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:
1 – 200 of 549 Newer› Newest»Fofoa, is the word GOLD mentioned??
Well, I almost responded to one of Gary's comments from the Sushi Island Savers Saga (wherein he highlighted some of the same choice clauses that FOFOA, has included) with the following:
Of course they know what's going to happen, as just about everything "they" have done for years now guarantees a (hyper-inflationary) outcome. I think it's also worth noting that this legislation is clearly the companion piece to the very chilling National Defense Authorization Act, which is clearly designed to deal with a U.S. population that is not going to
be remotely civilized when Le Grand hyper-inflationary (and who knows what else) shit storm really gets going.
Battle Hymn of the Public
Mine eyes have seen the horror of the coming of the hoard. He is trampling on the mintage were no value can be stored. He has loosed the fateful printer of unbearable reward. His truth is parching on.
Worry, worry, now he screws ya.
Scurry, scurry, now he screws ya.
Hurry, hurry, now he screws ya.
Gold go get you some
Hello Friends,
Executive Orders are nothing new. They've been used to centralize power for a long time. EO's are a convenient way for the executive branch to subvert the checks and balances supposedly provided by Congress and the courts.
The power granted to the federal government to control natural resources by Executive Order go all the way back to John F Kennedy:
http://www.presidency.ucsb.edu/ws/index.php?pid=58935#axzz1q0H9Wb4B
From what I understand, the key difference with this recent EO signed by our favorite Irishman O'bama, is that the federal control of resources is not only to be implemented in wartime. It can now be implemented during peacetime as well.
Given the fact that the US has been in a state of perpetual war for as long as I can remember, I'd say this latest EO is just a technicality. However, it still represents a cause for great alarm because it puts us one step closer toward complete federal rule.
From the way I interpret it, yes, the potential nationalization of US gold mines has now been codified into law. It already was before. It's just that now it can be implemented even when the US is in a state of "peacetime". Whatever the hell that is.
You can read a little history on Executive Orders in the US here:
http://en.wikipedia.org/wiki/Executive_order_(United_States)
If you notice, the first EO's were implemented by the tyrant Abraham Lincoln. IMO, he was the closest thing to a dictator America has ever seen. The groundwork he laid was what turned 'THESE United States' into 'THE United States'. We've been rolling downhill like a snowball headed for hell ever since.
So, my advice would be to hold your gold close to your heart and ignore these Executive Orders. Or better yet, you could come hang out with me in God's country where we don't recognize Executive Orders. Jefferson Davis is still my President and he never issued no stinkin' Executive Orders.
http://www.youtube.com/watch?v=_QaPRJWdtts
RJP
Sec. 502. Consultants. The head of each agency otherwise delegated functions under this order is delegated the authority of the President under sections 710(b) and (c) of the Act, 50 U.S.C. App. 2160(b), (c), to employ persons of outstanding experience and ability without compensation and to employ experts, consultants, or organizations. The authority delegated by this section may not be redelegated.
I find this interesting. Modern slavery eh? :P
another about silver:Silver will always be part of "gold money". But, is far too small a market for large, modern economies. Silver will do far better than any paper asset, only it will serve better as a "personal holding" than as a major money. If it is of your way to balance wealth, then silver will show value.
Hathaway purchase silver as part of it's long term "economic investment outlook". Not to be confused with a leveraged, quick profits bet. Understand, that Berkshire plays within the "world paper economy parameters", they are not looking for a currency replacement. What is not seen, are the personal holdings of Mr. Buffett, Mr. Soros and countless other "world wealthy". In those accounts you will indeed find silver, but also, much more gold!
I know that most of folks on this blog are gold fetishist, but even another didn't frowned at "poor man's gold", acknowledging silver as "gold money" camp, and as this blog is tribute to the thought of another, embrace his above thoughts.
Hi MF,
That caught my eye too. I'd be interested if anyone knows the precedent behind the "without compensation" wording, because the way I read the rest of the order was them declaring—and delegating to department heads—their ability to outbid the market in any way necessary should market prices disrupt or even threaten any supply line they think they might need or even want. Individual departments can induce and guarantee private loans, make loans themselves, or call up the Fed with the authority of POTUS. So it seems odd that "persons of outstanding experience and ability" would be the only ones not getting paid.
The whole thing was written in a catch-all manner, like "this shall only be in effect during daytime or at night." My read is that they wanted an order in place that could be pointed to when any department needs to deploy dollars in defense of any trade inflow. Some high-level commission must have determined that a possible increase in market prices threatens their trade inflow. And they want to be freely able to deploy their main product, the dollar, "against" those price increases in order to outbid the market at any point in any supply line.
"To ensure the supply… from high cost sources… in light of a temporary increase in transportation cost… the head of each agency… is delegated the authority… to make subsidy payments"
They should have specifically guaranteed wheelbarrow financing, production and distribution as well, IMHO.
Sincerely,
FOFOA
FOFOA
I agree they could have really shortened the thing.
XO
This grants us the power to do whatever the fuck we want.
Love
BHO
Aengrod
I am curious, do you hold gold and silver because someone else said one should or due to your own personal understanding?
Personally I think Another was wrong on silver, but right on gold.
This in my view is what is important, individual opinion.
TF
Ps. The site is dedicated to Another and FOA. They seem to not be in agreement on silver fwiw.
FOFOA
Ps. Wouldn't wheelbarrow supply stimulate aggregate demand to a lesser extent than forklift supply? Can't have that. ;)
I wonder why FOFOA sounds so surprised. The latest NDAA adjustments ("we can through you in jail and trough the key away forever without any trial") would have concerned me more, if I would be living in the US.
@FOFOA: I remember when you said year(s) ago about the USA: "We are staying...(lalala "our freedom tradition I believe in").
Welcome to FEMA city where the new jobs are.
Greats, AD
Motley Fool,
Yes. While I wont let anyone else hold my gold (except of myself) I wont be as hard on silver. It will certainly leave my coffers somewhere in the future, not in staggering amounts, but bit by bit, as I see that store of value function is applied respectfully to both gold and silver a.k.a "gold money camp".
"Oil" see value in both gold and silver. Go to middle east, visit jewelers, bullion dealers in dubai etc, see it for yourself.
My reading of the order indicates that the fiscal role of Congress
is completely bypassed, in favor of "agencies" direct guarantees for
loans provided by private banks. Does anyone have an understanding
of what the somewhat nebulous item regarding "contract with any
(individual?) federal reserve bank" is all about? Can they get direct
funding from an FRB, in addition to federally guaranteed "private"
bank loans?
One last observation. If this order is directed at any ONE thing,
it is probably RARE EARTHS, as the criticality for defense and
the China monopoly are a big sore spot with USA #1. It reads
like an authorization for a new WPA, with a national defense
fig leaf for cover.
Hi JR,
Thanks a lot for your detailed response (20 Mar) on the question of the price of oil in the post transition Freegold scenario.
I remain unclear as to whether or not oil will follow the gold revaluation fully or only partially or even not at all.
For sure there will be some owners of oil in the ground, that they see as a SOV, which they will only exchange for that other SOV, gold ounces in the traditional ratio of say 20 bbl/oz.
Thus, IMHO amongst all the currency and business turmoil we will also have a major oil shortage which will lead to major price pressure etc ... which will magnify the uncertainties ahead.
ChrisF
So you are suggesting that instead of accepting $100 per barrel they will demand $5000 a barrel and get it? :P
Why don't they demand $5000 per barrel now then? I don't see the point in waiting. ;)
TF
Victorthecleaner,
You had a question on backwardation in oil.
I ran an oil business in a previous life during the 1980s. We looked hard for possible correlations between backwardation and future price direction but found none at all. If anything, backwardation tended to be linked to a bearish future outlook where holders of priced physical were prepared to sell forward oil at a discount in order to at least be hedged.
This is completely contrary to the prevailing view in the gold market where any backwardation is seen as very bullish.
Prior to the run up to c. 150 $/bbl a few years ago I understand oil went into contango which was apparently explained by people's confidence in the lasting bull market of this SOV !
Hi TF,
I assume that today the oil giants obtain gold for the last say 10% of their production in the traditional ratio c. 20 bbl/oz. If not directly then by using $ currency.
One SOV for another.
Why on earth should they agree to a much less favourable ratio after the transition ?
After all they have been thinking in ounces since 1928 ;)
I forgot to add that enforcement of all these extraordinary powers will be very much dependent on elements of our society (the military/national guard) that there is reason to suspect will not be interested in cooperating with the government's vast eminent domain/confiscation initiatives. I guess we'll see when we get there, but, I, for one, will not be surprised to see secessionist behavior and/or movements crop up that are peopled in large numbers by retired and active duty U.S. armed forces personnel.
ChrisF
Because the values of things can change, and at $5000 a barrel, oil has no value.
Think on the value of oil prior to the invention of the motorvehicle.
This transition away from the dollar reserve will affect the value, the use of gold.
If today you can get 100 loaves of bread for a barrel of oil, and afterwards the same, what does it matter that your barrel of oil gets you less gold.
You may want to review FOFOA's It's the Flow stupid, or flow addendum (I forget).
The price of gold does not matter to oil, only the flow.
TF
TF
to stay on the "Ball of Twine" topic:
I wonder how the (US)gov. will react towards pension/retirement fonds (unfunded future liabilities): will they sacrifies the currency or the retirees?
At least in germany the laws are prepared to screw private retirement accounts, the public social retirement...who knows... Looking at greece they screwed the public retirees, okay they dont have a printing press (yet).. In hungary AFAIR they also screwed public retirees, although having a printing press...
gold - get paid ;)
Greets, AD
RJ,
You are correct that EO's are nothing new. In addition to the reign of Lincoln, one could look at the reign of FDR in a similar light. List of FDR Executive Orders
Both Presidents used war and economic ergency as a means of extending their authority.
In the case of FDR, he set a precedent by running for and holding the Presidency for a third and fourth term legally. The tradition of a "2 Term limit" was codified into law via the 22nd amendment. We'll never know if Lincoln would have bucked tradition, perhaps he would have. Both Presidencies ended with their death.
Looking at our current President, I would not be surprised if this EO is just part of a plan to hold the Presidency. Time will tell, but I suspect that Mr. Obama is going to try to hold that office, with extended power, at all costs.
Hi FOFOA
I sort of agree with AD.
I find it unbelievable that you find it unbelievable.
EVERYTHING i ve seen suggests a fascist dictatorshipish future for America.
They can now force you to be slaves,kill ,you whatever.
"So it seems odd that "persons of outstanding experience and ability" would be the only ones not getting paid."
I bet thats what the population of Cambodia thought about the type of poeple getting shot when the Khmer Rouge took over.
Nice to see the rose tinted specks slipping.
http://www.youtube.com/watch?v=FCSBoOcGFFE&feature=player_embedded
Regards
Ozzy
Hi Woland,
My reading of the order indicates that the fiscal role of Congress is completely bypassed, in favor of "agencies" direct guarantees for loans provided by private banks
There is a lot of this Congress bypassing going on, huh? Also in this month Congress bypassing is popular in the field of war:
http://www.youtube.com/watch?v=15j-g2pigg8
It seems to me there are two sides in American politics. Those that think the constitution should matter, and those that don't. The latter ones have been in power since forever. Seeing how the republican primaries are going, that probably won't change soon.
Wheelbarrows - get you some :o)
/Burning
Edwardo
Sadly that is not how it works. You may perhaps want to read up on the Milgram experiments.
It happens so gradually, it's just one small thing that can be excused, then another small thing and before you know it things have changed radically. The USA has already been busy with that process for a long time now, since 2000 at least, that I can see.
You are starting to make bigger leaps now. This latest executive order being one of them.
The people will wake up one day in horror and wonder what happened, having believed all the while they were the land of the free and the brave, and having fought for liberty.
Peace
TF
BTW...Thank God for EO's 6248 and 6249
;)
Nickelsaver
If I may, here's a friendly amendment to your parody of the Battle Hymn:
Mine eyes have seen the horror of the coming of the hoard. He is trampling on the mintage were no value can be stored. He has loosed the fateful printer of unbearable reward. His truth is parching on.
Worry, worry, now he screws ya.
Scurry, scurry, now he screws ya.
Hurry, hurry, now he screws ya.
Gold: go AND get you some.
(h/t Santa) USA threatens to shoot international US$ usage in the foot, by banning all countries buying Iranian oil from the US banking system.
http://www.bloomberg.com/news/2012-03-23/u-s-wants-iran-oil-buyers-to-pledge-cuts-or-risk-sanctions-1-.html
/Burning
Jaqship,
"Gold, go get you some!" is Ari's line...it says it ALL.
