Props to RJ Padavona who graciously agreed to be my guinea pig and help me work out some of the kinks in the interview process. He did so at the cost of his own interview perhaps coming across as a little more staged and a little less natural than the next two, including Matrix Sentry which I recorded just last night.
But RJ is so freaking funny that I was confident not even my awkward first steps could mess up his interview. And I was right.
To kick it off, I'd like to draw your attention to a comment RJ left on the blog back in March under the Savings & Capital Theory Open Forum. Here's the link to the comment and here's the full comment with context. RJ was replying to Woland:
Woland said...
FOFOA; The cartoon of "Schiff the elder" island was both entertaining
and informative, however, on said island, the store of value and the
medium of exchange appear to be one and the same. Not the best of
arrangements long term, no?
March 14, 2012 8:10 AM
RJPadavona said...
Hello Woland,
Ironically, Irwin Schiff is now living in the hard money utopia he once wrote about in his comic book.
As you may already know, Irwin was a very outspoken leader of an anti-income tax movement in the US. He is now serving 13 years in federal prison for tax evasion.
In prison, there is always a big black market economy going on and the MoE and SoV are the same unit: The postage stamp.
In the US, we now have what is called the Forever Stamp. No matter at what point in time you buy this stamp, it can always be used to ship a piece of first class mail. In other words, the purchasing power of the Forever Stamp remains the same, regardless of the increase in the official price of postage. It functions a lot like gold.
So Irwin Schiff finally got his wish: A return to hard money.
IMO, this says a lot about a hard money standard: It functions great in a system where you are surrounded by criminals and there is no trust. So, using that logic, I can see why hard money advocates want to return to a gold standard: Because there is no trust in the current $IMFS.
In prison, humans revert back to their most primitive state as a means of survival. Is this the mindset we want to use when developing our new monetary system? I hope not!
I guess this is what FOFOA means when he says going back to an old-style gold standard would be an example of the monetary system devolving instead of evolving.
The gold standard of old gives me the blues:
http://www.youtube.com/watch?v=rX009sWzRQg&feature=related
RJP
March 14, 2012 10:14 AM
And now, without further ado, here's RJP:
Coming up next… Aquilus!
Sincerely,
FOFOA
149 comments:
Unfortunately the YouTube is banned in office :-(. Will have to wait till I go back home.
I really enjoyed that. Thank you FOFOA and RJ.
PS RJ. secretary spread = no way jose
Great idea to do the interviews, looking forward to everyone's story. Most interviews are VIP to VIP, much more interesting hearing normal people's views.
Awesome stuff, you two. Great shirt and story, RJ, thanks for sharing.
Your cat has more hair than you two combined, FOFOA!
wow 2 post in a day...like Christmas in October!!
Great stuff! I can´t wait for the next episode. :-) This is now not only my favourite blog but also my favourite talkshow!
I used to think that JR was FOFOA after he's had too much to drink.
What a great story, thanks for the interview guys, and for doing something so different to the usual interviews we hear in the PM community.
Question....
FOFOA says that under the current system, all of China's Yuan is credit money.Because Yuan gets printed and given to Chinese exporters yet the US dollars from the US importer still exist.
Why does there have to be double entry accounting and different currencies around the world ?
In an ideal world, couldn't there be one currency (MOE) for the whole world ?
Say.. World dollars ? Which would do away with double entry accounting. The Chinese exporter would get World dollars from the American importer directly. No central banks needed in either country.
Then competitive advantages would be mainly focused in the physical plane. Ex. Oil for the middle east countries, manufacturing and engineering expertise for Japan, Germany ect. Warm places for tourism.
No mention of Dio in the interview?? I need that critical piece of background filled in.
M:
For having a single world currency, every country will have to accept a single world currency.
It took Europe more than 20 years to create the Euro. How long getting the whole world to agree on a single currency will take? Its not a practical endeavor. Maybe sometime in the future, after freegold.
The answer to the other part of your question, I understand only intuitively, and cannot explain it to you :-(.
M.
Yes... but where will these "world dollars" come from? "World CB?" Appointed by who?
I can´t think of an "ideal" answer to that one. Can you?
@ anand srivastava
It would be a process but the way it was explained here in the BOP/Freegold post was that double entry accounting was here to stay. Politically , that's probably true for a long while but if we were going to make a blueprint on how to run the world financial system from scratch, would we have double entry accounting ? I don't think so.
There isn't double entry accounting within the Eurozone. Germany still over produces and saves and Greece does the opposite. That is what separate bond markets are for.
very interesting story RJP. For some reason I expected you to be much older - maybe its your avatar's influence.
and lol'd at your porn/hooker quip.
big kudos for turning things around. it would have been easy to go the other way...well i imagine so...fortunately never been in that situation.
FOFOA: also like the ectasy of gold intro. The shiny yellow metal has been on a tear in AUD the last week or so and Metallica's S&M version has been on my playlist :)
@ Bjorn
Call them Euro's.
Basically, what I am talking about is a currency alignment with some of the big players.If people actually figure this whole freegold thing out, they will demand a one world currency to stop wealth shuffling via double entry accounting.
Would you take it completely out of the realm of possibility that Russia join the Eurozone in the future ?
Why not ?
After Russia, anything is possible.
M,
Under freegold, the only point of a currency is to serve as MoE and expand and contract as needed by the underlying economy.
It is more efficient if the MoE covers like states in a zone, because expanding the supply only affects the state's in that currency block.
So for a currency to expand its zone willingly (like the Euro), some conditions must be met by the states ( mostly economical, but clearly political too)
On the other hand, states may choose choose their own accord to not have a local currency, and adopt something like the dollar and the euro. That's outside the CB's control.
But I would say that the driving force between multiple currencies is the need to be flexible with issuance and you cannot do that if the currency spans the globe.
As for inconvenience, remember any major currency can be UoA for transactions (between businesses cross border). As for people, have you noticed the increased its of electronic money vs cash. With automatic conversion (yes some charge fees now, but others don't for fx conversion)
Awesome debrief! I sense it is destiny that you get a crack at my Jarhead lid. I have the disease you know and it won't be long before you will be able to count the hairs on my head! I'm thinking a road trip is in order to your neck of the woods.
Thanks for being the Guinea Pig. It made it a whole lot easier for me and FOFOA commented to me that he felt my debrief really benefited from his experience with yours.
BTW, yes, I will take a look at getting the A/FOA archives into a PDF format. I will have to think about how I am going to index them.
To answer a question from yesterday, I have great difficulty getting through to older pilots. As it turns out I have discovered that they suffer greatly from normalcy bias. I think this is because most of the older guys have been around a long time and have more experience with investing their money than the younger crowd. They have been become institutionalized and conditioned to believe that they must outpace inflation by attaining growth. Like the frog in the pot, they no longer notice the ever escalating risk they must take on just to create nominal performance.
Another problem is denial. Many of the older pilots have everything tied up in their portfolios and the idea that it could all be gone in massive $ devaluation is simply too much to deal with. Funny in a way to an outsider who sees a steely "Sully" who can deal with the extreme pressure in the most perilous situations.
The key is emotion. There is no emotion in an extreme cockpit environment. It is 100% focus on task accomplishment to the exclusion of all other things. Money on the other hand is one of the most emotional things that I know of.
Pilots are not good with emotion in general, both in terms of managing their own emotions away from work as well as reacting to others. Emotion is not part of a pilot's tool box. However, this is because he chooses to throw it out, not because he does not possess it in the first place.
Unfortunately there is bleed over in life outside the cockpit as a result of life in the cockpit. As you can imagine there is a lot of divorce and there can be all the other issues like depression and alcoholism. Under the best of times it can be a real challenge to be two different people at once, one at work and one in the world outside of work. Then add in lost pensions and severe pay and work rule concessions generated through industry wide bankruptcies, you get a guy that just cannot deal with anything more.
The younger pilot is a whole easier to reach simply because he has not become the old guy yet. Far less experience with positive net wealth because pilots are deeply in the red for the early part of their careers. Also, there is the generational thing as well. They see the world far differently and are more comfortable with non-conformity and unconventional thinking. They are looking forward to when a new world is revealed and expect hardship, while the older pilot is looking for signs that good old days have returned.
In short, baggage. We all have it to some degree and need to set it down. As I have let go of mine, I have felt a palpable sense of relief and find my time at home is far less a time to be managed than it to be simply lived. I actually enjoy work more as well. All of this is a consequence of finding this blog. What a pleasant surprise!
I"m noticing a shift in the way I feel about this blog as the
debriefings progress. It is feeling more like a community
than it did before, as the participants become real people
rather than disembodied voices. Some of you who have
communicate with one another on other forums may have
already developed that sense, but for me it is rather new.
Anyway, what a delightful interview, RJP, and what a good
idea, Fofoa.
@ Aquilis
You said-
"I would say that the driving force between multiple currencies is the need to be flexible with issuance and you cannot do that if the currency spans the globe"
I understand how freegold basically eliminates the ability for governments and CBs to steal by dipping into the savings of the local population via inflation but they could still transfer wealth and steal via double entry accounting.
This hits home for me because I worked for Statoil on their Canadian onshore project for 3 years. The Sovereign wealth fund of Norway owns 60+% of Statoil. The sovereign wealth fund is filled off of the sweat of Norwegians and I am getting paid by them (Statoil). Its a direct wealth transfer from them to me isn't it ?
M
I'm sorry, but I don't understand. Maybe you could clarify how exactly this wealth transfer occurs, because all I see right now is taxpayers being shareholders in an oil company, and the oil company pays employees/contractors. So there must be something more I'm not seeing.
World money?
RS View:As evidenced in the commentary about the new trade arrangements between Russia and China, it should be obvious and intuitive that bilateral trade between any two given countries could be similarly invoiced in their respective currencies. The timeline is effectively zero given that these currencies already exist and are in local use. At issue, mostly, is the simple matter of breaking with mere tradition — the habit of invoicing/contracting in this third party currency, the dollar. Given the suitable functionality of most national currencies for the invoicing/payment of their bilateral trade, there is no need for the world to spend time and effort conjuring up a new supra-national currency unit to replace the dollar as a universal invoicing agent.
FOFOA: Imagine, if you will, the euro supplanting the dollar's role as the globe's super-sovereign currency unit. This is (at this point) merely a conceptual exercise for all you anti-conceptual mentalities. Let's compare the two with regard to Triffin's dilemma.
