Sunday, June 10, 2012

Blondie's View



I thought Blondie's excellent comment was just about good enough to be a post. And when RJ called it Sermon on the Mount material, that tipped the scale. But be careful not to miss the forest for the trees, or the fractal for the chaos, because Blondie pretty much nails it. It's all in the view—the perspective. And even though you may not be a giant, you can still learn to view the world as a giant with a little practice. It's easier than you might think. All you have to do is gently set your shrimp baggage on the ground and walk away.

Blondie on the Mount

Another said:
"Gold! It is the only medium that currencies do not "move thru". It is the only Money that cannot be valued by currencies. It is gold that denominates currency. It is to say "gold moves thru paper currencies"

If this statement appears the least bit cryptic, if it does not make 100% crystal clear sense, then little else written on this blog by either the contributors or the scant few commenters who do understand it will make complete sense to you, despite your best efforts.

You see, my friend, in this world there are two types of people: those who PRODUCE, and those who consume. YOU consume.

Those who PRODUCE, and there is perfectly good reason why it is written in caps, are giants. Everyone else, including YOU, is a shrimp.

Another’s statement above is the perspective of the giants, not the shrimps. So don’t feel bad if its inherent truth is not self-evident, you have simply never directly experienced life as a giant. No shame in that! That in itself means nothing at all.

Except that you don’t have the perspective from which to understand gold. So you'll have to build it from scratch.

In this case actually understanding gold means firstly having to discard an awful lot of fundamental beliefs about the way things work. This is also the single biggest barrier to discussing gold with anyone else… they will never understand without ditching some of what they hold as fundamental beliefs, so you may as well not bother. If you win anyone over it is ultimately only because of their faith in you and your perceptions, not their own understanding. But I digress.

You may appreciate that we need gold to fix our monetary system, but that does not mean you actually understand how gold really functions.

Gold functions as the ultimate store of value. Nice words, nice idea, but you are a shrimp. You’ve never had value in a quantity that needed storing. Sure you may have “savings”, but you’ve never personally experienced diminishing marginal utility to the degree that gold’s function becomes apparent, so it remains a theory. There is a monumental difference between mere theory and theory corroborated by experience. The latter has graduated from theory to fact.

This is the basis of my previous comment about ‘new money’ and the fact that it does not necessarily understand gold. New money for the most part believes it has its surplus value securely stored in various financial instruments. Old money (real giants) knows better. This perspective is also why the idea that Oil would not require physical gold for their surplus is preposterous.

Another told you that you could follow in the footsteps of giants, and you can, but if you want to see their perspective there’s a bit more involved.

Newsflash: $US HI already happened. That’s what the ‘structural support’ since the early ‘80s has been in aid of, to avoid the conclusion of this process. As FOFOA has pointed out so clearly, as long as the marginal flow of excess dollars emitted by the US is absorbed into the market the dollar can continue to function. The devaluation of the currency is a market driven event, the final stage of every HI, but it does not occur as long as the excess currency is absorbed. Some entities have not wanted it to occur until they were better prepared, so they have, at no small cost, supplied the structural support to delay the denouement. Obviously they felt the costs were outweighed by the benefits.

The revaluation of gold is a distinctly separate though concurrent event.

If you understand how gold works you will appreciate that the giants have no incentive to directly trigger either of these separate but simultaneous events… they already have their gold, and they already know its value (and who wants to be blamed for something that was completely unavoidable?). If you don’t need to access the value you have stored in gold, then it is really irrelevant to you what the market currently values gold at. They don’t need the shrimps to tell them anything; rather it is the shrimps who need to wise up. Shrimps are the same ones objecting to “austerity” aka living within one’s means. Doesn’t occur to them that the fantasy may have been the time when they lived over and above their means, does it?

I got a good laugh from this article, particularly the opening paragraphs:

"So what is it about money that the leaders of the eurozone don't get?

Money has been around for a while, and it's not terribly complicated.

The key element is trust. That was true when money was a piece of metal that you could bite or bounce. Now that money is just a piece of paper, it's even truer. Today's money is nothing but trust.

That's why the euro crisis is so bizarre. The euro is, in theory, one of the world's great currencies. And yet, as this crisis has demonstrated, nobody actually stands behind it. There is no lender of last resort. There is no "full faith and credit." There's nobody on the other end of the promise.

And it's as if the leaders of the eurozone wanted to go out of their way to prove it. They've taken us up to the velvet curtain and then themselves, with a self-satisfied smile, pulled it aside to show us that there is no Great Oz.

And in the process they've done major, and perhaps irretrievable, damage to their own currency and to the very idea of money in our time. If you can't trust the euro, what paper can you trust?"


Looks to me like the “leaders of the eurozone” get it fine… the author is simply under the presumption he understands money. Doesn’t seem to have occurred to him that he may not.
He’s definitely not alone.

FOFOA:
"It's just a shift in the perception of savers. Can't change that."

“Savers”: those producers who currently do not understand gold.
Consumers (shrimps) are just along for the ride.

As I said at the top, if Another’s statement is not crystal clear you don’t understand gold, so don’t delude yourself that you do, and bear this in mind when you compose a comment.

I've no doubt my comments will upset some people. That doesn't mean they're not correct, just that some people don't like them. A bit like "austerity" perhaps.
__________

milamber said:

"... to this western shrimp’s mind, there is a whole lot of unlearning that I have had/am having to do!"

I appreciate that, having been there too. To be honest, it's not as difficult as it appears. Like many others, it became clear to me a few years ago that big things were going down. I felt compelled to find out what. It wasn't a big step to see that this was entirely a monetary issue. When I thought about it, I couldn't produce a really good definition of money, so ... I had some work to do. Build yourself a good definition and Another's perspective, not to mention the world at large, start making a lot more sense.
__________

639 comments:

1 – 200 of 639   Newer›   Newest»
Alexis Rigby said...

You know, I have spent a great deal of time trying to understand things I've been reading here for the past couple of years. Truth is, I'm really not sure I have the capacity to understand it all clearly. That said, what I do know is that what I read hear resonates with me. It just rings true. And though I be the epitomy of the word "shrimp" and I may not understand all there is to know, I understand enough to know that gold is what I need to continue to acquire with urgency. Thank you FOFOA, Blondie and so many others who have helped convert me from a silverbug.

Victor The Cleaner said...

+1000 for the picture!

I apologize for going off-topic right away. I'd like to draw your attention to a couple of tweets by Jim Rickards (who has a good track record and who predicted QE2 and OT2 almost correctly):

Tweet 1: #Fed‬ & ‪#Treasury‬ ex-official ‪#PeterFisher‬ @FinancialTimes says, “..Fed could buy foreign currencies, engineer a much weaker dollar.” Uh huh

Tweet 2: #Fed ex-official #PeterFisher @FinancialTimes: “dollar collapse would be to play w/ fire & gasoline..might create inflation or..depression”

Tweet 3: #Fed muse #ChristinaRomer: policy should be “..setting a target for..path of nominal gross domestic product” nyti.ms/LBDoRa. Got it

Tweet 4: #Fed siren #ChristinaRomer says #QE3 “...should leave the overall size and end date unspecified.” nyti.ms/LBDoRa. Uh huh.

Tweet 5: With #JanetYellin unused capacity paper, #CharlesEvans cri de coeur & #ChristinaRomer musing @nytimes, stage set for #Bernanke push for ease

Tweet 6: Over the past four years, we’ve exported our inflation to #China and our Bond Vigilantes to #Europe, so it’s all good here in #America.

Victor

Victor The Cleaner said...

Another one staying from the topic. GM Jenkins at Screwtape has some interesting charts.

Everyone here probably knows the gold/oil ratio. Now what's interesting are the gold/(other commodities) ratios.

The Reuters/Jeffreys CRB Index has only about 30% oil related components: Gold/CRB ratio.

The Continuous Commodity Index (CCI) is without oil: Gold/CCI ratio.

Victor

FOFOA said...

In the last thread, Victor wrote: "This is fantastic information… Do you think you can encourage the forex lady to get an anonymous account and then to start posting here?

I tried, Victor, but here's what she said:

"Hi FOFOA,

Glad the info is useful.

I am sorry, can't sign up for an account. Two reasons mainly being time constraints and because as a trader I need to avoid opinionated places like forums/comments sections, they can cause psychological issues like second guessing and information overload.

In this case I did go and look in the comments and you can see it is an argumentative mess! Would hate to be reading that on a Sunday night!

Jotted down a few notes as I scrolled

* Texan, is right and wrong. Wrong in that delta-1 is pure equity. It's a specialty, you have to know how to create a synthetic with a delta==1.00 to some underlying, no mean feat! Other than that I agree with him, CBs would not use delta-one techniques, for all the reasons I listed (he listed them too).
* Motley Fool, the reason I picked what I did is because those countries are strong in gold trade, gold is in the upper range of their export volume/value spectrum. Buyers converting foreign currency into the local currency, to short it in return for gold. Check the countries 'terms of trade' each year and see what the top 3 exports by volume/value are. These are the good starting 'kernels' to find "like deltas", and there is a good fundamental underlying reason for it to be so (trade flow).
* Some people commented about hedges falling apart, this is one of the main reasons why I suggested the OTC gold options would be used rather than delta-1 technique which carries those risks.

That's as far as I got before it was too hard to read.

Happy to answer any short/medium sized questions if they can be compiled in a sane format and sent to me."

d2thdr said...

milamber said:

"... to this western shrimp’s mind, there is a whole lot of unlearning that I have had/am having to do!"


Sir,

You'd be surprised how many people do not get it. AS FOA ONCE SAID - We all need to walk on this gold trail at some stage of our lives.

Should one risk financial assets based on this series (Aristotle's) alone? Never! On the contrary, no one should believe what he has written. Rather, we as a society should "study" his fine work and seek to understand it's meaning. Once fully understood, I think most would then agree with it's inevitable outcome. Indeed, a "free gold market", based only on physical holdings would impact the world economic system unlike anything seen before it. And Yes, it's impact on the relative value of gold will make that metal the monetary wealth investment for the next thousand years!

This my friends is why so many today, "Walk In The Footsteps Of Giants". They walk a trail that takes them further and further from derivatives of gold and the present currency it's (gold) priced in.

From Yesterday, through Today and onward into Tomorrow" ,,,,, we say buy Physical Gold for your future ,,,,,,, doing so will write your personal history in the palm of your hand!

"Soon, we will all hike the "Gold Trails" and see all there is to see ,,,,,,, over the mountains and through the valleys ,,,,,,, across rivers and plains ,,,, looking near and far as we stop along the way ,,,,,,, Truly, we will view the value of gold as modern mankind has never seen it before ,,,,, join in, it will be a journey in life, that's well worth taking.

thank you again Aristotle ,,, Trail Guide

dojufitz said...

Just in case you get thirsty on the Gold Trail....

in Australia....

Aristotle is rhyming slang for a bottle....

of beer/wine......at least to some old school folks....

Brian said...

I stop by this site every month or so. I get it. What I don't get is how the same information gets regurgitated ad nauseum over and over again.

Perhaps that is the nature of this beast.

Motley Fool said...

Thank you for the reply forex lady. :)

Using options for hedging makes sense to me. It would accomplish the goal without moving the market at the exact same time. What better way to hide one's fingerprints.

I take slight issue with that perspective of giants. I can see how it can approximate truth in practical terms from the perspective of a giant, however shrimp producers do exist. Even though to a giant their(our) contribution may seem negligible.

TF

costata said...

Brian,

What I don't get is how the same information gets regurgitated ad nauseum over and over again.

Perhaps because the same questions keep being asked and the same arguments keep being advanced that have been addressed already over and over again.

Theo Herzl said...

I don't get it, never did, and expect I never will.

That's one of the problems of being Tasmanian, but what can ya do?

I bought my first piece of gold in 1969, still got it, along with all the other Au one collects along the way.

Fortunately I've never had to sell any of it, but it does make one feel secure - that's what I get - security.

Oh, and I collect Ag as well, but only because it looks nice.

At least this Tasmanian knows he's stupid, and has purchased the only reliable insurance policy available.

One would hope that Au continues to be manipulated down - it does make the premiums a lot cheaper than they should be.

That said, now I can do something productive - I do make a delicious apple crumble, and sponge cakes that float like gold doesn't.

That is all ye know on Earth, and all ye need to know.

50sQuiff said...

Apologies if this is off topic and somewhat conspiratorial. It's struck me that one way to manage the flow of physical during an ongoing decline in the paper price, would be to devalue the Indian Rupee. If you're really in a bind, perhaps India would agree to implement a temporary import duty?

Jim Rickards is on record as saying the BIS were concerned by the disorderly ascent of gold last summer. Co-ordinating a devaluation of the rupee seems well within their capability. If you accept the Currency Wars premise, then perhaps India would even see such a move as beneficial.

DP said...

Spooky timing that this should pop up now:

RT @Reuters India could be first BRIC to lose investment grade: S&P reut.rs/LtFkc3

What a refreshing change, someone turning up claiming to be just a dumb Tasmanian and to not get it, while at the same time clearly demonstrating they do. I would offer a #YAAaay, but some clueless idiot would probably tell me I'm gay or something.

Jeff said...

50squiff,

India does have an import tariff:

http://www.indianexpress.com/news/govt-hikes-import-tariff-value-of-gold/959153/

Brian,

The same questions keep coming up because people don't read/ignore the archives. If you think it's tedious to read the same replies, imagine how it feels to keep posting them. JR should get a medal.

Alexis, Theo,

You have the right view. Not everyone need be a trailguide; some of us are content to enjoy the view.

In keeping with the title of this post, a reminder to shrimps everywhere:

"Do not lay up for yourselves treasures on earth, where moth and rust destroy and where thieves break in and steal; 20but lay up for yourselves treasures in heaven, where neither moth nor rust destroys and where thieves do not break in and steal. 21For where your treasure is, there your heart will be also"

AdvocatusDiaboli said...

okay, but I still need some help for further understanding:
In case the ESM in its current version gets signed to action:
http://de.wikipedia.org/wiki/Europ%C3%A4ischer_Stabilit%C3%A4tsmechanismus
(not just read the much too short english version!)

will it help setting "gold free" or will it delay "Freegold" for a couple of decades or centuries? My take is, that it will delay Freegold for millenniums, but I'll be happy to learn on that one.
Greets, AD

milamber said...

Blondie said…

“…and it is this latter subset of producers (shall we just call them "savers"?) whose perceptions will shift.”

Blondie,

Thank you very much for that!

That just made something go click. And I think I see where I have been looking at this all wrong.

God, I hope this is right, or I am going to the bar for a week. :)

Here goes.

I submit that Freegold commencing has *NOTHING* to do with the Giants.

I don’t know about the rest of the shrimps reading this board, but I have been so wrapped up in “following in the footsteps of giants”, that I have been viewing everything through *my* made up prism of,

“What are the giants going to do to usher in Freegold.”

Answer: Nothing.

The Giants already have their gold. They already produce more than they consume. They really don’t give a rat’s ass if the western paper market “revalues” their gold.

Furthermore, the Giants (as long as the gold flows) could care less when the system resets. They recognize that the (comparatively) limited paper that they have WILL BURN, but that is irrelevant compared to the wealth of ages that they possess.

But FOFOA has written about two other parties in this play. And one of them is destined to usher in Freegold, simply by being.


The real freegold players…

One group is the debtors/consumers/shrimps group. Out of this group, The biggest (and most important) one is the US Gov’t.

Why?

1. It net consumes $3.6B/day.
2. The US govt can print its own currency!

For this comment, let the US govt represent every debtor for the purposes of defining this group.

The other group is the “savers”, as Blondie defined.

Most of these "saver" entities still choose to believe in their paper based wealth that is denominated in the IMF$ system. And why not? It has been very, very good to them.

These savers primarily have an “investors” psychology. But they also want to make sure that their investments are “hedged” correctly (with more paper).

The vast majority of these “savers” will lose all of their excess wealth but will probably do well nominally. This portion of the “savers” group are irrelevant for the purposes of a discussion about the Freegold transition. While “important” right now (as defined by the MSM financial press by being displayed prominently on CNBC, WSJ, FT, etc) they will not matter after Freegold happens.

They will move some of their paper into physical gold, but it will be *AFTER* the revaluation. The Superorganism effect will impact all!

But there are also some savers who, since 1997, have woken up to the fact that their goldish paper (that they have “just in case”) may not come through for them in a pinch.

Since 2004 some of these savers have been very grateful for GLD (as long as you can buy in a big enough block). Others think GLD is a fraud (but yet think Sprott’s PHYS is as pure as the wind driven snow).

Some of these savers are trying like hell to acquire physical gold w/o running the price. And there are entities trying like hell to deliver them physical gold w/o a delivery failure.

-con't-
1/2

milamber said...

-cont-
2/2

Now that the two groups are defined:

- consumers/debtors/shrimps as represented by the US gov’t

- savers

This is how I think the phase transition occurs (based on my interpretation of what FOFOA has written)…

If the ROW stops soaking up the $3.6B/Day that the US Gov’t emits, then hello “Rip your skull off HI”, whether or not Gregor notices the loss of consciousness.

Quoting Fofoa again:

“I agree with Gregor that "hot inflation" is coming whether you like it or not, for all the reasons he explains and more. My only disagreement is that Congress will take it more hyper than we've seen in all of fiat history, so fast it will peel the skin off your face, because they are operating on a false premise. The miracle of the magical dollar theory premise is a false premise because it completely misses what's going on. And anyone who's waiting for those operating under a false premise to panic out of their dollar holdings before even entertaining this reality is like someone waiting for the loss of consciousness before entertaining the possibility of death.“

http://fofoa.blogspot.com/2012/05/inflation-or-hyperinflation.html

If this happens then at some point freegold happens when the US govt tries to stop the HI by offering something tangible (gold reserves)at a high enough price to make a difference.

But it doesn’t *have* to happen that way. And that is where the paper gold market comes in.

If there is a delivery failure to a GIANT or a saver, then we get Freegold due to the paper gold market collapsing.

And I am not talking about hearing about a customer of Egon Von Geyerz or ZH or Eric King hyperventilating about some non-conspiracy.

I am talking about a multibillion $ order for physical gold that doesn’t get processed. And a saver (or Giant if one is still doing Billion $ orders) gets pissed & it gets public.

Whichever one of these things happens first, then we start seeing Freegold play out.

It could be either or. It doesn’t really matter which one happens or when.

Mathematically, one of them is going to occur.

Another showed us that there are too many paper contracts written for too little physical gold (that is available for sale, especially at these prices).

And the US Federal govt shows us every day that there is NO WAY they are going to crash the US’s lifestyle.

