Wednesday, October 31, 2012

An American Horror Story

An American Horror Story for Halloween...

Dear Diary,

Today I awoke to the news that the dollar is no longer acceptable in settlement for the purchase of foreign goods from foreigners. This news was immediately disconcerting because I have hundreds of thousands of these dollars saved up over the past 30+ years, and I'm planning to retire soon.

The President was on all channels assuring us that this is not a big deal, and certainly meaningless unless we're planning to buy a foreign car or travel abroad. My dollars, he said, will still be "as good as gold" here in the United States. The US, he said, has the most important economy in the world, and the dollar is our currency. The government, he said, would not miss a beat. The government, he said, can never run out of money. Our dollars are safe.

The President said that this news today was only because of the international money speculators who, because they thrive on crises, help to create them. He said that these "speculators" have declared war on the American dollar. He said that this is extremely foolish because the American economy has the largest GDP and also because the American government can never run out of money.

So, in response, he has directed his people to halt all international payments except those deemed to be in the vital interest of the United States. And for those deemed vital, he said that any government agency can independently authorize payments of any size needed to keep the vital foreign goods flowing in. America won't be held hostage by either our own internal budgets or foreign currency exchanges, he said.

I'm not generally one to panic at anything, but even as reassuring as the President's words were, I started to panic. So after a little reflection I decided that I needed to call in sick to work and run out to stock up on a few last-minute necessities, just in case. What I found was deeply troubling.

Many stores were simply closed for the day, and the ones that were still open were overrun with people who, I guess, had the same idea as me. Most of the stuff on my list was already gone from the shelves. So I went back home to call my broker.

I've been talking about a dollar collapse and buying gold for weeks now. Ugh. And I've been reading about it for months, but I was so sure that this was just one of many possibilities. And even if it happened, all signs seemed to be pointing to 2014 or later, so I was goddam cocksure that I had plenty of time before making a big move. To my credit, I did at least have my broker sell all of my bonds and put the proceeds into cash and money markets, just so I could move quickly into gold on a good dip.

I called my broker to make sure it was still liquid, what with the news and all. He said it is, as long as I'm not planning an international transfer. Next I called the largest gold dealer in my state, the one that had been recommended to me. But he said that he is only buying today, not selling. He said he couldn't make any sales because his suppliers aren't quoting sell prices today to replace his inventory. He said I should try again tomorrow. I tried a couple more dealers and got the same run-around. WTF?

So here I sit, writing this pathetic entry. I'm not sure what comes next, and I am literally beside myself in confusion, dismay, dread, despair and regret. I cannot decide what to feel. I have this deeply foreboding sense that I really screwed up this time. I guess I'll just have to wait and see what tomorrow will bring. But I think I already know.

The dollar is crashing abroad and my government's response is going to compound the problem taking it to depths never before imagined in a global reserve currency. My retirement money is already as good as gone. It's not gone, but it is now trapped while being sapped of all real value. It is trapped because I waited one day too long, even though I knew what I wanted to do with it. This is the real world, and there is no reward for knowing, only for doing. I didn't do, and now I will have to face whatever reality delivers while knowing what I knew. What an absolute horror.


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Jesse McL said...

What was the quoted buy price?

Blondie said...

Less than you're gonna be happy with.

罗臻 said...

Phat Expat said...

Finally, a post I can easily understand! Thank you FOFOA!

Of course Blondie comes along and ruins it with:
"Less than you're gonna be happy with."

!@$#@$%@% Which is probably true if anything less than $30-50K. ;)

On another note, RMB is hitting 19 year highs against the USD. Am in Hong Kong now and heard discussion of RMB direct settling cross-straits; my goodness. Well, just gonna have to buy me some more gold.

Notice the timeline mentioned above in this post. Hmmm... Earlier than 2014. Probably not a bad (S)WAG.

duggo said...

How about a FOFOA T Shirt with:'

"There is no reward for knowing, only for doing."

Robert said...
This comment has been removed by the author.
Barry Michaelmore said...

Totally, duggo!

Winters said...

Nice. Although I don't get how this

"the dollar is no longer acceptable in settlement for the purchase of foreign goods from foreigners"

reconciles with this

"he said that any government agency can independently authorize payments of any size needed to keep the vital foreign goods flowing in."

The latter is a reference to the Executive Order from March 2012, but what is the point of printing more USD when the foreign counterparties are no longer accepting the USD as payment?

Blondie said...


I stated earlier (on the last thread): ”I maintain that you guys [costata & VtC] are attempting to bring some things through the focal point that just doesn’t make the transition (relatively recent stuff too), and this is distorting the view“, and I would like to outline some of those things.

Michael H,

”Do you think that restriciting credit expansion to the ammount required for 2% consumer price inflation would be an 'arbitrary restriction on potential economic growth'?

I see it differently, in that setting the 2% inflation limit would allow whatever amount of credit creation as the economy requires (and 2% more for a margin of safety).“

My comment was in response to VtC saying:

”I am with costata when he says that the CBs will probably control the credit volume created by the commercial banks (I hope I am right that this is what he said). Why? Not because the bankers were the cause of the financial crisis, but rather because freegold will make inflation of the effective money supply immediately visible, and the CBs will want to took good and preside over a stable currency (relative to gold). So they will tightly control the credit volume created by their commercial banks, and they will probably structly regulate consumer credit, etc.“

Any CB restriction on commercial bank credit creation appears arbitrary from my point of view, because the banks themselves will self-regulate...

costata said:
”the solution, in principal, is dead simple. Make sure the loans are repaid. In other words maintain the quality of the loan book across the whole banking system.“


I totally agree, but achieving this does not require CB control/regulation; it all stems from the commercial bank’s desire to make a profit, and the fact that they will now be attempting to do so in a new paradigm, AG.

Both costata and VtC repeatedly mention banks making “consumer loans”, “consumer lending”, and “close-to-consumer loans such as government debt“. This is important, because AG no bank will be in the business of extending credit to net-consumers.

BG yes, AG no.

BG this occurs because of demand… savers demanding securitised debt to save in.

AG this demand from savers is gone (into gold), and banks are stuck with any non-performing loans. That’s terrible business, and no banker is going to do it. AG banks are self-regulating (back to their regular business model of extending credit only to those who are capable of performing on their loans, the net-producers) and profit-constrained (there are only so many eligible for this credit and only so much they can borrow because they themselves are constrained in how much they can profitably produce). There is no extension of credit outside these parameters. This applies across the board to all prospective borrowers, including governments.


Blondie said...


AG there are no more “consumer loans”: all credit must be offset by real economic growth, and this growth will both follow and be larger than the growth of the effective money supply (because banks will obviously only extend credit to those who are able to generate surplus in excess of their credit repayment requirements).

The borrower's capacity to create real economic growth effectively creates the new money supply as and when this capacity is committed to the service of the credit extended.

Money is credibility is money.

VtC said:
”The other reason why Blondie's idea won't work is this:

1. Strong commercial bank lends irresponsible to consumers.
2. Consumer prices go up.
3. CB counters this by selling gold and cancelling base money.
4. Inflation goes down (albeit in a different area).
5. Someone other than the irresponsible lender runs out of reserves first.

Problem: Consumer prices are still higher (because no. 1. is still in operation), effective money supply is still elevated, and CB has less gold than before.“

Well that whole argument is predicated upon point #1 being true, and I’ve just demonstrated why, AG, it is not.

AG the commercial banks will meet the criteria for costata’s simple solution completely unassisted, which is why I see any theoretical CB restrictions on commercial bank’s capacity to lend as being arbitrary.

anand srivastava said...

"Less than you're gonna be happy with."

I think that is any way true.

But the important question is not that.

The important question is, if you put in 100USD now, what you will get at that point. Which asset class will perform best in the crisis vis-a-vis the price now.

I believe Gold will knock everything out in performance, even though it will still be much less than after revaluation. The only question is whether you have access to several coin shops around you. One shop is not going to cut it, as it is likely to pocket all the profits, and leave you with much less money.

The reason is that giants will be looking to buy gold at that point, and if you are able to chose whom to sell to, you will be able to find good deals even during the crisis. Just use very small denominations.

In Delhi, there are literally thousands of jewelry shops. You can find one every corner. If you will search around you should be able to find very good deals, although not as good as after revaluation, but better than almost everything else.

Winters said...

OK - someone whispered in my ear I was being too nit picky ;) I think I get it now.

I awoke to the news that the dollar is no longer acceptable in settlement for the purchase of foreign goods from foreigners

really means the dollar is rapidly devaluing but not yet worthless in the international space and this is just MSM spin the guy sees on the news. I see how I went wrong

The reference to the speculators was good too - ala bans on shorts in Euro markets and if I am not mistaken also aludes to Nixon's 1971 speech on August 15!

Motley Fool said...


I really enjoyed this post.

I suppose the best bet would be to find ten or twenty of the bluest chips there is and go all in at that point.

@Michael H and VtC

I posted replies in the previous thread, before i saw this post.


Michael H said...

A few of points before I get to replies:


1. Regulation of banks is not a moral issue, but a practical issue. The discussion is not whether the EEEVEL bankers need to be regulated into oblivion but rather what kind of regulatory framework will work best AG. And having zero regulations still counts as a regulatory framework. FOFOA has expressed the view that banks will be like utilities AG. While FOFOA may not mean to imply anything about regulation, utilities do tend to be heavily regulated.


2. I think the issue of regulating the banks is more important for a currency union that it is for a single-country currency. For the latter, the FOFOA “eunuch” quote applies. A good example might be the USA. If the US government tries to spend beyond its means it will find that the extra money does not generate extra purchasing power. And it is likely that the pressure to expand credit beyond what is necessary would come from the government.

For the former, a small country in a large currency union might be tempted to expand credit volume and thus increase its lifestyle by riding on the coattails of the credibility of the larger union – like Greece has done. Two ways to prevent this from occurring again are strict control over fiscal policy and control over credit creation. While a country might be loathe to give up control over its fiscal policy, perhaps it is more likely to give up control over its banking sector, as that area more logically comes under the purview of the monetary authorities.


3. Ryan posted this interview, and Michael Dv posted this quote from Draghi in the previous thread:

A lot of governments have yet to realise that they lost their national sovereignty a long time ago.

But quoting the whole passage paints a completely different picture:

A lot of governments have yet to realise that they lost their national sovereignty a long time ago. Because, in the past, they have allowed their debt to pile up, they now need the goodwill of the financial markets. That sounds like a paradox, but it is nonetheless true: it is only once the euro area countries are willing to share sovereignty at the European level that they will gain sovereignty.

Draghi might as well directly referred to the USA. This reminds me of the famous Bill Clinton story. The best reference I can find on short notice is

... Clinton asks the rhetorical question "You mean to tell me that the success of the economic program and my re-election hinges on the Federal Reserve and a bunch of fucking bond traders?"

Michael H said...

Motley Fool,

The required circumstances would be, store of value and medium of exchange separate. Locals income in the medium of exchange. The bubble would need to be locally fueled. No restrictions on exchange between medium of exchange and store of value. Non-hyperinflating medium of exchange, though this last condition can be dropped if need be.

I presume you refer to Jamaica. I am not aware of any such bubbles there, are you, or is anyone else for that matter?

Jamaica would be one example that was named here, but I’m sure there are others. Unfortunately, I personally do not know where to find the information that would answer this question, or whether we would find the presence or absence of bubbles.

I agree with your preconditions on an applicable scenario.

I think perhaps here you are indicating a preference as opposed to seeing what is. You are implying a number of things. First, that you would prefer markets that are always in equilibrium. Second, that any disturbances from this equilibrium has serious effects. And third, that we should exercise force on markets to prevent any disequilibrium.

I was only taking issue with the hyperbolic language, and pointing out that a bubble does not have to be massive to be detrimental. The dot-com bubble and the housing bubble of the 2000’s were massive, but there were also more localized housing bubbles in the US in the late 80’s.

Jeff said...

FOFOA: Credit money is borrowed into existence from the banks. This is what banks do. They expand their balance sheets to satisfy the debtors and for that risk they earn interest. They take the debtor's promise onto their ass(ets) and create liabilities that can be spent like base money created by the government.

This system will continue in Freegold with the exception of the securitization process. The securitization process allows the banks to offload their assets (risks) to savers relieving them of the need for future prudence. Securitization, or structured finance, was born in the 1970's, expanded beyond mortgages in the 80's, institutionalized for sub-prime debtors in the 90's and blew up in the 2000's...

