Tuesday, October 16, 2012

Debriefed #6 – Aaron

Instead of an introduction for this fantastic interview, I feel it is time to repost one of my all-time favorite quotes from FOA:

I (we) expect none of you to consider anything said here as credible. Everything is given as I understand it. If you came with a notion that I am someone who sees the future; grab the children and run far away. For these Thoughts, and my ongoing commentary, are meant to impact exactly as the "gentleman" said they would. People hear them, and whether believed or not, the words leave a mark. A mental mark on the trail, if you will. And later, after the world turns, our little "stacks of rocks" will be easier to understand next time you are passing this way. In fact, your ability to find your own way will forever be enhanced for having seen this path in a different light.



273 comments:

1 – 200 of 273   Newer›   Newest»
Dra said...

They are all asleep...

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

I don't wanna be first!

FOFOA said...

Then don't delete your comments prematurely! ;)

anand srivastava said...

I didn't get to be first. Found the video within 2 minutes. But had trouble watching, due to slow bandwidth.

Thanks Aaron for those stories.

DP said...

Guess I need to stay more current with my lessons from RJ

Dra said...

These guest lectures are the beginning of FOFOA U's Open Course on Freegold. Perhaps they can be compiled and a link created to the right?

DP said...

Thanks Aaron - confirms what I thought: the less you've been told what to think about economics, the better you'll understand economics.

Now where is OUR chocolate port?

Cheers!

Winters said...

Good interview - although Aaron I don't think you will be recruited by CIA. Is it Paul or Pat? :)

It is interesting how some of those trained in economics find it harder to grasp the concepts. I know an economics degree trained guy and he dismisses the idea of gold out of hand without really trying to understand the arguments. Maybe it's partly because as someone not trained in his discipline he takes affront at being told to suck eggs by an outsider? That being said I hdon't have a huge success rate on arguing with non economic trained people either. Maybe its my presentation skills.

These are anecdotal only but I do find it bizarre how some economics guys don't get these ideas. I wonder whether it is because they are trained only in the financial realm and only within a fair weather scenario and not edge cases like HI and to consider that finance is just temporary score keeping against the physical plane.

ein anderer said...

Thanks for this interview. I was looking a while what FOFOA is thinking about silver (since it will take some more time for me until I understand his and ANOTHER’s/FOA’s concept). So I took Google and found this link -- which brought me back to FOFOA again: http://fofoa.blogspot.de/2010/12/focal-point-gold.html
Now I am wondering where FOFOA gets all the time he needs to write (such long -- but easy to understand!) posts. Thanks again. Thinking it over (because my silver/gold ratio is (still?) 1:1 …

ein anderer said...

"… this link …" was:
http://www.zerohedge.com/article/fofoa-golds-focal-point-or-silver-money-too

Dante_Eu said...

I don’t have any economic education either. Maybe that’s why I understand freegold concepts so well. Or at least, I think I do. :-)

Michael H said...

Aaron and Jeff were two notable omissions from the poll list. Glad to see Aaron debreifed.

So where's Jenn?

Woland said...

Hi Fofoa:

Responding to your comment in the previous thread, I
certainly agree with you that, should any of us be so
fortunate as to learn FOA's identity, his privacy and
anonymity should be at all costs preserved, out of
both respect and gratitude. I think that if any of us
WERE to discover it, we would just like to offer it to
you as our little gift, and keep silent ourselves, rather
than as a trophy to be displayed. That's my plan.

ein anderer said...
This comment has been removed by the author.
ein anderer said...

… And since long I was looking for a "Reader's Digest"-like summary of the Freegold concept. So for all in a similar situation: I think I have found at least one -- of Blondie:
http://flowofvalue.blogspot.com/2010/10/freegold_41.html
Now I understand why so many are eager to get to know him/her ASAP ;)

KindofBlue said...

Aaron/FOFOA

Great debrief. I'm guessing non-economists get these concepts because we're less 'stuck' in paradigm-thinking. It's routine for people outside their field of expertise to bring fresh eyes and new solutions to old problems in other fields. The one economist that Arron mentioned automatically defined money as a medium of exchange, unit of account and a store of value as if it has to be some perfectly symmetrical relationship (i.e., "everybody knows..."). In addition, the government and the banks have a systematic, built-in interest in seeing the public save in their bonds, whereas gold's constituency are gold miners and other gold savers.

anand srivastava said...

ampmfix: from Wendy's debrief.

"Silver is the second most important commodity in the world, after oil."

If you look at silver, there is around 45 billion ounces of silver in the world. The mine production of silver is about 750million ounces a year. Consumption by industry is about 500million ounces per year.

This means that the industry is not able to use the silver produced every year. This means that the price of silver should go down a lot. If you add the 45billion ounces of over hang, Silver is way too expensive at this time. It should become very cheap.

The only reason it is so expensive is because it is considered a Store of Value. Take away that factor and it will become dirt cheap.

If FOFOA and others are correct then it is not going to be a SoV in the future. So either you agree with the thesis of Freegold (ie the focal point) or you don't. You can't be in the middle.

So it is highly probable, that the value of Silver will go down in current Dollars, while Gold will go up 30x in current Dollars. The GSR is already around 50. Do the math the GSR should probably go way beyond 2000. I think this is the reason the no. 10000, is making the rounds :-).

I can understand Wendy making silver covered doors, as it will not be useful for much else. IMO, it would be better to sell the silver now, and buy it later after the revaluation for the door, you could make a whole solid door :-).

KindofBlue said...

anand

"If FOFOA and others are correct then it is not going to be a SoV in the future. So either you agree with the thesis of Freegold (ie the focal point) or you don't. You can't be in the middle."


G-------------------------------------------><-S


Not 'in the middle', but not absolutely certain of all the outcomes either.

Boner Parte said...

How about this

G----><---ConsumerStaples---S-$-iPad

ampmfix said...

Anand,

Thanks for trying to explain. You surely noticed I said "if", people keep forgetting the "ifs". I am not sure those numbers are correct, 45B/750M = 60 stock to flow ratio, so high??

What is undeniable is that silver is the champion in industrial uses and NEW PATENTS. It will grow in importance. What is left to see is IF the mined output will go down.

You are right if Freegold comes tomorrow I am toast (well, I have enough gold to retire under Freegold, so I don't care much), but for some reason I think the can is going to be kicked for many years to come. I am rereading FOFOA archives and in 2008 most people expected the end to arrive in weeks..., the dollar will fight back for its life heroically, I guess. Imagine the delay that would occur if we get into some wars in the middle East, the dollar will be king again (assuming no nukes).
I will swap silver for gold as the silver price goes up. Without Freegold at sight, why wouldn't silver repeat april's 2011 50$? why wouldn't silver repeat 1980's peak which adjusted for the published CPI is around 150$? I am going to play the "get as close to the cliff as you can" game, just because I probably have all the gold I need at 55000$. If this experiment succeeds I will feel proud, if not, well...

Jeff said...

GLD lost inventory yesterday, back to Oct 5 levels. Coincidentally price stablized at 1740 for now.

BaronSilverBaron said...

Dear FOFOA
When I first came across your site I did what any self-respecting Silver stacker and Troll would do. Without reading much I posted some comments to stir the water. Spurred on by the comments of some of your followers I read a little of your theory and Trolled some more. I wanted to test the "metal" of your followers. I wanted to see if I could easily pick holes in your argument without too much effort on my part.

For some strange reason I returned time and time again. Not to comment but to read. I even looked at the "debriefings" (not a strong sell for a newcomer). Still I returned and read some more. It was an effort. Why did I make the effort? Well I'm a Silver Stacker and wanted to know if my ideas for stacking Silver were sound.

After reading a great deal of your output I now find myself entering one of the rooms in my house and discovering a door I hadn't noticed before.
The door is Golden and has an inscription which says "This Way".

You have enlightened me and annoyed me because I now have 12000 oz of Silver to sell.

I think I might even change my "handle" to BaronGoldBaron.

anand srivastava said...

ampmfix:

I am not sure I would be happy with the danger in waiting with timing this market. The payoff is small compared to the chances of losses.

ampmfix said...

Anand,

I am a daredevil! ahahah, you know why I got into swapping a high tech portfolio into metals?, basically because I didn't care much about anything anymore and I made a wild gamble, loose all or win big. Thanks for your words anyway.

/SleepingVillage/ said...

BaronSilverBaron -> BarrenSilverBaron -> BaronGoldBaron... looks like a nice progression to me :)

Aaron,

Great interview.

Dante_Eu said...

@BSB:

Now you can check off sign #16 from my 2nd list:

16. Almost all your silver has been swapped for gold. Yes, it was difficult at the time, but you know, deep down, it was the only sensible thing to do.

KnallGold said...

Hmm, 2600t of Gold (mentioned in a costata post the other day), that number sounds like a flashback for a Swiss as it is the total of the SNB holdings before they started to sell in 1999. As part of the stash it was said to contain many Vrenelies (logically, though only 90% pure), not sure if any were melted.

Btw the only rare 20Fr. coin is the 1926 and mostly in collectors hands, altough the prices corrected a bit, it used to go for twice. Same for 10Fr. pieces but those seem to go up in price recently. Lucky guy who has a 100Fr. coin, only 5000 minted and they sell for 10'000sFr. actually. Its said to be mostly in the hands of the wealthier burgois families but you could spot one occasionally.

I'm bringing this up as as questions posed to SNB chief Thomas Jordan in regards to the defense of the 1.20 maginot line against euro, he always responded that they have different instruments at hand, sometimes I was wondering what they could be besides the famous printing press. In the end, would creating sFr's to buy Gold not also weaken the currency? Altough it would not necessarily change the sFr/euro rate, but I'm wondering what the psychological impact would be.

As for Mr. Ender, this is what I found from 2008:

http://fofoa.blogspot.ch/2008/09/freegold.html

Enders game, "...and the most brilliant child of all the children is Ender. (Except in Ender’s Shadow it turns out that the most brilliant child of all the children is actually its protagonist, Bean ...").

http://jennysbooks.wordpress.com/2008/06/16/enders-game-and-enders-shadow-by-orson-scott-card/

Now we know Ender, its Mr. Bean (lol, just to say that I love British humor).

http://www.youtube.com/watch?v=N_utzLojCIE&feature=fvwrel

Aaron said...

Anand-

Thanks Aaron for those stories.

Your welcome, Anand. There were quite a few more stories in there which thankfully FOFOA edited out. ;-)

DP-

Thanks Aaron - confirms what I thought: the less you've been told what to think about economics, the better you'll understand economics.

Holy shit brotha, you ain't kidding. It's very interesting to speak with Paul. Intellectually he gets what I'm saying when we talk about Freegold -- sort of. But he is so steeped in his own ideas that once we're done talking he slips right back into his old school of thought. As Matrix Sentry mentioned in his debrief we all have our own baggage, but these PhDs have truckloads and truckloads of baggage that they literally paid to fill up with Keynes’s ideas and they hope to carry that baggage for the rest of their lives so they can teach it to our children! They have no plans to ditch that luggage -- ever.


Michael H-

Aaron and Jeff were two notable omissions from the poll list. Glad to see Aaron debreifed.

So where's Jenn?

As I mentioned to FOFOA I have a half-dozen accounts at any one time mostly to protect myself from spam and Jenn was an account I hadn't used yet when I made my first comment. Jenn left the building a long time ago.


KindofBlue-


I'm guessing non-economists get these concepts because we're less 'stuck' in paradigm-thinking.

Exactly!


Did anyone notice the picture behind me on the wall? Talk about Karma. I had absolutely no idea FOFOA was going to pull out that bottle of port and he had no idea I would have that picture in the background.


--Aaron

Aaron said...

Thanks /SV/!

KnallGold said...

Cool vid for making western spaghetti, I wish a happy meal for central europeans...nice cut of $ note ;-;

http://www.youtube.com/watch?v=qBjLW5_dGAM&list=PLE30DFC5B7FA8E6E2&index=2&feature=plcp

MnMark said...

Question: if FreeGold makes sense because it separates the SoV and MoE functions of currency into SoV (provided by physical gold), and MoE (provided by fiat) instead of both of them provided by fiat, why has it not been done anywhere in history that I've heard of?

"There's nothing new under the sun," the sages say. There's been fiat currency before in history, and gold has been used throughout history - so why has it not become clear before now that FreeGold is the best way for societies to handle their money?

ein anderer said...

Anand,
thanks to you also. Just start reading your blog too.

BaronSilverBaron,
I must admit that this was my attitude also – a bit (because as I wrote I am a 50:50). And just now, after coming back to FOFOA over and over again, I start to understand the Freegold thesis.

What I did NOT catch until now is: Is Freegold something which SHOULD get enthroned -- or is it something which will be born automatically?

I want to put it in a still more esoteric kind of term: Does Fregold need a conscious decision? Or will "the market" be driven more or less mechanical into Freegold's direction? Will it be predictable then--or will it be a symptom of a--let's say huge hype?

(To the historians here: Was there a time ever when Freegold existed?)

Because: Although a friend of many humanistic and ecologic goals our mankind may have--I am a bit tired of fighting whatever for. My vision is to help the worldwide entity "consciousness" instead in a non-specific manner so that it can get more in tune with the natural law. Which is after all governing the whole universe which we are a part of.

If this could succeed (many are working into this direction): Will Freegold be then an automatic result? (Assuming no nukes …)

Or: Is Freegold THE natural but forgotten store of value?

an ANT and Dec said...

Woland, PeteT claims to know FOA

anand srivastava said...

MnMark:

Perhaps Gold Standard was usable before the advent of digital age, so they always used to switch between a gold standard, which became diluted, and then again to a newly created gold standard. The diluted gold standard is the easy money regime and the newly created one was hard money.

In the digital age, there is no point in even trying with a gold standard, it will be instantly diluted.

We can think of ages when rich producers created scrips for paying the people, and then the people would use those scrips to buy stuff or buy gold. The scrips would circulate till it came back to the rich producer. The scrip was the MoE and the gold the SoV.

罗臻 said...

Some Phds are like Scarecrow in the Wizard of Oz, you can spot them because they appeal to authority rather than dealing with the argument directly. Also, those who aren't as bright/courageous are afraid to step into the fringes of debate because it brings pariah status. Look at some of these guys like Keen, they spend decades in the wilderness and it takes a massive crash to get them attention.

It's interesting how many reject gold out of hand though. I think there are intelligent critiques, but how many intelligent critiques do you run across? How often do you see some new paper against gold, only to see some well tread argument? I can't count how many times I've met that gold standard argument, that there must be some hard standard, rather than a floating price. On the flip side, many arguments in favor of gold are lacking in depth (they also argue for a hard gold standard), I think only about 10-20% of "gold bulls" (% pulled out of ass) grok the ideas in freegold or similar to it. And to be a pro-gold deflationist, what a lonely place.

But I don't think the transition will come because of understanding. When the transition comes, this mile-wide and inch deep defense will crumble quickly. It is all about the "tipping point" and the "Schelling point," not convincing people. The 2008 financial crisis didn't occur because people understood it (many still don't fully understand it). If the Phds are resting on such a thin foundation, imagine the rest of the U.S. Furthermore, remember the Chinese, Turks, Indians and Vietnamese who already know what gold is for.

I think it's good to debate though. Eventually you will run across someone who will think about it, realize it is a different argument, and come back with a good critique.