Going back to the Hemmingway quote, I can see that this process *IS* very gradual because I am living in it every day.

And it will stay gradual.

Until one of the above two things happens, & then HOLY CRAP, WATCH OUT!

Anyways, that is this shrimp’s view.

Criticisms are asked for and welcomed; The flamier the better. :)

Milamber

milamber said...

Blondie said...

"FWIW I can't see the USG mobilising their gold unprompted... hard to do much with your head between your knees and tears in your eyes. "

I agree. I don't think they do that unprompted. But I bet that the destruction of the paper gold markets or a rip roaring HI can be pretty prompting. :)

Milamber

Motley Fool said...

AD

I admire your faith in European governments.

One of their latest loan programs will solve all problems for decades, centuries or millenniums?

WOW!

TF

50sQuiff said...

Jeff, indeed India does have an import tax. I should've refered to a "sudden increase" in said tariff, rather than it's introduction. Cue the Indian bullion market grinding to a halt at a rather convenient time.

Still, I never underestimate the stupidity and incompetence of governments, so I'm by no means suggesting the Indian bullion tax move was categorically designed to dial down the flow of bullion. But the orderly yet dramatic devaluation of the rupee over the last year I find very interesting.

DP said...

@MF,

"Another innovation is that government bonds of the Member States as of mid 2012, always include a provision that, in an emergency under certain conditions, private creditors may be involved in losses."

How can you not see that private creditors will line up for millennia to buy & hold these risk-free Tier1 assets with their tiny yields??

Have you been at the bong again over the weekend?

AdvocatusDiaboli said...

MF,
I guess when securitized by the ESM, there is infinite space on the ECB balance sheet for additional SpanishSoccerPlayerContracts, maybe next we will see Acropolis-certificates, or how about german slaveownership titles? In that case who needs MTM gold?
Greets, AD

AdvocatusDiaboli said...

DP,
one of the most popular words in german politics today is "solidarity", so I have no doubt that we will see plenty of forced german buyers lining up at gunpoint in the name of solidarity (they are doing that already today, why change good old habbits?).
Greets, AD

AdvocatusDiaboli said...

DP,
just when I was assuming this, it has been suggested by the OECD:
http://www.welt.de/wirtschaft/article106493619/OECD-fordert-Zwang-zu-privater-Altersvorsorge.html
1.) force everybody in bonds (german law requires >90% in bonds)
2.) raise german retirement age continuesly, unlimited.
Greets, AD

Jeff said...

The forex traders' view is instructive, in a way. No offense to her, but her comment sounded to me like: 'I can't have outside knowlege (reality) pressing in on me when I am trading paper derivatives of paper products. It's too distracting.'

This is the entire system. Hedging paper with paper and ignoring the physical plane. Ignoring reality. That's not going to work out and a blinkered view won't help.

FOFOA: It is the physical plane that drives the flow. It is the producers that produce the stuff. And it is the net-producers that produce enough extra stuff that it can accumulate in the possession of the monetary plane managers. It is the savers that drive the economy. Savers are net-producers. Net-producers are savers...

Savers drive the economy, and the $IMFS consumes it. And what of investment? The $IMFS heaps the greatest rewards on those who invest in consumables, like APPL, rather than infrastructure or higher order capital goods. The concepts I hope you'll think about and discuss in the comments are the physical plane versus the monetary plane, savings and capital. The physical plane is all that matters. The monetary plane only exists to assist the Superorganism by transmitting information through prices and lubricating the flow. Savers drive everything.

DP said...

What you consenting adults enjoy doing to each other in the privacy of your own country is none of my business! ;-)

Can they yet stop you all from waking up and deciding to opt out through gold purchase, en masse?

78Rubies said...

Blondie (& FOFOA),

Thank you for this enlightening comment.

For a long time I was also one of those "shrimps" unable to understand that particular quote.

This morning, thanks to your comment, something clicked. I don't know what exactly that something was, but I'm sure the reason why currencies don't move thru gold (why gold prices currencies) has to do with gold being the ultimate savings vehicle.

I certainly have a long way to go... but this particular bit no longer bothers me.

And for that I'm grateful.

Robert said...

I still see the following impediments that may slow (but probably not ultimately impede) the transition to freegold:

(1) UST possibly supplying physical under presidential directive and as a stealth backstop for national security reasons.

(2) New governmental restrictions limiting cash withdrawals and phasing out the cash-based economy. They will try to push an entirely digital system.

(3) Inability of institutions to accumulate physical to feed the run on the bullion banks (and lack of incentive to do so given that they are graded by nominal performance)

(4) Lack of urgency of the giants to increase their physical holdings.

(5) Interconnectedness of the entire global financial system makes it impossible to cut the dollar loose from other currencies. There are too many swaps in place to help stabilize exchange rates. String, scotch tape and duct tape may hold things together a long longer than any of us realizes.

I still see this playing out over a couple of decades rather than a couple of years, and I still think that TBTB are keeping and eye on the flow and that we will continue to see a managed rise in the $POG.

50sQuiff said...

Robert, I think you could make that case in 1980, 1985 or 1997, just to pick a few milestones on the dollar's timeline. But now every bi-lateral trade agreement moves us tangibly closer to the supplanting of the $IMFS. It feels like we're closer to the beginning of the end, rather than the end of the beginning.

Polly Metallic said...

Thank you Blondie for the post, and FOFOA for providing it in this format to make it easier for people to find and read it. When I first read through Blondie's comments I, too, felt it was a particularly clear and concise presentation of key concepts.

Perspective is a great factor in grasping Freegold. I think back on one of FOA's original posts when he described (paper) gold investors playing a card game. The players were all upset because they kept losing the game, over and over. FOA pointed out that their problem was that they didn't understand the rules of the game, didn't really understand the game they were playing, so naturally they would continue to get beaten.

As a shrimp, it is easy to get caught up in wanting gold to go higher, so it will increase the appearance of our wealth and make us more secure. Giants have more money than they know what to do with and they are far more concerned about simply maintaining what they have than accumulating additional fiat gains that may be here today and devalued tomorrow. They are secure in the value of their gold holdings, no matter what the fiat price may be on any given day. To walk in the footsteps of Giants, I try to place little emphasis on the price of gold as expressed in any fiat currency. The frustration for most gold investors is that they are constantly viewing gold as a means to generate fiat spending money, so when gold goes down in fiat terms, they feel poorer. They should not be investing money that they will need for near-term expenses. Giants don't invest in gold and then sit watching the price charts.

JR said...

Costata,

OMG I love kimchi!



Hi Theo Herzl,

"delicious apple crumble, and sponge cakes"

Where do I sign up?


Thanks Indenture and Beer Holiday for indulging me, smiles back at ya :)

JR said...

Hi Ad,

I guess when securitized by the ESM, there is infinite space on the ECB balance sheet for additional SpanishSoccerPlayerContracts

Ronaldo may have gotten owned by Jerome Boateng all day, but at least he tries to make up for it via marketing revenue - pretty boy needs a trip to RJP!

Boopstir said...

it is a crazy thought to chase gold for its $ value only to 'remember' that $ dont really exist and gold itself is the value! kind of a mind-f*% until you let it settle in. I can see why 'they' dont care though. If you own all the apple groves you dont care what color the leaves are. I myself own a tree or two and I dont care.

M said...

From above..

"If you understand how gold works you will appreciate that the giants have no incentive to directly trigger either of these separate but simultaneous events… they already have their gold, and they already know its value (and who wants to be blamed for something that was completely unavoidable?). If you don’t need to access the value you have stored in gold, then it is really irrelevant to you what the market currently values gold at. "

Some of these giants though would probably love to stick it to this low life socialist easy money crowd. I know I would.

These giants eventually like to get into social engineering.(Soros for example)

AdvocatusDiaboli said...

"...they already know its value...
...These giants eventually like to get into social engineering.(Soros for example)"

Which actually boils down to: SOCIOPATHS!!!

What is the marginal use ((ADDED)VALUE!!!) for Soros have another 1Trillion of "purchasing power" in terms of tokens for his few years left?
And if you listen to Soros recents storries regarding "social engineering", that dude is the 100% opposite of Freegold.

Would I count the "Sorros of the world" to the PRODUCERS? No, havent worked or contributed to anything in his whole life, even OGWarrenB is more productive for the superorganism. The only difference to todays politicians: He keeps the raped easy money, whereas politicians buys votes with it.
I am happy for Sorros having the money, so shall he, go to the carribean have fun, or ask Berlusconi on how to spend it, but leave the world alone with that socialist MMT crap.

Greets, AD

Nickelsaver said...

Jeff,

+1 for the Matthew 6 reference.

Nickelsaver said...

Jeff,

+1 for the Matthew 6 reference.

M said...

@ Robert

"(4) Lack of urgency of the giants to increase their physical holdings."

This is not very encouraging. If the Giants sit on their fat asses long enough, it might just give the IMFS enough time to whip up another bubble.

Basically what it means is, its the gold bugs vs the IMFS because the giants don't give a f*$%. Its pretty sad that Indian govt(giant) will stoop low enough as to devalue the Rupee and starve out its billion people, just so some socialist debtors in the US can buy a few more iPads.

milamber said...

Robert said…

“I still see the following impediments that may slow (but probably not ultimately impede) the transition to freegold:”

If you had taken out the “(but probably not ultimately impede”, then I think you were on to something, but then your points confused me :(

I am going to try and address them & see if I can put into shrimp terms what I think FOFOA (and others) are very patiently trying to explain…

“(1) UST possibly supplying physical under presidential directive and as a stealth backstop for national security reasons.”

So?

Big deal.

Do you not remember that it is the US Fed govt that NEEDS the ROW to soak up $3.6 B/day.

Every day.

And this number will only grow.

Why will it grow? Because in the IMF$ system that is in place today, they can print however much currency that they need to acquire items in the PHYSICAL plane.

Reread the following posts to see FOFOA’s thought process on this.

http://fofoa.blogspot.com/2010/10/its-flow-stupid.html

http://fofoa.blogspot.com/2011/06/open-letter-to-ron-paul.html

http://fofoa.blogspot.com/2012/05/inflation-or-hyperinflation.html

If that still doesn’t make sense, then try thinking about it this way:

If the Fed Govt supplies its physical gold *for whatever reason* (and let’s be charitable and say the BIS doesn’t press its claims for gold at $42/oz), then congrats to the US govt!

What brilliant thinking!

Why?

At current gold market price (remember we are having price set at the margin in paper markets) of $1592/oz then then US govt has funded its net consumption imbalance for…. (wait for it)….

116 days! Yahoo!!

But if they wait until after ROW stops soaking up those $, and they enter HI, then (as the printer of the $) they say we will pay $50K/oz for orders over 1 ton or whatever basket size makes sense.

So to your 1st point, if the US supplies physical gold BEFORE the transition then they lose big. If they do it after the transition, they just lose less big.

Bottom line is US standard of living is coming way down once either the $ fiction is understand (AND ACTED ON) by the savers or there is a delivery failure.

“(2) New governmental restrictions limiting cash withdrawals and phasing out the cash-based economy. They will try to push an entirely digital system.”

I would suggest you go back & read the comments when Carl was here. I think that this option has been thoroughly debunked.

“(3) Inability of institutions to accumulate physical to feed the run on the bullion banks (and lack of incentive to do so given that they are graded by nominal performance)”

Uhm, you lost me here. When this point happens or the ROW stopping the mopping happens, then the transition occurs. I don’t see how this is an impediment?

“(4) Lack of urgency of the giants to increase their physical holdings.”

I submit that is completely irrelevant. See Blondie’s post about the savers. The giants are not the play here (unless one happens to not get their physical flow).

“(5) Interconnectedness of the entire global financial system makes it impossible to cut the dollar loose from other currencies. There are too many swaps in place to help stabilize exchange rates. String, scotch tape and duct tape may hold things together a long longer than any of us realizes.

-cont-
1/2

M said...

@ AD

"Would I count the "Sorros of the world" to the PRODUCERS? No,"

Good question....The whole IMFS must have corrupted the minds of allot of giants along the way.

milamber said...

-cont-
2/2

Robert continued to say...

"I still see this playing out over a couple of decades rather than a couple of years, and I still think that TBTB are keeping and eye on the flow and that we will continue to see a managed rise in the $POG.”

If I may be so bold, you are looking at this from a shrimps perspective. As FOFOA, Another, FOA, Aristotle & others have pointed out numerous times, this is not about how long the IMF$ holds together.

Predicting timing for a currency collapse/transition is a fools errand.

Giants have not been accumulating gold for decades, centuries (millennia??) because they were thinking that, “In 2012, boy we are going to see the IMF$ system collapse!” OK Maybe the Mayans were! :)

Freegold will happen when it happens. I don’t mean to sound trite, but that is the nature of the beast.
If you can tell me when the savers SEE & UNDERSTAND that it is no longer in THEIR best interest to soak up those excess dollars or when you can tell me when a saver (in size!) or a giant will CREDIBLY be denied physical gold, then we can start discussing timing. And even then it will be a fool’s errand. Why? Because if you wait until that phase transition begins, then you are already too late.

And in case some shrimps didn’t reread the FOFOA pieces above, please read this edited for brevity (Ha!) FOFOA/FOA masterpiece as you ponder the “impediments” that WILL cause you to make a mistake “timing” the transition to Freegold.

FOFOA said,

“But first I need to make it clear once again that this hyperinflation discussion is not about timing. It’s about how it all ends, and it’s better (for a saver) to be a decade too early than a minute too late. The other side (whoever it may be) often tries to make the debate about timing. It is not about timing and I don't do timing, but that doesn't mean the end is far away. If anything, it's overdue in the same way a big earthquake can be overdue…

Here is FOA on timing, from a post in which he specifically predicted dollar "hyper price inflation":

Timing?

We, and I, as physical gold advocates, don't need timing for this position! Timing is for poor, paper traders. We are neither and our solid, long term, one call over several years to hold physical gold will confirm our reasoning. There is no stress for me to own this ancient asset as it is in a good proportion to all my other wealth.

There is no trading an economic system whose currency is ending its timeline. Smart, quick talking players will joke at our expense until fast markets and locked down paper gold positions block their "trading even" move into physical at any relative cheap price. Mine owners will see any near term profits evaporate into a government induced pricing contango that constrains stock equity with forced selling at paper gold prices.

My personal view

They will, one day in the future, helplessly watch their investments fall far behind a world free market price for physical gold. Further into the future, one day, mines will make money on the last thousand per ounce price for gold; only the first $XX,000.00 of price will not be available to them.
....
My argument for hyperinflation is FOA's argument. So you'll see me use FOA's terms. You'll see me quote a lot of FOA. And you'll see me restate the same call he made back in 2001...

And just to be clear about FOA's call, here it is from that same post:

"While others call, once again, for a little bit of 5, 10, 15% price inflation, that lasts until the fed can once again get it under control,,,,,,,,, I call for a complete, currency killing, inflation process that runs until the dollar resembles some South American Peso!"

"Complete, currency killing" hyperinflation is a one-time event…”

http://fofoa.blogspot.com/2012/05/inflation-or-hyperinflation.html

Milamber

Edwardo said...

I think this concept of "Producer" and/or super producer needs to be fleshed out. Obviously, or at least it's obvious to me, that the chief (super) producer referenced (either obliquely or directly on this blog) are the Saudis, but who, pray tell, are the other vaunted super producers who have stored their "surplus wealth" in physical gold?

I pose this question for a variety of reasons not the least of which is that one can relatively easily conjure up a whole host of other very wealthy entities who produced little to nothing, but, nevertheless, are almost certainly sitting on enormous stockpiles of gold.

And finally, pardon me while I editorialize a bit by noting that there seems to be an implicit, and, yet, to my mind, undeserved reverence for these so called (super) producers. After all, on whose backs did they achieve all of their super production?

victorthecleaner said...

50sQuiff,

Jim Rickards is on record as saying the BIS were concerned by the disorderly ascent of gold last summer.

Just for general interest, would you point me to the exact source where he said/wrote this?

The idea concerning the rupee is very plausible. India takes about a third of the annual commodity supply (mining and recycling). So if you assume the demand is constant in rupees, and you manage to lower the rupee exchange rate by 10%, then ... voila.

The chart seems to confirm your idea very nicely:

INRUSD chart

Finally, do we need the giants to eventually drop the dollar and break the old gold market? I like the argument that those who already own (enough) gold, are in no particular hurry. There are some other considerations though:

1) The paper gold market may break because of the usual investment banking accidents that happen from time to time

2) The longer the old system keeps limping along, the more the real economy deteriorates. Some giants may decide it is enough and push for a change. I can think of both oil producers and China doing this. In fact, China may have already decided it and implemented it as of summer 2011 - it has just not yet been fully effective because of the flow of dumb money moving from the Euro to the US$ because of the European debt crisis.

3) There is a lot of "new money", i.e. savers with surpluses not yet in gold, who may one day switch to gold. A repeat of summer 2011 may be sufficient to trigger this shift which can easily overwhelm the old system, too.

Victor

Motley Fool said...

A foolish thought...

It would seem that socialism springs from the female psyche. There is a remarkable correlation between the rise of socialism and the rises of feminism, and women in general in our society since about the sixties.

On the other hand, hard money thought seems to spring from the unyielding male psyche. A stance that has been dominant for most of our human history.

Freegold represents a balance between these male and female instinctual responses, a synthesis.

TF

Jeff said...

"if you assume the demand is constant in rupees, and you manage to lower the rupee exchange rate by 10%, then ... voila."

If other things remain constant. Lowering the rupee makes indian housewives with gold feel richer (in gold). it might also make people want to buy more gold if they fear more devaluation. Wouldn't tweaking the import duty, which they have been doing, be more effective?

Also, the russian ruble has been depreciating against the dollar, but Russia is still buying gold. How much? Who knows.

So far the gold content of Russia's reserves is about 7.8% -up from 5.3% in January. The statement from its central bank reads,

"The bank of Russia is not committed to buying any particular amount of gold," the bank said. "Nor is there any official target amount of gold purchases. The bank buys gold at a market price, and its buying intentions completely depend on the market conditions."

http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=131107&sn=Detail&pid=39

burningfiat said...

MF,

A foolish thought maybe, but I long for this middle road.
Freegold maybe a compromise between easy and hard money, but from the viewpoint of this current European socialistic paradise, Freegold enforced performance on government/society would be more than welcome. I imagine it would feel like justice that you would be rewarded for performing economically and being able to save your surplus safely. Even if Freegold wouldn't do much difference for me personally as I already save in gold and would continue to do this after reval., I long for an environment where government is held responsible.
Here's what I hope Freegold will impact in my country:

G-men will not be able to borrow money at <1%. G-men will be punished by market for money-printing, G-men will be punished by market for raising taxes.

