On Saturday, I'll Have ANOTHER won the Preakness in Baltimore by a neck. Preakness is the second of three races that comprise the US Triple Crown. I'll Have ANOTHER also won the Kentucky Derby two weeks ago. If he wins the Belmont Stakes on June 9th, he'll be the first horse to win the US Triple Crown in 34 years. The last Triple Crown winner was "Affirmed" in 1978. Oh, and one other thing, the runner up in the first two races, Bodemeister, will not be competing at Belmont.
One of the musicians in this next video is one of the commenters here and a supporter. He wrote a song for the band called 'That Barbarous Relic' which he tells me is still in rehearsal. Here's a recent write-up in NPR Music. The band's new album, Safety Fifth, will be out June 12th.
593 comments:
«Oldest ‹Older 201 – 400 of 593 Newer› Newest»As you would expect M,
It is a complicated mess - http://www.treasury.gov/resource-center/data-chart-center/tic/Pages/ticfaq2.aspx#q1
A number of article report China can only buy directly, not sell:
The documents viewed by Reuters show the U.S. Treasury Department has given the People's Bank of China a direct computer link to its auction system, which the Chinese first used to buy two-year notes in late June 2011.
China can now participate in auctions without placing bids through primary dealers. If it wants to sell, however, it still has to go through the market.
http://www.reuters.com/article/2012/05/21/us-usa-treasuries-china-idUSBRE84K11720120521
Do we think this is accurate?
To put the always repeated China T-bond numbers into perspective:
China hold $1.17trillion.
German dumbass private savers alone hold 4,715trillion of those lovely euros.
http://www.faz.net/aktuell/finanzen/meine-finanzen/geldvermoegen-deutsche-reich-wie-nie-11762052.html
okay if you want, we can deduct all private&government german debts etc. still more than the chinese $-bond-numbers.
So who is not being paid in full so far? Germany or China? Who has more potential to get paid in full on those numbers in what markets today or in the future? Paid with what, by whom?
Thoughts?
Greets, AD
Wendy
you say what i think.
side note: I was 'gleaning' my driveway one day on my back from getting the mail and lo and behold something caught my eye. Something a bit shiny. I dug it out only to discover a very large gold ring encrused with diamonds. hmmm... makes me think of this blog. Geaning is good.
Costata
would not large purchases of treasuries (from China) by the Fed show up quickly somewhere? Dumping these on the market would send yields up but when/if the Fed buys these surely the'll have to report some increase in the money supply that was used for these large purchases...or are you thinking they will (illegally?) hide these?
@AD
"Paid with what, by whom?"
Good question. I guess that since Germany has none of its gold reserves inside of the country, if the EMU goes tits up the Germans will be even worse off then the Chinese: Hyperinflated currency and no gold. One thing I am sure of is that the "Friends of the Euro" will still be screaming "Eurowhinger conspiracy".
@jojo,
"your're a dbag....sorry you asked for thoughts. "
Classy comment and well thought out. You and Gary have been really shining of late.
@AD:
I would be interested to learn how a German prepares. I would be willing to exchange tips from Switzerland where we are renowned for the Reduit. I really think it is a pity that the army has abandoned this strategy, but the Swiss politicians so want to be able to send Swiss boys to fight in UN wars.
@Desperado,
When you say "a german perpares", I say: Most german people are completely asleep, but more and more are wakening up, but even in the media there is a little coverage of "prepping" increasing although it is still a little bit shown as a tin foil heads stuff.
For me personally I can say, I would not consider myself a representative german and there are only limited things you can do: Live your life, stack up real wealth (what ever that might be for you, food&water are definitely wealth, ask somebody in Somalia) and save the rest in the tokens of your choice ;)
What I personally learnt: The very most valuable thing is to realize, not to take anything for granted at all and to get used to live and adapt to those consequences, without following any kind of religion leaders, shall it be €-fascists, Krugmans, keynsians, austrians, Mish, OGWarrenB, FO(FO(A))s whatsoever in the world.
If you want to send me a PM, feel free to do so, would be interesting to discuss, without being permanently insulted here in the comment section:
advocatuxdiaboli@googlemail.com
Greets, AD
Years ago, during the NBA's All Star Weekend, the great Larry Bird was a regular contestant and winner of the three point shooting competition. On one occasion, Bird was said to have entered the locker room before the contest addressing his competitors with the following question:
"Which one of you is coming in second."
Suffice it to say that Mr. Bird subsequently won the three point contest.
I think you'll understand the purpose of me regaling you with this anecdote when you read the story at the link.
http://www.jsmineset.com/2012/05/24/the-top-five-gold-commentators/
@ Desperado and ADHD
You said "I guess that since Germany has none of its gold reserves inside of the country, if the EMU goes tits up the Germans will be even worse off then the Chinese: Hyperinflated currency and no gold."
Remember when France had all that gold in the US ? Then they decided to opt out of the London gold pool and collapsed monetary system in the process and sent a ship to pick up its gold ?
costata (May 24, 4:17 AM)
Interesting theory to explain why Treasury would put China on the same footing as the primary dealers by allowing China to buy direct from Treasury.
[quoting Aziz] "...now that the PBOC has effectively been upgraded to primary dealer status, would the Fed start buying treasuries directly from the PBOC [...] should China choose to quicken the pace of a future liquidation, potentially bursting the treasury bubble?"
- - -
enough (May 24, 5:15 AM)
IMHO, this is to hide China's liquidation so the FED can monitize it on the quiet and nothing more.
- - -
costata & enough,
Considering the Fed, specifically, with regard to these speculations over the rationale behind the direct link between the U.S. Treasury and the PBoC, there is room to give this matter deeper musings. Regardless of this new avenue, the Fed's Trading Desk already had full possession of the requisite operational latitude to conduct securities transactions discreetly and directly with the PBoC.
So, rather than imagining this "news" to facilitate new Fed-related activities, I would suggest that something else is afoot. Care to venture any modified musings?
Gold. Get you some. --- Ari
As I scramble to see if I can come up with the first potential answer to Ari's challenge, I found this 2009 article from Nathan's Economic Edge that explains some of the benefits of being a primary dealer.
This excerpt in particular caught my eye:
Primary dealers serve as counterparties in open market operations, the central bank’s mechanism for maintaining its target rate for overnight loans between banks. Primary dealers also are expected to bid when the Treasury sells bills, notes and bonds. The designation is coveted by some firms because central banks and certain pension and endowment funds will only do business with operations that have it.
???
hiya Aristotle,
you stated....
"the Fed's Trading Desk already had full possession of the requisite operational latitude to conduct securities transactions discreetly and directly with the PBoC."
The latitude you speak of is so immense that it is difficult to imagine a boundary that would require this newly publicized link between the PBOC and the Treasury.
I'll take a stab at it, given the fact I've begun taking these tabs that are supposed to improve brain function. If I'm way off the mark then I'll just stop taking them and use the funds to buy some more gold.
Could it be that China had agreed to "appear" to purchase Treasuries direct from the US Treasury to make things seem "biz as usual" but in reality these treasuries will soon after be monitized by the FED via the operational latitude you mention?
A new super sized QE behind a red velvet curtain, rather than the very public format via the primary dealers used prior? A new super stealthy QE using China as the intermediary between the Treasury and FED?
If this response has any merit at all, I would ask this question.....
Isn't the public announcement and knowledge of QE part of it's effectiveness? Would not hiding QE from public view hinder it's ability to support asset prices?
I guess if the most important reason is to fund the bloated US govt on the down low and raising asset prices is a distant second, then stealth QE via PBOC it is....
you can all stop laughing now..........
OK, it was worth a shot :-) best, E.
Don't worry Enough. I'm prolly farther off than you are. ;-)
Hmmm, the reality is hard, you not only RELY on it, but you almost talk like you 'invented' it, like in a brainwashed way.
Simply stating that I purely rely on none other than 13 year old anonymous sources doesn't make it so. You have been strawmanning me on my own blog for a long time AD and I have let you run wild like a buck naked native. It will not continue. If I tire of you enough, eventually, you may become #3 after Shelby and Art. But not yet.
- Probably you are correct instead of following a theoretical view on gold and a lunatic price setting of 50.000$ a oz =) =) Even in India they would call a shrink for you SIR.
- You should have been in gold from 1980 to 2010 and selling it in 2011. (Even Indians and Chinese are selling!). China does not need imports anylonger and they have enough gold in their own market to meet demand. On India level the new generation SELLS the gold FROM GENERATIONS. Because they want : car, iphone, western luxury, even kfc and mcd food, look at their gaining weight (and not in gold oz).
DiaAdv said :
What I personally learnt: The very most valuable thing is to realize, not to take anything for granted at all and to get used to live and adapt to those consequences, without following any kind of religion leaders, shall it be €-fascists, Krugmans, keynsians, austrians, Mish, OGWarrenB, FO(FO(A))s whatsoever in the world.
If you want to send me a PM, feel free to do so, would be interesting to discuss, without being permanently insulted here in the comment section:
advocatuxdiaboli@googlemail.com
@Desperado
Anno 2012 AdvDiaboli looks smarter than fofoa.
After all IF all Western Banks SELL all gold to Asia and manipulate the paper price further. (a) and use the received money in a fancy leveraged way (b) they can (c) drop the price back to levels even china mines stop operations (d) even an indian would no longer BUY gold (e) after one generation the compouding and leverage would beat even that 50.000$/oz in a magnitude of x1000. (and no hyperinflation needed).
Blondie: "These (both CB gold liabilities and physical gold) are fungible gold assets from the point of view of a BB looking at their own balance sheet, are they not?"
Yes, a gold asset held with a CB would be considered zero risk part of a BB's gold balance sheet.
Blondie: "So if there was a short-term “liquidity issue” with physical gold (ie. not enough to meet current obligations such as for example unallocated accounts seeking to become allocated, allocated delivery requests etc), CB gold liabilities could technically be good enough to act as nominal deposits in allocated accounts. I know these sorts of things are probably not “supposed” to occur, but things do happen when circumstance dictates, in an attempt to mitigate or avoid problems."
In normal circumstances this wouldn't suffice because the legal definition of allocated is off balance sheet and I doubt the CB would be willing to act just as a vault for the BB's clients metal, which would mean the CB has to recognise the title to the metal belongs to the BB's client. Any such action would show up as a reduction in CB's reserves.
But I suppose in desperate circumstances a BB may be tempted to continue to hold the physical bars at the CB in the BB's name, but in its books recognise those bars as allocated and be able to give their client a bar list. This would hide from the CB that those bars are actually owned by the BB's clients and potentially subject to withdrawal.
It would only be in a physical withdrawal run that the CB would be tested as to whether it is prepared to actually let physical go.
However, the scenario you paint would come up against a number of hurdles within the BB as to not explicitly have clear acknowledgement from the CB that the metal belongs to the client would be a red flag in the BB's vaulting, back office and risk functions. No doubt you will say that they will be told to toe the line by a desperate bank, but understand that while the popular perception of banks integrity is low, and that the bullion market deals in a lot of paper transactions, the market and inter-BB dealings and clearing relies heavily on the integrity of the physical operations.
The BB's may do a lot of paper transaction and have debits and credits being made by the accountants, but appreciate that within each BB they build up a very strong set of back office, risk and vaulting related controls, internal walls, and culture when it comes to physical vaulting and settlement because for the BB they are giving up a real tangible asset and one that cannot always be traced and recalled like a paper bank transfer can. The BB's put these in place because it protects them against loss.
I do not think it will be that easy to suddenly change that or get around it for temporary transactions - the number of people that need to be involved in such a fraud is large and thus at a higher risk of exposure. Note also that from the BB's point of view, even if they can break/reverse their internal controls and the back office etc people accept that, then the BB knows it is now at a high risk of fraud ON ITSELF from its own staff once they tamper with the interconnected internal controls over physical.
Hi Bron,
You're a super bright guy and I respect you immensely. I dont even understand the technical stuff you go on about, but......
"the number of people that need to be involved in such a fraud is large and thus at a higher risk of exposure."
OMG.....where have you been for the past four years?.....the only exposure these guys worry about can be cured with some SPF50 !!!
If your a pleb and you dont' tow the line, you get fired and end up in coventry !!!
If you're on the Board nothing happens at all !!!
Just out.....
SEC Staff Said to End Lehman Probe Without Seeking Action- Bloomberg
http://www.bloomberg.com/news/2012-05-24/sec-staff-said-to-end-lehman-probe-without-recommending-action.html
"U.S. Securities and Exchange Commission investigators have concluded their probe of possible financial fraud at Lehman Brothers Holdings Inc. without recommending enforcement action against the firm or its former executives, according to an excerpt of an internal agency memo"
Ari,
debtor is servant to the lender. 4 rooms comped with wet bar as long as you pick up the same chips you left behind the cage and play again tomorrow?
DP,
The real song with that name
http://www.youtube.com/watch?v=hE75mFhvd2c
IHA, get the job done/ I'm still in shock from Victory Gallop's charge in 1998. As a memeber of the crowd you knew the result was bad before they developed the photo.
Would be curious of any of your thoughts regarding real interest rates and gold performance. Seem some interesting report from Casey and others that show gold performance is greatly influenced by positive or negative real interest rates.
That is one thing that stood out that i don't remember seeing in the Gold Trail, but its possible i missed it also. Are all these moves more related to Real interest rates. Gold came down from the 80's because there was large real interest rates after Volker pumped up rates above inflation.
It seems to make sense. People make trade offs, invest in dollars etc through bonds which earn a yield or when yields are negative the opportunity cost of gold is very low.
"Yep. Not being able to print your own currency is the ultimate in slavery." -- M
I don't know about the "ultimate" form of slavery, but a form of servitude it most certainly is. Every dollar of source money coming into the system arrives as an asset to a bank... and a liability to everybody else. That's a lot of power.
No doubt. The treasury bond is the asset to the Fed's liability. If you understand what that means, you own some gold.
SMRI,
I would strongly recommend reading Victor's piece on Many Values of Gold, specifically the link between long-term bond yields and gold price. It is empirically established that long-term bond yields are anti-correlated to gold price (through the work of Barsky and Summers).
