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.

"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.


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M said...

@ e_r

"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."

Most of the lobbyist type rent seekers will die with socialism post freegold, as I understand it. The financier wall street type rent seekers will also die off.

DP said...

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.

The point being made is that you really won't want to use it on doomsday - in the period of the transition - because while today "gold" is far below fair value for physical GOLD, the "gold" price will plummet during the transition as all the long "gold" traders are cutting & running from the market. Until a new physical-only market is operational, you will only get "gold" price for your GOLD.

Bummer! :.-(

If one needs to sell during transition in order to survive, ones prep plan was off.

Sarah said...

Jojo - I'm not sure what the consensus here is saying on housing, but this is the scenario I do agree with -

" this being the bottom, "prices" for RE can only go up and this would be due to an ass ton more printing to occur- inflation IOW- which is the only way Joe Sixpack will again see his house priced at 500k." --- foreign demand holding up for U.S. homes too I would add to the mix for this year onward.

ampmfix said...

Hi DP, ok, so now the issue is not to time when the reset will come, but to ascertain the length of the transition: 3 months? 6 months? fine, we'll keep some food in the cellar. You see, to me the value that gold has is very clear. That is the value I want to see after reset. Less than that I will not let go, unless I have a gun to my head.
What is that value? surely less than the 55,000$ mentioned so often, to me 1 oz is worth no less than 3 months of my normal living expenses.

DP said...

Hi :)

The values bandied about, IMO, are not really nominal numbers we should wait to see on our screens, but a relative value against 'goods & services'. So when we see $55k, this to me means 'the price of the same amount of real stuff, consumer staples, that you could get for $55k today'.

If that makes sense (not everything is better with Android...).

ampmfix said...

Sure, that is what I mean by "3 months of TODAY'S living expenses", we agree buddy! Put it another way, if somebody offered me a new Lexus now, I wouldn't give him more than 1 oz for it. some months ago I was doing the same thought experiment with silver, just hold a gold eagle on your left hand and a silver eagle on your right (or way around...), so, how many silver eagles would "I" need to be offered to let my gold coin go, so it came out to no less than around 100.
Cheers and off to the pub I go.

M said...

@ Sarah

"" this being the bottom, "prices""

Its not the bottom. House prices fell in Japan for 15 years after their bubble and now they are moving sideways at best. That is also with ever lower interest rates. So that proves prices can fall even if rates stay low and prices will obviously fall when rates go up.

And as far as hyperinflatinary collapse, house prices will also fall nominally. From Gonzalo Lira-

Many economists and interested observers think that real assets—commodities, land, buildings, factories & machinery—all rise in price equally during an inflationary spell, whereas financial assets—bonds, stocks—uniformly fall.

But this is wrong: Inflation—and hyperinflation—affects two things immediately: Near-term necessities (such as food and fuel), and credit.

How does inflation and hyperinflation affect credit? By driving up interest rates—obviously. But what is the effects of rising interest rates in an inflationary/hyperinflationary environment?

Real estate price collapse.Real estate sellers—who depend on lenders to provide their buyers with credit in order to sell their properties—are forced to lower their prices, in order to attract buyers. Law of supply and demand: They cannot force up the price of their real estate to match the pace of inflation, because if they do, they will simply not have any buyers.

Thus, in an inflationary environment, real estate prices either remain static or indeed fall on a nominal basis, even as inflation is debasing the currency, because real estate sellers will not find buyers willing to take on usurious debt in order to buy the property. This is how real estate prices fall, even as prices for near-term necessities—food, fuel—rise. This is how you have a real estate collapse, even as you have inflation.

What about real estate in a hyperinflationary environment?

The same—only magnified: In a hyperinflationary environment, interest rates are so high that essentially, there is no lending. There’s no point to it: Most lenders will decide not to lend out their excess cash, and instead park that cash in assets which will resist inflation—they will certainly not lend out their cash to a borrower, and watch it become worthless on their books.

Argentina, in 2001: The Argentine peso went into a hyperinflationary breakdown, the causes of which are irrelevant to the present discussion. But because of this, no bank would lend money to purchase any real estate.

Thus, real estate prices plunged in Argentina.

I have a family friend here in Chile, an attorney named Hernán P., who made one of the shrewdest investments ever: At the height of the Argentine crisis in 2001, he bought an apartment in one of the most fashionable neighborhoods in Buenos Aires: A lovely and luxurious full-floor apartment, across the street from the Four Seasons.

It’s price before the crisis? $650,000. The price Hernán P. paid at the height of the crisis? Less than $90,000. Here’s the kicker: He was the only buyer. Of course, he had to pay in cash.He was required by the seller to close the transaction with actual physical dollars

Blondie said...

I fully acknowledge that things are never exactly black and white, but rather an infinite array of shades of grey. It just depends on perspective. Up close there is detail, while the broader perspective demands a narrower palette. I prefer to establish the bigger picture first and then “zoom in” to examine detail in context. Once you can see the pattern which reiterates to form the picture (system), further detail can often be seen intuitively.

Anyone who thinks that by reading the words of another they can fully share their perspective is fooling themselves. You will share that perspective only to the extent that your existing baggage will allow, and no more.

Thing is, infinite shades of grey require infinite words to describe. I paint my perspective here with broad strokes in the expectation that readers are capable of seeing further detail by applying that fine and admirable art of thinking for themselves. I don’t pretend my perspective is perfect, and reserve the right to alter it as and when I see fit. It was not I who deemed it a “sermon”. Judgement of value is the prerogative of demand, not supply.

M said...

@ Sarah Freegold related comments from that post...

As a person that lived through the post-Soviet hyperinflation I can see a problem in Gonzalo's reasoning. In Argentinan that he uses, the buyer was paying in US dollars and not in Argentinian pesos and that is crucial. I don't know how it was in Argentina, but what happened in Russia is that people switched to a double-currency system during hyperinflationary 90's. The double-currency system worked the following way: everyday small purchases were made with rubles, but any big items including real estate and cars were quoted and purchased either in US dollars or in equivalent amount of rubles at an exchange rate existing at the moment of purchase. This co-existence of two currencies solved many problems. There was "hard" money that people saved their wealth in, and "soft" money to buy food, pay taxes etc. The real estate was indeed incredibly cheap in early 90's but only in "hard" currency. A decent apartment in Moscow could be bought for $5-10k USD. Now the same apartment costs anywhere from $200k to $1 million depending on location.

Gozalo Lira responds

The anonymous comment at 12:33am February 13 (our Russian friend): Absolutely true, in most countries that suffer high-inflation or hyperinflation, there develops a two currency regime: The "soft" currency, usually the local one, and the "hard" currency, often dollars.

In many cases but not all cases, properties fall in the soft currency; but sometimes they rise in the soft currency. This is unpredictable, depending as it does on the extent of the fall in value of the local currency.

somanyroadsinvesting said...

On a side not. You have to pay in physical cash in dollars for almost every real estate transaction in Argentina, crisis or not(at least for individual apts).

e_r, I read your comments. I agree EJ didn't address how the US would 'manage' its massive deficits. However, I dont think that takes away from his historical references. I think there is a sort of MAD(mutually assured destruction) dynamic here. The US is such a massive economy, the IMF or rest of the world cannot just treat it like Argentina etc.

tintin said...

GLD replenished 97049 ounce, according to Harvey Organ: Total Gold in Trust

June 13.2012:

Tonnes:1,277.39 Ounces:41,069,471.89

June 12.2012:

Tonnes:1,274.37 Ounces:40,972,422.

costata said...


My emphasis in the passage below from the Lira quote in your comment:

In many cases but not all cases, properties fall in the soft currency; but sometimes they rise in the soft currency. This is unpredictable, depending as it does on the extent of the fall in value of the local currency.

I think this is a very dubious claim. Did Lira offer any examples where properties fell in the soft currency as a result of HI?

Anand Srivastava said...

@ampmfix: What has real estate prices in Mumbai got to do with Hyperinflation.

Yes there is a chance of HI, because our politicians are as corrupt as they come. I will be having enough Rice and Pulses for a year, just waiting for the rainy season to pass. The monsoon is highly problematic for any stored stuff.

Then I will be trying to use the silver to replenish those stocks during the HI, if it tends to be longer.

Max De Niro said...

Hello all,

It looks like Martin Armstrong's latest piece on gold is in response to a freegolder's comments:

Lots of chat about the impossibility of HI and the system being non-linear and it not being as simple as "printing out".

costata said...


Check out the chart in this article by Byron King over at the Daily Reckoning.

As you can see from the chart, many producers lift oil at an overall cost of $10-20 per barrel. Even the major international players (the red bar on the far right) are in the $40 per barrel average for production.

Read more: What's the Deal With Oil Prices?

Anand Srivastava said...

One problem with Armstrong's article.
Gold is not a commodity. Its trade does not depend on production and consumption. It is just a hedge against currency devaluation. So futures trading on it does not make sense.

There is a lot of things in the article which are not relevant to FOFOA. They are relevant to Gold Bugs. We already know that fixing the price of gold does not work.

His basic thesis seems to be that capital flight is integral to HyperInflation. I am not sure if that is true. In the coming crisis there will be a massive destruction of Capital. Wouldn't it fulfill the requirement of Capital flight?

Motley Fool said...


That view misses the why of capital flight. The why being to preserve value. If moving from one paper currency to another will not accomplish that goal, then capital flight makes no sense. In this context only capital flight out of paper money makes sense.

"All paper will burn."


costata said...

Max De Niro et al,

Re: Armstrong's post

I think this may be the most important passage in the whole paper (my emphasis):

HYPERINFLATION is not the CAUSE – it is the EFFECT! Confidence internationally flees causing a “flight-to-quality” and that causes the HYPERINFLATION! Why? As capital flees a country, it leaves behind debt that cannot be serviced. This lack of acceptable reserves of a nation precludes it from trading globally.

I would be asking this question of Martin: Why can't that debt be serviced?

Motley Fool said...

I had not yet read his post, but I can now quote to show his misunderstanding. :P

"HYPERINFLATION is possible only in a peripheral fringe economy because the rest of the world around it is STABLE. That allows capital to flee outside the economy helping to create the HYPERINFLATION lacking reserves."

"When you are talking about the CORE economy instead of the fringe such as Germany in the 1920s or Zimbabwe, it is no longer possible for capital to flee to other nations because there is nothing stable to run to. If the USA were to move into that sort of scenario, the entire world would collapse. What are you going to buy? Euro bonds? Yen bonds? They are better? Big institutional money still needs the dollar. The flight-to-quality is still taking place. "

Yup. All paper will burn.


Max De Niro said...

PS, I should have added in something to say why I put that up there, but it was early morning and pre-coffee, so I just assumed everyone could understand my un-typed thoughts.

The text at the beginning looks very much like the words of a freegolder - I don't see anyone else talking like that. I find it interesting that Armstrong would quote the text and then write a very long attack piece dedicated to it.

I haven't seen him do anything similar before.

I wonder what that says.

By the way, who wrote the email? Does anyone want to take credit?

AdvocatusDiaboli said...

IMHO Martin Armstrong's latest piece on gold has lots of valid points, if you look at it without any religious bias.

Anyway, what I wonder most of the time: What has to occure that a "real deep freegold believer" will loose his religion about "Giants", "Eurogold" and $IMF-Hyperinflation?
What kind of incident has to happen? How many decades have to pass, before changing and admitting that things are different from what has already preached 13yrs. ago?
Greets, AD

matrixsentry said...

I think it is pretty easy to see where MA is coming from. He is a deflationist at heart and his experience with government only reinforces his disposition. It seems to me that a sustained deflation would only be allowed by a government that believes that it can enforce social order. MA clearly believes that the government has the capacity and intends to go full blown totalitarian in order to maintain order during the chaos that would result from a global deflationary collapse.

His view on capital flow leading up to a hyperinflation is seen through a lens of his own choosing, where capital will flow from one failing currency to one that is still viable. This has generally been the case throughout history and it's an easy lens to choose for viewing the current situation. However, has there ever been a time where a currency has served as the "core" for an entire global monetary system?

I agree, he does a lot of trashing of the HMS crowd. This is easy, kind of like picking on the nerd on the playground at school. He then goes on to say that gold will move when its time is at hand and not before. Really, you think? I wonder what he thinks will cause gold to move when it's time? He says this:

"Consequently, for the individual who think the Goldbugs are crazy and make no sense preaching always the end of the world and how gold will become the new money, do not let that pure hype deter you from looking at gold for what it truly is – a hedge against government – NOT INFLATION! Gold is not even the hedge against fiscal mismanagement of the Fed and its monetization. Its role right now is the hedge against the meltdown of the current monetary system. HYPERINFLATION assumes that the entire world society will even tolerate that outcome. Keep in mind that it was the HYPERINFLATION in Germany that opened the door for Hitler."

He really says it there, gold is a hedge against government and a failing monetary system. Really he could simplify it and just say that gold is a hedge against government because it is just government "being government" that results in a failing money system and resulting hyperinflation. People will not only tolerate a hyper-inflationary outcome, they will demand it. Government will deliver what it is designed to deliver and in doing so will act to preserve itself.

I am not sure a heat seeking missile in the style of Big Gap in Understanding Weakens Deflationist Argument can bring MA into our camp, but I sure wouldn't mind seeing FOFOA give it a try. At the least there will likely be a few more "clicks" that result from such a post.

Anand Srivastava said...

AD examples? Any other concept that doesn't gel with Freegold and have not been mentioned above?

Jeff said...

It's easy to see what AD likes about Armstrong; they share a strong conspiracy streak.

DP said...


Yes. (H/T Peter for style tips ;) )

Also in common a shared belief in the omnipotence of the men behind the curtain.

Is he arguing with Freegolders or Goldbugs in this article? Because it's self-evident, to anyone understanding much of what FO/FO/A have written, that they are not the same target. So why would anyone go after two different dragons with a single thin wooden skewer?