Freegold simply offers a different way of controlling credit expansion that is more effective than the modern Austrian suggestions of making money harder and/or limiting or eliminating fractional reserve banking. There is no need for all that convolution, just separate the store of value so it cannot be fractionalized and then non-productive credit expansion will be as limp as a eunuch (which comes from this comment by yours truly). Snippet:

But debt itself is not the cause of our problems today. Today we have a situation where the vast majority of excess production value (excess capital) is enabling massive amounts of global malinvestment through new debt creation. That has peaked and is now contracting. But the problem is not the debt itself. The problem is the enabling effect of excess capital not having a viable alternative that floats against the currency. The problem is the lack of the adjustment mechanism of Freegold. There is no viable counterbalance against uncontrolled debt growth today. So we are only left with credit collapse and hyperinflation of the monetary base to clear the malinvestment from the system...

Banks can provide all the credit the debtors need beyond their ordinary income (and that includes governments). There is no fundamental economic need for the savers to contribute their surplus earnings through debt securitization as a store of value. All that does is encourage unemployment.

The savers have no business being counterparty to the debtors.

Michael H said...

Speaking of horror stories, GLD has an unprecedented 100% puke:

(should save a screenshot of this one)

Wil Martindale said...

I like this post. The one interesting thing that comes in "between the lines" is the local coin dealer's business model. My local coin dealer see's the "price of gold" as the "official spot price" on his computer screen. He buys from the public at that price, and sells to (whomever) at that price plus a small cash premium. Though he handles real physical gold all the time, his business model is still a byproduct of the current gold market COMEX pricing mechanism.

The point is, though I look for a deeper understanding, he does not actually realize that the "spot price" of gold is the price of a hybrid gold derivative that is maybe 1 part physical gold to 200 parts paper.

So in your story, what is really happening is that the "price" of gold is plummeting on our computer screen as the current "gold market" collapses. This is what COMEX (as Kyle Bass fully understands) and the BB's are BANKING ON, cash settlement as PERCEPTIONS of true physical gold "becoming worthless" creating a run on cash settlement of claims. Another foretold this exact scenario, with which I agree.

That large gold dealer may depend on suppliers to quote a sell price, but the local coin shop is fine with whatver the Kitco / Comex daily chart says ... to a point ??

So my point is ... I think the local coin dealer is in for the real paradigm shift. I think the paperhead sellers will be all shook out by then and the real gold believers / holders / freegolders will hold fast.

Being "poor" as in a shrimp, I am only concerned with my local coin dealers inventory in the days before the reset. I have far less cash than required for minimum bullion purchases, nor do I believe that any gold will be "shipped" during the crash anyway.

It will be a matter of hours, and a short drive for me, to exchange cash for coin on that day of the "president's speech" if you will. And that is the window of opportunity, those few hours, and nothing more, that is IT.

Because my dealer will at some point say to himself, "there's no way I'm selling any real gold at X% over spot." And there be some use for negotiation skills, as timing dictates.

But at some point, before he makes "the turn" he will, as his business model dictates, release physical coins during this decline in which no one is rushing in to buy "collapsing physical gold".

This will be the "blood in the streets" opportunity of a lifetime for the world's few crazy contrarians, we freegold shrimps, who see (and have the reeady cash available to purchase coin) these final hours before the reset, as the world slowly realizes that it's the pricing MECHANISM that is collapsing, not the value of the gold itself.

As I said, your story unfolds from the perspective of the sheople, and what I read between the lines tells much more :)

Michael H said...

costata, victor, Blondie,

I totally agree with VtC. You are dead right on the UoA issue. Just as hopeless as trying to use gold as an MoE. How's this for a thought? Gold fails as MoE because it is too effective as an SoV. The SoV properties outcompete the Moe and UoA properties.

This is a thought I had not seen before. For example, in ‘Honest Money’

FOFOA discusses the ‘money quadrangle’

which has the MoE as currency, the SoV as gold, and the UoA split between currency and gold depending on the timescale. Are you suggesting that gold would not be a good UoA on a long timescale? Or only confirming that it is useless as a short-term UoA?

One final point which I think may be quite important. Consumer lending not only expands consumption it shifts it forward in time e.g. a 3 year loan for the purchase of durable consumer goods shifts a +3 years ahead cash purchase to the present.

This seems to me like ‘conventional wisdom’. Is it really true?

Unfortunately I do not have a solid critique of this viewpoint at this time, only a vague feeling that there is more to it. As in, maybe what the consumer loans do is not so much ‘pull forward’ demand as ‘redistribute’ current demand. Or perhaps consumer loans partially affect demand and partially contribute to higher prices. Sorry I have no more coherent thoughts to offer.

FrancisHoard Coppola said...

I took Blondies comment to mean the buy price AT THAT time in this scenario(fg not quite there yet) would be way lower than the eventual FG valuation (the 55k number)let's just throw a dart and say it was $10,000- so if you didn't prepare/understand right, you may be tempted to sell at this point (not the guy in this scenario, but a person who did have phyz)thinking "woohoo, what a deal!"...NOT.

Michael H said...


I appreciate your outline of the ‘focal point transition’ view. I think part of the discussion stems from disagreement as to what the transition will look like.

In my view, the spontaneous ‘focal point’ transition you describe, where there is no slip-back into the old paradigm, seems to require a dislocation in world affairs to wipe the slate clean for the new system. To fully accomplish the transition, then, the dislocation would have to be severe enough and prolonged enough that cultural memory is re-set.

I am of the view that such a dislocation will be avoided if possible, even to the point of supporting the current system for a while longer to allow time to prepare the way.

(Note that I say “avoided if possible”, recognizing the fact that the wheels could come off no matter what anyone tries to do to avoid it. I don’t view that as a favorable outcome)

Michael H said...


AG this demand from savers is gone (into gold), and banks are stuck with any non-performing loans. That’s terrible business, and no banker is going to do it. AG banks are self-regulating (back to their regular business model of extending credit only to those who are capable of performing on their loans, the net-producers) and profit-constrained (there are only so many eligible for this credit and only so much they can borrow because they themselves are constrained in how much they can profitably produce). There is no extension of credit outside these parameters. This applies across the board to all prospective borrowers, including governments.

AG there are no more “consumer loans”: all credit must be offset by real economic growth, and this growth will both follow and be larger than the growth of the effective money supply (because banks will obviously only extend credit to those who are able to generate surplus in excess of their credit repayment requirements).

Can a net-producer apply for a consumer loan?

If a wage earner wants a loan to buy a car, the bank would do their due diligence and ensure the credit-worthiness of the borrower, then make the loan and carry it on their books. So I think we would see consumer loans AG.

The loan does have the potential to turn bad if the wage earner loses his/her job (in the event of a recession, for example). Then it would hit the bank’s capital.

Does this loan have the potential to cause consumer price inflation? I would have to think about this one further.


Can governments force their debt as savings on a portion of their population, as in government pensions, or bank capital requirements?

This would be less of a problem in a single-country currency like the USA because the purchasing power of the currency would drop fairly quickly in reaction. But in a currency-union country like Greece, this could allow the government to sweep deficits under the rug for long enough to cause problems.

byiamBYoung said...

"This is the real world, and there is no reward for knowing, only for doing."
-FOFOA now in my permanent collection of quotable quotes.


freegoldtube said...

This post brought back to memory Another work of fiction:


Motley Fool said...

Michael H

I would call both the housing bubble of the 2000's and dot com bubbles protracted and ludicrous. Just because we are facing the biggest bubble in history doesn't mean these are discountable.

I would also like to see data on similar countries, but also do not have the information at hand.

Can any others suggest target countries for a study?


Michael H said...

Motley Fool,

Yes, I was using the dot-com bubble and the 2000's real estate bubble as examples of 'protracted and ludicrous', but offered the late-80's local real estate bubble as one that was not ludicrous but still caused economic harm.

Sir Tagio said...

@Fofoa, good scary story!

@Wil Martindale,
I don't get your scenario. If you have cash, why at are you waiting to purchase in "the last days"? Two of the lessons I draw from the story are: (i) the "bargain hunting" mindset is lethal and (ii) act now, while you still have the chance. When it happens, you don't have to visit your local dealer, you can remain calm.

Jesse McL said...

@FHC I took Blondie's comment to mean the price would be around $200. That is, may the strong hands prevail!
@Wil M above says it brilliantly IMO. I would only disagree with him in that I think the window actually available to you will tend to zero :)

Peter said...


Negative real window - FTW!

Edwardo said...

VTC wrote:

"But its real value will not be constant. And this is not just some technical side effect, it is actually the main point!"

Would it be fair to say that gold is in a dynamic equilibrium with MOE and items in the physical plane, i.e. commodities, finished goods, etc, and that while everything is floating, gold is, relatively speaking more stable, or if one prefers, floating less?

Edwardo said...

My last post should have used "will be" instead of "is".

sean said...

Great story FOFOA! Nice incorporation of peak exorbitant privilege

So, anyone like to hazard a guess what happens on day 2?

Let's assume it's not total carnage - after all, businesses still have to try to keep operating even as fear of inflation is increasing. That fear, of course, is just fuel for the fire. I wonder how long it will take to overcome the challenge of buying and selling goods in a hyperinflationary environment?

And Y said...

FOFOA 2082!

H. M. Socialist said...

Dear Diary,

Today I awoke to the news that, in view of the recent breakup of the Euro, the president had come to his senses and decided to peg dollar price-o-gold at $10,000 USD and further that we were confiscating the German gold hoard. I found this news to be extremely validating and couldn't wait to go on the Internet and gloat at the freegolder scum!

I snorted some coke (as I do each morning) and then booted up my 'puter to check out how my miners and gold derivatives were faring. Sure enough, King World News finally came through. My paper-gold-wealth had grown to staggering new highs in newly gold-backed dollars. Immediately I went on zillow to find a property that might be suitable for my vast plantation and servants.

If only these freegolders had understood in time that money is not credit, or a thing in your head. It is GOLD that is money (and ostensibly gold-backed government paper). BIG DADDY GUBMINT MAKE MY MONEY HARD FTW!!!!!


Dante_Eu said...

Nice to see those familiar faces in the video. Well done freegoldtube!

Blondie said...


Yes, you read the meaning I intended about the price at that time.

Blondie said...

Michael H,

”If a wage earner wants a loan to buy a car, the bank would do their due diligence and ensure the credit-worthiness of the borrower, then make the loan and carry it on their books. So I think we would see consumer loans AG.“

This “wage earner” is a net-producer over the timeframe of the credit extension agreement (or the bank would not extend said credit), so I would suggest the term “consumer loan” needs reconsideration as it is misleading as to what is actually going on in this instance.

Lots of terms need to go under the microscope.

Tekin said...

In 1997, while the freegold price target was around $30,000, the maximum attainable paper gold price was estimated as $10,000+. I am disappointed to see that no inflation adjustment has been applied to that number! :)


Date: Sun Oct 19 1997 09:42


You should not think they are dumb! Invest in gold mines, will you? Notice how quick the Australian CB hinted at taking "gold in the ground" if needed. This was said after their sale! The nature of the coming crisis will make the taking of investor property a piece of cake. You see, because gold is a commodity, you will be compensated at the commodity price of return + a fair profit, of course.

How much further can they take this? The world private stockpiles that could be sold have been. The CBs are heavy into their own stuff now and are over their heads if they had to make good on all the private deals ( read my other posts ) . The economic game is ending now and has been from the start of 1997! Watch closely as the world currencies and markets fall one by one. Watch in absolute wonder as the demand for oil plunges and it's price goes thru the roof. Yes, oil stocks will crash with the markets. And gold? You will never know it's price. It will stop all trading as it slices thru $10,000+.

shortrib62 said...

FOFOA, or some factotum, can correct me if they see fit, but it seems that, however obliquely, our esteemed blogger is putting out a missive that is embedded with a strong hint as to the onset of HI in the U.S.A. and, by extension, freegold.

Motley Fool said...

Michael H

So we agree, that mis-priced assets (aka bubbles) are bad, we just don't agree on how to avoid them. :)


Ps. This relates to my reply to VtC in the previous thread, if you missed that.

Motley Fool said...


I think it's best to view it as fiction and consider the reason for choice of date to make this piece relevant to today.