In the just released MAP6:Euro-Brics discussion papers, contributors talked about closer Euro-Brics ties, reform of international governance institutions (IMF, WTO, World Bank, etc).
The Chinese contributor has this to say:
"(The greatly reduced trade surplus) will reinforce China's will, together with its BRICS partners, to secure radical changes in the International Monetary System in a not so distant future. A radical shift which can only be achieved with genuine involvement of Euroland countries, in order to move the world away from a US Dollar centric system." --- http://www.leap2020.eu/downloads/MAP-in-English_t12046.html
Michael: "gotta disagree"
You are free to disagree, that is the beauty of an open exchange of ideas.
However I don't care if you disagree, I maintain my position ;)
Hi enough,
The more I think about your Page 1 comment at May 24, 2012 5:15 AM the more inclined I am to think you are dead right with this:
IMHO, this is to hide China's liquidation so the FED can monitize it on the quiet and nothing more. This also allows China to sell without spooking the mkt with public sales as they still have enormous positions to unwind. It definitely allows them to liquidiate more quickly and for the FED to keep those sales quiet.
Occam's Razor!
Cheers
All,
It pays to read the latest comments before responding. I see others have shared their thoughts as well as 'enough' and Ari has "thrown down the gauntlet". Allow me to read the rest of the comments and mull over Ari's info about the existing capability of the Fed.
Cheers
Re: Ari's Challenge
I would like to take enough and costata's initial thoughts a little further and blend them with Michael H's data at the top of this comment page.
I would like to think that everything is as usual hidden in plain sight:
1. As China, I cannot start selling outright in huge quantities (political implication), but I would be interested in rolling over the interest and switching the long term maturities into SHORT term Treasuries (less risk, more demand, more liquidity, easy to "get paid first"
2. As the Fed, I would like to not show a spike in long bond rates, and I know that China will only buy short term Ts in much smaller quantities in the future.
Why don't I (the Fed) do Operation Twist, where I sell short-term Treasuries, and buy the long end?
Since the Fed needs to monetize part of the deficit, the long end is ok right now since on the short end there's enough demand from private or foreign scared money.
Hi Ari, enough et al,
Regarding this discussion of the Treasury deal with China. I must confess that at this point I have more questions than answers. Before exploring those questions let's review the announcement where it is claimed that:
1. Reuters has "viewed" documents about this agreement.
2. It is claimed that this is the first time the Treasury has entered into an agreement of this type with a CB/Country/Treasury.
Let's add in Ari's observation and a later report from Reuters as reported by JR:
3. The Fed can already enter into the kinds of off-market transactions that we speculated could be the motivation for this agreement e.g. issuing inflation protected UST paper to China, allowing the Fed to buy UST paper off China and so on.
4. Reuters claims in a follow up release that this deal allows China to buy direct but any sales by China must go through the market.
A few observations and questions if I may (and some speculations). If a journalist says they have "viewed" documents this is code for an unofficial briefing by Treasury officials. The UST wants this information out there nearly a year after the agreement was made but it doesn't want to make a formal announcement.
Q. Why put this info out there and why now?
Speculation: It was going to come out anyway. Perhaps transactions conducted under this agreement over the last 11 months are identifiable in the data since the agreement was reached as Michael H intimated in his comment at May 24, 2012 6:42 AM above.
Let's assume that it is true that this is a first.
Q. How does this agreement differ from earlier agreements between the USG/Treasury and other governments?
Speculation: None.
Let's also assume that this is a "buy only" agreement and not a buy-sell arrangement.
Q.What does Treasury have to offer aside from debt?
Speculation: Gold. Cash (via the Fed). The quid pro quo on a side deal with the USG. Other securities* not offered to the general market?
*I'm thinking along the lines of the preferential debt provided to the Social Security "fund".
Cheers
Aquilus,
If I read you correctly China dumps all of the long bonds it is holding onto the Fed via Op Twist and shortens the maturity across their portfolio by buying shorter dated paper direct from Treasury.
Sales are either via the market as claimed or off-market via the Fed - the option Ari points out. This shows up in the direct bid.
(Can anyone clarify what differentiates a direct bid from an indirect bid?)
All,
Let me throw something else into this discussion about the China-Treasury deal - failures to deliver.
I recall a few years back that there was a lot of talk about these failures by the primary dealers. Amounts were discussed of up to $2 trillion of securities not delivered on time.
Some observers pointed out that this could be interpreted as a short on USG paper. Other observers pointed out that this was a de facto free carry for the primary dealers on the cost of holding this paper.
Is there still a large floating aggregate amount of delivery failures? If so, does this lend credibility to the claim that this agreement will "streamline" China's purchases?
M,
"You said "I guess that since Germany has none of its gold reserves inside of the country, if the EMU goes tits up the Germans will be even worse off then the Chinese: Hyperinflated currency and no gold."
Remember when France had all that gold in the US ? Then they decided to opt out of the London gold pool and collapsed monetary system in the process and sent a ship to pick up its gold ?"
I guess it is completely moronic to think that a) that gold still exists & b) that germany will ever again get its hands on that gold. Maybe any other country, but not Germany, thats for sure.
Greets, AD
@Costata,
Yes. Trying to fit the following pieces together:
1. China cannot sell treasuries (held at Fed account) outright, but probably wants to minimize liquidity risk by shortening duration.
2. Fed needs to continue monetizing deficit, and can, for now, take advantage of strong "scared" money demand in short term Treasuries to concentrate monetization in long end
Thanks Bron,
I appreciate you sharing your knowledge and experience regarding bullion banking. This point: ”the legal definition of allocated is off balance sheet“ pretty much sinks my scenario on its own, without the other hurdles you outline.
To clarify, I agree with you regarding the integrity of the banks, in that I understand the problem to be a systemic one. The banks are simply operating inside that system.
You say ”I suppose in desperate circumstances a BB may be tempted to continue to hold the physical bars at the CB in the BB's name, but in its books recognise those bars as allocated and be able to give their client a bar list.“… the thing is, we could never know if the situation ever did get that desperate until after the fact (if that ever even occurs), so while not impossible, it can be no more than speculation on my part.
”It would only be in a physical withdrawal run that the CB would be tested as to whether it is prepared to actually let physical go.“ Well that’s the case no matter how a BB utilises CB gold liabilities.
A couple of interesting posts on oil over at Financial Sense from Jeff Rubin and Gregor Macdonald.
http://www.financialsense.com/contributors/jeff-rubin/whatever-happened-to-two-hundred-oil
http://www.financialsense.com/contributors/gregor-macdonald/opec-has-lost-the-power-to-lower-the-price-of-oil
Jeff discusses how softening demand derailed his $200 per barrel prediction from 2008.
Gregor views demand as being more robust (my emphasis):
Indeed, OPEC raised production several times in the 2004-2008 period, attempting to restrain oil prices as it moved to protect the global economy from an oil shock. However, the oil market, which was going through a fundamental transition at the time, as it reoriented itself towards insatiable, price-insensitive demand from Asia – paid little attention.
He also discusses his view that OPEC cannot push prices down these days. According to Gregor Non-OPEC oil supply is now around 60 per cent of the total supply and this is predominately in the hands of the major oil companies rather than state owned oil companies. and Russia is the big mover in the increased supply of Non-OPEC oil.
Recalling our discussions about oil in recent threads there is more grist for the mill in these posts.
Aquilus,
I'm not saying this is intentional but if you wanted to "prime the pump" to force a currency devaluation through inflation having all of this money in short duration paper would be an ideal way to do it. Like filling a dam with near term cash that could rush out as soon as the floodgates opened.
If the Treasury and Fed folks genuinely believe that deflation is the real threat they may even view this as an advantage. Something they could (perhaps) trigger with negative nominal (not just negative real) interest rates.
e_r,
Re: Barsky and Summers
I don't think I ever tossed the idea below at VTC because I felt that there was a bit of hero worship in his attitude to these guys.
It has occured to me (and a few others) that Summers deliberately reversed the causation in the gold vs interest rate theory he and Barsky presented. From a career perspective I think that would have been a boost for Summers.
Anyway I'm merely throwing the idea on the table. I don't think it matters all that much today whether it has any validity.
Cheers
ARI!!!
Where have you been? ;)
I'd like to take a stab at your challenge. Imagine you live in some bizarro world where you're somehow living off of nothing but 37 different credit cards. You've got one big one, maybe a Citibank Card, and 36 smaller ones. You're constantly rolling your old balances into new cards with low or zero interest and expanding your overall debt at Starbucks and many other ultra-hip places every day. Your friends think you're just the coolest thing ever because you're always picking up the tab. And you fully understand that this game will either go on forever, or you'll end up in some sort of bankruptcy. Either way, you'll never have to actually "pay" for anything you bought in the past. Life is good!
Then one day Citibank cuts you off. They can't give you any more credit, but they also don't want you to default immediately. They realize that their weighting in your credit report is as oversized as their share of your debt. What they really want is for you to start paying off your old debt (to them) with new credit from your other smaller cards, for as long as possible.
So rather than announcing (on your credit report) to all your other smaller creditors that your credit has been pulled, they (and you) set up a special direct line of credit to you personally. With this direct line they will help you roll over that portion of your maturing debt (to them) that you cannot immediately pay, into shorter term debt and, to the outside world, this will look as if they are not only still giving you credit, but that they now give you "special credit" through a super new direct IV into your main vein.
But do you announce this new "special relationship" with your long-time largest creditor while you're in the middle of Operation Twist(ing on the gallows)? Of course not! It's not exactly something to brag about. They just cut you off. But you hope that your other creditors will somehow notice it and interpret it in the way that you intended. If, at some point down the road, they realize you actually aren't getting any new credit from Citibank, you can always leak the story to Reuters and hope it gets spun in the way that benefits you. After all, this 37 credit card scheme has been working pretty darn well for a really long time. So no real worries, just same ol' same 'ol.
Sincerely,
FOFOA
PS. I will note (from my last post) that those smaller credit cards ponied up $68B in "surplus" credit at the same time as China reduced its balance by twice that amount (beginning in June when the "special relationship" began).
FOFOA,
great analogy. Now you only need to explain in case of the chinese bond deal, how does china benefit. Sure they can trade paper for other paper and they would be "paid first privilidged" what you imply. Still they will be paid with a $-paper. China and the US/FED do benefit both from this OTC trade, on the other hand they are still dealing with basically the same "asset". I can only see a difference in case USgov&FED would part. Is that realistic? maybe sometimes, not from what is to see today.
Greets, AD
AD, China can spend homeless dollars on things other than Treasuries. They can't spend Treasuries though. This is what the end of the line looks like.
AD
The Ps. offers a benefit you seek.
"PS. I will note (from my last post) that those smaller credit cards ponied up $68B in "surplus" credit at the same time as China reduced its balance by twice that amount (beginning in June when the "special relationship" began)."
So. If there had been an immediate default China would have lost everything. Already they have gotten a $68B x 2 benefit, without the US defaulting. $140B is better than nothing. I'm sure they have spent it on gold and perhaps euro bonds and what assets they could find.
Every billion they withdraw is better than having the US default immediately.
TF
Further evidence (if any were required) in the Eurowhinger's post above of a really tiny mind, as even I understand how China benefits from what Fofoa describes, and so too do my two cats.
Regarding China, can I test the water with what to me seemed to be a piece of the jigsaw dropping in to place recently, thanks to reading one of Fofoa's late 2009 posts (can't recall which) about 'Big Trader'.
The connection I made (which probably has already been made by most of you already, but I wanted to throw it out anyway) was that Another/FOA didn't anticipate Chinese support for US debt for the last 12 years or so, and hence the $IMFS survived a lot longer than they expected at the time.
I have pondered why would China help America many times, but when I read the 'Big Trader' posts, but I think I have realised that China gained much from this support over the last 10 years:
1. It gave it time to develop its economy/infrastructure/living standards, as it could recycle dollars into hard commodities and build stuff.
2. It allowed China to get in on the gold action, snapping physical up via Hong Kong, and no doubt other channels too.
3. It could dig a load of its own gold out of the ground and both add them to its reserves and encourage its citizens to own some too, ready for the reset.
4. By 'allowing' America to binge for another 10 years it was only helping to dig a deeper hole for its largest strategic opponent, so that when the collapse arrived the US would be so bloated and weak, it would no longer be a threat.
5. It knew that when the time was right for China, and they were as prepared as they could be, they could turn off the tap, as it appears they have done in the past year or so, and perhaps they could rescue some value from their T-bonds before the rest of the world grasped what was happening. Plus they have spent a lot of that value along the way buying and building real stuff.
So, it does seem to me that China has played its hand pretty well once it realised what was happening in the physical gold market, and it has done all it can to prepare for the US collapse. It'll still suffer from the collapse, but perhaps its citizens will spend some of their new-found wealth to compensate for the drop in Western demand.
Three cheers for the Chinese, their prolonging of the US game has given me the chance to join the trail and pick up a few crumbs just in time!
A few random, disorderly thoughts:
1. What does USA want; The "miracle dollar" goes on forever,
magically buying the world's excess production with promissory
notes which cannot be redeemed except "in kind".
2. What does the ROW want: The end of this system by which they
sacrifice their lifestyle/excess production, but without a global
depression. (note: this may not be possible)
3. What does China want: To convert its MOE US$reserves, which do
not act as a SOV, into another transactional currency, which can
act as a "better" SOV. There is not enough gold, copper, cement
wheat, iron ore etc. to stockpile as $ are sold. Only another
currency can absorb what they want to get rid of. They have
bought yen in the past, perhaps as an intermediate step? They
certainly will want more Euro, but how to do so without roiling
the markets? Perhaps a back door solution is planned.?
Since 2000, China has insisted on being pegged to the $. It is
willing to be pegged to one or the other of its' 2 major trading
partners, but will not allow the yuan to float free. It must
therefore peg to Euro if it is to phase out the $ peg, since with
thin profit margins, wide currency fluctuations cannot be
allowed.
I have a lot of confidence in 1,2,3. How, exactly the world (and China)
gets from "here" to "there" is another matter entirely.
FOFOA,
So IMHO although what you describe is perfectly right and makes sense, but it only applies to theory:
If it gets to the point when $-bonds are worthless, the dollars are as well, at least as long as FED=USgov. Will that change? According to what you wrote in "Ball of Twine", no indication to that...