Additionally, when he uses the word "HYPERINFLATION" (H/T Stylez-by-Art ;) ) I am confused whether he means a collapse in foreign exchange value due to a lack of confidence in the currency and it's issuers (implied by the context it is used at one place in the article), or does he instead mean hyperissuance of the currency (as implied by the context of several other instances in the body). Because around here, as we all know, these two things are considered discrete events. The former being what we would mean if we used the word at this blog, with the latter being an effect precipitated by the manifestation of the former.

A final observation for now. Is he suggesting that Freegolders believe the men behind the curtain will be the ones pulling our Freegold rip-cord - forcing our favourite gold monetary system on an unwilling world? Or does he agree with us that it is the world who will finally force our favourite gold monetary system on some reticent curtain-twitchers - some of whom are much better prepared today to deal with the consequences.

AdvocatusDiaboli said...

"that it is the world who will finally force our favourite gold monetary system on some reticent curtain-twitchers - some of whom are much better prepared today to deal with the consequences."

the used words "OUR" and "MUCH BETTER", actually tells it all, about bias and religion.
Greets, AD

enough said...

today's comic relief..........

(Bloomberg) -- Gold May Drop 20% to $1,300 an Ounce This Year, Shaoul Says

Gold prices may plunge 20 percent to $1,300 an ounce this year because bullion is not a “viable alternative” to currencies, said Michael Shaoul, the New York- based chairman of Marketfield Asset Management.

“The one thing that the world’s governments are not going to do is allow people to get away with making a fortune in gold” if the paper-currency system collapses, Shaoul said today at a Bloomberg Link conference in Boston. “It’s going to be extremely easy for them to sequester gold and make it illegal to hold in institutional portfolios.”

costata said...

Pedantic idiot writes:

the used words "OUR" and "MUCH BETTER", actually tells it all, about bias and religion.

The used word "religion" actually tells it all, about bias and ideology.

costata said...

FWIW, I think the fundamental flaw in Armstrong's analysis is that he has not updated his definition of capital since the rise of the Roman Empire.

Jeff said...

Returning to the indian demand story, here is a tweet from the FT:

FT Commodities ‏@ftcommodities
#Gold in rupees hit 30,000 per 10g for the first time ever today, according to reuters data. Does not bode well for #India's demand. #metals

Some suggest that reducing Indian gold imports is somehow anti-freegold. Maybe not.

FOFOA: When you see golden trends mapped out in weight instead of fiat currency the message can be deceiving. I'm not talking about Turkey, but in your India quote demand fell by 33%. Well, the price rise during that time period was not far off. Remember demand in India was at its highest, weight-wise, when gold dipped into the 700's during the 2008 wedding season. So the fiat demand may have remained relatively constant or even increased.

When you think about freegold, very high value gold means the movement of very small weights. This is because the number of players is very high, not low.

I'm not arguing against your thesis, just saying that statistics quoted in weight can be confusing to the underlying trend. Anyone that says gold is too expensive now for the small investor is ignorant of the fact that gold's price or value is completely arbitrary in the investor realm. In the jewelry realm, the commodity realm, gold CAN get too expensive. But that is why I have said that in freegold gold's commodity uses will mostly disappear. So a trend in that direction may actually be freegold-positive news.

"Jewelery shops (which also act as coin shops) are in distress. Trade is coming to a halt. Many of them are closing. Fall of the gold price, is the only hope of the remaining shop owners. Gold coins are now beyond the economic reach of the retail investors."

If the jewelry shops in Turkey, that also sell gold coins, are in distress, how can you say it is the coins that are distressing them, and not the jewelry? I would say it is the jewelry because that is where the profit margin really is. Gold jewelry is marked up 300% while coins are marked up only 5%.

"As the gold price goes higher, the number of players will diminish."

I would suggest that as the gold price goes higher, the weight of each recorded movement of gold will diminish, but the number of players will be increasing. Of course that is not how it will be reported.

DP said...


FWIW I think his definition of 'capital' doesn't include gold - so he can't see it flowing there.

Maybe it's because the curtain twitchers ordered all the currency stuff be laid out on deck for show, while the gold's down in the keel for stability.

jojo said...


Nice link....(r u freegoldtube??)

Freegoldtube writes the following on another video regarding Freegold. It's yet another description that should be helpful and I hadn't seen it till now.

Published on Mar 27, 2012 by freegoldtube
"Everyone knows where we have been. Let's see where we are going!" -Another


Physical gold is a wealth reserve asset, thus it represents payment in full, whereas fiat currency is a debt based medium that represents a claim in the monetary system.

Claims in the system are claims on assets.

In this light, the preservation of wealth simply means - he who holds gold has already been paid.

Freegold is a gold-based currency valuation system where the currency is not
tied to a fixed amount of gold.

In Freegold; gold will value all currencies individually and the exchange value of each currency will still be relative to every other currency.

For Example

1 Gold gram = Euro 1
1 Gold gram = Yuan 1.5

Therefore, Euro 1 = Yuan 1.5

It's a triangulation.

As the exchange rate between physical gold and currency is established, the relative value of everthing else is known.

If there is too much money printing by a currency issuer, the exchange value of that currency will decrease.

Likewise, as governments quantitatively tighten, that exchange value in gold will increase.

To put it simply, the rate of exchange between all fiat currencies and physical gold is set free to float.

But lets look at where we are right now.

1971 The Nixon Shock

By removing the dollar from the "Gold Standard"

It essentially combined the previously separated functions of money.

Medium of Exchange $ Unit of Account $ Store of Value

Enabling the USG to spend to infinity, as the Fed prints more money, decreasing the
value of every other Dollar.

So then what about the gold standard?

The Gold Standard would work perfectly, except for time. As an economy grows or
expands over time, fiat currency will naturally loose value, as the currency base

But if we break the bonds of that triangle, the Store of Value, Gold, is then free to
re-value currency as it changes.

The three monetary functions are now each being performed by the best "tool" for the respective "job".

This is Freegold !!

And it's coming....

People & Blogs
Standard YouTube License

jojo said...

LOVE the video made to Uprising!

costata said...


We (or at least some of us) have made the leap in accepting a separation of the MoE and SoV roles in currency and reserve assets (AKA savings).

Let's take this a step further and revisit the attributes that confer moneyness on money. I'm talking about divisibility and all the other properties. In this vein what confers capital-ness on capital? What differentiates currency as an IOU in circulation from currency as equity in a stock exchange listed commercial enterprise?

somanyroadsinvesting said...

The one thing that turns me off about probably 90% of all 'experts' is they have to come across as super confident or else they wont be able to sell you something. I think its human nature, no one wants to hear; this is possible or maybe this etc. They want to hear this is what will happen etc with confidence. When MA starts going off on his quantitative models I just kind of turn off. I mean its just absurd on the face of it. Raise money start a fund and use your model to get rich. It almost is tantamount to quackery.

Even though Another and FOA were not selling something they came across as way to overconfident for me. And in the process gave some bad advice. But I think it has more to do with what Dale Carnegie said a long time ago. The most powerful human desire is the desire to feel important. I think almost everyone is guilty of it.

DP said...


Not guilty.

Which is good, because I don't have to own the typos! ;^>

KindofBlue said...


Not to pick a fight as I generally appreciate your input, but I really don't get this comment:

"It's easy to see what AD likes about Armstrong; they share a strong conspiracy streak."

I have not paid much attention to AD's ramblings, but Armstrong doesn't seem to me to be trucking in mystery in the missive cited. What I do get from Armstrong is consistent self-promotion (tolerable, since he does offer some useful insights).

Either way, on the subject of 'conspiracy', I've found this quote to be a useful reminder:

"I truly hate the way 'conspiracy theory' is used to discredit anyone who suggests a bunch of people with common interests might actually put their heads together to engineer outcomes that work to their own benefit. Your sneakers are a conspiracy. Ice cream is a conspiracy. Cat food is a conspiracy, for God's sake. We know men sit in boardrooms to decide which store shelf to put anchovies on next week so they can sell 5% more, yet we are supposed to believe that when multi-trillion dollar cash flows and geopolitical balances of power are at stake, nobody can be bothered to plan how things will work out? That's a theory that's way more daffy than any conspiracy theory I've ever heard. The simplest question you need to ask to figure out who did what is -- cui bono? Who benefits? Cui bono is Latin and that was the Romans. They knew the score 2000 years ago. It's a shame that we've deliberately chosen to forget what they knew."

DP said...


What differentiates currency as an IOU in circulation from currency as equity in a stock exchange listed commercial enterprise?

One represents a half-completed barter transaction and the other represents payment in full.

One is the manifestation of some Units of Account (UoA), which we are able to use as a Medium of Exchange (MoE) in order to purchase our chosen Store of Value (SoV). A claim on a thing of your choice and at a time of your choosing.

You can buy any SoV (asset) you want with your MoE, as long as you have a sufficient number of units to satisfy the vendor.

But until you do complete the second half of your barter transaction, the value of your claim units is fluctuating against the real world of value stores (wealth). It might be good for you, or bad. Who knows?


DP said...

This is how all those "gold standards" failed.

They attempted to fix the value of an asset (an ounce of gold in anyone's possession) to a set number of "units of account" within the curtain-twitchers' system. While the rest of the universe of assets was allowed to float freely?

How could it "always be the right price"?

And if people generally believe that, say, "silver should be a value ratio of about 16:1 by weight with gold", or "oil should be about 20bbl:1oz" ... how can that possibly work out?

Central planning overstretch, much?

We'll never go back to any fixed gold standard.

Anyone confusing Freegolders with Goldbugs, should learn to walk before they attempt any hit & runs.

Victory said...

Asia and domestic leveraged speculators are funding US federal deficit

snippet..."That means that other than foreigners, the leveraged trader has been funding the US budget deficit. As much as politicians wish to believe in stable mom-and-pop treasury purchases called "households", the reality is quite different. The reality is that the US government is relying on slowing Asia and domestic leveraged speculators for its rapidly growing funding needs. And such a scheme is clearly not sustainable in the long term."

M said...

@ Costata

He did in another article. Apparently in Chile, prices fell in the soft currency.

The main gyst of his point I think is that house prices will not rise nearly as fast as necessities priced in the soft currency so in the physical plane, house prices are falling in the soft currency.

DP said...

I don't know about anyone else, but I'd ♥ to see a succinct, meaningful definition of the word 'capital' added to the glossary of terms.

jojo said...

free energy looking for a home?

Clyde Frog said...

Have wealth, can mobilize?

cleeray said...

Is this a blog of a cult leader of some sorts? The rhetorics seem quite conclusive:

1. author (prophet/preacher) denigrates readers (cult followers) while
2. at the same time appealing to some unspecified higher forces ("Another", "giants", "father God and his group of saints") so as to (a) foster obedience and (b) shift attention from his strictly manipulative asshole tactics ("I'm just a humble messenger, after all, who was just like you until I saw the light")
3. a group of true followers testifies to prophet's words, thus raising authotrity further

FFS, there is even a picture of Jesus-alike above the fold.

Ok, first and last post here. Have a nice time with your church - bye.

burningfiat said...


Yes, this a cult. You nailed it, congratulation.


M said...

@ Cleeray

Yeah. This cult leader has a big following in India too. He has been around brainwashing people for 5000 years.

byiamBYoung said...

I haven't made it through all the comment threads in the archives, but from my short time following along here at FOFOA's blog, it seems like the drive-by attacks are getting more numerous.

What's up with that?

gideon said...

has anyone here read martin armstrong's recent rebuttals of freegold? It woul dbe nice to see a discussion b/w fofoa and MA.

Michael said...

please be patient
our iconography is still in development as is our catechism.
for what it is worth our prophets can beat your prophets in a fair metaphysical fight...pretty sure about that...

60253 said...

Many are still 'hot' against the writings of those that follow the Trail!

We watch together, yes? Those that desire gold still know to avoid disturbing the market. Yes, time changes many things, but much stays the same.

The time is near my friends.

Motley Fool said...


From my reading of MA, he borrows credibility from FOFOA on the topic of hyperinflation and then then continues blithely forward with his view that hyperinflation is inflation on steroids.

I couldn't finish reading that whole piece of drivel.


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

What's up with that?

I think some of the same tools come here to post shit using different usernames.

somanyroadsinvesting said...

Little report from Comstock about deflation is more likely. Nothing really new, more of the govt will be overwhelmed. I personally dont see how you cannot believe as soon as prices begin to fall they wont come up w some new program. Anyhow here it is:

"The problem is that the Fed can take their horse to water, but they can't make him drink. Since 2008 they have already tripled the monetary base, the item they control most directly, without a commensurate increase in money supply. The money supply divided by the base is called is called the money multiplier. Since 2008 the money (M2) multiplier has dropped from slightly under 9 to 3.7. (Please see chart.) The pattern is similar whether one uses M1 or MZM. Simply put, the huge increase in the base has induced a relatively small increase in the money supply. In turn, the increased money supply has not resulted in commensurate increase in GDP. The GDP divided by the money supply is called the velocity of money. Velocity has also dropped sharply in the last few years. (Please see chart.) Therefore, when taken together, all of the government efforts to stimulate the economy since late 2008 have resulted only in a tepid recovery that is showing signs of petering out."

gideon said...

MA makes a simple point that hyperinflation is a result of loss of confidence, and this cannot occur in the core economy, only in peripheral economies. I do not think he feels HI is inflation on steroids at all. I find that he has flight of thought, and does not express imself well at all, but he does make intelligent points.

costata said...


Thanks for taking a crack at the question I posed at June 15, 2012 7:53 AM above. A definition of capital that we could agree on might make some of these arguments less convoluted.


Thanks for the feedback on Lira. It's interesting to note how often land/RE bubbles precede economic crashes. Was land/RE over-priced before the HI event in Chile that Lira discussed?