Motley Fool said...

MnMark

""There's nothing new under the sun," the sages say. There's been fiat currency before in history, and gold has been used throughout history - so why has it not become clear before now that FreeGold is the best way for societies to handle their money?"

I think this saying relates to human relationships. It's obviously untrue if taken literally. The internet for example is new, so are computers, and so is freegold.

It required evolution and much experience to grasp these truths, now we are ready.

TF

ein anderer said...

To underline the assumed importance of my question here is a pulsating quote of Blondie [ http://flowofvalue.blogspot.com/2010/10/freegold_41.html ]:


Freegold gives the market a real point of reference, physical gold, from which to assess the relative values of everything else. This is the point of reference originally chosen by the natural evolution of money, over thousands of years. Nobody invented money. It evolved naturally from our desire to exchange goods and services. This is just the next step in that continuing evolution, as the result of the world’s aggregate debt consolidating into the physical world, providing the physical gold owner with a pure equity position. "Freegold" is simply a term identifying a market in which gold trades purely as a physical wealth asset, free from gold denominated credit (aka paper gold). A little thought reveals that this is where our monetary system is going simply because it is the path of least resistance culminating in the most equitable arrangement.


Very, very interesting, BECAUSE: Blondies "path of least resistance" is one of the most fundamental laws of nature! Path of least resistance equals to the principle of least action mentioned in Egypt and Greece (and I am sure in ancient India too) thousands years ago, adressed again in the 18th century by Euler and Leibniz. [ http://en.wikipedia.org/wiki/Principle_of_least_action ]

anand srivastava said...

Aaron and DP:

The baggage problem is also there in the Medical Industry. If you told the Doctors that food can cure, they would never believe you. You can show them research papers that show the effects you are talking about, and they will find papers showing opposite. You can show them actual results and they will dismiss them as anecdotes.

I think this is a general rule. The deeper the baggage the more difficult it is to look outside. If this wasn't true we would have already had FreeGold. How come the traders are still going on trading in this forever losing situation. They are all risking a lot to make some more cash.

I have a former college mate who is kind of a trader now. He knows about the theory that I say, but he thinks that I don't know anything and I am just talking non-sense :-).

Motley Fool said...

ein anderer

"What I did NOT catch until now is: Is Freegold something which SHOULD get enthroned -- or is it something which will be born automatically?"

Nope. We ain't activist ( any more - for some of us), FreeGold is the natural evolution that will be driven by market forces.

There is no need to advocate for it or generate political will.

" Although a friend of many humanistic and ecologic goals our mankind may have--I am a bit tired of fighting whatever for."

Buy gold. You'll help yourself and mankind. ;)

TF

burningfiat said...

Ein Anderer,

My understanding is that we will have Freegold with the current setup. No changes are needed.
It will take a really powerful conscious decision to steer the world _away_ from Freegold.
Signs:
*) Old money / smart money / Oil is aligned with FG.
*) The Euro and many other currencies are designed to function as MoE and UoA with FG. (hint: MTM gold reserves)

All that is needed now is time. We just need to wait for the final breath of the $IMFS (Dollar International Monetary and Financial System)...
Freegold is the path of least resistance regarding the successor of the current paradigm.
IMHO there is so little resistance in this Freegold trail that it can almost be regarded as a super-conductor.

Jeff said...

MnMark said: Question: if FreeGold makes sense because it separates the SoV and MoE functions of currency into SoV (provided by physical gold), and MoE (provided by fiat) instead of both of them provided by fiat, why has it not been done anywhere in history that I've heard of?


In practice, separating the functions is done all the time. Countries with small currencies prone to inflation use another currency (usually the dollar) as SoV and the local currency as MoE. Like Panama:

http://www.euronews.com/newswires/1692066-panama-leader-tells-germany-he-wants-to-adopt-euro/

Jeff said...

Ok, Panama has gone a step farther by using the dollar (for now) offically, but you can see countries like Iran and Jamaica, where the USD acts as SoV.

I wonder why Panama wants to use the euro. :)

Cottonbelt said...

Slowly working my way through the freegold principle & thinking - my kudo’s to FOFOA and the entire blog community for the extremely high signal to noise ratio.

Re: silver, from my investment perch the silver ‘story’ tied to attractive, long-term industrial supply/demand picture and any monetary perception/tail-winds from the ongoing ascent of gold just lagniappe IMO.

Michael dV said...

Hooray for Aaron's 'Mary'...she could greatly revive the image of jack booted thugs as they enforce the central planners ideas for a more perfect monetary system.
I wonder if she actually thinks through her ideas and sees the blow to liberty that they would cause. "!!We will FORCE the people to do whatever it takes for my ideas to work!!"...sweet girl otherwise I'm sure.
Thanks aaron and Fofoa for the interview.

Andrew said...

MnMark,

I think the answer lies with the oft-quoted phrase here that golds needs fiat currency to truly set it free, of which I'm sure you're familiar. Well, all fiats are not the same. We've had paper fiat currency before but never digital fiat until now. Digital is an even purer form of fiat than paper, so now gold can be set free as never before.

-Andrew E.

victorthecleaner said...


Has freegold ever existed in history? There is a section of the gold trail on precisely this question, at the beginning of part 3:

http://www.usagold.com/goldtrail/archives/goldtrailthree.html

(you may need the end of part 2 to get the context)

Also, and this is what I find even more convincing is that 'freegold' has existed in numerous small countries in disguise all the time. Well, it's not free*gold*, but rather free*dollars* or free*deutschmarks*. I don't know who was the first to point this out, but it goes as follows:

Numerous smaller countries, for example, in the Caribbean or in eastern Europe, have their own local currency. But this currency is only used as a medium of exchange, i.e. for salaries, to go shopping, and to pay taxes. As long term savings, however, people hold dollars or Deutschmarks (now Euros). The separation of medium of exchange and store of value has existed in these countries all the time. As a consequence, their local currency has a rather high velocity, and any change in the effective money supply (base plus credit created) affects the price level in short order.

The store of value currency (aka secondary medium of exchange) has a much lower velocity, but it is used for large purchases (car, house), and if so, then it is often worth a discounted price.

Victor

MnMark said...

@Jeff: "In practice, separating the functions is done all the time. Countries with small currencies prone to inflation use another currency (usually the dollar) as SoV and the local currency as MoE. [e.g. Jamaica and Iran]".

Why don't the Jamaicans and Iranians use gold instead of dollars? Dollars lose value.

@Victor, I will look at the link the archives you mention, but I guess my question to Jeff stands to you too. Why would these small countries settle for using another country's fiat as a SoV when they have gold as an alternative?

If these countries have used foreign currencies as SoV before, it would seem that there is historical precendent for that rather than for gold and thus it might be expected that people will seek out foreign currencies to use as SoV in the coming crisis rather than gold. (What currencies that would be is a good question, but perhaps Euros.)

MnMark said...

Let me say it once again, because the more I think about it, the more I think it's a legitimate question:

If gold is recognized all through history as the superior SoV, then why is it not used as such around the world in countries which have already gone through what the dollar is heading for?

Why do Argentines use the dollar as a SoV instead of gold, for example? If gold is so obviously the reference point and the supreme store of value?

If neither they nor the Iranians nor the Russians (during their currency crisis) nor the any of the other Latin American countries (to my knowledge) have used gold as their SoV instead of another, more-stable-than-their-own fiat currency, why should the West use gold as a SoV in the next crisis?

Jeff said...

MnMark,

I was talking about individuals, not nations. Most people probably don't need to store a lot of value for a long time; for smaller amounts and shorter timeframes, currencies are probably easier (smaller transaction costs, etc.) Also, Of course some individuals do save in gold (indians, middle easterners), so culture is probably a factor. For larger amounts and for longer timeframe I suspect gold is more popular.

Dante_Eu said...

@MnMark:

“If gold is recognized all through history as the superior SoV, then why is it not used as such around the world in countries which have already gone through what the dollar is heading for?”

There’s always been alternative. US$, Deutchmark, Swiss Franc. Also gold. But if the de facto reference point, world reserve currency mighty US$, which all other currencies de facto are based on, goes puf, then what?

I think € will be used in USA as Deutschmark was used in Eastern Europe once upon a time. And by that time physical gold will probably be very high priced in both € and US$ or any other currency. Out of necessity.

Why do Argentines use the dollar as a SoV instead of gold, for example? If gold is so obviously the reference point and the supreme store of value?

Well, I think, they simply didn’t thought about it. For ordinary people it’s not so obvious. If you said to me 5 years ago, buy physical gold as a wealth reserve, I would laugh at you. Then the financial crisis happened and my stocks went to close to 0. Then the FED printed and my stocks rebounded. I thought about it. And then I bought physical gold (Au 99.99).

There is time and place for everything. Some learn slow, some fast, some never. As they say:
“When the students are ready the teacher will appear.”

jojo said...

Phew, we can all breathe a collective sigh of relief, due to the stress we were all under (now relieved)from worrying and caring about BaronShitBricks. Thank God you are here Baron and thank God you let us in on the wonderfulness that is you. All hail BaronShitBricks. He's decided to leave his dark lonely bedroom of 14 years.

PLease, more about YOU Baron.

MnMark said...

@Victor, I read through 2/3 of the 3rd part Gold Trail conversation you linked, but I didn't see any discussion of previous incarnations of FreeGold in any form I recognized as such.

It seems to me that if this combination of gold as SoV and a fiat as MoE and UoA is so powerful and conducive to prosperity and justice then we would have seen it in multiple places throughout history, in just the form being anticipated here. Surely we FreeGolders are not just now recognizing a truth hidden to people all through history. And I can't buy the argument that it was digital currency that makes all the difference. What is it about digital currency that makes FreeGold possible, that paper currency could not do?

Jeff said...

MnMark,

It's still a dollar world. Gold won't work until the paper market works. Gold is not stable. Ask a korean.

Date: Fri Dec 12 1997 21:33
ANOTHER (THOUGHTS!) ID#60253:

Even Korea will find out that oil is all that counts. Their paper will die! Gold would have helped them in a different world, but for now gold is in the background as the IMF tries to add more paper to this inferno. If one owns real gold, it will be with ease to view the world currency developments. They will be truly of biblical proportions!

...Also, as gold begins to rise against the dollar, the local gold reserves are seen as assets of increasing value, backing the local currency. Under these conditions, with a stable currency,citizens will purchase more gold as it is seen as a positive asset. Not unlike a rising stock,everyone wants an increasing investment. Contrast this action against that in Korea, whereeveryone sold gold as it increased in an unstable currency.

MnMark said...

@Jeff, ok, let's say we don't have FreeGold now because it's a dollar world. But it wasn't a dollar world 200 years ago, or a thousand years ago. So were there examples back then where countries issued fiat that was managed against the price of gold in that fiat, which the citizens used as a MoE, while using gold as the SoV? It is difficult to believe there is something unique about the modern world that is going to make that happen now, when it has never happened before. Human beings are not different than they were then, nor were the motivations of the ruling class.

Woland said...

Hello MnMark:

As I have nothing to do, let me make a few stabs at your
question. With regard to "what has been recognized
throughout world history", that history was re-written in
the period between the two world wars. What emerged, in
the wake of all that destruction, was an arrangement never
before seen in history: the currency of one nation (the US)
functioning as the "store of value" for the entire world.
It worked for about 2 decades, and broke down 6 years
later, in 1971. A combination of planning and luck extended
its' life another 30 years. Born as I was in 1945, I grew up
without any other concept of how things might or should be
different. The vast majority of my generation will die with
those same concepts firmly in place.
Turning to places outside the "American experience", there
are countries where the idea of the dowry, or bridewealth, is a
longstanding tradition. Gold has been a part of these cultures
for centuries, and it is widely used as an important element of
the dowry. Much of the saving that is done is in part for that
very purpose.
With regard to the smaller island counties or states prone to
repeated inflation, Jeff's comment about transaction costs is
particularly appropriate. In fact, in such countries, most of
the citizens are just struggling to get by, and have little
opportunity to buy gold in small amounts at modest markups.
The elites in these countries keep their wealth outside their
borders, so they are not a source of demand within the nation.
When thy do buy gold, it is most often as jewelry, but not the
high karat variety as seen in India, where it is wearable wealth.

anyway, thats my 2c, FWIW. Cheers.

Dante_Eu said...

@MnMark:

No, human beings are not that much different now from then.

The difference is we are having this discussion. Right here, right now.

That means probably, that much wealthier people than we, already have had this discussion.

And are prepared.

Jeff said...

I should have said gold won't work WHILE the paper market works. Poor typing.

MnMark, for the history of gold see FOFOA's post Moneyness, then go read FOA's masterful full exposition on Gold Trail three. You will find all your answers there.

Franco said...

MnMark said:

"Why do Argentines use the dollar as a SoV instead of gold, for example? If gold is so obviously the reference point and the supreme store of value?"

MnMark:

I have asked that question to myself more than once, being from Argentina and all. I can tell you this, in comparison to the local Argentinian currency, the US dollar has looked for a long time like it preserves its value. Interestingly, though, for the past few years there has been quite a bit of inflation in Argentina, in dollars. But even this strange development hasn't really caused many people to shift their attention from the US dollar to gold. Part of the reason for that, I suppose, is inertia.

milamber said...

MnMark,

I think you are asking a very good question. And one that I ponder all the time.

Why now?

Back in July, Blondie made a comment that really stood out for me. And I have been pondering it ever since (I do a lot of pondering).

It was when he discussed Gold being the “Supreme Possession” and then he followed it up with this comment that REALLY struck home for me:

“Actually, I think this natural system which spontaneously installed gold as the supreme possession is "Capitalism", and it has not existed free of coercion for over 2500 years now.

If it is not free from coercion, then it is not capitalism. As such Marx et al were not attacking capitalism at all, because they had no direct experience with it. They were attacking the coercion that had perverted capitalism, and rightly so. Unfortunately the coercion was assumed to be a normal part of the system, which it is not.

Everyone has been arguing from faulty premises the entire time.”

http://fofoa.blogspot.com/2012/07/fallacies-1-paper-gold-is-just-like.html?showComment=1342396817429#c102557224499227104

2500 years of a coercive system.

That is what concerns me most about Freegold.

Not that FG doesn’t make sense, or that the US can perpetually expand debt as a SoV, or even that the miners will overwhelm the system with their production (I’ve been conversing with AD on the Fool’s blog about this the last couple of days).

If we have lived under a coerced system for 2500 years, why would we stop now?

Think back to Aaron’s interview and how he describes the interactions with “Economics” people. Think back to the “conversation” we had with the former banker, Francis Coppola.

Most people accept the system that we have in place as normal. And they have for the last 2500 years, even as each system has succumbed to the pressures that invariably get built up.

As a superorganism, have we really evolved enough financially to recognize the sheer brilliance of FG as it resolves FOFOA’s dilemma? In other words are we smart enough to cast off 2500 years of history that says coerced capitalism is capitalism?

The smart money says no. Human emotions never change. If we have had a coerced system that we erroneously call capitalism for 2500 years, then why on earth would we expect it to change now?

That is why I can’t check in at the All-Inn. My reading of history, my (lack of) faith in humankind & my experience with people on a daily basis causes me to think that while FG is without question the best solution to FOFOA’s dilemma, we may be too stupid as a species to grasp it.

Another war is a more likely resolution to the unpayable debt that functions as the worldwide SoV for so many right now.