Fiction is nice of it semi-realistic and the reader can relate.

FOFOA doesn't do dates anymore, he has learned his lesson I think. ^^


Tekin said...

It might also be interesting to note that the oil price was around $20, while Another valued gold at $30,000. (Date: Sun Feb 08 1998 09:51 ANOTHER (THOUGHTS!) ID#60253:)

This implies a gold/oil ratio of 1,500 versus FOFOA's most probable ratio of 550.

Watching how Jim Sinclair raises his gold price targets gradually so as not frighten common people (his initial target was ~5xx), I tend to believe that most people make as conservative estimates as possible, while keeping their followers in the golden game. :)

shortrib62 said...

Let me be more clear: A strong hint as to timing, which is something of a first.

shortrib62 said...

And a happy halloween to you too.

Boner Parte said...

It's not often I've wanted to come in third

And Y said...

Day 2

Wife of And Y: "Why didn't you buy MORE?!?"
And Y: "You said to STOP!!!"

K said...

Is Equador the tipping point to Freegold? On Zerohedge, I know, I know... Equador is repatriating 1/3 of their gold... which really amounts to nothing but its the simple fact... Will this start a frenzy for everyone wanting their gold under their own roof? Get a couple of big entities bringing their gold "home", where ever that may be, if anyone doesn't get theirs... instant freegold?

byiamBYoung said...


Warning: I'm still learning, so I am not a fount of knowledge (and I've been here for three years!).

But your question, is Ecuador the tipping point? I think nobody knows what the tipping point is. Surely, if the trend intensifies of sovereigns choosing to pull their gold close, it is likely a signpost on the way to the transition. It could be a significant signpost.

My uneducated guess is that Ecuador is front running the whole shooting match, and possibly for reasons other than the possibly looming transition. Their move could be completely unrelated.

I do sense, though, that these drumbeats are getting closer together. I see daily signs that we are moving in the direction of a transition, and zero signs that we are moving away from one.

Maybe someone here who has a more solid footing will comment. However, I wake up every day and look for data that weakens the freegold concept, and generally find nothing but affirming signs.

Give me an Ecuador and a half dozen larger countries pulling their gold close in a very short period of time, and I'm dragging my family into hunker down mode.

My $0.02... but then again, that's fiat ;)

Hobgoblin said...

I tend to agree with you. I also get the sense that central banksters are resisting this movement as well as they can. the drumbeats you hear are typically from politicians and/or courts trying to force the respective central banks to "bring it home". I watch this trend closely ( in as much as any truly accurate information is available) as I fear the current FOFOA post may come true sooner than any of us like.

Blondie said...

Perspective is everything.

The Moon Cannot Be Stolen

Ryokan, a Zen master, lived the simplest kind of life in a little hut at the foot of a mountain. One evening a thief visited the hut only to discover there was nothing in it to steal.

Ryokan returned and caught him. "You may have come a long way to visit me," he told the prowler, "and you should not return emptyhanded. Please take my clothes as a gift."

The thief was bewildered. He took the clothes and slunk away.

Ryokan sat naked, watching the moon. "Poor fellow, " he mused, "I wish I could give him this beautiful moon."

Michael dV said...

I have a similar outlook

Harpua said...

An underrated and forgotten album, good choice.

Michael dV said...

I have no trouble playing the fool (I try not to get in other Fool's way).
dates...I was already wrong the 10/25/12 would be Blackest Thursday so I'll give another...end of 2012.
In fact I have promised myself if the direction is not clear by year end I am taking a few days off to navel gaze and reassess the whole GFC thing. I have completely fled the markets and I doubt I'd put much at risk but I might let up a bit and make more loose plans for the longer haul. One needs to determine how much sacrifice one will put oneself (and family) through just to prepare for a marginally better future. No point in going on a peanut butter diet if all you are doing is slightly altering how many future ounces one will have by a few percent.

byiamBYoung said...


Yes, but give Ryokan a wife, four kids, and a few dogs and qats, and his behavior would change dramatically.

Perspective, as you quite correctly note, is everything.


Aaron said...

I see your Moon Cannot Be Stolen and raise you one Miracle of Mindfulness.

Michael dV said...

In spite of your well known and often stated contempt for the musings of this group we seem to be in agreement in one thing: we are likely to see a moment of Golden instant when we will know if our financial future will be heaven or Hell!!!

shortrib62 said...

Thanks for your input, Michael dV. My view is sometime by the middle of the decade the HI genie will be released-or is it best thought of as an escape-from its glassy enclosure.

From where I sit, the sooner the proverbial button gets pushed the better.

Indenture said...

"'Need' now means wanting someone else's money. 'Greed' means wanting to keep your own. 'Compassion' is when a politician arranges the transfer.'" John Stossel

/SleepingVillage/ said...


When I read your thoughts I'm often reminded of Zen and the Art of Motorcycle Maintenance

I have almost mentioned it a few times in days passed. Today was a good day:)

Unknown said...

Let me comment from a dealers perspective.

The reason I became a dealer is to be able to profit from gold and silver transactions. However, my profit is not necessarily dollars. It also is ounces.

I need dollars to keep my business going. Staff, rent, advertising etc... I need dollars from profit to buy my groceries and take care of my family. After that, I prefer ounces.

Why would a dealer like myself even consider selling ounces in this scenario? I bought this stuff in the first place for this exact reason. I will not be selling it for dollars. I will be selling it for land, commodities, whatever I think is a better bet at the time than bullion. If I must convert it to dollars, than I will, but why would a dealer (or a foreign exchange trader) take your devaluing crap for the good stuff?

RJPadavona said...

Happy Begoween!.... What an appropriate holiday in a world full of rent-seekers.

Loved the video, FOFOA and freegoldtube. That Zombie Nixon pic almost inspired me to go vote and use that as a write-in candidate for Prez........ ALMOST ;)

Phat Expat,

When you're not busy watching 'Debriefed' reruns, keep your eyes open for the golden business cards that are circulating over yonder in "the land where all roads lead".


PS: Kids, stay away from spooks and Haunted Houses (especially if the name 'Sandusky' is on the mailbox ;)

freegoldtube said...


Thank you. Had some fun with that one.


It occured to me that the Zen Master, upon removing his clothes, could have given the thief the moon, simply by turning his back on him.

/SleepingVillage/ said...

As far as Ecuador goes...

I would like to think that this is at least the start of the tipping point. I do believe we will be hearing more of the same in the near future.

I say, bring it! Seriously. The humans have had plenty of time to get their shit together, it's GO time.

Blow My Mind

Phat Expat said...

"When you're not busy watching 'Debriefed' reruns... golden business cards..."

Before I depart for Kowloon (and to pick me up some gold and other stuff)...

LOL on the first; I preferred the image I held in my minds-eye. It was much more flattering for the de-briefed. ;)

Now there's a trend I could get behind! Of course, the chance of me ever becoming a highly placed Chinese official 'worthy' of a bribe, is nil. Back to the salt mines... Or maybe Times Square for an awesome steak (far better beef than anywhere on the Mainland; go figure). :)

罗臻 said...

No offense to Ecuadorians, but Ecuador doesn't count. When a "real" country inside the U.S. alliance demands its gold, it will mean something. I don't think this will be the tipping point though, because the Europeans and Americans aren't going to hand power to China. Or if it does happen that way, it will be orchestrated. "Whoops, gold is $XX,XXX per ounce. I guess we Americans and Europeans should use our 15,000 tons to rebuild the global monetary system."

vizeet srivastava said...

Nice story and the message "This is the real world, and there is no reward for knowing, only for doing."

I like your posts and try to understand as much as possible but I am quite bad at reading. This one is an exception...

I think the reason China and other countries are not buying US debt is production is struggling to meet consumption. Production consumption problem is now at global level. The same thing happened with Europe when Euro was introduced and slowly Europe stopped supporting US economy. I was seeing grain inventory in India I saw that inventory was consistently reducing since 2002 till 2008 when India imposed trade restrictions. And trade restrictions continued till 2011-12. China also imposed trade restriction on food grain export for few years. I think if Producing countries were able to meet demand then there was no need for China to stop buying US debt.

Another thing is that today China is more important nation than US because it is biggest producer and second biggest consumer and world's fastest growing economy. If most of the world transactions happen with china then why should they use Dollar and that is one of the reason why countries are getting into currency swap agreement with China. Other reason for more currency swap agreements is growing deficit in many countries.

Wendy said...

OMG DP thank fucking someone for the KISS principle!! (Keep It Simple Stupid) otherwise I might loose my mind reading this shit.

or reboot, as it suits me ;)

costata said...

Michael H,

Responding to your comment at October 31, 2012 8:06 AM above.

Are you suggesting that gold would not be a good UoA on a long timescale? Or only confirming that it is useless as a short-term UoA?

I don't remember ever giving any thought to timescale for a UoA. I tend to think of the UoA issue in terms of contracts, production cycles etcetera. So the timescale is always finite and generally not a long period. I would argue that a Stable MoE = Reliable UoA so MoE is the driver in my opinion.

Now that I think about it gold currency may not be a UoA at all (and never was) within a currency zone. If true then timescale is a moot point. In reality the UoA is actually the number and name of the unit stamped on the coin.

The proof of this assertion is that the melt value of the metal can diverge from the face value of the coin and the contractual obligations that reference the UoA don't move with the value of the metal.

Sellers may want more units of the currency per unit of goods if the MoE is inflating. But that response references the MoE movement in value not UoA. Transacting in gold with no face value stamped on the gold makes it a barter transaction in my opinion. As there is no money involved then concepts like UoA and MoE are irrelevant.

International trade needs to be looked at quite differently. Ideally the UoA used in these transactions needs to be rock solid and steady. Hence the Triffin Dilemma.

Incidentally this is sharpening my focus on how a commenter named 'Paul' got so far off the track a ways back in obsessing about the UoA function. It's a blind alley. Thanks for raising these questions.

For other readers the following was the response from Michael H to my assertion that offering "pay no interest for X years" deals timeshift future demand into the present:

..maybe what the consumer loans do is not so much ‘pull forward’ demand as ‘redistribute’ current demand. Or perhaps consumer loans partially affect demand and partially contribute to higher prices...

Agreed. Consumer loans do all of those things.

I think those no-interest-for-X-years deals were designed for a specific purpose. To encourage people to think "Why wait?" Consumers didn't perceive them as having any interest penalty.

I think this is the crucial point about this topic from my page 2 comment on the previous thread at October 30, 2012 11:20 PM:

I noticed in Australia that the 1-year-interest-free loans offered here a few years back gradually metamorphosed into 5-years-interest-free.

I watched those offers go from one to two to three to five years as the debt-fueled consumption boom progressed in Australia. By implication the 1 year deals targeted people who could have paid cash in 1 year with the "Why wait?" hook. Once they worked through that group the marketers went after the 2 year cash strata and so on.

But as I said earlier I agree consumer loans have many impacts on the market. If you put all of these types of loans under a single category called "consumer lending" collectively these loans affect consumption patterns in many ways.


Wendy said...

no offence intended to anyone, but a rule of "pontification" has not been defined (sigh)

Simon said...

Thomas Jacob on the Swiss Gold Franc Association.
Listen from 6:48 - 8:14. Sounds just like Freegold.

Phat Expat said...

I'm not sure, but I got this feeling, we are close to dramatic changes...

Of course, it could be the Dim Sum I had in Central area too. Whew... ;)

DP said...


+1 for kissing my happy place

costata said...


Hilarious, TY

Wil Martindale said...

At some point in time, after you have played the 401K game to the fullest, frontrunning the bullshit, then you cash out, take the USG hit :( and convert 75% to physical at prices of 1250 to 1600/oz., and the only cash reserves left are for dire emergencies, and your income barely meets you debt obligations ... you may decide to wait out the crash, and take a chance at doubling your stash for half the cash. Everybody's scenario is different, we don't need to "understand" each one.

It is good to hear the perspective of "a dealer" who understands the deeper meaning. I don't think all do, but many may, as I said, it is hard to understand motives held so close to the vest.

Like many, I stand ready to default on debt, once the realization that all debt has been repaid many times over by the FED, and your front lawn is so piled high with the indirect repayment of other debts already repaid, the sheople will begin to understand that their "good name on paper" has a counterparty, a neo-fascist / corpoartist debt consortium whose "good" name is "dirt".