How often do we hear euro critics repeat that the euro, a currency without a country, has no political union to back it and is therefore worthless? The US dollar has a country, but in its role as the world's currency it also functions just like the euro, without a global political union.
The fundamental difference between these two units of account (the dollar and the euro) is their relationship with gold.
If you have followed my blog at all, you know that the euro has Freegold, the wealth consolidator and "real money" with no country, no links and no political union to back it. So which unit of account (€ or $) is closest to gold? Which currency, of these two, is most likely to be preferred as the global reserve currency next to Freegold in the wealth reserve role?
The point is, once "Freegold" (nature's wrath) inflicts itself upon us all, it won't really matter what is chosen/used as the super-sovereign or supra-national currency to lubricate international trade. It could be the euro, the yuan, the SDR, Facebook Credits or even the dollar! Triffin's dilemma will be gone. And you shouldn't worry so much over the transactional currency question, because that will be chosen through the market forces of regression, the network effect and game theory's focal point discovery at the international level.
@ Aquilus
When a Norwegian exporter exports something to a few different countries, the Norwegian CB gets the currencies from the different countries and prints Norwegian Krone and gives it to the exporter. In that process, the CB can decide what the value of the Krone is on the world markets. If they decide to make it worth less, then less purchasing power goes to the Norwegian exporter and more purchasing power stays in the CB. Then the CB hands it to the sovereign wealth fund of Norway and they go off and spend it in Canada. Through this process, real wealth is being transferred from one country to another.
A sovereign wealth fund (SWF) is a state-owned investment fund composed of financial assets such as stocks, bonds, property, precious metals or other financial instruments. Most SWFs are funded by foreign exchange assets.
@ Jeff
You said ":As evidenced in the commentary about the new trade arrangements between Russia and China, it should be obvious and intuitive that bilateral trade between any two given countries could be similarly invoiced in their respective currencies. The timeline is effectively zero given that these currencies already exist and are in local use."
Do they practice double entry accounting in this new arrangement ?
M
I don´t see Russia, or China, or the USA joining the Euro any time soon (in my lifetime), for reasons of power, culture, pride and tradition.
Like Aquilus I don´t understand what you´re getting at with the Statoil example at all.
Unlike Aquilus I don´t think the main problem with a one world currency MoE is flexibility but rather insurmountable problems with unity and trust between the nations of the world.
The "double accounting" as you described it is also not a function of there being two currencies, but of debt buildup due to enduring trade imbalances. Freegold spur and brake will take care of that. Perhaps the Euro will be used as an international UA though in the future. In freegold it won´t really matter much. Anyway that´s my 2c.
@ Bjorn
"I don´t see Russia, or China, or the USA joining the Euro any time soon (in my lifetime), for reasons of power, culture, pride and tradition."
-I wouldn't rule out Russia but I agree to a point. I just don't know if these currency exchange agreements between countries like China and Brazil are based on a double accounting model.
"Like Aquilus I don´t understand what you´re getting at with the Statoil example at all. "
-I explained it again above.
"The "double accounting" as you described it is also not a function of there being two currencies,"
-Yes it is I believe.
"but of debt buildup due to enduring trade imbalances."
-There is still big imbalances within the Eurozone and they don't have double entry accounting. Euro's are Euro's.
RJPadavona: When someone told him they didn't like the idea of paying a premium above spot for gold he replied, "You would pay more for a hooker than you would for porn?"
My Appalachian friends might understand this simplicity.
FOFOA TV
Bookmark for future use
An odd thought crossed my mind last night, as I was thinking
back to Ari's story, which Fofoa was kind enough to reproduce
in his prior post. In that story, the adults, sitting around the
table playing the game of Monopoly with their children, might
on occasion be able to convince said children to perform some
real world task, in exchange for the orange one sided bills used
in that game. Eventually, he observes, they will become wiser
with age and no longer succumb to such inducements.
I wonder if Ari could have imagined a game, such as exists in
many forms today, where ADULTS spend money earned in the
REAL WORLD to make improvements to their property in a
purely VIRTUAL one. Well, that's how Zynga's Farmville and
Cityville make money, as well as all those games where 3rd
world gamers work long hours earning points for their 1st
world counterparts, whose jobs demand too much of their
time to keep up their virtual property or status in a game,
but are loathe to let them lapse. To me it seems quite odd.
I wonder what Ari would think. Cheers.
M
Yes I saw your answer to Aquilus after I posted and I think I see your point. And while it is true that double accounting requires two currencies, my point was that without debt buildup the negative effects will be small/negligeble.
Like the interviews, although would love to see FOFOA interviewed. BTW I always thought it eff ohh eff ohh aa. After all its a tribute to Another and FOA, I doubt people referred to FOA as fffoooaa.
I know you guys are not fans of Ron Paul, but he recently initiated a bill in congress to not have gold taxed and have it compete as currency.
If this freegold comes but people are still taxed on the cap gains it massivley reduces the 'savings' element, especially considering what the tax rates may be in the future. I know FOFOA has said he does not think it will be taxed but considering how govts operate I find this highly unprobable. So would not a tax on cap gains on gold not upset freegold greatly?
Also my main other issue w/ the freegold concept which i find few talking about here is the whole issue of paper gold vs physical gold. And eventually the physical mkt separating from the 'paper'. FOFOA etc are certainly economic and monetary experts but I havn't seen the expertise on the mkt, trading etc side of the argument. I have yet to see serious proof that there will ever be a divergence in pricing or why there should be.
Don't u think the advent of ETF's has had an effect on gold demand over the past 10 yrs? Sometimes I sense a complete lack of appreciation for what actually drives the supply and demand. What if India banned imports on gold. Don't you think this would have a big impact on prices?
I listened to a good interview by Bron at Perth Mint where he talked about how GLD, futures etc are arbitraged. Unless banks want to stop making money in the future i think and decoupling is unlikely. Plus I do think GLD has the gold.
BTW matrix i noticed you mentioned you have this GTU. Personally if I had to invest in one it would be the biggest one out there like GLD. It is well arbitraged and there are saftey in numbers. The one u mentioned seems very small, just my 2 cents.
M,
In most countries the exporter gets paid and *then* puts that foreign currency into the local banking system, where the local CB clears it as you describe above - often by meeting this new demand by printing local currency to keep the local currency cheap to support exports. FOFOA has written about this wrt China (on phone can't search to god now).
In Freegold the exporter can bypass converting to the local currency via the domestic banking system and instead just use the foreign currency to buy gold.
Dear FOFOA, I have just come across your site and am somewhat intrigued. I hold a number of 1000oz Silver bars with BullionVault. I also have a number of Gold Sovereigns but only as a small fraction to the Silver.
The reason I looked for your site was because the blog BrotherJohnf was stating that he thought your idea regarding Gold versus Silver was wrong and that Silver would climb back to a 10 -1 ratio. Silver is the place to be NOT Gold is what most precious metal blogs tell us. This has started me worrying. You seem to be a lone voice and my inner voice is starting to pay attention to the fact that central banks only hold Gold.
Two questions if I may.
Did banks ever hold Silver in the same way that they now hold Gold?
Why don't Central banks bother with Silver?
BaronSilverBaron
"Did banks ever hold Silver in the same way that they now hold Gold?"
Yes, a very very long time ago. Primarily China, and the USA.
Perhaps read Focal Point Gold that is referenced in this interview for some background and perspective.
"Why don't Central banks bother with Silver?" The above addresses this too if memory serves.
TF
BaronSilverBaron
The other two 'big posts' here about silver are :
Costata's Open Forum and Kicking the Hornets Nest
TF
Thanks for all the great comments! I'm glad y'all enjoyed my story and I hope it inspires more of you to do an interview as well. If some country bumpkin ex-con can sit down and tell his Trail story then anyone can.
SV,
I wore that shirt for you. I knew you'd be the first to notice it! And I wore the other shirt for Max and DP, my favorite Royalists across the pond. They love the Royal Stewart Tartan ;) They laugh at me because the closest I've been to Buckingham Palace is the Sanford Arms.
Jeff,
I've always been a HUGE fan of Ronnie James for as long as I can remember. I don't exactly recall why I used him as my monicker. Most likely I was listening to Rainbow, Sabbath, or Dio at the very moment I decided to join twitter. Or perhaps I was looking at the stars one night and the answer just came to me.
Indenture,
Friends in Appalachia, eh? You might know some of my kin folks ;)
Thanks again FOFOA, for giving me the opportunity to share my story. And thanks to the rest of you for listening.
RJP
RJP: Around here you don't have to drive far into the woods to find a friend and there's a Deer Check Station less than a mile from my home. (for those of you who might not know this is where hunters can buy a license and register their kills)
I kept thinking Ron looked familiar....
Separated at Birth?:
Ron's secret identity??
Computerwelt (in the paper Gold arena), its all the same with those computergenerizedfractals. Looks like the current Gold(bull) trading is just a totally computerlogarythm controlled fx phenomenon...and we all have to go through this till 2333$/oz!? Zeit ist Geld, hmm, at least something to think about until then...
http://www.kitco.com/charts/livegoldw.html
Original Kraftwerk:
http://www.youtube.com/watch?v=zWSkwvvfmco&feature=related
Copy:
http://www.youtube.com/watch?v=LalwNNeMnes&feature=related
But then, I also like live (well, almöst live...):
http://www.youtube.com/watch?v=3BZUUBX4tjk
"...Interpol und Deutsche Bank, FBI und Scotland Yard Flensburg und das BKA, Haben unsere Daten da Nummern, Zahlen, Handel, Leute Computer Welt Denn Zeit ist Geld Finanzamt und das BKA, Haben unsere Daten da Automat und Telespiel Leiten heute die Zukunft ein Computer fuer den Kleinbetrieb Computer fuer das eigene Heim Reisen, Zeit, Medizin, Unterhaltung Computer Welt Denn Zeit ist Geld "
Cool!
KG
Jr, M. The post isr Bondage or Freegold if memory serves me. Would link but I am also on phone...
Love the interviews but I have mixed feelings about fofoa coming out...I kinda liked that I didn't know anything about him.
I also sense some of what Woland said above.
This blog is the virtual Island of Misfit Toys. I'm glad I'm a misfit and glad to know you other misfits.