Don’t get me wrong though, I hope that the BIS/ECB are successfull and we "move from US$ without war".
http://fofoa.blogspot.com/2010/03/gold-man-not-goldman-at-bis.html

Milamber

P.S. Aaron and Wendy loved the debriefs. :) Sir Ender if you are up for it, it would be a very special October if you consented to be debriefed too!

burningfiat said...

MnMark,

As a matter of personal experience I would like to offer the example of South East Asia as a place where a Freegold-type environment is alive and well today.
Vietnam:

http://www.zerohedge.com/news/where-dong-weak-gold-rules-vietnam-they-will-pay-you-store-your-gold

My experience from Thailand:
Gold shops on almost every corner in every city worth its salt.
When people have a significant surplus of THB paper notes, they go and exchange them for gold rings or necklaces in the shop (with standard purity >23K).
In Thailand they measure gold weight in Baht. So one baht heavy of gold is 15.2 grams (approx. 1/2 ounce).
Jewelery is bought at low premiums to spot price, and typically in weights of 0.25 (noong salung), 0.5 (ha sip satang) or 1 (noong) baht.
You can almost literally see shop-owners go and exchange some of their surplus for gold at the end of every day.

If think a lot of this behavior is rooted in culture, but I also think this experience had something to say:
http://en.wikipedia.org/wiki/1997_Asian_financial_crisis

Only thing missing regarding the Freegold-like environment in SE-asia is the 50-bagger that will come once the rest of the world gets with the program :)

/Burning

MnMark said...

Thank you, various commenters, for your responses. Here are my responses to your responses.

@Woland: Dowries are not the same as Freegold, right? Let's stipulate that gold has been used as a store of value all through history. But Freegold is different in important ways: a central, government-authorized entity which creates fiat and manages it against the market price of gold, which people use as the MoE, while saving in gold, no taxes or other penalties or encumbrances on moving back and forth between fiat and gold, and no paper gold, among other characteristics which do not come to mind at the moment. There is general agreement here that Freegold provides the best of both worlds of fiat and gold without the downsides of a fixed link between fiat and gold. There is a general belief that this is the monetary arrangement which would most optimally benefit society.

OK, so if it's so optimal, and if societies adopt monetary systems because they are so optimal for the whole of society, and if human motivations are the same as they always have been, and if there were fiat currencies before, then why has no one in the history of the world before figured out that they ought to implement Freegold in their country and gain a huge competitive edge for their citizens over everyone else?


@Dante_Eu: Yes, we are having this discussion, but I cannot believe that human beings have never in 5,000 years (when there was fiat currency in China thousands of years ago, too) figured this out.


@Jeff, I read the Gold Trail Three and didn't see any discussion of why there has been no Freegold before in history. There is a discussion of ancient gold etc but I didn't see anything explaining why no system of fiat combined with free-floating gold was never used before.

MnMark said...

@Franco: I can accept that there is inertia. But given that many countries around the world have already gone through what the US is about to go through (a currency crisis), how can it be that no great thinkers there have ever recognized that if they just implement Freegold, they can win huge benefits for their country and restore prosperity and justice for their people? Is it likely that it is because FO/Fo/A are so brilliant that they have discovered a new idea never before conceived of by man? Or could it perhaps be because rulers are not particularly concerned with prosperity and justice for the people, or with providing the people with a way to save their money outside of the reach of the government?


@milamber: I completely agree with you. I do not buy arguments for Freegold based on how beneficial and just it is. I don't know how many monetary decisions made by governments are based on justice and prosperity, but considering how many communist/socialist governments there are and have been, despite the poverty and horror they impose on their citizens, even when the obvious relative prosperity of free markets is apparent for all to see in the West, I don't think it's many. I think instead that it is obvious that decisions are based on the desire to sooth class envy (e.g. Chavez) or for the benefit of the ruling class.


@burningfiat: Whereas I am not at all convinced by arguments that Freegold will be adopted because it is fair and beneficial, I do find arguments that it will be adopted because it is in the interests of the decisionmakers to do so much more compelling. I don't know much about Vietnam or Thailand. Do they have Freegold, in all the important respects it has been described on this blog? No taxes or limits on converting it into or out of the local currency? Management of the fiat currency against the gold price (e.g. purchases and sales of gold by the central bank)? If so, then we already have Freegold in part of the world - a part that has undergone currency collapse and financial turmoil - and that is a good argument that we may have it here as well. It is curious though that I don't recall hearing vietnam and Thailand held up as examples of existing Freegold systems before.

And wasn't there some discussion of how whoever first adopts Freegold is going to have a huge advantage? Is that true of Vietnam and Thailand? If not, why not?

JR said...

Hi milamber,

The smart money says no. Human emotions never change. If we have had a coerced system that we erroneously call capitalism for 2500 years, then why on earth would we expect it to change now?

That is why I can’t check in at the All-Inn. My reading of history, my (lack of) faith in humankind & my experience with people on a daily basis causes me to think that while FG is without question the best solution to FOFOA’s dilemma, we may be too stupid as a species to grasp it.

Another war is a more likely resolution to the unpayable debt that functions as the worldwide SoV for so many right now.


Who cares? The issue is not Freegold or not (although it is related), the issue is what do you save in. The issue is not Freegold or not, the issue is gold! Is it appreciating in real terms or not? Lotsa non-freegolders buy and hold gold, yes?

So if its not gold for buying and holding, what is it? Do you see war and TEOTWAWKI and no savings existing?

======

PS - Lots people in my field yabber on about evidence based practices. Well do we have freegold? Maybe not yet from an evidence based viewpoint - Freegold is really economic theory until it occurs (although there is direct and circumstantial evidence for its occurring, even existing now [SE and PE membrane, aka the 2 tiered market] but we leave that aside).

But what we do have is evidentiary witness to the real message of Another - gold is changing. So your objections to Freegold theory or not, does it matter?

Eschewing the theoretical for now, what about an evidence based practice - gold's on the move, and has been for some time (what did Roosevelt revalue it from, and then what price did Nixon set it free from??), and the recent movement has been getting hot and heavy.

What we learned from ANOTHER thirty years later was:

1. The purpose of the euro was to provide an international transactional alternative to the dollar.
2. The consequence of the launch of the euro would be that gold would undergo "the most visible transformation since it was first used as money."

Quote - Monday, August 6, 2001 - GOLD @ $267.20 - FOA: "The result will be a massive dollar price rise in gold that performs over several years."

Tuesday, January 1, 2002 - Launch of euro notes and coins
Friday, February 8, 2002 - GOLD ABOVE $300
Monday, December 1, 2003 - GOLD ABOVE $400
Thursday December 1, 2005 - GOLD ABOVE $500
Monday, April 17, 2006 - GOLD ABOVE $600
Tuesday, May 9, 2006 - GOLD ABOVE $700
Friday, November 2, 2007 - GOLD ABOVE $800
Monday, January 14, 2008 - GOLD ABOVE $900
Monday, March 17, 2008 - GOLD ABOVE $1000
Monday, November 9, 2009 - GOLD ABOVE $1100
Tuesday, December 1, 2009 - GOLD ABOVE $1200
Tuesday, September 28, 2010 - GOLD ABOVE $1300
Wednesday, November 9, 2010 - GOLD ABOVE $1400
Wednesday, April 20, 2011 - GOLD ABOVE $1500
Monday, July 18, 2011 - GOLD ABOVE $1600
Monday, August 8, 2011 - GOLD ABOVE $1700
Thursday, August 18, 2011 - GOLD ABOVE $1800




burningfiat said...

MnMark,

Yes, There are no taxes or limits on converting it into or out of the local currency!
I think this also applies to India and China as previously discussed. Please broaden your scope, Mark. 60-70% of world's population are already saving in physical gold! They benefit already every day from this decision, because they have a good nights sleep. All people saving in gold (also Asians) will have a huge advantage once we go to a physical only market.

Regarding central bank holding in these specific countries. Well, who cares? Not the people, as they already save in gold. They are their own CB.

I think it is a mistake to think that "decision-makers" has to do anything (especially in this late hour). Freegold is emergent, not decided.

The large percentage of the world population and the large percentage of the worlds CB's already aligned with Freegold should get you thinking...

MnMark said...

@JR: Yes there is a good argument for gold as the best way of saving regardless of whether Freegold is going to happen or not.

But if Freegold is not going to happen, then maybe we're going to see this in the future:

Friday, February 8, 2013 - PHYSICAL GOLD BELOW $1200
Monday, December 1, 2014 - PHYSICAL GOLD BELOW $800
Thursday December 1, 2015 - PHYSICAL GOLD BELOW $700
Monday, April 17, 2016 - PHYSICAL GOLD BELOW $600
Tuesday, May 9, 2016 - PHYSICAL GOLD BELOW $500
Friday, November 2, 2016 - PHYSICAL GOLD BELOW $400
Monday, January 14, 2017 - PHYSICAL GOLD BELOW $300

A serious part of the appeal of Freegold is the idea that its going to $XX,XXX per ounce *and staying there*. If Freegold is not going to happen, and gold is just passing through a manic phase on its way to another 1980s-style crash, then it changes a lot about how we are going to invest in gold.

MnMark said...

@burningfiat: I guess you should admonish FOFOA to broaden his horizons too, huh? Since I don't recall any articles about how Freegold has already been adopted in Asia.

I seem to recall an argument, too, that whoever was first to adopt Freegold was going to get a huge advantage in the big coming revaluation. So has Thailand and Vietnam already locked that huge advantage up?

matrixsentry said...

Wendy,

Been dealing with a "black hole" and just now have escaped the event horizon! I seriously enjoyed your de-brief and for some reason you lived up to my mental image more so than everyone else. Funny, my wife says it is because I knew you in a previous life ;-) Can't really comment on that per se, but nonetheless I look forward to your commentary as we all walk the trail.

Aaron,

Your debrief resonates. I have had a lot of experience discussing/debating Freegold with my colleagues as well. The toughest ones to get through to are the big time traders like I used to be, the silver bugs, and economic/business degree holders. All come with much baggage and pre-conceived certainties. The ones that know nothing feel the "rightness" of Freegold in very short order. Sometimes I wonder how I managed to set down my burden considering how certain I was that I knew all there was to know back when I discovered the blog.

At the Freegold Bar-B-Que I look forward to swapping some of your port for some of home made Apple Whiskey!

All,

Still cannot talk about the "black hole", but I can say that delivery has been accomplished and I am now in possession of 38 ounces that were in quasi-jeopardy. Apparently the message I sent was received and properly interpreted. However I will reiterate that nobody on this blog should be conducting business with the individual I had the distinct displeasure in dealing with. More on this later.

Jeff said...

Never fear, pessimists. Freegold won't solve all the world's problems. You can still be paranoid about your government.

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

Aaron said...

Hi Milamber-

Think back to Aaron’s interview and how he describes the interactions with “Economics” people. Think back to the “conversation” we had with the former banker, Francis Coppola.

That is why I can’t check in at the All-Inn. My reading of history, my (lack of) faith in humankind & my experience with people on a daily basis causes me to think that while FG is without question the best solution to FOFOA’s dilemma, we may be too stupid as a species to grasp it.

Actually, that's the beauty of Freegold. It doesn't matter if everyone gets it or not. Recall one important concept that FOFOA continually hammers home -- it's not up to the masses to usher in Freegold -- it's simply a change of perception by the savers. Freegold doesn't need debtors to force its inception and it definitely doesn't need Mary to understand. The GIANTS and Super Producers of the world need a place to store their savings and they have already made their decision. As savers I and my neighbor saving in gold certainly adds pressure to the system, but it's negligible pressure.

The Europeans carried the US bond market right up until they had their own currency union in place and China took over for structural reasons alone and they have since dropped support for large scale UST purchases a few years ago.

The ECB marks their gold to market and loudly pronounces it on line item one of their ConFinStat. China is buying gold hand over fist as are many other central banks we've been reading about (think Paraguay).

This is an evolution in our monetary system. Gold usurping USTs as the world reserve asset is inevitable. In fact, it's happening right now!

--Aaron

matrixsentry said...

Bravo JR!

Economically stated and cuts really to the matter: why obsess about whether Freegold is going to happen? Has gold been doing a good job of preserving wealth these last 12 years? Is it progressing in the proper direction?

Simple questions, simple answers. Where else would we be right now?

Jeff said...

*A serious part of the appeal of Freegold is the idea that its going to $XX,XXX per ounce *and staying there*

This is ant thinking. Attempting to ridicule something you don't understand doesn't make you look good.

FOFOA: ...the price of gold does not matter to the producer/saver, only the flow of gold matters. I'll say it again. The producer/saver doesn't care about the price of gold, only the flow. To the producer/saver the price doesn't matter because it is a straight currency exchange, like exchanging dollars for euros.


Did you see it in the article? Aramco owed the Saudis $3 million a year, but it had to be paid in gold. They didn't owe 2.67 tonnes of gold per year, but that's what they had to pay because the US fixed the price of gold at $35 per ounce. The US could have raised the price of gold to $100/ounce and then it would have only had to ship .93 tonnes of gold to the Saudis! Would the Saudis have been displeased with such a move? No. The guaranteed price of gold only matters to the printer of paper gold. To the producer/savers, all that matters is the guaranteed flow of physical!

Woland said...

Humanity: 7 billion persons
USA: 315 Million persons
World GDP: 64 Trillion "dollars"
USA GDP: 15 " "dollars"

It is amazing that 4-1/2 % of world population produces
22% of world production of value, no?
How do we achieve this amazing feat, of working 5- 1/2
times harder than everybody else, when most of what we
do is manipulate pieces of paper and digital electrons.

Religion has an answer: It's a miracle!! (hint: there's a trick)

RJPadavona said...

Loved the interview, Aaron!

You're a devoted soul to take on the task of explaining Freegold to Econ professors. I'd say they'd be the least likely of any group to have the ability to leave their baggage at the door.

I've had a few breakthroughs with some of my customers who are stockbrokers. That's hard enough. I couldn't imagine trying to get through to Econ professors. Although I suspect they'd be more accepting of these ideas coming from a colleague as opposed to..... a barber ;)

Looking forward to sampling some of your wine at that big FG BBQ we're supposed to have. I'm sure I'll be bringing some local corn squeezins too!


RJP

PS: Fun fact that you and your family can laugh about at my expense:

I literally never met a Jewish person until I went to prison. "You might be a redneck if......." :)

PPS: Glad you enjoyed the T.P. rationing tip. We never had a name for that trick, but I've since been inspired. From now on, I'll call it "The Chocolate Port" :D


ampmfix said...

Small correction, Woland, not harder, just more "effectively", that can mean lots of things, thieves are also much more effective than honest people.

Aaron said...

Oh, RJP. That's F*^#((g disgusting!!!

I am never going to be able to drink another bottle of that port again.

;-)

Wendy said...

LMAO at Aaron and RJP.

Aaron I loved the interview, and the cast of characters in your story :D

Thanks again FOFOA for doing this!

MnMark said...

@Jeff: It might not matter to the GIANTS what the price of gold is, but it damn well matters to me. One of the main themes of the Freegold theory is that "upward waterfall" where prices go up to a high level and then stay there. If they are not going to stay there - if Freegold is not 'true' or does not happen like that - then there is going to be a timing issue for me knowing when to get out. If we don't have a "upward waterfall" then what we are having is another variety of gold bull market with some variety of blow-off top followed by a plunge a la 1980. On the other hand, if Freegold is what is going to happen, then there is no need to time it. Just buy physical, stay in it, and ride it out.

