (Gold) from the Fort Knox stockpile to foreign central banks unwilling to hold dollars. (On his last day of office, March 31, 1978, Federal Reserve chairman Arthur Burns suggested that the entire $50 billion of the nation's Gold stock be sold for foreign currency in defense of the dollar, at which time the foreign reserves could be used to buy up the collapsed dollar in international markets. While this plan was originally rejected, within three weeks the Treasury Department was forced to announce it would auction Money (Gold) on a regular basis.)
Treasury Secretary Michael Blumenthal pledged in a meeting two days later with top-level Arab businessmen that the integrity of the dollar would be defended vigorously, and asked them to do their part to stabilize the global economy by keeping a price freeze on oil in place at least through 1978. (You should have no questions now about where the dollar found its value after the 1971 delinking with Money (Gold). The asking price by oil--influenced by many factors--is what established the dollar's value.)
[...]
[...]
Here I must ask you to pause for a moment to reflect on those huge oil trade surplus figures we toyed with in Part 3, and recall that they were from early 1970's oil demand at a price of $11.65 which caused the First Oil Crisis. What happened to the vast amounts of petrodollar revenue that was being pumped into international banks, and recycled as fast as the loans could be written to borrowers throughout the 1970's? Further, what happened to the earnings that were surely being generated on these deposits through the activities of the lending institutions? As I noted at the end of Part 4, the System miraculously survived the Second Oil Crisis of 1979, and concurrently the skyrocketing price of Gold promptly abated in 1980. Further, Kanovsky points out that oil prices started weakening in 1981, and then plunged in 1985. Force yourself to make the connections. You will be one step ahead of Kanovsky, who has identified the effect, but no doubt has missed the cause entirely. Let us now tie together everything we know, and fill in the remaining pieces...
===========================
Give us more ARI!!
Oh well, too bad Nobel Econ. Prizes cannot be retracted. Marginal
cost was 10 cents a barrel, so that will be the price to ALL producers,
just competing their little hearts out against one another, to
satisfy our thirst, eh? Good thing they weren't producing oxygen.
There was, of course, another issue besides currency debasement,
which FOFOA has discussed in prior posts: They did not realize,
until the spot market developed after the 1973 embargo, just how
valuable oil was to the West in real terms. They learned over a few
short months, back when the Shah still ruled Iran as our man in
Tehran.
JR: I'm printing up all your last stuff for my permanent library!
Thanks!
Thanks for the comments on the control of the banks in Europe vis a vis the Euro.
(I'd like to send a cheerio call to thedeadfauvi as we step through this part of the discussion. We'll try to keep this "concise".
http://fofoa.blogspot.com/2012/03/ball-of-twine-open-forum.html?showComment=1333024410493#c7818268385768762921)
This leads to my next question. Does the ECB/Eurosystem have enough tools in place now to manage the overall currency supply and the activities of the European banks to ensure that they cannot frustrate the pursuit of the ECB currency stability mandate?
I should probably add that I'm using the word 'manage' in a broad sense - quantity, quality, distribution and so on.
PS. I think CB interest rates are a blunt instrument which is at best useless and at worst destructive to the real (non-finance sector) economy.
Cheers
FOFOA,
thanks, that resolves it. It seems that after A/FOA you occasionally get imitators who send unsolicited emails to various addressees.
Victor
FOFOA said...
Victor/Aaron,
Just FYI because it seems like you are suggesting that was Another or FOA praising a conspiratorial essay about 9/11 and Iraq that Mortymer dug up.
Not this shrimp! I just pasted Victor's text into Google and it spit out a link. I'm innocent!
@JR
There is no doubt there has been malinvestment; isn't that the nature of a fiat system? I'm confident that much of what is imported can be replaced through local sources or even done away with altogether, without significant impact (and that is likely the direction).