Pendulum swinging back to the male side or pipe dream?

/Burning

e_r said...

Blondie: Shrimps are the same ones objecting to “austerity” aka living within one’s means. Doesn’t occur to them that the fantasy may have been the time when they lived over and above their means, does it?

On that note, Here is Jörg Asmussen's recent speech at Riga, on Lessons from Baltics.

This is what a responsible government ought to do:

to state that the adjustment is for the country’s own good, and not just to please international lenders;

to tell the hard truth;

to explain what needs to be done;

to be clear what the consequences of non-action or of alternative policy choices would be.

All this is conducive to public acceptance of the programme and, therefore, its success. And this is also in the enlightened self-interest of the government

In fact, sharing a currency is more than just drawing economic benefits; it means being part of a community with a shared destiny. This project of political integration justifies making short-term sacrifices to join – or stay within – the euro area.

If properly designed and effectively communicated, if fully supported by international lenders, economic adjustment does not necessarily imply political suicide.

50sQuiff said...

Victor, it's in this interview: http://www.youtube.com/watch?v=Tl9axPXtN5E

If I remember correctly, he refers to the central banks collectively in describing their concern about disorder in the gold market. He then refers to the BIS as the organisation through which they coordinated the prescribed intervention.

I'm going from memory here so apologies if this is incorrect.

poopyjim said...

@TF:

I'd say you're onto something. I have thought the same thing for a while. Women have a strong tendency towards collectivism, and tend to favor personal security over freedom.

Men exhibit collectivism as well. However, individualism, the desire for freedom, a sense of honor & justice, these are predominantly male qualities in my opinion. Men also have a far greater tendency to be savers than women do.

So yes I'd say freegold represents a swinging of the pendulum back towards men. It's about time, Lord knows we have suffered.

Nickelsaver said...

Pj,

Lol...I can't wait to read Wendy's response to that.

Polly Metallic said...

Hmm. Interesting theory about feminism, but there were a great many socialist societies before 1960 run by men, and some clear headed monetary views held by women like Margaret Thatcher, so I', mot so sure women favor collectivism. It seems more of the male component who hope to live easily off other's labor. Among my own acquaintances, I know at least as many irresponsible spendthrift men as I do high maintenance women. ;-)

50sQuiff said...

Jeff, the declining currency would naturally reduce bullion demand in terms of weight. The resultant flat paper price would dampen any public enthusiasm over and above regular savings demand.

Look at the correlation between gold and INR since last September: http://imgur.com/9vZkl

Alien said...

Marx, Lenin, Keynes = amputated dicks or transgenders????
Idiots! F...ing idiots with bad mothers and lousy women. Don't you call them "degenerated"?

Nickelsaver said...

I normally wouldn't ask a question like this, but considering the liberty taken by FOFOA with the title graphic; I am a Christian/Christ-Follower and am wondering how many others that follow this blog are as well?

Jeff, you quoted Mt 6, I used that in blog post titled "The Storage of Wealth" a little while back.

PJ, you capitalized the word Lord in your last comment. To me that indicates some knowledge of the proper use of the word that perhaps comes from some biblical perspective?

I'm not trying to turn the comments into a religious discussion. Anyone that wanted to reach out me by email or my blog, I'd love to compare views.

Thanks

Nickelsaver

M said...

@ e_r

I seen a study recently that said (i think)70% of greeks want to keep the Euro

M said...

@ Alien

"Marx, Lenin, Keynes = amputated dicks or transgenders????
Idiots! F...ing idiots with bad mothers and lousy women."

Keynes was a homosexual who had peado tendencies. FACT

M said...

@ 50sQuiff
With all due respect, how about a name change....? A 50 year old quiffing isn't something I like to cross my mind when im on fofoa

Biju said...

Here is Eric Janszen who has excellent track record predicting future in radio interview - in his opinion, No HI but only BI(Big Inflation).

I do not subscribe to this entirely but we can always entertain new ideas.

http://www.financialsensenewshour.com/broadcast/fsn2012-0611-1.mp3

burningfiat said...

Nickelsaver,

Sorry to bite on the religious discussion, but I for one only adhere to the gospel of Blondie.
...
Just kidding. Powerful image though! Looks like a dude I'd follow.

Agnostic myself (perhaps with some buddhist tendencies), but love all you Christians, Muslims, Jews, Buddhist, Hindus etc...
Funny thing to think about gold in the context of global cultures and religion. Gold really is universal to humanity, huh?
Guess that's because the tradition (h/t Bernanke) of Gold is way older than most religions.

poopyjim said...

@Nickelsaver

That's a hard one for me to answer actually. I am familiar with the bible yes, and in recent years I have been exposed to many people who I consider true believers whom I have a great deal of respect for (Jesse of Jesse's cafe being one).

I guess I'll say for right now, I'm agnostic. These are matters I will contemplate more from my remote mountain chalet, after the transition. ;)

Alien said...

M

I know and he hated Jews.
Marx had hemorrhoids/anal fistula.

What was/had Engels?

I expect FG's (do not confound with "FriGides") are the only sane men with intact Y's as the X is borrowed!

Motley Fool said...

Hmm

We all have aspects of masculinity and femininity in our being. Obviously male aspects dominate for males, generally, and similarly for females, though there will be individual exceptions.

Eastern thought understands the importance of balance. Debtors and savers. Male and female. Yin an Yang.

TF

burningfiat said...

MF,

Good point. The balance is what is important.

Perhaps I can follow Alien a bit that the past socialistic power-trips of the Lenins and Stalins wasn't so feminine...
Todays ongoing wealth transfer to welfare moms maybe more so.

http://www.youtube.com/watch?v=KhQOOBsV714

Biju said...

Thinking about EJ's(Eric Janszen) perspective, I saw milamber post FOA's comment -

"While others call, once again, for a little bit of 5, 10, 15% price inflation, that lasts until the fed can once again get it under control,,,,,,,,, I call for a complete, currency killing, inflation process that runs until the dollar resembles some South American Peso!"

Victory said...

VtC, FOFOA,

Why do you think the BB are choosing to store their reserves (or a portion thereof) in GLD as opposed to the vault. The notion that they do so in order to lend the shares short to earn a nominal yield makes sense, however if the borrow rate that VtC just reported is accurate they would get more OTC via the implied lease rate (as VtC pointed out.) Plus the operating expenses of the trust I believe is in the neighborhood of .04% per annum, far in excess of the borrow rate, and I would think they could store bars cheaper themselves. The amount of GLD shares short from the start of the year is on average about 14 million shares - roughly 43 tonnes, looks like the shares short increased by 12 tonnes leading up to the latest Puke from 4/15 to 5/15; unfortunately there is no data after 5/15 from this source.

Or am I completely misrepresenting your analysis in saying the BB are lending shares at all, as opposed to only borrowing them and redeeming for physical when their vault reserves are stressed due to allocation requests?

In either case do you think the BB’s possibly operate on a gentlemen’s agreement type of honor system in which if they redeem tonnage they are obligated to replenish what they have removed from inventory over time as the market allows?

Just some questions I had while reading the recent GLD talk.

tx,

v

Biju said...

Jeff said
"If other things remain constant. Lowering the rupee makes indian housewives with gold feel richer (in gold). it might also make people want to buy more gold if they fear more devaluation. Wouldn't tweaking the import duty, which they have been doing, be more effective? "

Jeff,
From an Indian house wife's perspective duty or not does not matter - they only look at what is quoted at the local jewellery store for a gram and this always includes taxes, duties, Jeweller's profit etc...

They would have heard about Govt increasing Gold duty, but they ultimately remember only the net price. So a price increase due to spot price or duty or sales tax etc.. are all the same.

e_r said...

Biju,

I heard Eric Janzsen's interview fully. It was interesting, but the central aspect of USD HI talked in the Inflation or Hyperinflation post was only fleetingly mentioned.

FOFOA: The USG today is spending $3.6B more than it is taking in, each and every day. That's a big mess of dollars flooding out of the USG. $1.5B per day is flooding outside of our zone while $2.1B is staying right here on our front lawn. This is all flow. It is ongoing and unstoppable. And it all must be mopped up by someone. And by someone, I mean either the foreign sector, the domestic private sector or the Fed buying up US Treasuries. $3.6B per day, an unstoppable, unending broken water main gushing out dollars. Marginal flow!

Don't be fooled by the misdirection. QE, twist, whatever; it's not about interest rates or helping the economy recover. It's 100% about disguising and managing this uncontrollable, unstoppable mess. It's more like a broken sewer line than a water main now that I think about it.


EJ's view (me paraphrasing what he said): The policy is to gradually depreciate the dollar down to 60 by 2016 or so, thereby improving net export position.

Move more towards energy independence, by reducing the dependency on foreign oil and therefore improve our net balance (import vs. export) position.

How does our net balance position improve, when there is no existing structural support for the $3.6B per day emission?

Any improvement in the export side of the equation is dwarfed by the USG over-spending, yes?

Unfortunately, the interviewer did not prod him any further on this so I don't really know how EJ concludes that this can be "managed".

1/2

RJPadavona said...

MF and PJ,

Something else to consider......

First of all, I don't think women shouldn't pursue careers if they want to. But I do believe that most women would prefer to to stay at home and raise a family if given the choice. At least most of the women I know seem to feel this way. After all, wouldn't the division of labor entail that those who are instinctively better managers of the home be drawn toward fulfilling that role?

But in most cases, both parents need to work just to make ends meet. Hell, one of those salaries goes exclusively to paying taxes and other imbedded costs imposed by our governments. In a Freegold world where governments and people are forced to live more within their means, I think it makes sense that balance will be restored in areas of male and female instincts. Without the parasitic government siphoning off as much of our hard earned resources, and with a functioning vehicle for family savings (gold) in place, more families will be able to afford to live a traditional lifestyle if they so choose. Personally, I believe this lifestyle to be a net positive for humanity as a whole.

Furthermore, something that is deeply enabled by the $IMFS is the ability to borrow cheaply in order to go to college. We're sold this con that in order to make it in life we have to get that magic diploma. Without artificially cheap capital to fund it, this myth will hopefully die.

That being said, just think about all the prime child-bearing years that women are spending in a classroom in order to graduate and become overqualified waitresses in many cases. In a Freegold world, I think different decisions would be made. And if more children being born is a result of those different decisions, then that will definitely help balance out the aging demographic problem that faces the West.

They don't call it a correction for nothin'!


Alien,

Whenever I see your name in Comments I instinctively cross my legs out of a subconscious fear of castration. So I apologize in advance if what wrote above has offended you. I'm scared enough of you as it is. I don't want to make matters worse ;)


Wendy,

While we're on the subject of women......
I haven't followed Comments all that long so this may have already been brought up. In the Peter Pan stories, Wendy is the mother-figure of the kids in Neverland. Has anyone here ever made the connection that Wendy is also the matriarch of the kids in "Euro-Gold la-la-land"? ;)


RJP

e_r said...

2/2

Here are the reasons why he mentioned HI in US is unlikely (and I'll post FOFOA excerpts as rebuttals):

1. Pre-condition for past HI has always been a completely ruined economy, economic output lost due to a war, no foreign investment therefore no growth. Political isolation as nobody wants to help the country or own the currency.

FOFOA: The dollar is the global reserve currency, so it is the physical plane that is the biggest threat to the dollar in the same way the FX market was a threat to the Weimar Mark. And it is not the nominal debt service that is the threat like it was in the Weimar Republic, but it is the structural (physical plane) trade deficit. To the USG, that is the same threat as nominal debt service denominated in a foreign (hard) currency was to Weimar Germany.

We already have a broken economy in the physical plane and an extremely bloated government, which is why we are running a structural trade deficit.

Structural support with CB storage gives dollar its value and that is disappearing.

As far as the political aspect goes, EJ is correct when he says that US is not a little country that can get thrown under the bus.

US has a very important strategic military, political and economic position in the world.

But how does that help the structural trade deficit problem that FOFOA talked about?

The military or a political position cannot magically convert US from a super-consumer to a super-producer.

FOFOA: One of the big points in the post above is that exorbitant privilege is something that is given, not something that is taken. This is wholly consistent with A/FOA's story and message, but if you start with your premise that the USG was the mastermind playing its high stakes poker hand, then you will see what you expect to see.

The dollar is at the end of its timeline. When that end comes, oil will switch to euro pricing. But switching oil to euro pricing is not what threatens the dollar with its end. Correlation does not imply causation.


2. 8000 tonnes of gold can be used to avert any dollar crisis. You'll have to set the price so that everyone calms down :) [his view is almost dead identical to Jim Rickards]

Now we're getting close to what FOFOA has discussed at great lengths.

FOFOA: That's the choice. You can collapse your currency against the non-economic good gold, killing the paper gold market and driving up the price of physical in advance of hyperinflation by buying it up. This gives you some hope of avoiding the worst of hyperinflation by providing a real outlet for unwanted surplus dollars.

Or you can wait until your currency collapses against economic goods and then you will have to buy back your own currency with your gold, also at Freegold prices. Even if you start a new currency you will still have to make a market for it because your credibility will be shot by that point.


It is very disappointing that EJ wasn't prodded more on trade deficit in the physical plane due to the complete disregard for prudent spending by the USG.

costata said...

Okay, since off-topic seems to be de rigueur let's take a look at oil with a particular focus on China. These savvy, never-run-the-price buyers have been paying over the odds with no apparent concern about price.

Uncharacteristic behaviour that is attracting the attention of far more astute observers than your Uncle costata as you will see below in the last article linked.

China currently maintains a strategic oil reserve equivalent to 30 days of imports, compared with 90 days in many developed countries. The United States' strategic oil reserves exceeded 700 million barrels in 2009, enough for 150 days of oil consumption, according to Zhou.

So perhaps "keeping up with the Joneses" in gold isn't the only strategic reserve" position that China covets (my emphasis).

To reduce the gap, China set up a national oil reserve center to build and manage its strategic reserves in 2007. Four strategic oil reserve bases in the coastal cities of Dalian, Qingdao, Ningbo and Zhoushan have already been built, and construction on another eight bases will be completed by the end of 2012.

http://www.china.org.cn/world/2012-02/21/content_24695371.htm

I respectfully suggest this next short article is a must read:

http://online.wsj.com/article/SB10001424052702304587704577335722040019632.html

A couple of snippets below.

China's crude-oil imports jumped to near-record levels in March, bolstering the belief among some energy analysts that the country is again hoarding oil for its strategic reserves.

If the predictions prove accurate, China's growing thirst for oil could underpin already-high crude prices and push the country's oil imports above market expectations.


....Mr. Wu estimates China's crude-oil imports will average 5.77 million barrels a day in 2012, up 13% from a year ago. Of that, about 150,000 barrels a day could find their way into storage. Chinese officials have said that the country had completed filling four storage sites in 2009, the first phase of a three-part process. Those four sites can hold 103 million barrels of oil.

....Apart from the strategic reserves, China also keeps commercial stocks of about 200 million barrels, held by national oil companies in the form of both crude and oil products, analysts said. Some of China's recent imports also might reflect a rush to replenish commercial stocks after big drawdowns last year.

And 200 million barrels in the "commercial stocks" of state owned enterprises forsooth. Given that the strategic stockpiles mentioned in these articles are mostly in the East of the country one might wonder what is happening in the far West of the country far from prying eyes. Perhaps a pipeline or three terminating in what pray tell? A "terminal" perhaps indistinguishable from a storage site.

Tyrone said...

Saw this at JMineSet...

Jim's comment:
What a mess. This is the monetizing of real, never to be repaid, junk debt.

BOE’s Posen: Bank of England Should Buy Small Business Loans
By Jason Douglas
LONDON–The Bank of England should purchase bundles of small business loans in an effort to boost the supply of credit and end an "investors’ strike" that is holding back the economy, BOE rate-setter Adam Posen said Monday.


And I'm reminded of this...
"My friend, debt is the very essence of fiat. As debt defaults, fiat is destroyed. This is where all these deflationists get their direction. Not seeing that hyperinflation is the process of saving debt at all costs, even buying it outright for cash. Deflation is impossible in today's dollar terms because policy will allow the printing of cash, if necessary, to cover every last bit of debt and dumping it on your front lawn! Worthless dollars, of course, but no deflation in dollar terms!"

Anand Srivastava said...

Nobody has commented yet on the fact that most currencies these days are devaluing against the dollar.

I am thinking this is because all countries are consuming more than they are producing, ie they are in trade deficit. There is no balance in the world at present.

I guess the countries such as India are being forced into devaluations via balance of payment. Some are doing it to help improve exports, like Brazil.

Comments?

Anand Srivastava said...

contd.

I would think that simultaneous devaluations are the next phase of the crisis.

Sarah said...

Assuming these have been written about, can any longtime readers direct me to the article(s) on this blog where FOFOA writes about whether or not the eurozone will be composed of fewer countries than it is currently in this decade and the fate of the euro currency as FOFOA sees it?

Also does anyone know where FOFOA wrote more on this(in which article?) "Don't be fooled by the misdirection. QE, twist, whatever; it's not about interest rates or helping the economy recover. It's 100% about disguising and managing this uncontrollable, unstoppable mess."

costata said...

Anand Srivastava,

Take a look at the table at the bottom of Kitco's home page for a snapshot of the currencies. Note that when the US dollar is stronger almost all currencies are weaker (led by the Euro - the so-called "anti-dollar"). Likewise when the dollar is weakening most other currencies move in the opposite direction.

I think that the behaviour of the currencies is increasingly just an artifact of the $IMFS and gold. At some point IMO there will be widespread recognition that "hey, if we just trade with each other, in our own currencies, then we will have stability".

No one with a floating exchange rate can pull the kind of stunts that the reserve currency issuer gets away with. Keep your eye on the FOREX market after the next Fed meeting on the 20th of June.

At the risk of causing some consternation among the readers and contributors here, watching the "price" of gold (in any currency) is rapidly becoming a complete waste of time. IMVHO it's the ratios that will tell the true story henceforward (e.g. oil:gold, gold:10yr, gold:DOW, etcetera)

AND let's not forget your old friend silver. If you believe that the Fed hasn't given up on its reflation efforts and why, pray tell, would neo-classical economists ever do that? Then silver could be in for a nice run later this year and perhaps a contraction in the GSR for those brave souls who like to trade these metals (or those who missed the chance to convert last time).

Anyway, that's my 0.02

Cheers

costata said...

PS. And those ratios don't have to be calculated in currencies. They can be recalculated in physical plane metrics such as weight ;)

poopyjim said...