So for those saying "who cares if Freegold happens or not? Gold has been going up for ten years": the ones who care are the ones who want to know if they need to worry about jumping back out at the right time or not. And from what I have been reading, that depends on whether Freegold pans out or not.

Wendy said...

Matrix,

I'm glad to hear your gold is safe and sound with you.

BTW, I very much like your wife's explanation :) I believe, as a species, we are still light years away from understanding conscience.

Wendy said...

conscienceness

Michael dV said...

Aaron, your response is closest to what I would say. It does not matter if smaller savers (even) go to gold, it will be done by large producers. Right now they see the 'arena' in which they have trusted their wealth is failing. The dollar is proving paper cannot be a store of wealth for any significant period of time. Ask China why they are importing so much gold...I bet the answer is not 'tradition'.
As for Econ Profs not being open to new ideas...any professional gets non-professional opinions all the time. Patients come into the doctor with wild ideas they interpreted from bits they read on the internet. In 30+ years I cannot think of a single important item I learned from a patient except occasionally they got to the newspaper before I did and showed my something I would have seen later. I can imagine these same profs listening closely if the idea was presented by a peer. If they are really open to new ideas and not 'burned out' they might engage however...usually it will be the brighter ones who see some truth even if it is not expressed in the lingo of the field of study.
That said I have yet to hear the major facts and features of freegold refuted by those who disagree. They may say it is wrong but then they quit the field before they offer their evidence.
Most of us here are a little insecure. The reason I stay is to hear freegold proven wrong. After all I am doing something crazy that no one else is doing. I am risking a lot. I would not mind at all if some one could prove everything we discuss here wrong and I could go back to investing as usual. I could be normal again...but so far that is not possible and freegold, for now, is the best course of action I have before me.

Alan2102 said...

Michael dV said...
"The reason I stay is to hear freegold proven wrong."

It won't be proven wrong. It might BE wrong, but it will not be proven. It will remain an intriguing hypothesis until it is either proven right, or the passage of years will render it, by small increments, increasingly less likely and finally moot (but still not actually PROVEN wrong).

In any case, you need not worry. Your investment in gold is as sound, and indeed sounder, than just about any other investment at this time. You'll do well, whether or not freegold happens.

vizeet srivastava said...

I feel Free Gold is not a new thing. Before paper currency was introduced in India, people were using gold as SoV and silver for MoE.

Alan2102 said...

MnMark said...
"for those saying "who cares if Freegold happens or not? Gold has been going up for ten years": the ones who care are the ones who want to know if they need to worry about jumping back out at the right time or not. And from what I have been reading, that depends on whether Freegold pans out or not."

I say: who cares if Freegold happens or not? Gold has been going up for ten years, and will continue to go up for at least 5 more. Don't worry about jumping out -- yet. Just be sure you are IN. It will be easy and fun to pick a few exit points at much higher prices, which are gold's destiny. If everything goes to hell and the currency collapses and/or freegold happens (it could be argued that the one will not happen without the other), then all the more reason to hold gold (and silver); you'll be one of the few left standing, and standing in very good stead.

Wendy said...

tomorrow I am going to tell you all the real reason I bought silver. And BTW its not just because I like the stuff.

I'm working on it. For those who know me, it relates to a son no longer here.

I'm hesitating hitting the "publish" button

JR said...

Hi Woland,

Regarding the inability to have a private conversation at the petroleum club, what do you make of:

I'm much more of an eye to eye, face to face, quietly making my position known, kind of fella. Take MK or Mr. Turk; these men can write. Im not kidding when I say that in their presents or in the company of other smart / important people I would typically blend into the shadows.

costata said...

Hi Aaron,

Good interview and good luck with your efforts to explain Freegold-RPG to friends and colleagues.

A little silver tidbit for the rollers (my emphasis):

One exciting thing that happened this year is the introduction of one-ounce Comex silver bars from Johnson Matthey. The premium is $2 an ounce, which is about $0.75 an ounce more than for a 100-ounce bar. But it’s a dollar an ounce cheaper than for a Silver Eagle coin, so they’re selling very well.

http://dollarcollapse.com/precious-metals/how-to-play-a-comex-default/

The perspective on a possible Comex default in this post appears to take its cues from the silver-buffoon-in-chief's misinformation. That said, there's some interesting information about the expanding list of suppliers for Comex approved product.

The price advantage on those new JM one ounce bars over Silver Eagles might be the reason that the US Mint's sales reports haven't been a reliable guide to US retail silverbug demand for some time now.

My take on the above is that the silver market has become even more opaque to the average punter. Advantage bullion banks!

costata said...

MnMark,

So for those saying "who cares if Freegold happens or not? Gold has been going up for ten years": the ones who care are the ones who want to know if they need to worry about jumping back out at the right time or not. And from what I have been reading, that depends on whether Freegold pans out or not.

Good discussion above. FWIW I think you are raising an important issue - strong hands during the transition will be crucial. And IMO strong hands result from remaining calm in the midst of turmoil and conviction based on reason and an accurate perception of reality.

So I'd like to toss a couple of thoughts about this discussion on the table. Firstly, I don't think that looking for an exact replica for the Euro Freegold-RPG regime in economic history is going to succeed. A little more on this below.

Secondly I think the discussants pointing out the cultural difference in the attitude to gold in Asia compared to the West have a strong argument supporting the likely success of the Euro Freegold-RPG architecture to replace the $IMFS system. Old Europe money and Asian big money is a powerful combination.

Between them these factions have an overwhelming numerical majority compared to the dollar bloc. This assertion holds true in terms of wealth, economic output, population and the list goes on. To cap that off Freegold-RPG is a viable solution for America if (when?) there is a catastrophic collapse in confidence in the US dollar.

Returning to the first point. You can identify an evolutionary process in central banking over the course of economic history. I'm not going to attempt to describe this in detail right now. Suffice to say that the ECB Eurosystem is unique. Nothing of its kind has ever emerged before. A truly independent currency issuer with a single mandate - stability. A currency literally "severed" from the Nation state.

Even in its heyday in the period (circa) 1700 to 1914 the Bank of England didn't have this much control over sterling. The Bundesbank in the post-WW11 period relied to some extent on the ability of the German electorate to intimidate politicians who wanted to influence monetary policy.

So the Deutschmark was to some degree vulnerable to a political power grab in an "emergency". And the pollies are masters at generating "emergencies" when it suits their political ambitions.

The black letter law and governance structure of the ECB makes it almost impossible to achieve the consensus required to enforce political control over monetary policy in the EMU. This is a first and one of the primary reasons I remain confident that Freegold-RPG will become a reality.

Cheers

burningfiat said...

MnMark said:
I guess you should admonish FOFOA to broaden his horizons too, huh? Since I don't recall any articles about how Freegold has already been adopted in Asia.

I seem to recall an argument, too, that whoever was first to adopt Freegold was going to get a huge advantage in the big coming revaluation. So has Thailand and Vietnam already locked that huge advantage up?


You misread me. I don't say full-fledged Freegold is already existent in Asia. I'm saying that a saving behaviour/culture that aligns nicely with Freegold is already in place. I also think that whether or not Freegold happens, the gold savers of Asia will do just fine. I actually don't think they care much about the outcome. What they have now already works.

Please realise that Freegold is not something active that needs to happen. The only requisite is that the gold paper market dies by itself. What is left when that happens we call Freegold.

When the current monetary and financial plane vaporises the current physical reality is what is always there underneath. That reality will now work in favour for those who saved in gold all along.
This reality won't affect those who are prepared already:
* Phys. Gold savers
* Central banks with MTM gold reserves.
* Other people with physical stuff and surplus production.

Shit will go along as normal or better for them.
BTW, consumers with no savings will not be affected in a great way either.

Who will be affected in a bad way is western savers living their whole life with their mind and savings up in the aforementioned monetary plane that is about to vaporise.
Seen from my (a gold savers) viewpoint paper savers won't be affected much in any way. I already think that their savings are worthless.
I imagine the biggest step-function will happen in the mind of the paper-savers who will at some point have to painfully align their perception of what their savings are worth with the reality.

/Burning

JulesFlying said...
This comment has been removed by the author.
anand srivastava said...

@mnmark:
Do they have Freegold, in all the important respects it has been described on this blog? No taxes or limits on converting it into or out of the local currency? Management of the fiat currency against the gold price (e.g. purchases and sales of gold by the central bank)?

I think you are looking at the expected outcomes of freegold, affecting us shrimps. These will not apply completely everywhere. This is not what freegold is about.

I think it will become easier to understand freegold, if you think that Freegold will occur when the Giants of the world are able to save in gold. Currently the giants cannot save in gold. Freegold really doesn't have much to do with us shrimps. Freegold is all about the giants. This is why you would do well following in their footsteps.

By this definition, today we don't have freegold anywhere in the world, not in India, not in Thailand. Our giants cannot buy gold with their excess produce today. But if you look a bit far into the past before paper gold, yes we had freegold. Yes gold was fixed to currency value, but then gold wasn't appreciating much, people's saving capacity was fixed. The prosperity of the people remained same over decades. The equation really has changed in the last century. It is only now that fixing gold to a currency will not work. Using gold as the main reserve is a better idea.

Reference Point Gold which will be a direct consequence of FreeGold will be the replacement of the current IMF$ System. Although it will not arise immediately. We will probably have a period in which countries are trading in their own currencies, with or without gold backing, just based on trust in their currencies. Ofcourse Euro and Yuan will rule in this space.

Freegold is not a panacea. It will not cure anything at all. It has been said that if you don't like the current system, you won't like the new system either.

Freegold is just a consequence of failing of the IMF$ system. The paper gold under the IMF$ system is keeping the price of gold very low. Once the IMF$ system crashes there will be a mad dash to get out of paper anything. This will cause paper gold to crash, and then the physical gold will be revalued. The 30x is just an expected value. It is not set in stone. You have to do your own calculation. I have done on my part and this number seems to be pretty good. But you are expected to do this calculation yourself, before you believe in it.

But if Freegold is not going to happen, then maybe we're going to see this in the future:

Friday, February 8, 2013 - PHYSICAL GOLD BELOW $1200
Monday, December 1, 2014 - PHYSICAL GOLD BELOW $800
Thursday December 1, 2015 - PHYSICAL GOLD BELOW $700
Monday, April 17, 2016 - PHYSICAL GOLD BELOW $600
Tuesday, May 9, 2016 - PHYSICAL GOLD BELOW $500
Friday, November 2, 2016 - PHYSICAL GOLD BELOW $400
Monday, January 14, 2017 - PHYSICAL GOLD BELOW $300


Do you really think price of physical gold can go below the cost of production??? Will mines produce any gold at that rate. Do you think giants will sell their gold at that rate. What about stock to flow ratio. You are basically saying that China, India and Middle East will stop buying gold completely. Do you think that is a sane proposition. As Jeff said this is an ant's perspective. You have to get a giant's perspective to understand freegold. It maybe difficult but you have to do it. There is no other way out. Freegold is not about us shrimps.

anand srivastava said...

@Milamber
Coerced system is not a product of capitalism, or communism, or democracy or tyranny. It is a product of centralization of power. Humans cannot form working communities bigger than a thousand people. This dictates that the communities should not be bigger than this size. But how do we live in huge countries with millions of people. Naturally the charismatic psychopaths rise up the top. The only solution would be to build communities of communities, with complete decentralization of power. But this is easier said than done. The charismatic psychopaths will find out a way to break the order.

Don't expect Freegold to solve this problem. It is just a monetary solution, not a political one. It merely keeps the savers safe from political issues causing monetary issues. It is a way to save your money, not to save the world.

Jeff Snyder said...

I find these discussions of tne historical necessity of FG and the timing of FG really interesting. What I infer from @costata's remarks above and prior remarks he has made is that FG will be a "lock" when (i) the ECB succeeds in unifying the European banking system [See recent remarks of ECB's Noyer's regarding necessity of unifying Europe's banking system to address sovereign risk], and (ii) China acquires gold reserves proportional to the European market/economy. Although FG could occur earlier if things spiral out of control, it seems that when those two events occur, circumstances are then best for a planned implosion of the $IMFS and a relatively smooth transition. The only other factor that I think muddles the timing of the FG transition is how to do it so that it does not trigger a war by the US. Maybe it will be sufficient that China is involved, since the American politicians can blame the Chinese for the American collapse (beause god knows it certainly wasn't anything America ever did{snark}, and we can't really blame our allies in Europe), and we won't go to war - particularly to try to grab more oil resources - because the Chinese have nukes. I am way out of my depth here, but it seems that, to preclude the US lashing out, it would also be good if Russia were on board with the transition. Or at least was able to quickly jump on board the bandwagon promptly after implementation of FG, kind of like recogizing the legitimacy of a new nation after a seccession or regime change.

Woland said...

Hi JR:

You know, there are only 4 pages out of 3315 in the USA Gold
archives which matter deeply to me, both mostly by FOA. One
is Msg. 45876 at 1/18/01; 19:34:02MT. I think or own Lisa was
kind enough to post that "Texas story" on this blog late last
year. It might have been someone else. It relates somewhat to
the nice snippet you provided.Let me just type out a few lines:

To better understand my replies, let me profile myself a bit.
The mental:
By some gift of destiny, I know the people world around me.
Perhaps better than some.
At all times I am intensely aware of the diversity of human
life we must all operate within.
Myself, and each of us have our right and wrong codes we live
by, and these are not always the same.
Yet, and because of this, society as a whole must function
through consensus or make war...............
You see, in real life, we must often take on the appearance
of the world around us. This action isn't lying or cheating
so much as it is trying to act out a play that is essential in
dealing with our hugely diverse society. A society, by the
way, that is mostly made up of people that aren't "the good
ones" as we often perceive ourselves to be. (smile)..........
As I have come to understand the captain at the helm,... the
driver of the corporation..... the general at the controls......
they are all just like us. Working outside our personal
moral standing standards, they must function using a diverse
crew that's usually not of the same thought...........
You see, a nation's rules, laws and moral requirements are
never more than a consensus vote from changing. In such
an environment, no leader can function for long at his or our
own standards. The office itself is a reflection of power
groups pushing their own position, and that requires us to
make our personal codes just that, personal codes. Not
public codes.

You know, I don't play chess, but I think that a world class
player could walk by a game in progress and say to himself,
White resigns in 17 moves. We can't see that, but he can.
Likewise, I think that when FOA walked into a room, he had
that extraordinary ability to discover, in a short time, just
what were the "people dynamics" of the situation. I certainly
think he sells himself way short in the writing department, and
he sure as hell has a spelling problem (dyslexia??) I could
say more, but enough for now. Just my 2c, FWIW. Cheers.





Peter said...

I started reading the blog posts from 2008 and you guys are still talking the same way you did 4 years ago, thinking that a huge collapse will come in a matter of weeks. This puts me off. It's like i'm watching a cult where every member "knows"what will happen in the future and they are the only ones with the knowledge and information to come out happy and safe on the other side. I am not saying your proposed scenario is wrong, what i'm missing in your presentation of it however is a some level of humbleness about your ability to predict the future. I will continue to study about the concept of freegold but i sincerely hope that i will never be as sold on the concept as you guys are. The prudent thing IMO is to accept that there are an incredible amount of variables at play that shapes our future and the best way to prepare is to educate oneself, hedge your bets and try to be prepared for anything.