Phat Export,
I'm not following, my point is the US basically consumes what it produces plus a whole bunch more from abroad. This overconsumption is unsustainable. It can't be replaced by local sources because it already requires all internal sources + additional external
Moneyness
But the problem is that, net-net, the US consumes everything it produces and then some. This intractable problem cannot be solved in the monetary plane, except through dollar hyperinflation! Here's some more FOA:
"I point out that many, many other countries also have the same "enormous resources; physical, financial, and spiritual" that we have. But the degrading of our economic trading unit, the dollar, places the good use of these attributes in peril. Besides, the issue beyond these items is our current lifestyle. We buy far more than we sell, a trade deficit. Collectively, net / net, using our own attributes and requiring the use of other nation's as well. Not unlike Black Blade's Kalifornians sucking up their neighbors energy supplies (smile). We cannot place [our tremendous resources] up as example of our worth to other nations unless we crash our lifestyle to a level that will allow their export! Something our currency management policy will confront with dollar printing to avert. Also:
NO, "this country will not turn over and simply give in" as you state. But, we will give up on our currency! Come now, let's take reason in grasp. Our American society's worth is not its currency system. Around the world and over decades other fine people states have adopted dollars as their second money, only to see their society and economy improve. Even though we see only their failing first tier money. What changes is the recognition of what we do produce for ourselves and what we require from others to maintain our current standard of living. In the US this function will be a reverse example from these others. We will come to know just how "above" our capabilities we have been living. Receiving free support by way of an over-valued dollar that we spent without the pain of work." (FOA)
That was written a decade ago. In the month that was written, the US as a whole (Government sector plus domestic private sector) was living above its means to the tune of $31.3B. That year we were living above our means by $361B. In the decade since that was written, we have maintained an average "excess consumption" of $48.5B per month and $581B per year. But here's the thing—in the most recent third of that decade (2008-2011), the domestic US private sector actually has crashed its lifestyle more or less. The economy is in recession and unemployment is up over 9%. Yet the government sector expanded its "lifestyle" to take up the slack!
No wonder we're maintaining that trade deficit!
So I thought I'd come up with my own "physical plane identity" (kinda like an accounting identity in the monetary plane) for "living above our means." Here's the legend:
USG=US Government sector
USP=US Private sector
BOP=Trade balance for both sectors combined
We know how much the USG is living above its means. That's the budget deficit. And we also know how much the USG+USP combined are living above their means. That's the BOP. So the "identity" looks something like this:
USG+USP=BOP
The annual USG budget deficit (how much the USG lives above its means, with means equaling taxes) is about $1.4T. And the BOP is about $565B. So we get this:
USG=$1.4T
BOP=$565B
$1.4T+USP=$565B
Or stated another way:
USP=(-$835B)
So the US private sector is actually living below its means by $835B if we isolate it from the government sector. The government sector, on the other hand, is living way above its means with 60% domestic support and 40% foreign support. Stated another way, the US private sector is providing the USG with $835B in goods and services in excess of taxes, or 60% of USG's "deficit consumption."
Viewed this way, there's only one way to reduce that trade deficit (inflow of free stuff): reduce the size of the USG monstrosity. Unfortunately, the USG is totally incapable of voluntarily shrinking itself, especially because it issues its own currency! The real problem, the heart of the matter, the reason why the dollar will and must hyperinflate, is that the US trade deficit, on the physical plane, is structural to the USG who issues its own currency. Simple as that.
[...]
So what's the danger in a little inflation?
If the dollar sinks, like they (the USG/Fed) want, sure, our exportable goods will become relatively cheaper abroad (even though their price here won't drop) and their (our trading partners’) exportable goods will become more expensive here. This will appear as good old-fashioned price inflation, since we’ll now have to outbid our own trading partners just to keep our own production, and pay more for theirs. And while the domestic private sector has already crashed its lifestyle somewhat, the currency issuer has increased its "lifestyle" to compensate.
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.
@JR
"But, we will give up on our currency!"
Of course; after all: "It may be our currency but it's your problem." Connally
"We will come to know just how "above" our capabilities we have been living."
I'm not convinced of that. More like wishful thinking/envy from competitors?
"But here's the thing—in the most recent third of that decade (2008-2011), the domestic US private sector actually has crashed its lifestyle more or less. The economy is in recession and unemployment is up over 9%. Yet the government sector expanded its "lifestyle" to take up the slack!"
Again, malinvestment.
And your point is?
I'm explaining FOA's statement that
The benefit to oil will be the increased world demand that a Euro settlement Free Trade will create. Once this train begins, everyone will jump on it. Why? Because it will benefit the largest part of the world population.
Dollar hegemony benefits the US at the ROW's expense, mmmkay? The US can "afford" to overconsume so long as they have the reserve currency, but the ROW isn't so keen on this setup.