I am prone to grammatical errors though - need to replace "were" with "where"
thanks
Nickelsaver,
I well know of Ari's line; I was just trying to fit words better into the melody.
Here's another version:
Mine eyes have seen the horror of the coming of the hoard.
He is trampling on the mintage were no value can be stored.
He has loosed the fateful printer of ILLUSORY reward.
His truth is parching on.
Worry, worry, now he screws ya.
Scurry, scurry, now he screws ya.
Hurry, hurry, now he screws ya.
Gold: go and get you some!
Sometimes gallows humor is better than none!
JS,
:-)
Thanks for putting so much thought into it. Maybe we can come up with more verses?
Yes, TF, I'm familiar with the wisdom of the frog boiling so slowly it doesn't know it is being cooked. Equally, I am acquainted with the tale of woe that goes as follows: First they came for the _____, and I did nothing, then they came for the_____etc. etc.
But hoi pilloi do, on occasion, respond, as they say, in kind.
I think there is growing evidence, should one choose to look, that civility among various key groups and demographics, is ripe to give way to something else entirely.
Edwardo
The conventional wisdom here is that the sons and daughters (police and army) will not want to shoot and repress their parents.
My point was that I think you will find the parents will not want to shoot their kids, while the kids will find solace in acting on authority.
I have also noticed the signs...however one should not think that the Authority will not react...and I predict that We The People will lose...not indefinitely, but long enough to severely damage a large part of your society.
TF
Curious. Tungsten speculation is doing the rounds again.
Tunsten filled 1 kilo bar
TF
TF,
I noticed that too. Makes you wonder how much fake gold is out there? My conspiratorial mind wonders if this type of thing isn't a tool of the fiat machine to shake confidence in gold.
caveat emptor
Regarding the Constitution, the real divide, in my view, is between those who
have reverence for The original Bill of Rights and those who do not.
And it's worth noting, therefore I am, that the aforesaid divide goes back to the days before The Republic was founded.
I guess I am counting on all generations within the family choosing not to take up arms against one another, TF. As always, vamos a ver.
Sec. 502. Consultants as commented by MF was the bigger eye opener for me really. wow.
and this...
The authority delegated by this section may not be redelegated.
Does that mean you go to jail if you decline the generous offer from the President?
"temporary increase in transportation cost"
Interesting how transport cost is specifically mentioned. Oil must be an input cost into so many other endeavours as well. I suppose cheap transport is the clincher though with everything about the economy predicated on that.
Hi,
I tend to go with FOFOA about how to interpret the EO. All the anti-terror stuff such as "and we can just lock you up for how long we want..." is not really new.
But what's new is that the executive can get Fed guaranteed loans to purchase supplies and equipment. That's new. It is not just the usual sabre rattling, but quite pragmatic planning. Planning for what? Of course, HI.
Kind of surprising that it is happening so late.
What I also found interesting is that they now threaten India with financial sanctions should they continue to import Iranian oil. I wonder who is next. China? How about Russia? Eventually the US would be left alone using the dollar. The interesting part of the question is when Europe will (dare to) step out of the lane, and when big oil will (SA, Kuwait, UAE,..)
Finally, would anyone be interested in writing an article about oil? Costata? I'd be interested in what the opinion on available reserves and spare capacity is? Somehow oil in Iraq has not been properly developed for decades due to the ongoing sanctions and war. How much is there? Also, are the old forwards with SA still open? If not, are they perhaps not pumping fully and leaving stuff in the ground, just waiting until US$ settlement is terminated? Or is it true that they are losing their leading position to Russia and Canada.
Oil backwardation: Perhaps all the speculators want spot oil now (fearing a war?), but all storage facilities are full, and so the arbitrage (sell spot, but forward) does not work because there is no further storage available?
Victor
Does that mean you go to jail if you decline the generous offer from the President?
Reading again, I'm guessing that means only the head of agencies can recruit the consultants and not their underlings.
A shame Mrt isn't commenting here at the moment, he might have posted a link about Iraq and red lines .
Victorthecleaner;
You might enjoy "Oilquake in the middle east", by Michael Klare.
Also: Early Warning blogspot; "Iraq could delay peak oil a decade". Jan 4,2010. Lots of detail.
Nickelsaver
As the original has 5 more verses, continuing the parody will take a lot of time. Certainly I'd be delighted to edit anything you come up with.
Nickelsaver,
You're right about FDR abusing his power to issue EO's. He was the second closest thing to a dictator America has ever seen. Luckily, he died at age 63 or there's no telling how long his reign as 'President for Life' would've lasted. The only good thing I can say about him is at least he didn't use the military to kill his own people.
Edwardo,
Funny you should mention secessionist movements cropping up in America. You're not alone in your thinking. A Russian professor, Igor Panarin, who predicted the break up of the Soviet Union has been predicting for a while that the US will break up as well:
http://online.wsj.com/article/SB123051100709638419.html
Although I don't exactly agree with his map, I don't dismiss this eventually happening.
MF,
You're right about the incrementalism that's used to implement radical change. Most of the brain-dead masses don't even realize it's happening. But there is one thing that Americans (especially in the South) will not take lying down and that is the confiscation of firearms.
This was tried as a test run during Hurricane Katrina and the government received a lot of backlash for it. The NRA made a big deal about it:
http://www.youtube.com/watch?v=-taU9d26wT4
As a result of this, most of the state legislatures have passed laws banning gun confiscation by state authorities in times of emergency. In 2006, as part of a Homeland Security Appropriations Bill, Senator David Vitter of Louisiana added an amendment to that bill that made it illegal for federal officials to confiscate firearms during a state of emergency.
But as you so eloquently put it in your summary of BHO's latest Executive Order, they really have the power to do whatever the fuck they want.
Americans may not care much about the nationalization of natural resources, but it will get ugly real fast if guns are confiscated.
As General Yamamoto observed: In America, you'll find a rifle behind every blade of grass. It's this fact alone that gives me solace that there may be some hope for my country yet:
http://www.youtube.com/watch?v=YDauc9En9R8
RJP
Oil again. This is Another:
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.
So the new reserves were found in the early 1990s. Where are they? Have they been used up by now?
In the oil world, everyone seems to think that the low prices of the late 1980s and the 1990s were because of political weakness of OPEC and excess capacity. Nobody seems to think of the US$ and of gold.
So should I conclude that the high prices of today and the apparent lack of spare capacity is because of peak oil or at least peak cheap-oil, or is it again just related to the US$ and to gold?
It seems that absolutely everyone tells you lies.
Victor
Two links from the comments section of the Zero Hedge article re testing gold:
http://www.goldcoinbalance.com
http://assayintelligence.com/
DP,
I don't know what Iraq and redlines means but I'll ask mortymer if he has any links.
BTW he has an open forum on his blog in his Feb folder
Also everyone in the oil world seems to think that the US and other western interventions in the ME had the purpose of making oil cheaper or making larger quantities available. This doesn't square either. Think of Iraq/Iran war 1979-198x, Iraq 1990/1, Iraq 2003, Libya 2011. On the other hand, Saudi Arabia was always left alone and has been supported extremely well.
Victor
RJP:
That quote cannot be attributed to Fleet Admiral Yamamoto.
Please see: http://en.wikiquote.org/wiki/Isoroku_Yamamoto
mr p:
Reality hits you hard, bro...
Darn you! I absolutely hate snorting coffee.
These guys have another interpretation of "Freegold":
http://www.thechinamoneyreport.com/
“Bingo! Let’s go to get our gold,” one villager was quoted as saying.
haha :D
full link to previous comment:
http://www.thechinamoneyreport.com/2012/03/24/villagers-in-golden-globe-city-given-100-gram-bars-of-gold-and-silver/
VTC wrote,
"I tend to go with FOFOA about how to interpret the EO. All the anti-terror stuff such as "and we can just lock you up for how long we want..." is not really new."
Your statement is counter factual. The following provisions in the latest NDAA- Title X, Subtitle D, entitled "Counter-Terrorism." In particular, sub-sections 1021 and 1022, which deal with detention of persons the government suspects of involvement in terrorism- which was signed at the end of last year is, at less than three months old, the very definition of new. What isn't new is that there is a NDAA. Such acts have been signed into existence over many Presidential Administrations. As always, it pays to read the fine print.
"But what's new is that the executive can get Fed guaranteed loans to purchase supplies and equipment. That's new. It is not just the usual sabre rattling, but quite pragmatic planning. Planning for what? Of course, HI."
-What I would like to know is what exactly they mean when they say guaranteed. Who precisely guarantees them and on what terms?
RJ wrote:
"But as you so eloquently put it in your summary of BHO's latest Executive Order, they really have the power to do whatever the fuck they want."
They have the authority, but it remains to be seen whether they will have the wherewithal, i.e. the power, to execute their self delegated authority. As your comments on firearm legislative in certain areas of the country suggest, one should have their doubts. Furthermore, fifth generation warfare will level the playing field for combatants who are at a disadvantage materially and numerically.
http://globalguerrillas.typepad.com/globalguerrillas/2006/10/the_changing_fa.html
Phat Expat,
I stand corrected!
After all, what good is honest information in an increasingly transparent world, if it can't keep me from posting urban myths I've heard all my life?
Thanks:
http://www.youtube.com/watch?v=06xZyh8VBFQ
Edwardo,
I hope you're right. If not, we're screwed:
http://www.youtube.com/watch?v=-WCj7S3Ha68
RJP
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.
http://www.youtube.com/watch?v=qzEQ440YjUE
DP,
mortymer said this:
http://anotherfreegoldblog.blogspot.com/2011/04/time-line-what-we-need-to-learn-is.html
-> 1928
oops, I think that link was for me in response to my remark saying I didn't have a clue what Iraq and red lines meant ;)
Yes. Did you find out much about the areas of Iraq inside the red lines, after Mrt gave you his starter for 10 points?
Nope. Not yet.
Just spent a while educating myself in goldbug land.
Art Cashin (on KWN) said that the rise in T-bond yields last week was probably a government selling. He speculates it was China. He says the sum is probably now in cash and has not yet been invested elsewhere (stocks, whatever...)
Robert Prechter (on Financial Sense) said that stocks were down some 80% in terms of real money - gold. I think that's some development for him, isn't it?
Still, later he says that when US$ credit collapses, he expects the US$ currency unit to go up in real terms and even relative to gold.
He also said that he initially predicted that the bond market would collapse already after 1999/2000, but that this was averted by the central banks (we are getting closer). He also cited Greek's default as an example of a central bank being unable to rescue all the debt (how about unwilling? - that's a pity because it put him on the wrong track)
Victor
Edwardo,
my non-US perspective may differ from yours. We non-US citizens have been threatened by indefinite detention for quite some time now - nothing new on that front. So, yes, for me the eye catcher is the funding of government expenditures.
Woland, DP, etc.
thanks for all the oil links. I am trying to educate mylself, ... but cannot one of the oil people here write a concise summary article? Please !
Victor
Here is a comment on savings and capital that crossed my mind when my Alice & Bob article was being attacked by some hard money socialist:
If you have earned a surplus (initially in the form of currency), what can you do?
1) buy valuable items for the long run (gold, paintings, diamonds,...)
2) hoard the actual currency tokens
3) lend the currency tokens to a business
4) purchase a business or shares in a business
5) lend the currency tokens to a consumer
Option (5) is stupid - no discussion. (1) is aquiring wealth. (3) and (4) are both forms of investing, albeit with rather different risks.
If you bring your cash to a bank, you are automatically in a mixture of cases (3) and (5) - one issue is certainly that people are used to it and don't think about it.
But (2), hoarding the actual tokens (as in hoarding US$ bills) is weird. I don't think people would do it naturally. **Unless** you have a gold standard. In this case, since your tokens happen to have a considerable intrinsic value, it actually makes sense. And so a gold standard should naturally have a declining velocity.
This is what people mean by "you should not hoard your gold, but rather make it available to the economy." In freegold, gold is in case (1), and this issue does not appear.
Victor
Jeff wrote:
"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?"
With respect to the remit of this blog, you are probably correct. However, I think it's worth pointing out that this document, which appears to be designed to deal with the ill effects of Hyperinflation, is hardly exclusive of a device that has the potential-as testified by its rather vague and simultaneously overarching language-to function as an instrument for further sundering what is left of Constitutional protections and weakening the rule of law in favor of the rule of favored private entities and individuals (thank you for already mentioning OG) within the government, aka fascism.
With regard to the idea that we shouldn't expect government to sit on their hands-aka engage in egregious acts of self preservation at the expense of pretty much anyone else but a favored few- again, government, broadly defined, has had more to do with conjuring HI than anyone or anything, so I think we can dispense with the notion implicit in your statement that this document is, how do I put it, benignly reactive.