JR said...

Hi Woland,

It certainly appears poker, not chess, was the right game for him! Thanks for sharing your perspective.

Jeff Snyder said...

@Peter,
Unless one has major personal financial resources, it is not possible to be "prepared for anything." One has to deploy one's limited resources as one's understanding allows. Personally, e.g., I don't expect a zombie apocalypse, so I have not devoted resources to an off the grid hideaway with solar panels, barbed wire and Class III weaponry. Personally, e.g., I hope that we will address the problems of our aging nuclear plants and long-term storage of nuclear wastes before we have a few Fukushima-style events in North America or in Western Europe {here's a sobering map: http://www.google.com/fusiontables/embedviz?viz=MAP&q=select+col0%2C+col1%2C+col2%2C+col3%2C+col4%2C+col5%2C+col6%2C+col7%2C+col8+from+587899+&h=false&lat=37.43997405227057&lng=24.609375&z=2&t=3&l=col1}, and I have not bought property in New Zealand, Uruguay of Chile to avoid a poisoned Northern Hemisphere. Perhaps, psychologically, or spirtually, one can be "prepared for anything," in the sense of having mental flexibility to do the best one can whatever may arise, but not materially. I cannot speak for others, but for me FG is a speculative play, albeit one that appears to have a better grounding in the psychology and actions of TPTB than idealistic or utopian visions of a return to the gold standard, cynical kick-the-can-down-the-road ploys like SDRs, or even more rational and realistic policy recommendations to address the imbalances in the current system like Steve Keen's "quantitative easing for the public." I welcome any discussion of countervailing facts or analyses because if I am mistaken in my speculative play, I would like to know sooner rather than later. It would be nice to have someone show up who offers a serious criticsm and challenge instead of the uninformed trolls who show up from time to time, whose "talent" consists in mockery.

In addition, speaking for myself, keeping some of what little I have outside the $IMFS is also an act of resistance to the system that, IMO, is leading us all to a significantly misallocated, resource-depleted and impaired world -- unlimited, unrestrained easy money mispricing everything -- and leading fairly quickly now to a neofeudalism that will be worse than the original.

Michael dV said...

Jeff
good comments
too bad about not having any Class 3 stuff...good fun
I agree with your comments to Peter but I also see where the observation of 'echo chamber' comes from though it is usually made by those who occasionally drop by.
Peter we would all love someone with the insight and quantitative skills to give us a better hint as to timing. Fofoa has no crystal ball (he might have a magic 8 ball though) but I believe the metaphor of the earthquake is the best...as in: freegold is like an earthquake, it could happen at any time and is overdue.
I have promised myself to re-evaluate my plans and beliefs at the end of the year. I began a journal of sorts last New Years and I hope to get some quiet time to reflect on freegold, my withdrawal from the markets, my personal planning and do an assessment of the stability of the world around me then. (yeah my New Years will be that boring).

罗臻 said...

Peter,

I remember seeing lots of bears in 2001-2003 predict the "crisis of 2008" in 2002. They were early, but ultimately right. The comments don't matter to timing, what matters is the argument: is it true or not? Mises said socialism would fail in the 1920s, but it took awhile.

The value here is in understanding the nature of the market, and by nature, I mean it's natural state. Freegold may never happen, but it is a pressure acting upon the existing system. I think it has a window of opportunity during this crisis (this could last another few years or 15+ years if it turns Japanese). If planners completely fail, we will see freegold. If they succeed at some point, then they will abort the transition to freegold, most likely by revaluing gold. The same way one controls political enemies by co-opting their issues, so they will likely co-opt gold to maintain control.

Woland said...

Hi Peter: You might be happy to know that your last
sentence, in the comment above, is exactly the strategy
adopted by.........FOA. He said so! Yes, he had a significant
amount of gold, but also many other investments. He spoke
of how, "a long time ago, I learned a lot about conservative
living from some world class wealthy people." In response
to a question at the old USA Gold forum, he advised against
"betting the farm" on any one outcome, for the very reason
that, if you succeeded, it would encourage your "farm betting"
behavior, and that when, tempted once again to do the same,
you would eventually lose. So, good for you for doing the same!
Even with his highly connected friend, and worldly wisdom,
he still chose diversification. Of course, he was worth a lot
more than you or me.

Woland said...

Heap quiet around these parts, Ke-mo sah-bee.

Michael dV said...

quiet yes
nothing like a troll to make the joint hop..recent eradication efforts have been successful.

JR said...

Tommy's got some legendary Apache for you!

And you? That's right, you are wondering how you ended up here. Stop wondering and start laughing. And when you stop, read the comments so you start again.

Aquilus said...

Aaron (or shall we call you errr... Austin?)

Nice, funny debriefing, really enjoyed it.

M said...

@ 罗臻

"Freegold may never happen, but it is a pressure acting upon the existing system."
Good line.

But don't you think that what the Keynesian federal reserve is doing, essentially guarantees freegold ?

Paul Volker managed to save it last time but Paul Volker was not a keynesian. He was an Austrian. Before someone says he wasn't an Austrian...see below

INTERVIEWER: Can we talk a little bit about your early influences as an economist? Were you exposed at all to the Austrian School of economy?

PAUL VOLCKER: I happened to have been exposed when I was an undergraduate, because my first teachers of economic theory came from the Austrian School, and this was in the late '40s. They were not all enamored of Mr. Keynes and the Anglo-Saxon traditions of economics, so I had a pretty good exposure to the Austrian School and Mr. Böhm-Bawerk and all his friends.

INTERVIEWER: When did you begin to have doubts about Keynesians ? How early did you begin to become skeptical about things?

PAUL VOLCKER: I was already skeptical. I guess I'm skeptical about everything.I was a little bit turned off by the precision and certainty that these people attached to the doctrine. The analytic framework was very convincing, but this feeling they had, that they could press the right buttons and manage the economy pretty exactly, for some reason it turned me off. I was very skeptical that they were not overselling the precision of this theory and the precision [with] which they could run policy.

freegoldtube said...

Aaron et al

Aaron said...

freegoldtube-

absolutely perfect.

Phat Expat said...

The interviews so far have been revealing. In this interview, I like that Aaron is engaging with the 'enemy' (jk) but I noticed somewhat of a stumble when it was mentioned that gold could be used for trade settlement (around 4:20 mark). From my reading, it doesn't seem that is the function of FG is it? Doesn't this statement muddy the waters of FG as SoV?

I would be curious how others would have answered this trade settlement comment? Maybe JR could point to some reading material to help with my understanding of how to answer this. TIA.

costata said...

I think these developments merit our attention. Some new leashes for the market manipulating scam artists (my insert and emphasis):

....the EU's bureaucrats, in their ongoing attempts to manipulate markets, [LOL, Hey regulators that's our job, cried the scam artists!] have issued a ban on so-called 'naked' trading in CDS. This means that speculators are no longer allowed to buy and sell CDS contracts to merely express their opinion. Unless one holds the underlying bonds, one will no longer be allowed to trade these credit instruments from November 1 onward.

http://www.financialsense.com/contributors/pater-tenebrarum/the-eu-trading-ban-in-sovereign-cds

I assume the rule change discussed above by Pater Tenebrarum is tied into the rollout of MiFiD II.

http://www.fsa.gov.uk/about/what/international/mifid/summary

The MiFID II framework, as with the original Directive, addresses two broad areas:

- the conduct of business rules for intermediaries providing investment services; and
- the effective, efficient and safe operation of financial markets.


High frequency trading, incentive structures, lax governance and OTC dark pools/off-exchange trading etcetera. They're all in the crosshairs of the ECB and EU regulators.

So we have the fiscal constraints discussed by Christian Noyer in that speech linked earlier, OMT, a possible early start to MiFid II and the banking union taking shape. IMHO once these measures are in place the EU will be in the best possible shape to maximize the benefits to the union from the Freegold-RPG regime.

And yes, I concede to the banished ones - you're going to hate this one too.

costata said...

Aaron,

I note Phat Expat's observation about your debrief. I think you need to talk to these people using language and concepts that they can relate to. I think it's a matter of explaining Freegold-RPG in terms of their training and theoretical framework.

FOFOA has my e-mail address and if you want to discuss this please contact him and I'm sure he'll be happy to forward your e-mail to me.

Cheers

Ore em' said...

Costata and Aaron, as these debriefings have demonstrated, we (ie. fellow freegolders) all benefit from being a fly on the wall. All of which is to say that I'd love to listen to you and Costata discuss how to frame the freegold paradigm in terms the "mainstream" can understand.

As for such proselytising, I've actually had what appears to be relative success in winning over converts. By my count, I've convinced 7 lay people to buy actual physical gold. They don't necessarily understand it all by any means (nor do I, obviously); but, through their untrained eyes they are able to see the truth of what is being said,even if they don't really know why that is.

ChrisF said...

Aaron,

Good debrief particularly your interaction with the economics professors/PhDs etc ...
I think many people here would be extremely interested in their arguments against Freegold as so beautifully outlined here by FOFOA.
Are you able to summarize them, maybe in bullet points?
After all, if an academic is unable to shoot down a thesis he should believe in it until he can!
Thanks in advance.

罗臻 said...

@M

"But don't you think that what the Keynesian federal reserve is doing, essentially guarantees freegold ?"

It's a bit of a complex answer. I wrote a long post "
State of play in Q32012: Fed and U.S. government policy is not enough to offset deflation"
. I think the hyperinflation ended in 2008 and to get more inflation, the Fed needs to get ahead of collapsing credit, which is very dependent on the economy and social mood.

I view a weaker U.S. dollar as letting pressure out of the system and a stronger dollar as building up pressure (just as I turn bullish as stocks fall). In order to have a rapid revaluation scenario, it requires massive panic, and people only panic when they are all on the wrong side of the trade. I want to see the gold price lagging badly in USD and rising in foreign currency. To me the best scenario is faith in all fiat everywhere is being destroyed, but moving from periphery to core, similar to how Greece was first, but then people start talking about France and Germany. Maybe it starts in Eastern Europe, then Japan, then China, then the EU. USD goes up and up, gold prices go up too, but not enough to make people suspect the dollar just yet. A lot of anti-dollar sentiment, from my observation, is heavily pro-euro, pro-yuan, pro-emerging market biased. When this argument dies, the strong dollar crowd will grow and then crow.

While this is happening, it is actually very inflationary in relative terms, that is the U.S. credit market is surging relative to the economy. I see the path to freegold as going through a deflation and total failure of the Fed, that in the end, they won't even be able to print money.

Woland said...

Michael dV: Maybe DP could create a "synthetic troll", just
for those "quiet moments". The kind well intentioned souls
could keep trying to help see the light. A delicate task.

matrixsentry said...

It seems FOFOA has been hitting the delete button on Art the Troll quite a bit lately. My iPhone RSS Feeder app still shows me his ramblings after they are removed. If I gave a shit about this idiot then I would be concerned for his mental health after reading his latest.

Art the Troll is quite certainly deranged, but one must conclude that all the Trolls revealed and ones in the making are most certainly traveling that same path to some degree as well. After all, what rational person would continue to inhabit a blog site that is so askew of their proclaimed views and philosophies?

This blog could be dedicated to any basic concept, say stamp collecting, and a Troll that likes stamps would eventually show up to harvest some attention to feed his ego. It is about self satisfaction for the Troll, at the expense of everyone else. Sounds a lot like psychopathy to me.

Help FOFOA. First send him a donation. Then do not respond to Trolls, even to call them out for what they are. They crave attention and are encouraged on when you attempt to engage them in any manner. A psychopath lives in the moment to please himself. They cannot be fixed or reasoned with.

FOFOA will deal with the Trolls made, we have to deal with Trolls in the making. Please consider the wisdom of ignoring them when they surface like the one yesterday. Look for the key words that are used to illicit emotion and recognize this is simply a cry for nourishment. Don't even name them. In short order they will be off to better feeding grounds.

Lord Sidcup said...

I don't get it.


ANOTHER (THOUGHTS!) wrote:
“The massive increase in the "reserve currency" price of gold would, no doubt be ushered into the USA house of congress as a godsend answer to Americas debt problems. With the "full production" of oil, now viewed as a sure thing,
The world may well see the USA send the military into the Middle East just to ensure that this "deal" [Freegold] is not disturbed. After all, it is oil that will be massively devalued by gold.”


Why, then, is dollar collapse/hyperinflation necessary? Why can’t the US/Fed simply skip it by announcing Freegold, allowing the price to rise and settling it’s debts with smallish proportion of it’s gold reserves?

Motley Fool said...

Lord Sidcup

8133.5 tonnes x 31500 x $55,000 = ~ $14.1 trillion. Us debt just passed $16 trillion. It may not be such a small chunk.

Besides why not devalue the dollar debt to zero and get to keep the gold. Is this not more in their interest?

TF

Lord Sidcup said...

Thanks MF

I'm working through Matrix Sentry's compendium pdfs in order.

FOFOA has previously mentioned Freegold at $100k and $500k per oz.
I haven't yet seen how the $55k was arrived at, nor why it has been revised down so drastically.

Motley Fool said...

Lord Sidcup

$100k perhaps...in the earlier posts. The other may have been $50k that you misread. If not, please link.

To be conservative of course.

TF

Aaron said...

Phap Expat-

I noticed somewhat of a stumble when it was mentioned that gold could be used for trade settlement (around 4:20 mark). From my reading, it doesn't seem that is the function of FG is it? Doesn't this statement muddy the waters of FG as SoV?

It doesn't muddy the waters at all. Everything lies somewhere on the store of value continuum as well as the medium of exchange continuum. For instance, think of a Zim$. You wouldn't call a Zim$ a store of value would you? I wouldn't -- but it is (was) in fact a store of value for about 4 hours. Likewise you wouldn't call gold a medium of exchange, but in Freegold you would see gold change hands at the international level albeit very infrequently -- maybe every 1-2 years to counter balance what ever the private gold markets are doing. So the primary function of gold in Freegold is indeed as a store of value, but can you see how to some extent it is also a medium of exchange? Same goes for a Monet or classic automobile. Great store of value, horrible medium of exchange, but those items still sit on both continuums. Do you see what I mean?


Costata-

Thank you very much for the offer. I will be in touch.


Ore'em-

If Costata and I come up with anything valuable I'll be sure to post it here.


ChrisF-

I think many people here would be extremely interested in their arguments against Freegold as so beautifully outlined here by FOFOA.Are you able to summarize them, maybe in bullet points?

I don't think this is something I could sum up in bullet points per se, I think it's more that these Econ profs lack the tools/language in their lexicon to grasp Freegold. Combine that with their many deeply entrenched, preconceived ideas and it makes for difficult conversation. For example, when I mention inflation to Paul he understands that to mean consumer price inflation -- that's all that comes to mind for him. He doesn't differentiate between price inflation, asset inflation, monetary inflation, etc. Costata is correct that their issues with understanding Freegold have a lot to do with their language, definitions, etc.



I've developed a bit of a head cold today and will probably be heading to bed early, but I will try to expand more on this later.

--Aaron

DP said...

Woland,

But why bother, when if you want it there is a perfectly good exercise bike waiting for you to take it for a spin class over there?