Synthesis
The euro architects were not trying to force a reserve currency on the world. There is a big difference between creating a government product with sovereign-monopoly backing that everyone must use, and creating a product that the marketplace must freely choose. In this case, the marketplace consisted of sovereign nations that chose to give up the privilege of printing their own money in order to join in the benefits of the euro.
Creating something the market chooses - so the ROW will chose the euro over the dollar.... hmmm...
Yeah... The best made plans... Unintended consequences... And all that.
This is fun... Please, more supporting 'evidence'.
If the Euro project is the only thing tying Freegold together, well, you will likely be soundly disappointed.
On a lighter note:
wepollock
http://www.youtube.com/watch?v=JjH-e9iBlcQ&feature=g-all-u&context=G286f0c3FAAAAAAAABAA
Does Freegold help to avoid this? NS, is this the pain you were speaking of? My goodness...
"If the Euro project is the only thing tying Freegold together, well, you will likely be soundly disappointed."
Good thing you can't read well. Here it is again:
Freegold is our destination with or without the euro.
JR,
Honest to god sometimes you make me laugh my computer screen .....
LMAO at Phat Export!!
my apologies Phat ;)
No problem Wendy. Your whining makes me do the same thing. Here's hoping more snow for you (and maybe option A isn't such a bad idea... hmmm...) Whoops... My apologies too; don't slit your wrists.
@JR
Yes, it would appear such an obvious statement, were it not for the endless dribbling references to the Euro. As if... :)
Phat,
I'm guessing you just opened a can for yourself. That was JR being nice. Now you're going to get the mob.
whoops
An interesting piece on Bitcoin's unofficial adoption within finance.
Bitcoin, the City traders' anarchic new toy
Also of note, lending in Bitcoin is rapidly growing. It is acting like a transactional medium, just as FOFOA describes gold's early development. Development and refinement of the protocol and software has been progressing rapidly as well.
Over the past six months, about 1.3mm bitcoins have been generated. On top of the roughly 7.4mm that were already in existence, that's a 17.5% increase in the monetary base - yet the exchange value has remained within a range from around $2.5-$7, settling at about $5/BTC for the past two months. The average inflow in USD terms to keep Bitcoin at $5 would be $6.5mm.
I think the only reasonable conclusion is that there is steady growth in adoption of Bitcoin - I've even been building a healthy business by making use of its features. I'm aware of a few instances of Bitcoin being used to transport large amounts of precious metals without actually moving the metals. In addition, Bitcoin price movements for the past few months have been predictive of gold's, generally occurring within one day prior to a move in gold - in the same direction and with similar magnitude.
Thank you for taking the time to respond Phat so?
Here's wishing you a lovely easter weekend, I'll be flying off implementing option B.
:P
I mentioned the book A Century of War by William Engdahl in the comments above.
I should add something. I had not heard of Engdahl until a few days ago. He is sort of a full-time conspiracy theorist, has worked for the think tank of LaRouche. One of the first articles by him that I saw claimed that the Federal Reserve was secretly controlled by the Bank of England who tried to destroy the dollar, that the oil crisis in 1979 was a hoax (no actual shortage, just cars lines up at the gas stations posing for the cameras), etc.
If you don't know what I am taking about, you can google "LaRouche" and you will find out.
So I clicked on and wasn't expecting anything beyond noise. Until a few days later when I saw that Sheikh Yamani references the book in his interviews and even endorses it in the marketing blurb.
Perhaps among all the weird stuff, there were some things that Engdahl got right. Perhaps some sources he cites are sound, and he just has some issues with the interpretation. I definitely wouldn't trust him on anything without checking. On the other hand, it is probably not that easy to get Yamani to endorse your writings.
On that topic, there are two further books
http://www.amazon.com/Hidden-Hand-American-Hegemony-International/dp/080142884X
http://www.amazon.com/Petrodollar-Warfare-Iraq-Future-Dollar/dp/0865715149
The second one is being endorsed by Engdahl which is still not really too much of a positive recommendation in my view, but at least that gives the book a Yamani number of 2. In any case, you will need to check references before you believe something (which is btw always the case if you are honest).