Sorry for continuing to sully this good forum with off-topic material >_<

@RJP

Great comment. I agree - many women would rather be mothers than have a career, and this is a fine thing and there is nothing wrong with it. In fact, in my view it is a good thing. One of many things I despise about the cult of feminism is that they scorn women who decide to become full-time mothers as though they are somehow inferior.

I think there is virtue in the nuclear family unit. It is the foundation for a moral society and a bulwark against the state, which is why communist regimes sought to destroy it. And yes, I agree with you that come freegold, households where one parent works may well become commonplace again. After all, once dot-gov is forced to downsize, it'll be like a $2.1B/day leech was removed from the backs of the productive sector (and we will lose the other $1.5B/day of government for free! Yes!!! :D). Of course we won't lose all of it, but you get the idea...

Anand Srivastava said...

Costata: The devaluations have been happening since 3 or more months.

I understand about the risk on risk off trading going on. But why the longer term trend. I would think its due to all countries going into deficit. US is special and hence does not get affected.

But this also points that the only surplus countries are the oil producing nations and they must be buying the treasuries now. For them to get away from buying Treasuries they will have to get into trading in local currencies.

victorthecleaner said...

Victory,

thanks - good that you are asking because I may have confused people with the latest comments.

When I wrote the article, I gave two examples of inventory financing that might be relevant to GLD
1) sell GLD shares to some retail investors (just as the Perth Mint does with their inventory)
2) lend or swap it to the market

The very existence of GLD tells you that (1) plays a role. I did not show you any evidence for (2) simply because I didn't have any. If you asked me to lend GLD to the market, I would sell my shares and then purchase a synthetic futures contract in the options market, i.e. buy a call in the money and sell a put out of the money with the same strike for a given date in the future. If you take a look at the options open interest, there are some positions of this sort around, but not too many. Probably less than 50 tonnes in total.

Then Baltic Mist figured out the interest rate to borrow GLD and suggested that if a BB is short of physical gold, it would be easier to *borrow* GLD shares and take the gold out, rather than borrowing physical gold in the forward market. If true, this might explain why GOFO has rarely shown any stress - perhaps it is just easier to borrow GLD. Note that this is the opposite of inventory financing. This is desperately finding some more inventory.

Concerning storage expenses, HSBC is the custodian of GLD. We know from Screwtape that HSBC has both GLD gold and other gold in the same vault. So their storage expenses are identical. (In the case of GLD, you have to pay the trustee and all the lawyers in addition though).

I am not sure it needs a gentlemen's agreement in order to replenish GLD. If it is advantageous for every BB to use GLD in order to manage their inventory (by selling some of it that is not immediately needed to the retail crowd), it may just happen automatically.

Victor

costata said...

Is Switzerland saving up to buy Portugal?

http://soberlook.com/2012/06/eurozone-citizens-moving-billions-to.html

Beer Holiday said...

@Sarah,

That quote is from inflation or hyperinflation .

Another article that might interest is you peak exorbitant privilege

The question of countries leaving the eurozone is discussed in the comments of Forum 1600 in July last year. There FOFOA argued that;

"The euro survives and thrives regardless of how the European debt crisis is ultimately resolved, and no countries will leave the euro".

That statement is then qualified with

" none that will leave short of a coup, revolution or state failure".

I suggest you also go looking for more recent discussion on the eurozone in FOFOA comments, it comes up all the time.

d2thdr said...

Edwardo,

You are querying about producers/super producers.

My opinion FWIW is the concept of super producers will die with the $IMFS.

I see no need for these beasts.

Any super producer will need to downsize his/her productive limits for purpose of profiteering. However, they can choose to invest this super productive abilities for the progress of humanity.

I see the second possibility more likely. Perhaps we are at a threshold of a pan-human renaissance.

Beer Holiday said...

@Sarah,

Here is a good discussion by FOFOA of the problems associated with leaving the eurozone (ctrl-f "insurmountable").

d2thdr said...

50squiff,

you wrote - Jeff, the declining currency would naturally reduce bullion demand in terms of weight. The resultant flat paper price would dampen any public enthusiasm over and above regular savings demand.-----

I see no declining demand. On the contrary I am seeing more jewelers spring up in Mumbai where I am visiting after 6 long years.

Alas the new generation Indians do not understand gold. They too will learn the hard way. Thankfully women in India are still ensnared by its shine.

Beer Holiday said...

Forgot to add Greece is word

d2thdr said...

RJPadavona - They don't call it a correction for nothin'!-

Well said Mate. My thoughts exactly.

Just one more thing to add- I wonder if you agree;

Increase in marriages, reduction in divorce, end of the concept of nuclear family?

Alien said...

RJP

once in a lifetime I wish I could agree with you.
I still cannot. You need at least two generations to change social patterns, not only financial resources.
Secondly, even if I am accustomed to scalpels, I don't use bath salts and still prefer
Mountain oysters.Just relax;)!

I am to fulfill a financial transaction in re in the EU (EZ and non_EZ). Does anyone expect capital flows restrictions from the periphery to the core in the next 6 weeks? Yes, I do liquidate re for better shiny purposes.

costata said...

Mixed Messages From The ME

Saudi Arabia (my emphasis):

Saudi Arabia's analysis of the current market situation suggests the Organization of Petroleum Exporting Countries needs a higher production ceiling, while OPEC's biggest producer remains ready to take action to ensure markets are supplied, whatever the reasons, the Kingdom's Oil Minister Ali al-Naimi said in remarks published Monday.

http://www.marketwatch.com/story/saudi-oil-minister-to-ensure-markets-are-supplied-2012-06-11

And from OPEC (my emphasis):

The cartel’s president, Abdul al-Luaibi of Iraq, said Monday that world oil markets were currently oversupplied and have led to a “severe” and rapid decline in oil prices, according to a news report from Platts....

... OPEC’s almost certain to maintain its official output ceiling at 30 million barrels per day at its meeting, wrote Julian Jessop, chief global economist at Capital Economics, in a research note Monday.

Even so, “this decision would not preclude some cuts in production in the coming months if demand continues to weaken, since actual output is well above its notional target,” he said.


http://www.marketwatch.com/story/crude-oil-jumps-more-than-2-on-spain-news-2012-06-11?pagenumber=2

What are the agendas here? Perhaps Chris Cook was on the money and the Saudi's are positioned to make money from a big fall in the price of oil.

50sQuiff said...

d2thdr:

Gold imports by the world's leading buyer of the precious safe haven yellow metal fell more than 55 per cent in the first quarter of 2012, marred by the ongoing nationwide strike of gold bullion traders and jewelers protesting India's proposed hike in import duty on gold bars, coins and platinum.

In a report, the Bombay Bullion Association said India's imports of the precious metal fell to 90 tonnes during the January to March 2012 period, versus the recorded 283 tonnes in the same quarter last year. In January and February this year alone, India imported only 40 tonnes and around 30 tonnes of gold, respectively.

When the jewelers' strike started on March 17, gold demand further depressed. Gold imports reached only 15 tonnes to 20 tonnes in March, as against the estimated 50 tonnes to 60 tonnes in the same month of 2011, Prithviraj Kothari, president of the Bombay Bullion Association, said. The high prices of gold further discouraged new purchases of the metal, he added.

"There are hardly any imports. Whatever little banks have imported, it is quoting at a discount in the local market," Kothari said.


http://au.ibtimes.com/articles/323646/20120404/gold-india-silver.htm

Robert said...

Milamber, sorry if my post was confusing to you.

The point of my first point, that the UST could by stealth step in and stop on run on gold is relevant because freegold only arrives "when the first Giant runs out of the bank screaming the bank has no gold." I did not mean to suggest that the U.S. would fund its deficets by selling physical gold.

Regarding my second point, possible future restrictions on cash withdrawals, I do not see how speculation of what might happen in the future can be "debunked." Speculation of what may have happened in the past can can, but speculation about the future is, well, undebunkable speculation.

Regarding the third point, that institutions are not set up to take delivery of physical, I am surprised that you say I lost you. One of the fundamental premises of the blog is that the breakup of the paper gold market and the migration to physical will herald the emergence of freegold. Factors that facilitate the hoarding of physical tend to accelerate the process. You say that the transition occurs at "stopping the mopping." I disagree. That will be one of the signposts along the trail, but the transition really happens when there is a run to physical, a small giant is denied allocation, and runs out of the bank screaming. When the ROW stops the mopping, interest rates rise to try to induce more mopping, and monetization eventually follows.

Regarding the fourth point, how can you possibly say Giant's complancency and lack of urgency to increase physical holdings is irrelvant to the question of timing. 5 demerits for sleeping through class! Anything that affects the flow is relevant to timing.

Regarding the fifth point, I cannot believe that you say "As FOFOA, Another, FOA, Aristotle & others have pointed out numerous times, this is not about how long the IMF$ holds together." Of course it is. The end of the IMF$ will mark the beginning fo freegold. That is what it is all about! Now predicting the timing, that is a separate question. And I agree with you that predicting the timing is a fool's errand. But even FOFOA suggests that Another and FOA expected it to happen by now, and probably did not foresee the extent to which China would be willing to ramp up mopping for another decade. And although FOFOA warns against trying to time it, if you read between the lines of his posts, I think he is saying that it will probably happen sooner than later -- though he wisely stays focused on the big picture rather than playing the timing game.

Keeping with the theme of this post, how about if I suggest that freegold will come like a thief in the night? And that it is better to be a decade too early than a day too late? And how about if I say Behold! "Freegold is coming quickly." Quickly is all a matter of perspective.

The IMF$ is quickly coming to an end. I wholeheartedly agree. But with so many having such a strong vested interest in maintaining the status quo, I submit that "quickly" might not be as quick as many here expect.

Beer Holiday said...
This comment has been removed by the author.
Blondie said...

78Rubies said: ”I'm sure the reason why currencies don't move thru gold (why gold prices currencies) has to do with gold being the ultimate savings vehicle.“

That's right, because gold saves the thing that moves.

Blondie said...

Theo said: ”gold… it does make one feel secure - that's what I get - security.“

Blondie said...

Boopstir said: ”it is a crazy thought to chase gold for its $ value only to 'remember' that $ dont really exist and gold itself is the [store of] value! kind of a mind-f*% until you let it settle in.“

Blondie said...

Thanks for that link e_r; that archive is good value.

Woland said...

Hmm. Off topic. Hong Kong Exchanges and Clearing, which
counts the Chinese Government os one of its' shareholders,
has made a 1.3 billion pound offer for..... the LME, the 130 yr
old last open outcry metals exchange. Via Reuters.

Wil Martindale said...

http://www.bis.org/publ/rpfx10.htm

costata said...

Hi Robert,

Your post was not at all confusing to me and neither are you.

Cheers

enough said...

BRON ON THE TELE.........

http://www.youtube.com/watch?v=J_l44MwVx0c&feature=youtu.be

Indenture said...

Milamber: Thanks for reposting your comment from last thread.

JR: You have earned enough Brownie Points to be 'indulged' and I'll state the obvious. Your relevant Copy & Paste skills are irreplaceable.

Blondie: You're like E.F. Hutton. We should all be listening.

AD: You're getting better at conversation but please don't capitalize just because you want to raise your voice. Your exclamation points work just as well.

Question: When we talk about the market causing the Transition can it be because the mathematics of all these derivatives finally breaks, that there is not a moment in the future when it will break but that there has already been a moment in the past where the system broke but it just hasn't caught up with the outside world? (I keep going back to that 'Tower of Babel - Treasuries' piece someone linked to that said on March 14-15 something happened that began an uncontrollable cascade of broken contracts).

Biju said...

e_r :

Maybe EJ also thinks - USG will also force cut down it's approx $50Billion/month deficit, but I doubt it.

Sarah said...

Thanks a million Beer Holiday for the links!

Wil Martindale said...

I would submit that everyone here knows where we are going, and that everyone now is just wondering "when". So I would like to give some
context to this post from the original thought from which it sprang:

"It is important to understand that few persons or governments hold US dollars! Look at any investment portfolio and what you will find "are assets denominated in US$". This sounds simple, but it is not. You have heard the phrase, "money is moving into real estate, land, oil, stocks or bonds". It is a bad meaning, as it does not what it says.

All modern digital currencies do not go into an investment, they move THRU it. The US unit is only an exchange medium to acquire assets valued in dollars. US government bonds are the usual holding. No CB holds any currency! They hold the bonds of that currency. The major problem today, is that digital currencies have erased the currency denominations of all government/nation debt holdings! Even thou a debt is marked as DM, USA, YEN, they are in "real time" / "marked to the market" and cross valued in all currencies! No currency asset, held by CBs today are valued in the light of a single issuing country, rather "all currencies are locked together". To lose one large national currency, is to lose the entire structure as we know it!

There is an alternative. Gold! It is the only medium that currencies do not "move thru". It is the only Money that cannot be valued by currencies. It is gold that denominates currency. It is to say "gold moves thru paper currencies". Gold can be used to revalue any asset, and not be destroyed in the process!"

This is the larger view, I believe, but to wit, "No CB holds any currency! They hold the bonds of that currency."

You host has several times remarked (in HI vs D posts) that it will be the collapse of the bond market that disrupts the "orderly decline" of the USD which certain CBs and their primary dealers (along with their captive governments) are attempting to manage.

But it is the interest rate swap complex, (hundreds of trillions notional) which has created bid unlimited demand in the Bond market, thus controlling interest rates (the cost of capital) and thus allowing this illusion that the TNX and Lie-bor create.

When Harvey Organ agreed that both Rob Kirby and Jim Willie were correct in the deception of JPM's recent (soon to be 400 billion dollar "CDS" loss?) by agreeing that it is in fact an unwind of their IRswap book, this added much credibility to the discussion, as no one understands this current gold market like Harvey Organ.

The SEC and FBI are not there to chastise Mr. Dimon, and he is too long in his cups to keep his cards close to vest in this "reassuring" comment about "staying power".

They are there for "damage control" or to "plug leaks" in the dyke. But clearly the actions of China, Russia, Iran and even Japan reveal that this cannot be done. Yes political support is over, long past is structural.

In the BIS link above:
"Activity in OTC interest rate derivatives grew by 24%, with average daily turnover of $2.1 trillion in April 2010. Almost all of the increase relative to the last survey was due to the growth of forward rate agreements (FRAs), which increased by 132% to reach $601 billion."

Further in the report:
Much of the increase in the trading of OTC interest rate derivatives was due to the
growth of FRAs, which more than doubled to $601 billion in April 2010 from $258 billion
in April 2007 (Table 6). The significant rise in FRAs is mainly due to a tripling of euro and
US dollar-denominated contracts and a surge in turnover for currencies such as the
Swiss franc and the Canadian dollar (Table 8).

end

Wil Martindale said...

Turnover in interest rate derivatives was concentrated in a small number of financial
centres, with more than two thirds of turnover taking place in only two countries
(Table 9). The United Kingdom continued to be the most active location with a share of
46% of worldwide trading, followed by the United States with a share of 24%, slightly
down from 2007. Outside these two centres, trading took place primarily in France (7%)
and Japan (3%), both slightly down from 2007, Singapore (3%) and Switzerland (3%),
both slightly up. Turnover in Germany almost halved to less than 2% in April 2010
compared with 2007.

/SleepingVillage/ said...

"no one understands this current gold market like Harvey Organ"

Yes, I would say guys like Victor, KD, FOFOA... do not understand the gold market like Harvey;)

You may(or may not?) want to check this out... mainly the comments, haha.

Wil Martindale said...

I will certainly keep that in mind. Thank you so much for your contribution.

Edwardo said...

Jim Willie? Oh dear! You, sir, have my sympathy if you are using Mr. Willie as any sort of guide. The poor chap is positively off the beam, and utterly impervious to a better, a far better, understanding of matters to pertaining to gold and the monetary system in general.

I don't know how anyone can stand to read his semi-coherent missives. His poor writing and lack of clarity befits the quality of his analysis.

Wil Martindale said...

Thanks so much for that important contribution to the discussion of the BIS Triennial report and JPMorgan's Interest rate swap book.

Most encouraging !!

Edwardo said...

Um, Will, no one who is apt to tell, knows the state of play with respect to JP Morgan's IRS book.

Beer Holiday said...

From ZeroHedge " the US recorded a deficit of $125 billion in May, on outlays of $305 billion and revenues of $181 billion"

125/30 = 4.2 Billion $ per day.

JR said...

Tyrone, Reveal Thyself!

and Gimmie FREEGOLD!

Cheers

Wendy said...

"Lol...I can't wait to read Wendy's response to that."

**yawn**

;)

Ramon said...

Long time... looks like I have to catch up on the comments :)

Before that - has anyone been watching the HKMex? Contracts for gold and silver there have hit new records since the exchange began last year.

Charts here.

COMEX open interest has been declining for gold and stagnating in silver, so I don't think it's too much of a stretch to consider that some of those former participants may be switching over to the HKMex.

Wily Coyote said...

While I appreciate the effort that goes into an article like this, it's no surprise that "forex lady" and others would be turned off.

Blondie starts off with a riddle, which he never explains, and then goes on:

"If this statement appears the least bit cryptic, if it does not make 100% crystal clear sense, then little else written on this blog by either the contributors or the scant few commenters who do understand it will make complete sense to you, despite your best efforts."

With all due respect that sounds arrogant. What is this some secret society, where only the robed initiates know the handshake? Just explain it. You believe gold has a fixed value, and fiat currencies go up and down against that iron standard. See, not so hard.

Unfortunately that is never proven, and in recent history we saw the price quickly go from $300 to $800 and back again. Did the USD devalue over 100% and then reverse in the same timeframe? Of course not. I was there. No, gold goes up and down upon the whim of hedge funds and everyone else. It's not the granite standard you seem to assume.

The rest of my comment is for Fofoa. You make a good case for devaluation, and perhaps even HI. (I've read "the trail", and several other articles.) You make a good case for gold. Where you fall short, is you don't make a case FOR ONLY GOLD.

To protect against inflation, there are other alternatives:

1. You said yourself that equities will almost protect as well (I'm paraphrasing).

2. What's wrong with other currencies? Presumably Europe will get through it's painful transition, leaving the euro and chf as safe outlets. There will be safe havens when the USD starts trending down in earnest.

3. I understand counter party risk and MF Globals can always happen. But so can your physical gold be stolen. I equate these risks as equivent.

4. Gold has very high transaction costs and low liquidity. I can press a button and be out of my CHF if it turns out to be a mistake, but with physical gold it may take me hours/days to find a buyer and do the transaction. The market can swing quite a bit in that amount of time.