Many continue to honor debt in a time without honor, because their lifestyles with be injured by their "credit rating" impact.

But I feel this is all part of the change coming, connected to freegold. There is not a homeowner in America, who holds a mortgage on a ten year old home, which principle has not been repaid many times over by the Fed, and all they are doing is buying the free lifestyle of the churning debt slaves who already repudiate that debt.

A massive debt repudiation would pull the trigger, but the masses do not have the balls to do it collectively.

Now that my friends, would be a facebook revolution I would like to see. As the FED is in overdrive already, why not.

But playing chicken with the IRS has its consequences still, at least until the fan meets the final sheet.

Timing does apply.

duggo said...

Dear FOFOA and Poopyjim
It's worth taking a look at the "Great Guru of Silver" BrotherJohn's latest video. At 11.30 minutes in he states:-

"I've spent a long time with large numbers of videos refuting FOFOA and his arguments".

He then adds:

"When you look at the anti-silver FOFOA arguments they really come down to some vague threat and strange stuff that really doesn't make a lot of sense"

Obviously BrotherJohn had difficulty understanding the concepts on this site and being totally biased didn't try to understand the arguments put forward by FOFOA. Former Silver Stackers like myself who take the trouble to study the FOFOA postings are forced to confront the logic of the argument and can't help suddenly being aware of the muddle-headedness of the Silver argument.

Anyway it's worth watching the BrotherJohn video to see his lack of logical thinking.

DP said...


Did you come across this merry band of Che-wearing pirates yet?

It is better to die standing than to live on your knees. Allegedly.

DP said...

(BTW, lest it need be added.)

Barry Michaelmore said...

Good stuff duggo!

This shit ain't easy to see, but it's pretty simple. And a lot more rewarding than wasting your time following the knuckle-draggers you can find anywhere you look in the Silverogosfear.

jojo said...

Almost a year and a half a go, Chavez recalled all their gold some 366 tons.
Ecuador has 26 tons.

Edwardo said...


A corollary to the "better to die standing" maxim is making the rounds with respect to the upcoming U.S. Presidential election:

If one happens to be a certain breed of (nearly extinct) Democrat, one should vote for Romney because it's preferable to be frontally assaulted by Mitt than to be stabbed in the back by Barack.

It's a questionable perspective, but, at the same time, an understandable, and, not necessarily entirely invalid, point of view.

DP said...

Hey, that could catch on!

They're all going to do the same things anyway, so why not vote for the wrong one and then at least if they win you can endlessly complain about what happens without bringing your own ideology into question. And tell everyone how much better things would have been with your team in charge.

DP said...

RT @nand2: After Greece & Spain, now Portugal firmly enter positive current account territory Ireland too!

DP said...

Those crazy-stupid Europeans are driving their economies over the cliff eh?

They should be more like us!

A PIIG said...

I've read(again) through a lot of FOFOA posts, as well as Another and FOA the last few days, and somewhere I've read something dealing with the following question:

Why can't the US simply follow Europe and mark their gold reserves to market?

Can anyone give an answer or does anyone have FOFOA/FOA or Another quotes that deal with this?

Edwardo said...

I am willing to bet that a certain journalist with the initials APE, excuse me, AEP will not be writing a word about the current account getting, uh, current.

Peter said...


Yes. Let's Buy Happiness!

Oakay Nobmilka said...

"I've spent a long time with large numbers of videos refuting FOFOA and his arguments"

Why waste time watching clueless video posters, when you could instead spend the time understanding what it is they are refuting? I suppose BrotherJohn is trying to leverage the investment of time that the other idiots have already wasted, so he doesn't have to as well.

Kinda like trading gold Futures, because you sincerely believe paper will die.

Dr. Octagon said...


The US currency is a product of the US Federal Reserve System, aka the banking system. The US Gold is held by the US Treasury, aka the Government. The two are disconnected, and the Federal Reserve does not own any gold reserves to mark-to-market.

Edwardo said...

When I wrote APE I was just monkeying around.

poopylover said...

Hi Duggo,

FOFOA has no shortage of critics, most of whom are rather low quality. It's obvious they simply lack an understanding of the concepts presented here. That's what initially piqued my curiosity re: this blog, was how little its critics/detractors bring to the table, and how thoroughly they are rebutted when they show up.

Of all those critics, silverados are IMHO the least interesting. Their underlying mentality can be summarized thusly: "I missed the boat on gold b/c I can't buy much of it w/my fiat! But I can still get LOTS of silver! I'm gonna be rich!"

P.S. RJP, I'm having trouble liquidating your 1 oz. hard silver debt to me. Turns out it's not very marketable. Do you know anyone who will accept this? THX.

Indenture said...

He might fool us with his human form but he will revert back to the true FOFOA for a commercial spot!

A PIIG said...

@Dr. Octagon

Why couldn't the treasury transfer ownership of the gold to the FED? Simple no?

A PIIG said...

Found what I was looking for:

[b]FOFOA: Well, if the US ever put gold back on the table through another confiscation of its citizens' gold, the BIS would call in all of its outstanding claims in gold at the rate of $42 per ounce. And the BIS would not be alone. Other entities would have legal claims for gold at $20.67 per ounce, and others at $35 per ounce. How much gold was either confiscated or defaulted on without due process of law? Claims of perpetual entities never go away. If the US government ever exposed its own gold (or its citizens' gold through confiscation) to the light of day, it would expose itself to all kinds of claims and an international legal mess. Under international law, the US is still an OUTLAW when it comes to gold! [/b]

I'm sure I read something similar from Another or FOA.

Even still, doesn't sound like much of a stumbling block, especially if the choices are, restore credibility and face some legal action, or leave their currency collapse

DP said...

The Treasury could take in the "you owe me $42.22 worth of gold" certificates from the Fed, and give back some "you owe me 1oz of gold" certificates, which could then be marked to market.

But will they? What would this tell the world about the real present value of the dollar?

Perhaps after the dollar's exchange value has already collapsed is a better time. From their point of view.

See also: GELOC?

Jeff said...


Gold standard and MTM gold are two separate issues. Actually, FOFOA agrees with you that the US could MTM. So why do you think they don't do it?

FOFOA: How about this? Rather than selling the gold, why don't you just value it like the rest of the world? Why not just mark it to the market price of gold on the Treasury books? If you, Congress, are going to insist on an honest accounting of America's liabilities, why not properly account for her ASSETS as well?

And then… the U.S. Treasury, under the daft guidance of the G-man, can issue new gold certificates to the Federal Reserve. As anyone with even a rudimentary understanding of double-entry bookkeeping knows, the balance sheet must balance. For every asset there is a liability, and vice versa. This is basic stuff. You don't need to be a banking "expert". And so far the Fed only carries $11 billion of the Treasury's gold on the asset side under the gold heading. Today we have room to add $370 billion more, and that means fresh Fed liabilities—also known as U.S. dollars—accruing as fully paid-up credits to the Treasury account for the government to use however it deems appropriate.

Again, I realize this doesn't solve any of the big problems, but it does buy some time. And furthermore, it is not a bad or reckless thing to do. It is the right thing to do! America has an untapped asset. You can use it without selling it for gosh sake! And just like the old gold certificates, the new ones will NOT be redeemable by the Fed or any other banks in physical gold. They will simply be an accounting entry on the Fed balance sheet. In the future, that gold can be mobilized, if necessary, in defense of the U.S. dollar. But only with the approval of Congress. The physical gold remains the property of the United States. It will simply be monetized by properly revaluing it as the monetary reserve asset that it is, and placing it—at its proper valuation, updated quarterly—on the asset side of the central bank's balance sheet, just like the ECB...

I have written in the past that the only hope there is to avoid a full-blown hyperinflation would be for the U.S. to proactively introduce Freegold, even inadvertently. This is not something I just thought of. But I have also pointed out how this scenario has a near-zero probability because the morons in Washington would never think to do that. But heck, it's worth a shot, isn't it?

A PIIG said...

Thanks for your replies,

I was aware the comment I quoted was in reference to a gold standard, but it applies equally as much if they decided to float gold and mark it to market. If the rest of the world would have a problem with them revaluing gold to $10,000 an ounce in an attempt at some sort of gold standard why is it just fine if they revalued their gold by marking it to market?

Re-valuing the dollar by marking it to market won't really tell anyone anything they don't already now. Who thinks a dollar is worth 1/40th of an ounce rather than 1/1700th of an ounce?

JR said...


Following up on DP and others' excellent responses to your queries "Why can't the US simply follow Europe and mark their gold reserves to market?" and "Even still, doesn't sound like much of a stumbling block, especially if the choices are, restore credibility and face some legal action, or leave their currency collapse."

You frame the issue as why let their currency collapse when they can revalue their gold and save some credibility. What advantage would the USG power elite gain from a currency collapse, why not save their currency?

From Gold Trail 3-

Q: What advantage would it be to the Power Elite to destroy the dollar?

FOA: Wrong context. What advantage does the Power Elite gain by expending assets to save an already failed currency. Better to do what major players have done for centuries and are doing now, buy gold and evolve your power base to use the next reserve.

In other words, why would the US spend real gold to salvage all the old debts, instead of letting the old debts be wiped clean by a hyperinflation prior to putting the gold in play?

Indeed, that is fitting with the notion that a system of saving in paper currency allows you to consume in the now that which people "save" in your paper,

Q: Debt is designed for default as fiats are for debasement.

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

Why not pay off the old debts, those that can't be repaid in real terms anyway, with Worthless dollars?

JR said...

The modern dollar is an already failed currency, the US's exorbitant privilege a product of international support and oil "backing" via paper gold deals, not the dollars greatness as a currency.

Supporting dollar with revalued MTM gold does not return the exorbitant privilege once the ROW stops supporting dollars. Revalued gold does not allow the US to run a perpetual trade deficit. Revalued gold is only truly necessary to support the dollar, which it currently has (although waning) form the ROW.

When The dollar loses its ROW support and exorbitant privilege, the dollar falls and gold helps restore confidence, but gold does not restore the exorbitant privilege, revalued gold doe snot allow for the dollar to regain its status under the $IMFs. From Inflation of Hyperinflation -

The dollar is so vastly overvalued today because the rest of the world has kept it on life support for 30 years past its expiration date. It is the stability of dollar prices at that small marginal flow that sustains the illusion of wealth in the entire, massive monetary plane. And yet the modern "hard money thinkers" think that we can somehow retain this level in real terms by simply devaluing the dollar against gold and then managing that new "gold value".

The USG cannot somehow "somehow retain this level in real terms by simply devaluing the dollar against gold."

Date: Sat Apr 04 1998 19:55

Look now and see if the US dollar does not “fight” for a high oil price! In every way, the question of supply disruptions is shown as the need for other suppliers. But, other suppliers cannot produce at a lower price? If the gulf states are allowed to bring oil “down” to it’s true “fair” production price, in terms of a “correctly higher revalued” gold price, the US dollar would no longer be priced and backed by oil. Any paper trading currency would do.

See that - any paper currency will do if the oil is revalued in gold. Revaluing gold = end of the $IMFS, its the end of the US's free run of being treated super special. The exorbitant privilege is not taken by its holder, it is given by others. The ROW has to treat the US super special and support the $ to give the US this privilege.

The USG MTMing their gold means the end of the US dollar being super special.

Michael dV said...

so you see the USA and Europe joining together to create a new monetary system?

JR said...

In follow up to the idea of why would the power elites let their currency collapse, perhaps it is helpful to consider what a currency collapse means. In this context it means the $ no longer serving as it does now, with an exorbitant privileged. The issue is we consume more than we produce. The $ that enables this will collapse. But we must not confuse a currency's "total demise" or "falling out of use" with a "loss of identity". Our American society's worth is not it's currency system. As this $IMFS currency system collapses, we will recognize what we do produce for ourselves and what we require from others to maintain our current standard of living, and we will come to know just how "above" our capabilities we have been living.

What collapses is the free support of an over valued dollar that we spent without the pain of work. But that does not mean the dollar falls out of use completely, the entire internal US sector can and will function as it's currency runs a price inflation just like these third world countries. We will adapt as they have by dropping our living standard accordingly and adopting the Euro as our second money.


JR said...