Greets, AD
The ball of twine grows larger:
Taxpayers now stand behind derivatives clearinghouses.
May 23, 2012 – WSJ
President Obama’s standard gripe is that the economy has performed so poorly during his term because of the financial crisis he inherited from George W. Bush. But this week it is Mr. Obama who has bequeathed to his successors a landmark in financial regulation. It is bound to haunt them, though not as much as it will haunt taxpayers...
Specifically, the law authorizes the Federal Reserve to provide “discount and borrowing privileges” to clearinghouses in emergencies. Traditionally the ability to borrow from the Fed’s discount window was reserved for banks, but the new law made clear that a clearinghouse receiving assistance was not required to “be or become a bank or bank holding company.” To get help, they only needed to be deemed “systemically important” by the new Financial Stability Oversight Council chaired by the Treasury Secretary.
http://www.luxlibertas.com/wsj-a-mess-the-45th-president-will-inherit/
In light of the WSJ story, maybe China wants to be as plugged in as everyone else when HI kicks off. No waiting in line.
Jeff,
The rape and pillage continues.
An interesting piece from Martin Armstrong that everyone should read IMHO (my emphasis below). Unfortunately in the extract Armstrong has made a mess of explaining the problem with his clumsy use of language and lack of detail.
Despite this there is a lot to be gained from attempting to understand what he's saying about the current account post 1971. I have tried to assist with the highlighting. It's the best I can do at the moment as I am too tired to do much more.
http://armstrongeconomics.com/693-2/2012-2/saving-the-world/
The trade statistics are calculated based upon the old gold standard of Bretton Woods. If money was of a fixed value, then the shortcut to calculating trade was just to monitor the money going back and forth.
When the floating exchange rate system emerged as a bargaining chip in 1971, there was no formal conference and nobody sat down and revised the entire world monetary system. When they came up with the brilliant idea of manipulating the dollar down by 40% to reverse the trade deficit forming the G5 (Now G20) at the Plaza Accord, again the concept was just insane.
Since currencies floated, the “trade deficit” that was really the Current Account no longer represented actual tangible goods, but the same goods now fluctuated in price and a rise in the deficit would no longer imply you actually important more goods for the currency simply changed.
Again I wrote to the White House pleading with them not to act in such a stupid brain-dead manner. You could no more isolate only trade, and would reverse investment flows as well.
Costata, from the article we learn that even foreign based clearinghouses will be backstopped by the front lawn dump. I used to wonder just how face-ripping this HI will really be; it's going to be huge.
Woland,
Re: Your No. 3
They certainly will want more Euro, but how to do so without roiling the markets? Perhaps a back door solution is planned.?
Overall the EU has balanced trade with the rest of the world. Consequently the EU has no need to import capital - it's self-sufficient. If it imported capital anyway that imported capital would, after finding something to buy, need to be converted into Euro in order to be spent in the EMU countries.
One of the problems they would face is that there are only two sources for this Euro exchange - the existing float or newly issued Euro. Consider the currency implications if China attempted to inject that mountain of notional FX they are sitting on into the EU.
Consider also that in order to convert this notional FX into cash it would need to sell the assets it has already purchased with that FX - mainly US debt. How would that affect the US dollar? Even if they succeeded in the conversion who would exchange those US dollars for Euro?
The trap is sprung. The game is in checkmate. There is only one thing that can rectify these imbalances. No other good, asset or security can substitute. Gold is the only solution. It can absorb surplus without limit and fill a deficit that is near infinite (but one time only).
Good night all
Incisive insight and intellectual clarity from FOFOA. (Contrast with the lack of knowledge, paltry-minded duplicity of just another of the scam merchants, Bron). Listen to/be misled by the latter at your absolute peril. The way ahead is clear and wholly unavoidable. FOFOA will not lead you astray.
Peter. T: come on - has more credibility and is a good contributor here. We don 't want to throw dirt here on legitimate contributors here.
Ari/FOFOA,
Is it possible that the dollar swap lines the FED opened last year for Europe was a 3 way swap... as in China ended up with the Euros, Europe ended up with dollars, and the FED ended up with the treasuries...? I do not know, as I doubt anyone knows the real number, the size of the dollar swap lines...
@ Dr.T
thank you for confirmation of my same feelings for years.
Is there not a key difference-perhaps ultimately immaterial- between FOFOA's scenario and the one actually in play, namely that one amounts to robbing Peter (all the creditors other than Citibank) to pay Paul, (Citibank) whereas the real life scenario is, how do I put it, more along the lines of the debtor dragon being forced to cannibalize itself starting at its tail?
Biju,
Everyone is entitled to "judge" for himself as he will. I agree with Peter T, if not with the same passion. When apparent credibility flies in the face of a crucial decision - you have to take a side.
Ari,
To further add to what FOFOA has written, there is possibly the Iron Law of Debt at play here.
The liquidation value of debt is the amount that would liquidate it here and now. It obviously depends on the rate of interest. The liquidation value of total debt is inversely proportional to the prevailing rate of interest. In particular, halving the rate of interest by the central bank is equivalent to doubling the liquidation value of total debt.
To be sure, cutting interest rates does increase the burden of debt contracted in the past because liquidation value is calculated by capitalizing the stream of future interest payments.
China would prefer short-term debt roll-over of its previously owned long-term debt, so it wants to get in line first to buy the short-term debt to reduce the duration risk.
costata,
this was so good, I do have to comment:
A couple of interesting posts on oil over at Financial Sense from Jeff Rubin and Gregor Macdonald.
I have challenged Gregor here at Chris Martenson's site.
I'm not saying this is intentional but if you wanted to "prime the pump" to force a currency devaluation through inflation having all of this money in short duration paper would be an ideal way to do it.
You said somewhere that the USG had a considerable incentive to inflate the US$ suddenly and quickly. Check. Intentional or not? They are not so stupid as to not know the risks.
Something they could (perhaps) trigger with negative nominal (not just negative real) interest rates.
Agreed. The question is whether they can influence it or whether one day it 'just happens'.
I don't think I ever tossed the idea below at VTC because I felt that there was a bit of hero worship in his attitude to these guys.
No worries - I'd be happy to raise my hand during his presentation and tell him he's wrong.
Your question is interesting:
Barsky-Summers say the real price of gold anticipates future real interest rates. What we know, however, is only that changes in the real price of gold anticorrelate with future real interest rates. So the obvious other possibility is this: Future real interest rates depend on changes in the real price of gold.
Reginald Howe and Nick Laird have studied this correlation and found that it is almost absent during 1995-2001. 1995 happens to coincide with Summer's term at the Treasury and also with the expansion of the London gold market related to the gold-for-oil scheme.
So does Summers know the correlation is costata's, i.e. opposite to what his paper with Barsky suggests? Then by lowering the gold price, they have set things up for future positive real interest rates. Is this point of view any helpful?
Conversely, the increasing gold price since 2001 (even increasing in real terms) has set things up for future low or even negative real interest rates.
Can you explain the mechanism, i.e. why would an increasing real gold price today guarantee low or negative real interest rates in the future?
Victor
Gary,
I have realised that China gained much from this support over the last 10 years:
One thing that the US$ system 'achieves' is that it cheats all those exporters of resources who accumulate US$ assets with their surplus. This means that as long as the US$ system is up and running, resources (non-oil perhaps) are on sale.
And China has been stockpiling resources like mad. Remember all these reports that their banks lend against copper as the collateral? This isn't so much about sound financing as it is about getting tangible assets into the country.
Victor
PDs are *required* to bid, that's what they do - the basically sell US debt for the Treasury.
Primary dealers are also required to participate in all auctions of U.S. government debt and to make reasonable markets for the New York Fed when it transacts on behalf of its foreign official account-holders.
http://www.ny.frb.org/markets/pridealers_policies.html
@Victor
"why would an increasing real gold price today guarantee low or negative real interest rates in the future?"
Interest rates and gold price are both correlated to another variable, only interest rates have a longer lag time. What is the variable? Here are some ideas: long wave cycles, fiat monetary system variables (money printing), deliberate control and manipulation by the elites.
Desperado,
it is a good idea to actually read the original article (Barsky-Summers) before commenting. Their data happen to be taken from the period of the gold standard in Britain before 1914.
Victor
Uncle Costata says, 'Having said that I'm not convinced that the players in this game have completely run out of options that can help them kick the can down the road for a while longer (say 1-3 years max IMO) but the ice is getting thinner all the time for the USG.'
1 to 3 years. I would be shocked if this charade could go on for 3 more years. Are we not seeing a very obvious loss of democratic process all over the globe? Middle East under the guise of democratisation is turning into a dog eat dog battle. West in turmoil with the US elections and the London Olympics perhaps the only 2 things which perhaps need to be got out of the way before the fireworks start? Hmm China riling the whole of the south China sea occupants and thus inviting the ire of everyone from Japan to Indonesia to India to Singapore. Will the possibility of conflict in the South China Sea be the last roll of dice of the Great US war machine?
Uncle Costata says, 'Having said that I'm not convinced that the players in this game have completely run out of options that can help them kick the can down the road for a while longer (say 1-3 years max IMO) but the ice is getting thinner all the time for the USG.'
1 to 3 years. I would be shocked if this charade could go on for 3 more years. Are we not seeing a very obvious loss of democratic process all over the globe? Middle East under the guise of democratisation is turning into a dog eat dog battle. West in turmoil with the US elections and the London Olympics perhaps the only 2 things which perhaps need to be got out of the way before the fireworks start? Hmm China riling the whole of the south China sea occupants and thus inviting the ire of everyone from Japan to Indonesia to India to Singapore. Will the possibility of conflict in the South China Sea be the last roll of dice of the Great US war machine?
My concern is golds true value may never be set free. I honestly dont understand the whole BB suppression system etc. I try to focus on the economics because i have no control over price discovery so I feel little value in trying to understand it deeply.
However if they have been able to at least manage it this long with raging eastern demand why wont this continue? I could maybe understand when gold was flat and there was little interest but not there are a lot of physical buyers. How will this change in a ten yr time frame?
Then there is the danger that if you believe there is some paper suppression but in reality there isnt or its not as big as one thinks then you may wait to long to sell.
SMRI,
Gold in my possession is the way I choose to store value. I have no desire to ever exchange that gold for FRN/dollars.
I guess I could miscalculate my future need for FRN and exchange too many available "dollars" for more gold and end up having to reverse a transaction; however, selling gold is something I do not even think about.
This is how Andy Gause puts it in his Real World of Money Show, "Ten percent, never lent, never spent." Pay yourself first and forgetaboutit.
Hi VTC,
Your gracious reply to my musings deserves a considered response. I have a few tasks to complete and then I will attempt to comment on your qquestions.
All,
Some excellent points have been raised recently in this thread. Much to discuss. I'm looking forward to it.
Cheers
I'll try again. What effect will the coming technological singularity have on the price of gold?
Brad said...
I'll try again. What effect will the coming technological singularity have on the price of gold?
Brad, please describe for us what effect the coming technological singularity will have on the human race and we will tell you what effect the coming technological singularity will have on the price of gold.
Vtc-
Outstanding discussion over at CM. I'm a Peak Oil analyst believer turned skeptic turned believer turned skeptic turned believer turned believer turned skeptic. Either way the discussion is and your contributions are probably some of the best published anywhere.
Hello FOFOA,
I haven't been reading Comments for the past several days. I've realized that I get more pleasure out of them if I let the comments build up for a few days. Kinda like Kegel exercises for understanding Freegold ;)
So I'm a little late putting my .02 into this discussion.
I understand your frustration with certain commenters and I can see how you would envy FOA for going off and watching the Trail from afar. But before you get annoyed enough to make that same decision, I'd like to suggest that you consider offering a subscription-only service instead of quitting all together. I'm sure those of us who appreciate the value of your hard work would support such an endeavor.
We already know your haters are a gang of losers who are apparently unmarried. They obviously aren't getting enough bitching and moaning at home so they come here to get their fill. So, if you had a subscription-only service, we'd see what kind of desperate losers they really are. Would they actually pay money to come to your blog and spew their verbal diarrhea?
Well, maybe if you were the CEO of the Master Race, you could afford such a thing, but how many of those are out there?
Anyway, thanks for all your hard work and patience.
==========================
VtC,
Welcome Back!
RJP
Aaron,
I'm a Peak Oil analyst believer turned skeptic turned believer turned skeptic turned believer turned believer turned skeptic.
LOL - Same boat.
Brad: Are you talking about cold fusion? And gold priced in what?
Hello Brad,
Since I'm not a cyborg yet, I can't tell you what effect the coming technological singularity will have on the price of gold. I suppose as man merges more with machine, we may figure out something that would make for a better store of value than gold. Or we may eventually become smart enough to make synthetic gold that no one could tell apart from the real thing. But there's no way of knowing for sure what the future has in store for us. At least not something that specific.
I think the question you should be asking is the reverse of what you asked. What I'm interested in is "How will the price of gold affect the coming technological singularity?"
Moore's Law tells us that the number of transistors that can be placed inexpensively on an integrated circuit doubles approximately every two years. Notice the word "inexpensively". How much of this exponential growth in technology is due to the cheap capital that's been available as a result of the exorbitant privilege enjoyed by the United States and their reserve currency status?
If you believe Freegold is inevitable then you also believe that more balance will be brought to this world concerning matters of finance. This most likely means that ultra-cheap capital will be taken out of the equation. In order for banks to entice you to put your money in CDs, savings accounts, etc they will have to compete with the SoV function of gold. That means they'll have to offer higher interest rates as an incentive. That also means borrowing costs for businesses increase when they need loans to expand their business.
So when the true price of gold is realized, I think it will have an affect on Moore's Law. Maybe the timeline goes from two years to four years or longer. Or maybe humans will be resilient enough and find other ingenious ways to keep the trend intact without cheap capital. Who knows?