There is also an app for that.

costata said...

Aaron,

I'll look forward to your e-mail.

Phat Expat said...

Aaron:
"but in Freegold you would see gold change hands at the international level albeit very infrequently -- maybe every 1-2 years to counter balance what ever the private gold markets are doing."

That's not how your response came across in the interview and, if you mentioned it that way to the prof, the conclusion he would likely have come to would be FG = GS; not something he would likely want to embrace.

I do look forward to the results of your exchange with costata. He has a nice way of making the complex less so.

doug said...

I saw a post above indicating that there are 45 billion ounces of silver in the world. But isn't that all that has been mined since the beginning of time, and hasn't most of that been consumed, in landfills or otherwise unrecoverable? It is my understanding that there are about 1 billion available ounces of silver worldwide, which is lower than the amount of gold available. Doesn't this change the equation on the direction of future silver prices?

Lord Sidcup said...

MF

The $500k was in fact, from Steve Hickel, cited by FOFOA.

doug said...

BTW, you can do searches on 40 billion silver or 45 billion silver and you only come up with amount of silver ever mined. That is completely different from the amount that is available, which is the only relevant factor in terms of rarity and pricing. I do own gold, but it's hard for me to believe silver can plummet when there is less of it than gold available above ground, and in some estimates about a 10 year supply below ground before it becomes the first "extinct" element in the periodic table.

Jeff said...

MF, Lord Sitcup probaby was referring to FOFOA's post, Reflection. From the comments:

FOFOA: The population is now 6.8 billion and the global gold stock has doubled to around 160,000 tonnes. 90% of the global population that was closed off from the last gold bull (1980) is now rushing into the gold mart. That's about 6 billion new gold customers! Global salary disparity from lowest to highest is six orders of magnitude! Toys of the wealthy now include private yachts the size of cruise liners and gold-encrusted private 747 jet airplanes. Times they are a-changin', as you say!

But probably the biggest difference today is the debt. Past debt, promised future debt, ongoing debt appetite. Imagine a small poker table, six guys playing poker. They empty their pockets of gold and put it in the kitty, then divide up the plastic poker chips to match the gold 1:1.

Next they play poker until a couple of the players have all the chips. At that point the winners return the chips to the losers so they can play again. But they make little marks on a piece of paper like this: III... to signify the return of the chips. These marks are IOUs. They play again until those same two players have all the chips, and once again they return those chips to the losers and make a few new marks.

They continue this game with the winners returning the plastic chips to the losers each time. And the winners are the same, each time. And this game continues for 88 years. How many pads of paper did they go through keeping track of those IOUs? And if they were to settle up in gold now, where gold's value was once equal to the plastic chips 1:1, but now they must incorporate the IOUs, what would be gold's new value relative to the chips?

You could say that the two winners should probably just get all the gold, right? Like France should have emptied Fort Knox in 1971. But that's not the way the real world or the free market organism really works. The way it works is it revalues that gold so that upon uncontrolled collapse, the winners are somewhat fairly paid and the losers still have enough gold to keep on playing.

So you can factor in population, gold stock, current wealth metrics, whatever you like to justify the old men's suit comparison all you want. But just don't forget the debt, the largest factor of all!

The relative value of gold has been suppressed longer than any of us can even imagine. As I mentioned above, the gold-exchange standard and even the gold standard had their own forms of paper gold. And even when gold was used physically in transactions, when the common man had a piece of gold to make some payment, gold's relative value was suppressed by the velocity of circulation.

This may be hard to comprehend, but "money" that circulates loses value the faster it circulates. And being the normal medium of exchange kept gold's value much lower than it would be as solely a store of value, a wealth consolidator, and not a physical medium of exchange. Look at Zimbabwe for how this works. The faster the Zim dollar circulated, the lower its value fell.

Cont...

Jeff said...

...Back in December I wrote a short analogy to demonstrate this velocity dynamic: "Imagine an island of 100 men with a money supply of 1,000 sea shells. That's 10 sea shells for each man. But over the course of a year each man on the island works and earns an annual salary of 100 sea shells. So the total economic power of the island over a year is 10,000 sea shells. We could say that the GDP of the island is 10,000 ss. We could also say that the demand for sea shells is 10,000 over the period of one year and that demand is met by a supply of only 1,000 sea shells.

"Now imagine that ownership of a piece of real estate on this island costs about 2 year's salary, and that there are enough pieces of land for each man to either own or rent one. So each piece of property might cost about 200 ss. The entire island's worth of residential real estate would be in the ballpark of 20,000 sea shells, twice the GDP. Yet the money supply still remains at 1,000 sea shells and that limited supply somehow meets demand.

"The reason this works is because sea shells are the currency. They circulate and pass from hand to hand over a short timeframe. This is called velocity and it has the exact same effect on the value of a single sea shell as does the size of the money supply. On our island 1,000 sea shells change hands 10 times per year creating an island GDP of 10,000 ss. If they changed hands 20 times a year the GDP would be 20,000 ss. Or if we doubled the money supply to 2,000 sea shells that changed hands 10 times per year it would also yield a 20,000 ss GDP. So velocity and money supply of the currency have exactly the same effect."

The point is, that in the past gold's value as a wealth reserve has been suppressed by either circulation velocity or one form of paper gold or another. And that which is transpiring today, for the first time in all of history, will remove all of these past factors and reset gold to balance the debt as the one and only wealth consolidator.

By the way, did you notice that I used a "price crescendo" in the post? This was intentional. The prices mentioned were... $1650 >> $2000 >> $10,000 >> $30,000 >> $50,000 >> $100,000 >> $500,000

The point is that to focus only on the $500,000 number simply because it is farthest away from today's price, and most difficult to imagine, is to COMPLETELY MISS THE POINT of my post. And that point is....

THE FUTURE PRICE OF GOLD IS COMPLETELY ECONOMICALLY ARBITRARY. IT WILL GO WHEREVER IT NEEDS TO GO TO SOLVE THE DEBT PROBLEM.

Arbitrary... look it up.

What I have always written about, and what Another and FOA wrote about, was the free market organism resetting the price of gold when it is finally "set FREE" from the restraining factor of paper gold. Ie. Freegold.

Jeff said...

Remember that A/FOA always said "you will not know gold's price as it slices through $10,000" and "gold will go into hiding". And it will later emerge in the stratosphere at a physical-only price. This is what I'm talking about. I am simply pointing out that the price physical will emerge at, might be a lot higher than we even think or talk about. Because whether we realize it or not, we automatically, subconsciously apply "Western Thought", economic restraints, technical analysis and ratios we have lived with our whole lives when we make projections. And the true fundamentals of gold tell us that none of these things will apply.

What will apply is the debt, and the gold stocks to flows. Flow is velocity. It tends to lower relative value. But the thing about gold, as Fekete says, is that "in terms of the ratio of stocks to flows the supply of gold is far and away greater than that of any commodity." This is what sets gold apart from everything else as the only real modern wealth consolidator. Or as Another put it a different way, "spend your time in the company of truly wealthy ones, see how they make gold lie very still!"

As debt fails, what will happen is the price of gold will rise to the point that the flow of gold will be credibly sufficient to supply the exchange of any and all debt for physical gold. And this includes real debt that's hidden off the books. This is a difficult (or impossible) calculation to make, but it is very high and it has nothing to do with the total stock of gold, nor the total stock of transactional currency. It has only to do with the flow of gold (that prefers to lie very still) and the number of IOUs on the poker table.

And for those that like to read voluminous posts, this was an inspiring article for me with regard to the arbitrary nature of the future price of gold. It is, in part, responsible for my Ultimate Un-Bubble post:
Why the global financial system is about to collapse - Part 1
Part 2

Lastly, for all of you that think this will never happen because a few poor people will become super rich overnight, think again. Exactly how many people out of the 6.8 billion do you think have transferred more than a percent or two into physical gold? In fact, most people are dishoarding their future windfall today by mail, through Cash4Gold. I finally convinced someone close to me to buy some physical. He has a nice retirement nest egg. Know what he bought? 2 coins! Wow!

And of those that even read this, how many do you think will go all in? A good estimate is that over the next week 20,000 people will read my post. That's .0003% of the global population that will read this post. And of that .0003%, how many will take the step that merely retains the present value of their savings? How many will double their nest egg? And how many will laugh and do nothing?

Sincerely,
FOFOA

Jeff Snyder said...

@Lord Sidcup,

You must have quite the sense of humor to use that handle. Hopefully you look better in shorts than your namesake, and if you secretly run an establishment for lady's undergarments, I hope it is very successful.

I, too, have puzzled over how Fofoa arrived at his prediction of $55K/oz in 2009-dollar purchasing power terms. I admit it to be a bold prediciton, but it has never been explained. As I recall, in the essay where this price was pegged, Fofoa showed a bell curve with the first standard deviations from the mean price of $55k being $40k per oz and $70k per oz. The use of a bell curve to show the price range suggests a more sophisticated analysis than a simple linear or arithmetical calculation of the kind, e.g., Jim Rickards bandies about, such as a simple divison of M1, M2 or M3 or their global counterparts by total ozs.

I'm not sure it matters all that much. The key factor seems to be that if you expect FG, the current price will have to expand signficantly for gold to fulfill its new monetary role. This is a totally different view of things than the fractional reserve, gold-backing approach taken by Rickards, or the people who see gold simply as a means of preserving purchasing power from the ravages of inflation or hyperinflation, or the people who think gold will soar into a bubble as it did in the '80s and then collapse, and who are trying to time it right.

Btw, I am convinced Rickards knows and thinks more than he lets on. I think he spreads his message in terms that will be most readily grasped by his mainstream audience. The guy is wicked smart. I have to believe he is a closet reader of Fofoa.

Cheers,

ein anderer said...

TF:
Thanks. I changed my Gold/Silver ratio from 50:50 to 100:0 just some hours ago. Don’t need any reserve MoE currency anymore. Some dozen 1 gram bars should do the trick asame (and a well filled cellar for the case things get a bit rough for western europe too …)

matrixsentry said...

Doug,

How many Mona Lisas are there? Rarity is not the only thing that drives price. Such a simplistic view would suggest that a one off like the Mona Lisa would be priceless, it is not.

Is the Money Lisa a reference point of value? Does the world look to it and choose it as such? What about silver? Do the central banks of the world look to silver as a benchmark of value and hold as reserve asset? Are they likely to in the future?

You are speaking of the commodity value of silver. We do not speak to the commodity value of gold. We speak to gold as the ultimate reserve asset or store of value. Many here, me included, do not speculate on the future price of silver. For that matter, many do not speculate to the ultimate price of gold, me included. We simply say that gold will shed any linkage it has to currency and its valuation as a commodity. When it does this it will assume a role as the world's designated reference point of value.

Silver will continue on as usual as a commodity or as speculative instrument for the markets to play with. We see gold as reserve asset for saving, not for speculating.

As far as I am concerned I am a saver and am not interested in exposing my stored wealth to risk. My goal is for my gold to preserve the value of my wealth. Therefore I care not what the price in currency becomes, only that I can trade my gold in the future for an equivalent amount of goods and services in the present. The appreciation that will occur as a result of the focal point of value shifting from the dollar to gold will be gravy and welcomed boon.

You are going to find a lot of savers here and very few speculators that would ever be concerned about trading gold or silver. Does this sound odd to you? If so, I would suggest that you need to do some reading. If you read this blog, the posts rather than the comments, you will understand why we dismiss silver and any other potential reference or focal point of value that is not gold.

You have some homework to do. Read the Compendium PDFs linked at Ron M's Air-Friendly PDFs on FOFOA's link list to the right. Then if you still feel that silver is compelling as reserve asset you can offer up your argument for review.

Jeff Snyder said...

@Jeff
Thanks for the Fofoa blast from the past re: the gold price and it's relationship to the settlement of debt and the flow of gold. I have often feared that there is a lot of key information or missing pieces in the comments to the articles, most of which I have not read. Perhaps I'm too lazy and am daunted by the size of the undertaking to wade through all of that. Plus, unfortunately, the comments are not on Ron M's Air-Friendly's pdfs, which I can carry around on the kindle and read at leisure. But that was a most enlightening snippet.

athrone said...

Quote from PIMCO:

"Globally there are roughly $12.5 trillion in physical and electronic currency reserves. Given that there are 155,000 metric tons of gold above ground, this equals an approximate price of $2,500 per ounce if all of the world’s reserves were to be backed by the entire stock of above-ground physical gold."

Thoughts on how this compares to alternate calculations (such as dividing the U.S. Debt by the U.S. Gold reserves)?

Oakay Nobmilka said...

$12.5 trillion huh? Interesting.

victorthecleaner said...

Lord Sidcup,

Why, then, is dollar collapse/hyperinflation necessary? Why can’t the US/Fed simply skip it by announcing Freegold, allowing the price to rise and settling it’s debts with smallish proportion of it’s gold reserves?

I agree that the idea is worth thinking about, but then we need to look at the actual numbers.

There are more than $8000bn held by foreigners - this is the legacy of the reserve role of the dollar. The US would have to be prepared for these dollars to bid for gold. Let's say they are willing to sacrifice half their official gold, i.e. 4000 tonnes, for these claims held by foreigners. This implies an average gold price of $62k (assuming the US government gives the gold to the foreign creditors and the Fed cancels the dollars they received).

Then, the US have a trade deficit of roughly $500bn per year. As the FOREX value of the dollar declines, this trade deficit will shrink, simply because unnecessary components (Chinese plastic toys, clothing, Japanese and Korean cars...) will be priced out. But some imports are difficult to get rid of (energy and some other resources).

Luckily, at $62k per ounce, the $500bn per year is just 250 tonnes (which would have to come from any combination of private or official gold reserves). So with the remaining official 4000 tonnes, they have about 16 years in order to get their economy in order and cure the structural trade deficit.

Yes, if they were serious about this, it could work. But even in this case, the FOREX value of the dollar would suffer quite a bit - very difficult to come up with a serious estimate - but perhaps avoid HI.

Note that the core area of US influence (US, Canada, Mexico) are reducing their dependence on energy imports at a rapid pace. Peak oil is soooo dead. In addition, Saudi Arabia keeps shipping a lot of extra oil into the US which then just disappears from all statistics. So someone is building up a considerable extra reserve somewhere. (I think I had a very rough estimate that it's about 300 million bbl or almost half the capacity of the SPR - this would cover crude oil imports at today's rate for about 9 months).

Victor

victorthecleaner said...

Jeff Snyder,

I have to believe he [Jim Rickards] is a closet reader of Fofoa.

I think he admitted on twitter that he knows the Thoughts! and the Gold Trail.

Finally, LS should take MF's remark seriously. If you are the US government and you want to optimize your strategy for yourself (as an institution), wouldn't you consider HI'ing the dollar first, and only then use the gold? This way, you don't lose that much of your official reserve (and your people suffer some more serious price inflation, but that gives you - as an institution - more power).

Victor

Boner Parte said...

Hey Oakay, I caught you a delicious bass.

The dollar is already hyperinflated

As escape pressure builds in the upper regions of the upper pyramid, the legal tender dollar constricts its escape route like a clinching sphincter muscle as its (the dollar's) price rises. And then all that value that escaped the upper region starts collecting and compacting in the large intestine of Treasury Bonds, held in place only by the swollen sphincter that is the swelling dollar.