Victor:
I will take a quick shot at summarizing my understanding:
There are still quite a fair bit of reserves in the world, vast amounts if you include unconventional sources. The reserves are not the important figure though. The critical aspects are 1) flow rates 2) net energy 3) available exports.
Depending on how you define a peak for oil, it is either far gone (oil production per capita, late 70s), gone (light sweet crude), imminent/here (crude), or in the near future (crude+liquids). The currently observable depletion rates virtually guarantee this outcome. See here for an update on Saudi (http://www.theoildrum.com/node/9059) and here for a comprehensive homework list (http://www.theoildrum.com/node/7191)
While it appears that we could maintain the present flow rate for up to a decade, the quality of oil is decreasing. When Ghawar was first tapped, approx 1 barrel of oil spent produced about 100. New finds are about 8-1, meaning that the net available energy to society is decreasing for a constant flow rate, and the size of the energy sector relative to the rest of the economy must increase. EROI is a bitch.
Third, the critical exporters are all experiencing rapid internal consumption increase. This cuts into the amount available to purchase, and with the well decline rate will rapidly decrease the amount available on the market. Canada, Russia, Saudi, nobody can prevent this.
Summary: easy stuff gone. Future energy availability in the form of oil needs to be discounted. Conclusion: Stuff already above ground/produced should be valued higher than it is relative to future production on oil factors alone.
Hope this helps start your search. IMHO, while the flow rates are maybe discussable, the math behind the EROI and net exports (google export land model) is pretty uncompromising, and well based in empirics.
Cheers,
D
Hi Friends,
I had a question concerning FOFOA's Debtors and Savers post. FOFOA lays down the context in which the current monetary system exists and how it will evolve in the future.
The post is well-written, but I find that it oversimplifies the reality. For instance, are all savers really responsible savers? Are all debtors just irresponsible debtors?
A wealthy corrupt businessman is probably a net saver for all intents and purposes, but is he really responsible?
I suppose what I'm trying to wrap my head around with my minuscule understanding of the Freegold topic is that how does Freegold really prevent non-productive rent-seeking?
e_r
That is not a easy question to answer. It involves the psychological effect of MTM gold on the populace over a period of time.
In essence...given time the populace will demand smaller government.
I think. ;)
TF
Some interesting freebies being posted at Armstrong's site, more to follow:
http://armstrongeconomics.com/library/books/
Anyone else considering getting their gold tested in the light of this tungsten-filled revelation. Sod's law it hits just after my pension funds were deployed, otherwise I might have bought just coins.
Edwardo,
Thanks for your reply.
I don't see government as necessarily benign, or malicious. Yes, it is coercive by its nature, but I am less inclined to the laissez-faire school of thought often found on gold blogs, and presented here by several posters. IMO government is a superorganism which of course gets some things wrong, some right.
As far as fascism, this EO doesn't rank very high in the annals. It doesn't send an entire race to internment camps, as was done 70 years ago in USA. It doesn't draft men into the army, or legislate segregation, or suspend freedom of the press, all acts that were done in the past (a fact not mentioned by anti-government types who like to hark back to a mythic past golden age of unfettered liberty). It is very significant but it is targeting hyperinflation, not broad social policy. Again, my opinion.
Greets. :)
Hello ephemeral_reality,
The terms debtors and savers simply imply a dividing line between groups with shared innate tendencies. It may be helpful to think of them more in terms of fundamental camps. The easy money camp and the hard money camp. Or as net-producers by nature and net-consumers by nature. Because we save debt in the $IMFS, we end up with part of the population who are both saving and in debt. Like this from Yo Warren B:
"Now think about that person, let's call him Bob, with $201K in debt and also a $200K pension or IRA through work. In essence, he could be almost debt-free were it not for his "savings"."
Debtors who understand what is happening can also participate in the Freegold revaluation. But you will know them by their actions after revaluation. They will be the ones cashing out to live like lottery winners because they have no desire to sit on a dead asset that does nothing more than retain its purchasing power. ;)
Sincerely,
FOFOA
Hi Jeff,
I will try not to belabor this debate as you make some excellent points when you harken back to just a few of the more shameful episodes in U.S. history. The good old days were indeed never so good as one would like to think. However, with respect to at least one of your points, namely the draft, particularly the lack of one, I must take issue.
"They" aren't engaging in old style conscription because the experience of Vietnam taught the Mandarins well that a draft made them very vulnerable to public opinion in a manner that threatened their ambitions.
What's more, they no longer need to as our economy has "evolved" in such a way that the military is able to fill its ranks with young men who-save for the ever present risk of being wounded, killed, or fundamentally traumatized, have little hope of doing materially better than a career in the U.S. military. Thrown into the bargain, the authorities recycle these young men in brutal fashion in seemingly endless tours of duty. For a lot of young soldiers, the Hotel California mode of service- You can check out anytime you like, but you can never leave-is a living breathing nightmarish reality.
Suffice it to say that I think this approach is instructive beyond the area of how our military functions.
Saw this video. Talks about Iran wanting to switch to Euros. Interesting was done in 2008. Seems like anyone that tries to move away from trading in Dollars tend to get bombed. How does this end? A slow transition?
http://www.youtube.com/watch?v=LgEfvi2sHQM&feature=channel
In the discussion of the gold bar alteration article on ZeroHedge one comment stated the he had received 4 bad Gold Buffaloes (a once ounce US coin).
From what I have read this would be quite difficult ( to successfully make a fair facsimile) and I am not sure I believe the comment. For those who own these it presents a problem because they come in wrappers which are almost as good as having the coin slabbed. So the issue is whether to rip off the plastic and weigh and measure or just weigh a few in wraps and estimate the weight and thickness of the wrapper.
DASK,
thank you, I'll have to do some reading. Perhaps the U.S. manage to kick the can down the road as long as necessary so that afterwards cheap oil is impossible in any (other) currency (,too). That would be a kind of rational policy goal: as long as it is available, we get preferential treatment - if we cannot have it, then you cannot have it either.
Victor
Michael,
the density of tugsten is so close to gold, that the method you propose would not be conclusive. The only inexpensive method would be to melt the coin .... tugsten's melting point is far higher than golds,you would end up with liquid gold and tugsten curd. And destroy the coin of course.
I guess you coud drill out a core as well. But if you think about this, it just doesn't make sense to screw with little 1 once coins/bars. The likelihood of discovery is far greater than big bars left sitting in a storage facility.
Great comment, Jeff! Mainly because I think you captured so well my take on the EO. I think it is a mistake to view it as a step toward Fascism. Having given some more thought to the "without compensation" wording, I think it's probably the opposite of what it seems on the surface. Buffet or Immelt or whomever they tapped for intellectual assistance would likely not care about getting on the G's payroll, and they would also probably have reason to not want to be paid for such service. But at the same time, it would be like adding insult to injury to not be able to reimburse the expenses associated with that activity. If you bring someone like that in to help there are going to be a lot of expenses, travel, etc.., and perhaps that requires Presidential approval which has now been passed on to department heads but cannot be delegated any further.
What I found unbelievable was not what they said they will do. I always knew exactly how they would respond to a disruptive dollar devaluation as you pointed out with an appropriate quote. FOA knew too. The easy money camp is perfectly predictable, as is the USG in this regard. What I found unbelievable is that they laid it out so clearly on the WhiteHouse.gov website at length. And this was my conclusion too: "This EO, IMO, means that the hour is getting late."
Mugabe had his well-paid stooges to maintain control over Zimbabwe. But I can't imagine that that kind of centrally-funded control during a currency collapse scales up very well. Harare has about 1.5 million people. All of Zimbabwe has only 12.5 million. Washington DC Metro alone has 5.5 million and the United States is now over 300 million people. On top of that problem of scale, the dollar is used all over the planet as a means of extracting real production and the US is presently paying for more than one-fifth of its imports with nothing but dollars. This is, I'm guessing, the kernel of their concern. And the only way they have to even attempt to defend against the reality brought by their worst fears is full-blown hyperinflation; what I have always said.
I added your comment to the bottom of the post, not only because I liked it, but also because it was an excellent excuse to post some Maiden.
Sincerely,
FOFOA
FOFOA, first thing I thought of when I skimmed this EO was what you wrote about those closest to the printing press during HI. I thought, ok...they're lining up.
@FOFOA
"This EO, IMO, means that the hour is getting late."
"And the only way they have to even attempt to defend against the reality brought by their worst fears is full-blown hyperinflation; what I have always said."
I hope that is all it really means. I don't like conspiracy and I hate to think that my/our government has nefarious motives, but I remain suspicious. Of course, time tells all...
fofoa opening the maiden door...sweet!!
http://youtu.be/FSoreSYGPL4
Wendy
ny reading reveals that tungsten is brittle and very difficult to make into a pressed coin. I would think that one could combine careful observation with measurement and come away with a pretty good idea about the coin in question. Buffaloes have a weird wavy pattern on the surface that would require that there not be much tungsten near the surface.
I have Buffaloes from 3 sources so I'll have a chance to do a comparison. As I said, I have reason to doubt the truth of the blogger's comment. I think he might be one of those guys who lies to us 'for our own good' ...you know...just to keep us hyper vigilant, on our toes...
Regarding coin testing, the best way is with a digital caliper (about $50), a 0.01g scale (about 40$) and a top to place it on and spin it. If the coin has the correct dimensions and weight it is either gold or gold plus less than about 50% tungsten. If you balance the coin at a couple different angles over a thin edge and can place it on a balanced top and spin it, then if there is tungsten in it the tungsten has to be perfectly symmetrical (e.g. a voidless fused disc, which is pretty damn advanced tungsten tech.) This level of gold coin fake has not been seen yet, so just the calipers and the scale will get you pretty close to certain regarding the authenticity.
The only non destructive tests that will reliably find perfectly balanced tungsten in a coin is an ultrasound probe. There is simply no way to fake the speed of sound of tungsten to be anything like that of gold. This test will always work on any gold object. Unfortunately, the equipment for it is still in the thousand euro range (or hop down to your local physics dept). May still not be a bad investment for a freegold world. You should take heart that there is no fakery in the world that will ever fool an ultrasound imaging test for gold.
One comment regarding reevaluation of oil. There are alternative sources of energy. If opec tried to increase prices too much alternative sources will become very attractive. So unlike gold oil has an upper bound on prices.
As Sheik Zaki al Yamani put it: "The stone age didn't end for lack of
stones".
And the oil age won't end for lack of oil. What it did do was lay the foundation for the modern and future world. And if the oil for gold hypothesis is correct, then many major oil producers will already (smartly) have converted their contribution to the era of oil into a permanent wealth for whatever comes next.
Dask: Beautifully put. On another topic, Paul Brodsky, one of the
mainstream financial world's few sincere admirers of FOFOA, which
he has expressed in his client letters, has a wonderful new piece,
entitled BB Gun, which you can read over at Barry Ritholtz's "The
Big Picture' blog. You will enjoy seeing the Chairsatan's recent
lecture on The Great Depression and the Gold Standard eviscerated
in true Freegold FOFOA style. Enjoy!
Let me fire some x-rays or neutrons at those Buffaloes and I'll tell you their composition in no time.
x-rays will only give you the surface composition and won't reveal much more unless they are super high energy (and out of league). Neutron sources and measurement apparatus are outside a personal budget. Eddy current testers have the skin-depth problem as well. Tungsten will fool diamagnetic approaches. Ultrasound imaging is the perfect test: nondestructive, commercially available, 1-2k euros for a handheld machine, can't be fooled by any possible material configuration. Many large dealers already have them. May not be a bad personal side business as a door to door tester for those in doubt.
Woland: I've got FOFOA to thank for most of that.. That was a great article. Nice to see the floating price meme spreading into more mainstream articles.
Niton x-ray guns are the best but very expensive (over 28k$).
http://www.niton.com/Default.aspx?sflang=en
High energy x-rays of course! But your point about budgets is a good one, and my options are probably too expensive.
DASK: Barry has one of the top 10 financial blogs in the
English language by # of followers, and is quite influential.
Brodsky's work is almost always covered by Zero Hedge,
but that has a narrower following. It was also nice that
Jesse's Cafe Americaine, one of my personal favorites
for good links, had a link to the great: "MONEYNESS"
about a week or so ago. I wish Naked capitalism would
link, but there's too much MMT support over there at
present. Oh well, time will prove all things!
Ultrasound on the cheap?
http://www.digiwork.ca/product.html?title=Professional Ultrasonic Thickness Gauge DW-1&list=products/data111
$549 device that should? do the trick...