JR- did I understand you to say your interview won't ever happen? That would be a damn shame. I realize some might not want to give out their mug and retain some semblance of anonymity so can I suggest, if this is the case, you still do the interview but wear a Guy Fawkes?
By popular request (that means you RJP!) I have made a PDF compendium of the Another/FOA posts found on the usagold website. Just go to the Ron M's Air-Friendly PDFs link on the right of the blog.
I'm not sure why I didn't think of this when I did the FOFOA compendiums. Thanks RJP!!!
Time to catch up on the reading people.
Here is the link as well:
Another/FOA Compendium
Matrix, RJP,
Do also check out the 'regular archives' compendium put together by Martijn:
http://www.scribd.com/doc/42612553/Usa-Gold-Regular-Archives-Collected
By the way, I would add Martijn to the list of candidates for interviews, if FOFOA is still in contact with him.
Michael H,
Thanks. I will check it out!
Bondage or Freegold?
FOFOA should do one like this:
http://www.youtube.com/watch?v=dE-mxVxFXLg
Victor the Cleaner (Thanks!) sent me a reference to a few very early posts that pre-date Another (THOUGHTS!). I updated the compendium with these posts and they link to VTC's blog with other posts, including those of Big Trader.
RTFB.
And then there was The Southern Death Cult (haha), love the Lyrics though, kinda spooky these old ghosts...
Later it evolved via Death Cult into a simple Cult, as we have known and loved. ( Btw agree I that you have to know what a bit more open profile means before you jump in the water of sharks&jerks ). Alhtough sometimes it helps to tease opponents out from their cover ;-) http://de.wikipedia.org/wiki/36_Strategeme
http://www.youtube.com/watch?v=cAPu7KRmjYI
http://www.youtube.com/watch?v=yFKbhhgrvrE
The rest is (was?) history. For some time he (Ian Astbury) was singer for a Jim Morrison / The Doors live revival.
But you can still back go to the Crypt, until dust settles, but it takes some time until they can't track you anymore.
http://www.youtube.com/watch?v=nvOcJq2lyrc
Nice one Michael H !
I second that.
@ Bjorn
"my point was that without debt buildup the negative effects will be small/negligeble. "
I wont argue with that. Savings denominated in gold will likely lessen the ease of theft/wealth transfer via double entry accounting.
Funny how there is a populist hate-on for the Euro (not necessarily from the Euro population itself but by Americans, Brits)when it actually protects the little guy from theft/wealth transfers via DEA.
I still wonder if these currency swap agreements by Brazil, Russia and China are based on DEA.
One must never underestimate the power of a good hairdo.
@ JR
You said " often by meeting this new demand by printing local currency to keep the local currency cheap to support exports."
And by printing excess local currency and giving the exporter less purchasing power, it results in a direct theft/wealth transfer from one country to another. This is where these massive sovereign wealth funds come from. Stealth theft from the population via double entry accounting.
"In Freegold the exporter can bypass converting to the local currency via the domestic banking system and instead just use the foreign currency to buy gold."
That is basically the answer I was looking for. I'm just not sure why DEA has to stay or is even necessary at all after freegold.
And technically, (not politically) the whole world could adopt the Euro or at least another big player could.
RJP,
I just happened to be wearing one of my Sabbath shirts while I watched your debriefing. Not all that rare of an occurrence, haha.
Your link to the redneck tune inspired me down the rabbit hole of memories this morning, So thanks for that
Time To Switch To Whiskey
A few of my favorite Canadian, American and Canadian/American artists.
One of the best songs ever imho, whatever version ( "acid on the floor so she walk on the ceiling" ) by SOM.
http://www.youtube.com/watch?v=K2AOiDnqL_c&feature=related
M,
please explain what's your issue with double entry accounting. If you just mean the usual form of accounting
http://en.wikipedia.org/wiki/Double-entry_bookkeeping_system (Haven't verified this source in detail)
then there is nothing wrong with it. Every single company uses it, and this is because it is very convenient.
A quick explanation is as follows: Every account has two columns: 'credit' and 'debit'. Every transactions is recorded twice, once as a 'credit' and once as a 'debit', i.e. where it is coming from and where it is going.
For example, if your company receives a cash payment from a customer, you credit the 'Cash in the bank' account (there is now more cash), and you debit the 'Trade receivables' (your loan to the customer was paid back).
No black magic here. Is this what you are referring to?
Victor
US car dealer buys car from German manufacturer.
Option 1: German company has dollar bank account in US. US company credits the dollar account of the German company in the US. Inside the US, some Federal Reserve Balances shift from the bank of the customer to the bank of the producer.
Option 2: US company wires the money to the dollar account of the German company in the Euro zone. Now German company has dollar claim on German bank. German bank has dollar claim on Eurosystem (here: Bundesbank). Eurosystem has dollar claim on Federal Reserve. US bank of the customer has less Fed reserves than before, but now Eurosystem holds a dollar reserve at Fed.
The question of which currency is used, is a separate question.
Option 1a): Keep dollar balance.
Option 1b): German company goes into FOREX market (inside US) and sells dollars for Euros. Now has Euro balance with US bank. Selling pressure on dollar, buying pressure on Euro.
Option 2a): Keep dollar balance
Option 2a): German company goes into FOREX market (inside Euro zone) and sells (euro)dollars for Euros. Now has Euro balance with German bank, but someone else has now has the dollar balance with the German bank, and the position between the Eurosystem and the Federal Reserve system is unchanged. Selling pressure on dollar, buying pressure on Euro.
Except for the accounting entry in Option 1, the CBs are not involved.
Now the Eurosystem may decide to add to their US$ reserves (=suppress Euro relative to dollar). Therefore, they would go into the FOREX market in the Euro zone and buy dollars for newly created Euro base money. This means the German bank no longer has a dollar claim on the Eurosystem, but rather a Euro claim.
The balance sheet of the Eurosystem would grow. They would have dollars as a new asset and the Euro base money that is now held by the German bank as a reserve, as a new liability.
This action would neutralize the buying pressure on the Euro/selling pressure on the dollar of Options 1b,2b. But it is a choice. Always was. Same with China.
Victor
If it gets technical, the references should be correct:
"Option 2a): Keep dollar balance
Option 2b): German company goes into FOREX market (inside Euro zone) and sells (euro)dollars for Euros. Now has Euro balance with German bank, but someone else has now has the dollar balance with the German bank, and the position between the Eurosystem and the Federal Reserve system is unchanged. Selling pressure on dollar, buying pressure on Euro.
Except for the accounting entry in Option 2, the CBs are not involved."
@ VTC
"please explain what's your issue with double entry accounting. If you just mean the usual form of accounting"
As per FOFOA, all Chinese Yuan is just credit money because of double entry accounting. The USD purchasing power still exists and so does the equivalent amount of Yuan.Thus, the CBs can allocate huge amounts of wealth by deciding what their currencies should be worth. Only possible under DEA
Hi guys
Please would somebody kindly give me a quick explanation as to why there has to be a period where paper gold collapses even while physical becomes unavailable. It is not possible that during a dollar collapse, paper gold simply unwinds or is closed out and hardly any one, if anyone at all, may take delivery of future or OTC contracts?
I just don't see why it is necessary for the paper gold price to collapse. Would the paper gold price become a token meaningless item, and everyone would know it is a token, meaningless piece of information, if physical gold is only available at much higher prices?
There is a lot to read here an on the gold trail, just trying to learn.
@ VDC
Where does all the money from these sovereign wealth funds come from ?
Looks to me like they come from currency pegs wether they are soft or hard, doesn't matter. Its theft.
Not to nitpick but Victor you T acct example is not correct. I have some experience in this field:
"For example, if your company receives a cash payment from a customer, you credit the 'Cash in the bank' account (there is now more cash), and you debit the 'Trade receivables' (your loan to the customer was paid back)."
Company makes a sale and receives cash:
Debit: Cash
Credit: Sales
moreover if the store sold a customer on credit it would be:
Debit: A/R
Credit: Sales
when the customer pays 90 or however many days later its:
Debit: Cash
Credit: A/R
Has nothing to do with where it comes from and where it is "going".
Lemuel
as for the paper price 'having' to do anything I am not convinced. But...if it becomes apparent that the paper market is meaningless (ie all bid to deliver are withdrawn) then the market would be in disarray at least.
With not paper market to signify the price then how does one price physical? It is suggested here that a nominal price might be posted for paper so as to service a few contracts that might need to be closed out. That price of $300 per ounce would serve as an accounting reference only. No gold would be moving. The price/value of gold would be unknown until a new market place for physical was put in place.
I believe it will be more chaotic than orderly and since hyperinflation will likely occur first (my opinion) we may have silly prices and wild fluctuations by then anyway.
Imagine what you would do if the price was a million an ounce one day and 10 million an ounce the next. You would not sell because you would know that gold would do best after reset.
The future is cloudy for me on the specifics of the endgame and anyone here who has a clearer vision is welcome to chime in but I doubt we have yet read an outline of how events will occur here or anywhere else that is even close to how they actually play out.
You can read about hyperinflation in several good books but the death of the world reserve currency and its replacement by another has not happened, at least not like the coming one will be.
One reason I keep reading is that getting this last bit right may be critical to getting wealth through to the next system. There will be a thousand screaming voices trying to dictate the correct way to do it. The HMS will likely go to war before they accept a new improved fiat. The current regime will not want to be declared dead even though it has been without a pulse for months. Many other things will likely be happening as a new system emerges. Brenton Woods was developed while the world was still at war (and zee Germans were not invited).
We may even see different policies in different countries for a period of time.
It may take a while for leadership to decide that taxing gold might not be the best thing to do to keep gold flowing.
My plan is to lay low until the big dogs have fought it out and then come meekly back into the light.
Knall
Lez Werner, one of the several drummer for the Cult lives here in Las Vegas and has been a friend for years. He did the LIVE album if memory serves. I have a DVD with him on it so I could check. Ian kicked him out and he never forgave I think.
Thanks for the response Michael dV
So the best thing is to sit and wait it out and not try to anticipate exactly how things play out. I do wonder if there is chaos, what the chances are of picking up physical at some kind of discount? Wouldn't that be great?