Ender said...


…As it was many years ago.

Yes, we watch, but more importantly, we participate. Bankers will not willingly give up their right to print currency or their ability to bend the rules at any moment. Physical gold in hand – outside the influence of the banker – is where the value stands.

My friends, stand strong - tomorrow will be nearly identical to today.


Edwardo said...

costata said...

A couple of interesting snippets from the parish newsletter over at SJMineset.

A snippet from a WSJ article (my emphasis):

Now, changes to the rules will allow a wider variety of assets—such as gold and equities—to count toward banks’ liquidity buffers, among other changes envisioned to soften the rules, according to people involved in the talks.

DP, putting equities on the same footing as gold in terms of bank capital adequacy would have some interesting implications.

And THIS from Bloomberg (my emphasis):

Hong Kong Exchanges Bid for LME Beats out ICE
By Stanley James and Agnieszka Troszkiewicz – Jun 15, 2012 8:35 AM GMT-0300

Hong Kong Exchanges & Clearing Ltd., host to the world’s fifth-largest equity market, agreed to pay 1.39 billion pounds ($2.15 billion) for the London Metal Exchange, which handles more than 80 percent of global trade in industrial-metal futures...

....Hong Kong Exchanges pledged to maintain the LME’s contracts and ring, host to London’s last open-outcry trading. The bourse will continue to be based in London and regulated by the FSA. The Asian exchange also said it would keep the LME’s existing warehousing network, help the bourse develop its own clearing house and freeze trading fees until at least the start of 2015.

The transaction will help the distribution of LME data across Asia and increase the number of customers in mainland China, the London bourse said. Hong Kong Exchanges will also support the expansion of the LME’s warehousing network, which currently consists of more than 600 storage points.

Woo Hoo! Game changer. Big Trader must be smiling in his grave.

e_r said...

Costata, DP,

A definition of capital that we could agree on

I'll take a shot at defining capital.

Before defining capital, let's try to remove ambiguities surrounding the prevalent understanding of the term.

Nothing properly included as either land or labor can be called capital.

Note that the term land includes everything that is freely supplied by nature (natural resources, fertile land, fresh water etc.) Labor includes all human exertion.

Wealth is a tangible product produced as a result of productive labor, that satisfies human desires.

Gold is wealth, only when man digs it out of the groud and subjectively ascribes value to it.

Capital is that part of wealth which is devoted to a certain purpose, which is production of more wealth.

All capital is wealth, but all wealth is not capital. Capital is wealth in the course of exchange or transformation.

Let's take a few modern examples and see where they fit in.

Stocks, bonds, mortgage promissory notes are all means of exchanging wealth, but they are not wealth itself. Savings in fiat currency is again a means of exchanging wealth, but is not wealth itself. Savings in a tangible product is wealth, savings in gold is wealth.

Gold can transform into capital only when it is used by man to produce more wealth.

Is this a definition we can agree on?

Michael H said...


Might be worth reminding readers that the LME only trades base metals, not precious metals.

So it could be a game changer if you are referring to the tons of copper etc. inventory / collateral in China, but not if you are referring to the gold market.

costata said...

Michael H,

Good points. For the record I was not referring to this as a "game changer" for gold in a direct way. It could, however, IMHO be an important step in the eastward shift of economic influence given that China is the largest consumer of copper etcetera.

If their intention is to take these commodity metal markets back to their original function this may be an inflection point in the battle between the speculators and the producers.

Perhaps that should read monetary plane speculators and physical plane producers in order to draw the battle lines more clearly for those struggling with the distinction between the two "camps".

costata said...


I'm not confident you will find general agreement with that definition of capital at June 15, 2012 6:16 PM above but it certainly opens up some interesting avenues for discussion.


Wily Coyote said...

Thanks to those of you who responded to my questions. I was expecting to be flamed for not adhering to the party line, and am grateful for all the helpful, patient replies.

As for my questions:

1. Will equities protect against HI?
The consensus seems to be yes, but not enough.

2. Why only gold. Why not other currencies?
The consensus here seems to be they’ll be inflated or destroyed right along with the dollar. I agree. Even if they didn’t blow up, they’d never sit still and let their export markets dry up.

3. Counter party risk vs. theft
Agreed. Safe storage -- easy. Save counterparties -- no way to be sure.

4. Spread, liquidity issues.
Agreed that securities become illiquid in a crisis.

5 And 6 -- Is 5% allocation really protective?
Perhaps so. Who knows?

My questions really relate to how best to protect my savings. I know the financial system is a ponzi, but it’s had incredible staying power. I didn’t lose my retirement nest egg in the Nasdaq or housing bubbles. I don’t want to be the chump who loses it if gold goes back to $300.

I’m leaning to the 25% allocation of the “permanent portfolio” for each of gold, stocks, cash and bonds. However, bonds need to be ignored until rates are more normalized. In other words, timing is important.

I’m pretty comfortable in my own belief (guess) that “the crash” won’t happen any time soon. I mainly base that on the historical perspective found on this blog (thanks again). The main parties to the system are working hard to maintain it. The Asians and the oil producers know they are getting worthless paper for their hard work and resources. They’re jealous of the US’ “exorbitant privilege”. But China needs the US consumer until they can find a way to employ a billion people. The oil producers need US military might.

In other words, both communists and kings need the system in place to maintain their kingdoms… their own exorbitant privilege. So they move to gold, but are willing to compromise when it jeopardizes the system. Until some day they’re big enough to take over.

Wily Coyote said...

@ Blondie --

"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?"

I get that you're all SAYING THAT and I'm sorry I didn't express myself very well. But why? What proves that? How can it be the ultimate store of value if it's value wildly fluctuates?

Answer that and you'll never have trouble convincing your friends and family from going 100% gold for their savings. I suspect none of them want to be the chump who gets ruined if gold goes back to $300.

Victory said...

Primary Dealer Treasury Holdings Soar To Record this what front-running a fresh round of easing looks like?

Edwardo said...

Wily writes,

"How can it be the ultimate store of value if it's value wildly fluctuates?"

It's value doesn't wildly fluctuate, even if paper gold's "price" denominated in currency appears to. Over time, and by time I do not mean days, weeks, months, or even a few years, but greater expanses of time, such as generations, centuries, millenia, physical gold's purchasing power is unmatched, except, perhaps, by certain objet d'art. It's rather hard though to protect delicate art treasures.

Gold mined in antiquity still has value, and that same gold has maintained purchasing power even as currencies that attempted to price it have come and gone. I've tried making these points to a collection of numpties over at Naked Capitalism, but they seem impervious to the naked truth.

And in the meantime I wouldn't be too confident that “the crash” won’t happen any time soon."
The crash in in process, we just haven't had the culmination to this slow moving crash.

costata said...

Wily Coyote,

How can it (gold) be the ultimate store of value if it's value wildly fluctuates?

The short answer is that it can't in any practical sense for shrimp savers. Our time horizon is generally too short to cope with wild swings in price. And for most of us our nerves simply won't take it.

So there is a time dimension here that I'll come back to below. BUT first take a look at your question again with one minor change:

How can it be the ultimate store of value if it's value fluctuates?

Again the short answer - in order to be a store of value it has to fluctuate. Value is subjective. Stability is relative. Fixed gold exchange standards fail because they are inflexible. They break because they can't easily "fluctuate" as economic conditions demand.

If you look at time on a multi-generational scale then fluctuations in price in an SoV that can't be tolerated by someone living paycheck to paycheck are inconsequential. These "giants" we speak of here could perhaps be more usefully described as "wealth with staying power". The kind of wealth who are almost never forced sellers (of any asset reserve they hold their wealth in).

Another issue with your comment is the question of numeraire, or the benchmark, if you prefer. You express a concern with the currency price of gold going to $300. The underlying implication is that this is a fixed exchange rate. Three hundred of constant "value" US dollars for one ounce of gold presumably. So is this a dollar with 10 zeroes lopped off after a HI devaluation? Or a 1913 dollar with 100 cents of purchasing power versus your 3 cent dollar of 2012? Are you getting the flavour of this issue of relativity?

FWIW I suggest you explore a few other benchmarks to expand your concept of price relativity. How about a gold oil:ratio floating (fluctuating) around 15:1 for 60 years as a reference point? Then compare the dollar to gold with oil as your reference point for purchasing power. What is fluctuating here, the price of oil in dollars or the price of dollars in oil?

After the transition to this new system there will always be a market maker standing ready to buy or sell gold at tight spreads - your local currency issuer. So gold will be relatively stable provided your local currency is well managed.

However gold will price your local currency not the other way around. This is the crucial difference between the existing system and the new one. The US dollar will not be the sole reserve currency and numeraire pricing all other currencies and goods in trade. That role will be filled by gold.

Blondie said...

Wily Coyote said: ”How can it be the ultimate store of value if it's value wildly fluctuates?

Answer that and you'll never have trouble convincing your friends and family from going 100% gold for their savings.“

I did, and I didn’t, respectively.

You seem to have missed the point Wily, because when I say ”Gold functions as the ultimate store of value“ it is a given that most people (obviously your good self included) do not currently understand this. We are discussing a future in which it is inevitable that all people do, and in this light you can choose to grasp it now or grasp it later.

We have been acknowledging, as costata has pointed out so well above and I have stated a couple of times already in this thread:

Without wealth of the magnitude that makes one aware of gold’s function as the only remaining means of avoiding diminishing marginal utility of value, gold’s actual value remains obscured.

This point really does appear to have eluded you.

With all due respect, do you understand what diminishing marginal utility is?

If you do then may I suggest you (re)examine gold in this light, because if you do so you may discover that in terms of diminishing marginal utility gold is unique. It is the only good to which diminishing marginal utility does not apply. Think about the relative utility you may find in gold if you were incredibly wealthy.

I’m not attempting to convince anyone of anything, merely relay a perspective. You are free to reject it of course, but it would be well-mannered of you to at least demonstrate that you have understood it first.


costata said...

Gimme That Old Time Religion

I note this comment from ‘byiamBYoung’ where he observes “it seems like the drive-by attacks are getting more numerous”. My perception is that they fluctuate in frequency and intensity (but the quality is consistently low). It seems some readers and quasi-contributors can’t seem to shake off the desire to shoehorn the secular matters we discuss here into a religious paradigm.

Practicality and pragmatism doesn’t seem to cut it for some folks. So here’s something I came across a couple of two years that should provide some heat for their fevered imaginations. A “conspiracy” they can really get their fangs into. (Other readers may simply find enjoyment in the words and insights of a truly astonishing intellectual.)

As a challenge, don’t jump to the links at the end of this comment before you try to identify the speaker whom I view as an important sponsor of the European project. Note too the references to currency stability below. (My emphasis in bold.)

19............. endeavour to preserve free market mechanisms, ensuring, by means of a stable currency and the harmony of social relations, the conditions for steady and healthy economic growth in which people through their own work can build a better future for themselves and their families.

48. These general observations also apply to the role of the State in the economic sector. Economic activity, especially the activity of a market economy, cannot be conducted in an institutional, juridical or political vacuum. On the contrary, it presupposes sure guarantees of individual freedom and private property, as well as a stable currency and efficient public services..... The absence of stability, together with the corruption of public officials and the spread of improper sources of growing rich and of easy profits deriving from illegal or purely speculative activities, constitutes one of the chief obstacles to development and to the economic order.

In recent years the range of such intervention has vastly expanded, to the point of creating a new type of State, the so-called "Welfare State"...... However, excesses and abuses, especially in recent years, have provoked very harsh criticisms of the Welfare State, dubbed the "Social Assistance State". Malfunctions and defects in the Social Assistance State are the result of an inadequate understanding of the tasks proper to the State.

By intervening directly and depriving society of its responsibility, the Social Assistance State leads to a loss of human energies and an inordinate increase of public agencies, which are dominated more by bureaucratic ways of thinking than by concern for serving their clients, and which are accompanied by an enormous increase in spending. In fact, it would appear that needs are best understood and satisfied by people who are closest to them and who act as neighbours to those in need.

Here are some links for further reading. Firstly to the introduction to the “paper” here and links to the extracts above (19 here) and (48 here).

Good luck to those of you with a religious bent. Perhaps you can spin this “Old Europe” new/old Euro Freegold-RPG monetary architecture into a Catholic vs Protestant plot as opposed to a safety net for a failing Anglo-American $IMFS.

FOFOA said...

Hello Wily Coyote,

You write: "How can it be the ultimate store of value if its value wildly fluctuates?

Answer that and you'll never have trouble convincing your friends and family from going 100% gold for their savings. I suspect none of them want to be the chump who gets ruined if gold goes back to $300."

I'll add my answer as succinctly as possible to the stream of other great responses from costata, Blondie and Edwardo, but first you seem to have a few misconceptions about my blog. First of all, I'm not trying to convince anyone to go 100% into gold. After reading my blog for a time, some do go all in, but that's different than saying I am trying to convince everyone to do it. I am only writing here to help you understand. I do not publicize this blog. In fact I shun attention because it distracts these threads from what I want to do, which is explore difficult concepts. And I have said over and over again, "buy only as much gold as you understand, but 5% of your savings should be a no-brainer even if you don't understand much about gold, because 5% is common, conservative financial advice."

As for friends and family, mine don't even know I have a blog. Imagine that! It's (sadly) true. And finally, I'm not predicting a bull run in gold from $1,600 to $55,000, passing 10, 20 and 30 thousand along the way. In fact, I have predicted your exact fear of it going back to $300 in multiple posts. Here's one from 2010:

"So, in conclusion, the price of gold will plummet!

That's right. At some point in the future, after the price of gold rockets upward, it will fall like a box of rocks! And right about that time you'll see more of Robert Prechter on CNBC than you ever thought was possible.

But here's the challenge. When the price of gold falls to $200 per ounce..."