Here (again) is FOA from Gold Trail Three ( from the same post I quoted above concerning Power Elites:

FOA: We must not confuse a currency's "total demise" or "falling out of use" with a "loss of identity". In our time there have been few major moneys that went away. Today, we have a whole world of national fiats "in use" and "not demised" that still carry their nations identity. They lose value at an incredible rate, are mismanaged to the highest degree, are laughed at and despised. But, still they are "in use" as they function for their governments and economies. Usually, they function along side whatever major reserve currency is in vogue. Today, the dollar, tomorrow the Euro. Make no mistake, the entire internal US sector can and will function as it's currency runs a price inflation just like these third world countries. We will adapt as they have by dropping our living standard accordingly and adopting the Euro as our second money. Also:

The prestige that we have the largest military force in the world does not help our money problem. We talk as if we will let any country die that does not use our money or support our currency. I point out that the British also made such comments and it didn't stop their downfall. Nor the Russians. Also:

I point out that many, many other countries also have the same "enormous resources; physical, financial, and spiritual" that we have. But the degrading of our economic trading unit, the dollar places the good use of these attributes in peril. Besides, the issue beyond these items is our current lifestyle. We buy far more than we sell, a trade deficit. Collectively, net / net, using our own
attributes and requiring the use of other nation's as well. Not unlike Black Blade's Kalifornians sucking up their neighbors energy supplies (smile). We cannot place your issues up as example of our worth to other nations unless we crash our lifestyle to a level that will allow their export! Something our currency management policy will confront with dollar printing to avert. Also:

NO, "this country will not turn over and simply give in" as you state. But, we will give up on our currency! Come now, let's take reason in grasp. Our American society's worth is not it's currency system. Around the world and over decades other fine people states have adopted dollars as their second money, only to see their society and economy improve. Even though we see only their failing first tier money. What changes is the recognition of what we do produce for ourselves and what we require from others to maintain our current standard of living. In the US this function will be a reverse example from these others. We will come to know just how "above" our capabilities we have been living. Receiving free support by way of an over valued dollar that we spent without the pain of work.

Dr. Octagon said...


The US Government has almost zero dollars in savings. They also have many trillions in dollar debts, and a big pile of gold that isn't accessible to anyone wanting to buy some of it with their dollars. It seems to me that the incentive is strong to allow the dollar value to drop and the gold value to rise. I see no good reason for the US government to prevent it.

JR said...

If the rest of the world would have a problem with them revaluing gold to $10,000 an ounce in an attempt at some sort of gold standard why is it just fine if they revalued their gold by marking it to market?

There is a difference between trying to enforce a fixed exchange rate between your currency and gold (irrespective of what the fixed rate is, be it $35.oz or $10,000.oz) and, on the other hand, simply recognizing that your dollar's value in gold terms is whatever the market says it is.

Under the former (a fixed gold standard) the Government says, we will redeem our currency for gold at this rate. A promise to do soemthing.

Under the later, the G says you can go sell you currency for gold on the market here is what it is worth. No promise to do anything, just a recognition of the world as it is (MTM), not as the G might like it to be (a fixed price).

JR said...

It seems to me that the incentive is strong to allow the dollar value to drop and the gold value to rise.

Suppose the gold rise doesn't offset the dollar value drop?

Suppose the USG loses an exorbitant privilege, and then has to start paying their own way. Even though they have lots of gold to use to start their own way, free stuff > stuff you have to pay for, no?

The market will revalue gold when the ROW stops giving the USG its exorbitant privilege. Why the rush the USG says, it will come in due time and I'm still hungry and I like the cheap prices. If one is addicted to consuming for free, would we expect them to voluntarily start paying for that which is currently still free?

DP said...

What JR said.

The dollar is way overvalued today and the USG knows it better than anyone.

Why rock the boat?

Michael dV said...

my thought is that China is simply fed up with saving in treasuries because they see that they are worthless, you seem to think that they have stopped buying because they can't afford to buy?
thanks for that vidclip:
it IS Freegold, just without a few details which, in time will follow.
the other clip that IS Freegold is the Ron Paul Charles Partee debate. It took me a while to understand Partee's point (because I was an HMS?) at the time but 'Indicium' is just a cleverly disguised word for freegold:
Steak? in HK? I prefer to sit next to total strangers slurping noodles, (who I have had to climb over to get a seat on the bench next to them) while trying to place an order in a language that I barely understand all the while realizing I need to pee and will have to climb over 8 people to find the hole in the back where such deeds are done. ahhhh China (sigh)
and to all who would escape the yoke of debt...patience, soon you will find the currency you need to pay off your debt. It will be in the garbage bin, discarded by those who are now using the newer, higher denominations:,i:210

Michael dV said...

ooops, sorry for the 13 line long URL. Does anyone know how I could have shortened this? thanks Mike

Michael H said...

Michael dV,

The url for the image itself is

or you could have made a clickable link,

Like this

Here is the code,

[a href=""]Like this[/a]

but replace the [ ] square brackets with the < > triangle brackets.

Michael dV said...

Does anyone else have a problem with the term Freegold? I find myself immediately trying to explain how it is really not 'free' as soon as the word leaves my lips. I guess RPG suffices and Robert Zoellick (former president of the World Bank and Romney consultant) has used 'reference point' and 'indicator' to describe gold. Has this forum given any effort to find a more compelling phrase? I don't recall seeing such discussion....and I really believe we need one.

DP said...

my thought is that China is simply fed up with saving in treasuries because they see that they are worthless, you seem to think that they have stopped buying because they can't afford to buy?

Maybe it's the US private sector who can't afford to buy China's goods any more?

jojo said...

I think it's been bandied about before but it's been a while.
I too used to have issues with the term but in the end, realize it probably fits the best.
How about Unrivaled Gold...or Single and Looking, not that.
How bout
Original Gold- the true OG???

DP said...

Someone did once suggest to me that "Freegold" starts a conversation off on the wrong foot from the get-go. And I totally get that.

How about we call it "Flibbety-jibbets"?

Or… we start off by explaining it's just freeing gold from the present systemic suppression of it's value, to once again fulfill it's ages-old natural function. The prime wealth reserve asset, fit for a king. And also his minions, if they can lay their hands on it.

jojo said...

DP is right, we can't shop at walmart any more cause they took our jobs

jojo said...

Dang, DP was serious. From the wiki:
Freegold (also known as Flibbety-Jibbets) derives its name from a monetary environment where gold is set free, and has no function as money. Gold is demonetized, and has one function only: a store of value. The function of legal tender changes only slightly: it is a medium of exchange and unit of account, but stripped of the store of value function. In this environment, currency and freegold will coexist to supplement each other, without interacting with each other.

JR said...

I find myself immediately trying to explain how it is really not 'free' as soon as the word leaves my lips.

The Free in Freegold

Okay, here it is. What you've been waiting for patiently, I presume. This is what gold will be freed from: The fractional reserve banking practice, which is a carryover from the gold standard.

This is the free in Freegold.

Gold freed from this silly modern Western notion that gold=money.

JR said...

On this silly modern Western notion that gold=money from Moneyness -

The Pure Concept of Money

According to Webster's the word 'money' emerged in the English language sometime during the Medieval period in Europe, maybe around the late 1200s. Wikipedia suggests a possible etymology originating with the Greek word for 'unique' or 'unit'. The Western term for physical coins that emerged sometime around the late 1500s was 'specie' from the Latin phrase for "in kind" or "payment in kind," meaning "payment in the actual or real form." The word 'currency' came a little later from the Latin word for current or flow, and was married to the money concept in 1699 by the philosopher John Locke who described the "circulation of money" as a flow or current of monetary payments made in specie.

Etymology is important, because with money or "the moneyness of things" we are talking about a vital concept that predates the word by thousands of years. And it's only by understanding the pure concept that we can see the ways the word has been bastardized by the two camps over centuries. The meaning we commonly assign to words may change over time, but that never changes the original concept underlying the emergence of the word in the first place.


The point is, your modern understanding of 'money', and the pure concept of money that emerged long before the word, may be substantially different things. I'll go even further to say that the modern understanding of money is so confused and disputed by the two opposing money camps that the only way we can hope to have a clear view of what is actually happening today is by reverting our understanding to the original concept, before it was corrupted by the two camps.

Gold freed from this incorrect notion about money that is a "carryover from the gold standard."

Dr. Octagon said...


Michael dV said...

Michael H
thanks for the tip. This is even more embarrassing as I just realized the photo has appeared on this blog, oh well..

JR said...

Another angle on freed that overlaps with the whole being freed form Government attempt to control gold/impose the notion that gold=money:

FOA: Gold has always been the most political metal our world has ever known; political because it offers
so much power to those that hold it in their hand. Many of the downtrodden look at government
policies and say:

-----"they dictate our wealth and put us in debt so as to control us"! -------

Conversely; A simple person can control his controllers by staying out of debt and owning a wealth
no government can dictate the value of: Gold Bullion!


-- value it with official contracts and currencies and your wealth is their power ,,,,,,,,,, keep it as your savings of ages,,, and your wealth becomes their master!

Michael H said...

It's libre-gold, not gratis-gold.

Michael dV said...

I guess 'crack whore gold' will just have to suffice until we agree...

freegoldtube said...

Once Upon A Time we had us some fixedgold; some sterlinggold; some dollargold; then some limbogold and some suppressedgold; and now some conflictedgold.

So no matter what you call it, you got some splanin' to do.

Michael dV said...

Michael H
yes we are restricted by the language....too, to, two...bad

Michael dV said...

time to come clean. There is a famous troll at ZH who has all the style of HMS...confess: are you MDB? I promise I'll never tell.

poopylover said...

@Michael dV

It ain't me

Though FYI my official policy of denying association with any troll accounts (truth of the association notwithstanding) began prior to the posting of this comment.

Seriously though, ain't me. There are many bullshitters out there, of which I am only one. ;)

Edwardo said...

There is no elegant term, acronym, etc. etc. that effectively encapsulates the yellowed, excuse me, hallowed condition of physical gold freed from the shackles of the repressive paper gold market. But, perhaps one might express as concisely as possible the concept that, to quote, Harvard grad, songmeister, and actor, Kris Kristofferson, "Freedom's just another word for nothing left to lose."

JR said...

KK: Freedom is just another word: It seems to get truer the older I get. It makes me think about the time when my apartment got robbed and everything was gone and I was disowned by my family. I owed money to a hospital and I owed my wife five hundred a month for child support and I thought, "I'm losing my job." I hadn't any money, I hadn't anything going for me, but it was liberating. I was in this Evangeline Motel, like something out of "Psycho", a filthy place, just sitting there with this neon Jesus outside the door, in the swamps outside of Lafayette, Louisiana, and I thought, "Fuck. I'm on the bottom, can't go any lower" -- and from then on, man, I drove my car to the airport, left it there, and never went back to get it. Went to Nashville and called this friend of mine, Mickey Newberry, and told him I'd just got fired, and he said, "Great. Johnny Cash is shooting a new TV show. Come up, and we can pitch him some songs." The next moment, they cut three of my songs, and they were hits. I never had to go back to work again.

ampmfix said...

Did you know there is a line in the sand in the Universe? it is the number 56 (not 42). Iron. Most useful and abundant, last element to be cooked in stars (all the other are only generated in supernovas, including gold).

holdinmyown said...

An interesting article in the Financial Times published recently describes how the RMB has become a more important "reference currency" than the USD or Euro in East Asia.

In new research, we find that since the global financial crisis, as the US and Europe have struggled economically, the renminbi has increasingly become a reference currency (meaning emerging market exchange rates move closely with it). In fact, since June 2010 when the renminbi resumed floating, the number of currencies tracking it has increased compared with the earlier period of flexibility between July 2005 and 2008. Over the same period, the number tracking the euro and the dollar declined.

East Asia is now a renminbi bloc because the currencies of seven out of 10 countries in the region – including South Korea, Indonesia, Taiwan, Malaysia, Singapore and Thailand – track the renminbi more closely than the US dollar. For example, since the middle of 2010, the Korean won and the renminbi have appreciated by similar amounts against the dollar. Only three economies in the group – Hong Kong, Vietnam and Mongolia – still have currencies following the dollar more closely than the renminbi.

Trade is also propelling the rise of the renminbi outside east Asia. For example, the currencies of India, Chile, Israel, South Africa and Turkey all now follow the renminbi closely; in some cases, more so than the dollar. If China were to liberalise its financial and currency markets, the lure of the renminbi would broaden and quicken.

HMO view: This new research suggests that the USD is quickly losing some of its network effect to the renminbi.