Me, I´m not that worried about the coins. Seems too complicated for stuff under ~1kg. Maybe they will start to appear after FG, but i really can´t see it being worth the effort at todays prices.
So if the measurements and weight are ok, I wouldn´t worry too much.
I do have one of those "cheap" ultra sonic testing devices. Works for me okay. But you need a plain surface for the sensor to apply with conducting gel.
I have heard of testing devices on magnetic basis. Does anybody have information or experience on those (for testing my coins)?
Thanks & Greets, AD
@victorthecleaner
Many analyses of oil are conducted in a vacuum wihtout reference to natural gas. If you listen to Bloomberg radio, you will hear constant references pushing NG, why fracking is really safe, etc., and descriptions of the US as a "Saudia Arabia of NG". The Obama administration wants to push NG because it can be a valuable export commodity for the US, and also speaks longingly of pushing NG-powered cars as a form of clean(er) energy.
Problem is, NG's very plentiful, with new discoveries in the Mediteranean including a huge field appropriately named Leviathan off of the coast of Isarael, who now has visions of becoming a major producer. The plan for that field in particular is to run a pipeline from that field through Cyprus into Greece (and yes, pipeline resources are on auction block because of Greece's financial problems) in order sell to Europe. This project would be more viable/profitable, interstingly, if the existing pipeline construction bringing gas from Egypt through Syria, currently deadstopped at Homs, which merely coincidentally I am sure, is one of the focal points of the new Syrian war.
Since NG is plentiful and very cheap, they need to get its price to increase by, among other things, making oil very expensive and putting supply lines under constant threat of disruption (thus giving them greater room for raising prices and motivating people to switch to NG). There is also a "peace" pipeline under construction from Iran to India by way of Pakistan, which, has also been the recent target of "terrorist" attacks. http://en.wikipedia.org/wiki/Iran%E2%80%93Pakistan%E2%80%93India_gas_pipeline
Yes, who wants high oil prices? It seems a mystery, but some of it becomes explainable if you look at it from the perspective of the interests who want to push NG, and want to destablilize mideastern sources so that western sources have an export commodity.
Regarding the possibility of a tungsten-core coin, such as a buffalo or other 24k coin, has anyone considered the difficulty of doing the same with a 22k coin, such as a Krugerrand or Eagle? I'm not considering the difficulty of filling a genuine coin, as it seems much easier to just make a tungsten core sandwich, but rather the density difference between Tungsten and 22k gold. A different filler element, or a tungsten alloy would seem necessary.
Pardon the elementary question, but where can one find out what the valid weights and measurements for various 1 oz coins and acceptable margin or error are?
Jeff
The measurements and weights can ususally be found at the respective mint´s homepage, or at a reputable dealer such as Tavex or (I should think) Apmex.
There is really not much of a margin of error, I think it would be more due to the scales than the coin. (If you don´t have a lab-type super scale) If it´s more off than say 0,1-0,2g I would start to worry.
Very nice response to Ben Bernamke's Lecture at George Washington University.
http://www.zerohedge.com/news/annotated-paul-brodsky-responds-bernankes-latest-attempt-discredit-gold
I was thinking, when the hyperinflation EO came out, we were about to head down the QE trail once more. Certainly those in charge of monetary policy are smart enough to know that its the collapse in confidence that causes HI. With that said, the more and more QE programs the harder it will be to spin the news. Given enough time, QE will cause the rush for currency. Will there be enough time for QE 3(4/5/6...?) to be the event though?
Armstrong on gold.
[...] Gold is not backing anything and government has no possible way it will ever return to a gold standard that failed before anyway. You cannot FIX the price on money for it is simply a commodity. If money is a flat line, that is communism. In a free market, it does not matter what is money. It rises and falls against assets. Under a gold standard, the yellow metal DECLINES with inflation and rises with DEFLATION precisely opposite when it is a free floating market. [...] Gold is a good investment NOT because of all the fiat nonsense, but because inflation has passed it by and there will be a huge burst of price movement. That will come when the Sovereign Debt Crisis hits the USA and that does not seem likely until 2015.75. So back off of all the nonsense and you just might find a broader base for gold be disassociating it with all the false religious fervor that gold should be money. Be careful what you wish for. They confiscate money.
Jeff S
This should work
TF
@Bjorn,
Thanks, I'll look into getting an accurate digital scale.
@Motley Fool
Thanks!
Motley Fool,
You're right about the psychological effect. Still, I'm not entirely clear if Freegold actually eliminates incentives to seek rents. For instance, FOFOA says:
Gold would not be valuable if one person owned all of it. It is most valuable in its widest distribution possible , the wealth reserve, which requires a much higher valuation than it has right now.
Given that an extremely unfair distribution of wealth already exists (especially in the United States), I just don't see how a higher gold price and a Freegold paradigm would actually make this distribution fairer and maintain it to be that way. Unequal wealth distribution has always been a precursor to severe depressions and this time is no different. If the giants already are aware of this gold valuation entering mankind's consciousness more and more, wouldn't they front-run and maintain this unfair wealth distribution anyway?
Why can't the extremely wealthy sustain this unfair distribution as long as they want and put us back in the Gilded Age of the Robber Barons ?
FOFOA,
They will be the ones cashing out to live like lottery winners because they have no desire to sit on a dead asset that does nothing more than retain its purchasing power. ;)
LOL, that's for sure. I suppose non-productive rent-seekers are also in the easy money camp, as they essentially want to earn their income through government established rents and monopolies.
Based on what Ari says in his Hall discussion essay,
National fiat currencies allow governments to manage their own national economies to the extent that that are able.
I think Freegold in and of itself does not serve to eliminate parasitic rent-seeking activity, but would provide a conducive environment for a balanced economy.
e_r
What is unfair about the way things currently work is that value can be appropriated from others. Under FreeGold one can protect your wealth so that this does not happen.
I say let the chips fall where they may.
Those that are currently wealthy due to such appropriation will quickly fall on hard times.
You ever read about people winning say $100 million in a lottery and being back to dirt poor in a few years? ;)
FreeGold would not solve all that is wrong in this world, but it is a good step in the right direction.
Peace
TF
For anyone who deals primarily with 1 oz coin, this thing is a cheap version of the fisch tool, and does pandas, maples, buffs, eagles and kangaroos: http://www.goldcoinbalance.com/
For scales, simply google coin scale. You need 0.01g accuracy, but this will be less than 40.. eg here (they also have calipers.) http://www.wizardcoinsupply.com/products/scales/
For serious calipers (and a 50% sale) http://www.tresnainstrument.com/
My sister has access to one of these bad boys at work ;) http://www.olympus-ims.com/en/omniscan-ut/
Woland,
Glad to hear Jesse linked the Moneyness post. As I wrote in one of my comments in FOFOA's Sushi saga post -- Jesse had written that he hadn't read anything in detail about the how of Hyperinflation . He thought FOFOA's body of work dealt more about the why rather than the how.
I don't think any other blog on the planet has dealt with the topic of HI in all its breadth and depth as FOFOA has done.
From the BOE Quarterly Bulletin 2012 Q1
http://www.bankofengland.co.uk/publications/Pages/news/2012/037.aspx
“Maintaining price stability and maintaining financial stability are the two core purposes of the Bank of England."
Or in other words, conflicted at the core.
RJP - nice first post. I think we are of similar mindset. Screw slave rules and get back to the Republic. Any chance of a more private venue for discussion?
Victor - peak oil is just another state-created shortage. North dakota, saskatchewan and alberta have major oil booms right now. no reason for fuel to be expensive. except for regulations, taxes and inflation of course.
Most gun powder scales are accurate to the 1/10th of a grain. There are 82 mg/ grain so 1/10th of a grain is a tad over 8mg. If one nees to be accurate to .01 grams (ie 10mg) the any gun powder scale would work fine. I have a couple that were less than 20 bucks.
I hate not being able to easily edit in Blogger. I really can spell and I know all of my letters...honest...
“Maintaining price stability and maintaining financial stability are the two core purposes of the Bank of England."
Stability is destabilizing - Hyman Minsky.
Trading off resilience for stability is a bad idea, as the Kosi river flood management experiment showed.
Bron´s take on the fakery issue:
http://www.perthmintbullion.com/blog/blog/12-03-26/Fake_Bars_-_The_Facts.aspx
This story : Turkey Once Again Proves That Gold Is First And Foremost Money
to me can be seen from the following perspective:
Turkish banks are encouraged to increase their holdings of gold as reserves - that is a very thoughtful thing to do.
As long as they don't lend out in gold/gold certificates (and there's no sign of that), they are following in the path of the ECB-style balance sheet. Plus, it re-enforces the demand for physical.
Anyone see it different?
latest news about the great awesome "Gold" Euro:
Mr. Gurria/OECD said that we need at least ANOTHER 1 trillion bailout.
Wow, isnt this euro great? What a great predicted golden age.
Greats, AD
While our POTUS' express delegation of his statutorily granted powers to his high level stooges (his Cabinent) draws the focus, SCOTUS is hitting the sexy Commerce Clause stuff on day 2 of three of oral arguments on the individual manadate aka Affordable Care Act.
Does the Commerce Clause exist
This week, the U.S. Supreme Court considers the case challenging the Obama administration health care plan’s requirement that most Americans purchase a government-approved health insurance plan by 2014. The court should rule that this individual mandate is unconstitutional. To do otherwise would give Congress almost unlimited power….
If Congress could use [the commerce] clause to regulate mere failure to buy a product on the grounds that such inaction has an economic effect, there would be no structural limits to its power. Any decision to do anything is necessarily a decision not to do something else that might have an economic effect. If I spend an hour sleeping, I thereby choose not to spend it working or shopping. As the lower court decision in this case explained, the government’s position “amounts to an argument that the mere fact of an individual’s existence substantially affects interstate commerce, and therefore Congress may regulate them at every point of their life.”
Follow the happenings at SCOTUSblog
Wow, isnt this euro great? What a great predicted golden age.
+1!
we need at least ANOTHER 1 trillion bailout.
Why certainly sir! Plenty more where that comes from when you really need it. #GELOC
Aquilis - here's a related article. The way I see it, the people of Turkey are being good savers, storing their savings in the form of gold, outside of their banking system, which has a history of poor currency management. The government is trying to push the people to store their savings in the banking system, where it becomes available for lending:
The push to tap into the individual gold reserves—the traditional form of savings here—is part of Ankara's efforts to reduce a finance gap that is currently about 10% of gross domestic product. Government officials say the banking regulator will soon publish a plan to boost incentives for consumers to park their household wealth inside the financial system. Banking executives said they are considering new interest-yielding gold-deposit accounts that would allow savers to withdraw gold bars from specially designed automated teller machines.
In my interpretation, the people of Turkey are on the path to Freegold, and the government is trying to push them off the path. I'm interested to see how it plays out.
Dr Octagon,
I think what you are seeing is actually a step towards freegold. This is why (take all items together):
1. People's gold is deposited and redeemed as physical, not as paper receipts.
2. The interest paid will be in turkish lira not physical (paper obligation increases, not physical gold obligation)
3. The physical will represent bank reserves (just like the ECB) and can be marked to market
4. Very important - there does not appear to be any gold loans, only lira loans made by these regular banks --> bank runs can only occur in lira - there is no obligation to deliver gold, and the Turkish central bank can still be free to print lira to cover losses (just like in freegold)
The only thing we don't know is if the banks will decide to play the bullion bank game behind everyone's back - that does not seem to be the case from the current reports. If and when they do loans redeemable in gold, then yes I will agree with you, it would be a step away from free gold.
Does that make sense?
'Maintaining price stability and maintaining financial stability are the two core purposes of the Bank of England.'
Mervyn King and his cronies are a bunch of liars, just like the other central bankers. The UK has had inflation way over target for several years, and yet still he's QEing like a maniac. I don't think more than a handful of people in the UK see the risk of currency collapse. Certainly those in industry and all parties just can't seem to get enough of it.
Also, I just read over at ZH that the Fed has admitted it's been monetising Euro-area sovereign debts. Is that a sign the Fed knows it must keep every plate spinning? Prediction: later this year they start to buy lots of Japanese Gvt bonds, maybe some nice Gilts too. When you can print, why not buy the lot?
'Certainly those in industry and all parties just can't seem to get enough of it.'
Of course I meant the political parties, rather than the drinking & dancing kind of parties!
In a non-linear system which has been charged up into a critical state, an unravelling/collapse event can become overwhelming in no time at all. The criticality is provided by unconstrained fiat issue - US swaps are now funding Europe in the $trillions - and the Bundesbank has now publicly berated the ECB for taking on impaired collateral at full value in return for new fiat.