A few years ago, if you wanted to know something, you had to go to school and learn about it or at the very least, look it up in an encyclopedia. Nowadays you don't have to waste time learning all these things. You just whip out a little computer that fits in the palm of your hand and look up what you need to know in a matter of seconds. It only makes sense that the next step in the ascent of man will be that the act of whipping that device out of your pocket will become old-fashioned. The computer will be wired to your brain (like the cochlear implant is now) and the answers you need to know will just come to you as you think about it.
How long will this take? I don't know, but I do think that due in part to the future price of gold, it may take a little longer than Mr Kurzweil expects.
But one day, I do think the Superorganism will require Superhumans ;)
I hope this helped you out, Brad.
RJP
PS: If you're interested, Max DeNiro and me had a conversation about this very subject on Twitter on May 5th.
https://twitter.com/#!/rjpadavona
Another "random thought" re: "Aristotle's dilemma":
Remember, when making the distinction between the Treasury
and the Federal Reserve, who "has the gold", and who has "receipts"?
The Treasury, which does NOT issue the currency, HAS the gold. For
the Fed, it's just the opposite. Ari said that the Fed's trading desk
already had the capability to conduct securities transactions directly
with PBoC. But the Fed has no authority over the US gold stock.
Only Treasury has that. The PD relationship is between Treasury
and the PD's, not the Fed and PD's. Am I all wet? I's sure I'll find
out shortly.
Greets: W
@RJPadavona
"I'd like to suggest that you consider offering a subscription-only service instead of quitting all together...
We already know your haters are a gang of losers who are apparently unmarried. They obviously aren't getting enough bitching and moaning at home so they come here to get their fill. So, if you had a subscription-only service, we'd see what kind of desperate losers they really are. Would they actually pay money to come to your blog and spew their verbal diarrhea?"
I simply don't understand why we are constantly exposed to all the vitriol when the real issue is merely how we choose interpret facts, propaganda and reality. Let me summarize (my views, anyway):
Friends of the Euro Reality:
- The Euro is a noble effort to create a strong currency that can take over after the dollar
- The masters of the universe running the CB's are basically good people doing their best job
- There are no conspiracies, especially NWO
- Freegold is inevitable and can be brought on without the destruction of the Euro and thereby the ruling European elites
- Silver Sucks
Eurosceptics Reality:
- The Euro is tool of the NWO and will be used to further enslave the muppets.
- The heads of the CB's are part of and owned by the NWO
- There are many groups, organizations and government agencies deliberately doing very bad things
- Freegold is not inevitable and may well only come about after the elites have stolen everyone else's gold
- Silver will do well in every scenario gold does, and may well out perform gold by orders of magnitude. Those who choose to save in a medium that does not support their own enslavement may be forced to dump their gold and move to silver.
So for these differences in opinion Eurosceptics are constantly exposed to obscenities and abuse by the friends of the euro. Well Fofoa had better hurry up and start that subscription service because the Euro is slow-motion-train-wrecking right before our eyes. And when the first serious riots break out due to the Euro and the EMU, resulting in major loss of property and life, you can be sure that I will be crowing on this blog, at least unless people like RJ, Gary, Jojo, and costata manage to get me censored.
Desperado
It is enough to address one of your claims I feel :
"Silver will do well in every scenario gold does, and may well out perform gold by orders of magnitude."
Alright, if that is your claim, the burden of proof rests upon you. Why do you say silver could outperform gold (by orders of magnitude)?
"Those who choose to save in a medium that does not support their own enslavement may be forced to dump their gold and move to silver."
Why and how does saving in gold support our own enslavement?
Thanks
TF
Brad
I do not know what You specifically have in mind when you talk about a technological singularity.
However, this I can say.
Think of gold as a store for all the value that does exist and also the value that will exist in the current potentialities. If those potentials change, the value of gold changes.
If for example we halve the human population, we will (perhaps) halve productivity and value created and the value of gold will decline.
If we for example figure out cold fusion, then the potential creation of wealth increases significantly, and so the value of gold increases.
Does that make sense?
TF
Brad
I should not have said all the value that does exist. The a Van Gogh,for example, also stores value. Rather let's say a store for most of the value that does exist, and will exist. ( but not all :P )
TF
Sometimes I think Mr, Sinclair has a scew loose so FWIW, here's his latest comment......
"The one thing I am sure of is that the majority opinion on the destiny of the euro is wrong. The bear position is so crowded it may as well be one sided.
Sure, that type of trading will continue to put pressure on but it all will go splat after the fact. Yes that type of position reflects its mirror image on the dollar and could make the present bullish near term price objective real, but for a moment only.
Gold seems to recognize that we are witnessing the death throes of all fiat currencies inherent in this transition of the euro.
The unexpected is in fact happening. Sovereign insolvency resulting in debt repudiation was thought to be a part of history in Zimbabwe only. It is not.
It is a clear and present danger to the largest debtor nation on the planet, the US dollar. The problems with the dollar will make Greece look like child’s play.
Once the euro circus, which seems traditional, comes to its dead end a change will occur. At or slightly ahead of that time the short of the euro is going to get crushed. The firm dollar is no longer a factor in the gold price as the death of fiat currency overcomes the temporary mirror image of the euro the dollar is.
I feel from the time of the event we will see a much higher euro and weaker dollar that may well prevail for years.
Stay the course. We are totally correct"
me....maybe he reads FOFOA and JR's comments :-)
Desperate, my old mucker, you mis-state matters (deliberately I am sure):
'The Euro is a noble effort to create a strong currency that can take over after the dollar
- The masters of the universe running the CB's are basically good people doing their best job'
I would say the Euro was a pragmatic effort, rather than a noble effort. One that recognised where the dollar was doomed to head, and so designed a currency with the wealth reserve par excellence at its core (oddly, no silver though).
As for central bankers, those that designed the euro knew exactly what they were doing. Many of those around today know exactly what they are doing too, even if it is going to lead to doom. They are merely playing the game to its conclusion.
Sadly, you and you ilk just seem unable to grasp the reality that is unfolding, and how we have got here and why, because you have such ingrained biases.
As I've mentioned before, 18 months ago I thought gold was in a bubble, the Euro was doomed, and deflation was a cert.
The difference between you and me (being polite): I was able to entertain other ideas and changed my view. Reality is reality, NWO and all that nonsense is....nonsense.
You don't like this world, you don't like the views here, you are stuck with this world, but please feel free to move to a blog where others share your view: that is why you get abuse etc, you just drone on about issues that most have grasped (due to open minds) many moons ago. I do pity you.
Dr. Peter T: "Contrast with the lack of knowledge, paltry-minded duplicity of just another of the scam merchants, Bron). Listen to/be misled by the latter at your absolute peril."
All I was saying was that the fraud within the system is a lot easier for paper products and book keeping compared to the physical plane. It was no defense of banks.
Rather than engaging in a discussion on the robustness of controls over physical within a bank, you just make a personal attack. Your comment indicates you've not read my blog, please do and let us all know where I mislead.
This could be significant:
http://www.zerohedge.com/news/china-and-japan-dropping-dollar-cross-rate-system-will-transact-directly
At least an indicator in a long line of indicators pointing to the demise of the US dollar as reserve currency...
something to add to your saying Desperado,
"Friends of the Euro Reality:
- Freegold is inevitable and can be brought on without the destruction of the Euro"
Well, having this being summed up by you. To add, there have never been ANY kind of trail by FO(FO(A) that would point out what is going on NOW:
HOW DOES THE PROBLEMS IN THE EURO ZONE BEING SOLVED WITH FREEGOLD.
Germany holds the most surplus of euros (currency+bonds)
AND Germany holds the most gold in officially CB statistics of gold AND as well gold in private hands.
AND Germany holds the biggest capacity of export potential (I assume at least for the next 5yrs).
You can put the price of FG whereever you want, those issues are not going to be solved.
Greeds, AD
AD
You continue to claim that, even after I went to pains to explain to you that you are wrong.
Here, again, is why you are wrong :
"Your suggestion is that within a shared currency zone, it is impossible to settle balance of trade between entities. If this were true then it would be impossible to settle balance of trade between the different states in the USA. At a finer grain it would also be impossible to settle trade imbalances between the different provinces in a country, or for that matter between different cities, or even different neighbourhoods. This is obviously not true. Prior to the current system balance of trade was settled, by the flow of gold; on the individual, community, city, province, state and international level. So we know it is possible. All that remains is to envision how this will occur under FreeGold."
Quoting myself.
If you can see that the above is the correct view, it is up to you to try and understand how it is possible, instead of repeating your fallacy because you have not yet understood.
TF
Desperado,
When you write slanted, emotionally charged rubbish like your comment of May 26, 2012 5:24 AM is it any wonder so few take you seriously.
AD,
Nice performance there are at May 26, 2012 3:42 PM as best supporting actor in Desperado's favourite passion play. By pointing out that Germany has lots of gold and Euro, both publicly and privately held, you help to make the case for (a) the survival of the Euro and (b) the revaluation of gold under the Freegold-RPG system.
I think that was very noble and altruistic of you. It was "illuminating" if you catch my drift ;) ;) Many thanks for your self-sacfice. Your invitation to the next Bildergerg conference is in the mail.
Dr Peter T,
Bron is a big boy and well able to take care of himself but I can't let your comment pass. He has been consistent in his writings over several years. Bron is the polar opposite of the kind of shill you seem to be describing. From his writings I discern him to be a man of honesty and integrity regardless of whether I agree or disagree with any particular piece he has written.
Anyway that's my 0.02
Hi Aaron,
Re: Oil
I was working on a response to VTC about that Barsky-Summers thaing but my mind kept returning to oil. So I went over to CM to delve into that comment thread about oil you linked. Some elements of the discussion dovetailed with my recent thinking about the relationship between the Anglo-American alliance and Saudi Arabia.
In discussions about oil in earlier threads I put forward my concerns about the lack of action by countries who you would expect to have the most to lose from the outcomes the PO and PCO camps anticipate. And in some cases countries such as the USA and the UK seemed to be doing the exact opposite of what prudence would dictate e.g. taking big chunks of existing production off line (Venezuela, Libya, Iraq, Iran etc).
At that time I characterized some of these actions as protecting the role of Saudi Arabia as the swing producer by hobbling potential competitors and keeping the supply and demand balance tight. Today I'm more inclined to view the events of recent years as an attempt to make it impossible for any country to be the oil production swing producer (at least for the present time). The USA appears to have substituted military intervention and political destabilization for production capacity in this “swing producer” role with a bias to higher prices rather than the low prices their economy relied on in decades past.
In Gregor's recent piece he put a lot of emphasis on the claim that Saudi Arabia and OPEC's excess production capacity can only push the price of oil down rather than allowing them to use it to push up the price of oil. This excerpt from a post by Julian Phillips seems to support this view:
The oil price before the visit (by Hilary Clinton) was over $100 a barrel; today it stands at $92.49 a barrel. In the first week of May, crude oil supplies climbed by 1.9 million barrels per day to 377.8 million barrels per day, a rise not seen in more than 21 years!
I have some big issues with a key assumption implicit in Gregor’s observation. To whit, that Saudi Arabia has ever used its position as swing producer to push up the price of oil to any significant degree. Other OPEC producers perhaps during their euphoria over their newfound "power" in the 70s but the Saudi's were more concerned about maintaining demand even then according to reported comments by Sheik Yamani the SA oil minister during that period. This is consistent with their revenue requirements. As I mentioned in an earlier comment “you can’t eat sand” either.
I don't think there is any point in rehashing the 70s oil shocks. IMO the record is now quite clear. The Anglo-American interests wanted the price of oil higher in order to make new oil provinces commercially viable and to achieve certain later acknowledged geopolitical aims. And higher it went. By their own admission the Saudi's were not consulted about the decision to cut the deal with the Shah negotiated by Henry Kissinger.
I have come full circle on the questions about Saudi Arabia's role in the oil market. I don't think price is their ace in the hole from a bargaining perspective. The only credible threat the Saudi's have ever been able to offer is to demand gold instead of US dollars for oil up until the birth of the Euro. But the underpinning of the Euro is gold as Another described in his comments about the BIS playing “the big poker hand” to make the Euro strong in gold.
In the end it all comes back to gold so I think we are correct to place a lot of weight on the gold:oil ratio in our discussions and analysis. And I for one am even less interested in where this PO or PCO bell curve is drawn against a given time line. This isn’t about geology in my opinion. To paraphrase Another that’s a sideshow. It’s about gold, energy politics (and the commercial interests influencing the politics) and US dollar hegemony.
Central Banks boost gold holdings yet again
"...The most significant reported gold purchases in April itself included 29.7 tonnes by Turkey (a 14% increase in its reserves, but this is thought to have largely been due to its policy of acceptance of gold as collateral from commercial banks), 2.92 tonnes by Mexico, 2.02 tonnes by Kazakhstan, and 1.4 tonnes by the Ukraine...Overall reported Central Bank gold purchases last year amounted to over 450 tonnes - the highest for nearly 50 years..."
I also note with some interest the sudden proliferation of commentary on this topic: If 'irreplaceable' gold a Tier 1 banking asset what next?
What's next is that the higher gold is priced the better for all concerned, that's what.
I maintain that this looks to me like the big red button under the glass reading "In case of emergency, break glass", the button by which the nuclear weapon of the currency wars is fired.
oh, and a rhetorical question.... is link one somehow connected to link two?
costata,
Thinking of oil/gold ratios.
From Another
' This action is coming about because of a gross, huge mismatch of the value of gold and oil! We are not talking about the price of these items ( in any currency ) . We speak of the total amount of physical gold, worldwide and the total amount of oil worldwide'
Blondie,
...the button by which the nuclear weapon of the currency wars is fired>
Perhaps rather than being a weapon these days it would be the armistice in the currency wars. Given the delays almost everyone who matters at a sovereigh level has gold in their Treasury, in the hands of their citizens or in the ground.
Letting the banks in on the game would secure their enthusiastic support as well. (BTW I'm not suggesting they deserve to benefit.)
jeb,
Exactly. Thanks for the quote from our mentor in matters golden, oily and so on.
@MF,
If the elitists take off their masks and go full fascist NWO, then you can be sure that they will have cornered all the gold and if you want anything from them you will have to be their serf in order to earn the gold or their legal tender fiat to survive. In this scenario "resistance" could well boil down to transacting with silver.