Herb said...

I think it is simply too clever by half to bandy about the concept of gold being both "demonetized" and a "store of value." I understand the theoretical underpinnings of that notion, but it is simply too confusing for prime time.

The reason gold is money is because it has the premier attributes of money. You know, the good old textbook qualities of fungibility, divisibility, portability, etc, etc. You can no more deny gold is money than you can deny that a dog is canine or a cat is feline. It simply is what it is. (Saying that gold is not a "currency" is a whole different matter).

If you want to point out a non-monetary store of value you can start with a warehouse full of toilet paper and go on from there. But gold . . . no.

Blondie said...

Kris Kristofferson obviously hadn't lost it all, though it does make a good story.

He got by, as we all do, on his credibility, and that's your pure money concept, right there.

Wil Martindale said...

DP thanks for that link to the debt strike movement within Occupy. I think they have the right idea, but it won't work until people like me do it, the people who *think they have a lot to lose.
I think the system could break for other reasons before it comes to that, but either way by that time it'll probably be close between several competing straws that breaks the camel's back.
I think what is going on in Iran right now, is a form of micro-freegold incubation, yet within an artificial system that is different than a global incubation, due to being a fishbowl within it right now.
I also see the real news headlines leaning heavily on repatriation, and I see more and more mentions of gold creeping into the main stream.
So many things could trigger the paradigm shift, an overused term admittedly, but being a student of Kuhn, I feel qualified to use it.

People will probably suddenly realize nearly all at once how big a lie it is that holds the paper world together.

And the events that will unfold in the days following that will be spectacular.

Lawn chairs manditory.

Wil Martindale said...

BTW Blondie your drill down on credibility vs. value was definately worthy of reflection.

A PIIG said...

Thanks JR, questions answered!

Wil Martindale said...

BTW 2 (manditory is just like mandatory only spelled incorrectly)

H. M. Socialist said...


Brilliant insights! You are a beacon of truth in this sea of ignorance.

costata said...


We often speak here of a loss of structural support for the US dollar by the ROW. Long time readers know that Uncle costata has a different view about whether withdrawing support is a policy decision by China or they are being forced to do so by a structural shift in their economy.

Regardless of the reasons there's an interesting time line here:

2005 - reform of the yuan exchange rate mechanism

2009 - China permits trade settlement in renminbi

And this from the article you linked above:

....since June 2010 when the renminbi resumed floating...

Take note of what is happening now to the profits of US and European multi-national corporations who manufacture in China or outsource manufacturing to Chinese owned companies.

Economists, such as Ben Bernanke, who advocate currency debasement (inflation) as the cure for the world's ills should be careful what they wish for.

costata said...

h/t JSmineset for this chart:

Caption reads: "US Dollar Cork In The Sea Chart". Very apt IMHO.

costata said...

One last snippet for the China watchers with another h/t to JSmineset.

If anyone can shed more light on this passage in the article quoted I'm all ears.

...paves the way for Taiwan banks to take deposits and loans in renminbi...

If this means that Taiwanese banks will be able to make loans in renminbi this is a de facto currency and banking union emerging.

Cross-Strait currency clearing takes effect 2012-11-01 13:11:33

BEIJING, Nov. 1 (Xinhuanet) -
At a press conference held on Wednesday, the spokesman of China’s State Council’s Taiwan Affairs Office Yang Yi says the cross-strait currency settlement memorandum signed at the end of August has officially gone into effect.

The scheme will allow direct currency transactions between the Mainland and Taiwan’s banking systems, thereby forging closer monetary ties.

The Chinese mainland and Taiwan signed a deal late August that paves the way for Taiwan banks to take deposits and loans in renminbi.

Under the deal, the two sides will each designate a bank to carry out currency settlements and liquidations for the other side.

Yang Yi, spokesman of the State Council’s Taiwan Affairs Office, says that monetary authorities from both sides have geared up for the operation of the cross-strait currency settlement mechanism....

Wendy said...

DP, I know I've seen that show before (with those two guys), likely from your previous postings. I don't know where you come up with this stuff? I don't think we have anything like it here! Thank god? ;)

Michael dV said...

Don't forget to set your hyperinflation clock forward this weekend. The new number for USG debt per day is now 6.3 bilion:

Blondie said...

Continuing with Kris Kristofferson’s story, while he clearly had little to no credibility with neither his wife nor his family, his claim ”I hadn't anything going for me“ simply isn’t accurate for the same reason “Economics” struggles to produce anything worthwhile: it’s not viewing the whole picture.

Kristofferson still had professional credibility, which he exercised with Micky Newberry who duly extended him credit. Kris also neglected to mention that he still had considerable intellectual capital which he then levered with the credit Newberry extended (or perhaps the credit levered the capital, but who cares, 4x5=5x4 doesn’t it?) to produce something of value. Further, it was his degree of belief (yep, belief) in his own intellectual capital that meant said capital was even available to be levered. Without that self-belief he likely would have just destroyed his credibility with Newberry too by being unable to produce the goods, and he then would have been that much closer to really having nothing.

This train of thought has barely left the station, and it is clear that there are a multitude of factors involved in human production and consumption that cannot be empirically measured, yet obviously exist all the same. Calling them "animal spirits" seems to imply they are beneath us. Fundamentally everything runs on feelings, and I mean 'everything' in the broadest possible sense. A lot of people continue to exhibit a belief in “Economics”, seemingly undeterred by the results to date, but Kristofferson’s example (and his is but one of billions) suggests to me that a belief in one’s self should be first and foremost on everyone’s agenda. Kristofferson seemed to make out okay with this rather than an in depth appreciation of the dismal science.

RJPadavona said...


Funny you mention having trouble liquidating silver. I was out of town today, where the closest coin shops are. Hardly any deal in bullion. Almost exclusively numismatics. I saw a new coin shop that's been around 6 months or so. But it said "Precious Metals" on the sign, so I gave it a shot.

I went in and asked if they sold bullion. They said "Yeah"! They seemed pretty excited. And of course, they had no gold at all. But they had plenty of silver. I had to tell them I didn't want silver, that I only wanted gold at least 3 different times before I left the place.

Apparently you aren't the only one having trouble liquidating silver :(

anand srivastava said...

Michael dV

That looks to me like they had not shown some data during last months which added up in Oct to show a much higher number. So this number would be a gross over estimate.

RJPadavona said...

Since Blondie mentioned Kris Kristofferson......

I'm not sure if this has been posted here before, but just in case people haven't seen it, Kristofferson starred in a movie called "Rollover". It's a good flick about a financial crash. The Saudis go into gold and collapse the system. Here's the scene that would be the most memorable for followers of this blog:


I always thought it was funny that movie was filmed in 1981.

Michael dV said...

yes possibly just a election season thing but I promise you even if Ron Paul gets elected there will be increased spending. As things fail there will be no politicians who call for restraint. The entitlements must be preserved, the military must be funded, the debt has to be paid, infrastructure will be upgraded and the next natural disaster will call for an outpouring of cash to the victims. We have reached the point when deficits don't matter and there is infinite money...or so it seems since it just keeps coming. We will see FOA's words come true as defaulting debt is bought up for cash and (smile) you know the rest.

RJPadavona said...

Sorry, JR

I see you mentioned KK first. I wasn't caught up when I commented. I should've known our resident hippy would be quoting KK :)

Blondie said...

You have JR to thank for bringing up Kristofferson RJ, but you have my thanks for linking that clip.

"Money, capital, has a life of its own, it's a force of nature... it flows where it wants to flow.

This whole thing with the Arabs and gold is inevitable, we're just going with the tide."

Michael dV said...

In considering the concept of freegold I believe that more than issues revolving arround gold, the biggest questions have to do with the issue of money itself:

Economists, however, have a language all their own when it comes to money. They define it as something that serves as a medium of exchange, a unit of accounting, and a store of value.

The idea that money MUST be all 3 is the barrier. Actually it is the idea that a currency must be all 3 that is the real issue. So in explaining freegold our first obstacle is the widely held fact a definition...that to be money a currency must meet all 3 functions. I believe that is a real stumbling block for many new to the concept. From our POV we just need to separate MoE from SoV. To the beginner we are telling them that this new money we conceive will in some way be deficient, unlike the way all the other moneys in history were designed to be.
It probably sounds like we are trying to sell them a 3 legged dog...not that we are selling anything (and it would be a one legged dog)

罗臻 said...

@Michael dV

The U.S. and Europe have the most gold, by far, and can still be considered as "the West." Russia would have reasons to favor a hard currency standard, China not so much at this time. If you think all that gold is gone, then this makes no sense, but if they've only sold paper gold and kept the physical, to me Occam's Razor suggests they would be able to direct the creation of a new monetary system, even if they didn't have as much operational control over it. China and others will play a bigger role, but the "Golden Rule" will apply during the writing of the rules.

罗臻 said...

The Chinese buy U.S. Treasuries because it is mandated by their currency policy. Period. Fullstop. They ran a peg to the U.S. dollar of ¥8.28 to $1 for many years, then started allowing it to rise and have now moved to a basket of currencies. It relies less on USD now, but when an exporter receives U.S. dollars, the central bank buys those dollars with freshly printed RMB.

China's currency was undervalued and this caused many dollars to flow into China. Now that China's currency is closer to fair value, the flow of dollars has stopped and the trade balance has gone negative in some months. Two times in the past year, the renminbi has depreciated against the U.S. dollar as hot money flowed out of China. Wealthy Chinese move their money out of China and financial news now recommend people diversify out of renminbi.

If Chinese citizens demand to hold U.S. dollars or they move money overseas, and if there is no offsetting demand for RMB, they will end up using US dollars, draining them from the PBOC and forcing the PBOC to sell Treasuries. While bearish for Treasuries, such activity is bullish for USD and bearish for RMB.

vizeet srivastava said...

Michael dV,

I think the reason China is not saving in treasuries is because they are not accumulative dollars that much. There internal demand is increasing and same is the case for rest of world. They have currency swap agreements with many countries now and so they don't accumulate dollar that much.
Do you think if China continue to accumulate dollars won't it buy US debt bonds?
The whole reason is that there is growing demand in every country and so most of the countries are having problem of increasing deficit. So normally to solve this problem these countries used to take loan but a better option for them is to do currency swap and pay in there local currency which they can print.

There are two things:
1. The reason all FIAT currencies will end up in hyperinflation is that people want more service and less tax so at some point in time the balance breaks. And this is inevitable whether the country is democracy or dictatorship.

2. Debt based economies rely on consumption which increases exponentially while production increases sequentially. So at some point in time the production is unable to meet expectations that is when the balance breaks.

US was able to avoid consequence of (1) by balancing it with other countries like Europe, Japan and China. But because of (2) it has to face consequence of (1).

costata said...


You wrote at November 1, 2012 10:03 PM:

..."Rollover". It's a good flick about a financial crash. The Saudis go into gold and collapse the system....

... I always thought it was funny that movie was filmed in 1981.

I recently read that Reagan pledged a return to the gold standard if he was elected in one of the campaign advertisements filmed in 1980. Obviously that advertisement never appeared on television.

Also worth noting that it was President Reagan who approved the Gold Commission of 1981/82.


duggo said...

@ RJPadavono Nov 1, 2012, 8:50 PM

Many Silver sites are constantly shouting "special deals" for buyers but you never seem them offering "deals" for people selling.

I wonder how long it would take to open the flood-gates of "sellers" if a number of people tried to sell their "monster boxes" of Eagles back to the dealer and were met with reluctance?

Everyday I'm glad I switched to Gold.

Mircea said...

Hi FOFOA and Co

I've been watching this blog for almost 2 years now and I learned a lot about money from your posts and comments. Thank you all for that. But I think now it's the time to make myself heard and ask some questions of my own.

First, let me introduce myself to you: I am a 38 years old mechanic from Romania. Yeah, Ceausescu and Dracula will come first in your mind but is a lot more than that. As an outsider of the world of economics, and without an University diploma of any kind, my questions for you will not be of technical nature, rather of logical and psychological one.

Seeing that the topic of this blog is physical GOLD, GOLD, GOLD and how it is the ONLY solution for the financial crisis my questions to you are:

1.Did any of you had a look at history of money related to gold and noticed the accomplishments of the economies during the periods of gold standard? My observation is: the gold standard of money only made possible the industrial revolution in those countries that actually had physical gold IN HAND.
THIS is the only aspect that made the gold standard viable. There was no industrial revolution in America before The gold rush in the west. There was no industrial revolution in England before the British fleets started roaming the seas and bringing home the gold collected in the New World, there was no industrial revolution period without gold.