This puts clear blue water between Germany and the basket-case economies of the rest of Europe, but their intentions to form strong and lasting economic partnerships with Russia and China still get little press.
More goodies in these articles:
Rift Grows Between Germany's Bundesbank and ECB
http://www.scribd.com/doc/86247419/Rift-Grows-Between-Germany-s-Bun-Des-Bank-and-ECB-PP
Handicapping the Collapse
http://www.financialsense.com/contributors/jim-willie/handicapping-the-collapse
Greece is Now Irrelevant. Spain and Germany Will Decide the Euro’s Future
http://www.marketoracle.co.uk/Article33739.html
Gary,
Yes, good observation. Of course industry would love it. They are the debtors after all (lines of credit, loans for assets, bonds, etc). The only thing they mind is they credit being cut.
As long as they have access to cheap credit (especially under the real rate of inflation) the party is in full swing.
They are also some of the biggest lobbyist groups to ensure that credit keeps flowing their way, adding fuel to the fire.
It's the small businesses, the ones that do not have this access, that get really hurt and /or go out a business at this time.
Who is first: sterling, yen, or dollar?
At least in the UK, there must be a place where you can bet on this - just make sure the wager is not in sterling ;)
Victor
Victor,
What do you think about this paper as an answer to your question?
Of course the author is bearish on the Euro and bullish on the dollar.
Since HI is really an after-effect (ridiculous policy response) for a severe deflation, it makes sense that dollars (the short-term cash) become scarcer before they may become worthless. Yes?
ephemeral_reality,
who wrote this? I don't believe a single word. What is most irritating is that he doesn't even back his claim with numbers that the US$ would decay the most slowly.
Also this gibberish about 'convertibility'. Perhaps the Euro will be convertible (at floating price...), but the dollar will not (broken London market). Who knows?
I am also not sure that it is guaranteed that the US$ will sharply rise (before it crashes). There are at least two factors: If there is another deflationary scare as in 2008, it may well rise. But at some point, the bond vigilantes will move. Whereas in the case of Greece, they dumped the bonds and caused the yields to spike, in the case of the U.S. they will most likely dump the dollar (because the Fed stands ready to monetize whatever people sell - never fight the Fed). Don't ask me in which order things will happen.
Finally, there is Bernholz' rule. A currency first collapses in the foreign exchange market before its domestic purchasing power collapses. This has some empirical backing (Peter Bernholz: Monetary Regimes and Inflation). If it applies, this would favour the bond vigilante scenario over the rising dollar scenario.
Victor
Victor,
It was written by Sandeep, a student of Fekete.
I do agree that he doesn't have empirical backing in that paper, but the analysis itself is done in the spirit of Carl Menger's value axiom and marginal utility (a tenet of the Austrian School).
I suppose the way I see it -- since the Fed is crowding the long end of the curve, there will be a scramble towards to the shortest end of the curve (physical cash), and therefore a spike in the USD. I think this aligns with what FOFOA had written in his Deflation vs. Hyperinflation series.
The Bernholz rule you mention seems interesting. I suppose that's expected since USD is the world reserve currency.
Since you asked about empirical data, it reminded me of a chart I saw where USD measured in gold grams was plotted. The author posits that USD death is like a radioactive particle.
Apologies, if the paper got you too riled up. Henceforth, I shall be careful to present something backed with empirical data ;)
ephemeral_reality,
but the analysis itself is done in the spirit of Carl Menger's value axiom and marginal utility (a tenet of the Austrian School).
I don't want to bully you (please don't misunderstand the reaction), but this is the problem I have with the article: I cannot see that he actually uses a marginal value argument in that article.
Victor
Fofoa,
You educate many of your readers with passionate, elaborate, detailled and well rounded posts. Recently, you took on Buffet's letter to the sharedolders and it was a critical and accurate review. How about Bill Gross recent/last commentary? He suggests TIPS, dividents and real assets )productive, like machines, builidngs, land, commodities). Is he also talking his book or he gives honest advice?
Thank you,
CG
It's my birthday :D
But after 52 of them, they get kinda old (pun intended)
;)
Hi Chris,
Have you read Glimpsing the Hereafter?
Ari wrote me an email the other day including this: "In the meanwhile, I'm happy to note that Bill Gross has (yet again) stepped up to the challenge of carrying some water for us today. Begins folksy and ends golden. Now that's what I call having a worthy waterboy(!),,, he being manager of the largest mutual fund on the planet (i.e., PIMCO's $242 billion Total Return bond fund)."
Here's the quote with which Bill Gross begins his latest and greatest, Life and Death Proposition:
Where do we go when we die?
We go back to where we came from
And where was that?
I don’t know, I can’t remember
Virginia Woolf, “The Hours”
With this lead-in he draws a comparison between death and the hereafter, and the death of our financial system built upon the lending of real savings to debtors with what comes next. He goes on to explain, "The transition from a levering, asset-inflating secular economy to a post bubble delevering era may be as difficult for one to imagine as our departure into the hereafter." But at least he gives it a shot with a little help from Virginia, ending with, "Where does credit go when it dies? It goes back to where it came from."
Now, while I can't help you very much with the pearly gates, I can indeed help you imagine the monetary and financial hereafter. It matters little to me if you believe me or not, because I still think there is value in sharing this vision either way. Someone (who incidentally named his band Third Eye Blind) once remarked, "I don't really believe in crystal balls, but I respond to the need for them." And so now I'll dust off my own very special crystal ball with a wink and a nod to a few of you who understand this need.
I do recommend reading Bill's entire piece as he lays it out nicely how hitting the zero-level floor in USD interest rates is inevitably leading to a "liquidity trap" for earned savings. It sounds to me like the inescapable gravitational pull of a black hole singularity that, perhaps, creates similar difficulty in trying to see through to the other side.
Bill Gross is in the business of helping savers lend their savings to debtors through the use of bonds. And he has done very well in this business, which is why he is acutely tuned in to the implications of zero interest. With zero interest, you can't earn a yield or a capital gain as you can when interest rates are high and falling. And so there is no reason for savers to lend money to debtors for the longer terms necessary in order to run an economy. In fact, it is terribly risky for savers to do so in a zero rate environment....
Happy Birthday Wendy!
VTC,
Good stuff. Its is true that Bernholz has empirical evidence tending to show that in the past, currencies have often/typically first collapsed in the foreign exchange market before its domestic purchasing power collapses.
But this sorta reveals a weakness of econometrics - what comparison is there for the world's reserve currency failing? Exactly!
=============================================
"A currency first collapses in the foreign exchange market before its domestic purchasing power collapses... If it applies, this would favour the bond vigilante scenario over the rising dollar scenario."
Moneyness - "The USG cannot be forced into involuntary default on its own currency debt."
The Debtor and the Junkie
The USG may be a dealer in the monetary plane, but it is most definitely a sketchy junkie in the physical plane. The USG thinks (and truly believes) that the key to rejuvenating the US economy is trashing the dollar as a short cut to increasing exports (reducing the trade deficit). But what it can't see (nor anyone that focuses solely on the monetary plane for adjustment) is that the huge trade deficit the USG wants to quit is actually its own heroin fix. This is a deadly combo for the US dollar.
MMTers don't think very highly of "hyperinflationists". They call us "hyperventilators" and such, although I shouldn't really bunch myself in with the others. I think my description of hyperinflation is more in line with reality than others I've read. See here, here, here, here and here. But in this post I hope to show you where the MMTers go wrong on hyperinflation, and to show why—and how—dollar hyperinflation is the only possible outcome.
The "debtor" I had in mind for my section title was Weimar Germany in the early '20s, not the USG today. The USG is the junkie. Weimar Germany owed war reparations, a debt resulting from WWI that was essentially denominated in gold. This was a debt in a hard currency (hard as in difficult, not hard as in solid), unlike the USG who owes its debt to others in its own currency. MMT got that part right. The USG cannot be forced into involuntary default on its own currency debt. And because of this property, USG debt is a monetary plane illusion when viewed from the physical plane. It is a great store of nominal value, and a terrible store of real value.
Wendy,
Congrats on your full deck.
http://youtu.be/JTV8fR7ZrBE
JR,
doesn't the excerpt from Moneyness you posted, suggest an exchange rate collapse? I still think we can both be right (including Bernholz) when the chain of events goes like this:
1) repatriate all funds, abroad is too risky
2) away from stocks and high yield bonds into T-bonds
3) away from long-term T-bonds into short-term T-bonds
4) away from short-term T-bonds into demand deposits
5) away from the US$
Finally, doesn't the USG know that devaluation will not work? Isn't what they are trying to keep the US$ strong until the last minute and then let it suddenly collapse. They know that gradual decline won't work because it takes too long to re-industrialize and to build up exports. If they had this option, we wouldn't be here. After the crash, they will be in the dark for a few years and forcefully self-sustained before they are able to rebuild a relevant exporting industry.
No, the talk about the strengthening of the exports is because they need something to tell people.
Victor
Happy birthday, Wendy!
VtC
I'm not too sure I agree on that many years. They do still have the 8000 tonnes to ease the transition back to a productive economy.
TF
Hi VtC,
Briefly, yes, I see a flow into the $ (the reserve) as the credit it is denominated in continues to collapse. It is this process that in effect forces the USG's hand to change the nature of out money from credit money to base money. Loss of confidence and G responding. Sure there will be a critical point in the future when the rubber band breaks and over the waterfall we go.
Bernholz is know for studying HI in the 20th century, particularly post 1980. I'm not sure these are the best comps.
"That a currency first collapses in the foreign exchange market before its domestic purchasing power collapses" ----> "this would favour the bond vigilante scenario over the rising dollar scenario" does not follow. The point is the $ rises until it pops, not that its doesn't pop. Of course its gonna pop - at the end of the day, a HI is still a HI - faith in he currency collapses.
The issue is more the unique nature of how and why the dollar will collapse. And its to these questions that Bernholz's research is not directed.
HI VtC,
"doesn't the USG know that devaluation will not work?"
Its more the USG is a junkie that can't break its consumption habit, so whatever else it does sorta doesn't change that fact.
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!
Trade needs to balance, the US needs to consume less and export more. Devaluation may help exports but it doesn't change the fact the US still need to consume less. Without consuming less than devaluation will not alter this imbalance. In fact, they are printing to try to maintain the balance - to keep up their lifestyle.
Ultimately, re-balanced trade is what the superorganism/ market is gonna force on the US via HI - devalued currency and a whole lot less consumption too. From Moneyness:
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.
FOFOA: 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.
One of the strongest arguments that the USD will not hyperinflate like Weimar or Zimbabwe is that the USG's debt is not denominated in a foreign currency. If it were, this would be a different kind of hyperinflationary feedback loop we were facing. If all the USG debt was in a foreign currency and the dollar started falling on the foreign exchange market, that debt service would lead to hyperinflation. But that is not the case. So it’s not the FX market (monetary plane) that is the big danger to the dollar.
The dollar is the global reserve currency, so it is the physical plane that is the biggest threat to the dollar in the same way the FX market was a threat to the Weimar Mark. And it is not the nominal debt service that is the threat like it was in the Weimar Republic, but it is the structural (physical plane) trade deficit. To the USG, that is the same threat as nominal debt service denominated in a foreign (hard) currency was to Weimar Germany.
As the German Mark fell, there was "not enough money" to pay the debt. And with a little inflation, there is "not enough money" to buy our necessities from abroad.
VtC,
After the crash, they will be in the dark for a few years and forcefully self-sustained before they are able to rebuild a relevant exporting industry.
The US doesn't make simple blue collar stuff anymore, yes.
Instead, the US is a world leader in the production and export of higher order, capital intensive goods (machinery, computers, manufacturing equipment, capital plant equipment, etc). :)
The big issue is the consumption side, not the production side.
===============================================
What America Sells To The World
It's a myth that the U.S. doesn't make anything anymore. It's a myth that we don't export anything to the rest of the world.
Yes, we import more than we export. Our trade deficit last year was $558 billion
But we export a lot. Last year, U.S. exports were worth $2.1 trillion. Which raises a simple question: $2.1 trillion worth of what?
Mostly goods. Also, services:
Here's a closer look at our goods exports in 2011. The two biggest categories — industrial supplies and capital goods — account for about $500 billion a piece....
Hello Victor,
The point of JR's excerpts is that the real threat to the dollar lies in the physical plane (real price inflation) rather than the monetary plane (foreign exchange market). The source of the price inflation will be from abroad and it will be reflected in the exchange rate, but the price inflation, not the FX market, is the real threat.