@AD,
Isn't it fun watching the polyanna friends of the Euro ignore what is going on right under their noses?
...The new EU bank plan states clearly and without remorse that the decisions for any bank insolvency will be made by Regulators. This would be people appointed by European politicians, this would be bureaucrats, this would be employees of the State as Europe returns to the governance of the old Soviet Union where the Rule of Law was subordinated to the designs of the nation. Let me make this clearer; unsecured bank debt owners will have no rights, no due process and no appeal. The State will decide who is to get what, how much they will get and your rights as a bond holder will be about equivalent to Russia under Stalin where the legal system operated under the thumb of the man in charge. Further the regulators can, once again, exempt the EU, the ECB, the EIB, the IMF or whomever they like from any call on assets so that the bond owner can be subordinated to whomever the Regulators so desire. Then if they will impose this system of State dominance on unsecured bond holders today who is to say that they will not impose it on other classes of assets tomorrow. When the Rule of Law is replaced by the Rule of the State then I will proclaim, unconditionally and without qualification, that the system has been rigged for the benefit of the nations and to the detriment of any private citizens. Therefore there is only one rational conclusion that can be reached which is that no one should own any European unsecured bank debt, NONE, of any bank on the Continent as the Regulators in Europe can now decide the fate of the bondholders for any political reason that they deem relevant and expedient.
@Costata:
Emotion, like sarcasm, is very difficult to detect in blog posts. I would suggest that you are letting your hatred cloud your judgment.
costata,
I'm just running with Another's analogy, but I agree it amounts monetarily to both mutually assured destruction and salvation simultaneously. Let's call it 'mutually assured collateralisation'. This process revalues everything. Both a solution and a paradigm shift, on every level.
This is how paper and physical diverge... unallocated et al. doesn't make the cut to Tier 1 with the real thing, and thus the membrane between the inter-CB level gold value and the value the rest of us use ("spot") is breached.
Blondie,
'mutually assured collateralisation'
I love it - the Big MAC.
Cheers
http://azizonomics.com/2011/08/31/chinas-endgame/
Sounds familiar?
Is it reasonable to surmise that the seeming lack of dispatch on the part of the BIS to designate physical gold as Tier 1 capital is down to the BIS allowing CBs around the world more time to acquire more physical? And speaking of these CBs acquiring more gold, who, pray tell, is providing it to them?
Desperado
I'm sorry, what?
"In this scenario "resistance" could well boil down to transacting with silver."
Even assuming we go back to barter in silver, which I think a ludicrous claim. Your above does not explain how silver would outperform gold by several orders of magnitude. Please explain your claim.
You also completely ignored by second question, so I will repeat. Why and how does saving in gold support our own enslavement?
TF
Desperado
While we are at it, let's take a look at this scenario you paint.
"If the elitists take off their masks and go full fascist NWO, then you can be sure that they will have cornered all the gold and if you want anything from them you will have to be their serf in order to earn the gold or their legal tender fiat to survive."
"If the elitists take off their masks and go full fascist NWO,..."
Isn't that a much stupider way to control the populace than giving them the illusion of freedom? For what reason would these go full fascist? It would engender more resistance immediately.
"...then you can be sure that they will have cornered all the gold..."
A corner relates to the flow of esp new gold. Since gold mining is at about 1.5% of stock a year, it is of little import. Assuming a worldwide fascist overtake ( lol, this is just too funny) then the amount of gold produced would be reduced. Even so, what does this have to do with existing stocks? How would this prevent barter among the 'resistance'.
"...and if you want anything from them you will have to be their serf in order to earn the gold or their legal tender fiat to survive."
What does one want from fascist overlords except to be left alone? Theirs is a monopoly on force not production. Gold and fiat in your scenario is a medium of trade. What does that have to do with force? Nothing.
If they are unwilling to allow you access to their legal tender, then you will either barter or not produce at all. Both are too their detriment. I can perhaps see them looking to keep gold for themselves as they cannot devalue that, they have no power over it, their force does nothing to inert gold.
In essence your deductions are illogical, never mind your assumptions being completely deranged.
TF
Ps. All above questions are rhetorical, in case you are uncertain.
costata,
"By pointing out that Germany has lots of gold and Euro, both publicly and privately held, you help to make the case for (a) the survival of the Euro and (b) the revaluation of gold under the Freegold-RPG system."
yes, great now Germany have all those tokens. So what? Have you noticed that you cant eat tokens? And I dont care so much about the tokens monetary plain, I care about the physcial plane and the rule of law for the freedoms of the european nations. Guess what, those are be being destroyed. It is happening RIGHT NOW! Ben has forgotten to fish, and Chen is forced to continue to work for Ben till after he dies. Why? Because the socialist party leaders like their thorn and they can only keep it as long they live from the transfer wealth from Ben to Chen.
What's up next? Oh yes, exactly what MF thinks is a goal: The fiscal transfer union of europe. Well, if a european persons likes that, dumb, but okay a choice to be made by europeans.
But any kind of opinion about that from somebody outside of europe (probably never lived here), I say STFU.
AD
I am beginning to wonder if it that you are unable or unwilling to try to understand.
You seem to have things completely backwards.
Things are as they are at present due to the incentives in the current system. If the incentives change then people's actions change and things are different.
People always take the path of least resistance. If a man can live without working, and have another pay for him, then most men would do that.
The system at the moment allows the southern european states to get away with doing less and letting Germany carry the burden.
This won't continue forever.
I said nothing about a fiscal transfer union. I said you should work towards understanding how under FreeGold the Germans will stop carrying the burden. And how under FG the Greeks will start living within their means again.
TF
Desperado,
I would suggest that you are letting your hatred cloud your judgment.
My hatred? Of whom or what precisely? Perhaps you confuse intense dislike of stupidity, poorly constructed arguments, cant, prosetylysing and sophistry with hatred. If so, then know from me it is not so. I lack the emotional energy for hatred except toward lamb's brains and tripe. Come to think of it - you're in the end zone.
BTW that piece you quoted from is one of the most asinine, self-serving pieces of bilge I have ever read. Holding America up as a paragon of the rule of law, especially in relation to the TBTF banks, is beyond laughable. It's obscene.
Has that idiot you quoted ever heard of General Motors? I hear their bondholders didn't come out of that deal too well. And you quote this to us in the very same week when it is announced that there will be no further action in relation to the Lehman matter.
These parables of good vs evil you spout are cartoonish. Some of us here have spent hundreds of hours (and for a few us at least it's thousands of hours) researching and thinking about these topics. You present childishly simplistic observations about matters that have been well understood at this blog for years and behave as though we should consider them revelatory.
What's the message? The EU banks are up to the same tricks as the American and British banks. They are trying to socialize their losses. Is that your "hot off the presses" news? Well, no kidding compadre! Pardon me for yawning. Okay, message received you can stop broadcasting now.
And this choice piece of prose: "the polyanna friends of the Euro". WTF does that mean? Something like "Hi, I'm Jose and this is my good friend the peso!" You nincompoop.
http://www.wisegeek.com/what-is-a-nincompoop.htm
Others believe the word nincompoop was a corruption of the Latin phrase non compos mentis, meaning "not of sound mind."
Sounds about right.
Enough! I have had it with both you and AD. Incidentally AD gainsay is not argument in any fricking language (including German).
IMVHO the only way the rest of us can continue to have a worthwhile discussion is to talk around the pair of you. You have wasted enough of our time IMO. And TMF for chrissakes stop encouraging this fool.
Goodnight all!
Enough's musical contribution to the USA's Memorial Day celebration.......
http://www.youtube.com/watch?v=tnfr9Amz7-g
here's to Freedom !!!, NOT !!!
costata
I'm simply tired of them coming here attacking our position without ever once having to defend their own.
As regards AD, I don't see how pointing out he is repeating prior fallacies that have already been disproven is giving encouragement.
I haven't been engaging any of them for a while, due to following the good policy of not feeding trolls. But they have not stopped, and I simply thought it's time to change tactics and ask them to defend their positions, since they continually attack ours and expect us to accept their attacks as legitimate.
Peace
TF
And ANOTHER to our friends at TEPCO....
http://www.youtube.com/watch?v=loF7-8V62M8
enough,
Good idea!
In Memory of "Those Who Wore the Gray"
Hi Costata-
Re: Your comment on May 26, 2012 8:04 PM
I'm right there with you. From my perspective most if not all PO analysts subscribe to the idea that oil producers are running production at maximum capacity and have been for the past 30-40 years. This is the underlying premise for every production curve interpretation by PO analysts I have read. I would of course agree if current productions curves were reflective of maximum extraction rates -- and if we ignore the economic health and wide-spread acceptance of consuming nations' currencies so that each nation wanting a share of the oil gets their slice of the flow -- the majority of PO analysts' outcomes would be more or less accurate.
But the idea on the table is not that PO will happen, but that PO will happen simultaniously and globally as a result of geologic constraints -- and the effects on consuming nations will be similar across the board. This I don't agree with.
I can imagine for political/economic reasons oil producing nations having "preferred customers" based on the consuming nation's economic health and/or wide-spread acceptance of that "preferred customer's" currency. I can even imagine a scenerio under limited production (should the circumstance arrive sooner rather than later) where some nations will be awash in oil while other nations starve for access.
No doubt some in the PO crowd will rightly proclaim, "but no amount of currency can bring more oil out of the ground than is already there!" Absolutely true. There is no debating this fact. I would respond, "No amount of wishful thinking can compel OPEC/NON-OPEC nations to drive extraction to the brink of capacity if the economics don't support the goals of the producing nation."
We all agree that international reserve figures are shaky at best. What's to stop producers from fudging max. capacity numbers to keep a few barrels in the ground for their grandchildren or for future global markets at the right price?
Aaron wrote:
"I can even imagine a scenerio under limited production (should the circumstance arrive sooner rather than later) where some nations will be awash in oil while other nations starve for access."
You don't need to imagine it, Aaron, because this scenario is happening now. There are quite a few nations that are, effectively, priced out of the market.
Months ago, I posted a comment entitled "AD's greatest hits", pointing out essentially what a troll AD was. I kind of lost interest in the comments section shortly thereafter. I recently started reading them again, and lo and behold the same thing is going on. Admittedly some of the responses to AD are quite informative and/or amusing (such as costata's above). But most of this discussion really doesn't get us any further, and frankly it's just an ongoing effort to educate AD about the source material he's criticizing.
I've seen this happen with a number of blogs, where the blogger starts out with a very "free speech" principle on commenting, but as the blog continues to gain in popularity the trolls emerge in force and gradually wear the blogger down, until the blogger capitulates and starts employing the ban-hammer as soon as these individuals emerge after 1 or 2 posts.
So FOFOA, if I may make one humble suggestion, it would be that you employ the ban-hammer a bit more liberally. I think it would improve the discussion and hopefully would help maintain your sanity as well. There are many of us who greatly appreciate your work here.
Best,
Poopy J
I'm usually a very EU-sceptical guy. I have voted against my country being integrated in the euro-zone several times. And so far we're doing fine being outside EUR-zone, while still being a member of the EU. So I totally get were AD and Desperado are coming from. I'm no fan of "democracy" too far removed from citizens.
At the same time I think one has to engage this comment-section with an open mind. It is only fair that one is asked to defend the viewpoint spouted here (especially when opposite of the prevailing view), and not just mock "polyanna friends of the Euro".
I would really appreciate a thorough debate on the Euro-zone subject, but that requires that all parties engage in a earnest exchange of thoughts, where each party seriously listens to the counter-argument, and makes an effort to give a serious reply. Like the kind of debate MF is seeking above.
If this kind of sincere debate is not wanted, well... Maybe Poopy J's suggestion is the way to go?
/Burning
@burning:
To clarify, it is not my suggestion to silence those who have opposing points of view.
I would merely suggest silencing those who fail to understand, and in fact refuse to attempt to understand the source material here, yet persist in being contrary in a quite verbose manner... i.e. trolls. They simply don't advance the discussion.
The downside of the ban-hammer is that we lose the entertainment value of JR, Costata, and Fofoa's (among others) when they are pushed over the edge by inane arguments. I love a fileting every now and again, especially with a good measure of sarcasm and wit, which I can always rely on with this crowd. Costata, you left out haggis, lol...I vote to move slowly with the ban hammer, but to wield when necessary (Art, dopey Marxists, etc...)
Burning,
A noble goal on the debate, but too many rhetoricians with no interest/capacity to argue the actual issues/systems. IMO a very long putt.
H/T to robert essian over at CM for this timely link to Chris Skrebowski's Sept 2011 ODAC Newsletter. The snippet below is from that newsletter:
"Thus the geologists are right that the depletion of low cost oil will produce Peak Oil but it will not be caused by a shortage of oil resources."
"The economists are right that there is no shortage of oil resources or oil substitutes but have so far failed to recognise that there is an oil price which cannot be afforded and this constraint will create and define an economic Peak Oil to be differentiated from a geological Peak Oil."
One additional important point here is that Skrebowski's mention of "price" is within the context of Reference Point USD within the $IMFS.
Poopyjim, burningfiat, MF et al,
Despite any appearance to the contrary my point of view is closer to yours than you may realize. The problem is that the dampening effect on free discussion these guys have is more subtle than it may appear. I can't speak for anyone else but there are issues that I would like to raise for discussion about the Euro, for example, which I feel I can't because of these puerile antagonists.
Any critique of the Euro's structure etc would, I'm certain, be seized upon by these guys. Instead of a balanced exchange it would become a point scoring excercise. Do you think we could have a rational discussion about currency blocs versus nation state issued currencies with these fools kibitzing?
Everything is devolved in their minds to the lowest common denominator. I wasn't joking with that remark about cartoonish parables about good vs evil. If you see merit in the EU then you risk being labelled as pro-Brussels (AKA evil). I happen to think centralism is a recipe for disaster regardless of whether it presents itself as "democratic" or some other flavour of government meddling.
The tip off with people like Desperado is the way he reacts when he is accorded far, far more respect than he merits. I threw him a small rhetorical lifeline by describing the Euro-whingers as Euro-skeptics earlier. Instead of rising to the title he grabs the title and uses it to cloak his whinging in a more respectable cloth. And whinging is all he and AD produce.