I have completely given up on any kind of acquisition in the chaotic period. The idea of getting gold 'when the paper price falls' is a very low probability event (I think). There could be panic selling if the price drops some what slowly but I am not setting aside cash for that event.
http://gizmodo.com/5948739/
interesting article on gold creation
Too much computer kills brain cells, they say. Sorry for party rocking...
http://www.youtube.com/watch?v=k39ju0Z5VmE&feature=relmfu
http://www.youtube.com/watch?v=SkTt9k4Y-a8&feature=related
Silence, I kill you!
Friends - Any idea of the impact of new Tesla cars(Model X) that can ride 200 miles without recharging, on the price of oil.
I think they will start pricing these in $30K range in 2 years. I assume this can have a lot of impact on Oil and it's relation to Gold.
Model S test driven for 250 miles.
http://www.youtube.com/watch?v=AO9Rku_ZNeM
Biju, unfortunately oil has too many uses (it is in fact the inverse of gold!), there is still no substitute for the chemical industry uses, which are vital in our modern world, like plastics, fertilizers, asphalts, etc... We are going to have a very tough time substituting oil completely if ever possible.
By the way, thanks a lot Matrix for the pdfs! I am going to point them out to a friend of mine who is captain of A340s in Iberia (he always says he prefers good old 747s, mainly for the "real" feeling and not so much computer aided flight...).
M,
Where does all the money from these sovereign wealth funds come from ?
Probably a budget surplus, i.e. more tax (and royalty!) revenue than public expenditures. I think that usually the sov' wealth funds manage assets of their treasury departments (i.e. accumulated budget surpluses). They are not on the balance sheets of the central banks, and I haven't seen any CB yet who invests in equity, private equity, real estate, etc. (although that would be possible).
As per FOFOA, all Chinese Yuan is just credit money because of double entry accounting.
I don't think so. The Yuan is partly base money (notes and coins) and partly credit money (balance in a bank account). This is because it's true for every currency which can be borrowed and lent.
Double entry accounting is just the most convenient way for the banks to keep track of what they own and what they owe.
somanyroadsinvesting,
yes, I exchanged 'credit' and 'debit' in that example, sorry, I learnt it some 20+ years ago and never used it myself. But I don't think there is any other problem. The point was that it's very convenient, but has nothing to do with the question of whether the PBoC want to accumulate dollar reserves or not.
Victor
In my "US car dealer buys a car from a German manufacturer", there is another option:
When the US company wires dollars to the German company, the German bank may just end up with a claim on the US bank (if the German bank has an account there). So it is not necessary that this position goes through the two CBs.
While I think in China, until a few years ago, all these positions went through the CB (their choice, not free movement of capital), in the example of the Eurosystem vs US, it seems that the banks have these positions with each other without going through the CBs.
In the balance sheet of the Eurosystem
http://www.ecb.int/press/pr/wfs/2012/html/fs120104.en.html
it is assets, line 2 (Claims on non-euro area residents denominated in foreign currency) and liabilities, line 7 (Liabilities to euro area residents denominated in foreign currency).
Victor
Has anyone come across any video of what what's happening on the ground in Iran with the rial? It sounds like the shelves are going empty and I was curious if some of our European friends were seeing anything on their tv news feeds.
By the way, I'm heading to Hengelo, Netherlands on Nov 1 for two weeks so if any of our Dutch readers are in that area I'd love to hook up for a bier.
Ik was niet zeker, Martijn of je nog steeds leezde de fofoa blog en hoe ver woon je van de westerse grens? En ook Geel Ijzer en de resterende mannenbende van de goude forum.
--Aaron
"Iran’s already fragile currency, the rial, has fallen in value by about 40 percent over the past week, battered by a combination of potent Western sanctions over the disputed Iranian nuclear program and new anxieties among Iranians about their government’s economic stewardship, analysts said."
Mike:
Its not really gold creation. Just a new process for gold refining. This will not add much to the present stock. And so is mostly irrelevant.
ampmfix:
I would be happy if these particular uses would vanish. They are poisoning the world. Yes we will lose a lot of conveniences of technology, but we will find other ways to do those things.
@ VTC
"Probably a budget surplus, i.e. more tax (and royalty!) revenue than public expenditures. I think that usually the sov' wealth funds manage assets of their treasury departments (i.e. accumulated budget surpluses). They are not on the balance sheets of the central banks, and I haven't seen any CB yet who invests in equity, private equity, real estate, etc. (although that would be possible)."
To use China as a simple example. Their FOREX reserves and sovereign wealth funds do not arise come from surplus taxes although some SWF's do. They arise from the excess purchasing power they keep by deciding to price the Yuan low relative to the USD(relative to everything) Same goes for allot of other countries I presume.
Wiki
Most SWFs are funded by foreign exchange assets.[1]
Some sovereign wealth funds may be held by a central bank, which accumulates the funds in the course of its management of a nation's banking system; this type of fund is usually of major economic and fiscal importance.
There have been attempts to distinguish funds held by sovereign entities from foreign exchange reserves held by central banks. Sovereign wealth funds can be characterized as maximizing long term return, with foreign exchange reserves serving short term currency stabilization and liquidity management. Many central banks in recent years possess reserves massively in excess of needs for liquidity or foreign exchange management.
(Yuan being credit money)
"I don't think so. The Yuan is partly base money (notes and coins) and partly credit money (balance in a bank account). This is because it's true for every currency which can be borrowed and lent."
According to FOFOA, the Yuan is all credit money in the grand scheme of things. I understood it but I cant explain it.
Basically, Yuan is loaned into existence. Chinese exporter exports a shirt to the US. The American pays in (borrowed) dollars but the Chinese don't use dollars so the CB of China keeps the (borrowed)Americans dollars and prints the equivalent amount of Yuan and gives it to the exporter. The Yuan is just a derivative of US dollars thus, credit money.
@ VTC
"While I think in China, until a few years ago, all these positions went through the CB (their choice, not free movement of capital), in the example of the Eurosystem vs US, it seems that the banks have these positions with each other without going through the CBs."
I don't believe that. I think that the G8 or the G10 all have soft pegs that they agree to. Look at what they did after the earthquake in Japan. They got together and intervened in the currency market and devalued the Yen.
And from what I can tell, its all possible because of multiple currencies and double entry accounting.
M:
Basically, Yuan is loaned into existence. Chinese exporter exports a shirt to the US. The American pays in (borrowed) dollars but the Chinese don't use dollars so the CB of China keeps the (borrowed)Americans dollars and prints the equivalent amount of Yuan and gives it to the exporter. The Yuan is just a derivative of US dollars thus, credit money.
This will work the same way in Euro as well. Just replace Chinese and China with any country in Europe.
But that does not mean that Euro is a derivative of USD.
Its just that the surplus USD is stored as foreign reserve. And when the CB takes it as reserve they must give the local currency to the person who earned the USD.
Even US will do the same, if a person in US sold something to China. The only trouble is because of the long term account imbalances. Once the long term account imbalances disappear, you will be able to think more clearly of each currencies actual worth.
The long term account imbalances are because of USD being a reserve currency. Freegold will remove the necessity of any reserve currency. Not even Euro is required. Don't think Euro will be a special currency in Freegold. Most currencies will move to tailor their currencies after Euro. It may be the first one to do this, but in the future it will not be the only one.
Sorry about this but it has to be said. I don't want to hurt anyone's feelings but as a new comer to this site I notice there is a "certainty" almost akin to religion that Gold is the only precious metal that will have "real" value in the future. The arguments put forward seem logical. However. If you go to the latest BrotherJohn blog http://www.youtube.com/watch?v=W1r7BnPP32E&feature=plcp You will see an even more persuasive argument for Silver. Don't get me wrong I like Gold but see a much more logical argument for Silver. The argument on this site rests on the fact that Central banks are only buying Gold... So what if they are? Silver is still a better argument.
So here I am a possible Silver Christian standing in a Mosque full of Gold Muslims.
Will anyone take the time to listen or does Gold blind people totally.
Isn't there a good argument for both "religions".
@ anand srivastava
FOFOA stated that the Yuan is credit money. I understand it enough to know its true but I cant explain it the way it was explained before.
The Yuan is hard pegged to the dollar by the CB of China. In this situation, even if trade between the US and China was balanced, all transactions still go through the CB of China.
BaronSilverBaron,
No need to apologise (you're quite right, it did need to be said), indeed thank you for taking the time to set the crowd here straight.
You make a strong and deftly nuanced case in your presentation of the persuasive and logical argument for Silver, and in very few words too.
Where can I and other converts register to join with you and have Brother John and Father Ted minister to us?
I'm most grateful, as all this thinking for myself has been giving me a terrible headache. What a fool I've been.
I kneel in the long shadow of your excellence.
Questions for the FOFOA superorganism's mobile users:
1) anyone know how to turn off mobile blogger and default to the web version?
2) anyone know of an app for posting from a mobile, I find blogger's software difficult (it's hard enough to spell/type right when I can clearly see what I am doing)?
Thanks
Silverbaron with the unintentionally hilarious post of the day. Silverbaron, whenever you stumble across a new blog with an unfamiliar premise, the best thing to do is attempt to set the readers straight immediately without considering the material they discuss in depth. And for heavens' sake, don't read the articles!
Stick around Silverbaron, you might learn something. Lugging around those 1000 oz silver bars and the accumulated silverbug baggage must be heavy.
SilverBaron,
Kind of like being invited over to your brand new neighbor's home for a "lets get acquainted" get together and upon arrival saying, "hey, where can take a crap?"
You are speaking to people who have read the entire blog, many have read all the posts multiple times. Why don't harden up and read the blog a bit?
RTFB.
JR: Not a direct answer to your questions, but here's what I do.
If the mobile version comes up, click the "View Web Version" button at the bottom. This puts the "?m=0" in the URL. You can bookmark this page. If you use this page often enough, it should stick in your history.
On the iPhone, clicking on the top bar takes you all the way to the top of the post, which enables you to click the refresh button, then I crazy scroll back to the bottom.
FOFOA - if you could put a link on the top of the page that links to the bottom of the page, that would save mobile readers heaps of time.
I've never posted via the mobile, so will have to let others comment there.
DI.
Silver Baron,
You rock up at a precious metals blog and assume the readers haven't heard about silver and don't know any of the arguments?
C'mon dude, expend some thought credits, it won't hurt I promise.
No, seriously, why not read the blog a bit, do a little unbiased thinking, considering, contrasting?
Maybe you'll benefit, maybe not, but rocking up with that stuff doesn't help anyone, including yourself.