And here's another one from February:

"While I can't speak for all gold investors, I'm not buying gold because I think the ranks will grow. In fact, I think the ranks will ABANDON "gold" at the worst time in all of history.

As I wrote in a recent comment, "My scenario… ALL TRADERS dump ALL gold, paper, physical, whatever, in my scenario. It has nothing to do with insiders. It has to do with traders and weak hands." But that's a difficult concept to wrap your head around…"

I guess one could say that's what my blog is mostly about: "difficult concepts to wrap your head around." They're really simple concepts, but they're difficult because of the baggage we bring with us. Kind of like your preconceived notions about this blog. Those were baggage, and now you can set them down.

Okay, back to your question:

"How can it be the ultimate store of value if its value wildly fluctuates?"


FOFOA said...


"How can [gold] be the ultimate store of value if its value wildly fluctuates?"

Value is a relative concept. Value is the subjective measurement of our individual preference for one thing over another. Value is in the eye of the beholder. Infinite marginal utility simply means a new gold purchase does its job equally well no matter how much you already have, which is all the Giants need to know to make it the focal point of tradable wealth for thousands of years.

Imagine barter trade at the Giant scale if you can. "I like that Renoir, or priceless ancient artifact, or diamond, or anything that doesn't have to be registered for tax purposes like real estate and cars, what will you take for it? One pallet (one tonne)? Deal. I'll have it delivered to your vault tomorrow."

All relative values are always and everywhere in a constant state of flux, regardless of scale. Gold’s value really comes from this historic preference of intergenerational Giants who have no need to ever sell gold, but who really like to buy, hold, buy more, and then trade it for cool stuff they may encounter. They just net-produce for the economy and then they net-produce some more, and they do it over and over again, happily and willingly for more and more gold. And then they just sit on all that gold until they die and pass it along to the next generation. Lucky us, recipients of all that net-production for nothing but rocks!

We can follow in their footsteps, or so I'm told.

Izabella Kaminska "warns" that gold is not a scarce commodity. She says it is only made artificially scarce "by hoarding it." She's absolutely right! There are 170,000 tonnes of it out there and today's flow is barely more than what’s coming out of the ground, so yeah, absolutely! And that’s what makes it so gosh darn valuable, obviously much more valuable than today's price!

See? Simple concept, difficult to understand. But there are plenty of posts here to help you understand it for free if you ever get interested in understanding Freegold. ;)


60253 said...

Costata, Big Trader no doubt is smiling!

Look at the shareholders and directors of Hong Kong Exchanges, it is China itself making this move.

Barclays, Citi and the rest will be held to account when the time comes. But a market will be made again!

Thank You.

mr pinnion said...

Is that 'the' ANOTHER, or another another?


Blondie said...

Hello 60253,

As both your username and syntax are obviously familiar, can you please indulge me by stating whom exactly it is that you claim to be?

Thank You.

Motley Fool said...


Saudi crown prince Nayef dead

He was heir to the throne.


Dante_Eu said...

Well, as I have stated here maybe that time has finally arrived.

Regarding Blondie's View article and the picture at the top it is good timing. :-)

Woland said...

FOFOA's comment to Wily Coyote got me thinking, in an
imagined conspiretard sort of way, on how USG might, in
the easiest possible manner, get access to the gold bugs gold.
In South Korea in 1998, they used patriotism to get the population
to melt 250 tons or so from rings, jewelry etc. That won't work
here. In 1933, they made it illegal to hold all gold except for
"rare and unusual coins" , with prison and fines as the threat. That
was well into a depression, and would be both impossible to
enforce on shrimps, as well as too politically risky. There is one
easy way to get at the non Freegold aware gold bugs gold, though.
Price: and not by super high prices, but the opposite: a collapsing
paper price that terrifies many gold believers.

On that day, you will want to have, in your home safe, right next
to your stacks of maples or perth 1s and 10s or whatever, stacks
of Benjamins to take down to the local coin shop, to mop up the
excess, because your coin dealer will probably be as confused as
the customers outside his door. If you think you will feel pangs
of guilt as you buy their suddenly "unwanted" gold, just try to
convince them to hold on to it. Explain Freegold to them, and
how this is just part of the expected transition. GOOD LUCK!
They will treat you like the nut your friends secretly thought
you were as you patiently tried to explain it to them.

So, how much is enough to have in stacks of 100's, in whatever
currency zone you reside when that day arrives? 5%? 10%? I
don't know, and the opportunity may be brief, but not too brief
to make your FINAL transition to the All In.


60253 said...

You ask a question to which I can give no answer that would be satisfactory. I am no more than Another watcher of events these days, like you! I see that you and I share the same clear view. Little else matters in these times.

Thank You.

costata said...


I share your enthusiasm for this development with the LME. However, a small correction is necessary for other readers who may not understand that "Big Trader no doubt is smiling!" doesn't conflict with what I said about Rong Yiren - "Big Trader must be smiling in his grave".

e_r said...

FOFOA said: Value is in the eye of the beholder .

Wily said: How can it be the ultimate store of value if it's value wildly fluctuates? I suspect none of them want to be the chump who gets ruined if gold goes back to $300. .

Wily - you are using dollars to value gold and complaining that it fluctuates widely. What is exactly fluctuating here? Is it gold or the dollar? It's all about perspective.

Blondie: You will share that perspective only to the extent that your existing baggage will allow, and no more.

Costata stated a good point to use gold:oil ratio as a reference point. Please consider this chart.

costata said...


AAANND, if you really want to mess with people's heads try converting the EROEI of 1913 oil to 2012 oil relative to currency.

julian said...

Blondie said,

[i]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.[/i]

I am enthralled by this recipe of "The Gold Must Flow" and "Inflation or Hyperinflation?"

What Thoughts in a bite-sized snack!

somanyroadsinvesting said...

FOFOA, you say people will abandon gold at exactly the wrong time as "paper" gold drops to $300/oz. Then you say you can't wait until then to buy it because no physical will be available. "it will go into hiding". I have a hard time seeing this practically.

Lets call the price on the compt screen the "paper" price. I think humans in general act in a herd mentality. Even harder core physical gold people may sell when they see the price dropping so much. So I really have a hard time believing that if the price dropped that much that we would not be able to walk into a LCS and buy some coins. In fact I think there may be a ton of supply. Almost any asset(houses, stocks, pet rocks etc) people buy more as the price goes up and sell when it goes down. That is human nature.

What will you do if the price is $300(personally i don't think this will happen) and there is plenty of physical to buy? Does this mean the theory is dead?


Nickelsaver said...


An LCM will be one of two types of owners. He will either know the value of gold during the crash, in which case he will close his doors and hoard his gold. Or he will sell it as quickly as he can AS THE PRICE DROPS thinking that he can replenish at a lower price. But the gold won't be there for him to replenish. Gold will go into hiding as every entity big and small that knows its value gobbles it up.

poopyjim said...

IMHO This drop to $300 or so will likely coincide with a bank holiday when the banks simply don't have enough cash. Any physical gold shaken loose at that price will quickly be gobbled up by strong hands. A couple days later the trucks of cash will have come to the banks and then we'll be well on our way to HI. That's when gold goes into hiding. amirite?

somanyroadsinvesting said...

Perhaps, I can't see the future but I would say thousands of years of human nature would argue against events playing out like that. If the price really did drop to something like $200-$500 even the hardest core physical gold holder would be getting very nervous. Which in turn would make many sell. people would be selling on craigslist, ebay, LCS etc. I think there would be plenty to buy.

Also this type of drop would leave such an emotional scar i would find it hard to believe demand would come back quickly again to drive the price up. People would say 'oh i am not gonna get burned by gold again its to volatile'.

This whole thing about people that know its true value does not ring true for me. After gold was severed from any relation to money it became a freely traded asset. Its value is what the mkt says it is. There are no rules that says gold has to be worth X amount etc. So when you are saying these people 'who know what it is worth' will buy it all up. What are they relying on? What measure?

Nickelsaver said...


Gold will have gone into hiding long before the price hits 300. Imagine the frenzy of traders trying to unload aka randolph and mortimer.

What causes the frenzy, knowledge that delivery cannot be taken, contracts will need to be settled in cash. Cash that will seek out physical that wount be there

78Rubies said...

@60253: nice touch using the numerical user id of Another from usagold archives. ;) Oh, and you emulate the writing style quite well, too.

Nickelsaver said...


This is the decoupling of paper vs physical. Gold will no longer bid for dollars. HI has already happened

AdvocatusDiaboli said...

"$300...Gold will go into hiding as every entity big and small that knows its value gobbles it up."

so, what is its "value" of the yellow stones? If its "real value" is so much higher than today, why dont these entities already gobble it up today?
Why didnt these entities already gobble it up in 2008, when it dropped?

Such reasoning makes absolutely no sense. In fact it is very similair to the stuff you hear in the silverbug camp.

poopyjim said...


Yes perhaps you are right.


That is sheeple gold you are talking about there. Sheeple think dollars bid for gold. Strong hands, giants, know better. Maybe for a short while there would be a lot available, I don't know. I know I'd be buying then. Whatever the sheeple may do though, they cannot stop the dollar from hyperinflating. Then we'll move to this new system by necessity.

Pat said...

SMRI, you are thinking like a shrimp. Turn off your shrimp brain,and get behind a Giant and just draft.

e_r said...


This whole thing about people that know its true value does not ring true for me.

As articulated very clearly by Blondie, it's all about perspective.

Have you ever experienced diminishing marginal utility of your wealth? GIANTS are called giants for a reason.

Here's more to think about from FOFOA:

Today's "gold" encompasses many other things. Ask any investor what percentage they have in gold and whatever they tell you will likely include mining shares, GLD, silver, maybe some platinum, and possibly not even ANY discrete, unambiguous pieces of physical gold. This is an important concept to grasp, that "gold" today is a bastardized term and the $PoG does not have anything to do with "gold the wealth reserve—which means physical gold only."

Of all the possible "unproductive assets" out there, gold has the highest stock to flow ratio because of its unique, singular properties. To think about it simply, price is determined at the margin—the flow—while value resides primarily with the stock(holders). Does this make any sense? If gold is as undervalued as I say it is, then we should expect the s/f ratio to explode, constricting the flow (supply) at the margin.

Can you see how viewing price and value from this angle puts the onus on the stock holders at least as much as on the pool of new buyers?

This is the rush out of future-dated debt into Here&Now cash (T-bills for the really big $$$). It's the bank run shoebox under-mattress effect en masse. This makes the dollar look (temporarily) strong and today's "gold" (the $PoG) look weak by comparison, gold bug protestations notwithstanding. So just imagine another quick run-up like July/Aug. to, say, $2,333 correlating with a big spike in the USDX/$IRX (price) and then a crash in the $PoG down to ~$1,000 or lower. How hated would today's "gold" be by the homeless savers then? That's some serious beta!

FOFOA talked about the exact herd mentality that you just referred to!

So that's why I said in the post, "ALL TRADERS dump ALL gold, paper, physical, whatever, in my scenario. It has nothing to do with insiders. It has to do with traders and weak hands." And at the same time… because the return is surprisingly shitty all of a sudden… "physical gold **IN SIZE**, the kind of size that represents entities that know WHY they are holding gold" … "stops bidding for dollars (low gold velocity), the price (in gold) of a dollar falls to zero."

This is when the stock to flow ratio explodes to infinity and physical gold goes into hiding, when the price (the $PoG aka today's "gold") gets too low to support parity between it and "gold the wealth reserve, which means physical gold only."

It's a simple concept to wrap your head around, but it's hard because of the existing baggage we all carry.

Pat said...

SMRI, ( wow my third post ever here, I'm becoming prolific ), to add: every time I get befuddled, it is almost always because I'm thinking parochially about MY situation, what will I do, like the fear of paper price dropping.
I always end up tell myself, oh you silly little shrimp boy, when will you learn?

somanyroadsinvesting said...

I assume by giants you mean Countries and super wealthy. 2 questions. How long do you plan to wait? what is reasonable in your mind? 10yrs? 20,100? Second to AD's pts why didnt china or any surplus country pick off 10k tons in the drop in 2008?

It seems like people always fall back to there is some big entity that has much more influence than people do. While major CB buying no doubt has had a big impact, what the avg person as a collective does with their money has just as much influence if not greater.

Lets take India for example. I have seen reports that say its people not its CB has prob close to 10-20k tons of gold. well if there is some major crisis and its people have to sell dont you think this will effect the gold mkt? Look i believe that govt influence all mkts so they are massaged and to prevent spikes and drops but I think you get in a dangerous area when you start thinking that what avg people as a collective do w their money has no influence on the mkts.

Matt said...

SMRI - don't you know predicting the future is only dangerous if you don't know the future!?!

If your leader has a crystal ball, how could there possibly be any danger?

DP said...

DP, putting equities on the same footing as gold in terms of bank capital adequacy would have some interesting implications.


Woland said...

SMRI: "What the average person as a collective does with their
money...." Guess what? The average person has no gold, and
has no intention to buy gold. The only possible (though unlikely
for the moment) POSSIBLE change in the mind of the "average
person as a collective" is to buy gold. If he changes his mind from
"not buying gold now" to never buying gold, PERIOD, how will
that effect the price of gold? Not at all, since NOTHING will have
changed. Today, almost everybody is caught up in the game of
finding the next paper asset that others will value - "before they
figure it out" and then dumping it once they do. Is this how you
save for your future? Is this what we have come to believe is


60253 said...

Matt and somanyroadsinvesting,

It is Western thoughts that you consider 'what is the paper price for this piece of gold'? There are a great many people in the world who would sleep through the events you describe, as they know the value they hold.

Gold will be seen as pure wealth again, and no longer as an investment. Even in the West!

costata said...


Sorry the jury is in. You are a BS artist - piss off.

Nice try though.


AdvocatusDiaboli said...