There are no constructive criticisms or pertinent arguments offered. I'm sick of them hauling out their soap boxes every time a crowd gathers for discussion of any topic they believe they understand better than anyone else.
Look at that comment from AD earlier. Anyone who doesn't live in Europe is obliged to STFU and not discuss it according to AD. Is China off-limits too? How about the USA? (That could be a bit limiting.) And these "types" have the hide to allege that there is some form of censorship here!
Do we have to run an eight hundred comment thread every time a moron like Carl shows up? Some of you probably lost interest but I can tell you he finally put his cards on the table in the last 30 or so comments. And he had nothing at all - just the usual HMS ideological pap.
If he had declared his true position early it would have been all over quickly. Instead he wastes everyone's time by teasing it out while he basks in the limelight.
I agree with costata. Desperado is a lunatic yammering about worldwide fascist FEMA camps and black helicopters, the EU as the khmer rouge; when is the last time he said anything based in reality? A year ago? AD is a troll trying to stifle discussion.
I sometimes miss swaths of discussion. Did we loose a troll?
Michael,
Sure hope so but I doubt it.
The Australians are on fire today, with their rational and patient arguments in the face of pot-head level conspiracy theories and Euro-whining.
I guess the Aussie government forgot to send out the chem-trails this month, or maybe the iodine levels in the water have fallen too low.
XKCD on chem-trails
XKCD: someone's wrong on the internet
OT distraction:
When I read this :
http://miami.cbslocal.com/2012/05/26/miami-police-confrontation-men-leaves-1-dead-1-hurt/
I couldn't help but advise my wife that the zombie apocalypse has started.
full disclosure: I recently read Max Brooks World War Z.
Here's a little more "seasoned" fodder for your theory, Jojo.
JR,
Well lookee here! Mr Keen seems to have discovered another group of economists who "saw this coming":
The “Global Financial Crisis” is widely acknowledged to be a tail event for neoclassical economics (Stevens 2008), but it was an expected outcome for a range of non-neoclassical economists from the Austrian and Post Keynesian schools.
My alter ego told him years ago he shouldn't disparage the Austrians. I argued they were onto the same core issue (debt) as he was/is even if their perspective and methodology was quite different to his. He even had a convenient (if somewhat tenuous) "bridge" between the Minskyites and the Austrians in Schumpeter.
The article introduces no new arguments as far as I can tell. Link for completeness only.
http://www.debtdeflation.com/blogs/2012/05/22/predicting-the-global-financial-crisis-post-keynesian-macroeconomics-2/
Thanks for that FOFOA,
Those chestnuts I bought a couple of days ago are going straight into the rubbish bin.
Hi Aaron.
Back on the subject of oil, I think that what we were discussing earlier meshes with the material from the archives.
Another aspect to the oil market that has been jarring with me for a while is the behaviour of China and the lack of reaction from other players. Since when do the Chinese chase volume apparently unconcerned about running prices up?
I acknowledge that the PO/PCO camps would explain this as evidence of peak oil. However look at the energy efficiency of China's industrial output compared to other countries. It's way behind.
They have a history of forcing inefficient producers to shut down once they achieve a critical mass of efficient producers in a sector of their economy. Where too is their all out drive for energy efficiency? Nowhere to be seen. The emphasis seems to be on volume.
Their behaviour makes sense to me if we apply the following assumptions:
1. They value the oil at a far higher price than the US dollars they are holding. Hence building and continuing to fill strategic reserves in the teeth of record prices.
2. They are driving to become an important customer with their energy suppliers. And perhaps securing preferential treatment because of that position. At first glance that might seem to argue for a concern over higher prices/supply shortages.
But that makes no sense to me. As Edwardo pointed out high prices lock increasing numbers of competitors out of the market. You need/want preferential treatment when prices are low and every man and his dog is clamouring to buy.
Further if future low prices are only to be had in other currencies apart from the US dollar and they have to pay for their oil in Yuan then they could be in a real bind unless they were ready for a much higher Yuan vs ROW currencies exchange rate.
3. Apparently none of the other geopolitical actors who are in a position to influence the price of oil object to China putting upward pressure on prices.
4. They perceive a ceiling on the benefits that they can achieve from innovation in their use of oil. Consequently volume is the key to growth with efficiency being the (internally controlled) "low hanging fruit" they can pluck once they have achieved sufficient volume.
To some degree I'm thinking out loud here so I'd welcome any input pro or con.
Cheers
Costata, you said
'Since when do the Chinese chase volume apparently unconcerned about running prices up?'
My limited understanding tells me that china is on Europe's side. Running the price of oil up makes the USD appear weak in oil.
Is this a flanking manouver in this battle of currencies?
jeb,
China is on China's side. I wouldn't assume any covert attempt to undermine the US dollar. The failure of the US dollar is simply happening over time as it becomes exhausted as a viable reserve currency.
IMO their support for the Euro would be based entirely on self-interest. Also the EU and the USA are about equal as the largest markets for Chinese exports.
I'm thinking that their pursuit of oil is due to the size of the oil market. There are over $10 trillion of FX reserves globally. I disagree with FOFOA about this issue of China (and other surplus countries) being able to redirect their surpluses to acquire goods and services in the physical plane in preference to US dollar denominated securities.
Most commodity markets are too small to absorb an avalanche of cash. Most local populations are also hyper-sensitive to land grabs and other large scale purchases of assets by foreign interests even if their governments welcome the "investments".
Look at what happened a few years back when China tried to buy ports in the USA and Unocal. They had the door slammed in their faces. Big corporate takeovers would likely be prevented on the grounds of national interest/security. There are already examples we could point to around the world.
Of course China is incrementally acquiring foreign assets but these investments are tiny compared to the size of the cash flows. What's a hundred billion when there are trillions floating around?
It appears to me that the options are quite limited for China to make acquisitions in size. Gold, oil (energy), debt securities - that's about it IMHO.
@Costata
on China and oil, just musing... If I were in their position, I would definitely want to stockpile as much oil as possible in case of disruption in supply during USD HI, until an acceptable transactional currency to replace the dollar is fully agreed on and accepted. Same thing with encouraging the stockpiling of other industrial commodities (like copper for collateral for example). To me that's just the prudent thing to do as long as prices are not driven high but not sky-high, it should be ok by them I would think...
@Aristotle
Any chance you can give us a hint if we were on the right track with our answers/speculations ? Thanks.
Aquilus,
I think the stockpiling of copper and aluminium is driven by the private sector not the state. The numbers are insignificant compared to the FX the state holds.
Whereas gold and oil are both officially items that are being stockpiled (though in what quantities we cannot know).
Cheers
Informative piece from Santa:
http://www.jsmineset.com/2012/05/27/behind-the-scenes-with-harry-schultz/
FED and IMF is backing the ECB bailout of European banks, to hold the Eurozone together. At least till after the Nov. elections.
This could also be spun as: TPTB trying to hold $IMFS together. Or: fighting deflation in non-performing bank assets with money printing.
Also: One of China's biggest banks now has retail branches in the US.
All seems to fit nicely with the well-established date of 2012-12-21 for $IMFS collapse and freegold ;-)
Leave The Euro?
If you want to understand the fundamental flaws in the leave the Euro and restructure debt argument versus the case for remaining in the EMU and restructuring debt read these two articles in the order presented and then read the first one again.
Once again the batting order is No. 1 and No. 3 here:
http://www.mpettis.com/2012/05/18/europes-depressing-prospects/
And No. 2 here:
http://www.bloomberg.com/news/2012-05-09/spain-s-stealth-devaluation-goes-unrewarded-by-investors.html
I have to sign off and won't be back on line until late tomorrow. Happy to discuss then.
Gold incorporated into the Zombie Apocolypse....
from the Daily Telegraph......
"A British man has been arrested in Thailand after being found with six foetuses that had been roasted and covered in gold leaf as part of a black magic spirit ritual."
apocolyptic link below....
http://www.telegraph.co.uk/news/worldnews/asia/thailand/9274106/Briton-arrested-with-roasted-human-foetuses-for-use-in-black-magic-ritual.html
I make a point to send FOFOA a personal holiday "greeting" each and every holiday......
Maybe the idea will catch on....best, E
Speaking of disturbed and depraved culinary practices, I once dined at a restaurant in Paris where filet de canard was translated on the menu as dick filet. Ouch, and Bon appetit. Now would someone please address some of my questions.
Interesting new piece over at Eric Janszen's Itulip, re: Triffin, the
construction of the Euro, and China, all in connection with the
decline of the $IMFS. Worth a look IMHO.
Costata-
I had to laugh at my own comment further up. I was trying to make a case for "preferred customer" status in the face of shortages and high prices while your point highlights the significance of the same in the face of glut and lower prices -- and you know what -- your point makes a hell of a lot more sense than mine!
costata,
"If you see merit in the EU then you risk being labelled as pro-Brussels (AKA evil)."
problem with you guys in the discussion is that you dont know s*** about the evolvement of the EU and what it means to the all day life of the people here. How can one discuss stuff where he knows nothing, cause he is not confronted with it?
Just to give you one recent example "Vorratsdatenspeicherung", germany vs. EU. Some pothead might think what a great achivement, I say go to china to have your great "Vorratsdatenspeicherung".
Greets, AD
Cold Sushi, Hot Particles.......
Radioactive Bluefin Tuna Caught Off Coast Of San Diego....
"Five months after the Fukushima disaster, Fisher of Stony Brook University in New York and a team decided to test Pacific bluefin that were caught off the coast of San Diego. To their surprise, tissue samples from all 15 tuna captured contained levels of two radioactive substances -- ceisum-134 and cesium-137."
http://www.10news.com/news/31122527/detail.html
What happens when the financial plane rapidly expands while the physical plane rapidly contracts (becomes unusable)?
Simultaneous monetary HI combined with real or percieved physical hyper-contraction (HC)?
Could percieved physical plane HC be the catalyst for monetary HI?
Hording is not necessarily rational, mostly an emotional response to a percieved threat. Local news reports of radioactive seafood hitting the west coat of the USA can't be good for the "let's order in" dumbed down, Housewives of O.C. populace........
story just now picked up by Reuters and WSJ
http://www.reuters.com/article/2012/05/28/us-japan-nuclear-tuna-idUSBRE84R0MF20120528
http://online.wsj.com/article/SB10001424052702303395604577432452114613564.html
AD,
The Euro is retarded. Except for the things they did right in the event of a dollar collapse. I don't really underdstand the slow play out, given all of the tension, but if you think about what is waiting on the other side it all does make some sense.
Enough, I know you have expressed deep concern about this in the past. I share your concern however not your knowledge. Would you be able to recommend a couple of good sites, which would allow me to bypass the googley crap?
Wendy
http://enenews.com/nytimes-fukushima-daiichi-pushed-japan-brink-evacuating-metropolitan-tokyos-30-million-residents-national-collapse-former-prime-minister
Very serious articles.
thank you alien, I'll have a look
Enough,
The levels of radiation in the tuna are very low. Yes, it sucks that we can detect radiation in fish, but I don't see any cause for alarm. The article states the levels are well below the accepted standard.
The article states the fish had;
"5 becquerels instead of 1 becquerel".
Radiation counts N have an uncertainty sqrt(N), so the uncertainty in a count rate of 5 is sqrt(5), which is about 45 %. A count rate of 1 has 100% uncertainty.
Maybe they had repeated measurements, which could reduce the uncertainty, but Still, 5 counts over 1 count of background is not exciting, any way you cut it.
If you want to keep being scared of tuna, look a the amount of mercury in tuna. The FDA suggested
weekly intake for canned tuna (it isn't that much!):
"Another commonly eaten fish, albacore ("white") tuna has more mercury than canned light tuna. So, when choosing your two meals of fish and shellfish, you may eat up to 6 ounces (one average meal) of albacore tuna per week."
Those sushi islanders were is serious trouble :-)
Sorry, what I was trying to say above is that it looks like the scientists guessed correctly that you would see even really low levels of radiation is the fish, because radiation is easy to measure even in very low doses.
It's more a case of some bright sparks getting the scoop on "the first signs of radiation from Japan to the USA", regardless of how low the dose is.
Which means that it isn't something to worry about, since the dose is really low. You could eat that tuna sushi safely, and I'd speculate that those tuna didn't go to waste.
http://goldharvest.blogspot.com/2012/05/jp-morgan-where-theres-smoke-theres.html
The TRUTH has a way of extinguishing many years of LIES once it goes viral.
-W
@all,
Not sure if this has been discussed here or not, but the latest from Fekete:
http://www.professorfekete.com/articles/AEFNoBusinessLikeBondBusinessStill.pdf
seems to be at odds of what many here thinks, he seems to think deflation is a given and Fed has no control what-so-ever.
And what about his paradoxical "lower interest rate, higher debt burden" argument? Any previous discussions here on that?
Hi Bosco,
I read the original essay on this topic from Professor Fekete and just finished reading this piece. Thanks for the link.
I'm not sure why you think Fekete's theories are "at odds" with what many here think. The view held by many here is that hyper-inflation is caused by a catastrophic loss of confidence in a currency.
If Professor Fekete views HI as inflation on steroids or an effect of excessive printing of money then he would be at odds with the perspective on HI discussed here.
Have a crack at providing Fekete's definition of deflation and inflation and we might be able to explore this further.
Cheers
Bosco,
thx for the link to the Fekete article. The whole inflation/deflation debate is interesting. However, I just dont see this deflation the delfationists are talking about. What has gone down in price in the last 10 yrs? Only housing has gone down recently in the past 4-5 yrs. I spend a lot of time in Latin America. I travel in countries that used to pay double digit interest rates on its bonds now they are below 5% yet prices go up like clockwork 10% or more every yr, falling bond yields and rising prices doesnt seem to fit into what he was saying in the article.
Beer Holiday,
After FUKU blew, Japan RAISED the allowable limits of varrious isotopes in food by 500% !!
OK, Japan says above x is harmful before at a certain dose but now that EVERYTHING, including tea, exceeds that level, we were just kidding about harmful levels and we are just raising it to the real harmful limits.
These cesium levels in CALI tuna were masured in 100% of the test sample 15/15 Tuna 6 MONTHS after incident (7/11) Why release that now?