JR:
You can open fofoa, and then change the m=1 option in the link to m=0 and then when it opens save the link. This will give you an icon.
This technique should work if your phone is android.
I don't know the answer to second question. I rarely post from mobile.
Delusional Investing.
Actually you can simply edit the address bar when the FOFOA is open to replace m=1 with m=0.
Hi Anand,
In the address bar, I just type "F", and it suggests for fofoa...?m=0 as the first option. And that's only if I've shut down the page - which is rarely.
GLD has been adding inventory again. 12.6 tons this week.
SilverBaron
Read the Blog. Hint: the answer has a lot to do with the annual stock-to-flow ratio which for Gold is approx. 60 and for Silver is < 10?
The lack of industrial uses for Gold @55,000 $/oz. enhances its role as the ultimate SoV compared with Silver and other things.
I am holding physical Silver (from 5 $/oz.) but
will swap for more physical Gold once the GSR gets to < 20. Am being somewhat greedy here!
BaronSilverBaron won't be happy with my interview, that's for sure...
BaronSilverBaron,
All joking aside, start with:
http://fofoa.blogspot.com/2010/12/focal-point-gold.html
http://fofoa.blogspot.com/2010/12/kicking-hornets-nest.html
http://fofoa.blogspot.com/2011/05/costatas-silver-open-forum.html
http://fofoa.blogspot.com/2011/05/costatas-silver-open-forum-part-2.html
You'll probably find some of your questions addressed in the comments to the above as well.
While you're at it, this Mencius Moldbug piece is germane as well:
http://unqualified-reservations.blogspot.com/2011/04/on-monetary-restandardization.html
Biju,
The Tesla's effect on oil prices will round to zero.
First, keep in mind that electricity is an energy carrier, not source. So the energy still has to come from somewhere. The one under-priced source currently is natural gas, but it would make more sense to use it directly instead of converting it to electricity first.
Second, to have any effect on prices, the new technology would have to be adopted on a large scale. There is no indication that this is even possible -- i.e. can the entire US market be supplied with batteries, without sending the relative prices of their material inputs sky-high?
Third, if one wanted to reduce the energy use of the US transportation system, there are much better ways of doing so with current technology: reduce miles driven (already happening), drive smaller vehicles, put smaller engines in said vehicles.
If you want to scroll to the bottom of the posts with an iPhone/iPad you can do the following trick:
1- Create a new bookmark of any page
2- Edit the bookmark so that the name reads "Scroll to bottom" (or anything that reminds you why this is for)
3- In the website erase all text and paste this:
javascript:window.scrollTo%280%2Cdocument.body.scrollHeight%29%3b%0a
4- Save your new bookmark
Now clicking this bookmark will scroll to the bottom of the page you are currently seeing in Safari. Looks like Apple executives don't read FOFOA! It is impossible to live without this if you read this blog!
Xavi,
Nice job sir! Works perfectly.
We need triple T around here to tackle the silver crusaders.
Triple T
Hello SiverBaron:
You know, society is constantly evolving. The uses, production
processes and relative values of all things follow this evolution.
It might surprise you to learn that Napoleon III, nephew of
Napoleon I and Emperor of France, used aluminum flatware and
plates at all state dinners. Why? It was rarer and more valuable
than gold at the time! Once platinum was considered a nuisance
metal in the gold panning process, far less desirable than silver.
Its' many important uses, discovered much later, made it for a
time more valuable than gold. Today, whether you like it or not,
gold is in the process of changing its' function once again, to
perform ALONE what both gold and silver had done in past
times. Whatever the lonely citizen may wish, the nation states
who must settle their trading balances WILL call the tune. They
have spoken, and are speaking every day, if only you have ears
to hear.
Michael H :
I agree that electricity production needs an another energy source, but these are cheaper than petrol. Nuclear and solar comes to mind.
If Tesla and others can produce sub 30K cars. I think it can change oil consumption in a big. Now the only question is sourcing the lithium used for the batteries.
To JR : Iam posting from iPhone and I do 't have problem. I just do a "select all/ copy" before attempting to post , so that I can repost if blogger eats it.
Thanks Xavi, Pure Gold! Oh wait..
JR,
I am a blackberry user (the slow one, I know). But I am actually able to post comments from my phone. I downloaded a browser app called 'Opera Mini' which allows me to toggle between mobile and web easily, search within the blog, and also view the comments as threaded and comment without panning down to the bottom by just hitting reply to the first comment I see.
I'm not sure if Opera Mini is made for the other platforms, but it works great for me.
"Now to understand Freegold, I think there are two issues that need to be addressed. The first is the difference between money, or a monetary store of value, and an industrial commodity levitated by investment demand. And the second, once the first is understood, is whether silver belongs in category with gold as money, or with platinum as an elevated commodity. You see, the very key to understanding Freegold may actually lie in understanding the difference between gold and silver with regard to their commodity versus monetary wealth reserve functions."
From: Focal Point Gold
Baron: Please try reading 'Focal Point Gold'. It may help you shed some heavy baggage. After reading 'Focal Point Gold' if you have any questions I'm sure someone here will help. I just reread it and while pushing confirmation bias aside for a moment I was reminded of one of the many reasons why I ditched silver.
The Can Be Only One
and it is not up to me to choose which one it will be
BaronSilverBaron
I watched your linked video.
I am having a hard time expressing in polite terms what a waste of my time it was.
Perhaps you need to understand that practically everyone here has owned, or do still own some silver(though they might be looking to trade out for gold at favourable ratio's due to new understanding).
It might be in your interest to understand why.
TF
BaronSilverBaron,
I am VERY familiar with BrotherJohnF.
When I first discovered FOFOA (roundabout a year ago), I thought much the same way as you. I thought the premises here to be strange. I watched BrotherJohnF's youtube rebuttal's to Costata's silver forum, which initially resonated with me.
But for some reason, something didn't quite seem right to me. Call it a feeling, but I had to know why FOFOA and the others here believed what they believed. So I stuck around. I read, and I argued, and I read some more.
Understand that I was a very 'religious' holder of silver. The arguments present by the likes of BrotherJohnF are not unique, they are very mainstream. Moreover, BrotherJohnF (a christian) presents his views as a beacon of light to other christian's.
Well sir, I am a Christian. And one thing I can tell you is that, not only is the Freegold paradigm compatible with a christian world view, it is, in reality, a better fit than you know. I say that, because I have done what BrotherJohnF has NOT done. I have sought to understand this view by putting in the time to read and understand it.
If you should have any particular objection to the premises here based on what you perceive as a lack of biblical perspective - try me!
@silverbugs:
Understand this:
• The price of gold is arbitrary! It can (and will) go as high as the human superorganism needs it to go.
• By hoarding gold, you DO NOT infringe on the rights of others!
• All the gold we need is already mined. It only needs to change hands i.e. to flow.
Save gold – trade and speculate on everything else, including silver.
I'm grateful to those of you who answered politely. I have read many of the arguments put forward by this site and I find them appealing. I actually have done quiet an amount of reading on this site. Please do not be offended if I find the argiments not yet convincing.
I too will change out of Silver into Gold when the ratio is getting towards 20 - 1. Whether the site is FOFOA or BrotherJohn being defensive, as both sites seem to be, is a little too dogmatic for me.
I shall continue to visit your site but I shall wait for a really cast-iron argument before I put everything into Gold and throw Silver into the dustbin.
BaronSilverBaron: Many remember patiently watching that magical gold to silver ratio, silently wringing hands as they anxiously waited for their own personal number to determine when to sell. You have determined that 20-1 is where you will change out of silver for gold. The important part of that process is the 'change' or trade if you will. You are trading silver for gold.
So silver is for trading and gold is for saving.
Fantastic. Trade all the silver you feel comfortable trading.
When you are done you will be saving in gold. Oh, but don't forget about the time factor. Trading at the wrong time could be very detrimental to your overall well being.
BSB,
With all due respect. You came into the comments with a very bold and offensive statement regarding the views of those here, and offered BrotherJohnF up as something that would enlighten us. Now you have the audacity to say WE are defensive? You were expecting what, for us to be amazed at your ability to place a link inside the comment stream?
Sorry, you're back-peddling. Be a man and own your views. Try discussing some of your objections. No one hear will be shocked.
BTW, you should own only as much Gold as you understand. And there are plenty of folks here that still own silver, and will continue to do so. For me, it is not as an SOV, but as a barter item for the transition. Although, I am at the point where the amount of silver I plan on holding is very small. I'm not waiting for 20:1, 40:1 will do just fine for my final swap.
From the dept. of "things that only I find amusing":
A brief history of the "tinfoil hat".
In the mid 1850's, Emperor Napoleon III of France was
the first person to wear an aluminum helmet. Even by
the mid 1860's total production was only 1.5 tons per
year, and cosmic rays were yet to be discovered.
Today, even the poorest citizen can now indulge in
this treat once reserved for royalty, with all its new
found uses.
...when the ratio is getting towards 20 - 1.
A lot of folks, even here, speak of an absurdly favorable ratio like this as if it is a certainty. While on paper this may well happen, I highly doubt there will be much of a window, if any, within which you can exchange your silver for physical gold at a ratio like this. Frankly, 1:50 is a fantastic ratio to trade out your silver, and 1:40 was a godsend that in my opinion will probably never happen again.
I was in the coin shop a couple weeks ago buying a Krugerrand. There was a scruffy looking dude ahead of me buying silver, salt of the earth type, dirt on his face, clearly engaged in some kind of hard manual labor for a living. This guy had just bought so much silver that he could not carry it out of the store in one trip. He was eyeing me suspiciously when the store owner assured him that he would watch the silver while he made the trips.
Does the above story not set off alarm bells for anyone? Silver is available, in massive quantities, for a paltry sum to anyone who wants it. Dudes like this are listening to highly emotive arguments thinking they are in on something that no one else is. Do you silverados really think you're on the ground floor of some awesome investment no one else understands?
Beware: silver is the Siren's Song. It has no monetary fundamentals at all.
Some people need cast-iron arguments; some think for themselves. If you get an airtight argument from Brother John or Farmer Ted, do share. But what if 20 to 1 never comes?
https://www.youtube.com/watch?v=K5IEVQ_-OHw
FOFOA: Thinking for yourself pays. Seeking reassurance feels good, but it doesn't pay. Waiting for official confirmation is also rewarding, but the reward isn't money.