Victor
Wendy; enjoy. I personally don't believe in Santa Claus anymore (unless the ref is to JS). I'm sure no matter where you go, there is sunshine (at least that's what momma used to say).
NS
Bring it... The worst that could happen is to be deluged by JR's endless barrage of quotes. And if Wendy represents part of that troupe, well, I'll have plenty of laughs (at their expense). It may be 11:30 am in this wonderful part of South China but I think I will crack a Tsingtao. Peng bei!
Victor,
globalreasearch.ca is a regular host to Engdahl's "papers". I think a conspiratist is a good evaluation.
cheers phat!
Hi Ramon,
"It is acting like a transactional medium, just as FOFOA describes gold's early development... In addition, Bitcoin price movements for the past few months have been predictive of gold's, generally occurring within one day prior to a move in gold - in the same direction and with similar magnitude."
The article you linked says:
He also likes that there is an absolute limit of 21 million Bitcoins built into the system.
"If you try to print more than 21 million Bitcoins, you will be rejected by cold, loveless computers whirring away in nerds' garages. It is a better form of money than we have right now, or than anyone has designed so far."
The trader, who was not willing to be named, said he spent four hours a day on Bitcoin, describing it as his second job. He estimated 90 percent of traders have bought it, most "looking for a quick 2,000 percent".
He, however, is playing the long game, accumulating as much as possible in the belief that one day, he will own a small but significant percentage of a world currency with a fixed supply.
What's up here? Do you not see the conflict between A/FOA/FOFOA and what you claim Bitcoin is and what Bitcoin actually is? Are you just into pain?
Wendy:
:) Already did. (burp... compliments to the fine folks in Qingdao; a brewery visited long ago, while in the Navy).
NS
Besides, I didn't think I was having a beef with JR, just an attempt at understanding. If it was perceived otherwise, well...
"Freegold is our destination with or without the euro"......or the EBT card ;)
http://www.youtube.com/watch?v=UC7DXiEFHn4
RJP
RJP:
Especially like this part:
...
Get your high school diploma, go to college
Get a degree and start makin dollars
Only one thing wrong, and it's a trip
Inner city schools don't teach us shit
Got us stuck on stupid, straight S.O.S.
Can't get nothin, but they payin the rest of them fools
all around the world in the other countries
They should be spendin that money right here
in the state of California
You graduate and can't spell diploma
...
Eminem
...A visionary, vision is scary, could start a revolution,...
Hi JR,
My post was not an attempt at an argument, just an informational update on the state of the system. To summarize: Bitcoin is still here, and growing.
Do you not see the conflict between A/FOA/FOFOA and what you claim Bitcoin is and what Bitcoin actually is?
I'm not entirely sure now. Bitcoin is a system that is growing and in flux, so I don't think any hard definition can be applied yet without being incomplete.
What I see from the A/FOA/FOFOA side is a focus on gold and the Austrian theory of how money arises that precludes the possibility of Bitcoin working - a critical point in particular being the requirement that money starts as a commodity. I agree with the theory, but not with certain assumptions and definitions it rests on.
I don't see how the fixed supply is detrimental. Bitcoin expands its "supply" by moving the decimal to the right: divisibility (theoretically unlimited with protocol changes) - the opposite of traditional fiat and similar to gold. Existing wealth is preserved while growth is still available without acting as a fulcrum the way gold does/will.
You also focused on speculation. There are now budding futures, options, and stock markets in Bitcoin; the exchange price has stabilised for now.
Funding pools are being used for hard money lending and various micro-finance operations, including efforts to integrate with or mimic Kiva. These are being run as sustainable Bitcoin businesses within the Bitcoin system, i.e. the funds are held as BTC unless local currency conversion is needed for lending purposes or domestic expenses, after which most of the profit is converted back to BTC. The largest operations doing this have volumes in the hundreds of thousands of BTC per month, so a sizeable percentage of the system is providing services in contemporary economies while the flow is decidedly moving into Bitcoin; speculation is not the only source of influx.
There are funding pools held on either side, in both BTC and USD (or any other fiat), and hedged accordingly based on exchange valuation; it doesn't matter what BTC is valued at in another currency because it still functions exceptionally well as a transactional medium even after conversion fees are taken into account.
As far as I see, the general behaviour is similar to gold's beginnings as proposed by FOFOA even if the structure is different.
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