5. You wrote that 5% gold is good protection. I doubt many people can be convinced losing 95% is good protection of their savings. Portfolio allocation needs to have a much more convincing argument.

6. Even if one were to allocate 100% gold, after a severe HI event you would still lose 28% just from capital gains taxes. So it would seem that in less extreme devaluation scenarios, we get bled about 30% either way.

Again, I appreciate what you do, and I've learned a lot. But to convince the masses these issues need to be addressed.

Wendy said...

I'm kinda thinking that the link between socialism and feminism is weak. Further I would argue that male dominance is probably not on the increase these days: I am observing an evolving male/female equilibrium.

In regard to the comment that suggested "feminists" berated the choice of women who stay at home and raise their kids ....

are you on crack?????????

for the most part women support the free choice of all women. The big word is CHOICE! As someone commented all PEOPLE in our western society are working just to make it.

Including and managing the incusions of Women in the work force offered the government an increase their income tax base of 100%. its a no brainer for the short sighted gov, but it has a huge under-rated social implication

50sQuiff said...

Wily Cayote:

1. I don't believe he did.

2. They're still going to have to inflate the Euro and the CHF with it. They might look good as the mirror image of the dollar but kill you all the same.

3. The reasons why these two risks are not equivalent have been theorised about on this blog a number of times. What's more one has happened and is happening right now, at the hands of a kleptocrat banking sector. The other is pure fear-mongering.

4. If you're looking to gold for liquidity in a monetary crisis, you probably prepared poorly. It will go into hiding. Oh, and when you just get "404 Not Found" on your broker's website you won't be selling any CHF. With capital controls in place you probably won't be doing anything with them either.

5. I don't believe folks have a clue what "portfolio allocation" is. They will, however, understand the precipitous decline in the value of paper.

6. That's the accountant's equivalent of the "you can't eat gold" argument. Although note that in the EU, national bullion coins are free from capital gains tax.

Bjorn said...

Since some people have slipped on to the treacherous topic of timing a bit...

Negative yields anyone?

Sure looks like sooner rather than later to me.

That said it´s probably much better for the nerves to have the mindset that it´s going to drag on for another 10 years. Getting harder by the day to hold that thought though...

Blondie said...

Wily Coyote,

Relatively little effort was expended. It was a comment, it appears to have been well received by some people. That it was elevated to a post had nothing to do with me. If I was given a brief to produce a post then real effort likely would have been expended, the result would be longer and more carefully considered, and I would hope quite a bit more useful in relaying my perspective. More effort was expended by myself removing a good half of the content and softening my approach than in actually writing it. If you thought it arrogant you would have loved the original.

I’m not surprised either that the “Forex lady” found the comments disjointed and difficult. I’ve been reading them for two and a half years and I still often find them that way too. It is what it is. Depending upon what one is looking for there may be great value here, or none at all. That is up to the reader just as much as the writer.

Perhaps Another’s quote which I started with could be considered a riddle. I never gave my explanation, and that was the point. I thought that perhaps others would give theirs, or would ask some questions, so we could discuss what it means. 78Rubies made just such a comment. Understanding Another’s perspective is one of those things which one can really only arrive at under one’s own steam. It’s not necessarily easy, but it is simple. I can put my own understanding in a sentence, but I don’t think that would be doing anyone any favours. I’m simply pointing out that if it is not an easy remark to understand then there are still many many more layers of meaning in the material awaiting you.

You say :”You believe gold has a fixed value, and fiat currencies go up and down against that iron standard. See, not so hard.“

You don’t appear to have put as much effort into reading my comment as you have into composing your own. At no time have I ever believed or stated or even insinuated that gold has a fixed value. What I did state was this: ”Gold functions as the ultimate store of value.“ How does this make its value fixed? Did you see my reply to Boopstir's comment above?

Your comment has really demonstrated the validity of mine. You don’t understand Another’s “riddle”, you have made that clear in your interpretation. You then go on to make six points which all suffer from the same problem: your perspective. The riddle is just an easy way to test it.

I'm not saying my perspective is superior to yours, that would be silly. We are all entitled to our own views, and presumably hold those which we feel serve us best. I fully respect the rights of others to hold whatever views they wish. To presume to know what is best for another is to disrespect their personal sovereignty. I do however presume that anyone reading a blog which defines itself as "A Tribute to the Thoughts of Another and his Friend" may find it advantageous to be able to consider it from as close a perspective to Another's as possible, and my comment was made in this light.

With all due respect I ask you to consider whether the arrogance is perhaps your own? FOFOA did state in his preamble that you would need to set your baggage down.

Tekin said...

@ costata

***What are the agendas here? Perhaps ... the Saudi's are positioned to make money from a big fall in the price of oil.****

------

Perhaps, it may have something to do with the comment made by Barton Biggs. Low oil prices may weaken Iran after which Saudi-Iran war may commence.

Analogously, the fall of the USSR somehow coincided with low oil prices.

However, this may also be meaningless propaganda. Who knows?

Saudi Arabia’s oil war plan hinted
http://www.rt.com/news/saudi-arabia-oil-plot-754/

costata said...

Tekin,

Thanks for the link. One of the comments in that article which troubled me was this one (my emphasis):

Under normal recessionary circumstances, we would be reducing production to maintain current prices. Instead, we will be flooding a weak market already suffering indigestion.

Historically this is the exact opposite of the low-cost oil producers' reaction to recessions. Producers who remain profitable at lower prices have tended to increase production to maintain revenue at the expense of higher cost producers.

Dropping the price of oil to $60, in the short term, is consistent with the market play that Chris Cook predicted. The second thing that troubled me about this article was the claim that the Saudis would be doing this over a two year period. That might have the opposite effect on prices by forcing higher cost producers to shut in production thereby reducing supply and exerting upward pressure on price.

In order to pull off the coup described by this Saudi businessman the Saudis and their ME allies would also need to increase production in order to make up for any shortfall in supply.

Preventing customers from buying Iran and Iraq's oil would be more effective. But, in the case of Iraq, you then run up against the Western commercial oil interests who presumably want to sell Iraq's oil at a profit.

Can you see why this report troubles me?

Motley Fool said...

Wendy

"I am observing an evolving male/female equilibrium."

That is what one would expect to see, if my speculation were correct.

Not that such an observation proves my speculation.

TF

Robert said...

Costata, thanks for your message.
Wily Coyote, a few thoughts on your 6 points:

1. Equities: Equities nominally go up with inflation, but the best you can realistically expect is to tread water. In hyperinflation a company may be wiped out, or maybe not. Nominally equities might perform extremely well, but they are still high risk.

2. What's wrong with other currencies? Everything is intricately tied together. The USD for all of its flaws cannot be separated from the rest of the world’s currencies. The rest will not stand still while the USD hyperinflates. When it goes, everything goes.

3. Counterparty risk. True, physical gold can be stolen, but is the risk of physical theft really equivalent to counterparty risk? I doubt it. Gold in a safe deposit box is probably safer than an account with MF Global.

4. Gold has very high transaction costs and low liquidity. In some parts of the world this is true. In other parts, not so true. In a real crisis when there are no bidders, prices of securities can drop like a rock. The market is liquid only when the market is healthy.

5. On losing 95% of savings: Do you understand the revaluation argument? If purchasing power of the 5% physical gold allocation jumps by 30x to 100x, you come out ahead even if the other 95% goes to zero. For me this was the “Aha!” moment. That helped me understand why China can hold all those Treasuries even though it is obvious that the USD is doomed in the long run. The object of the game now is to keep accumulating physical gold, to keep the flow moving. China’s Treasuries can go to zero overnight, and it will not matter if the revaluation of the gold China has acquired over the last decade more than offsets the loss.

6. Capital gains taxes. Consider that after the USD dies, there will be good reason to abolish CGT on gold to coax it out of hiding and to facilitate flow. The current reason for CGT on gold is to promote and bolster the IMF$. Of course there is no assurance that the USG will repeal CGT on gold, but there will be an entirely new paradigm.

Blondie said...

Blondie’s View Addendum

If I’d have known my words were going to be elevated to such a platform I may have composed them differently. Since I appear to still have the floor, here’s something I’d like to add:


It has been observed that people seem to like the way they feel once they have for themselves some physical gold. A feeling of security. A little more peace of mind. I suggested that the function of gold is pretty difficult to grasp unless you are producing surplus value to the extent that diminishing marginal utility is making that function apparent to you.

Do you think the world would differ greatly if every single person enjoyed that feeling of security and peace of mind that holding gold has given you?

Wouldn’t it be cool if rather than it being gold itself that delivered these feelings it was the function of gold that did? And that if gold were to function publicly it would deliver these feelings whether you yourself owned any or not?

Publicly functioning gold will eventually be demanded by the human super-organism, so I guess we’ll find out one way or another.


So... is the value in the gold, or is it in us?

costata said...

Hong Kong/China

From Chuck Butler's Daily Pfennig:
http://www.kitco.com/ind/Butler/20120612.html

There’s an interesting story making the rounds this morning regarding Hong Kong… The man that helped introduce the Hong Kong dollar’s (honkers) peg to the U.S. dollar in 1983, now believes that there is a need to address the question of whether the peg serves the public interest of Hong Kong.

Long time readers my recall me saying years ago that I believed that eventually honkers would drop the peg, and China would use this drop of the more mature currency as a way to get their feet wet in the floating currency world, as a precursor to floating the renminbi… Well, that may still happen, but I see the Chinese first simply changing the peg from the dollar to the renminbi…


The source cited for this rumour by Chuck is Joseph Yam. Here's an article discussing it and a few interesting snippets from that article. Incidentally it's amazing to me how many people still mistakenly believe that the Yuan/Renminbi is pegged to the US dollar.

"There is a need to address the question as to whether the monetary system of Hong Kong, as currently structured, can continue to serve the public interest of Hong Kong," Yam wrote in an academic paper titled 'The Future of the Monetary System of Hong Kong.'

...Yam's paper said the trading band could be widened or turned into "a corridor" whose width, slope and center could be periodically reviewed. The latter option could be managed against the dollar, yuan or a basket of currencies, he wrote...

...HSBC Chief Executive Officer Stuart Gulliver and his counterpart at the Bank of East Asia Ltd., David Li, said in August 2011 that any shift could be to a link with a basket of currencies....

And this on the "peg" (my emphasis):

China ended its own peg to the dollar in July 2005, saying it would manage the exchange rate against a basket of currencies, and the yuan has strengthened 30 percent versus the greenback in that time. Chinese officials told European Union business executives that the yuan will achieve "full convertibility" by 2015, EU Chamber of Commerce in China President Davide Cucino said on Sept. 7.

If the target for full convertibility is 2015 then fiddling with the HK/dollar peg seems like a waste of time to me unless they manage it against a basket as a preliminary step before pegging to the Yuan.

Perhaps this is one for the FX lady.

Tekin said...

***Can you see why this report troubles me? - costata***

I can only guess. :) It looks like a big increase in oil price is being setup. Shii-Sunni war, would be cited as the official reason. Late 2014-2015 appears to be the schedule if the sources of Barton Biggs are to be believed.

d2thdr said...

So... is the value in the gold, or is it in us?


What a good question.

I have pondered long and hard on that one. As humans we give value to things but the possession of things also give us a value. Thats very much a thought in the current paradigm.

How about this question in the era of freegold?

I believe every endeavor we put effort into will extrapolate into realistic returns on the our efforts. The masses as they are will always demand a piece of the pie. Will they get it is a moot point.

That I believe is the beauty of the era of freegold. You will not need gold to enjoy the fruits of a more equitable system we will hopefully live within.

In essence the system itself will value every effort in direct proportion to the need of the super-organism.

I guess having a huge population may be an advantage after all.

poopyjim said...

Wendy sez...

Further I would argue that male dominance is probably not on the increase these days

I agree. Male subjugation is what is on the rise. We see this in family law, the welfare system, and many other societal institutions which have been erected largely for the benefit of women at the expense of men. IMHO the male's position will improve in a true meritocracy, hence why I think freegold will benefit men, but we are not there yet. 

Regarding the link between feminism & socialism, I wouldn't say feminism caused socialism. I think politicized feminism is the result of inherent female nature. However, feminism and socialism are synergistic in that both require an ever-growing army of bureaucrats to implement their nefarious purposes. This is why you see feminism strongly associated with the political left. Feminism is basically just like socialism except the benefits accrue solely to women. Feminism, despite the protestations of women to contrary, essentially consists of  employing male henchmen (in the form of the state) to forcibly promote women's interests at the expense of men using various false justifications such as patriarchy theory, the pay gap myth, and "rape culture". 

Of course no one cares when a man points out these issues, as we are instinctively inclined to view men as disposable utilities and view women as angelic, so I'd like to refer anyone who's interested to the very fine videos of girlwriteswhat - they will blow your mind. Here are a few of my favorites: 

Feminism and the Disposable Male
Fempocalypse
NAFALT!!!!1!!1! (not all feminists are like that)

Sorry, COMPLETELY off topic. I will resist the urge to continue this line of discussion...

Robert said...

Blondie, you asked the question "Wouldn’t it be cool if rather than it being gold itself that delivered these feelings it was the function of gold that did?" Yes, yes and yes! The big problem with the current system is that you never know if it is safe to get off the treadmill. You can never possibly stash away enough to know that you will not outlive your "savings". Well I suppose a small percentage of the population can, but not the other 99% of us.

IMO it's not about gold per se. It's about the certainty of your savings, the foreknowledge of how long the purchasing power of your savings will last, and the array of choices that come with being able to plan around those factors.

Michael H said...

FOFOA,

Thank you for the response in the comments in ‘GLD Talk Continued’ starting June 3, 2012 12:09 AM.

You’ve made the point in these snippets before but I still found them a concise re-statement:

”Short exposure is a slam dunk to the BBs. They don't fear it one bit. As I said, it's more of a wonder (i.e. mystery) when the $PoG rises than when it falls, which is why it doesn't make sense to think that anyone is intentionally suppressing the $PoG.”

”There's really no risk of paper gold rocketing to the moon. Unlike the real thing, paper gold can be quantitatively eased (expanded in volume) to meet demand, kind of like the dollar. The risk is an uncontrollable shift in demand from your paper to your reserves. To manage that risk, you must manage the flow of reserves. “

Further, part of my original question was effectively ‘will the BBs bury themselves by hedging gold with non-gold’, which you replied (paraphrase) ‘not likely since if the BBs are winding / unwinding their hedges then they know about the market action ahead of time and can adjust to profit from it’. Makes sense.

My next thought was that perhaps another threat to the paper gold market is a sudden un-correlation of markets driven by forces outside the BBs, like perhaps a blowout in the gold-oil ratio. But realistically, should that happen then the losses would be currency-losses only, and could be papered over with a currency bailout from the CB. The only thing the BBs cannot survive is a depletion of reserves.

Michael H said...

Texan,

Re: your comment on June 8, 2012 7:19 PM, on ‘GLD Talk Continued’:

”I will take a stab at this. If there is a sudden "reset" and gold goes up by a factor of 25 let's say (50,000/oz), we will have had "HI" - all at once.

The question becomes how does everything price after that. Even if oil is widened to a 100:1 ratio, you are still looking at $500/bbl. Which in turn will jack up the price of everything by orders of magnitude and presage a massive shift in purchasing power to gold-holding countries like India. Which geo-politically just isn't going to happen. Does the UK even have any gold left? Do you think they would agree to a pricing system based on a SOV they don't have? I don't think so.”


As I understand it, the revaluation that FOFOA predicts is a revaluation of gold with respect to oil. See the two charts at the end of

http://fofoa.blogspot.com/2010/06/how-can-we-possibly-calculate-future.html

e_r said...

Wily Coyote,

You thought Blondie said gold has a fixed value .

When I read Blondie's comment (posted as his view in this post), I never thought for one moment he meant it that way. And now he has asked a wonderful question, worth exploring.

Blondie asks: So... is the value in the gold, or is it in us?

Something that is subjective, cannot be fixed in value. This is a fact that even the best of minds (Jim Grant for example) fail to comprehend.

And secondly, I would also focus on this statement too:

you’ve never personally experienced diminishing marginal utility to the degree that gold’s function becomes apparent, so it remains a theory.

When you earn fiat currency (which is what we all do), there is so much surplus for the wealthy that they actually have a diminishing marginal utility for the fiat currency spending. What do they do then? Do they sit on this asset that continuously diminishes in purchasing power? [Marginal utility for the fiat currency being the ability to buy things]

Edwardo said...

The ECB will be bust, bust I tell you! Well, Nigel, don't forget that they can always push the yellow button.

http://www.youtube.com/watch?feature=player_embedded&v=TN_1mF-3JTI

Michael H said...

Wily Coyote,

”You believe gold has a fixed value, and fiat currencies go up and down against that iron standard. See, not so hard.”

As Blondie mentioned in his response, we do not see gold as having a fixed value.

Perhaps this post by FOFOA might shed light on his view of gold’s value:

http://fofoa.blogspot.com/2012/02/glimpsing-hereafter.html

The short version is as follows:

The value of gold is determined by (1) savers and dis-savers as well as (2) the general economic activity.

”Where you fall short, is you don't make a case FOR ONLY GOLD.”

If you mean ‘only gold in the center of the new world financial system’, then look at

http://fofoa.blogspot.com/2010/12/focal-point-gold.html

If you mean ‘only gold as part of personal holdings’, then well duh. FOFOA is not a financial advisor and he only suggests you buy as much gold ‘as you understand’. Everyone’s situation is different.

”To protect against inflation, there are other alternatives”

To paraphrase Another, “we are not facing inflation or deflation but *destruction* of our currency”. Since you don’t like riddles, I’ll try to explain: this is not a typical business cycle we are facing but rather the changing of the whole world financial / monetary system. The rules of ‘inflation protection’ do not apply to this scenario because that is not what we are facing.

Others have covered the specific investments you listed but let me add a couple of points:

”1. You said yourself that equities will almost protect as well (I'm paraphrasing).”

http://fofoa.blogspot.com/2012/02/yo-warren-b-you-are-so-og.html

Cliff notes: equities will lag hyperinflation.

”2. What's wrong with other currencies?”

What’s wrong is that they may very well inflate or devalue as well, to a lesser extend than the USD. So sure, a 10:1 Euro inflation is better than a 1000:1 USD hyperinflation but you’re still out 90%.

”4. Gold has very high transaction costs and low liquidity. I can press a button and be out of my CHF if it turns out to be a mistake, but with physical gold it may take me hours/days to find a buyer and do the transaction.”

I suppose it depends on the size of the transaction. But I think you should be able to call Apmex or a similar gold dealer and lock in a price in minutes. I suspect that larger orders have their own very liquid channels to go through as well.