The funny thing about the $50K believers & shrimps is, that they think there will be somebody (giant?) buying that stuff from them at $50K (in todays purchasing power!!!). If it is such a "wise intergenerational giant" why hadnt he bought already @<$1000 in the first place?

To sum it up: The key points that have to happen for the freegold theory is:
1.) only hard bidding on a physical only market
2.) and therefore (e.g. by law worldwide) abandoning of the paper market (bullion banking).
3.) nationalization of all worldwide gold mines, or no more mining at all. But remember: mine nationalization also means HMS price controls/influence (also downwards!!!).

If you really really believe that this is realistic and ALL of the above steps happen and are about to stay that way, fine, go ahead with your FG belief.
If you are not 100% sure about ALL the above issues will be fulfilled, forget FG, you can not expect to see FG (waterfall).

Woland said...

Dear AD:

I have refrained from replying to your comments to date, but
I think that your points 1,2,3 , all having to result from some
worldwide agreement or decree, are in error. I would like to
ask one of the more knowledgeable regulars to re-post the
"Mr Allen's perfect article should be read by all'' comment
from Another, in which he shows how 1 simple change in
oil pricing could bring about a new worldwide price for gold
overnight. Subtle thoughts for a not so subtle world.

Woland said...

Hmm. Found it in "It's The Flow, Stupid". Mon Dec 15,1997
Msg ID# 246224

burningfiat said...


Not only is AD points 1,2,3 erroneous. I think that his initial assertion, that giants will not buy at 50K$ is also wrong.
Why would a gold holding super-producing giant not continue to save his on-going surplus in gold? He has just had confirmed that his previous decision to save in gold was good, and the paper system is obviously in some kind of trouble.
And AD, if the giant didn't save in gold before the revaluation he wasn't really a giant anyway, eh?
If he though he had great wealth before, but didn't have any gold, don't you think he would be scrambling to secure the remains of his burning paper pile [in gold]?


Ender said...


There is no jury when it comes to understanding the value of physical gold. I encourage you (& all) to open your minds and welcome anyone that is willing to share/debate the Freegold Concept. All points of view are valuable. Every human is valuable!


Fofoa can be trusted. Make a small donation and you’ll be hooked up to his email.

@all newbes,

To everyone debating the price of gold (above), step back and remember that the value of the gold is debt settled. Open your eyes and observe. I ask you, who will find settlement for the hoards of debt that they hold today!? Who will make good on that promise? What is that promise worth?

As events unfold, their rules will change. If you are ‘in the game’ as they have outlined, be prepared to have the rug pulled out from under you. If you have the security of physical in hand, you stand independent of their rules.

Stand independent. Take strength in that stand.


60253 said...


Your modern language leaves much to be desired. So sure are you of your jury decision? 12 good men no doubt!

The world does indeed change, some things for the better, some things for the worse. Your manners good sir I place in the latter category.

But that is of no consequence, some here may still find value in my thoughts on occasion, so on occasion my thoughts will be spoken, for the simple ones that are embarking on their journey only now.

best of luck, to us all.

somanyroadsinvesting said...

I am gonna let this pt of debate rest. I come here for the lucid economic discussion not predictions of how the mkt will play out.

Just my 2 cents but when you start predicting things like a major mkt doing absolutley unprecedented stuff like dropping 80% then going up 20x as well as HI as a given(and basically dismissing any other viewpt as absurd) I think its hurts the credibilty on the more important issues (understanding the current and near future of the economy).

John Fry said...

is it Memorex, or is it real? In this case, does it matter? somewhere in Louisiana, an old man dips his feet in snake infested waters. as it ever will be. i'm looking forward to more of those short-and-sweet posts from 60253. a nostalgia thing, perhaps. they really irritated some pretty bright folks back in the day. maybe another round of rope-a-dope is in order. there need to be a few "broughts" in there to seal the deal.

Tony said...


Perhaps you could give 60253 a little test of sorts. A few answers to some poignant questions posed by you ought to do it. If 60253 is the real deal, he/she won't mind answering them.

mr pinnion said...

A bit harsh that. dont you think.Not like you.

I m going to stick my leg out and say i think 60253(feels like i m talking about a borg drone) is him.
His posts have a very Anothery slant to them.A lot of wisdomic wordage packed in.
If it is him, then how fitting he should show up on Blondies post.
I think i remember FOFOA said a while back Another chooses not to post, meaning he s still in the land of the living.
And FOFOA did say it would be a year of surprises.
If someone was going to impersonate Another, i think they would have done it before now, this being a very important weekend for the euro.

If it is him, i dont think he will feel the need to take any gold trail tests.I think the idea would offend him.


Tony said...

@ Ozzy

You could be right. As far as I'm concerned, if his posts add to the discussion, I'll continue to enjoy reading them. I, for one, am hoping he's the real McCoy...what a welcome addition! Just wondering why surface now after such a long layoff???

mr pinnion said...

@ Tony
He s done his stint at the coalface.And FOFOA s been doing a stella job so no need.Things seem to be comming to a head in the world economies so nows the right time to comment as it all unravels.


costata said...

Okay folks,

My apologies for the outburst. If 60253 wants to pretend to be Another so be it. I'm back on my best behaviour.


It is possible to over-analyse things. Ponzi schemes always collapse. It's inbuilt. Just like the RE bubble. The collapse is "unprecedented" before it happens (if one ignores all of the precedents).

Ryan said...

Well,,,,,, Michael,,,,,, Randy,,,,,,, All,,,,, For all my insisting to "him" that this venue was the correct place to build an understanding of our future world of gold,,,, I guess I was wrong? I got back a quick retort and firm instructions. Instruction I will follow till hell freezes over because I will not lose my connection to Another. He said simply "tell them right now our position and walk away, it's over"! And I can tell you when he says it's over,,,,, it is over!

So,,,,,,,,, MK, please understand that it's not old FOA walking away mad this time. The big guy said we are done. I'm back to discussing this in private with select people that want to hear it and debate it in private. I'll stay in touch with you and discuss as you may want? After all this work, I guess it's my turn to feel low now. What a bunch of garbage!

Good luck all, I did my best to plant the seeds of thought. Own the wealth of gold and they will grow for you!

You will now "watch this new gold market" without FOA or Another.

Your friend and hard worker,(smile).
Last post, Signed off!

DP said...


Time reveals all things.

e_r said...

An illustration of why value is in the eyes of the beholder.

full link.


How long do you plan to wait? what is reasonable in your mind?

For what?

Second to AD's pts why didnt china or any surplus country pick off 10k tons in the drop in 2008?

This has already been discussed at tremendous lengths. I think AD takes discussions several steps backward rather than forward, most of the time.

If you're a giant and you are trying to get as much physical gold as you can, would you spook and completely break the market while you're at it? Wouldn't that be foolhardy?

well if there is some major crisis and its people have to sell dont you think this will effect the gold mkt?

If there is a major crisis, do you think they will sell their gold for rupees? Have you seen how well INR has been doing lately?

mr pinnion said...


Did nt reveal bugger all to poor bob :o/

costata said...


I'm looking forward to comments from 60253 about Big Trader. I named him as Rong Yiren earlier. That is merely my better than even money bet on the identity of the big Chinese buyer who nailed the lid on the coffin of the oil for gold deal and almost broke the bullion banks in the process.


FOFOA said...

Hello John Fry, Tony, Mr. Pinnion, Ender, costata and, of course, our new arrival #60253!

Ender, yes, of course every human and his point of view are valuable! And I'm sure we'd all give an especially warm welcome to FOA and his point of view if and when he returns as promised after “the rains come and the ground begins to open”.

#60253, it's clever that you chose your old Kitco unique ID number as your new handle, especially since I mentioned and explained it for the very first time on this blog exactly one month ago in this comment. It is also a little ironic that what the introduction of that particular number did for you on 9/23/97, to distinguish the real you from the impostor ANOTHER's running around up until that date, it fails to do today.

As most of you are aware, ANOTHER never posted comments directly. It was always FOA posting "on behalf of another". Only after about eight months of posting both his own words and ANOTHER's under the same ID# did FOA create a few different handles to distinguish between when he was writing his own thoughts and when he was relaying ANOTHER's. In the end, Trail Guide was his handle in the discussion forum and FOA was used for the main posts.

I, for one, and I'm sure FOA is too, am very happy that there hasn't been a rash of impostor ANOTHER's ever since Bart put in that unique ID# system. Even since FOA stopped posting in 2001, there hasn't been a single FOA impostor that I am aware of, either on USAGOLD or in the four years of this blog. And especially because this blog is a tribute to these two fellows in particular, I feel it is incumbent upon me to maintain clear air, free from people ambiguously pretending to be the object of my tribute.

Luckily for all of us, FOA included, Aristotle has a foolproof and easy way to authenticate the real FOA, because the two of them communicated directly and privately back in the day. Call it a "secret handshake". This "handshake" will also validate Aristotle's authenticity to FOA.

Mr. Pinnion wrote, "If it is him, i dont think he will feel the need to take any gold trail tests.I think the idea would offend him." Of course! Luckily we don't have to go through any such offensive authentication process. Authentication will be quick, easy and private. And then Ari and I can vouch for the real McCoy to the rest of you. And as I said, we would both love to have him back and welcome him into an exalted position at this blog like what he is used to from both Kitco and USAGOLD. Remember, he was never just a random poster. He always had a special line of communication with at least one point of contact at the site, a line of communication that was useful on more than one occasion for the purpose of authentication.

So #60253, please send me a private email. You don't have to donate to get my email address as Ender implied, it is right there when you click on my profile. ;)


costata said...


There has been quite a lot of discussion in this thread about wealthy people and their presumed predilection for saving in gold. I would like to offer a contrarian view. To whit, people store their wealth in things they understand and things that have served them well in the past.

If RE is your thing then most of your wealth will be stored there. If their thing is stocks then that's the place their wealth will go to. Likewise bonds. For some people the preference will be gold, art works etc. This may seem to be at odds with the thinking here but it truly is not. It's human nature.

Something else I was told long ago also influences my attitude to this issue. Decades ago when being a millionaire was a big deal I was told by a Swiss fellow who provided "services" to the uber-rich that there were people striding the world to whom a million dollars was petty cash. For those folks spreading their wealth across various asset classes, geographical locations etc is not just a preference it's a necessity. People like that Swiss chap I met do the spreading for them and they are paid handsomely as much for their discretion as their acumen.

As that scion of old money FOFOA mentioned earlier suggested the names of the really big money do not appear in newspapers let alone "rich lists". To paraphrase Ben Bernanke, they have a technology called the telephone (and they use it).

somanyroadsinvesting said...


how long is reasonable to you to wait for the revaluation in gold? I'm sry i thought that was clear.

This whole thing about the 'giants' not wanting to crush the mkt and thats why they didnt scoop of tons in the 2008 crash seems like a ghost to me. At some pt these giants need to make their move. So how long are they gonna wait, everytime there is a sell off, no can't do it now can't shake the mkt. The more time goes by the more this loses credibility. Also seems like there is all this talk of oil etc. Doesnt seem like SA owns that much gold for how much oil they have sold. Is the contention that they own many multiples of this? Like 20k tons?

Plus look Buffett was able to get a huge position in silver a while back without really moving the mkt. I think if china wanted to buy 5-10k tons during the 2008 selloff i think it would be entirely possible without moving it that much.

Unfortulately by acknowledging this #60253 you may have encouraged more copycats. I would think he would contact you directly before you would have to ask for him to contact you.

jeb said...

I'm under the impression that all large gold stocks are held in strong hands. Perhaps someone can help us on this.

Tony said...

I seriously doubt FOFOA's remarks will encourage more copycats. Quite the contrary...I think his secret handshake will only stifle the idea.

Getting back to a real point of discussion....I'm left to wonder how Giants will play through FOFOA's scenario from "Shoeshine Boy", where gold suffers a "**BIG** correction". Assuming that's a very plausible scenario, are these giants so uber-wealthy that they'll be indifferent to this type of paper-gold price action? Or can we assume many will be privy to the ongoings of what's coming and liquidate prior to a price fall? Truth be known, not sure why I care, but now that I have a core position established, I'm keeping some cash aside in the hopes that I'll be able to scoop up a few ounces @ $200 ea ;)

Tony said...

Speaking of the big price correction....does anyone/everyone suppose this will also be the case with silver? While I recognize silver won't be the beneficiary of a massive revaluation, is it safe to say it'll share gold's temporary dollar-priced demise? While I intend to maintain a small amount for the transition, I'm wondering how much merit that idea has, all things considered.

costata said...


Some of your assertions are bizarre:

At some pt these giants need to make their move.

Que? "They" have already made their move - past tense. A/FOA wrote about the gold market being cornered long ago. The stock moved into private hands in the period after WWII and by the late 1990s the stock was cornered.

somanyroadsinvesting said...


Already made their move? China is the one of the biggest if not the biggest creditor nation in the world. According to latest stats they have very little gold relative to their reserves(i am sure it is more than reported, but much of this has been added in the past 5 yrs).

e_r said...


According to latest stats they have very little gold relative to their reserves(i am sure it is more than reported, but much of this has been added in the past 5 yrs).

if you are sure it is more than reported, why do you pay any attention about the latest stats? :)

Either case, here's FOFOA:

So what I don't foresee is a stampede by those homeless savers into today's "gold". There may well be another mini-stampede like we had in August, but it will display many characteristics of a bubble, including the volatility and the downside, which savers don't like. Savers aren't looking for the next XX-bagger and they don't like beta, so they are a hard sell for both OG and the $PoG. Savers simply want a nonfluctuating asset… preferably in real terms.

So Freegold, newly stabilized at a plateau stasis of ~$55K in constant dollars, will be very appealing to them. Funny to think that they'll buy gold en mass at $55K but not while it's only $1700, but hey, c'est la vie. As KindofBlue wrote: "Early adopters [of the next reference point for purchasing power] are being handsomely rewarded."