Imagine a toy model where the entire United States (govt. + private sector) imports $100,000 worth of stuff during a period of time (T). T repeats perpetually and, just to keep it real, let's say that t = 1 second, which is pretty close to reality. So the US imports the real stuff and exports the paper dollars. But the US also exports $79,000 worth of real stuff each second. So 79,000 of those dollars come right back into the US economy in exchange for the US stuff exports.
Now, in our toy model, let's say that the US private sector is no longer expanding its aggregate level of debt. And so let's say, just for the sake of simplicity, that $79,000 worth of international trade over time period T represents the US private sector trading our stuff for their stuff. And let's say that the other $21,000 worth of imports each second is all going to the USG consumption monster.
So the USG is borrowing $21,000 **from some entity** each second and spending it on stuff from abroad. This doesn't cover the entire per-second appetite of the USG consumption monster, only the stuff from abroad. The USG also consumes another $114,000 in domestic production each second, which is all the domestic economy can handle right now without imploding, but we aren't concerned with that part yet.
Now, if the **from some entity** is our trading partner abroad, then there is no fear of real price inflation. The USG is essentially borrowing $21,000 this second-that our trading partner received last second- and the USG will spend it again on more foreign stuff in a second and then borrow it again. See? No inflation! The same dollars circulate in perpetuity, the real stuff piles up in DC, and the USG debt piles up in Beijing.
But what if that **from some entity** is mostly the Fed, and has been for two years now (and they are calling it QE only to make it sound like its purpose is to assist the US private sector)? If that's the case, then the fear of real price inflation is now a clear and present danger to "national security" (aka the USG consumption monster). Not so much for the private sector which is now trading our stuff for their stuff, but mostly for the public sector which trades only $21,000 in paper nothings, per second, for their stuff.
Under this latter situation, you now have $21,000 per second piling up outside of US borders and it's not being lent back to either the USG or the US private sector (which has stopped expanding its debt). It's either going to bid for stuff outside or inside of US boundaries.
The USG budget approved by Congress does account for this $21,000 per second borrowing, but it also assumes reasonably stable prices. If the general price level starts to rise faster than Congress approves new budgets, this creates a problem for the USG. It's not as big of a problem for the US private sector, since we are trading mostly stuff for stuff. If the cost of a banana rises to $1T, it will still only cost half an apple. But if you're relying only on paper currency to pay for your monstrous needs, real price inflation is an imminent threat!
Cont…
2/2
FX volatility has more to do with the changing preferences of the financial markets. It is a monetary plane phenomenon on most normal days. But it will also show up when the price of a banana starts to rise.
When the USG cuts a check, it is drafted on a Treasury account at the Fed. Sometimes those funds are all ready to go in the account. Sometimes they are pulled (momentarily) from a commercial bank into the Fed account for clearing purposes. And sometimes the Fed simply creates them, adding a Treasury IOU to its balance sheet.
This latest Executive Order paves the way for the Fed to start stacking not only Treasury IOUs, but also Commerce Dept. IOUs, Homeland Security IOUs, State Dept., Interior, Agriculture, Labor, Transportation, Energy, Housing and Urban Development, Health and Human Services, etc… IOUs. Whatever it takes to keep the real stuff flowing in! If you think the Fed's balance sheet looks like a gay rainbow now, just wait!
But from a financial perspective, if you are stuck in dollar assets when real price inflation takes hold, you are going to want out. And the quickest way out is through the currency itself. So we could see a spike (outside of the US) in the price of Realdollars even as the dollar is collapsing against the physical plane and the USG is printing like crazy to defend its own largess! How confusing will that be to all the hot "experts" on CNBC?
The financial markets can cause dramatic changes in the FX market, and vice versa. But that's all monetary plane nonsense. A small change in the physical plane might not even be noticed at first in the FX market, especially if a financial panic is overpowering it in the opposite direction. But even if the dollar doubles in financial product purchasing power terms (USDX to 150+), that's not going to change the price of a banana in the physical plane while the USG is defending its consumption status quo.
Sincerely,
FOFOA
Another comment worthy of being a post.
A short one, for all those itty-bitty attention spans out there. ;)
Links to comments no longer work in my neck of the woods.
Thanks Blogger.
Happy Birthday, Wendy!!
More Maiden for the dollar
(I know Blondie likes Maiden! ;)
"I'm waiting in my cold cell, when the bell begins to chime.
Reflecting on my past life and it doesn't have much time.
'Cause at 5 o'clock they take me to the Gallows Pole,
The sands of time for me are running low...
When the priest comes to read me the last rites,
I take a look through the bars at the last sights,
Of a world that has gone very wrong for me.
Can it be that there's some sort of error?
Hard to stop the surmounting terror.
Is this really the end, not some crazy dream?
Somebody please tell me that I'm dreaming,
It's not easy to stop from screaming,
Words escape me as I try to speak.
Tears flow but why am I crying?
After all I'm not afraid of dying.
Don't I believe that there never is an end?
As the guards march me out to the courtyard,
Somebody cries from a cell "God be with you".
If there's a God then why does he let me go?
As I walk my life drifts before me.
Though the end is near I'm not sorry.
Catch my soul, it's willing to fly away.
Mark my words believe my soul lives on.
Don't worry now that I have gone.
I've gone beyond to see the truth.
When you know that your time is close at hand,
Maybe then you'll begin to understand
Life down here is just a strange illusion."
Hello Fofoa.
My tiny mind is struggling to grasp this statement:
'But from a financial perspective, if you are stuck in dollar assets when real price inflation takes hold, you are going to want out. And the quickest way out is through the currency itself. So we could see a spike (outside of the US) in the price of Realdollars even as the dollar is collapsing against the physical plane and the USG is printing like crazy to defend its own largess! How confusing will that be to all the hot "experts" on CNBC?'
What sort of dollar assets do you mean please?
If you are in a dollar equity asset, say holding shares in a commodity producer like Exxon, why would you want out. Perhaps you are suggesting that investors will take actual dollars and spend them quickly to gain physical things that are rising in price?
I'm unsure what you mean by 'realdollars'..do you mean notes? Or is it just assets converted to dollars in the bank? I would have thought that if one was outside the US, the move would be away from real dollars, into Euros perhaps or gold, or something else in the physical world.
I'm struggling to see why non-Americans would move into dollars if they can see very high inflation in the US itself? Do you think that the US dollar will still be perceived as the 'safe haven' currency even at this point?
Also, am I right in thinking that you are expecting that the dollar exchange rate might rise against other currencies, whilst falling against the physical world?
That is pretty confusing to me too.
If (for example) sterling was falling against the dollar, and the dollar was falling against the physical world, would not the British be in a worse position than the US, at the bottom of the heap versus the real physical world? Or perhaps the Uk will have already seen its own currency collapse first?
Kind regards.
Does anyone know if there is any truth to this?
Bernanke, Geithner accuse Gold of being a currency manipulator.
Senator Charles Schumer, D, New York, said that if Gold did not
stop pegging itself to the dollar at an "artificially low" rate, then
the Congress would be forced to take action.
A spokesperson for the yellow metal responded that it had done
nothing wrong, and was in fact spending all its time in bars, deep
underground, where it could not possibly do any harm to the US
or any other currency.
Gary, if I may,
I think the dollar assets are things like treasuries, or US corporate bonds. To exit, you sell them for realdollars.
Woland, very good.
Aquilus, thanks. That makes a little more sense, but if I am selling USTs for real dollars, someone else will be buying them for real dollars? But perhaps by then the Fed will be the only buyer, so the real dollars doing the buying will be (QEd) adding to the base money supply, fuelling yet more problems in the physical world.
Yes, that makes sense to me, but would welcome feedback from brighter minds!
Gary,
Try this series of comments from JR about 'Realdollars':
http://fofoa.blogspot.com/2011/06/from-treasure-chest.html?showComment=1309619211980#c8614179482815949557
Realdollars are US base money, as opposed to 'Eurodollars' which are dollar-denominated-credit-money existing outside of the US, and thus outside of FED backing.
"if I am selling USTs for real dollars, someone else will be buying them for real dollars?"
Or maybe: if I am buying real dollars with USTs, then I will have to bid the real dollars away from their current holder.
"I'm struggling to see why non-Americans would move into dollars if they can see very high inflation in the US itself? Do you think that the US dollar will still be perceived as the 'safe haven' currency even at this point?"
Non-Americans would move 'through' dollars into gold etc; the increased usage demand for these transactions will give the dollar the appearance of strength for a brief time.
"If (for example) sterling was falling against the dollar, and the dollar was falling against the physical world, would not the British be in a worse position than the US, at the bottom of the heap versus the real physical world?"
Sterling is probably a poor choice of comparison, since it probably will follow the USD into HI unless it joins with the Euro. Replacing 'Sterling' with 'Euro' in your question is more useful.
I can think of a couple of possibilities:
1. The Euro initially inflates worse than the USD against the physical plane, as you suggest, but the difference is short-lived and the USD quickly overtakes the Euro in the currency-debasement/HI race.
2. The US actually experiences a brief bout of price deflation at this time, in preparation for full-out HI.
Hello Michael, thanks for responding.
'Or maybe: if I am buying real dollars with USTs, then I will have to bid the real dollars away from their current holder.'
Yes, I do get that bit, in effect it's the market driving down the price of USTs versus actual dollars.
I'm in the UK, so are my clients, hence I'd rather use sterling as a comparison!! (real world etc.).
I think I see that the dollar can rise in value via it's large reserve holding status, whereas sterling doesn't have that same benefit. So, I still think the UK, and probably Japan hit trouble before the US, or maybe at precisely the same time, just without any appearance of currency strength, hence the mainstream will maybe not spot the same thing happening (in the virtual world) in America. But it should be obvious in the UK and Japan. Europe, taking its sovereign debt medicine now, I feel may escape currency collapse.
Yes, I think maybe I grasp it, thanks again Michael (and Fofoa for the original comments).
Victor,
I cannot see that he actually uses a marginal value argument in that article.
Here's Menger's axiom:
Value does not exist outside mankind's consciousness .
Here's Sandeep's paper expanding on this axiom and bringing Marginal Utility into the picture.
Menger’s axiom gives rise to marginal utility. Marginal utility is the only correct
expression of economics. It is the ‘boundary use’ that determines value to the human
being. Each substance that satisfies a particular need can be graded with regards to
satisfying various human needs. For example, water is undoubtedly of great use to the
human being. Humanity cannot exist without water. Any particular individual might have
the following ordinal uses for water, assuming they don’t have access to it currently:
relief of own thirst; relief of pet’s thirst; watering flowers and cleaning windows. As each
use to the individual is satisfied, the next use is considered all the way to cleaning
windows – which is the marginal use in this case – that determines its ‘value’ to the
human being.
Moving on, if there are too much dollar based assets in the market place, there have been giant buyers scooping them up as USG kept running deficits and spending away to glory. Without these giants placing value and therefore bidding on these dollar assets, they cannot be sold.
The mere fact that these dollars exist means that the demand for the world reserve currency based assets has been there for so long. Right?
FOFOA,
thanks, I second Blondie. Since New Year's Day, you have often titled the blog post 'Open Forum' and then hidden the actual post somewhere in the comments section :D
Let me summarize. What will kill the dollar is that foreign holders of financial assets denominated in US$ want to get out. In order to do that, they have to sell their assets for eurodollars which may at first cause the exchange rate to spike upwards. Only the second 'wave' will be eurodollars trying to bid for either real assets (inside or outside the U.S.) or for foreign currency.
Problem is that observers will for a while be unable to tell whether investors are trying to get in (into eurodollars) or out (of US$ denominated financial assets).
I hope I am getting this right.
Victor
"Let me summarize. What will kill the dollar is that foreign holders of financial assets denominated in US$ want to get out. In order to do that, they have to sell their assets for eurodollars which may at first cause the exchange rate to spike upwards. Only the second 'wave' will be eurodollars trying to bid for either real assets (inside or outside the U.S.) or for foreign currency.
Problem is that observers will for a while be unable to tell whether investors are trying to get in (into eurodollars) or out (of US$ denominated financial assets)."
What would this look like?
USDX spiking way up, while UST yields also jump?
Such a jump in UST yields / drop in UST prices would be a dead giveaway that the game is over. I wonder if such a jump can be hidden via QE from the FED.
Perhaps that will be the form of the final QE: FED swaps of realdollars for USTs held abroad.
Hi all ... Long time reader, first time poster; i've felt tempted to post before, but poor english + so many bright minds around have detracted me to show up before.