As for transaction costs: gold is for saving not for trading.

”But to convince the masses these issues need to be addressed.”

FOFOA can speak for himself, but from what I read I would guess he is not interested in ‘convincing the masses’.

Jeff said...

The masses don't matter; that's why we call them masses.

FOFOA: The debate is about determining the best stance someone should take who has plenty of net worth. And I do mean PLENTY. People of modest net worth, like me, can of course participate in the debate. But then it can become confusing at times when we think about shortages or supply disruptions of necessities like food. Of course you need to look out for life's necessities first and foremost. But beyond that, there is real value to be gained by truly understanding this debate...

In a world like today where the choices for a savings medium are myriad, you are right to be concerned that your particular choice might go no bid at the worst possible time. But I challenge you or anyone to find me a time in history when physical gold went no bid during an economic collapse. In fact, just the opposite tends to occur. We've all heard the stories of gold coins in Weimar and poor Zimbabweans panning for gold.

But no one here is saying that gold is what will carry you through an economic collapse. That's not what it's for, even though it is one of the few "useless" things that historically holds value even during the worst shortages...

That today we are in the process of switching from a world where the choices for a savings medium are myriad, to one in which a single focal point savings medium will stand out above all else. Passing through this particular crisis is what will make its light shine bright, like a Firework for all to see. So this time, and this one time only, you'll not only shuttle your wealth through but you'll also expand it like you never thought possible. And then, on the other side, gold will continue performing as it has for thousands of years.

jojo said...

Long way to read still but this guy is too funny.
An apropo name.
So FOFOA= roadrunner no doubt.

jojo said...
This comment has been removed by the author.
Robert said...

The masses only matter when they run out of cake and roll out the guillotines.

jojo said...
This comment has been removed by the author.
jojo said...
This comment has been removed by the author.
DP said...

Mmmmm, coyote flavour popcorn! #RoadKill

milamber said...

Edwardo said...,

“I think this concept of "Producer" and/or super producer needs to be fleshed out.”

I agree. I know for me the last two years I get confused on the definitions & how they are applied contextually. But before we can get into producers versus super producers, we must define a Giant.

Sometimes a Giant is defined simply as a producer (or super producer). Other times a Giant is defined as a producer that *CHOOSES* to save their excess wealth in gold & requires gold to flow when they get paid for items in the physical plane.

Based on all the different ways the term is used here, it comes with the baggage of being very imprecise in what that term means in the readers mind. I have seen the term “Giant” used as a very imprecise way of defining entities that have a large positive net worth, or have a LOT of physical gold, or are super producers. All of those types of entities have been held out to be Giants.
But does anyone think that the following entities should be called Giants?

- Apple
- Exxon Mobil
- Microsoft
- PetroChina
- Wal-Mart
- IBM
- Royal Dutch Shell
- AT&T
- General Electric
- China Mobile
- Blackrock
- BH/Warren Buffett
- George Soros

Looking at the above list, one could make the argument that Apple is a Giant because they produce more than they consume. But I don’t think that is the type of entity Another/FOA was talking about when he was writing about Giants.
In fact, since we can listen to them any time we want to, let’s ask FOA:

Me: FOA, thanks for your time. Two quick questions if you can spare a moment:

FOA: Sure. I have nothing better to do than patiently answer the same question over & over again.

Me: OK. Sorry, but some of us are pretty dimwitted & it takes a while for these concepts to sink in. And since I am king of the dimwits (as my wife will vouch for), I figured I would ask again. Anyways, here are the questions:

1. Do you think we are going back on a gold standard?

2. Could you please tell me what a Giant is? I am really confused on this point.

FOA: Sure. Let me draw your attention to something I wrote back on January 19th of 2000. The Dow was at 11,535.24,& gold closed at $289.20

FOA (1/19/00; 8:53:32MDT - Msg ID:23197)
Last "overview" for a while

Our stance is and always has been that the world will be using paper digital currencies for the rest of our lifetime. I for one, have never heard any official voice his stance that we will move back into a gold standard. Their (Euroland) direction has always been to keep a reserve currency system and strengthen it with a free physical gold market trading in the background. In none of our meetings have we heard where a fear was expressed that the governments will lose control of digital currencies and give it (that control) back to gold. That is simply not going to happen, no matter how severe a down turn the loss of the American dollar system creates. Believe it.
This has been the fundamental thrust of this news. The dollar system is failing as we move into another stronger (relative to fiat currencies) money system. I support, use and promote the new Euro simply because it is and will create the next trend for the future. Not because it's a gold currency of extra hard value. This (Euro) future will see us all using digital currencies, for better or worse. Therefore, by logical extension if I must use a reserve currency of account, I move into one that has the best strategic ability to survive and denominate my assets. In addition, it's creators are restructuring the gold market to the physical bullion holders advantage. This is the only reason I "Walk In The Footsteps Of Giants". They created this bullion path and the world will follow in due time. Therefore, my position of Euro assets and physical gold. Mostly (because I am American), I lean to gold for this transition.
http://www.usagold.com/hall/hallfame2.html

-cont-
1/2

milamber said...

-cont-
2/2

(I just threw in the Gold standard question for the HMS lurkers.)

The “money(ness)” quote in regards to the Giants question was,

“…it's creators are restructuring the gold market to the physical bullion holders advantage. This is the only reason I "Walk In The Footsteps Of Giants". They created this bullion path and the world will follow in due time. “

I think that FOA gave a very clear answer as to who Giants are.

It is not simply some entity that produces more than it consumes. That OF COURSE is a requirement for being a Giant. But there is more. It is an entity that has VAST excess wealth and they save it in physical gold.

That’s why I tried to put forth the idea that not all producers (super-producers) are Giants. But all Giants are SUPER PRODUCERS/SAVERS that have always saved their excess wealth in physical gold & demanded a portion of their remuneration in gold.

Freegold is not about the Giants. They have already blazed the trail. It is not really about the Euro. The Euro just makes Freegold easier and less messy when it inevitably will happen.

Thank you JR for patiently getting me to see that.

Freegold is about the savers waking up to the FACT that the run of the exploding in quantity (but not in value) incredible magical dollar MUST end.

And once the savers work that out & see that there IS a focal point for their savings that is a TIMELESS wealth preserve, they go about acquiring it.

As more and more savers come to this realization (hello super-organism), it puts more & more pressure on the price of gold. And the price of gold was already under pressure because of the Euro & Giants (as FOA defined the term above) just being Giants (wanting their flow of gold).

I believe the applicable phrase is “over promise & under deliver”. That sums up the paper gold market today. That is also a good descriptor for ANY fractional reserve lending system. The only problem is that with a fractional reserve lending system (as a slightly edited Aristotle phrase puts it) “when the chips are down and the grown men at the table aren't blinking” do you want to hold a promise of gold or do you want to hold gold.

That’s why I took my stab at defining terms in the previous thread, and I reposted it in this one after Blondie asked me to. Because for me at least, understanding the distinctions between Giant, saver (super saver?), producer, super producer, etc carry HUGE implications regarding Another’s statement in the masthead,

"Everyone knows where we have been. Let's see where we are going!" –Another

As A/FOA/FOFOA/Aristotle have laid out, we are going to Freegold. We are going to Freegold in the same way that a parched man travelling in the desert WILL stop at the Oasis to drink water.

Not because he is required to or because it was foretold that he would over a decade ago in some cryptic internet discussion board. Or even because some Europeans planned it back in the 80’s in response to some dude named Nixon peeing in all the other water holes.

He will stop & drink from the oasis because the dude is THIRSTY.

He is thirsty for a savings vehicle that isn't gobbled up by the collective & doesn’t *force* him to chase yield.

He is thirsty for a transparent currency that is young and built on a solid gold foundation.

But most importantly, he will stop because he is tired of mopping up $3.6B of camel dung every day.

And he finally sees that the crap coming out of the camel is only getting bigger & smellier.

Milamber

JR said...

Hi Milamber,

This is good on the distinction between savers and giants:

"It is not simply some entity that produces more than it consumes. That OF COURSE is a requirement for being a Giant. But there is more. It is an entity that has VAST excess wealth and they save it in physical gold."

I broadly think of giants as the big producers, most of which are old money. But there are newly emergent giants (aka newly wealthy super-procures too), maybe we can think of them as "small giants."

Maybe this excerpt from Freegold Foundations dealing with "small giants" will help you sort through these issues:

When Another spoke of "rich third world persons" and "old world giants," what quantities of gold do you think he was talking about? Mr. Gresham asked him once:

Mr. Gresham: "We who read here generally buy the coins, one ounce and less. The "Giants" you speak of are usually buying the large bars (100 ounce?), yes?"

ANOTHER: "I ask you, how many of your bars in tonne? This is the small purchase size."


Good question. How many 100 ounce bars are in a tonne? The answer is 321 and a half. Or 32,150 ounces. And this is a "small" giant! 4 billion ounces in private hands. Let's take just half of that and wonder how many of these "small giants" there might be in the world. 2 billion divided by 32,150 = 62,208. So I'm going to go out on a limb and say, conservatively, that there are probably "tens of thousands" of these so-called "giants" in the world. That 4 billion ounces is out there somewhere, in private hands, and that kind of family wealth doesn't necessarily show up on things like the Forbes list.

So what is my point? My point is that today is not just the sum of the last 10, 20 or 30 years, like it probably seems to most Westerners. To the giants, to the world outside of the West, today is the net sum of centuries of production minus consumption.

[...]

And it seems that some of these authorized participants are doing just that…

Jan 14th, 2011 08:27
"… large bullion-backed exchange-traded funds continued to see outflows."

[source]

RS View: Silly reporters. Instead of calling these “outflows” from the ETFs, it should be called what it is — a redemption of a basket of shares for physical gold by the Authorized Participants (e.g. bullion banks). Such share redemptions would actually be a bullish sign because it entails a reduction in the global supply of paper gold while at the same time signifying a preference by the redeeming party for having the metal over the ETF shares. That is, of course, unless the drawdown in physical gold merely represented the routine sales of the gold inventory that occur to cover the ETF’s administrative expenses.


And why do they do this? Because more and more of those "small giants" are converting their unallocated accounts into allocated accounts. This very act stretches the Bullion Bank's fractional reserves ever thinner. So there is a sort of tug-of-war on those scarce gold bars in the Bullion Bank's vault...

JR said...

Hi Milamaber,

Great thoughts. As a conceptual exercise, here are some edits in brackets, does this help clarify the view for you.

"Freegold (actively being ushered in) is not about the Giants."

In other words, absent a Euro nuclear option, we don't expect or think it is likely the old money Giants will break the paper gold market.

But at the same time, the paper gold market could not be broken if physical gold were not already cornered, yes? The fact the Giants have cornered the physical gold market and are not dis-hoarding is really the crux of the issue that underlies it all, yes?

As FOFOA wrote in Who is Draining GLD?

The physical portion of the paper gold market is cornered, plain and simple.

Its in this sense that FOFOA makes comments like:

FOFOA said...
Hello Kicker,

No, Freegold transition does not require small sizes. They will likely be an after effect. The vast majority of currency is traded for life's necessities and debt service rather than the timeless wealth asset of Kings. Following in the footsteps of giants requires more than pocket change.

The transition to Freegold is all about the big players.

Sincerely,
FOFOA
August 3, 2011 2:16 AM

comment

In my view, "big players" includes the old money giants who have cornered the market and the "emergent," small giants seeking to get a piece before the action dries up. As you put it:

And once the savers work that out & see that there IS a focal point for their savings that is a TIMELESS wealth preserve, they go about acquiring it.

As more and more savers come to this realization (hello super-organism), it puts more & more pressure on the price of gold.


And as FOFOA has described it:

We shrimps should have gold available for purchase until some small or medium-sized Giant is denied allocated bullion. Several people asked after my last post, "What if all the APs won't play ball and redeem your basket?" My answer was, "Well, then it is game over for Bullion Banking!" Gold is going into hiding. When a small Giant runs out of one of the Bullion Bank's front door announcing "the bank is out of gold," as Fekete puts it, all offers to sell gold against irredeemable paper currency will be abruptly and simultaneously withdrawn.

The View: A Classic Bank Run

Sarah said...

This is off topic right now, but since I've seen talk of real estate on here, I'll pass this link on:

This guy makes the case for "shadow inventory' not being a problem. His message - Stop worrying about it.

http://wallstreetexaminer.com/2012/06/08/north-las-vegas-crisis-an-example-of-why-to-stop-crying-about-shadow-inventory/

Edwardo said...

Robert said,

"The masses only matter when they run out of cake and roll out the guillotines."

I think a "big"-I use the word big advisedly as you will see-problem for the so called masses is that, in the main, they have eaten entirely too much cake, and, therefore, the only thing that they are up to rolling out- and only then with exceptional effort- are their own obese selves.

Thanks, Milamber, for sharing your ideas on producers/super producers.

JR quotes FOFOA,

"To the giants, to the world outside of the West, today is the net sum of centuries of production minus consumption."

Not really. And this gets precisely to the point I was attempting to make about putative (super)producers. Old money, very old money especially, almost certainly never acquired their golden boodle in the manner suggested by that quote. Old money didn't produce something that some portion of the rest of the world chose to pay a dear price for, the profit from which was then stored in gold.

Old money's surplus wealth came from imperial and governmental privilege, or, in some cases, the assumption of imperial/governmental privilege which is generally the result of some form of conquest. And conquest without fail involves confiscation and/or outright theft. Great "Producers" of today, such as the House of Saud are, of course, no exception. They are indeed pulling the hydrocarbons out of the ground, but it is the acquisition and control of the ground itself that is of interest. In the meantime, I realize that what I am describing does not effect, by one jot, the prospects for the freegold thesis, but the language we use to describe the "movers and shakers" is, at least to me, instructive and worth pondering.

e_r said...

Edwardo,

They are indeed pulling the hydrocarbons out of the ground, but it is the acquisition and control of the ground itself that is of interest.

Very well-said. In some of my earlier comments, I was mentioning Henry George.

I did not get much of a response from anyone, but your statement above is very illustrative of George's concepts.

From the article linked above:

The means of producing wealth differ at the root: some is thieved from the people and some is honestly earned.

George differentiated; Marx did not. The consequences of our failure to discern lie at the heart of our trouble.


I think what you are referring to can be termed as rent-seeking .

RENT, IN THE ECONOMIC SENSE, is the part of the produce that accrues to the owners of land (or other natural capabilities) by virtue of ownership.

I've had trouble reconciling FOFOA's distinction of debtors vs. savers for this very reason.

Marx made a distinction as labor and capital and completely ignored the "land owner" component there.

FOFOA's distinction does not say anything about the problem of land ownership and its associated rent-seeking problems as well.

Regardless of any monetary system, I see the privilege of rent seeking through simply owning a natural resource to be a pervasive and an unsolvable problem.

Desperado said...

The Payoff

This prick not only sold off more than half of Switzerland's gold, he also presided over policies that have completely bloated the countries foreign reserves with trash like Euro sovereign bonds. He even set up his successor. Now he gets his payoff, Blackrock VP.

Swiss TV (SF), a parasite existing on mandatory tax contributions from everyone who owns a TV in Switzerland, didn't even bother to mention it on the evening news tonight. 20min, the widely read commuter rag, says that this is a jackpot for Blackrock.

What a foetid cesspool the worlds system of central banking is.

milamber said...

JR Said…

"...Freegold (actively being ushered in) is not about the Giants."

In other words, absent a Euro nuclear option, we don't expect or think it is likely the old money Giants will break the paper gold market.

But at the same time, the paper gold market could not be broken if physical gold were not already cornered, yes? The fact the Giants have cornered the physical gold market and are not dis-hoarding is really the crux of the issue that underlies it all, yes?”

JR,

Thank You!

Your brackets (and clear comments) brought much needed clarity to my post that I was struggling with.

My original response (before work this AM) revolved around FOFOA’s Freegold foundations post. But then I kept coming back to the fact that producers/savers/giants/little giants, big players etc. weren’t all defined in Foundations, so I scrapped my comment & wrote this one. (Indeed, I can’t find a post anywhere that deals with defining all of those different entities. And if there is one, pretty please point me to it!)

As to my comment that Freegold is not about the Giants. I can see where I am being unnecessarily confusing. Let me say it this way:

The Giants are not the change agents here. The Giants behavior is a given. They are not going to wake up one day and say,

“Hey, maybe I should convert my physical gold holdings into dollars, before those miners dig up too much of the stuff. Or before the US cuts its lifestyle 30% (or more) & goes all out Volcker on us & jacks their interest rate to 20%!”

So I don’t mean to imply that Giants are not important. They most certainly are! That was wrong of me to use that word.

But I contend that they are not the ones to watch (except in case of delivery failure) & I think you are saying this too, but I am not 100% certain.

I think that what they have done & what they will continue to do is a given (in regards to the Freegold transition). The Giants are already playing out their role in the transition simply by being Giants (storing wealth in physical gold & demanding payment in same).

But if one does get denied their physical flow, it is not the fact that a Giant gets denied that is important. It is that a large physical order can’t be processed for a big player; any big player!

Whether that order was from an Old Money Giant, a new money saver that just discovered financial repression, A pension fund in Texas or Japan, or an Authorized Participant that needs physical gold in a hurry, the fact that a “Big Player” was denied physical gold is the important fact; not who was denied.

Another way I view it is like this:

Giants are important in the same way that the US gov’t is important; neither one is going to change their ways. Giants are always going to store excess wealth in gold. The US govt is always going to want the world to mop up that $3.6B (and growing) per day.

The question us shrimps have to ask is how will that stress ultimately resolve? If you think that it will resolve with the rest of the big players financing the US lifestyle into the Quadrillions of Treasury debt (ending in infinity from $15Trillion as of 2012), then call up OG Warren & buy BH. If you think it resolves into Freegold, then, as FOFOA says,

“Buy.Physical.Gold.”

Milamber

Motley Fool said...

e_r

I may not have responded at the time, but I read your link and enjoyed it.

TF

mr pinnion said...

Blondie said,

"Do you think the world would differ greatly if every single person enjoyed that feeling of security and peace of mind that holding gold has given you?"

Holding gold only gives the type of people who read this blog a feeling of security and peace of mind, because we know whats going on.

Certainly, before the credit crunch, people in the western world thought their savings were safe(and most still do), so i guess they got that feeling of security and peace of mind that we get now.Did all that security and peace of mind make the western world a better place five/ten years ago? No.Why would it after freegold?

Regards
Ozzy

Edwardo said...

Thanks for your response, e_r.