So now I'm looking only at physical gold **IN SIZE**, the kind of size that represents entities that know WHY they are holding gold (i.e., not for paper profits). And I'm wondering when physical gold will stop moving through paper currencies, at least at parity with today's "gold", the $PoG. And I think that can only happen when the $PoG goes too low.

Do you see the difference? Your question is implying this stampede scenario, which FOFOA does not foresee to push towards the revaluation.

It is more about the existing holders of gold deciding to stop moving through paper currencies.

costata said...


China (like Russia) is sourcing their public sector reserves from their own mine production. Their middle classes are (presumably) buying on market. Some here adhere to the theory that the public sector in China soaks up any excess inventory on price weakness but the main story is mine production.

costata said...

Woo hoo debt deflation!!

This is not to say that there is not deflationary pressure out there. By all means there is. The financial crisis of 2008-09 was a classic deflationary rush to the exit that, had it been left to unfold without policymaker intervention, would have collapsed a substantial portion of the global financial system.

But for all those ‘deflationists’ out there who believe that, under elastic, fiat currency regimes, deflationary pressures result in either monetary or price deflation, please reconsider. The evidence points to exactly the opposite: UNDER AN ELASTIC CURRENCY REGIME, DEPRESSIONS LEAD TO MONETARY AND PRICE INFLATION, NOT DEFLATION!

OOPS! Guess not. But how? I hear the deflationists cry: "Policy says Mr. Butler".

So how was it that, notwithstanding the natural deflationary pressure on the economy, policymakers succeeded in preventing monetary and price deflation? Simple: They changed the rules. The Fed did not merely expand the monetary base in 2008-09. It also purchased toxic assets, guaranteed money market funds and underwrote bailouts to various financial firms and government agencies.

And how does this movie end?

The Inflationary Endgame

I don’t for one moment deny the deflationary pressures building around the world. They are massive. They are pulling down asset and commodity prices. They are going to wipe out a material portion of the world’s accumulated real wealth over the coming few years. But these deflationary pressures will, in one country after another, trigger even more massive inflationary policy responses.

As in 2008-09, these responses will be effective. They will prevent material monetary and price deflation and in most countries trigger monetary, commodity and general consumer price inflation. A key lesson of the Great Depression is that, under a gold standard, depressions are deflationary.

A key lesson of the Second Great Depression—as the current one will be referred to in the history books—is that, under an elastic, fiat currency standard, depressions are inflationary. Investors who have already learned this lesson have a clear advantage over their ‘deflationist’ counterparts and either already have or are preparing to position themselves accordingly.

So debt deflationists don't heap scorn and blame on poor old costata for this dire news. It's not my fault - the Butler did it.

FOFOA said...

Hello SMRI,

You wrote: "Just my 2 cents but when you start predicting things like a major mkt doing absolutley unprecedented stuff like dropping 80% then going up 20x as well as HI as a given(and basically dismissing any other viewpt as absurd) I think its hurts the credibilty on the more important issues (understanding the current and near future of the economy)."

This may be another case of misunderstanding a simple concept because of the baggage you are hauling around with you. This is not a "major market move" being predicted at this blog, it is a reset, an overnight revaluation, and it will come from necessity. Yes, there is a gold bull market. But that is somewhat separate from what Freegold is about. In the end, it is about a new financial architecture. FOA said it pretty clearly here:

"This not only has everything to do with a gold bull market, it has everything to do with a changing world financial architecture. And I have to admit: if you hated our last one, you will no doubt hate this new one, too. However, [here's the caveat] everyone that is positioned in physical gold will carry this storm in fantastic shape. "

You also wrote: "FOFOA, you say people will abandon gold at exactly the wrong time as "paper" gold drops to $300/oz. Then you say you can't wait until then to buy it because no physical will be available. "it will go into hiding". I have a hard time seeing this practically."

Here's a recent email exchange I had with one reader titled "Catching a falling knife" edited slightly for brevity:


…Now if I had stockpiled gold from 2000 onwards I would have a lot of ounces and feel very secure for my family, but as I only came into the game late 2010 onwards, each ounce has been "very expensive" in relation to other living costs, so despite real serious efforts already I would still like to secure my family's future as best I can and am trying to weigh up a balanced way of doing so ...

If i have it right, just before the eventual USD HI or transition to free gold, the actual spot price (which is the "general" public's perception of the "value / cost" of gold") will plummet rapidly towards ZERO.

Is there ANY possibility that during this panic, physical gold will still be able to be picked up at spot, and could one take a small gamble on some retained savings and wait to try and catch a falling knife as this happens (assuming they had a small stockpile anyway so it was not a purely speculative or greedy play)?

Thanks again


On catching a falling knife, of course anything is possible when the markets are in disarray, like your neighbor might turn out to have a box full of gold coins and be happy to sell it to you as the $PoG is plunging. But unless you are a gold dealer yourself, here’s what I think you’ll most likely encounter:


FOFOA said...


As the $PoG is plunging, yes, lots of people who don’t understand gold and don’t understand what’s happening will be puking up their gold coins to the dealers. But I think you’ll find that most dealers will be buying only, not selling.

The reason is a little complicated, but suffice it to say that you are not the only one who has this idea. And I’m not talking about the dealers buying in order to keep the gold themselves. I’m talking about the way dealers work, through a network, and there will be someone much larger than you on the other end of that network with a standing overbid for any physical coming into the network. In the past I’ve called it that giant sucking sound on the other end of the dealer network that will prevent us shrimps from buying during the collapse:

"…that GIANT sucking sound you hear when you call your dealer and mention that you have some gold for sale will be the Giants somewhere at the other end of the dealer network with their unlimited currency, their insatiable demand for gold, and their standing over-bid acting like a giant concubine sucking a golden golf ball down a tiny hose. Let's call these Giants "the buyers of last resort" for gold. Another said they stand ready to buy any and all physical gold offered for sale.

On the other hand, that sound of thousands of telephones ringing in the background, when you call your dealer to sell your silver, will be all the other shrimps placing their sell orders at the same time…"

I can’t say at what price you won’t be able to get any physical. But I’ll tell you something right now that you will not believe until the time comes and you do exactly as I say. I don’t think you’ll get any physical below $1,000. But when the price is falling fast, say $50/hr. or more, psychologically it is almost impossible to pull the trigger in the middle of the fall knowing it will most definitely fall further. So I believe that very few who attempt this will be successful. Make sense?

I think that either it happens soon and you’ll regret not buying more when you had the money and the chance to buy easily. Or else things carry on a while longer and $1,600 will start to look really cheap in a little while and you’ll regret waiting for a lower price. I think those two regrets are more likely than the regret that you bought too high. And in that latter scenario, if the $PoG keeps rising and rising for another year or more, you are likely to chicken out of your plan to catch a falling knife and just give in to buying some more at, say, $2,100/oz. Factoring in an unknown timeline and known psychological weaknesses, I think it’s better overall to just do as Another advised:

"Think now, if you are a person of "great worth" is it not better to acquire gold over years, at better prices? If you are one of "small worth", can you not follow in the footsteps of giants? I tell you, it is an easy path to follow!" --ANOTHER (THOUGHTS!) 1/10/98


Thanks FOFOA,

I truly appreciate you taking the time to reply at length and I will follow in the footsteps of giants. :)

Best Wishes


FOFOA said...


Remember what Another said about Asian giant gold buyers?

"The rub was that they only bought low, and lower and cheaper. They never ran the price and they never ran out of money."

When you have unlimited money you'd like to move into gold, it is quite obviously a bad strategy "to make your move". What Another said kind of matches what my FOREX contact heard while gold was plunging through the $1,500s, doesn't it?

"I hear on the wire today that there is at least one Asian Central Bank with bids in the interbank market for spot gold at $1525"

That was a standing bid at a lower-than-market-price while the price was falling, just waiting to get filled. And then a few days later she wrote:

"I also hear a rumour this weekend from a buddy that the Asian Central Bank with bids in at 1525 was BoKorea. Not PBoC.

I have a feeling he knows the true size of the bid, but he isn't letting on…

In the case the bid is filled, the 'pros' at the bank will see how well the auction responded to the fill and do some 'market making' around the price to carefully increase the position until the 'true size' is filled.

Were they filled fast and at full size? Maybe the market was a little too quick to sell to them, they'll introduce resistance at the current price by offering chunks of long inventory and increase support at a lower level by listing new bids in the book at lower prices. Maybe they think there's plenty more for sale in the next few days and are happy with the price so they offer only small amounts and keep adding large buy limits until they are all filled.

Were they filled only 75% and it took 5 mins on the phone? They might stop filling other traders bids and push every offer in sight up to 1530 before letting the price drift down (stop pushing offers) and repeat until happy with size."

BOK is known to have very low gold reserves among CBs, and Asian CBs in particular. Remember that they bought 25 tonnes last July as well, so this all rings true and is consistent with both logic and Another's explanation.

Also, just last night I heard from Ari that in the latest edition of the Central Banking Quarterly Journal there is some discussion about the BOE now lamenting the Brown's Bottom sale of half of its gold reserves. And there is talk of them going into the market to build it back up. Ari has been traveling lately and he's still not home, which it why he hasn't been around. But he did bring the journal with him on his trip.

He said that it may have been mentioned in a recent speech by the current Chancellor of the Exchequer (Gordon Brown was Chancellor of the Exchequer at the time of Brown's bottom). So maybe one of our trusty bloodhounds can sniff that speech out. I asked Ari to send me the article when he gets home.

Has anyone heard anything about this in the news? If you were the BOE now planning to go to market to rebuy your gold reserves, would you announce it the way Gordon Brown announced the sales in 1999? That CB journal is an expensive subscription and a boring read, so it is read by almost no one who is not a central banker. No one except Ari.


RJPadavona said...

Hello costata,

Here's a TV interview with John Butler from a couple weeks ago. He talks about the resistance to gold becoming a Tier 1 asset at this point in time. Interview starts at 3:10 mark:


jeb said...

The Debt Management Office will consult on the case for issuing gilts with maturities longer than 50 years, and the case for a "perpetual" gilt with no fixed redemption date – something Britain last felt able to issue six decades ago.We are also taking the opportunity to rebuild Britain's reserves, which had fallen to historically low levels.I can confirm our gold holdings have risen in value to £11 billion.This does not include the 400 or so tonnes of gold sold a decade ago for £2 billion, and which would now be worth six times that at over £13 billion pounds.

costata said...


Thanks for the link. Cheers

Wendy said...

60253 are you FOA? If you are don't you think FOA is a nicer nic than a number? Although I guess I get it, that's it's an obvious point of re-entry.

BTW welcome back Sir Ender! :)

60254 said...

Hello Wendy

Blondie said...

Yes Julian, in fact it may be briefer and more accurate to simply state that “structural support” for the dollar is really nothing more than the making of a market for the dollar at a time when it may have otherwise gone no bid (HI denouement).

In this light it is easy to see how China has spent the last decade making just such a market, buying themselves time in which to accrue real wealth at nominal valuations.

Nice to see your name (and a few others I always look forward to) back in the comments once again.

e_r said...


This is probably what Ari is referring to --

UK Chancellor unhappy about past gold sales

We are also taking the opportunity to rebuild Britain’s reserves, which had fallen to historically low levels. I can confirm our gold holdings have risen in value to £11 billion. This does not include the 400 or so tonnes of gold sold a decade ago for £2 billion, and which would now be worth six times that at over £13 billion pounds.

Here is one more from a tabloid:

Mr Osborne's jibe in the House of Commons was greeted raucously from Conservative ministers as embarrassed Labour MPs could only look on.

George Osborne said at the time: 'Gordon Brown's decision to sell off our gold reserves at the bottom of the market cost the British taxpayer billions of pounds. It was one of the worst economic judgements ever made by a chancellor.

e_r said...

The central banking link might be blocked by a paywall, in that case you can google the title and it should open up.

Otherwise, here's the full text of the Chancellor's speech courtesy Bloomberg.

Wendy said...

Hello 60254,

I guess I really didn't expect an answer to my direct question. That's ok, I'll answer it for myself.

JR has what he thinks a good nose for shit, but it appears he is on vacation ATM


FOFOA said...

Hi Wendy,

I quote you from your two comments here:

.......60253 are you FOA?
Hello 60254,

Do you see any difference? ;)

For the record, 60253 has not emailed me yet, but 60254 did, and I can verify that he's not FOA. He was just messin' with you Wendy. :)


victorthecleaner said...

Seeing the discussion about gold going to $300 and making some bargain purchases, perhaps I can offer another definition of 'giant'.

Firstly, here is the opposite of a 'giant'. Imagine you have been reading FOFOA for a while and then spent your entire savings on 10 ounces of gold. You are proud of your achievement and you call it 'all in'. Well, that's what it is. But now you are worried. If your employer skips one pay cheque, you will run out of reserves and you may have to sell your gold. Timing is suddenly an issue. When will 'it' happen? If you can save another $1000 of your salary until the end of the year, should you buy gold immediately or wait for the price to drop. To the hell with the timing. You cannot wait!

Here is the contrast. You own two companies. The dividends easily feed your family. You have land, some real estate, a fat stock portfolio, a healthy balance in your bank account(s) and some valuable paintings in your villa. Plus some gold, perhaps 20% of your net worth, some of it in your safe at home, some hidden in your holiday home, some allocated with a private bank in Switzerland. You are not 'all in' - far from it. But you are a (small) 'giant': You are relaxed. You don't care about the timing. You can afford to watch events unfold. If the reset happens tomorrow, you will make a killing. As a bonus, your fine art, your companies, your land, your houses will still be there. If the reset takes another ten years, then so be it. If the stock market crashes first, you have enough cash to increase you stock allocation from 20% to 40%. Should the gold price crash to $300, you have enough resources to place orders successively all the way down from $1200. You are in no hurry. Time is always on your side, you are well positioned, and you have the resources to seize an opportunity if one presents itself. You are a (small) 'giant'.