Even though I'm freegold fan and I'm 20% bullion savings, I still have the feeling that TPTB will sustain the whole charade for much longer; people want to believe in the current set up and loss of faith in the $IMFS will still take time, that's why I like AD's comments, he usually adds a touch of reality and incredulity despite being a FG believer himself.
Taken lots of time with highly qualified finance people and still haven't been able to find a single person who'd bet in HI, although almost anyone I've shared my views with, thinks that Central Banks will print us out of this chaos and will be somehow able to drain all the base money when/if things start to go out of control.
Having said that, I think that the current Euro sov crisis going on is good for the Euro itself as it's somehow making the savers realize that currency and sov debt are not one and the same (as Duisenberg stated long ago), what I also tend to believe is that the $IMFS are battling the Euro as the only option to USD, a chain is as strong as its weakest link, being Greece weakest of all, Ireland and Portugal were next ones, but the whole thing has managed to stay together, so Spain and Italy come after ... Chain will break at some stage and the question is if ECB/BIS will pull the FG trigger, if they don't my guess is that we'll have the $IMFS set up for years as the chinese will gladly accept all that time Central Banks are buying them, yes?
Maybe I'm just feeling pessimistic today, but enen though FG would be fair, I've got the feeling that only Big Trader or someone powerful enough to buy paper gold and asking for delivery of let's say 1000 tons would do the trick; why didn't the BIS or the ECB started FG valuations so far? ... Human kind is greedy and vanidous by nature, so if FG was on the cards Why is it that nobody else but Another and FOA have whistleblowed it?
Sorry once again if I sound like a troll, believe me I'm not, already made several contributions to FOFOA, it's just that when the puzzle looks almost done we just get another bunch of pieces.
Best,
db
Michael H,
USDX spiking way up, while UST yields also jump?
That looks like a strong economic recovery, doesn't it?
db,
I agree with what you said about the Euro. But they can attack only the sovereign debt, but not the currency itself. Isn't this what the ECB needs?
Victor
So FOFOA above notes that with the US borrowing being financed by the FED, dollars are piling up overseas:
So the USG is borrowing $21,000 **from some entity** each second and spending it on stuff from abroad. This doesn't cover the entire per-second appetite of the USG consumption monster, only the stuff from abroad. The USG also consumes another $114,000 in domestic production each second, which is all the domestic economy can handle right now without imploding, but we aren't concerned with that part yet.
Now, if the **from some entity** is our trading partner abroad, then there is no fear of real price inflation. The USG is essentially borrowing $21,000 this second-that our trading partner received last second- and the USG will spend it again on more foreign stuff in a second and then borrow it again. See? No inflation! The same dollars circulate in perpetuity, the real stuff piles up in DC, and the USG debt piles up in Beijing.
But what if that **from some entity** is mostly the Fed, and has been for two years now (and they are calling it QE only to make it sound like its purpose is to assist the US private sector)? If that's the case, then the fear of real price inflation is now a clear and present danger to "national security" (aka the USG consumption monster). Not so much for the private sector which is now trading our stuff for their stuff, but mostly for the public sector which trades only $21,000 in paper nothings, per second, for their stuff.
Under this latter situation, you now have $21,000 per second piling up outside of US borders and it's not being lent back to either the USG or the US private sector (which has stopped expanding its debt). It's either going to bid for stuff outside or inside of US boundaries.
So external dollars are accumulating. As they bid for stuff in the US and we a rising price level in the US, which causes a problem for the USG and its need to chase its consumption fix.
Remember that's the "big danger in a little Inflation" from Moneyness - not dollars coming in mass, but enough to drive the USG to have create more paper to maintain the same level of consumption to print.
And the money that stays oversees will look for a place to go, and much perhaps ultimately goes to gold, and that blows up the paper market. Here is how miner49er described it
So, do these orphaned dollars eventually come home to roost in the US domestic markets? We will be told that. The media will wring their hands over anecdotal wake-up stories like Arabs buying up vast tracts of property, and how "they" will soon "own" the country... (This has been going on for ages in the U.K., as you're aware... every other lovely English manor is seemingly owned by some Saudi mogul...) We experienced the same with the Japanese in the 80's (Rockefeller Center...). Hence part of the political response will be to enact capital flow restrictions. But anecdote amounts to chump change, in a purely financial evaluation.
cont.
cont.
The really big holders of dollars are the central banks. What they do with their reserves will make or break. Their influence over other banks and financial institutions will also largely dictate the destiny of these dollars. In the gold standard, the currency acted as something of a title deed for a specific good at a specific price. Central Banks could and did take these "receipts" and claim gold from each other. In this day, there is nothing for CBs to "claim," as these dollars are no longer "title deeds." Rather, they are like non-expiring calls for things on demand, at the variable and going price. CBs are likely to neither a) dump them on the forex markets, as this would simply devastate the currency, and risk dreaded instability globally -- something banks are NOT prone to do; or b) race to our markets to try and buy things (like gold), as this would also be fruitless, since a market revaluation for this action would instantly make gold unpriceable, and it would not even be offered. Again, why engender the instability?
Without a certain weapon in the arsenal of the euro's design, the foreign CBs would indeed be over a barrel. Previously they were forced to evermore be on a dollar standard, since they would realistically only opt for this as the lesser of two evils. The alternative of saying no to the dollar at that time, would only have meant a return to a gold standard, and the politically unacceptable bone-crushing depression that would follow (as well as instability). In 1979, the European CBs began marking their gold reserves to market. This one act demonstrated immense foresight, and would provide the escape valve from the rock-and-hard-place no-win choices between eternal dollar support, or global depression.
Quietly, the euro-system banks have been divesting themselves of dollars. Collectively they retain something like 211 bn. currently. (This is not a large amount relatively speaking, but consider fractional reserve lending, and quickly we perceive the immesity of euro-dollar infestation.) This decline in dollar holdings is desired to take place concurrently with a rise in the price of gold to offset this. Spoonfeeding dollars into the system won't crash it, as well a slow commensurate rise in gold. The discipline that they have thus far maintained is indicative of the tectonic movement of the geopolitical strata. Ideally there will be no rash or even discernible activity. The perfect result is to simply keep shifting these plates until we wake up one day and the world has been remapped. Reality of course is that there are points of friction that cause tremors of unpredictable frequency and proportion all along the way. At some point critical mass will be reached, and the dollar contract markets for gold will no longer be able to contain its price as market perception on a large enough scale discounts paper parity with the real metal accordingly. It is at this juncture that the gold reserves of the CBs will provide immense expansionary leeway, as they are for a season revalued constantly upward. This bona fide liabilityless reserve base will make the ECB member banks the premier lending institutions to fuel the economic growth of the euro zone, and those align themselves with it.
[..]
The strategy of the level-headed is to slowly remap the globe financially. This involves as much as possible a SLOW transformation from one currency paradigm to Another. These dollars en masse will not return home. They were born in exile and will die in exile. We will hyperinflate ourselves, and won't need help from overseas...
dolt typos:
So external dollars are accumulating. As they bid for stuff in the US, we see a rising price level in the US, which causes a problem for the USG and its need to chase its consumption fix.
Remember that's the "big danger in a little Inflation" from Moneyness - not dollars coming in mass, but enough to drive the USG to have create more paper to maintain the same level of consumption.
As miner49er says,
These dollars en masse will not return home. They were born in exile and will die in exile. We will hyperinflate ourselves, and won't need help from overseas...
DB, on this point:
'why didn't the BIS or the ECB started FG valuations so far? ... Human kind is greedy and vanidous by nature, so if FG was on the cards Why is it that nobody else but Another and FOA have whistleblowed it?'
Firstly, you would not want to be seen to the one pulling the trigger. Just look at what happened in Libya and Iraq and Iran next. Any move away from the dollar and they come after you.
The BIS/ECB have just set up the perfect currency for when the current system breaks, and can afford to sit back and let it happen. It won't take much longer, their options are now limited to QE or similar.
Who knows why only Another and FOA came forward, but the great news for PGAs is that everything they predicted is now happening.
Just from reading Fofoa's past posts it is clear that these changes (like the tides or a big river) happen in slow motion, but so many little eddies and currents show up every day, all moving in the same direction.
Have faith.
Gary,
"Another and FOA came forward, but the great news for PGAs is that everything they predicted is now happening."
Oh really? Toilettpaper on the ECB balance sheets instead of gold(claims-LOL), that's what they predicted? EFSF? ESM? I must have missed that part of the trail, can you show me?
Greets, AD
And the idea is not that all the external dollars will overwhelm the paper gold market from the long side, but more:
This decline in dollar holdings is desired to take place concurrently with a rise in the price of gold to offset this. Spoonfeeding dollars into the system won't crash it, as well a slow commensurate rise in gold.
[...]
At some point critical mass will be reached, and the dollar contract markets for gold will no longer be able to contain its price as market perception on a large enough scale discounts paper parity with the real metal accordingly. It is at this juncture that the gold reserves of the CBs will provide immense expansionary leeway, as they are for a season revalued constantly upward.
The market perception causing a discount in paper v physical gold can occur as a result of
A top-down shift in risk perception as the very few physical gold holders of size in the world all at once withdraw their physical from the marketplace.
As FOFOA wrote in Today's (quote-unquote) "Gold"
In light of this new perspective, we can see that price can converge with value through the actions of either the current stock holders or the pool of new buyers. And when valuation is of the relatively objective variety, as it is with OG's stocks, it is usually a combination of both.
But in the case of gold, where value is entirely subjective, this is not necessarily the case. In fact, I would even propose to you that, subjectively, those who already possess the physical gold value it higher than those who don't yet hold it. Ergo, the explosion of price to the level of value is more likely to be brought about by the existing stock holders exploding the stock to flow ratio toward infinity for a period of time than by a stampede of panicked savers driving the price higher and higher.
AD, I couldn't care less about your bias against the ECB. Go do your own reading you lazy fool.
This I wrote above:
"As they bid for stuff in the US, we see a rising price level in the US"
Is better said as external dollars bidding for stuff the USG also wants to consume. So its not just US domestic goods and services but also goods and services external to the US which the USG needs to consume - the imports needs to maintain its level of consumption. These foreign dollars can also compete with USG dollars for these foreign made goods and services (aka stuff the USG imports from abroad) as well as for US made stuff.
And of course these foreign dollar holders can also seek real physical goods to store value, which ultimately leads them to gold.
Hi Gary, tks for your reply
"Firstly, you would not want to be seen to the one pulling the trigger. Just look at what happened in Libya and Iraq and Iran next. Any move away from the dollar and they come after you.
The BIS/ECB have just set up the perfect currency for when the current system breaks, and can afford to sit back and let it happen. It won't take much longer, their options are now limited to QE or similar."
Don' you think it's naive to think that the $IMFS bad guys will just go after you if you say "we oppose the usd as the reserve ccy & SOV"?
The Bernanke is whatever but a nursery child, my take is that he knows what he's doing as it's the only thing he can do to extend the system's time lie ;-), but same way he knows that, I believe he's also aware of what comes after, so they must have a plan, and given how the US has always taken over those who wanted to remove their power, I'm pretty sure this time is not different ... Plan may or may not work, but if i had to I'd bet for it, and EUR sov debt crisis is part of that plan.
Maybe it's me being conspiranoic in regard to what the US can do, but knowing what comes after TARP, TALP, QE1, QE2, ZIRP, etc and not having an escape route is like jumping from a cliff pretending to land safely without having a parachute ...So why getting involvedbin such a monetary base expansion knowing what comes after if instead you can manage FG and profit the most by frontrunning it?
Best,
db
Where I said:
"Don' you think it's naive to think that the $IMFS bad guys will just go after you if you say "we oppose the usd as the reserve ccy & SOV"?"
It should have said:
Don't you think it's naive to say that the $IMFS bad guys will just go after you ONLY if you say "we oppose the usd ..."
Gary and of course all the other FG analysts,
You seem to understand Freegold better than AD.
Could you please explain the measures Bosston Consulting Group seems to implement together with Schaeuble in Germany?
BCG's Daniel Stelter has become one of his advisors and now please look at this:
http://www.manager-magazin.de/politik/weltwirtschaft/0,2828,823204,00.html
He suggests 5T debt reduction in order to bring the deficit at 60%, even constitutional changes are taken into consideration.
This man is working for the German finmin!
http://www.appell-vermoegensabgabe.de/upload/PDFS/BCG%20Back%20to%20Mesopotamia%20_%20Debt%20Restructuring.pdf
How is this plan consistent with the Freegold?