Not that I hope you can relate to this metaphor – I'm sure some of you can – but what do you think happens when that "flow restrictor" lets go, just a tad? Do you think "just a tad" escapes? Perhaps… at first. But with the Fed shoveling Ex-Lax (QE) into the system like there's no tomorrow, what do you think the end result will be? Will it be a journey back up into the stomach?

milamber said...

1/2

JR wrote…

“Who cares? The issue is not Freegold or not (although it is related), the issue is what do you save in. The issue is not Freegold or not, the issue is gold! Is it appreciating in real terms or not? Lotsa non-freegolders buy and hold gold, yes?

So if its not gold for buying and holding, what is it? Do you see war and TEOTWAWKI and no savings existing?”

To paraphrase Shakespeare, that is the question! So many key concepts in such a short response! I wish I could be that concise and hit the bullet points that well. But alas, I ramble (like now). But in any event, here goes…

I think that the evidence shows that there are super producers STILL squarely in the dollar camp faction. They chose to denominate their savings in someone else’s debt. They chose to save in paper backed by the “full faith & credit of the US”. At last check, US govt debt is OVER $16 TRILLION and the 10 year is yielding 1.79%

To me this is a clear indication that lots of super producers still chose paper as their savings vehicle with the Fed right behind them making sure that nothing goes bidless. How long can this situation last? Got me.
I think the earthquake analogy is very apt here. The $IMF system is built over the Ring of Fire. They will have a beautiful view until the volcanoes erupt. The problem is we don’t know when the volcano will erupt. Although now, I think the eruption will be more like the Yellowstone Caldera as opposed to a run of the mill volcano eruption.
http://en.wikipedia.org/wiki/Yellowstone_Caldera

“the issue is what do you save in.”

Since ‘71 “Savings” means investing your electronic digits (credit/debt or “equity”) in order to generate a yield. And because the system is so skewed that yield curve is yielding less & less. AND YET the debt markets still have not collapsed. Why?

cont...

milamber said...

2/2

“the issue is what do you save in.”

There are still quite a few super producers that chose to save in paper. They most certainly could be GIANTS (I define a GIANT as a super producer that saves in gold), but they chose NOT to save their wealth in gold. Lets call them super producer paper giants (sppg).

And as we most recently saw in 2008, the sppg’s will do everything in their power to make sure that the system that backs those pieces of paper will be maintained come hell or high water. Even if they have to destroy the paper to save it
http://en.wikipedia.org/wiki/B%E1%BA%BFn_Tre#Vietnam_War

======

“… But what we do have is evidentiary witness to the real message of Another - gold is changing. So your objections to Freegold theory or not, does it matter?"

My objections are not with FG theory (or the reality of it as evidenced by the price rise in gold since Euro adoption). My *concern* is what will be the response of the sppg’s that have chosen to save in paper “when all paper burns”?

I see the most likely responses degenerate down to war brought on by states collapsing, coup’s or revolution. We saw how quickly Ben Ali, Mubarak, Saleh, & Ghaddafy fell. And we see the ongoing civil war in Syria right now. My point is that things can spiral more quickly out of control than CB policy can ameliorate. Think US exported inflation in food prices.

Once the debt can no longer be serviced, and WHEN (not if) things get ugly enough, based on our collective historical record, I think that there is a good chance that some event will spiral out of control and the responses to that event will lead to a destructive war (or a series of state failures/conflicts) to settle the imbalances in the current IMS. And I am not certain that the dollar faction will lose.

To latch on to FOFOA’s poker analogy that Jeff just reposted, what if one of the poker players brought a gun to the game and told everyone, the rules for settlement are changing. That would put a decidedly different spin on how things play out.

That is what I mean when I say that I hope we (collectively) are smart enough to acknowledge and adopt FG. But as long as sppg’s continue to save in their MoE, and as long as the $IMFS works for them, they will fight like hell to maintain it. And if it degenerates into a shooting war, no one knows how that will turn out.

“the issue is what do you save in.”

Agreed 100%.

Milamber

milamber said...

@ Aaron,

“...The GIANTS and Super Producers of the world need a place to store their savings and they have already made their decision...”

I don’t think the evidence supports the statement that the super producers have chosen gold. Some have. And I call them GIANTS. But other super producers still save in paper.

“The Europeans carried the US bond market right up until they had their own currency union in place and China took over for structural reasons alone and they have since dropped support for large scale UST purchases a few years ago.”

And yet the 10 year is still bid. What‘s more it is under 2%. Someone still wants it.

“The ECB marks their gold to market and loudly pronounces it on line item one of their ConFinStat. China is buying gold hand over fist as are many other central banks we've been reading about (think Paraguay).

This is an evolution in our monetary system. Gold usurping USTs as the world reserve asset is inevitable. In fact, it's happening right now!”

I agree. My question is how will the super producers that still save in paper respond when their paper burns?

Milamber

milamber said...

@ Anand,

“Coerced system is not a product of capitalism, or communism, or democracy or tyranny. It is a product of centralization of power...

Don't expect Freegold to solve this problem. It is just a monetary solution, not a political one. It merely keeps the savers safe from political issues causing monetary issues. It is a way to save your money, not to save the world.”

Agreed. But what happens when the political issues force a nation state to war because their paper burns?

"War is the continuation of Politik by other means"

http://en.wikipedia.org/wiki/Carl_von_Clausewitz

That is the question that no amount of planning can prepare for. That ultimately is why the BIS/Euro group will not do anything to provoke the crisis. They will try and manage it, but the world choosing FG versus descending into a disastrous war is not by any stretch a guaranteed outcome.

Milamber

Jeff said...

"Note that the core area of US influence (US, Canada, Mexico) are reducing their dependence on energy imports at a rapid pace. Peak oil is soooo dead."

Not sure about that. This chart:

http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MTTIMUS1&f=M

and this:

http://www.eia.gov/countries/country-data.cfm?fips=MX


don't show that, IMO. And Mexico is reducing its energy imports AND exports at the same time? The only explanation would be falling demand, no? Possibly in the US also? And even if 1 is true, it doesn't necessarily follow that 2 is true. What is this statement based on? Saudi exports to US are disappearing? Does that mean that the falling energy import numbers are not correct?

milamber said...

@ Burning Fiat

“I think it is a mistake to think that "decision-makers" has to do anything (especially in this late hour). Freegold is emergent, not decided.”

Yes, but what will be the response of the decision makers once the truth is known & understood by the ones that still save in paper?

When the paper burns, the heat will make people do crazy things. As Colonel Jessup said in a Few Good Men,

“Take caution in your tone, Commander. I'm a fair guy, but this fucking heat is making me absolutely crazy.”

Looking at that movie as an analogy for FG, I look at Jessup as the $IMF faction and Cruise/Moore/Pollack as the ECB. They win in the end, but only because the rules were obeyed. What if Jessup had been able to suspend the rules (you know like not paying in gold back in ’71)?

Yes, FG is emergent, but that also means it can be suppressed for quite awhile and then when it breaks through, have the rules changed. Again.

I used to view FG as gravity. Meaning it is there whether we acknowledge it or not. But that is not really accurate. Gravity was around before Humans were here to label it as such and understand it. And yes, so was gold. But the difference is gold requires humans to prize it in order for it to have value. Gravity just is.

Milamber

doug said...

matrixsentry,

Thanks. I do need to read up when I get the chance. I was mainly responding to the comment/position above that there are 45 billion ounces of silver and therefore the price must come down. I do realize the importance of seeing things in terms of purchasing power of precious metals, and figured silver would be like gold in buying as many gallons of gas, dozens of eggs etc. as it did decades ago, etc. BTW I have over half of my PMs (55%, over 100 oz.) in gold.

athrone said...

Victor,

"The US would have to be prepared for these dollars to bid for gold. Let's say they are willing to sacrifice half their official gold, i.e. 4000 tonnes, for these claims held by foreigners. This implies an average gold price of $62k (assuming the US government gives the gold to the foreign creditors and the Fed cancels the dollars they received)."

Why do the foreign-held dollars have to bid for US gold? Couldn't they bid for Gold held by anyone? In this case, wouldn't the denominator become the above-ground supply, not just the US holdings?

anand srivastava said...

Milamber:

Agreed. But what happens when the political issues force a nation state to war because their paper burns?

Can they?

When the paper is burning, people are more concerned with just surviving. USA will not have enough capital to wage a war. War requires capital. Most countries get into HI due to the capital used during a preceding war. They don't fight wars when they are getting into HI.

Woland said...

Here's just a quick thought. If you are a super producer who
ONLY saved in paper (unlike most "world class wealthy" folk)
then when your paper burns, you're suddenly nobody. So, you
lost most of your power, perhaps? So now who cares what you
think anymore. If you were smart and diversified, you survive.

I do think there's paper that will burn, and paper that will just
get singed. If I own a share of stock in the railroad, as shown on
the exchange, its' value may burn. But if I own the same railroad
outright, I think that its value will survive the transition. I think
a lot of that mismatch is caused by saving in those shares in the
first place, and the market mechanism that discovers their value.
Kind of like a time share versus ownership of the unit it represents. Maybe I'm wrong. It wont be the first time!

shortrib62 said...

http://gma.yahoo.com/blogs/abc-blogs/first-time-treasure-hunter-discovers-trove-roman-era-123747420--abc-news-topstories.html

/SleepingVillage/ said...

Milamber said: "To latch on to FOFOA’s poker analogy that Jeff just reposted, what if one of the poker players brought a gun to the game and told everyone, the rules for settlement are changing. That would put a decidedly different spin on how things play out."

I guess we have to remember that the "pros" at this table are pros for a reason.

Tough guy brings a gun to the table - I flash him my C4-packed sexyvest and hand him one of two detonators :) Fun game? M.A.D.-ness :)

A world destroyed by nuclear war benefits who?

You may think the US calls, or could call, all of the shots, but they don't. They might push around Libya or Iraq, but they're not gonna push China or Russia or any of the other pros.

Jeff Snyder said...

@milamber and @anand srivastava,

Interesting observation you made about having to have capital to wage a war. Just this morning I read an essay written in 2009 titled "The Asian Road to Victory," from Morris Berman's A Question of Values. There, Berman makes a passing observation about the effects of FDR's policies in building up the capital we needed to wage WW2, a perspective I had never encountered before. He says:
"In In the Jaws of the Dragon, [author Eamonn Fingleton] makes the point that while the Americans spend like there is no tomorrow, the top down bureaucratic system of China forces its citizens to save rather than consume. In this authoritarian, state-capitalist arrangement, a number of policies make consumer pending very difficult, with the resulting savings generating huge cash reserves that are then deployed in boosting key industries. It's a coercive system, says Fingleton, and it works. (In fact, Franklin Delano Roosevelt did something similar during World War II, and the U.S. savings rate went from 5% to 25% in three years. The resulting capital was used to pay for armaments manufacture.)" (pp 191-192)

Lord Sidcup said...

MF, JS, VTC

Thanks for the answers.
Fascinating and useful.

Am surprised as it seems that FOFOA has not 'shown his workings' in getting to the $55k number.

Perhaps it is unknowable and arbitrary, but the number is repeated often and given FOFOA's precision with the written word, I assumed you all knew how he got to that number.

Michael H said...

Lord Sidcup,

Look at the two bell curves at the bottom of

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

Most people only look at the first one showing FOFOA's price probability curve in 2009 dollars, but the second chart is the likely source of the estimate in the first chart.

Essentially FOFOA is saying that oil will be devalued by gold to the rate of 550 bbls oil per ounce of gold.

victorthecleaner said...


In all I said about oil above, the Canadian supply is crucial, i.e. that it is available (not just shipped to China) and that it is for sale for US$ come hell or high water. I think both are a done deal. Not so nice for Canada, but what can you do (in particular if you deliberately forget to build pipelines). When I mentioned "oil imports" this is net imports into North America (Canada+US+Mexico).

athorne,

if the Chinese sell all their unwanted extra dollars, who is going to buy?
1) other foreigners for goods, resources, services
2) Americans for goods and services
3) the Fed/USG for gold

The problem is that (1) does not reduce the number of dollars that circulate abroad and play hot potato, and so would not relieve the FOREX pressure on the US$.

The only way out is (2) which reduces the trade deficit (dollars that come home) or (3) which needs official US gold (otherwise you cannot cancel the unwanted dollars).

The only other way of getting rid of the unwanted dollars is by decree: The US declare all US$ held abroad invalid. The problem is that this would be the same as 100% trade and capital controls. Very unlikely to happen.

Finally, think about how it "looks". Anything that can be seen as a decision by the USG that then sends the financial system over the cliff, will not happen. This includes an official decision to revalue gold upwards. The short-term effects on the living standard are so big that nobody will want to be seen as having triggered it, including the USG.

So it will happen by accident or with a clearly visible scapegoat. ("Accident" includes the possibility of a London banking blow-up that might be possible to trigger without being seen).

Victor

Dante_Eu said...

Just testing...very nice!

Motley Fool said...

ein anderer

Congratulations. Now you can tick off number 17 on that second list. ;)

TF

burningfiat said...

Milamber,

Gerald Celente: “When People Lose Everything, They Have Nothing Left To Lose, And They Lose It” :-)

So 100% paper savers lose (approx.) everything. What money will they use to go to war/fight Freegold?

If you have saved over ~3% of your wealth in gold, you'll be a net. winner in Freegold. Why fight it then?

I guess, paper savers who realize the truth before transition will just go and buy as much phys. gold as possible if they are smart. Paper savers who realize the truth after transition will be wiped out and thus not really a force to worry about.

Of course you're right that things can be delayed by different political tricks being played...
I just think that there is a natural limit to this delay.

When everything has been put up as a collateral, no more sane credit expansion is possible. Well, then we can try to expand monetary base to keep the borrowing going. But how long can this go on, before it leads to increased inflation, then confidence collapse, then outright HI in an attempt to keep Gov. functioning?

Volcker type rescue also not possible in 2012, right? Debt too big to service at 20% rates...

Austerity and government making itself smaller? Lovely thought, but won't happen before flying pigs!

A little extra snowflake falling on this mountain can start the avalanche anytime.
A small delta of increased inflation or defaults can lead to a small delta of increased loss of confidence in debt as saving, which in turn will lead to more savers pulling out of paper saving and into physical gold. And once this spiral really gets going it will quickly go exponential, and the drama will be over in a couple of days...

I like the earthquake analogy.

/Burning

Jeff Snyder said...

@Michael H,
Yes and at $100 per barrel and 550 bbls to the oz, that's $55,000/oz. But that just pushes the question back another level. Why is oil going to be repriced at 550 bbls per oz. from its current price of about 17 bbls per oz.? It's certainly NOT because oil is becoming more plentiful. It's not intuitive.

Michael H said...

Jeff Snyder,

Why is oil going to be repriced at 550 bbls per oz. from its current price of about 17 bbls per oz.?

That is a big question and the answer spans the entire contents of this blog, plus the gold trail and the Thoughts! of ANOTHER.

My shortest answer would be this: those that pump oil out of the ground currently value gold at much higher than the 17-1 ratio, as a way to replenish the fleeting wealth of oil with the permanent wealth of gold. The current paper gold pricing mechanism is just a way to hide this reality so that the flow of gold to these oil producers can continue unabated.

Eventually these paper games will end, and the true value of gold will be brought out into the open for all to see. This is to the advantage of the oil producers and the non-US gold-holding oil consumers.