We are now getting close to the end of 2012 and the industrial era exhibits clear signs that is about to become obsolete.The boom-bust cycle is one of the Universe's laws, is happening on every scale you can imagine, no matter if you like it or not, and further industrialization is not possible in the countries without gold and the already industrialized countries have become the holder of most of the physical gold (extracted or underground).

How do you imagine it is possible to return to the gold standard of money in such circumstances?

2. Having set the relationship between gold and industrialization we might take into consideration the resources necessary to keep the industrial lifestyle alive. Yeah, oil energy and minerals. What is the possibility of gold to play any role in keeping the actual industrial paradigm on the boom trajectory that it naturally demands to be on?

These are two of the questions i feel compelled to ask you, because it seemed to me that you, focused on gold and only gold, lack the view over other major aspects of the big picture of the human society as it is today.

Thank you.

Jeff said...

Hi Mircea,

One of the nice things about this blog is its focus. It doesn't try to be all things to all people, and IMO that keeps the comments on topic, high quality and civil.

FOFOA: Those are my two main topics, Freegold and hyperinflation, because those were ANOTHER and FOA's two main topics.

burningfiat said...

On the silver situation:

I went to my local coin dealer yesterday to make a silver for gold swap, and possibly a swap with a 1 oz. gold coin for some lesser weight coins.
He was vacuumed for gold, lots of silver though. He theorized that most people now hand off their gold at these cash4gold buy-only shops.
He would only buy my silver for cash at 25% below spot...

Funny thing then happened. I showed him the 1 oz. Krugerrand and said I wanted to swap for smaller coins, but: "though luck, as you're out of gold".
"Erhh, wait a minute", he said. Then he pulled out a special box with his own "private" gold. We made the swap and I've now got 4 1/4 oz. coins :-)

Lesson? Hmmm... must think some more, but all of a sudden I got this urge to sell my silver really soon :D

PS. Who's really on the business end of these cash4gold shops?

fonoah said...

Hello Costata and RJP, thank you for your responses to my comment in the previous thread going back a few days (Oct 27, 9:38 and 11:08 respectively) – and apologies for not acknowledging earlier but I have been on site and outta touch the past week.

Coststa – as always your response makes me realise how shallow my understanding is.

If you are speculating on the possibility of a controlled devaluation, . . . . .
On the other hand after a spontaneous HI epsisode . . .
So I guess this puts me in the camp that anticipates Freegold first and then RPG after the HI.

I always understood FG and RPG to be one and the same thing? How can you have FG without RPG?

Hey RJP - I tried your “the Gold does’nt really have be there” routine with some engineers on site. “It does’nt really matter one bit if there is enough steel in the bridge, as long as the Certifying Authority says it’s OK, and as long as we never drive the train across it”.

Sad to report it does’nt work with steel and engineers – only Gold and the Fed.

Mircea said...

Thank you Jeff for your honest reply but the way you put it doesn't turn you, guys, in some type of Japanese soldier defending the freegold island while the whole world have moved forward?

Barry Michaelmore said...

Everyday I'm glad I switched to Gold.

Amen, brother duggo!

Every day I thank god that you realised you were making a mistake.

No, sincerely!

Bazza ;)

DP said...

Yes, BF. I too have often wondered who is behind Cash4Gold. And who goes there. :(

burningfiat said...


And then the next question: How do we get in on this scheme????!!?

Edwardo said...


Not to minimize the importance of a potential banking union between Taiwan and the mainland, but such a development would seem to imply considerably more than a new monetary regime. After all, the animus between Taiwan and mainland China is well established, and this apparent development would seem to indicate that the heretofore hostile relationship between the two nations (with special emphasis on the following word) may be in the process of evolving salubriously.

poopylover said...

@RJP, burning

Your experiences mirror mine - particularly yours burning. I moved to a new area recently and that meant finding a new gold dealer. The first place I tried seemed OK, until I walked in one day and they said "We're out of gold." Only when pressed did the guy pull out a box of smaller gold coins, which I mixed & matched to make about an oz. of gold. He had no 1 oz. denominations. He didn't seem too enthused about taking my 1 kg. of silver as partial payment for it either.

I gave up on that place and found a new place that actually does stock gold. But even there the guy only had maybe 10 oz. of gold bullion, the rest of the gold being numismatic e.g. from the Byzantine empire and what knot.

Meanwhile both these places had PLENTY of silver. But um yeah, all you guys playing the ratio - I'm SURE that these places will easily be able to order the truckloads of gold they'll need to satisfy everyone who floods in to trade out their silver when G:S hits 16:1... XD

Robert said...


Your questions are quite relevant. One of the dominant themes of Another's writings was oil, oil oil. He talked about oil just about as much as he talked about gold. Is industrialization possible in a country without gold? Since the 1970s, absolutely. World growth and productivity increases have been the result of cheap oil. How have countries without gold industrialized? They did it on the backs of their labor forces, who supplied goods to the US in exchange for the dollars they needed to buy oil and industrialize. You are right that any country that has no physical gold on hand would be in a severely disadvantaged position if the petrodollar system were to break down.

Regarding your second question, this is also 100% relevant. As Another said: "In this modern world, the current value of every asset is formed by a relationship of gold/currencies/oil." The world became dependent on cheap oil in the 1970s. The Arabs used this as the opportunity to build up their gold reserves. At some point when the system goes off the dollar, those reserves will be massively revalued upwards, and when they are, a tiny amount of gold will buy a lot of oil. Remember that the Arabs won't need a lot of new gold coming in for the oil that will be going out after the resent. That does not work to their advantage. It is sufficient that their existing holdings be massively revalued upwards. So I think the oil will keep flowing. It is not in their interests from a geopolitical standpoint to turn off the tap.

Wil Martindale said...

Something Max Keiser said (like him or not), "the world is always on a gold standard".
How true. Consciously or not, manipulation at it's peak, we still compare currencies to gold, "we" being the central banks (and as for currencies they certainly matter).

But as for a return ro a traditional gold standard, as in currencies fixed peg to gold, that is not what freegold is about. It is quite anti-thetical to that.

Free vs. fixed gold standard. If by that you mean a free gold standard, yes Max is right, we are already on it.

What must die is the manipulation of the currency "price" through the fractionalized paper gold lunacy.

That is why people sometimes rail against fractional reserve banking, even though at 10-1 it has always worked failry well (with paper).

JS Kim (and myself) believe that fractional gold paper, claims to physical, is closer to 200-1, though I believe it is far, far greater than even that.

I pointed out in (before closing it down) that Goldman had at risk credit default paper of 1100 to 1 risk to reserve for all to see in the OCC reports some years ago, and this was made into "no big deal" by the main stream.

When the truth about how much paper in GLD is backed by physical comes out, the reaction will be startling.

I do believe real gold will have its day then.

Michael H said...


Keep in mind that 'freegold' is not the same thing as 'gold standard'.

FOA mentioned that, in the 70's when the dollar-gold convertibility was suspended, the options for the rest of the world (ROW) were to either continue the support for the dollar or go back to a hard gold standard. Third world countries, in particular, saw the support of the dollar as the lesser evil than the gold standard, due to their poor past experience with the latter.

As to the inferior positioning of countries without gold under freegold:

First, keep in mind that the entire stock of gold holdings within the country, both in public and private hands, will count as 'gold reserves'. So even countries without much official gold may do OK if their citizens hold gold.

Second, even countries without much gold in either private or public hands will be in no worse position than countries without a US-Dollar printing press are now.

Welcome to the comments section.

Frank Pansy said...

GLD has all the physical gold their shareholders have claim to. (Whether most of the shareholders are in a position of being able to redeem the shares for the gold baskets is another matter.)

There isn't, however, physical gold backing every spreadbet/option/etc derivative that is used to speculate on the price movements of the GLD shares. Or on any of the other forms of gold.

There also isn't physical gold behind every ounce of unallocated gold (gold credit) sold by a bullion bank to its customers and left "on deposit" there. Many people believe they own the same pieces of gold that comprise the banks' fractional reserve.

While so many people "investing in gold" are really betting on the price movements of "gold", or giving their money to a bullion bank in exchange for a solemn promise of gold at some point in the future, this is demand that is diverted from ownership of the physical metal itself. Which suppresses its value. It is not "free".

But, how can this be, you ask? It is done, "right before your eyes" and we see it not! I ask you, if you have one ounce of gold, and sell it on the market for $300, it is worth $300, yes Now, what if CB hold one ounce of gold, and sell it twenty times, that one ounce is now worth $6,000, no? The difference between you and CB? The persons that hold "interbank" IOU for gold, value it at the multiple of leases/sales made against reserves. This leverage, it is held for performance on bank part. The BIS, it force performance, on any economy! You ask Korea about gold, yes?

Robert said...

In addition to Frank's comments, I would like to elaborate on this statement: "GLD has all the physical gold their shareholders have claim to. (Whether most of the shareholders are in a position of being able to redeem the shares for the gold baskets is another matter.)"

The other issues to think about are these:

What happens if the Trustee permits Authorized Participants to withdraw bullion in violation of the documents? What if the Trustee withdraws the gold in violation of the documents. Sure there would be liability, but how would you quantify it? Based on the price the gold when the breach occurs? Based on the price of gold when trading stops? Or based on some other point in time? If the gold is gone, those claims withh be paid in cash (probably from the USG in the form of another bailout).

You have to weigh the risk that the Trustee and the Authroized Participants will find a way to get the gold out and let the bankruptcy court straighten everything out after the fact.

costata said...

Finally nailed it:

money = circulating credit

an ANT and Dec said...

DP said...
my thought is that China is simply fed up with saving in treasuries because they see that they are worthless, you seem to think that they have stopped buying because they can't afford to buy?

Maybe it's the US private sector who can't afford to buy China's goods any more?

FOA 10/8/01 - We managed this threat with help from our Euro friends; somehow thinking they enjoyed and wanted our fleecing their lifestyle to the same degree we did it to the rest of the world. Their cooperation, we will find out, was but a structural policy that bought time; time for a dollar replacement to be made.

Mircea said...

Thank you all for your kindness and patience with me. I will keep raising questions about how gold could be looked as the only valid option for the future of finance world and one of the questions is about regulation and control of a freegold system and who's authority will be behind the rules? What do you think to be the response from TPTB for any attempt in this direction? Will they cease the practice of manipulation or will they gain a more effective way to screw things up by using the rules to move physical gold from public hands to those on top of the economic pyramid?

Without changing the fundamental approach to economics in relationship with human nature, gold,FIAT money or anything else will do nothing to divert us from reaching the apex of the societal boom-bust cycle.

Having said this i will point your attention toward this:

and this:

It seems to me that except those involved in gold trading nobody else is interested in moving back to gold as reference of value.

Wil Martindale said...

Oh, and there was an article floating around out there about all the physical flowing East and where is it coming from (if not the CB's?).

But as Michael H. implies, vast gold amounts of gold are in the hands of 6 billion shrimp, there are only what 19 or so CB's ??

I do remember 2003 when everybody's mother quit their day job to get their real estate license. Now those same people are on street corners holding arrow shaped signs that read "WE BUY GOLD".

Oh yes, I do know this about my coin dealer. He has a "buyer" that will always buy his entire stock at spot "any time, every bit".

So aside from Libya's gold going to Venzuela, i think the flow from debt ridden public holdings during the "managed price increase" (not managed retreat) is substantial.

And one last straw to add to the camel's back of course, derivatives.

It is funny how more and more the truth comes out. We all know it is 1.1 Quadrillion (though for 4 years they would hardly admit half that) and the question is, "will they print to meet these paper obligations as they unwind, or will it usher in the final repudiation of this complex paper debt grid".

The ESF commands armies, including NATO.

an ANT and Dec said...

The latest from Martin Armstrong is DOW to 20,000 minimum with rally gaining steam summer 2013.
Also, it appears that a lot of other technical analysis points to the beginning of a structural bull market and the end of the of current bear market we have been in since 2000.