We agree. The entire rent seeking mechanism that is currently in force represents an immense problem. It is part and parcel of why we are enmeshed in such seemingly chronic difficulty. One thing is clear to me though, and that is that the lion's share of our problems with our present rent seeking system, a system that is almost defined by the fact that it benefits a select few at the expense of everyone else, lies with the elevated position of corporate actors and their handmaidens in government. Exorbitant privilege isn't just for dollar emitters.

Indeed the sort of financial reform that the general economy so desperately needs, but has not had an inkling of, is the direct result of a government that is effectively under the thumb of that rent seeking parasite known as the big banking system.

But that is just one area of grotesque rent seeking, see health care, food production, and the communications sphere to name a few others, that is in desperate need of being addressed. At the risk of sounding overly dramatic, the fate of mankind hangs in the balance. I'm quite sure, that, since it was you who named the malady, you know all this.

Jeff said...

Milamber,

Either giants or the USG, or the europeans could initiate freegold, but right now they all see it to their advantage to not do so. Still, it's a lot of fingers on 'the button' isn't it?

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

JR said...

Edwardo,

You are not disagreeing with the statement.You are instead taking a step back and making an assumption about how they came to be producers.

Yes, rent seeking is inherent given government. Its not just old money giant, but you really can't conceive of any giant, small or big, old or new, who is not profoundly impacted by rent seeking.

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

e_r,

In brief, land is not George's strong suit. (he's been haunting my life since I read Heil-blowhard "Worldy Philosophers" in 8th grade).Non-Lockean proviso homesteading rights FTW.

With all due respect, this is awful socialist ideology:

FOFOA's distinction does not say anything about the problem of land ownership and its associated rent-seeking problems as well.

Regardless of any monetary system, I see the privilege of rent seeking through simply owning a natural resource to be a pervasive and an unsolvable problem.


Some quick ideas:
http://archive.mises.org/1610/murray-rothbard-and-henry-george/
http://mises.org/journals/jls/20_1/20_1_6.pdf
http://www.fff.org/freedom/fd0603b.pdf

This is not the place for this discussion but I would suggest much of the geoists' land/property perspective is built on faulty premises at odds with those underlying Freegold. And I love a lot of what George wrote.

Polly Metallic said...

Mr Pinnion. I don't believe the public has ever felt that their moneyy/savings/investments were secure. People are always trying to find ways to stay ahead of inflation without putting their savings at too much risk. Tough to do. And most people have lost money or at best stayed even for the last ten or fifteen years. I read a piece just the other day about the decline in people's net worth in the past decade. Part of that was due to real estate losses, but they aren't making gains elsewhere, either. Banks pay virtually no interest and stocks have been treading water for ten years.

Edwardo said...

Hi JR,

"You are not disagreeing with the statement.You are instead taking a step back and making an assumption about how they came to be producers."

I can see why you would say that, but that's not entirely accurate. And I'll leave it at that.

FOFOA said...

Hello JR,

You quoted me earlier from Freegold Foundations: "… That 4 billion ounces is out there somewhere, in private hands, and that kind of family wealth doesn't necessarily show up on things like the Forbes list."

That reminded me of something one of our regulars told me just the other day in an email. I hope he doesn't mind me sharing it:

"I should have a chance to meet a real life Giant for the first time at work on Tuesday. Dude comes from 1800s old shipping industry money and was quoted to me as saying "the only people on the forbes list are the ones who can't hide their wealth" and that he has friends "far richer than the people on that list!"

I wonder if he asked him what he thought about physical gold as a consolidating wealth reserve? Maybe he'll come here and share with us his impressions from the meeting yesterday! ;)

Sincerely,
FOFOA

e_r said...

MF,

Thanks, glad you enjoyed it

Edwardo,

the fate of mankind hangs in the balance .

I don't think that's dramatic, if one can comprehend the level and extent of rent-seeking.

JR,

With all due respect, this is awful socialist ideology

That is not a counter-argument, but we're getting awfully close to a war of words which for the purposes of this blog -- may turn out to be counter-productive.

much of the geoists' land/property perspective is built on faulty premises at odds with those underlying Freegold.

If you say so. You've spent a lot more time understanding Freegold than I have.

I'll leave it at that.

milamber said...

Robert said…

“Milamber, sorry if my post was confusing to you.”
I am certain the confusion is on my end. Let’s see if I can understand it better now… :)

“The point of my first point, that the UST could by stealth step in and stop on run on gold is relevant because freegold only arrives "when the first Giant runs out of the bank screaming the bank has no gold."”

Darn. Maybe I wasn’t completely confused. I am afraid I am going to disagree. :( I think that Freegold can be ushered in by the Bond market blowing up once ROW stops mopping up the US gov’t’s dollar discharge. Because once they stop mopping up dollars, the IMF$ (as currently configured) is OVER!

Isn’t that the main point of FOFOA’s Inflation or Hyperinflation post?

http://fofoa.blogspot.com/2012/05/inflation-or-hyperinflation.html

“I did not mean to suggest that the U.S. would fund its deficets by selling physical gold. “

You didn’t. That was my bad. I was conflating two points in my mind and projecting them on to your post. Yay! The confusion for this point is all on me. :)

“Regarding my second point, possible future restrictions on cash withdrawals, I do not see how speculation of what might happen in the future can be "debunked." Speculation of what may have happened in the past can can, but speculation about the future is, well, undebunkable speculation.”

Hmm. Let me try it this way. I am going to speculate that tomorrow 2+2=5. I think that we can all agree that my “speculation” is wrong, even though it is about something that will happen in the future.
My statement was in reference to FOFOA’s debunking Carl’s comments that there wouldn’t be any cash ergo no HI. FOFOA also tackles this concept in
http://fofoa.blogspot.com/2011/04/deflation-or-hyperinflation.html http://fofoa.blogspot.com/2009/08/waterfall-effect.html

That is what I was meaning when I had said the concept of an IMF$ system digital only currency was debunked.

“Regarding the third point, that institutions are not set up to take delivery of physical, I am surprised that you say I lost you.”

Hmm. Go back and read your 3rd point. You originally wrote,

“Inability of institutions to accumulate physical to feed the run on the bullion banks (and lack of incentive to do so given that they are graded by nominal performance)”

Now you are saying that it is,

“institutions are not set up to take delivery of physical...”

I am not following the point you are making. Won’t the Inability of institutions to accumulate physical gold hasten Freebgold as opposed to be an impediment?
Maybe I am being slow here or misunderstanding a term?

“One of the fundamental premises of the blog is that the breakup of the paper gold market and the migration to physical will herald the emergence of freegold. Factors that facilitate the hoarding of physical tend to accelerate the process.”

Agreed.

“You say that the transition occurs at "stopping the mopping." I disagree.”

Let me edit that slightly. My premise (and I hope that I am simply regurgitating FOFOA) is that Freegold transition “naturally” happens when one of these two items occurs:
1.Some entity is denied physical delivery. In size
2.ROW stops mopping up the excess $

As JR pointed out, the Euro folks always have the option to preemptively go Nuclear, but I don’t think that will realistically happen.

Whichever one happens 1st will be the proximate cause (kindof like Archduke Ferdinand being assassinated), but why it has the effect to usher in Freegold was baked in the cake a long time ago (Credibility Inflation).

“That will be one of the signposts along the trail, but the transition really happens when there is a run to physical, a small giant is denied allocation, and runs out of the bank screaming.”

I don’t think it has to be a small giant. I think it is anyone (In size) who is denied physical.

-cont-
1/3

KindofBlue said...

On a less serious -- and somewhat amusing -- side note to the post "I'll Have Another":

http://usabailout.com/content/decadent-and-depraved-kentucky-derby-spells-d-o-o-m-market

Doom? Well, we already knew it's gonna be rough.

milamber said...

Robert continued to say...

“When the ROW stops the mopping, interest rates rise to try to induce more mopping, and monetization eventually follows.”

But as FOFOA wrote in Inflation or Hyperinflation,

“Sure, the Fed needs to keep interest rates from rising. Because what happens when interest rates rise? The value of the entire $35T bond market starts to collapse and bond holders panic. The Fed doesn't want that, so don't bet on them letting interest rates rise.“

So interest rates can’t rise because it destroys the bond market. Or the currency gets killed as the US gov’t prints to keep the lifestyle up & interest rates down.

“Regarding the fourth point, how can you possibly say Giant's complancency and lack of urgency to increase physical holdings is irrelvant to the question of timing. 5 demerits for sleeping through class! Anything that affects the flow is relevant to timing.”

Good point! I stand (sit) corrected. How ‘bout this:
Giants are gonna do what Giants are gonna do. See my responses to JR for more detail & let me know if you buy that argument or if I am still at the wrong tree.

-cont-
2/3

milamber said...

Robert finished saying...

“Regarding the fifth point, I cannot believe that you say "As FOFOA, Another, FOA, Aristotle & others have pointed out numerous times, this is not about how long the IMF$ holds together." Of course it is. The end of the IMF$ will mark the beginning fo freegold. That is what it is all about!”
“Now predicting the timing, that is a separate question. And I agree with you that predicting the timing is a fool's errand.”

I think we may be having a semantics disagreement. I wrote that comment in the vein of FOFOA’s statement concerning timing (IE when the IMF$ ends). FOFOA said,

“But first I need to make it clear once again that this hyperinflation discussion is not about timing. It’s about how it all ends, and it’s better (for a saver) to be a decade too early than a minute too late. The other side (whoever it may be) often tries to make the debate about timing. It is not about timing and I don't do timing, but that doesn't mean the end is far away. If anything, it's overdue in the same way a big earthquake can be overdue. “

Notice FOFOA specifically says how it end, not when it ends. Big difference!

From my perspective you are holding several contrary positions:

(from your 4th point) “Anything that affects the flow is relevant to timing.”
“this is (about) how long the IMF$ holds together…”
“predicting the timing is a fool's errand “

Thus my confusion. :)

I submit that a Shrimp trying to guess *when* the IMF$ is going to come to an end is indeed the same thing as trying to time how long the IMF$ holds together.

Don’t worry about it & be glad it hasn’t happened yet! And use this time to prepare. That was the intent of my comment.

“But even FOFOA suggests that Another and FOA expected it to happen by now, and probably did not foresee the extent to which China would be willing to ramp up mopping for another decade. And although FOFOA warns against trying to time it, if you read between the lines of his posts, I think he is saying that it will probably happen sooner than later -- though he wisely stays focused on the big picture rather than playing the timing game.”

I agree. It is human (and fun!) to speculate. But I think the core message concerning this point is best be said by FOA,

“Timing?

We, and I, as physical gold advocates, don't need timing for this position! Timing is for poor, paper traders. We are neither and our solid, long term, one call over several years to hold physical gold will confirm our reasoning. There is no stress for me to own this ancient asset as it is in a good proportion to all my other wealth. “

“Keeping with the theme of this post, how about if I suggest that freegold will come like a thief in the night? And that it is better to be a decade too early than a day too late? And how about if I say Behold! "Freegold is coming quickly." Quickly is all a matter of perspective. “

Agreed.

“The IMF$ is quickly coming to an end. I wholeheartedly agree.“

As long as you agree that quickly is a matter of perspective, then Agreed. :)

“But with so many having such a strong vested interest in maintaining the status quo, I submit that "quickly" might not be as quick as many here expect.”

Agreed that quickly might not be as “quick” as some expect. But also not as slow as some think. And to the meat of the issue as a holder of a TIMELESS wealth preserve, what does it matter when it happens?

Milamber

Alien said...

It might matter for some people. For example for FOFOA. His single revenue is this blog and the income it generates depending how long he can make it run. Does anyone think he would still write about freegold in 5 years? Would YOU pay for his thoughts in 10 years? Are YOU sure you will still generate income in that time frame?
I hope for you, otherwise YOU might sell your few coins for some basic needs.

Edwardo said...

This is strange but interesting.

http://usabailout.com/content/decadent-and-depraved-kentucky-derby-spells-d-o-o-m-market

milamber said...

Alien,

I think you are forgetting about some very key concepts. I submit FOFOA would be the 1st to point these out:

Freegold is NOT about FOFOA's blog. Nor is it about him maintaining an income writing about it.

If you need to sell your timeless wealth preserve to meet current income needs, then you are not a giant or a saver.

FOFOA is a shrimp. I suspect you are a shrimp. I know I am a shrimp.

That's why I am not at the ALL Inn.

As Aristotle wrote,

"...the victory was theirs, but their hands were too small to hold it."

http://www.usagold.com/hall/hallfame5.html

Shrimps don't matter here. But shrimps can allocate whatever portion they are comfortable allocating to physical gold & know they have a timeless wealth preserve.

I submit, whether or not the super-organism (or the savers) realize gold is a timeless wealth preserve within the shrimps mortal time frame is not an issue as it relates to the Freegold thesis.

Milamber

p.s. With that being said, I made my 1st donation to FOFOA last week, because I finally had my "AH HA!" moment. If you (generic you) value the discussion here, might I suggest you do the same!

Texan said...

Milamber,

If you haven't read it already, go back to one of FOFOA's early posts where he links Mencius Moldbug's discussion of gold being the ultimate Nash equilibrium. I think it pretty well summarizes the "defection" process of "savers" from dollars into gold. I have some quibbles with it, but they aren't worth going into here.

milamber said...

Texan,

Yeah that one & focal point gold are the ones that caused me to stop acquiring physical silver. Maybe I can sell my silver to some Greeks or Hugo for the new & improved silver drachma. :)

Milamber

Texan said...

Michael H,

Yes, I know. Note that in my example, I revalued gold 25 times, but only revalued oil 5 times. Ie, good could go from 1600 to 30,000 - oil goes from 80 to 500.

Or whatever numbers you want to use. I don't know if FOFOA thinks a reval in gold would result in oil not moving in price at all, but I at least think that oil would move some - and even a spike to 200 would be bone - cripplingly catastrophic to the world.

Alien said...

milamber,

only for the "giants" is timing uninteresting.
But btw what is your notion of "saver"? not someone putting his money in a bank account?

For my understanding every surplus not consumed today and postponed for later is done by a saver and his savings are also for unexpected circumstances for himself or his family if he has one.

We do have now unexpected circumstances and some Damocle's swords over our heads.

I am no gambler and I do not believe in diversification as i do not believe in euro and therefore I AM worried for the next years and the way the play goes on.The logical outcome can be only one but the way to it is still foggy.
The American beast ($)is still strong.

Michael said...

'There's a fool on every corner when you're trying to get home'
Roseanne Cash, 7 Year Ache
It has occurred to me that most of us are not original thinkers. We get our info and concepts from others. We live or die by those ideas we incorporate into our thinking. It is therefore one of the most important things we learn in life, knowing who to believe.
There are lots of ways to get things wrong and I'm sure in many endeavors I do not have the right guide or I have messed up what I have been told. I have a high degree of confidence that the explanations put forth by A/FOA and as dissected and reconfigured by FOFOA are among the best theoretical underpinnings of all the decisions I make.
So thanks to all who have contributed to the mush in my brain. I believe I see the right way to make very important decisions.

Nickelsaver said...

Alien,

The question is not if there would be interest in this blog should the can be kicked down the road another 5/10 years, but if FOFOA should grow weary of writing about it.

FOFOA is a very talented writer. He could start a blog about some other subject, and probably do just as well.

That being said. He has carved a niche here and will be sorely missed if/when he decides to stop. And I don't believe he stops due to a diminished audience, quite the contrary.

milamber said...

Alien said...

“only for the "giants" is timing uninteresting.”

I don’t think I would phrase it like that. If I am correct in what I have been posting, Giants don’t save their excess wealth with the same mindset that us shrimps do.

Meaning, I bet a lot of shrimps that have studied Freegold have saved in physical gold because they expect it to go to $50K/oz within their lifetime. And it very well may. It could happen tomorrow. It could happen this summer. But it could also happen next decade or some other point in time in the future.

Blondie’s post really hit home for me because Giants don’t save in physical gold because they are timing when Freegold is going to hit. I think that makes a huge difference in how you go about doing things.

“But btw what is your notion of "saver"? not someone putting his money in a bank account?”

I think a saver is simply some entity that saves/produces more than (s)he/it consumes. The real question is what should a saver save in?

“For my understanding every surplus not consumed today and postponed for later is done by a saver and his savings are also for unexpected circumstances for himself or his family if he has one.”

OK. But make sure that if you save in gold that you have enough cash/current income to meet expenses.
But even if you don’t have enough cash and you have to sell some of the precious, then so what?

FOFOA again from Inflation or Hyperinflation,

“…I know of one FOA reader who went "all in" with gold coins that year (2001) to the tune of somewhere around $400K. He had just retired from his previous life as a trader. Today his golden nest egg is worth $2 million, andhe has been living off of it for most of that time! So much for bad timing, eh?“

http://fofoa.blogspot.com/2012/05/inflation-or-hyperinflation.html

“We do have now unexpected circumstances and some Damocle's swords over our heads.”

I think the sword has always been there in one form or another; more of us are becoming more aware of it now.

“I am no gambler and I do not believe in diversification as i do not believe in euro and therefore I AM worried for the next years and the way the play goes on. The logical outcome can be only one but the way to it is still foggy.
The American beast ($)is still strong.”

I disagree. You may not want to be a gambler, but you are. We are all. Life is a gamble. Purchasing physical gold simply allows a shrimp an avenue to save a portion of his $ for the time period sometime in the future when the IMF$ blows up. Based on how the IMF$ is looking these days, I like those odds. :)

Milamber

Aaron said...

Michael-

+1000 for your 9:32 post!

--Aaron

burningfiat said...

Real FOFOA-predicted change, one could even say Metamorphosis starting to happen now in heavily indebted danish agricultural sector:

http://translate.google.com/translate?sl=auto&tl=en&js=n&prev=_t&hl=en&ie=UTF-8&layout=2&eotf=1&u=epn.dk%2Flandbrug%2Farticle4721484.ece

For me this is a clear sign of a non-performing financial system. Heavily indebted farmers can't borrow any more from a bugged down bank-sector. Pension funds can't find yield anymore, especially in debt/bonds.
Solution (as prescribed by FOFOA 3 years ago): Savers go directly to producers, bypassing the debt-system. System slowly (and then suddenly?) moves from debt to equity-based.

Super-organism at work. Debt deflation ahead?

/Burning

AdvocatusDiaboli said...

“…I know of one FOA reader who went "all in" with gold coins that year (2001) to the tune of somewhere around $400K....So much for bad timing, eh?“

Big deal, so what? That is one of the most stupid arguments. Just imagine that trader would have followed some supposingly "secret inside information of a giant" about Apple?
And statistically there has to be people like that, probably even got there "hint" over some anonymous blog, - so what's the conclution?