If you run a central bank and issue your own fiat currency for your people and, on top of this, you have some 1000+ tonnes as a reserve, again time is on your side. You are in no hurry and you can watch the events unfold. You are a (large) 'giant'.

Concerning the UK. I think the news item is about 4-6 weeks old, probably made in conjunction with the budget. It said that the UK wanted to increase its reserves. Gold was not mentioned. When I read the original statement (not what the Guardian wrote), I had the impression that they wanted to be dollar faithfuls and but more dollars.


victorthecleaner said...

Oops. I hadn't seen the original speech. Gold was indeed mentioned.


Blue Donkeyman said...

It seems like martin Armstrong attacks you specifically can you please respond in a post

AdvocatusDiaboli said...

"Why would a gold holding super-producing giant not continue to save his on-going surplus in gold?"

Because he wouldnt be so stupid to buy something 50 times the mining/production price. Would you?
If you can have other assets just roughly under/over production price?

Even Robert Zoellik, your RPG guru said so: "Gold is too cheap....(to produce/mine)"

AdvocatusDiaboli said...

well put about the real life (of giants/shrimps).

But what makes me laugh most, are the 10-100ounces (all in) people arround bashing e.g. OGWarrenB, considering themself the smartasses numero uno.

Looking at your description of the "small giant", guess what, he will not care about gold vs. fiat vs. stocks at all, just like you put it, once in a while shifting a little in his portfolio. What is the biggest danger to him?
Total breakdown of society and/or socialist/communist/totalitarian dictatorship. That's where we are headed, maybe now you can figure why I am such a "big fan" of the EU(ro)...
Greets, AD

burningfiat said...

Because he wouldnt be so stupid to buy something 50 times the mining/production price. Would you?

I fill up my gastank with stuff priced at 4 times the production price (due to taxes). Giants do as well, without them all opening their own private oilwell/refinery.
Regarding a 40-50 times revaluation of gold in real terms, yes I'd expect to see a Gold Rush, especially in areas not taxed out of proportion, so what? In Freegold only physical above-ground gold will matter.

Another point. Let's say there is the same stock of gold in the ground (mineable at up to 50 times the current price) as there currently is above. When all that has been mined in 50-100 years, the stock of gold will only have doubled. Still a pretty good long-term deal compared to expected stock increase in CB/government paper for instance. And there will be no/tiny stock increase after that!!
So yeah, the increase in total gold stock per year will maybe go to 3-4% per year instead of 1-2% for a period after the revaluation. It's not a biggie.
Maybe a few adventurous giant will arbitrage some of their surplus into mining-stocks?

All in all, I don't think there is much to your "gold is a commodity"-based criticism of Freegold, and giants are not going to use rice as a SoV from now on, because they can acquire it close to production cost.

Good luck in the Glory hole, AD! No guts no glory.

AdvocatusDiaboli said...

"All in all, I don't think there is much to your "gold is a commodity"-based criticism of Freegold"

I personally dont see gold as a commodity, sure not, so if I can have it as a commodity, why not have it?. But if you read my earlier post of the three steps, you see what has to happen in order to change todays "price discovery" from a "commodity-like" to a truely freegold market place and ask yourself how likely are those three steps.
Greets, AD

Woland said...

Assets are sometimes not valued by their cost of production,
whether marginal or average. Consider the most valuable thing
in your life -it is Oxygen. You will be dead within 3 minutes
without it. So do you have tanks of it stored in your home in
case of emergency? Nope. Because it's FREE. No cost of
production. It is free because of its' "strategic location" on
the surface of the planet. 300 feet underwater, or in outer
space, Oxygen has a different value, even though its' cost of
production "nearby" is still the same. The same thing is true
of strategic FUNCTION as it is with LOCATION. Remember
when platinum was first discovered, it was more or less a
nuisance? Worthless? Later on its' many new functional
qualities made it (temporarily) more valuable than gold.
It will be the change in gold's function, combined with
continued scarcity of new production and quality of reserves,
which will make the currency cost of production irrelevant.


50sQuiff said...

It was a strange reference from Osborne. It seemed like an attempt to take credit for Britain's improved reserve position by virtue of the rising gold price. I think it was merely an excuse to take a swipe at Gordon Brown and his infamous "bottom" rather than a statement of intent in the gold market. Note that such comments about Brown and gold reliably resonate with the Press here.

What Britain lacks in bullion it possibly makes up for in gold market influence. We are, after all, the home of the mysterious and magnificent LBMA. I do wonder how the UK will deal with a failing paper gold market and whether we're willing to go down with the USD ship.

If there is an effort by the BoE and Treasury to maintain the integrity and importance of the London market, perhaps only the existing market-making members will be hung out to dry. If HSBC and JPM 'default' on their unallocated and derivative customers, so be it. Perhaps new members like China's ICBC will be ready to step in and make a market for physical gold.

If the system itself starts to express the growing recognition that paper and physical gold are not equal, then the "gold to $300" thesis is in jeopardy. The pricing mechanism could evolve to head it off at the pass.

If, on the other hand, the London market is closed in a gold bank holiday as reserves are drained, then all bets are off. My only hope is that premiums in the retail market will give me the fortitude to hold through the transition, whilst irredeemable gold vehicles are dumped or rendered inaccessible.

Edwardo said...


The great irony embedded in Mr. Butler's analysis-which I did not read in its entirety, so I don't know if he pointed it out-is that in our epoch's installment of "How will the great depression play out", gold (or some of us would seem to think) comes back into the money game (not, of course, as before) but, nevertheless, as the planet's reference point and chief savings mechanism.

One can't, or so it would seem, have one's cake and eat it too. If one is going to pile up mountains of (unserviceable) debt one must take the red pill, aka the ultimate debt antacid of all time, physical gold, in order to properly reset the system. I define a reset as a robust recapitalization of the banking system that rests on the ability to, once and for all, extinguish the debt.

Polly Metallic said...

AD, what is the cost of production of a $100.00 bill?

AdvocatusDiaboli said...

good point. AFAIK ~18cent?
Therefore I am prefering holding my spending cash in paper rather in digital numbers. And when times get tough, at least I can burn them for some warmth, something you will not be able to do with gold...
So the conclusion is, if I were a 10ounce shrimp, I'd rather stack up usefull stuff....

enough said...


Worried over flow of savings for investment in gold, Finance Minister Pranab Mukherjee on Saturday said there is a need to spread financial literacy to encourage people to invest in market instruments.

"Quantum of import of gold ... is a clear indication (that) large section of community...want (to) investment in dead asset only with expectation that value would appreciate", he said while speaking at Zee television award function.

costata said...


If I was an arrogant, egocentric German shrimp I would consider what 10 ounces of gold means in a world where you need net assets (not cash, net assets) of US$4,000 in order to be in the richest 50 per cent of a human population numbering around 6.5 billion.

You idiot, you're a walking advertisement for contraception.

Beer Holiday said...


Thank you!

somanyroadsinvesting said...

Costata: thanks for that link to the FSN article. Thought that was helpful.

Thanks for the response. I understand your logic, however, currently I feel it is a very low probablity way of playing out that way. If the price went down to $200 I think there will be many sellers and plenty of supply to buy. Who has bought all the Maples, Eagles, Phils etc over the past 10 yrs. That is a retail product. Giants buy 400 oz bars and kilo bars.

Victor also mentions these 'Giants' like there is always some massive standing buyer there that will suck it all up. I disagree. Look what happened in 2008 many of the super rich were the ones begging for a bailout. Most large businesses have debt or are financed on a daily or monthly basis on debt they were getting margin calls and having difficulty funding their businesses. Remember Sumner Redstone he was probably a few months away from being bankrupt. He is a multi billionare!

I don't want to argue about forecasting outcomes. I would rather focus the discussion on good economic debate; like in the article Costata posted.


AdvocatusDiaboli said...


You say 50% are f*cking poor, so I better keep my mouth shut?
Although you are probably not aware, you 100% made my point, why in that case not to hold 10ounces, but rather hold the equivalent in real values.
Let's say, somebody has the chance to choose between e.g. education, farm equipment, tools, land, food, water, bike, etc... over 10oz? What is more valuable for your real life and what is speculation on more wealth forthcoming?
Hmmm, having said that, remember Freegold-Valhalla aka India?
Greets, AD

The Engineer said...

Dear friends,

I would like to tell my view of gold at this moment. First of all, I have and have had a relatively nice life and I have found peace in gold.

I came to start understing the financial world after 2008-2009 crisis and found FOFOA`s blog in 2010.

In 2010 and 2011 I have simply turned 2/3 of my "wealth" mostly in gold (have some silver), managed to turn 50% off the books.


Simply put, there`s is NO OTHER investment left at this moment. I live in South America, where RE states prices are in a full and complete bubble. The stock market? Too dangerous at this point. Keep fiat at a bank or bonds? Just understand the debt base system and the fractional reserve banking! Please!

My only and total need is wealth preservation. Nothing more. Inflation is rampant all around the world! Inflation is nothing more than the "legal" default of governments! They will always pursue inflation!

What is GARANTEED at this point, going into gold, is that I`ll have my wealth preserved. Gold can fall to USD200 an ounce and the financial system continue how it is? Sure it can, it is a possibility. But everything will have to drop too, so wealth is preserved anyway.

Will gold fall to USD200 an ounce and everything rise in fiat papers? ONLY IF we are seen the complete collapse at that point! It is not a possibility!

Never will gold fall in value to goods we need from now on. CBs just proved that everyday since 2008. Gold at USD400/oz and the DJ at 20000 points would mean that the time for revaluation of physical gold has come!

So, I personally thing Freegold is years and years away, if we indeed come there, mostly because banks via the political system will block any attempt. If it comes, better. If it doesn`t in my life time, I will have my wealth preserved anyway.

I believe this is the best argument to deal with those who don`t have faith in gold at this point. Skeptics friends, there`s is still time.

Cheers to gold!

AdvocatusDiaboli said...

"Who has bought all the Maples, Eagles, Phils etc over the past 10 yrs."

Me? But more interestingly who sold those? ;)
Okay seriously, the 1kg bars are certainly easy to associate with the continous refined inflowing scrap. But what really wonders me: Where do all the coins come from? When I buy coins, lots of all different years (and I am talking about thousands). Where do those come from? Because the earlier owner must have already bought those with being aware as a store of value. Who is selling those in neverending quantities? That would be much more interesting to know through which hands those went. Ideas?
Greets, AD

Edwardo said...
This comment has been removed by the author.
Edwardo said...


The reason that the gold "price" would fall to some figure like $200 an ounce is because some giant couldn't get his or her hands on physical. The whole point of gold falling to such an absurd price is that the minute a very big player can't get his or hands on their physical, on demand, the game is over. The curtain will be, in effect, pulled back on paper gold (aka as The Wizard of Oz, or, more properly, the Wizard of oz) to reveal that there is no there there. Do you think the very big player who wanted his or her gold before wants it less now? Do you think he or she isn't tapping every resource he or she can to acquire an asset that is about to experience an orbital moon shot?

You are not taking the measure of such a scenario when you offer that all those retail products will just sit around as opposed to get sucked muy pronto into the gold reval event horizon. Consider how the sea acts in the moments before a tsunami hits. It's the ultimate head fake as the tide rolls out only to be followed by the biggest rush of water onshore anyone has ever seen. That's what the fall of the paper gold price to -pick a figure- equates to.

50sQuiff said...

SMRI, you're focusing on the West's 'Potemkin' Giants lauded by the media. If they needed a bailout and got it, that makes them powerful. It doesn't make them truly wealthy. It's the Giants you don't read about, in Asia and the Middle East, who were having sub-$700 bullion flown over to Dubai by helicopter in 2008.

I don't believe the assertion that it's Mom and Pop buying all the Eagles and Maples either. A coin dealer I visit in central London ran out of gold sovereigns during last year's edition of the Euro crisis because of a small number of people buying coins in their hundreds.

Mom and Pop over here in the UK are still into buy-to-let property and savings accounts paying 1%. They're not buying gold sovereigns in bulk. Instead, strong hands are buying national coins for their tax advantages (in Europe) and a perceived safety from confiscation.

60253 said...

We speak in this virtual world? The identity of your Big Trader matters not, do not concern yourself with speculation of events past. It was China! and it still is China. PAGE, the backdoor into the Treasury and now the LME. Yes, China holds a very strong hand and it grows stronger. When will they show their cards? When it suits them of course! Is it better to let your American adversary burn in a paper fire, or to hold out a hand to rescue the buyer of your exports?

The identity of 60253 will never be known, do not concern yourself with such matters. Are we not all anonymous in this place, yourself included? Wise words Mr Ender, we all value gold, but many do not value their fellow men!
I am not a friend of Aristotle, I am merely a viewer of events from a distance, one who sees the pace quicken of late. Irony indeed! Should my comments not be welcome here, say it now, and I will be gone as quickly as I arrived.

Thank you.

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


This small ant/shrimp votes >+1x10^6 yes for you.

But it's not about what the ants think, I think that from my A/FOA/FOFOA glasses.

PS I wonder how the Greek ants will vote?

Thank you again

sean said...

Understanding the reason gold price will crash prior to Freegold is KEY to understanding just about everything discussed on this blog, not to mention arriving at Freegold with your savings intact!!

FOA (06/12/00; 19:48:25MT - msg#26)
The current paper gold world will die (burn) as its value to users erodes, not increases! We have to remember that some 85% (or more) of the long side of our world paper markets will not (perhaps cannot) take delivery of physical gold. If the paper trading price is driven ever lower from new derivative supply, these longs simply "trade out" and take their cash hit.
FOFOA's post Shoeshine boy lays it all out.