Silverbugs,
how about this line of thinking:
You have figured out that there is too much debt around (in dollars) and that one day, it will all be unwound. Either they refrain from bailing out the banks, then you get a repeat of the 1930s. Or they bail out the banks and print money to do so. They have already shown their hand, and you think they will print.
Your conclusion is that you should not hold dollars (-> correct), and now you argue about what else you should do: gold, silver, land, guns and ammo, whiskey, cigarettes etc. Basically, you are expecting chaos, and you think you need the 'best' protection.
The game changer in your argumentation is this:
* the rest of the world (ROW) knows what is the problem
* it is the role of the dollar as an international reserve
* the debt is not the primary problem, but it is one of the consequences of the reserve role. This role is what has allowed them to create so much debt
* the reserve role is partly due to the global influence of the US (and all sorts of bullying tactics and worse), but it is impossible to sustain without support from the ROW
* once the ROW stops accumulating dollar reserves, it is over
* the ROW has known this problem since the mid 1970s, and they have actively planned for this scenario at least since the early 1980s
* the ROW has long decided that what will replace the dollar as an international reserve, is physical gold
* but gold will only be the reserve (= store of value), but nor the currency (=medium of exchange)
* the Euro was set up so that it can survive the switchover from the dollar to gold
* (what is called the 'Euro' crisis in the press is rather yet another debt crisis, but has little to do with the viability of the Euro as a MoE)
Once the active international support for the dollar is withdrawn, the ROW will be in control, and they have chosen gold and have clearly communicated this (to anyone who cares to search for it). Silver does not show up in this equation.
If you are greedy, you can say the 'upside' for gold is the structural switch from dollar reserves to gold reserves. The 'upside' for silver is the same as for any other industrial commodity - you need to understand supply, demand, stocks, future industrial developments, who owns which mines, etc. But it's a different order of magnitude.
Victor
BSB,
I also started believing in silver, in fact, I still have 50% of my savings in it! I have read all the blogs out there in the last 3 years and the most convincing case is here IMO, but it is a lot of reading. As others here, I will swap for gold, in my case when it hits 33 gsr, it already did in April 2011, I think it will even overshoot that but not by much and not by long. Another limiting factor is absolute price, I doubt silver will ever go beyond 150$, because of its industrial demand. So, that gsr might be reached sooner than later. I bet within a year. After that, gold will decouple.
Dont't trade your silver because people on this blog tell you so. Only trade what you understand yourself.
Diversification has been smart for thousands of years ...
just sayin
"Dont't trade your silver because people on this blog tell you so."
Absolutely. In fact, don't buy anything because anyone, anywhere tells you to do so.
Buy or sell based on your own understanding.
TF
Re silver,
I can even imagine an eventual gold-silver ratio of 500 or more.
Why? Everyone out there on the silver blogs tells us that the GSR will eventually approach about 15. Have you every bothered to verify that argument? Result: There is no argument.
The reason is that the price of gold is 'arbitrary'. When people here say 'arbitrary', they mean that its price (if it was a physical-only price) is determined only by its monetary function, i.e. supply and demand of store-of-value, but not linked to any economic activity nor to the general price level of goods and labour.
Why is this?
1) Mine supply (2600 tonnes/year) is small compared to existing stock (>160000 tonnes): stock/flow ~ 60. So even if mining were fantastically profitable and everyone was out there with their shovel, they might perhaps double production for a short period. Even this would hardly influence the price.
2) There is hardly any industrial consumption. Recall that although some gold jewellery is sold as 'fashion' in the West, this is a small part of demand. In Asia, gold jewellery is sold as 'investment' (store of value). Also, dental and electronic applications can easily be priced out of the market and would have to be substituted by other processes, but would not significantly reduce demand.
So if the price of gold is 'arbitrary', the GSR is, too.
Finally, silver as a speculation is perhaps nevertheless interesting. The reason is that silver (XAG) is the only other substance besides gold (XAU) that is traded as a currency OTC in the banking system. So many issues about bullion banking that apply to gold, also apply to silver.
Although before 1999, the Euro CBs supported the dollar by leasing gold and allowing the BBs to expand the market for paper gold, the CBs had no such silver operations nor any silver reserve. But, for example, the GLD puke indicator works for SLV and silver, too, and so I suppose that the BBs handle paper silver vs physical silver in the same way as gold, a potential for blowup included.
But this speculation with silver is a speculation on the failure of some derivatives rather than on a global shift of international reserves. With gold, the shift of reserves will most likely involve such a derivative failure, too, but the key to the gold market is the function as a reserve. You hold gold because it is the future reserve. You may hold some silver, too, because you think you can profit from a banking blow-up. These are rather different goals.
Victor
BSB,
I arrived here via silvergoldsilver, turd, brotherjohn, zerohedge and other similar sites.
I was all into silver and only silver except for when I listened to George at urbansurvival in about 2003 and got some gold then.
This place is/was unique and drew me in, albeit slowly. I slowly phased out of those other sites as my reading and most importantly, comprehension, increased. At one time about 2 years ago I "totally got" FOFOA, and yet, I still was poking around silver forums and thinking in terms of "well, the US has all these guns and muscle, how could they NOT be able to force things their way?" and/or " the PTB will never allow this to happen".
Luckily for me, I kept on reading here because at that time, even though I thought I "got it", in hindsight, I clearly did not.At that time, I couldn't and wouldn't read let alone participate in these comments.
I kept on though and once in a while I would read something that would click on a light bulb in my brain.(I think FOFOA is exceptional at writing about these things)and then late last year, these aha moments increased in frequency and the picture, if you will, started coming together in a big way for me. It only got easier after that. I would say it was only early this year that I truly did 100% get it. I have no doubts ever anymore. It's so simple, it's elegant IMO.
I can't explain it well to people (yet?) but that doesn't matter- what matters is I get it and this understanding is going to pay huge dividends for me and my family which is what I care about most.
I can only say stick with it and keep reading. So many of us came from exactly where you are.
@ BSB and others who like silver,
I also hold some silver, for spending during the transition (maybe aka "SHTF"). I hold a bit less than before, I lucked out and changed some silver to gold when the GSR fell to +/- 35, what, a year or two ago. But I still hold a decent amount of silver. And I hold a decent amount of platinum as well.
I believe, big time, in diversification, even in precious metals. I believe FOFOA is right, but I cannot be sure...
But, the great majority of my PMs is in GOLD! What sold me on Au (vs. Ag) was the fact (mentioned above by a couple of you) is that people are talking about trading INTO gold. I have not read even ONE account of someone wanting to trade their gold for silver... Buying or receiving gold means that you indeed have already been PAID (FOFOA), not just holding a promise. The central banks holding gold and not silver also was instructive for me.
***
FOFOA, I have very much enjoyed your two Debriefings! Nice step, I agree with the above observation that it is really great to see non-VIP interviews, it is instructive to see real folks tell their story re gold and their journey here at your blog.
For zee record...
I was once a bit of a silverbug as well. I used to own a lot of it and almost no gold. The main thing that swayed me, and I came to the conclusion before I found this blog, was the fact that central banks don't own it. Big, huge, giant red flag.
The second thing was that it is too useful as an industrial commodity to be used as a store of wealth. We already have gold for that, and there is no need for two. It is simply redundant from a practical point of view. Smaller red flag waving in the wind...
I happily ditched mine at around $46 and switched directly into gold. I still own a few ounces of silver because I think it's kinda purdy, and they were gifts ;)
The main problem with silver, that I can see, is that it's not gold!!
Where would I live if I were a man of golden words
Words and music - my only tools.
@ FOFOA..
My search ain't working. I'm not as good at it as JR.
At some point it was mentioned that the Chinese Yuan is credit money because of the relationship it has with the USD. Is this true ?
If so, does double entry accounting not play a roll in this ?
@ anand srivastava
(My apologies for interrupting a good debate with one of the most intriguing and insightful silver bug yet)
FOFOA stated that the Yuan is credit money. I understand it enough to know its true but I cant explain it the way it was explained before.
@ Victor The Cleaner
"Probably a budget surplus, i.e. more tax (and royalty!) revenue than public expenditures. I think that usually the sov' wealth funds manage assets of their treasury departments (i.e. accumulated budget surpluses). They are not on the balance sheets of the central banks, and I haven't seen any CB yet who invests in equity, private equity, real estate, etc. (although that would be possible)."
To use China as a simple example. Their FOREX reserves and sovereign wealth funds do not arise come from surplus taxes although some SWF's do. They arise from the excess purchasing power they keep by deciding to price the Yuan low relative to the USD(relative to everything) Same goes for allot of other countries I presume.
From Wikipedia
Most SWFs are funded by foreign exchange assets.[1]
Thank you all for your inputs. I find it interesting and instructive when people show there real real colours, their fears and hopes by how they react to someone who doubts their premise.
I own a lot of Silver. Even I am not sure why except for its manipulation and rarity. The argument that Gold is the only store of wealth because Central Banks hold it is very flimsy. Many religious beliefs are based on less. You may all be right. As right as the last man who paid a fortune for a black tulip.
If you believe that anyone who dares to question your certainty is someone to be ridiculed then you must examine your beliefs. Once you become certain and lose the ability to question you are doomed. Just think about it. Stop patting each other on the back and start to question. Healthy debate if right can only reinforce a good idea.
Sorry I've had a few glasses of wine so the grammar is sometimes not correct
Today is an anniversary day. Today is the day, 15 years ago, when Another first showed up on the USAgold forum:
http://www.usagold.com/goldtrail/archives/another1.html
Date: Sun Oct 05 1997 21:29
ANOTHER ( THOUGHTS! ) ID#60253:
Everyone knows where we have been. Let's see where we are going!
snip
BSB
"The argument that Gold is the only store of wealth because Central Banks hold it is very flimsy."
That argument is not flimsy, it's completely wrong. a Picasso is a good store of value, and it is neither silver nor gold.
"If you believe that anyone who dares to question your certainty is someone to be ridiculed then you must examine your beliefs. Once you become certain and lose the ability to question you are doomed. Just think about it."
I have thought about it, hence my certainty. I'm also certain gravity will kill me if I jump off a building, but don't consider myself doomed.
The argument is rather about what role gold or silver will play in the next monetary system. This is the key.
Central bank holdings show us the view of big players as regards this; they say silver will have no role. Your or my disagreement is a fart in the wind against that opinion.