I infer from this, that the velocity is going to start picking up next year.Money will start to move out of the bond markets and off the sidelines and into stocks, assets. Is this final inflationary CRACK UP before the end game. The next question is how long does the CRACK UP last. Do we get a sustained period of 'HOT' Inflation. Or as from FOFOA in "Inflation or Hyperinflation"

Of course "hot inflation" is coming! But how long will it last? How long can it last without the structural support of foreign CBs mopping up the dollars the USG will be printing in order to defend its own "lifestyle" in real terms? How far can prices rise without hitting that hyper feedback loop at the margin where prices are discovered?
My only disagreement is that Congress will take it more hyper than we've seen in all of fiat history, so fast it will peel the skin off your face

In which case this could be the shortest bull market in history :-)

Michael H said...

New post up at Voodoo Economics

Perhaps there was a random confluence of events in the late 1990s from what we can observe. ...

DP said...

FOA 10/8/01 - We managed this threat with help from our Euro friends; somehow thinking they enjoyed and wanted our fleecing their lifestyle to the same degree we did it to the rest of the world. Their cooperation, we will find out, was but a structural policy that bought time; time for a dollar replacement to be made.

The dollar system appears to fleece everyone outside the US who employs it. And in the long run also those within.

If the system were to continue indefinitely, at the end of the day the domestic share of claims on the US economy would inevitably close in towards zero. If the rules of the game continue to be played indefinitely then it becomes clear the US doesn't really have an exorbitant privilege, but it is consuming it's own accumulated capital.

The developing countries don't mind it so much, because by importing an ever-growing share of claims on the assets of the West, through out-competing domestic Western labour, they're able to invest in growing their own economies to bring standards of living closer to those of the West. We consume and they invest. So they have an incentive to perpetuate the game as long as they can - as long as the West are prepared to continue consuming and their own real economies are expanding as a result.

Europe already has a developed, Western economy. And they do not issue the dollar that forms the primary reserve asset of the system, so they don't benefit from Freestuff™ (but not really) like the US does. They don't really enjoy much benefit from the system, aside from the fact there IS an agreed-upon system so they are able to trade with others. But their trade is balanced.

So perhaps it is fitting that China are so warm and friendly towards the Eurozone. They did China (and the other emerging markets) a massive favour by extending support to the $IMFS for as long as they did. The surplus-earning countries' debt assets may burn as the system expires, but they will still have all their real infrastructure and means of production - paid for by the consumption of the West. And all that gold they've been sucking up too.

Which is just as well, because I don't foresee the US wishing to keep playing this game right up to it's inevitable conclusion, do you?

Yes, everyone wants to collect their kiss, but they also don't want to get spit on them. Europe helped sucked up the problems of the dollar system, because they have a special purpose. Despite this, they are still screamed at for not doing enough to resolve their financial problems. Pretty ironic.

Robert said...


Few are proposing RPG as a proactive policy choice. RPG is what you get, whether you want it or not, when there is a final run on physical gold. When that happens the government and the bullion banks have lost the ability to control the spot price. At that point every asset in the world will get revalued.

victorthecleaner said...

Yes, there are these Cash4Gold shops. I wonder where the Cash4Silver ones are?

Wil Martindale,

When the truth about how much paper in GLD is backed by physical comes out, the reaction will be startling.
The ESF commands armies, including NATO.

This reminds me of the good old days when I used to drive the fork-lift for Jamie. Unfortunately, we are in a double bind now because Blythe stubbornly refuses to join us to North Korea.


Jeff said...

"If the system were to continue indefinitely, at the end of the day the domestic share of claims on the US economy would inevitably close in towards zero."

All that liquidity melts an ant's hard earned pile of sugar.

FOFOA: We are all like ants in an ant farm when we patronize Wall Street. Our contributions to society, should they exceed our day-to-day needs, are deployed by a system that does not care how they are deployed, just that they are deployed ASAP.

matrixsentry said...


Yes, there are these Cash4Gold shops. I wonder where the Cash4Silver ones are?

It really is that simple isn't it? Where are the CBs holding silver as a reserve asset?

Seems it takes a very specific and tiny community to see the wisdom in hoarding silver.

H. M. Socialist said...

This reminds me of the good old days when I used to drive the fork-lift for Jamie. Unfortunately, we are in a double bind now because Blythe stubbornly refuses to join us to North Korea.

*OMG* an insider! This confirms what I have heard through another highly connected insider known as "London Trader"! Have you had dealings with this man?

Also, are the rumors true? Does Blythe use black magic to manipulate the silver market? Is the CIA involved? Inquiring minds would like to know.


Michael H said...

H. M. Socialist,

If you want to know THE TRUTH, you'll have to subscribe to my newsletter.

(comment: too bad blogger doesn't allow strikethrough formatting in the comments)

Michael dV said...

after 2 years of reading I'm sure you realize this site is about analysis and NOT about advocacy. I am surprised that GOLD is all you see. I have gotten much more out of my 2 years reading about hyperinflation, the role of debtors and savers and the history of money. I will say that 'get you some physical gold' is a strong suggestion here, but that is because we see the future, as controlled by 'shots', much bigger than us, planning a world monetary system in which physical gold in one's possession will be beneficial.
Another reason I hang out here is to find solid evidence that Another and FOA were wrong, either in analysis or fact. I have made some very important person decisions based upon what I have learned here. If there is an error in either fact or analysis, I would prefer to know before it is too late. So if you can poke holes in either poke away, but mere opinion, unless it effectively undermines the premiss, is not helpful to me.

Wil Martindale said...

Hah Victor, good one. Ask North Korea about Gold ??
My coin dealer always has drawers full of silver. Gold ?? On any given day, he has none.

I often wonder, when the COMEX price of "gold" hits $800, how many hours before it hits $500 ??

Will Comex say to eal gold, "look at gold dropping, we'll cash you out at yesterday's high."

At what point will gold say, "I wipe my ass with yesterday's high"

Michael dV said...

Falling gold price is only a problem for those who have to get some money out before those who got piggy and took possession of more than they could pay taxes on and now need money for taxes. Other than that...we just watch this new market together.

ampmfix said...

Hey DP,

Forgive if this was already posted here, but I find it very good, Gary North on Steve's real ability: the banjo.

DP said...

It's clear in his telling that there was no real shortcut to his eventual fame, and the compelling life it generated.

Yes folks, I'm afraid it's, what, probably about 3 years now you've suffered me so far… you have perhaps a further 7 years before I finally make sense.

Biju said...

Yesterday I saw a youtube video in Apple TV about a $205 Million Cash haul by Mexican Govt from a Chinese-Mexican Drug Lord's(Methamphetamine) Secret Room at his house in Mexico city's exclusive neighbourhood.

His name is Zhenli Ye Gon and he is/was a mini giant. A small one at least.

I was surprised by the cash stashed at this home. Also the hundreds of Gold studded Rolex watches/coins.,0,709967.story

costata said...

Michael H,

Thanks for the Lan Pham link. I hope she is intending to post more often.


I'm looking for more information about this deal between China and Taiwan. I'm not sure what to make of it at this stage.


I see Freegold as the revaluation and RPG as the official recognition by Central Banks that, er der...

"We've been holding gold in our reserves for a reason. It's the premium international reserve asset, not the US dollar or sovereign debt. Sorry we forgot to mention that earlier."

All jokes aside I think that this recognition of gold will change the way currencies are managed. An unstable gold price in a currency zone will be a stain on the reputation of the currency issuer/manager. Hence RPG.

I think the revaluation will be portrayed as an "act of god" by the parties responsible for this slow motion train wreck. IMO the politicians should be first on the list if (IF) we are trying to decide who to blame. And I'm not sure that is an excercise worth pursuing.

The key issue for me is what checks and balances are missing from the current system and how the new system will operate. If the new system lacks specific checks and balances that are needed then we can use the past as a guide to the future. If they are present then we need to reassess our expectations across the board.

costata said...

Couldn't help laughing when I read this over at JSmineset a moment ago:


How would you answer FOFOA and his followers, who say silver is going to crash?



Why answer them? What is FOFOA? Is that something like FUBAR?

Yesterday I asked cooperation in the work I am doing regarding emails. My interest in what others think is limited to our crowd. Apparently you missed it, or do not read JSMineset often.

Silver will trade at $50 minimum. In the meantime it will drive you nuts.

Respectfully yours,

It's like playing Chinese whispers. The message is distorted in translation - "silver is going to crash". Cue Blondie to give poor old Uncle costata a tongue lashing for doing the same thing and blocking the trail.

Wendy said...

I was at a coin/bullion/jewellery shop in Vancouver on Oct 19; although I hesitate to call it a shop as it's about 4000 ft2 of retail space. I had no trouble selling silver and buying gold. These days they are selling more silver than gold, and I found this quite a surprise because Vancouver has a very large asian population.

Lord Sidcup said...

ampmfix, DP

I don't know why you're mentioning him, and although I don't much like his comedy, Steve Martin's autobiography is a fantastic read

Pierre Don Denirio said...
This comment has been removed by the author.
strannick said...

You guys see COMEX sell 1/4 of the worlds global production in 10 mins today in conjuction with the NFP?
Silver is simply manipulated in the extreme. Anyone who talks of silver as primarily an industrial metal, whose demand will retract with an ailing world economy is deluded. Simply overlay silver to gold, and voila. No two commodities should EVER trade like that. Silver is first and foremost a monetary metal manipulated in the extreme.

Winters said...

There is an interesting article+photos on ZH about lines of people queueing for gas in NY/NJ for their cars and heating. It's cold, fights are breaking out and guns have been pulled.

I wonder if this is a small scale study of the effects of hyperinflation - will oil stop shipping in and gas stations run dry?

A major difference of course is people are still able to trade their currency for gas...well after HI they still will but will need much more of it.

There is the SPR - Strategic Petroluem Reserve - but that only contains 36 normal days worth of consumption. I imagine it being 'strategic' means it will be largely witheld for defence/emergency services - not civilian use.

Maybe more people will be prepping in those areas after this experience.

Wil Martindale said...

I was just reading about the Bundesbank "apologizing" to the Fed for all the alarmist rhetoric over this measly 50 tonnes a year.

"Gold is important", he says, "but what we really have here in Europe is a CONfidence problem".

Perhaps they can get 50 tonnes of CONfidence from the sovereigns and store that in their vaults.

And now ... off to the Cabaret !!

Aiionwatha's Nation said...

Keep your silver. Bottom line is it has a better exchange value than what is offered currently. Plus you get the added advantage of a focal point with lack of central bank ownership. I would however be hesitant to hold one without the other.

The idea that those chuffs will maintain enough credibility to revalue anything by the time time they are done with this is laughable. Is the ant farm going to just sit back and say, whoops we built our mound in the wrong spot, better see what the boss has to say about the next locale?

Does anyone even remember half of the the alphabet soup programs we are using as our money at the current moment?

H. M. Socialist said...


EXACTLY! That is what I keep trying to tell these freegolders! Gold and silver are BOTH money! They will BOTH be a reserve when the dollar is replaced! This will not be needlessly complicated nor will it be impracticable; Gresham's law is a MYTH.

I get so butt-hurt when these freegolders make fun of my silver sword and shield that I can barely sleep at night! But then I turn the light back on and rub on my shiny 1000 oz. bars and it makes me feel better.

Silver is first and foremost a monetary metal manipulated in the extreme.

+∞! If silver EVER goes down it is because of MANIPULATION. The COMEX shorts shall be slain by the wrath of the silver liberation army! The sheeple shall flood into silver in a great wave when the dollar hyperinflates, defeating the elites once and for all!

@Michael H


I am heading to the bank tomorrow to help out a new friend who is Nigerian royalty, I can pay you then!


Aiionwatha's Nation said...

HMS - Picture is great. Hopping up someone's ass who has a bigger sword to watch those with an actual ambition to change the situation we are in perish, not as elegant.

Marcia Tan said...

Apparently Jim Sinclair doesn't know about FOFOA. Maybe FOFOA should try and reach out to him to explain his concept of Freegold and his theory on silver.

Jim’s Mailbox
November 2, 2012, at 4:51 pm


How would you answer FOFOA and his followers, who say silver is going to crash?



Why answer them? What is FOFOA? Is that something like FUBAR?

Yesterday I asked cooperation in the work I am doing regarding emails. My interest in what others think is limited to our crowd. Apparently you missed it, or do not read JSMineset often.

Silver will trade at $50 minimum. In the meantime it will drive you nuts.

Respectfully yours,

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