Ender said...

Hi again 60253,

Not too long ago the Euro was launched and touted to be – the first currency to break the link between state and currency. This statement once carried weight. As with people, the actions – rather than the words - show the doer’s true character. It seems actions have weakened the once prized broken link. Would you have an opinion regarding this?

My observations on this have drawn me to believe that the current political will is not the same as that which existed 20 years ago. I can’t help but think that US aggression helped to derail the old confidence and change timelines. Early converters of oil for Euro no longer exist. Have you make observations in this area?


Wendy said...

Thank you FOFOA, i missed that ;)

Biju said...

One comment by a good prognosticator blogger - Nadeem Walayat caught my attention.

The fundamental background is that of the world markets about to be exposed to another wave of highly inflationary central bank money printing liquidity. I have covered at length over the past few years to explain why deflationists are wrong in their mantra of debt deleveraging deflation that only really exists in their theoretical models, despite REAL and ongoing inflation, the usual suspects from the mainstream press right through to the BlogosFear still continue pounding away at the non existant Deflation argument, despite the fact that even countries such as Greece that have been in economic meltdown have suffered INFLATION (Greece 10% Inflation over the past 3 years).

Pause there for a moment and think about that. Greece has had 10% INFLATION Whilst its economy has collapsed by more than 16%, whilst average workers wages have collapsed by more than 20%. Greece illustrates the difference between the REAL world and THEORY!

Pat said...

How we can ask such a well spoken and polite 60523 to exit, no matter his true identity ( is that you Bruce Wayne? ). He makes no claims to be other than a current entity with a non de plume of some zip code, and verily doth speak in pointed truths not enmeshed in veiled vernacular.
Welcome, welcome, have you tried the mead?

gideon said...

if you look at greee's stock, bond and real estate markets, they have had PLENTY of deflation. As usual, each camp tends to focus on the things supporting their argument, but biflation seems closer to the truth.

Alien said...


thank you so much fpr your wise words. It is as it is and Europe has really changed a lot.

jeb said...

60253, please stay and share your thoughts.
Two questions.
What is the significance of the LME purchase?

What events have you observed that show the pace to be quickening?
Thank you.

Alien said...


nice to have you here. Do not worry about Costata.
He is simply a quite rude person even if he is well informed.
It would be quite nice to have some people around with solid and well proven arguments as too many here are getting really blind about s
Things happening today ar their interpretation of events is no longer objective. Please stay around.

victorthecleaner said...

Looks like Neo Demokratia is leading in Greece, and there will not be any socialist government.

Watch the dollar index for a considerable dent on Monday morning.


Edwardo said...

Hello 60253,

May I refer to in future you as 16? (6+0+2+5+3=16) It's just easier. Just kidding. I don't want to be called Ed or Eddie, though 60253 isn't exactly a name one can muck with.

On a more serious note, it strikes me that the actions taken by The Chinese so far amount to revealing at least some of their hand.

You ask a question, albeit, it would seem, a rhetorical one,

"Is it better to let your American adversary burn in a paper fire, or to hold out a hand to rescue the buyer of your exports?"

How exactly, if at all, do you see The Chinese helping their American adversaries presently?

Regarding another rhetorical question you posed,

"Are we not all anonymous in this place, yourself included? "

Yes, and yet, I think it's fair and accurate to say that some posters are more anonymous than others. So, while I probably don't know the real names of any of my fellow posters, some have revealed interesting details about themselves. Admittedly I have no way to verify any of those details.

Finally, you wrote:

"I am merely a viewer of events from a distance, one who sees the pace quicken of late."

The pace of what? And how, in your view, is it quickening precisely?

costata said...


Given that this blog was created as a tribute to A/FOA this very rude, well informed person objects to someone using the name Another in their ID if they are not. IMVHO you could not possibly say something as patently silly as the following and be that august gentleman:

PAGE, the backdoor into the Treasury and now the LME.

Conflating PAGE and the HKMEX now there's an interesting imaginary hybrid. It will, however, be both interesting and disappointing to see how many people you can take in.

costata said...


You seem to have misinterpreted that snippet from the World Wealth Survey. There are readers and contributors to this blog who didn't win the sperm lottery that many Westerners take for granted.

Some here have worked very diligently to acquire amounts of wealth that it appears you would disdain. I think it's time to compile a list of your offerings to these threads. I'll call it the Rude Guest Laws in your dishonour.

1. No one who isn't a resident of the EU can comment here on the Euro, the EU or any matters pertaining thereto. (In your words they should "STFU".)

2. No one who hasn't crossed a threshold of gold ownership in (presumably) the thousands of ounces should comment here because they (again presumably) lack the requisite authority.

Sarah said...

Here's one reason why a good friend of mine wasn't surprised by the election outcome in Greece today and why he wasn't surprised by Obama's immigration announcement last week:

It seems pretty convincing to a novice to geopolitical economics like me...

Alien said...


common, dude, you would not obfuscate so easily like a perishable mimosa. See it from the other side: You are argumentatively very good when you want. Unfortunately all things brought up against your concept are often a conspiracy or unfounded. You and some other are never interested in what people in continental EU/EZ hear, read or feel.
And btw, how many times did you call AD names, especially "idiot"?
I do agree with you that he doesn't seem to accept that only gold is the only response to this mess, but except older data you and the rest seem to be in the impossibility to bring up more recent arguments to prove your thesis.
Scrambling for arguments, calling names without considering the details of the present policy in EU is not quite helpful.
And you know what, I still hope you ARE right! But so sad to say it, the whole "conspiracy" is so hidden, that nobody can to make a clear call. NOBODY. Just nebulous assumptions.

I found it so funny to see how naive Blondie asked for the identity of 60253... LOL!!!
I even think Blondie must be a blonde charming XX!!! LOL! Not very cool, I must say.

Alien said...
This comment has been removed by the author.
Alien said...

Bilderberg is an issue but the way these (!!!) people present the whole is detrimental for understanding it.
I don't know if they rule the world or not but they are to influential and they DO conspire together in incestuous/fascist relation.
Otherwise why is nothing being written about their meetings?

Nickelsaver said...

in regards to 60253 a/o 60254, and in keeping with the tongue in cheek analogy of this post, I offer the following:

 Then if anyone says to you, Look, here is the Christ! or There! do not believe it. For false christs and false prophets will rise and show great signs and wonders to deceive, if possible, even the elect. Matthew 24:23,24

Oh and AD,

Get ye behind me satan!

Wendy said...

60253 I apologize for challanging your anonymity.

victorthecleaner said...

Concerning the European debt crisis, here is another idea to think about.

Forget Greece. The two other governments that received bailouts are Portugal and Ireland. The bailout conditions have been strict control of government spending and have been in effect for almost two years now. You haven't heard that much about these two countries (as opposed to Greece) because they have been busy at work, cutting down on government spending among other issues.

Of course, initially their economy shrinks simply because the steady infusion of (inflated) cash suddenly disappeared. But one day, these two economies will recover and resume some growth, simply because inflated asset prices are back to normal and the government (or banks in the case or Ireland) got out of the way. So one day, the news from Europe will be improvement of the economy in Ireland or Portugal.

That would be tough on the dollar and on the official U.S. doctrine that you need monetary policy in order to support the economy.


victorthecleaner said...


As with people, the actions – rather than the words - show the doer’s true character. It seems actions have weakened the once prized broken link.

Are you saying that you think Europe may have given up on the goal of replacing the dollar in short order?

I wonder how this squares with FOFOA's point of view that it was the support by China that has kept the dollar alive. Unexpected? Delayed or given up?

Given up why? Because oil didn't switch to Euros? I thought FOFOA says that oil will switch once the dollar fails rather than the dollar will fail once oil switches?

Also, all this relates to my old question that the European CBs must have known at least since 2002/3 that there was a debt bubble inflating in Europe, and that trade imbalances were sustained only because the savers were accumulating the debt of the consumers. They just let it happen. Why? Because they didn't get it? Because they didn't care? To teach them a lesson? How is that working out?


Aaron said...

I apologize up front for abandoning my usual cordial demeanor, but I can no longer remain silent. AD/Alien, your posts have yet to add anything meaningful to advance Another's position and in fact with each post from either of you this blog is set back on the order of years if not decades. Add to that the fraud of the recently arrived Another posing as 60253 and his complete disrespect to the many that have worked tirelessly to educate us on the financial system we all live within. Pardon my language up front, but this is absolutely bullshit! The thesis of Another has been stifled long enough over the past decade and I for one am sick and tired of the same biting ears that sent Another and FOA into the shadows.

Costata, your input is essential. Please continue.


Anand Srivastava said...

If 60253 was Another, he wouldn't need that number. He never did post directly before, why would he do now. Also it makes sense for Another to contact FOFOA, if he is going to pose as Another, because this is FOFOA's blog, and it will undermine his position.

I agree with Costata and Aaron that it is pretty rude of 60253 to pose as Another. Pose as anybody but Another or FOA, those are not acceptable on this blog.

I guess it is easier to pose as Another because of that special manner, compared to FOA.

FOFOA said...

Hello FakeAnother,

Do you mind if I call you FakeAnother? 60253 just seems so impersonal.

You write: "Are we not all anonymous in this place, yourself included?"

Indeed we are! At least most of us are. We have had a few commenters with established resumes drop by from time to time who used their real names, like Mike Shedlock, Charles Hugh Smith, Rick Ackerman, Bron Suchecki and Gregor Macdonald. Their credibility here rests on credibility they established elsewhere. But for the rest of us anons, we earn our credibility with each word we write.

Aristotle is one of us anons, but his credibility was established through more than a decade's worth of fine writing at another forum, which is why I authenticated him as the original before welcoming him here. As far as Mike, Charles, Rick, Bron and Gregor go, I authenticated them as well, with ease. I certainly wouldn't allow a FakeMish to parade around here pretending to be the real McCoy, and I don't think Mish would like that much either.

So you see, everyone has a choice between two options. Option 1 is that you can be totally anonymous and earn your credibility with each word you write. Or you can go with option 2 and benefit from credibility which you established elsewhere. But if you choose to go with option 2, I must have a way to authenticate your chosen identity.

Had you simply chosen 60253 as your new handle, that would have been a clever pseudonym! But you went further. You did two things in addition to picking a clever name. You put your name down as ANOTHER on the profile page for your Open ID, and you posted six comments written in a style obviously meant to emulate the real Another. Adding these three elements together--along with refusing authentication--actually sets you apart from everyone else who has ever commented here. You chose option 3: to benefit from someone else's credibility established elsewhere without any means of authenticating that you own that credibility. I wouldn't allow that with anyone, let alone FOA and Another. We once had two J's accidentally, and the original J spoke up immediately. So I'm certainly not going to allow a FakeAnother given that the theme of this blog is "A Tribute to Another."

No one knows A/FOA's true identity, not even Aristotle. And the "secret handshake" authentication process won't change that level of anonymity one bit. FOA probably won't even know what the "handshake" is until I put him in direct contact with his old friend Aristotle. I don't even know what it is. It is simply a phrase or something cute that only the two of them could possibly know.

My apologies to anyone who is disappointed by my decision.


Matt said...

Giving the whole background to FG some thought, I know a particular Gentleman who meets fairly regularly with the heads of UK Govt. (the PM and cabinet) on private sector matters and has done for well over a decade (and lord knows who else he meets with).

I have asked him about gold before just to guage his reaction and have gotten a response best described as a mix between '???' and 'who/wha?'

Now, supposing he isn't exposed to the level of thinking that is behind a transition away from USD reserve system,, but if the Heads of Central Banks are appointed by the Heads of State (independently of course!!!) how do we know that the Euro was founded on these principles or that Giants do 'know gold'?

Genuine question - can anyone give me third party examples giant's preference for a gold reserve system?

FOFOA said...

Hello Matt,

Because of your proximity to my big FakeAnother comment, I couldn't resist a response. ;)

At what point do we stop analyzing the theoretical seaworthiness of a ship that has already sailed? If you are struggling with this blog at such a base level that you question whether the A/FOA perspective is just an illusion (after thinking you already understood it), I suggest you look inward rather than outward. And I say that with the utmost due respect.


Matt said...


To clarify - implicit in '..who meets fairly regularly with the heads of UK Govt. (the PM and cabinet) on private sector matters..' is that he meets just as regularly with the heads of the UK private sector.

Blondie said...


Genuine questions with regard to your genuine question:

Where do you suppose the bulk of the 170,000 or so m/t of gold ever mined currently resides? You know, the actual physical stock that never reappears on the market.

And why?

Matt said...

Hi FOFOA - I ask for independent verification because the FG tale is a goldbuggers wetdream,, it's very seductive and I don't trust human nature (epecially mine!) to remain rationally independent in light of that (inward focus for you).

I understand the principles, I question the assumption on the motivation of giants. My assumption is that giants actually benefit from the current system by the very nature of being a giant, so what would they gain my ushering in a new one?

In my eyes FG remains an emergent human reaction to currencies going supernova, a possibility you also accept, but even then I believe that a lot needs to happen before the future unravels out that way too. I truly question any assuredness on the way the future will unwind, the like of which I see on this blog.

"Everyone knows where we have been. Let's see where we are going!" Even Another struggled with that one, despite his knowledge and connections. I put it to you that's it's a near impossible task, even for him.

The only principles we can rely upon are the ones that stand-up in the face of rigourous scrutiny, so please bear with me when I try to apply that.

Matt said...

Blondie - I don't suppose to know. Can you show me?

I would assume that you could take the current know distribution and absorb the unknown amount via the same distribution percentages.

Blondie said...

" My assumption is that giants actually benefit from the current system by the very nature of being a giant, so what would they gain my ushering in a new one?"

Nothing. You haven't read the post and the comments above?

From post 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. They don’t need the shrimps to tell them anything..."

They aren't ushering in any new system; that's happening regardless.

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