TF
BSB
I own a lot of Silver. Even I am not sure why except for its manipulation and rarity.
Well, you have certainly persuaded me with this incisive bit of analysis. I have seen the light and will now sell all my gold for silver. What a fool I was for being led astray by this vile cult! XD
Alan2102,
yes, but before that, they were on the Kitco forum. Thanks to Jeff's discovery, we have the following candidates for their debut:
Date: Sat Aug 23 1997 18:09
ANOTHER (thoughts not written anymore):
Hello to all!
I had the opportunity to read a private reports/discussion over the last week and thought this one would have some meaning to this group. The thoughts come from a different culture and land mass so they required conversion to Western style communication. Here is from one you don’t get here anymore.
Why do they view their debt in terms of yield when it only returnees more of the same paper? The only way to convert the return on this American debt is by buying something real with it. Only then do we have a “yield”. So let us continue to view it as always before, using it’s pricing gage to determine value, the US dollar. The marketplace is never wrong to give a high price to a low value debt as long as it uses an “unreal “ currency as a value gage. The Westerners use “paper to price paper” and “more paper to price more paper” in an endless quest to add value where value only exists in the minds of men. To this end they say we have lost holding gold, but our families and children cannot go broke? No one owes us and we owe no one, and we do not “convert paper to something real” to create “yield”. We already own our “yield”, no conversion needed! Now they have created the illusion of gold in great supply to lower it’s value in currency terms, and the Americans accept this. They do not question that this illusion was done using paper contracts ,that do not hold gold but are priced in currencies that offer a yield valued only in human emotion terms. It is in this fashion that the greatest folly of Western thinking will bring an end to an era of unvalued money. It will come about as the entire world evolves into those that have military might using paper currency maneuver little people countries with gold. But all gold is owned by someone, somewhere and is not free for the taking. In the near future a real value will be exchanged for gold and those that hold paper gold will bid much higher to obtain what they thought they already had!
Remember now, “a broke superpower ever destroys a simple country that has gold, they will do business with them ”! Big Trader
Now that most have converted paper gold contracts to real gold we have but to view the “great scramble” from far away. To the advantage of many, the Americans continue to position themselves in opposite fashion from the third world. They sell all real gold to hold gold contracts and gold stocks.
At some point all of the gold will be off the market. Then the CBs will be forced to become the full primary suppliers. This continued drift to CB sales will no doubt destroy most bullish gold traders until London is forced to sell real gold. Then the true volume will drive the price of gold in all currencies to such heights that it will force a reevaluation of “what was primary supply” in the first place. During this “lock up” time all Asians will be happy with the conversion price during the summer of the last few years.
Know this to be true, the millions of ounces out on hidden contracts will not be made up for by the CBs once the problem begins. During this time the new “currency price” of the entire gold stock will equal all the paper money in existence and the CBs will suddenly claim they have very little gold in an effort to hide all they can. Big Trader
This rewrite is very close. It comes from the real one, not the fakes. good luck!
I guess this is FOA relaying a message from Big Trader. What do you think?
...
Date: Sun Aug 24 1997 20:40
ANOTHER (REPLY TO ELDORADO.):
ELDORADO: These communiqué were done at different times appxomentally two weeks ago. I received them via an indirect/secure source. I can tell by this system that others have tried to interpret and post some of this gentleman’s thoughts. The content is thought provoking to myself and I hope to others. Here is a repost of the earlier work and appx. dates.
Hello to all!
I had the opportunity to read a private reports/discussion over the last week and thought this one would have some meaning to this group. The thoughts come from a different culture and land mass so they required conversion to Western style communication. Here is from one you don’t get here anymore.
Aug 01
Why do they view their debt in terms of yield when it only returnees more of the same paper? The only way to convert the return on this American debt is by buying something real with it. Only then do we have a “yield”. So let us continue to view it as always before, using it’s pricing gage to determine value, the US dollar.
The marketplace is never wrong to give a high price to a low value debt as long as it uses an “unreal “ currency as a value gage. The Westerners use “paper to price paper” and “more paper to price more paper” in an endless quest to add value where value only exists in the minds of men. To this end they say we have lost holding gold, but our families and children cannot go broke? No one owes us and we owe no one, and we do not “convert paper to something real” to create “yield”. We already own our “yield”, no conversion needed!
Now they have created the illusion of gold in great supply to lower it’s value in currency terms, and the Americans accept this. They do not question that this illusion was done using paper contracts ,that do not hold gold but are priced in currencies that offer a yield valued only in human emotion terms. It is in this fashion that the greatest folly of Western thinking will bring an end to an era of unvalued money. It will come about as the entire world evolves into those that have military might using paper currency maneuver little people countries with gold. But all gold is owned by someone, somewhere and is not free for the taking. In the near future a real value will be exchanged for gold and those that hold paper gold will bid much higher to obtain what they thought they already had!
Remember now, “a broke superpower ever destroys a simple country that has gold, they will do business with them ”! Big Trader
Aug 04
Now that most have converted paper gold contracts to real gold we have but to view the “great scramble” from far away. To the advantage of many, the Americans continue to position themselves in opposite fashion from the third world. They sell all real gold to hold gold contracts and gold stocks.
At some point all of the gold will be off the market. Then the CBs will be forced to become the full primary suppliers. This continued drift to CB sales will no doubt destroy most bullish gold traders until London is forced to sell real gold. Then the true volume will drive the price of gold in all currencies to such heights that it will force a reevaluation of “what was primary supply” in the first place. During this “lock up” time all Asians will be happy with the conversion price during the summer of the last few years.
Know this to be true, the millions of ounces out on hidden contracts will not be made up for by the CBs once the problem begins. During this time the new “currency price” of the entire gold stock will equal all the paper money in existence and the CBs will suddenly claim they have very little gold in an effort to hide all they can. Big Trader
This rewrite is very close. It comes from the real one, not the fakes. good luck!
I guess this is FOA again explaining where he got these pieces from.
...
Date: Sun Sep 14 1997 21:12
ANOTHER (an answer?):
This could be an answer directed to the “Red Baron”?
The CBs are becoming “primary suppliers” to the gold market. Understand that they are not doing this because they want to, they have to. The words are spoken to show a need to raise capital but we knew that was a screen from long ago. You will find the answer to the LBMA problem if you follow a route that connects South Africa, The middle east, India and then into Asia! Remember this; the western world uses paper as a real value, but oil and gold will never flow in the same direction. Big Trader
Now is this FOA relaying Another or relaying Big Trader?
Victor
victorthecleaner said...
"Alan2102,
yes, but before that, they were on the Kitco forum. Thanks to Jeff's discovery, we have the following candidates for their debut:
Date: Sat Aug 23 1997 18:09"
Yeah, I know. He was run off the kitco forum. I was not present for that incident, though I did inquire of sharefin (Nick Laird) about it, a year or so later; he was there throughout. I did not start reading usagold until mid-98 or so.
Indenture said...
"BaronSilverBaron: Many remember patiently watching that magical gold to silver ratio, silently wringing hands as they anxiously waited for their own personal number to determine when to sell. You have determined that 20-1 is where you will change out of silver for gold. The important part of that process is the 'change' or trade if you will. You are trading silver for gold. So silver is for trading and gold is for saving."
They are both for saving, until the time comes to trade them. I'm sure that that idea represents the purposes of the vast majority of readers of these words. A few bugs might desire gold, or particular objects of gold or other metals, for religious, ceremonial, sentimental or aesthetic reasons. But the great majority of us hold it because we wish to trade it some day for things that we can use and enjoy -- hopefully a lot more of such things than our stash would currently yield. That's why we are savers: because we want to make (prosperous) trades at some point in the future. At the end of the day, we're all traders, and the distinction between "saver" and "trader" is artificial. That's at the END of the day. During the day, (so to say), I can understand the distinction between the hyperactive ticker-obsessed day-trader, seeking a quick buck, and the sluggish, methodical, dumb saver (like me), who trades only once or twice per decade. There is a distinction, but it is not absolute.
poopyjim said...
"I was in the coin shop a couple weeks ago buying a Krugerrand. There was a scruffy looking dude ahead of me buying silver, salt of the earth type, dirt on his face, clearly engaged in some kind of hard manual labor for a living. This guy had just bought so much silver that he could not carry it out of the store in one trip. He was eyeing me suspiciously when the store owner assured him that he would watch the silver while he made the trips.
Does the above story not set off alarm bells for anyone?"
No. Why should it? People go to coin shops and buy (and sell) gold and silver every day. Big deal.
BaronSilverBaron said...
"The argument on this site rests on the fact that Central banks are only buying Gold... So what if they are?"
I've often asked myself the same question.
Central bankers were, not long ago, selling their gold off at ridiculously low prices. That was when I started buying gold. As far as I was concerned, you'd have to be a moron to sell gold at those prices -- $250 or $300 per ounce -- which, adjusted for inflation over the previous 15 years, was practically FREE. We're talking SOLID ***GOLD***, for pete's sake! Utter freaking morons!
Let's just say that the example of the central bankers was not a big motivator for me.
Here's Marc Faber, on the wisdom of central bankers:
http://www.moneyweek.com/investments/how-to-profit-from-a-falling-dollar
'Why is it that the Asian central bankers continue to support the dollar, the American economy, and the huge American structural deficits?' I recently asked Dr Marc Faber, editor of The Gloom, Boom and Doom Report. 'Don't they have better places to invest their money, like their own economies, for example?' 'Of course they do,' Dr Faber replied. 'But most central bankers are idiots. That won't change. But I tell you this; a grand exit from dollar-denominated assets is already underway.'
victorthecleaner said...
"speculation with silver is a speculation on the failure of some derivatives rather than on a global shift of international reserves."
It is also a bet on a lot of other things. The case for silver is very strong. It does not just rest on derivatives, or any other one thing. And the case becomes stronger, the further out you go, i.e. 5 years, 10 years. It is obvious that silver is still underpriced, and will be a wonderful hold for many years to come. At the barest minimum it will track inflation, and in all likelihood will do much better than that, just as it has the last 10 years. There's also a modest possibility that it will explode, in FOFOA-ian fashion, to unbelievable prices. MODEST possibility; unwise to expect it.
"With gold, the shift of reserves will most likely involve such a derivative failure, too, but the key to the gold market is the function as a reserve. You hold gold because it is the future reserve."