Cesium as a 30 year half life and does not sink to bottom of the Ocean but evenly distributes.
JPM's initally reported loss was $2Billion, what is it now? Point being, break news slowly as to not alarm.
The fact is the Pacific above the Equator is dead to fishing. Kelp forests on the W. Coast of USA are showing very high levels of cesium.
You going to feed your kids Tuna that the Govt. tells you just a has a teenie weenie amt. of cesium in it?
Everyday Tepco pours seawater in the broken tops of Reactors 1-3, whose pools are breached and the radioactive water runs out the bottom and back into the Pacific. Millions of tons of seawater already and they can't even get into those reactors they are so hot.
Decommisioning them will take 30 years. removing all the rubble in and above #4 spent fuel pool will take 2 years at earliest before thay can even get to the rods. There is no roof on #4. This Pool is open to the sky !!!
You just cant lift dry rods out of pool. They need to be removed in a cannister type deal that has water in it. Like transporting a fish from one tank to another exccept this "fish" starts to burn if it gets dry.
Beerman, listen to the MSM. They always tell you the facts in the USSA.
This will get worse and worse. The Northern Pasific is toast for fishing unless you want cancer.
The fact is TEPCO and the whole world are praying the mostly likely scenerio does NOT occur. #4 Reactor pool breach which causes a giant dirty bomb that sets of a chain reaction that takes out all the rods in ractors 1-6. In that event it's game over.
The M9.0 from 3/11 created an extremely unstable plate strucutre. They are having M5.0 ave. every 24 hrs now. A big one occuring before they remove the rods which in turn causes another tsunami or containment breach is a given. Like I said, prayer is all we have.
Right now 1-3 are in meltdown. The molten radiactive cores are sitting in the bottom of the containment vessels, no longer in pools and TEPCO is attempting to cool them with these seawater hoses I mentioned. There are breaches in the containment vessels and the contaminated water runs back into the pacific.
These cores are in MELTDOWN and eating through the bottom of the containment vessels. CHINA SYNDROME. When they hit groundwater, they will blow in massive hydrogen explosions. That what hot rods do when they meet hydrogen in water. That is what caused the initial explosions in the reactors 3/11.
This is not fantasy, it is happening NOW. So what;s the worst that can happen really? Millions die of cancer over the next 30 years. OK then, that's the way it will be.
I'm more concerned with a panic that occurs as news of what is really occuring get out and the actions the public take. MSM will not be able to hide this or play it down. The Japanese people are wide awake now. A hydrogen explosion from the molten cores in 1-3 hitting ground water as they melt through last level of containment or breach of #4 fuel pool and the dirty bomb explosion that spreads radioactivity over the planet cant be hidden and there is no place to run.....
Beerman.....keep drinking
Wendy......dont eat Pacific fish
The rest of you....good luck
link below is live cam for #4.....if you see the building on the right go down.....cry
at the top of this site there is a button for alt websites and Japan MSM for news
http://radioactive.eu.com/index.php?option=com_k2&view=item&layout=item&id=4&Itemid=193
below is another link to informative alt. news site
http://enenews.com/
Published: May 29th, 2012 at 8:21 am ET
BBC: Public health hazard from fish arriving in California waters? May be considerably more contaminated than radioactive tunas
"The fish that will be arriving around now, and in the coming months, to California waters may be carrying considerably more radioactivity and if so they may possibly be a public health hazard"
Hi Wendy,
live cam of unit #4 with news links across top of site. If the building on the right (#4) ever goes missing, things have not turned out well.
http://radioactive.eu.com/index.php?option=com_k2&view=item&layout=item&id=4&Itemid=193
Beerman.....give your kids some tuna with cesium in it, it's safe cause they say so.....
enough,
interesting storry, besides a little OT on a "gold blog"....wait...well not really: Besides saving a large portion of my wealth in gold, I choose to spend any money on any kind of stuff I could find as "have fun with your life, it could be long as well as short".
One thing I found fun, before the oil might stop flowing and/or eco-fascist finally completely take over my country (and yet still the no-limit highways):
http://www.youtube.com/watch?v=1OmHj9xcOQM
I figured that the marginal use of 55onces of gold is less than this nice 4-wheel driven master piece. Which comes down to this: What is the marginal use of stacking tokens in your life?
Greets, AD
P.S.
“In the Long Run We Are All Dead” - J.M.Keynes
@Costata
"My hatred? Of whom or what precisely? "
I don't rightly know. But let me provide a few examples:
- You have on more than one occasion apologized to the readers of this blog for being so nasty
- You have made promises to this blog and to yourself that you wouldn't be so nasty in the future, and around New Years you said you wouldn't be so nasty for a year. In fact in this one thread you have broken this promise several times
- With your devious little "eurosceptic" trick to get me to fall into your trap you have revealed a level of obsession that borders on sickness.
- You have constantly shown an arrogant disdain for any post that you feel doesn't live up to your standard of "1000's of hours of research". You do this by trying to belittle anyone whose opinions contradict yours.
- You took a sadistic glee when you massacred the strawman you held up in Mark Grants article:
"Holding America up as a paragon of the rule of law, especially in relation to the TBTF banks, is beyond laughable. It's obscene."
Sure, he is incorrect about the US legal system and he ignores GM. But the article isn't about the the US or EU banks socializing their losses. The point of Mr Grant's article is that this new bank plan would overturn the ranking of creditors in bank bankruptcies across the EU in a politicized fashion. Apparently, according to Mr Grant anyway, this would also overturn all those sovereign guarantees that were given out so liberally by national governments across the EU in 2008/2009. This would be one more example of the EU simply seizing more control of its members sovereign financial systems. So to summarize for you Euro friends (and I see Costata is backpedaling on this), it appears that on the Euro the run could begin with bank bonds where as in America it is more likely to begin with sovereign debt.
I am quite busy now and grow weary of the constant pissing matches Euro friends try to engage me in. One thing is certain, time will tell. And when the Euro does collapse before the dollar we can be certain that "Uncle Costata" will try to say "I told you so".
Adieu,
Desperado
FOFOA
It's been many days since I've been able to brush up on the buzz here.
I'd like to echo the respectful comments of many (most recently RJPadavona at May 25, 2012 5:38 PM) about your patience with certain smarty-pants persons. Maybe it would be best if you were to just scroll past those persons' posts.
It would be tragic if you were to let those creeps drive you away from doing that which you do best.
@costata,
Just to point out a few (an incomplete list):
- He thinks because of risk-free profits of speculators, T-bond market has a long way to go and will not collapse
- He thinks HI is not imminent, but far from it, here we are having and will have deflation for a long time
- He thinks Fed has no control over inflation or deflation or interest rates at all, they just pretend they have control
- He thinks as long as there is no war (in ME), there will be no HI in the foreseeable future
- He thinks USD, even with a big lost in purchasing power, will still for world reserve currency for a lengthy period of time
Maybe I miss something, but I don't think that's FOFOA's position like HI from physical plane deficit, CB's role, Fed's will and ability to print and reflate.. and so on and so forth.
@SMRI,
I don't know about USA but in China (which currency are essentially pegged to USD), we have tons of inflation.
Perhaps you do have deflation in US, but no, definitely not in this part of the world.
enough, I'm shocked by that article you linked to! Japanese really pay $24 for sushi??! Good grief! They're mad!
But seriously, you really ought to stop worrying. Your body already contains more radioactivity than that from the 1950s nuclear weapons testing.
So now you can relax. :)
This is an example that I am having trouble with Fekete's theory:
"the presence of risk-free speculation (in T-bond) renders the increase in the money supply counter-productive. It causes prices to fall rather than rise.
Giving them the toy of risk-free profits makes speculators vacate the commodity market where risks are too high. They will then congregate in the bond market where risks are non-existent. The speculator who in the absence of risk-free profits might resist falling prices in the commodity market, will decline the honor of pushing the Keynesian agenda if given the choice of risk- free profits in bonds."
The above was written in Jan 2010 and in his latest paper, he said he's been proven right by the events in the past 2 years as shown in the performance of the Treasury market.
I do not know how to make of this.
Hi Sean,
You and the Beerman are missing my point.....
I'm old enough that cancer 30 years down the line matters little. Life is and has been good. No fear of hot particle embedded in my thyroid here mate.
My point/question is.......
What is the emotional/psycological reaction of the masses to a catastrophic follow on event that has a decent probability of occuring? Which is occuring in slow motion and could reach "criticality" at any moment.
An event that triggers a collective FEAR of future supply/availability/useability of physcial resources?
A central discuss here is the masses "fear" of a crash in the purchasing power of their fiat. Leading to abandoning the monetary plane and a rush for the physical. Which causes the govt to hyperinflate the currency.
So is the discussion about the possibility of the masses percieving (rationally or not) a reduction of the physical plane itself setting off this rush to the physical so different and off topic?
No, discussion here must focus on the masses fear of the burning monetary paper system/plane and not on the possibility of the masses fear of the burning of the physical plane itself.
A real or irrational rush to the physical plane not initiated by a lightbulb that goes off in the collective conscious that their fiat is losing purchasing power but set off by an event that instills a collective fear that the physical plane itself is collapsing?
Impossible....not !!
The emerging news flow is sufficient to light the fuse IMHO....
I've said my piece so we can now go back to our regularly scheduled programing, discussing burning paper rather than a burning planet.....
chicken or egg?
Remember "Today's quote-unquote 'gold'"?
One question was who is supporting the London gold market by leasing their gold? (except for European CBs before the Euro and for some weird reason the Belgian CB still today)
I just came across the following:
FOA (8/24/99; 20:04:14MDT - Msg ID:11995)
Reply
RAINMAN (8/24/99; 10:46:24MDT - Msg ID:11953)
--------Working for a large bullion bank , I know for a fact that a lot of Gold accumulated by Middle eastern investors is regularly offered for leasing purposes. This baffles me. They are negating the very reason why they invest in GOLD by lending it with the risk of facing a default by their counterparts. Maybe FOA could give us some of his insights about that fact.---
Hello Rainman,
I can't help you there. Another may if he sees this??? My view of that is much the same as yours, it's baffling. I would also have to ask the question, "who is helping who" in that situation? Perhaps the BB needs some gold? Fees are also a consideration, as in who gets them! [...]
Victor
for dear uncle Costata with love
http://www.youtube.com/watch?v=tZawOPQCpT4
A whinge...oops
Bosco,
I wouldn't rule out mischief in the T-bond market for sure. It is largest liquid market with the biggest players.
Here are some links to peruse (for Costata and others following this topic):
Front-running Fed buys by Jesse.
Front-running Fed in the Treasury Market by Fekete.
I don't think Fekete has ruled out HI but as he mentioned in this video, he thinks previous HI happened in the context of a war where productive capacities and commodity stock piles were destroyed etc. It is not necessary that any future HI should follow the trajectory of past HI, however.
Here's FOFOA: If the financial system collapsed tonight and wiped out everyone's assets, their 401Ks and IRAs, their pension and trust funds, the US dollar would spike on the currency exchange like never before. I could imagine it rising well above 100 on the USDX, maybe even to 150, as all that financial sludge frantically unwinds.
And the Fed will start buying whatever crap the primary dealers bring to its window. It will flood the markets with fresh Fed liabilities (obligations to print more cash) in a futile attempt to quell demand as the dollar goes to 100, 110, 120… up, up and away.
Prior to HI, it will look just like a massive, severe deflation but really it can turn into a currency crisis within a blink of an eye.
http://www.telegraph.co.uk/finance/financialcrisis/9298180/Europes-debtors-must-pawn-their-gold-for-Eurobond-Redemption.html
It draws closer.(As usual ZH mock the idea, as indeed they seem to mock everything...idiots).
Gary,
Interesting article by AEP. Thanks for the link. Here's one for you discussing the "death of the Euro" trade:
http://www.kitco.com/ind/Hamilton/20120525.html
I don't have time to respond to some of the other comments right now.
Cheers
One more thought and then I must depart for a while.
If Ben Bernanke really does want a lower US dollar then how many viable levers does he have left to use?
I would argue he only has three left - negative nominal interest rates, gold and Euro (the "anti-dollar"). See if you can come up with any others.
Good stuff Victor,
A couple quick ideas. I think this is key: Perhaps the BB needs some gold? Fees are also a consideration, as in who gets them!
From "The View: A Classic Bank Run"
http://fofoa.blogspot.com/2011/02/view-classic-bank-run.html
This suggests Oil was willing to assist/work with the BBs after the Asians cornered the market.
Now the real picture is starting to emerge. "Oil," lined up at the "outgoing" gold window, had the physical flow already cornered because of oil's indispensable value to the West. Then the Asians showed up at the window. Well, not completely. They were also taking supply right out of South Africa so it never made it into the Western paper liability system, the BB reserves. This caused the BB reserves (think cash on hand in a bank) to shrink.
The CBs stepped in to backstop this run on the BB's reserves with their "CB certificates." (A backstop prevents price from running away, the same way Bernanke's 2009 currency swap calmed the rising dollar.) Additionally, they convinced "oil" to take "repayment contracts" removed from the asset side of the BBs' balance sheets in lieu of actual physical reserves. These contractual assets were (now) as good as gold in the hand because they were backed by the BB's reserves which were (now) backstopped by CB gold, still sitting in the CB vaults.
Are you starting to see the view yet? Okay, let me back up a little bit for the slow. We really need to start thinking of the Bullion Banks as the banks that they are! In fact, it is largely unnecessary for us to insist upon calling these "bullion banks" – along the same premise that we don't find it necessary to specify when commercial banks are acting as "dollar banks" or "euro banks" or "yen banks." A bullion bank is simply a bank that carries a set of books denominated in "gold units" as opposed to dollars, yen or euro.
But to be fair, the act of operating a banking book in units of gold is specialized enough that it does tend to warrant the extra adjective when referring specifically to those banks that run in bullion circles. So who are the Bullion Banks? They are the banks that engage in banking and clearing operations with units of gold ounces. They include, but are not limited to, all the big banks that have committed themselves to offering market-making quotes to the LBMA network. These LBMA Market Making Members are:
Furthermore, we know stuff like Citigroup (who was biggest bank in world before 2008 GFC) was one of the major BBs in late 90s/2000s, and they were owned by lots of Saudi oil money.
http://en.wikipedia.org/wiki/Al-Waleed_bin_Talal
http://money.cnn.com/2008/11/20/news/companies/citi_stake/index.htm
Costata,
The Helicopter collective lever?
http://www.copters.com/mech/collectives.html
Sorry, couldn't resist...