There will always be a lottery winners as well as lottery players that claim to know the next numbers drawn.

Alien said...

milamber,
it was my guts to switch my savings before I found this blog and I even discovered the archives when watching the fx trade at usa gold.
Surely I didn't understand much and was very astonished even considered it a conspiracy.
What's going to happen to my cash, I don't know but all I know is that I will not have any pension to make a decent living in due time.
That decision I took after Lehman (unfortunately so late) was based only on the fact that the debts of the Western world will never get paid.
That was enough for me to take that step, not freegold I didn't know about but later on 2009.

My cash is my big question mark as its value is now almost lost in the next years. The introduction of the euro cut my reserves in half, the prices went up and the income stagnated for the last ten years.

Therefore of course I wish I had a glass bowl to tell me the short term perspective.

Selling would be unconceivable for me especially b/c I got used to think like "old money" for the next generation even if it asks for my own sacrifice.
About gambling, that's another subject and then we go into the philosophy of free will and determinism, where I am a believer in the latter.
The bad shape of the IMF$ is about as old as myself and is still alive if not well, which I do not suggest will be forever. Still I have to recall FOFOAs words about scorched earth left behind when the monster will crumble.

How scorched and which direct consequences for us?

costata said...

JR, e_r and Edwardo,

I have to disagree with JR's perspective on the Georgists. Equating their view with socialism is well wide of the mark IMO. I would describe their position as advocating a user-pays system.

I am only part way through the second paper JR linked but I have to say that the first paper was a very disappointing piece of woolly-headed thinking and full of specious arguments to boot.

If we accept that some form of income/asset taxation is necessary (and that's a big IF in my opinion) then replacing deadweight taxes with a user-pays system would be beneficial.

Further I view the Georgists perspective on rent, up to a point, as being compatible with Freegold-RPG and their thinking about land/natural resources as being entirely compatible with Freegold-RPG.

I'm not attempting to open up a debate on Georgist theories here but I don't think characterizing them as socialist and dismissing Georgist insights into land as faulty premises should be the final words on the subject.

The fact that Karl Marx hated Henry George and his theories should be reason enough to study them (LOL). On a serious note, I think studying the work of thinkers who base their work on Georgist theories is well worth the time invested.

ampmfix said...

Hi Milamber,

My reason to go into gold was because I realized, making very careful calculations, that my life savings had been partially consumed by the inflation (or rather the loss of purchasing power) monster. I made these calculations from 2000 to 2009. The aha moment that ensued, made me look for some hard asset that maintained value the best and then go all in, why keep ANY fiat, once you realize it is losing value? Now, if the reset comes in my life time, fine, if not, I am pretty much convinced that the gold price will keep going up 17%-20% per year for a good 5-8 years ahead. That means at least x4 from here. That is enough for me, it means I will gain 20%-10% = 10% net per year, who can do better in the stock or bond market?
I also have some silver which I expect to swap into gold soon (it was a mistake to buy it, now I am trapped), hopefully when silver reaches 70-100€... Cheers.

Anand Srivastava said...

I live in India. I am reasonably confident we would not go into HI. So bank deposit lockers in public banks are a safe place to store the shiny things. We still will be affected very harshly by the Crisis. What would be a good bet for the crisis period?

I understand that there will be two phases to the crisis. In the first phase everything will go down, and gold will go into hiding. And in the next phase gold will get revalued and slowly everything will start to function again.

The problem is what to keep for the first phase. I think selling gold during the first phase would be selling it at a much lower rate, as no decent pricing would be available, at least not for the shrimps.

I am thinking Silver would be a better bet at this time. I think it will not completely disappear from the market at this time because it will be required by the industry. I would think it would be easier to sell at a decent price. Still not very well revalued. Also its easier to sell in smaller chunks :-).

I am thinking of keeping some chunks of Silver with me for that first part.

It might even make sense to keep some currency in bank (public banks), as Rupee will not be worthless, although it will lose a lot of value.

Does this make sense?

Biju said...

AD said :

Big deal, so what? That is one of the most stupid arguments. Just imagine that trader would have followed some supposingly "secret inside information of a giant" about Apple?
And statistically there has to be people like that, probably even got there "hint" over some anonymous blog, - so what's the conclution?


I would say your reasoning is stupid because you don't know.
There was no such inside information about Apple and hence most apple employees. I have talked to long time(since 1997) several apple employees here in bay area and they all say are not millionaires. Because they never in their wildest dreams thought their iPhone product will be this successfull. They all sold their shares when apple shares doubled and tripled to $40.

A bucket half empty of water like half knowledge makes a lot of noise. You are one.

d2thdr said...

If we accept that some form of income/asset taxation is necessary (and that's a big IF in my opinion) then replacing deadweight taxes with a user-pays system would be beneficial.


said costata.

I feel democracy has no future in the era of freegold.

Only national defence, law order and judiciary spending could be justified through any taxation. All other taxation reeks of socialism. And I hope you agree that socialism will have no place in the era if freegold.

ampmfix said...

Hi Anand,

I think more and more that the real value in silver is industrial, not monetary. If the world does extremely well and growth is huge then silver will gain a lot, if not, then gold (and maybe silver somwhat less) will gain. So, in my mind I am hedging my gold with my silver!

jojo said...
This comment has been removed by the author.
ampmfix said...

D2, income tax is an aberration, a theft and a crime. Indirect taxation fine, let pay who uses.

But income tax?? Luckily I am (and will always be) outside of the reach of the IRS.

Frederic Bastiat sums up pretty much the FREE world I wish for.

Rather dead than pay a dime to the stupid government-state. There, I said it. So, I will prefer to sell my gold in the black market, even losing a lot than making gifts to the horrible state.

d2thdr said...

I live in India. I am reasonably confident we would not go into HI.

said Anand Srivastava.

AND I am confident there will be hyperinflation even in India. Just visit Mumbai and see the amount of realty already constructed and not occupied and the new construction starting up. Property prices in suburbs 1.7 million USD for a 770 sq metre built up area and no sign of the heat being lost from this market?

I do agree that nationalised banks may be safer.

Wil Martindale said...

The "oil for gold" deal in which the LBMA was exposed was the incredible "revelation" of the 90's.

In this current millenia, the "interest rate derivative price fixing complex" is the equivalent "incredible revelation" in which the relationship between the ESF - Treasury - FED - USG is exposed.

Many have miscalculated "timing" as a result of this opaqueness. While Another did understand the origin and utility of financial derivatives, I do not believe he actually saw the view presented here:

http://news.goldseek.com/GoldSeek/1326469500.php

If anyone would actually read this (I believe that it is easy to understand, especially for anyone who has followed the somewhat complex principles of VTC or FOFOA) and comment about the subject matter therein (rather than discrediting the source) then I think the issue of timing can come more clearly into view, through more discussion of it.

True, no one who knows is speaking about "this play", but we can extrapolate from the forensic evidence that it is at hand, and we can see that the rest of the world refuses to support the brand of global corporatism / fascism (under the auspices of democratic socialism) it represents.

I apologise if this material has been specifically covered by your host, as I have not re-read each and every post, but I do not think it has been covered. That said, surely he will understand that it MAKES the argument for the bond collapse identified in his HI posts.

This revelation is spreading, and its understanding has already commenced the run on physical that will take down the paper gold market, just as A, FOA, and FOFOA have always known.

But there is still one last power play at hand.

ampmfix said...

Interesting but somewhat long:
http://www.cobdencentre.org/2012/05/in-defence-of-the-euro-an-austrian-perspective/#

DP said...

@NS,

+1 for it being at this point far more likely supply drops the rope before demand, in this case.

+another1 for hoping not.

milamber said...

AD,

I am not understanding your question/comment. There is a very high S/N ratio (prob 10:1) in it. Can you adjust your antenna and try again? And please use little words so my shrimpy brain can follow along.

Milamber

Jeff said...

Demand holds the cards.

FOA (09/03/00; 16:27:20MD - usagold.com msg#34)
Of Currency Wars

Gold will reset itself in value compared to all world fiat currencies. But, that percentage reset will be viewed in a different context than when gold money was ordained by governments. Gresham's understanding applied more to gold as a bankable currency, not an asset holding "in and of itself". This is the future of "freegold" in our time. It will be much like comparing an advancing stock to the currency it's denominated in, a rising asset,,,, not a competing money!

Now look northeast, into the valley:

What will make this "modern gold market evaporate"? Well, value in a paper contract is a funny thing,,,,,,, it can change radically when no market bid exists for it to trade in. Like paper dollars, contracts have no value without a trading market demand. Walk into any store,,,,, if everything is suddenly priced in a physical barter format, our dollars suddenly become worthless, no?

If the gold market was to shift to say, 5 day hard delivery, how could one trade their contracts for gold? Yes, you guessed it, paper would trade all right,,,,, at a huge discount. But in short order, as a spiking price lunges upward into the thousands,,,, and doesn't come back to earth,,,,,, what counter party on the other side of your contract could deliver? Further, how could the bullion banking system match liabilities and make good on a cascading default?

Stop here and see how it could happen two ways (or a combination of both):

You see, all it takes is for one or two government and/or private entities to pull the cord. Most all of you long ago came to the same conclusion; a Dollar / Euro currency dispute could set this off. Outside parties begin buying gold with dollar reserves,,,,, on the barrel head for 5 day placement. It begins with twenty or thirty 100 ton orders ,,,,,, a billion$$ or so each! Not derivative orders, mind you,,,, hard delivery orders that aggravate and outline the soft nature of modern gold banking. They keep coming,,, days on end! Then, suddenly the paper markets "are no more".

Jeff Snyder said...

Sorry to be late to the party, but my one quibble with the Blondie Sermon is that he implies that Giants are those who PRODUCE and the shrimps those who consume. I think it is probably more accurate to say that the Giants are those who have a tremendous surplus to conserve and preserve. I am sure that the Saudi royal family has a lot of gold from oil riches, but I wouldn't call them producers. They "earned" the money in the "old-fashioned way" by being heirs to a kingdom secured once upon a time by brute force, which had the stuff in abundance, that is, by having a state monopoly over the resources. As compared to a Bill Gates or Steve Jobs or Henry Ford, who are in fact PRODUCERS. This change in terminology - from producers/consumers to those who have enormous surplus/those just getting by, I think is more accurate, and avoids any Calvinistic shades of implied inherent moral worth (or the lack thereof) that arises in connection with the producer/consumer dichotomy.

milamber said...

Alien said...

"…That decision I took after Lehman (unfortunately so late) was based only on the fact that the debts of the Western world will never get paid…"

I don’t know about this. The past history of the US (since ’71) shows that the debts will get paid, but they will be paid in continuously devaluing dollars. If I understand FOFOA correctly, this is the part that the deflationists miss.

But once ROW stops mopping up those dollars, WATCH OUT!

Milamber

e_r said...

Costata,

Aristotle recognized that reality is shades of gray, in his brilliant essay:

But while their general awareness of what makes for a more perfect world should be providing them with fuel for an enjoyable life, instead, this level of idealism often blinds many of them to any shades of gray -- and there is little comfort living in a strictly black-or-white world. I write this with hope in the off-chance that it may help provide a source of comfort to this small group of idealists, offering them some subtle shades of gray that won't completely undermine their idealistic integrity.

I see Freeegold-RPG architecture as an excellent, realistic way of eliminating a currency reserve monopoly (in this case the US dollar) (USG Exorbitant privilege stems from this world reserve currency usage).

Nevertheless, when I talk about land monopoly - I am labelled as a socialist.

IMHO, in these discussions -- I see a lot of emphasis on painting the world as black or white (capitalism vs. socialism), while reality is gray.

For example, here's Blondie painting the world as black or white:

You see, my friend, in this world there are two types of people: those who PRODUCE, and those who consume. YOU consume.

Let's take a quick example to show why this is in the "black or white" category.

King of Saud is a PRODUCER, as per Blondie's argument.

I would say he is a RENT SEEKER, because he is earning wealth simply by possessing a natural resource, in this case: OIL.

In addition to Blondie's categories, there is a third category, which goes unnoticed in most of the discussions: there are those who are parasites, who simply partake in the results of PRODUCTION, without actually PRODUCING anything. Their partaking stems simply from ownership of the natural resource.

Here's what I said:

FOFOA's distinction of debtors vs. savers does not say anything about the problem of land ownership and its associated rent-seeking problems as well.

Here's the reply I got from JR: awful socialist ideology . LOL, the world is black or white again.

I stand by my statement that FOFOA's distinction does not recognize the parasitic rent-seekers. Dangerously, the parasitic rent-seekers are also grouped with the real producers.

milamber said...

Ampmfix said…

“why keep ANY fiat, once you realize it is losing value?”

I would be very careful about making that broad of a generalization. A fiat currency that is worth less each day is not the same thing as a worthless fiat currency. Does that make sense?

Go see if you can acquire goods in the physical plane with your FIAT currency. If you can, then by definition it still has value, as a TRANSACTIONAL currency (MoE). I agree one should not keep FIAT as your primary store of value (SoV), but as shrimps we need to make sure that we have enough liquidity to see us through the transition, fully understanding that said liquidity does not equal a permanent wealth reserve.

Hopefully, I am saying this correctly!


“I also have some silver which I expect to swap into gold soon (it was a mistake to buy it, now I am trapped), hopefully when silver reaches 70-100€... Cheers.”

I don’t think buying silver is necessarily a mistake. It is just that the reasons put forth by the SLA, Max Keiser, Eric King, Ted Butler, Harvey Morgan et all are wrong.

But remember:

A broken (analog) clock is right twice a day.

Doesn’t mean we should use it for the other N-2 times that we want to check the time.

I put the Silver pushers in the same category as the Broken clock.

Silver will go up in value because it is a tangible physical plane item. And as the dollar expands in quantity, everything physical plane item that is measured in dollars will command more.

But Silver as a timeless wealth preserve for "Big Players"?

I don't think so!

Milamber

milamber said...

Anand Srivastava said...

“I live in India. I am reasonably confident we would not go into HI. So bank deposit lockers in public banks are a safe place to store the shiny things. We still will be affected very harshly by the Crisis. What would be a good bet for the crisis period?”

Anand,

I would be very careful about being confident about India not going into HI.

Because we all live in an IMF$ world, *All* paper is at risk when the currency wars go Nuclear. When the $ reserve currency goes HI, the Euro is best positioned against HI due to its link to a floating value of gold.

India I would submit is in good shape *AFTER* the revaluation because of the broad gold ownership among its super-organism (and I still marvel at the vaults of the Sree Padmanabhaswamy temple
http://en.wikinews.org/wiki/Hidden_treasure_worth_billions_of_dollars_discovered_in_Indian_temple

h/t Biju)

But during the “crisis period”?

Unfortunately, I think that we will see more instances of this

http://articles.timesofindia.indiatimes.com/2012-06-07/hyderabad/32100254_1_decomposed-body-nala-girl

But those incidents will not prevent the IMF$ from imploding. They will just increase the misery.

I think the watchwords should be flexibility & resiliency. Meaning, anything you can do to build up your resiliency & increase your flexibility to respond to a changing environment will accrue to your advantage.

Remember this shift is about the “Big Players”. Us shrimps need to keep a sharp eye out so we don’t get stepped on

http://fofoa.blogspot.com/2010/04/life-in-ant-farm.html

as we walk in those footsteps!

Milamber

Jeff said...

Right you are Milamber, about devalued dollars.

FOFOA: First is that we are facing a systemic shift from the $IMFS to Freegold. Don't forget that the actual value of an individual transactional currency unit (even a euro) doesn't really matter in the context of its primary function. So even though one currency is built for the new, emergent system, I would still not want to be holding that currency through the transition.

Second is that Greece's debt cannot be paid back in real terms, and neither can the aggregate planetary debt. It doesn't really matter if it is not paid back through default (bankruptcy) or through devaluation of the currency... it will not be paid back in real terms. But devaluation of the currency is certainly the more politically acceptable route.

Third is that all this planetary debt (including Greece's) is a function of the $IMFS. The eurosystem, even though it was built to thrive under Freegold, is still supporting the $IMFS. The action to look for is the passive action of withdrawal of support.

The way the $IMFS works is that, at the very end, it either bails you out or kills you dead, depending on who your friends are. Freegold spanks you along the way with a little pain here and there until you get your finances back in order.

You see, the shift is going to be swift and it will reveal a change in perception that is almost impossible to imagine right now. Physical gold is going to rise so high, so fast that it will become known as the most prized treasure a collective state can hold. And immediately upon this recognition Greece will have to either part with or encumber its most prized "monetary" treasure while it restructures its newly devalued debt and its economy.

No longer will unlimited Ponzi finance be an option for ANYONE'S financial difficulties. But at the same time, the worst of the financial predicaments will have been significantly devalued, as they were bad bets by creditors from the start.

This is why it is so important to understand the implications of Freegold now, because the cascade of events once "the plug is pulled" will be mind-numbing. The ability to understand events as they unfold will be quite rare (and quite valuable) as we are in uncharted waters.

somanyroadsinvesting said...

I am sure someone posted this earlier so I apologize of its a repost. EJ has a recent interview on FSN. He seems to be in the high sustained inflation camp vs. HI. Like maybe 5-10 yrs of 20-50% yearly inflation.

Says almost all HI's in history are due to a country that just lost a major war and as a result is completely politically isolated and very small relative to global GDP. Which the USA is neither. Second he says if it got even close to HI the govt could just use its Gold reserves to backstop the run or at least slow it down.

I tend to like the way EJ talks because he comes across as very frank and without hyperbole.

http://www.financialsense.com/node/8504

ampmfix said...

I hear you Milamber, but I will not tolerate loosing 10-20% purchasing power each year, so whenever I have surplus I buy gold. Being convinced of it's stability (stock to flow), I'll find a way to use it when I need to, if that doomsday arrives, which I doubt.

e_r said...

SMRI,

See my counter-arguments related to EJ podcast posted here and here.

Short summary: EJ has some good points, but not stated convincingly how the monstrous US trade deficit (ever expanding through deficit spending) can be managed.

jojo said...

Food For thought from FOFOA
future value of gold
"The true Giants of this world that hold large amounts of gold have a good idea what their gold is worth. And yet, when it finally gets there they will still not liquidate their "stocks". This is because gold as a store of purchasing power has an infinite time horizon. These Giants are not interested in "catching the top" like Western traders. They are interested in storing purchasing power well into the future.

I guarantee to you that the Noble families of Europe still possess some of the same exact pieces of gold that were in their families in the 16th, 17th and 18th centuries. And this is purchasing power stored (and increased) through several currency collapses!

somanyroadsinvesting said...

Thanks e_r, will take a read.

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