I do not see any approachment to BIS/ECB/euro architecture....anyway not coming from EUzone or other European institutions. It might be born in the USA by HI or worked out by the superorganism in longer term than we expect it now.
db, I think if you oppose the $IMFS and you're a country like Libya/Iraq/Iran (with oil, maybe gold too, and not a global superpower) then yes they already have and will come after you.
thedeadfauvi, my cat understands freegold better than AD. I am a freegold student that's all, but I am sure someone will have a look at your link, maybe I will have time tomorrow.
Based on your comments though, 5T debt reduction sounds like reality being addressed, medicine being taken, rather than the US/UK/Japan route of ignore it and print. I know which I'd rather have (as a saver)!
TDF,
absolutely, this is something where I see FG as a big hoax. People viewing ANOTHER as the ultimate cult leader, completely ignoring and blinding out REALITY. I mean this stuff you mentioned is REAL, regardless of this "lalalala-but-another-said" stufff. In my view this leads to the worst reputation for FO(Fo(A)) possible you can think of.
Can the BIS/ECB allow gold to drop 50%? No! Even Ben Bernanke says: Gold is an asset, so I am buying.
Why am I still buying silver, although I am not really that convinced? Because you can not leverage silver unlimited forever (but with gold you can!!!), somebody wants the physical for real.
Greets, AD
db,
You said: So why getting involvedbin such a monetary base expansion knowing what comes after if instead you can manage FG and profit the most by frontrunning it?
I've thought along these lines too.
I came across this link (may be this has already been posted in some other thread, apologies if it has already been dealt with):
Keynes In A Mandelbrot Set.
While I do think bad things (civil social unrest, capital controls etc. etc.) are very highly likely due to huge debt overhang, the central planners can come up with things that don't necessarily lead to Freegold.
I recognize Freegold as an excellent Monetary System Architecture, I have similar doubts like you do as to whether Freegold in its fullest form is inevitable .
Victor,
Did you read my explanation related to Sandeep's paper? Any thoughts? Agree/Disagree?
tdf,
Ender said it well, "From my point of view, Freegold is not a “solution for” but will be the “result of” the current financial mess that we are in today."
In that light, any proposed plans could be necessarily deemed as "current paradigm" centric.
ephemeral_reality,
sorry, I still don't get the argument. He says that in the past, people have been happy holding lots of dollars. Yes, that's observable indeed.
But why would this imply that the dollar will hold up better than sterling or yen? The future is often different from the past, isn't it?
thedeadfauvi,
a business consultancy working for a government department is not the place I would look for freegold. If they had a clue, they would have started to implement measures that prevent the German savers from hoarding so much foreign debt. They haven't. They have probably never thought about the international imbalances.
But since Schauble said that many Brits would be surprised to see how quickly the UK joins the Euro, I think that he is now in the know. He, Merkel, and Sarkozy at least. Someone must have explained it to them in summer or fall 2011.
I don't have a strong opinion as to who is going to trigger it. It might be foreigners rejecting the US$, it might eventually panic buying by some CBs, it might be a sudden deleveraging that breaks the gold market. I would look at monetary policy and the actions of CBs, but not at the actions of governments.
Victor
Thanks for the Happy Birthdays ..... love the frog FOFOA ;)
Nick, the cake was delicous :D
yw
Always nice to have your cake and eat it too (westerners who own gold)
Wendy,
Turns out you share a birthday with Marge Simpson
Victor,
But why would this imply that the dollar will hold up better than sterling or yen? The future is often different from the past, isn't it?
While fear can make a situation turn on a dime (from dollars being scarce to dollars being worthless), the fact that virtually everyone owns dollars means that a larger populace need to become consciously aware that the dollars are worthless. Wouldn't you say that this would take longer than a smaller section realizing that the Yen or Sterling is worthless?
Sterling and Yen do not dominate world trade today, right?
I don't know if this is exactly what Sandeep meant (and may be we can even counter argue that this is not true), but I'm trying to expand on what I think he meant based on your questions.
Here is some freegold discussion in the comments - but beware it is Zero Hedge style:
http://www.zerohedge.com/news/guest-post-are-there-any-currencies-backed-gold
Victor
If half of all dollar holders decide they are too risky, there is a problem. If half of all sterling holders decide that sterling is too risky, there is a problem. Sounds rather similar.
When I think about it that way, then a large stock to flow ratio is an additional risk. There is a certain flow (demand for dollars per time) because of transactions. If now 5% of all holders get scared and try to sell within a certain period, what matters is how big is 5% of the stock relative to the flow. That's an additional downside for the dollar, isn't it?
Victor
VtC,
"Schauble said that many Brits would be surprised to see how quickly the UK joins the Euro, I think that he is now in the know. He, Merkel, and Sarkozy at least."
since you have such great inside, I would be interested on your take, why Weber and Stark have left the ECB, and instead now ECB, Italy & Greece are now ruled by Ex-Goldmansachs people.
Greets, AD
Winter is gone, but not forgotten.
And if you thought that was good
AD,
this is a very good question indeed. I don't know the answer. Here are a couple of alternatives to choose from:
1) They are old school hard money. They know Draghi will create inflation, and they hate him. Better not be associated with such an ECB. (but if you leave, then how do you influence the ECB?)
2) They are frustrated that the Germans have saved so much in paper assets which will now either default or burn. (how surprising, given that they have seen all the data about credit levels, capital flows, etc. for years and years)
3) They know that the German public listens very carefully when Bundesbank people speak. If they step down, this is the signal to "get out of paper!" (which you have to admit is the right message after all)
4) They will be needed later because frustrated old men who have thrown in the towel can tell things to the press that a person in office cannot.
If you accept that no Bundesbank official will give an interview saying "We have long known that the dollar will collapse and the debt bubble will pop. Today, we tell this to you simple people, too. This is the last call. Get out of paper now.", then it is probably one of these four options, isn't it?
Victor
VtC,
reading these four options, I can only come up to the conclusion, that it is not the dollar that will collapse, but rather the euro will break up.
And when the euro breaks up, only the dollar is left and for psychological reasons I think this is something not to be underestimated. Remember, it's the receiver that determines the value of the money. So the only question remaining is, can the political powers change this thesis by brute force, at least to me it looks like they are trying (regarding dollar just as euro).
Oh and about the persons we are talking about, here's an interesting perspective, much more realistic than this lalala-ANOTHER-euro-BS:
http://iknews.de/2012/03/28/interview-hans-olaf-henkel-unzensiert/
Greets, AD
I can pipe the text into google translate, but how do you do that with the video? Who's that guy?
Again, I said it many times that the Euro will not break up. Why would it? Germany needs it (as an export-absorbing buffer), and Greece needs it (otherwise they would be annihilated immediately). So what is all the fuss about?
Also, I think the ECB still has very good cards if they want to keep consumer price inflation in the 0..2% range for the average over the euro countries. Won't feel very nice in Greece, that's true, but you won't get runaway inflation anywhere else either. Remember, some debt must default, then you have enough leeway to monetize another part.
Victor
and about gold:
http://www.cnbc.com/id/46877251
So I wonder if it is a good idea to buy stuff recommended by CNBC & GoldmanSachs.
Greets, AD
VtC,
"I can pipe the text into google translate, but how do you do that with the video? Who's that guy?"
If you dont understand german and even do not know that dude, how can you be so conceited on the other side to judge on the actions of Merkel & Schäuble?
Greets, AD
After a comment like this from you-know-who:
'absolutely, this is something where I see FG as a big hoax. People viewing ANOTHER as the ultimate cult leader, completely ignoring and blinding out REALITY.'
I would respectfully suggest that he is clearly a dope and a troll, and if anyone gets into a discussion with him.....craziness.
To AD, we all get it, you don't believe in freegold, and you hate the ECB/Eurosystem, we get it 100%. So, unless you have something on freegold to add, stop wasting your time and ours with your pointless views.
There must be an anti-EU blog where you can go and moan with kindred spirits, why waste your time here. WE DON'T CARE (THAT YOU ARE A BLINKERED BIASED ILL-INFORMED CRETIN).
JR, thanks for you comments re realdollars.
VtC
unfortunately your the four answers don'quite add up.
1. Most of the people have no idea who and what Weber and Stark are and if they know they cannot make any connection.
2. If that were the case they could have made clearer statments (but they didn't).
3. Same as above, some publicity was given by MSM but by far not enough and not conclusive. MSM is absolutely not helpful for Au and is not better than in the rest of the West, you have exactly the same vocabulary in Germany as in USA.
4. Very conspi-rational. There will be plenty of people - in case they were needed to tell the "truth" as it is.
These answers, VtC, are sadly insufficient and I admit AD's questions are very prescient.
@Gary
Do you think it is correct to insult someone when he asks questions you cannot answer very plausibly?
Why do you think some people questioning the EU, the euro are hanging here around at FOFOA? Is it maybe because they are looking for a valid answer, because they are worried about their financial future or because they look to discredit Au?
I can tell you that the last is not the answer. I've made up my mind before I've found FOFOA, I decided Ag is good as speculation, later on as change in emergency case.Due to the fact that it is enough of it on the market and because it is an industrial metal i preferred to get straight to the goal and not mess around.
From the very beginning I stood skeptical about the euro. Actually I wonder how many many people living under euro regime believe in its strength and future here expressed. AFAIS most of you are not paying with the euro.
Sure, I see some truth in the explanations given here but my doubts remain. The monetary part of the FG theory is superb but the forces against it are very strong. It's about Am. supremacy, highest national interests of the most abject politicians of the world. They are still stong, see MFG, see the wars they incite.
It is inconceivable for me to see how they let the situation excerbate so far if they have a solution.
As for triggering the waterrfall, the Europeans do not have the balls for that, this is true but not because they do not want to be seen like authors of a catastrophe, but because they are not willing. Germany is the key for plenty of unpleasant things here.
The mandate of the ECB has changed of late, it's more fiscal than before the crisis.
The rest of the laws supported by the EU are completely and outright undemocratic, adopted 1:1 after the Am. ones vave been implemented.
Up to know the Am. policy is prevailing everywhere in the world. My only light at the end of the tunnel are the BRICSA, the ditching of the $ in their trade. The FG theory is beautiful, it may come along some day but it's not proven.
Never times ago have people chosen what's best for them ALL, they always had to take what SOME of them suited better. Ordinary masses have no choice, no vote. Awakening and murmuration need some longer time to fullfil.
Of course I stick to my pile and wait for the future but i don't hold my breath for FG.
Finally I have to agree with AD:
Nobody here is able to give a concise answer to these palpable questions and it is really a handicap the FG analysts do not speak other languages - where perhaps German would be the most useful.
AD/fauvi,
You say the question is not answered, but I have seen Victor say many times he does not think the euro will fail. FOFOA has said many times he expects the euro to survive, but allows that even if it fails, freegold is still our destination. We know Another's position.Instead of asking the same question over and over but not accepting the answer, why don't you tell us what will happen? Bartertown? Gold standard?
Enlighten us and perhaps we can move on.
@VtC:
5) Weber and Stark were made an offer they couldn't refuse, or maybe they only needed to see what happened to Straus-Kahn. Anyone posting with the handle VtC should see this as a likely scenario. Anyone posting with the handle VtC should also realize how corrupt and worthy of overthrow a system is that allows all of its bureaucrats to pay no taxes on their income.
You write:
"Again, I said it many times that the Euro will not break up. Why would it? Germany needs it (as an export-absorbing buffer), and Greece needs it (otherwise they would be annihilated immediately). So what is all the fuss about?"
This passes for astute commentary here? It reminds me of what Foch told the French about the Maginot line. And why did the Reichsmark fall apart when Germany really, really needed it then too?
@Gary: Please stop trying to have AD removed, his contributions to this blog are far more important than your echo chamber echoes and flatulence.
@AD: please keep on keepin' on. Interesting interview with Henkel. It looks like all is not well with the Franco-German EU alliance. What happens to the EU if France and Germany get a divorce? Victor KNOWS that they will both keep using their joint checking account (the Euro). I am not so sure.
@TDF: Those Boston Consulting slides are an eye-opener. I am sure that our NWO fascist overlords would love to have the chance to confiscate wealth directly with a one time wealth tax. That way they can keep their Euro and still remain in control of the banking system and money creation.
@Jeff: These discussions reveal one of the big weaknesses of FG as discussed here: in the real world things don't happen because that makes sense. We are dealing with all the worst human emotions like, greed, revenge, lust and hate. Noone can tell what is going to happen, least of all those who refuse to consider that maybe what Another wrote 15 years ago no longer apply. So why don't we make a simple wager, which currency goes into HI (defined as 50% inflation in a month) first: the dollar or the Euro? And the breakup of the Euro would qualify as HI.
At least wager is objective and easier to settle than AGW or "freegold" where the devout will simply deny reality or change definitions.
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