I hold gold because I think it is going to go up, probably dramatically, in price. There are several reasons to think this; future reserve status is one, not the only one.
"You may hold some silver, too, because you think you can profit from a banking blow-up. These are rather different goals."
Not really. I think I can profit. That's why I hold both. I agree that the fundamentals for each are quite different in some respects. They have some sameness, but many differences as well. The case for each is very strong. They are both going much higher, IMO.
But then, I'm an idiot, so best not to listen to me.
@Alan
No. Why should it? People go to coin shops and buy (and sell) gold and silver every day. Big deal.
Intuition, in large part b/c of the quantity purchased. How could there be that much upside to this metal when unthinking people are going in and buying several kg of it? I guarantee you that guy's decision to buy silver was not based on a thorough analysis of its industrial fundamentals, but rather because of the propagandistic nonsense being spewed all over the "alternative media" and goldbug sites. Basically, it screams to me "bagholder". And that is exactly what you will be if you buy bags of silver (h/t @freegolds).
Of course anecdotes like mine are not at all necessary to dismiss silver as a rather poor investment or at the very least utterly inferior to gold at the present juncture. Do you honestly think silver will have a monetary role post-collapse, or ever in our lifetimes? If so, what role, and why?
BaronSilverBaron said...
"Isn't there a good argument for both 'religions'?"
Yes. There are excellent arguments for both religions. And you can embrace both without angering the Gods and being cast into the lake of fire.
The arguments for both were strong in the late 1990s, and time has borne them out, and indeed the arguments are even stronger today than they were then. You should either be staying at the All Inn, or you should be very seriously considering it -- for your own financial survival, in addition to health. The gold versus silver "debate" is silly and insignificant, like a petty family feud, relative to the matter of gold+silver VERSUS EVERYTHING ELSE.
If this has been posted. Sorry, I haven't read the comments. Looks like someone has been reading A/FOA/FOFOA.
http://www.zerohedge.com/news/2012-10-05/guest-post-gold-and-triffins-dilemma
"Here at GBI, we see ourselves as a way for every investor to have the choice on how to save their stored labor. We want to make it as easy to buy and sell gold as it is to move money from your savings account to your checking account. We can all walk in the footsteps of the giants, as a Friend and mentor is apt to say."
Hill C,
From the same article:
As a bonus, if gold was to become the worlds foremost reserve asset, would that not finally solve good old Triffins dilemma? Wouldn't gold serving as the preferred global saving vehicle and fiat continuing to serve as the worlds spending vehicle finally break the natural tension Triffin has so aptly illuminated for us? Perhaps, but given golds stable supply and other unique features (see our next essay titled "Forget Supply and Demand, it's all Stock to Flow."), it would by necessity be at a much higher price to function in that reserve role. Some estimates put that potential price into the many tens of thousands of dollars, and given a monetary and fiscal path that seems to be following Triffin's fateful trajectory, how could any price be ruled out?
Yes, somebody has been reading this blog and it has apparently made quite an impression.
Wow! Wow!! WOW!!! Absolutely brilliant FOFOA. Just when you think “Surely he can’t top his previous greatest hits . . . . sure enough, you go out and do just that”.
(And thanks to MS and RJP for going first. I can’t wait for all the others hopefully soon to come).
Recently I proposed this tribute:-
FOFOA has explained where we are going. Now everyone needs to know who he is and where he has come from . . .
Thanks for sharing who you are FOFOA, but now I want to know more about “where you have come from”. To this day I cannot accept that you are just a regular guy, with no advanced academic background and/or experience in high-finance, who just happened to stumble upon something in the archives. I am a devout rationalist, but if that is how it really played out, then I would have to admit there might be something of divine intervention involved . . .
So I nominate you FOFOA as one of the next interviewees. (Perhaps Michael Kosares would agree to be the interviewer – now that would be interesting would’nt it??) But if that is too much to ask, then please add Woland and MF to the list (as interviewees).
By the way - my wife just recently coined a new verb in the English language “to Fofoa”, as in “Surely you’re not going to sit inside and Fofoa all afternoon . . . “ and I can assure everyone it is pronounced foh-foh-ah.
BaronSilverBaron,
"...by how they react to someone who doubts their premise."
You doubt, but you don't argue. If you want a good discussion, present your best pro silver / against gold arguments, and we can discuss.
It's hard to go beyond "is too" / "is not" otherwise, and, as the visitor to this blog, it is on your shoulders to lay out your position first.
BSB, I was going to address this issue of the GSR and what the argument is for supposed reversion to the mean, but Victor did so much better than I could.
I'm going to assume given your interest in metals that you believe the current fiat regime is on its last legs.
My suggestion would then be to write down in point form each of the reasons you hold silver, and then categorize each of those points into whether it is based on (a) a wanting to preserve your wealth through the end of fiat, or (b) wanting to profit from an increase in its value.
It may also help to think about the form in which you will hold your material gains after profiting from this "increase". This may help to sort out the difference between gold and silver.
Apologize if this seems elementary, but this sort of thinking helped me to make "the transition".
A further superb post explaining the role of gold vs peanuts according to central bankers comes from Mencius Moldbug.
Robert Mix said...
"I still hold a decent amount of silver. And I hold a decent amount of platinum as well.
I believe, big time, in diversification, even in precious metals. I believe FOFOA is right, but I cannot be sure..."
Infernal doubter! For that apostasy you will surely be damned to eternal monetary hellfire. ;-)
"I have not read even ONE account of someone wanting to trade their gold for silver..."
Well, here's one: I deeply regret not trading my gold for silver when the GSR was so favorable (into the 80s) in 2003 and 2008, and switching back after a decent move (say, back under 50). If I had done that, I would be WAY ahead. And I don't mean just ahead in dollars (though that, too, of course), but ahead in OUNCES. I could today have a much larger stash of gold if I had played the ratio, just as miles franklin suggested years ago. I don't know why I didn't. I'm too sluggish, too timid, perhaps. I'm constitutionally much more of a patient saver than a trader. This is both good and bad. Good because I've avoided many losses typically suffered by trader types, while benefiting greatly from the broad sweep of the bull market; bad because one MUST trade, sooner or later, and when the time comes it is essential to: 1) recognize it, and 2) have the grit and courage to pull the trigger -- even if it is only once or twice in a decade. Opportunity knocked very clearly, twice, and I did not heed the call. Maybe I'll do better in the future.
Part of the problem is that I tended to view things in apocalyptic terms. I was perpetually waiting for the Big Bang, the great Day of Reckoning. I remember thinking, initially, that gold and silver would explode to the upside certainly no later than 2002! Haha. That would be as opposed to viewing it all as an unfolding incremental process -- as it has proved to be, over 12 years. Viewing it as a process would have caused me to take more seriously the idea of occasional trades for modest profits along the way, rather than just waiting for the Big Bang, the Rapturing to Heaven of the gold/silver bugs (which will surely come Any Day Now, right?). Of course, now that I've reached this new and more moderate and sophisticated (?) understanding, the Rapture probably WILL strike, next week. Ha.
/SleepingVillage/ said...
"I happily ditched [my silver] at around $46 and switched directly into gold."
GREAT timing, man! Perfect. I admire and envy your trading prowess.
Alan2102
Hindsight is always 20/20 eh? :)
The thought of swapping my gold for silver with the hope of swapping it back in the future gives me the chills. I doubt I would be able to sleep, for as many months as the swap stays in place.
As to DoChen...I think he follows the sage advice if this blog perfectly...he has as much gold as he understands. No man should have any more. :)
TF
Hill C,
Quite a food fight started over at ZH because of that article! I was excited to read the comments, although some of them left me dumber for having read them. I'm always interested in opportunities to challenge what we accept here as fact, to drive out confirmation bias.
As far as I have gotten in those comments, no one has laid a glove on the freegold concept, although many are throwing haymakers with great effort.
Interesting to see regulars from this blog chiming in over there. A little like seeing your teacher at Wal Mart.
Cheers
Alan:
That story tells you that Silver is a bubble now. That would mean that it is high time to get out of silver now. Read Shoeshine boy.
Regarding Silver:
To me the most important point against silver is the huge weight of it. When you are considering physical storage, weight is a big detriment. Everything else being equal the heavier (in terms of value), loses. Gold is 50 times lighter. That is a big deal.
A consequence of the weight is that any entity of huge worth will not invest in silver, it will only hold gold. This includes CBs and people like Rothschild.
The second and probably as important is the fact that it is not an industrial metal, and consequently the price can be arbitrary.
A consequence of the second point is that Gold has a much higher capability of acting as a reserve for the world, and can be as costly as it is required to monetize the whole world.
The fact that CBs hold Gold is a consequence of the above two facts.
Silver will definitely not do bad. But we are at the juncture of a monetary transition. Silver is not a monetary metal at this point. It is an industrial metal. I would invest in silver if I found that there is a potential for a major industrial use coming up.
But now at the juncture of monetary transition where gold will replace dollar as the reserve, you want to hold gold as it is going to appreciate due to the new role. Silver will not.
After the transition yes you can trade into silver. But not before the transition.
If you are waiting for 20:1 with all your silver, you might lose the potential of gold, because this ratio might not occur at all. IMHO you are being penny wise and pound foolish, literally.
I luckily had no baggage. I knew nothing about economics or saving before I stumbled upon FOFOA (within a couple of months of getting interested in the US HI).
I did buy a bit of silver in the beginning of my learning, but it is less than 1:1 by weight of my gold stash :-). I hope it will be useful during the crisis, but the more I understand it, the more negative feelings I get. Silver normally gives bigger swings than gold. So when gold drops, silver is going to drop much more. So it would probably be less worth than gold even during the crisis. But I keep it as a (low probability) hedge :-).
Alan,
Thanks, maybe got a little lucky, but I followed my gut instincts on timing it. Things were looking a little "ripe" and I was happy with my potential return on the move, so I went for it. The main motivator for me was that I could end up with a few "free" ounces of gold and get rid of that big pile of silver...win/win:)
I got my mom out of her silver at an even higher number...almost at the top:) She did well on it and ended up with a few "free" ounces of gold, too.
After the massive waterfall a short while later, I must say that I felt rather pleased with my decision. It's funny, though... I remember posting at another site, full of the extra batshit-crazy variety silverbugs, and catching flack for my move. That was the last time I posted anywhere other than here and Screwtape...
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