I'm glad someone, in this case, Gary, put up a link to the "Eurobonds, give us your gold" story. If, by mocking the story, Gary, you mean that ZH mocked the idea that this initiative is designed to be anything other than a crass gold grab, and that pilfering gold has been the intention of certain bad actors all along, then, yes, they most certainly mocked it.
Is the thinking that this plan is freegold friendly because, should gold be pledged as collateral, when, (not if) there are defaults, the ECB, or someone else with the requisite wherewithal can act to increase the value of the precious collateral. Ultimately, in such a scenario, far less gold, by weight, would then need to leave the coffers of those who pledged their gold as collateral.
Costata,
Regarding, Ben Bernanke and his levers, might we consider that all of The Bernank's machinations combined pale in their effect next to what was accomplished by the suspension of the then existing accounting rules. Mark to fantasy, arguably, had many knock on effects. For example, if you peer at a chart of the dollar index you will notice that the high in the greenback was in close temporal proximity to the suspension of the old mark to market accounting rules.
Hi Edwardo,
Think of Eurobonds as a variant of the EMF option discussed by FOFOA in "Synthesis" http://fofoa.blogspot.com/2010/03/synthesis.html
Things are not always as they seem.
Remember the "nuclear option" discussed in Greece is the Word? As far as practical applications go, one could be forgiven for wondering if an EMF could be more of an EMP in practice.
Here are a few nagging questions I have about this EMF thingy.
Why discuss an EMF when the IMF is so eager to help? How would an EMF be different from the IMF? How would it NEED to be different from a practical standpoint? How could such a "gold-backed" EMF scheme work without revaluing gold to Freegold prices? And could the end result of such an EMF project actually be the balanced meritocracy of Freegold at the sovereign level that we are watching for?
Randy Strauss over at USAGOLD had some interesting comments as well:
The Bundesbank’s resistance or opposition to this scheme is well understandable from the perspective that its gold reserves provide a stabilizing force as the strongest component residing on the asset side of its balance sheet...
...That isn’t to say that a gold-holding EMF is an entirely bad idea, it’s just that its own gold reserves can’t be simply pirated from legitimate gold-holding entities through a paper-juggling enterprise. They must be obtained, if at all, through the open market. And who knows… at a sufficiently high (HIGH!!) gold price in the not-so-distant future, even the Bundesbank itself might be more cooperative on the point of dishoarding an acceptably small portion of its gold reserves for certain political objectives…
So, is the idea of an EMF a flattering copy of the $IMFS' IMF, or a nuclear $EMP?
Here is a fun idea about what value gold would be held at to make such an idea viable:
Conclusion
Freegold is our destination with or without the euro. Even on the outside chance that an SDR or a similar super-sovereign currency is accepted as the new global reserve currency, it would have to contain gold at Freegold valuations in order to be viable, accepted and trusted, in the same vein as Randy's comment about an EMF. So any way you cut it, the future comes to us with really high value gold by today's standards.
Not sure if you guys have seen this. He puts up some data on the whole am/pm fix difference.
Adrian Douglus video on BB manipulation.
http://www.youtube.com/watch?v=GmpVurAewpo
Thanks, JR. Have I missed something, or would it be fair to say that the answer to my last question,
"Is the thinking that this plan is freegold friendly because, should gold be pledged as collateral, when, (not if) there are defaults, the ECB, or someone else with the requisite wherewithal can act to increase the value of the precious collateral?"
is, (by hook or by crook), yes? Also, if this plan
is taken up, what will the effect be on the BIS' deliberations on the question of whether gold should be designated a Tier 1 asset? It would seem to me to be a moot deliberation.
I wonder if CHS is still reading FOFOA.
He has written a recent post of conventional wisdom about how the strengthening US dollar is an effect of the global decoupling of US bond and stock markets.
For instance, I had to LOL at this line: the U.S. offers relatively plentiful transparency, predictability and market data.
Plentiful transparency, really?
I wouldn.t necessarily disagree Edwardo, but I;m not too sure on the small details.
My only point was to get at the crux of the issue, which is that debt-laden Europe needs to re-capitalize, and more paper won't do the trick, nor will gold at today's valuation.
As FOFOA wrote in his "First Post" - http://fofoa.blogspot.com/2008/08/first-post.html
When I look to the future, I am looking to the end of this round. We are going from here to “there”, and it is the “there” that I am focusing on. There are many paths to get us from here to “there”, and in most cases the various paths have very similar probabilities while the final destination has a much higher probability. So by focusing on the endgame, I believe I can predict the outcome of our current crisis with greater certainty than many of the false prophets who are attempting to predict the exact road that will take us “there”. Does this make any sense?
====
Some thoughts on Greece pledging gold as collateral also got discussed here - http://fofoa.blogspot.com/2012/02/yo-warren-b-you-are-so-og.html?showComment=1330014402655#c5641583662009174811
Question for our European friends...can one buy and sell gold in European banks? If so is it just the large ones? Is it unusual? If not are there 'coin dealers' like there are here in the States?
Michael-
On my last trip to Holland I found myself asking that very same question and decided to test the waters at ABN AMRO, SNS bank, and Rabobank in Hengelo. Three big banks and no gold -- in fact -- no cash either. The only way to get cash out of those people is to use the walk-up ATM. So as far as Holland goes, Nee. Geen goud van de bank. I was told to check with the jewelers, but didn't have time to follow up.
Thats right: One way to improve the value of money is by stealing it from the productive party that received the money before. And I really always wonder why for many FG-advocats this appears so hard to see.
Greets, AD
lol...sigh
Did somebody just whisper "Tier 1"?
Edwardo,
Gold already is, for all intents and purposes, Tier1 capital by virtue of its appearance, in size, on the balance sheets of all major central banks.
Your comment ”…increase the value of the precious collateral“ presupposes the idea all players share the same perception of the value of gold, which is not necessarily the case… if central banks, either individually or collectively, already value gold at a level which makes the system whole then all they are really looking for is the least disruptive avenue for all other players to arrive at said valuation (assuming the other players ever even need to arrive at it*).
Official designation of gold as Tier1 is simply one of the most overt (and direct) of these avenues.
Those who hold gold in size are certainly aware of it’s function, and thus it’s true value… and for it (gold) to function for them, they need not see it officially reach its true value in their lifetime. Because gold is timeless. A shared perception of value is only really important to the flow, not the stock.
Gold’s true value will need to become public however upon the failure of the $IMFS, and this will occur during the lifetimes of the majority of those who currently hold gold in size. My point though is that they don’t personally need it to be known as it functions for them regardless.
The superorganism, however, is going to find gold’s true value to be indispensable as the single most important reference point with regards to its subsequent monetary system.
*systemic collapse is when they definitely need to find that value, otherwise, within the confines of the $IMFS, not so much (to the continued befuddlement of HMS' everywhere).
BTW,
Some thoughts on PAGE:
If it had become operational as was indicated it may, that is being fully allocated, it would have caused the demise of paper gold. Gold’s true value would have been revealed (and the $IMFS collapsed).
The scenario was, as far as I can tell, pretty much spoonfed to a couple of western gold commentators.
By the Chinese.
The launch of the exchange was aborted.
By the Chinese.
Perhaps they never seriously intended to launch it, at least at this time.
This “process” however sent a fairly clear message from China, which was no doubt heard loud and clear by its intended recipients. If you didn’t hear it, then it probably wasn’t intended for you.
The fact that the BIS have signaled that they are considering elevating gold to Tier1 with 100% weighting falls into a similar category as the Chinese signaling PAGE.
Those who know what these things imply (in size!) are on notice.
Blondie,
nice thought about PAGE. (I wonder why at this point FOFOA does not scream "retarded conspiracy", threatening of banning...)
Anyway whos physical is being sold anyway in todays physical markets? Sure there is some scrap in each country that is changing hands, but looking at the balance sheet of the refiners there must be some other vaults being opened?
Greets, AD
Blondie wrote:
"Gold already is, for all intents and purposes, Tier 1 capital by virtue of its appearance, in size, on the balance sheets of all major central banks."
Yes, it would seem that way. And knowing as much makes the BIS deliberations seem pointless. But I
take your point regarding the bifurcation in understanding between those who hold gold in size-and have for a long time-and everyone else.
The BIS deliberations aren't pointless, except to those who understand and already utilise gold, and even then they are not completely pointless as those parties have an interest in a functional monetary system too.
The flow of physical gold is relatively opaque, thus we can do little more than speculate on where flow is coming from IMO. It appears certain that CBs are buying. From whom and for how much is not disclosed.
At least concerning Germany as a gold loving country (relatively speaken): You can by gold at the bank (at least the none private Volksbanken & Sparkassen) it is no problem. But, somehow their "source" is also not really "official". e.g. when you call them and say I want to buy 10kg gimme your price, they first contact their sources and than give you the price and availability. Happend a couple of times that they told me: Nope, not available. Does not sound like any kind of "european Freegold market" to me at all.
Greets, AD
Not just CBs are buying by the ton. Feel free to ignore the faulty conclusions of this article:
http://mobile.bloomberg.com/news/2012-05-29/gold-set-for-worst-run-since-1999-as-dollar-strengthens.html
An interesting snip: 'Bullion purchases by India may be about 50 metric tons to 60 tons this month, down from 102 tons a year earlier, Prithviraj Kothari, president of the Bombay Bullion Association, said today in a phone interview.'
That's a lot of gold, Indian housewives.
Costata,
Thanks for (re)opening the Leave The Euro? discussion.
It seems Spain could work its way out the hole if investors leave them alone (keeps interest-rates low) for long enough to let the turn-around happen. A Germany with more political will to balance its trade would also help the struggling countries.
Germans should import more stuff with their current surplus...
For instance gold (at Freegold prices)?
Costata, this reminds of a somewhat related discussion you opened back in February about whether gold should belong to current or capital account in a Freegold world. I don't think we reached a conclusion to this debate, did we?
Link:
http://fofoa.blogspot.com/2012/02/indias-gold.html?showComment=1329422952449#c5201309354372694588
/Burning
...Another acorn we can carry easily is this idea that seemed so important to the Fed, of a separation between official and unofficial gold. Basically, Arthur Burns stated the issue most clearly as the Fed's fear of CBs transacting in gold "at market-related prices." This is what we call a two-tier market, and I have written about the "membrane" that exists between official and unofficial gold. From an old comment:
"Since 1933 there has been a thin membrane that separates sovereign entities (SE) from private entities (PE) when it comes to gold transfers.
Gold moves from PE > PE as a commodity. And it moves from deficit running sovereign entities (SE-D) to surplus running sovereign entities (SE-S) as a monetary asset; a balancing function in the monetary system. SE are different than PE because they can print money, and they collect foreign currency surpluses.
Whenever gold starts to pass through that membrane, no matter in which direction, a phase transition starts to occur. If a SE-S tries to buy gold from the PEs, gold starts to phase-shift from a commodity into a monetary asset. If a SE-D tries to sell gold to the PEs for the foolhardy scam of lowering its commodity value, gold starts to phase-shift to a monetary asset because it is clear what SE-D is doing (especially to SE-S).
Freegold will be the elimination of the membrane. All players will be on a level playing field. This is not a gold standard. But it is a shared function for gold between SE and PE.
By the way, think about $6,000 gold trading amongst the giants with this membrane in mind."
And:
"The paper gold market (mine hedging, forward sales, gold leasing, futures, ETF's etc...) became (serendipitously?) a way for the SEs to "virtually" permeate the membrane without breaking it and causing a phase shift. This was a way to trick the PEs into settling the trade deficit with certain SE-Ss. It worked as long as the SE-Ss (large physical accumulators) were limited in number. And it always had a finite timeline when the expanding virtual gold would finally lose credibility."
This membrane was a façade that existed even before 1971, and it was this membrane that Arthur Burns wanted to retain, at least superficially. US Treasury and IMF auctions beginning that same year certainly violated the membrane, as did the London Gold Pool of the 60s and the BOE auctions of 1999-2002. So it was fine for deficit-running CBs to sell gold at market prices but not okay for surplus-running CBs to buy gold at market prices. This was the secret Fed strategy to continue sterilizing the natural adjustment mechanism that began in 1922.
Cont…
December 6, 2011 12:36 AM
...As I wrote above, "Freegold will be the elimination of the membrane." Euro architect Alexandre Lamfalussy wrote something similar all the way back in 1969, which I put in this post:
"Even in the absence of effective purchases or sales on this market by the central banks, this price would only become the "true" price if all the buyers and sellers of the metal acquired the conviction that no central bank will ever connect the two markets in any way. As long as this conviction does not exist—and it does not appear to exist today—the price on the ordinary market will take into account potential purchases and sales by the official institutions. Quite clearly, the market is at the moment discounting possible purchases (rather than sales) by the central banks."
He basically said that the price of gold would only be the "true" price if the membrane separating official and unofficial gold was 100% impenetrable. It logically follows that the price would also be "true" if the membrane was eliminated. So the Fed wanted to keep official and unofficial gold separate, except when it suited them to sell official gold into the market. The Fed also didn't like that France revalued its gold to the market price, because this act alone was a violation of the membrane.
You see, there is no membrane if all official CB gold is marked to the same price made by the free market. And there is no membrane if CB gold is allowed to be mobilized, which ironically makes it even more valuable.
http://fofoa.blogspot.com/2011/12/unambiguous-wealth.html?showComment=1323160625730#c1888197933697708390
Michael: In Austria you can buy Austrian gold coins at the banks, but as a general rule the banks do not sell gold coins minted in other countries. The premiums vary from bank to bank. There are also quite a few coin dealers in Austria, but not all of them buy and sell gold coins. Dealer premiums are usually more competitive than what you see at the banks, but their inventory is typically limited and you cannot always get the type of coins you want in the quantities you want.
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