Woland said...

from: "It's the flow, stupid" - "Mr. Allen (USA) 's Perfect article.....
for a nice summary.

M said...

@ 罗臻

You "I think the hyperinflation ended in 2008 and to get more inflation, the Fed needs to get ahead of collapsing credit, which is very dependent on the economy and social mood."

Not a dime of new money has to be created to cause hyperinflation, depending on your definition of HI. As I explained here-

http://freegoldobserver.blogspot.ca/2011/10/forgotten-crisis-and-what-every.html

YOu"A lot of anti-dollar sentiment, from my observation, is heavily pro-euro, pro-yuan, pro-emerging market biased."

?????? There is no anti dollar sentiment other then in the hard money crowd. Basically none. There is huge anti Euro sentiment whether its CNN, FOX, Time magazine, Keynesians, Austrians ect. Even that moron Austrian Philip Bogus wrote a book on how the Euro is doomed.

you"I see the path to freegold as going through a deflation and total failure of the Fed, that in the end, they won't even be able to print money. "

I see the path to freegold the same way as it happens in any other country. Russia in 1998, Asia in 1997, Iceland in 2008. Capital flight out of everything in the country.

M said...

@ VTC

(Can someone show us how to bold writing on blogger ?)

you said

"Yes, if they were serious about this, it could work. But even in this case, the FOREX value of the dollar would suffer quite a bit - very difficult to come up with a serious estimate - but perhaps avoid HI. "



That depends on what percent of inflation you define hyperinflation. One thing is guaranteed is a full blown American currency crisis.

poopyjim said...

M sez...

(Can someone show us how to bold writing on blogger ?)

Per your request, simply put the following in the comment box when you post a comment:

To bold:

<strong>Text to bold</strong>

To italicize:

<em>Text to italicize</em>

Linking (advanced technique!):

<a href="http://www.interestingsite.com">Click here to go to an awesome site!</a>

A tag preceded with a "/" is a closing tag, and signifies where you want the effect to end - it is important! I realize this is elementary to most of you but I figured it might help some folks, especially some of you old timers ;)

costata said...

From VtC above (my emphasis and my [inserts]):

...if the Chinese sell all their unwanted extra dollars, who is going to buy [exchange]?
1) other foreigners for goods, resources, services
2) Americans for goods and services
3) the Fed/USG for gold

[4) Other currencies]

The problem is that (1) does not reduce the number of dollars that circulate abroad and play hot potato....

And taking points (1) through (4) together the potential absorption capacity of these dollars (and cash equivalents per OBA) is ultimately limited to the economic output of America + the total asset base of America.

Nice work in that passage I quoted from you VtC. BOP accounting, world trade and China's inability to discretionary spend their national FX reserves explained in two paragraphs.

Cheers

freegoldtube said...

FOFOAtv

FOFOAtv playlist on Freegoldtube

costata said...

I just had to bring this to the attention of the discussants (my emphasis):

Italy sold € 18 billion in what the Wall Street Journal reports is an all time record for one auction and essentially completes their funding task for 2012. As a former Treasurer I can assure you that the day you have your funding task for the year done is always a boon so Mario Monti and his team will be much more relaxed going forward.

The really cool thing about this issue – and something other European nations will have noted – is that this auction enabled your average Italian momma and pappa to take part in the deal and saw strong demand as a result. Nice work. Spain also had an OK auction result and Spanish bonds fell a little further.


Viva l'Italia!

h/t MacroBusiness Blog

victorthecleaner said...


In case you are interested, here is a (somewhat old) article about William R. White, chief economist at the BIS:

http://www.spiegel.de/international/business/the-man-nobody-wanted-to-hear-global-banking-economist-warned-of-coming-crisis-a-635051-druck.html

(when the journalist explains to you what Greenspan thinks and what White thinks, I am sure you know how to read it...)

Victor

JR said...

Economist article on Euro banking agreement: The red-eyed walk to banking union

“TONIGHT I have confirmation that the worst is over.” President François Hollande’s bullish assessment came at the end of yet another long night of debate at a European summit. His lectern was marked "Jeudi 18 Octobre", though it was well into vendredi 19.

The main reason for his optimism was the pre-dawn compromise on banking union: the euro zone’s new banking supervisor was on course to be legally established by the end of the year, and would become operational “in the course of 2013”. So some time next year the euro-zone’s rescue fund, the European Stability Mechanism (ESM) could be used directly to recapitalise troubled banks.

As the French tell the story, European leaders were able to drag Germany back to last June’s promise to create a banking union in order to “break the vicious circle” between weak banks and weak sovereigns, after it had tried to backpedal from several aspects of the deal.

Indeed, the agreed timetable was faster than promised in June, noted Mr Hollande, and the ECB will have the power to supervise all 6,000-odd euro-zone banks.[...]


Dra said...

Thank you, freegoldtube! Phenomenal!

Peter said...

Thank you everyone who replied to my comment, i was very happily surprised by the tone and the message. It seems like you are all not as sold on the concept as it might seem from the outside when i first started reading here but you actually view it the way i think it should be viewed, as a possible scenario among many others, albeit that you assign a high probability for the freegold-scenario.

I think it should always be of utmost importance to not look at things in absolutes but to always be open to change ones view in light of new information and/or new concepts and ideas. Confirmation bias is very dangerous and all to common. I think most of you will agree with me on that.

costata said...

VtC,

You're on a roll today. That article about William White contains some interesting material. It's right up there with the Noyer speech linked earlier IMHO (for other reasons).

I'm going to post some extracts from the White article at some point and see if they explain a few issues better than I have been able to do so thus far.


JR,

Thanks for that link on the banking union. A big step toward the US dollar versus Euro lightbulb moment in the bond and FX markets IMHO.

Cheers

Folks who think that European efforts to "save" their banking system is solely about political croneyism should take a look at how big a slice of international trade financing and facilitation these EU banks have.

For the benefit of readers new to this blog; maintaining world trade despite a US dollar collapse is a central theme of this Euro Freegold-RPG narrative.

Back to my cave.

Jeff said...

rickards interview:

http://www.youtube.com/watch?v=YiRiGw6hpjY&feature=youtu.be&t=12m19s

china grab for aussie gold:

http://politicalmetals.com/2012/10/19/china-grabs-aussie-gold-sales-soar-900/

costata said...

Hi Jeff,

Bless the discussants at this blog. Thanks for this Rickards interview. Now I think I understand a couple of his blind spots.

Cheers

Jeff Snyder said...

@Michael H,

Thank you for that overview. I am sorry if this comment will seem obtuse or overly picky, and I want to try to express my concern better than I have so far. Your comment is that, basically, the superproducers of oil value gold much higher than its current paper price and that this much higher value will emerge when "all paper burns." I am okay with that. However, that explanation still begs the question of how we know what value the superproducers really ascribe to gold (when priced in barrels of oil per oz.)

My own guess is that Fofoa took the price often quoted by Another and FOA of $30k/oz and updated it from the end of the FOA era to his own. Another and FOA were insiders, one in the european central banking community and one in the oil industry, and had direct experience and knowledge of, and discussions with, the people in this small, esoteric realm that moves the world. In short, they had good reason to know what value the people in this realm -- the Giants -- really ascribed to gold. Fofoa relied on that and updated the price based on the passage of time.

If that guess of the derivation of the current projected post-FG price of gold is correct, I am okay with the projection and can live with it. It all comes down to whether what Another and FOA had to say really resonates with you. In this regard, I believe Fofoa was correct to project the price as falling in a most likely range of $40k - $70k/oz, with $55k/oz being the mean, and leave it at that.

I believe that we as commenters on this blog do a MINOR disservice to newcomers to this blog by too easy, unqualified references to the post-FG price of gold as $55k/oz. The fixity of this number and the ease with which it is bandied about, virtually as a fact, implies a mathematically-derived certainty that it does not have. I perfectly understand Lord Sidcup's natural assumption that Fofoa had applied some sort of mathematical model and formula to arrive at the price (that's what all the goldbugs do!), and I understand his surprise at learning this is not so. As Yoda might say, the frequent citations of $55k per oz. all come across as "So certain are you!"

I said above that it was a "minor" disservice because I balance the somewhat misleading aspect of the number against the fact that is important to send the message loud and clear that the FG valuation is based upon a much different and more complex analysis of contemporary affairs than the standard goldbug analysis. I know we need some sort of telegraphic way to discuss or reference the post-FG price, but from time to time it would be good to acknowledge the basis on which this has been projected, even though we have ample strong reasons, carefully explored, explained and elaborated upon by Fofoa, for understanding why the price must/will go much higher than it is today.

Just my 2 cents as one who, like Lord Sidcup, has been baffled by the price projection for some time.

Ashley said...

@Jeff:

Here's a quote from the archives that discusses the actual mechanism by which a few oil producers could themselves force such a gold/oil revaluation any time they wanted to. It's worth reading the whole post for more context.

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

=============================
Date: Sat Mar 07 1998 13:19
ANOTHER (THOUGHTS!) ID#60253:

A Noble Purpose, This Oil For Gold

When one considers the merits of a specialized world oil currency, the thought usually turns immediately to "send in the military and stop them". I must ask, why? If an oil currency is born before or out of the shambles of an financial meltdown, and it offers great benefit to all, again I ask, why stop it? Look at the merits of such a move:

In a very real "currency sense", oil will be devalued in terms of gold. As one makes a currency weaker by increasing the money units per ounce of gold. Oil will become very cheap in gold, as the amount of gold paid per barrel will fall dramatically as compared to today's ratio. There will be much more than enough gold worldwide to quantify a "world oil currency". To that end, the world paper "reserve currency" at use in that time, will continue to be traded for oil at an extremely low price relative to today. The only change will be the addition of a "unit of real value" added to each trade, a "world oil currency", gold! However, in terms of today's currencies, gold will be "upvalued" to perhaps $10,000 to $30,000 an ounce. So as not to rewrite what is already an excellent piece on this coming readjustment, I will repost part of Mr. Allen ( USA ) 's perfect article on the subject along with his requested changes per his :
Date: Mon Dec 15 1997 11:06
Allen ( USA ) ID#246224:

Last one on this topic until more ANOTHER posts. I'm not sure that it would be necessary to have that large a cabul in on the "offer" of oil for gold. Given the rather small market in gold in comparison to oil/currencies it would only take one or two well endowed oil states to pull this off. Here's why.

Let's say the Saudi's have been accumulating gold through the back door ( approx. 5,000 tonnes ) . They sell say 20 Mln Bbl oil a day. Close enough. At one ounce of gold per thousand Bbl oil that's 10,000 ounces of physical gold per day. That's a lot of physical gold.

The first few moments after the Saudi's proposal to trade oil for gold at a very steep discount of 1000 Bbl/oz ( approx. 1.5% of current US$ price ) there would be
roars of laughter. One fast thinker after another would think "Hey. I buy some gold at $300/oz, trade for oil to receive 1 Mln Bbl, then sell the 1 Mln Bbl for US$ 10 Mln. Net profit is

$10,000,000-$300,000=$9,700,000. Easy money.

Everyone at once turns to the gold market to buy, which promptly shuts down. Now no one is laughing. Because everyone realizes that gold is now worth at least $10,000 per ounce and no one is prepared for that revaluation. Whoever has gold now has 66.67 times the purchasing power in that stockpile. What appeared to be a stupid offer has now become a complete revaluation of all gold stockpiles vs all currencies.

Franco said...

Jeff Snyder:

Nice post. I should add (as an engineer who makes a living estimating things that haven't yet happened) that as a guiding principle, when you estimate something, the more variables involved or the more variance involved or the more uncertainty in regards to the when/how/who/etc., then the fewer significant digits you should use in your result, and therefore the bigger tolerance. For example, the number 55000 has two significant digits (or maybe more!). If you predict "55000" it implies that the result will be closer to 55000 than to 54000 or 56000. That's a tolerance of less than 1%!. If you had said "50000" (one significant digit) then you would be implying "closer to 50000 than to 40000 or 60000". I chuckle when I see people like Jim Sinclair toss predictions like "in a year from now gold will be trading at 2153". Wow, he got it down to the last dollar! Maybe FOFOA really does have the confidence to predict it +/- 1%. I don't know.

Motley Fool said...

It's probably around $100,000 +-$50,000, if I had to thumbsuck some numbers. ^^

an ANT and Dec said...

Following on from Ashley's comment,
"Everyone at once turns to the gold market to buy, which promptly shuts down. Now no one is laughing. Because everyone realizes that gold is now worth at least $10,000 per ounce and.."

So, could Iran pull this off now as US pushes them into a corner. So rather spill some oil in the straits, instead they offer to sell their oil at 500bbl/ounce.
Does this have the effect of revaluing gold to this same price, thereby killing the paper gold market, crashing the dollar system and setting in progress the chain of events leading to freegold.

Woland said...

Another quiet day in Lake Wobegon. So I was reading an
old post, "Brown's Bottom", and found a REALLY NICE
comment from the archives, in answer to a question posed
by FOA. The author is - el St. One. Have a look, it's
in the comment section.

Jeff said...

FOFOA: If you want to be so bold as to perform the impossible calculation that only the Superorganism is capable of making, then by all means, go ahead. But try not to think so small, like an Ant on the Antfarm, next time.

I am only trying to spare your fickle sanity from the brutal shock of reality when it finally hits, and perhaps your nest egg as well (if you are fortunate enough to have saved one). I remember someone here once made a pretty convincing argument for gold resetting at around $1.2 million or something like that. But I don't want to spread incredulous numbers around, so I'll stick to what I can personally visualize. ;)

Michael H said...

victor,

Great article about White. Very interesting snippet at the end:

He is familiar with human nature, and he knows how to handle it. White is more concerned about the things he doesn't understand. New Zealand is a case in point. Interest rates were raised early in the crisis there, and yet the central bank was unable to come to grips with the credit bubble. Investors were apparently borrowing cheap money from foreign lenders.

This is the sort of thing that worries him. "That's when you have to ask yourself: Who exactly is controlling the whole thing anymore?"


MH: victor, you have asked in the past "why didn't the ECB rein in credit expansion in the periphery and thus head off the crisis?", and this article seems to give two possibilities:

1) Central bankers didn't see any problems because there was no price inflation.

2) Even if the ECB wanted to head off the credit expansion, it would have been powerless since borrowers would have tapped foreign sources of cheap credit anyways.

...

Jeff Snyder,

By now, the $55,000 figure is translated in my head as 'a bajillion dollars per ounce'. To me, it just means 'much higher than now', though the exact magnitude and trajectory is uncertain.

Franco, what is the tolerance implied by the figure 'a bajillion'?

... this much higher [gold] value will emerge when "all paper burns."

Just to be clear, the post-revaluation gold value does not need to exactly correspond with oil's current gold valuation. There could be knock-on effects due to the fact that others in the world will now value gold as a means to get oil, which will in turn allow oil to get more for their gold should they wish to dishoard any of it.

...

Woland,

Nice find. The comment is here:

http://fofoa.blogspot.com/2009/08/browns-bottom.html?showComment=1250105233074#c6068860251934326383

Edwardo said...

I think this one day old news story has already been mentioned by another poster, but I don't think much, if any, comment resulted. I'd say it's more than a little meaningful when one considers how important the Panama Canal is with respect to global trade.

http://www.thenewstribune.com/2012/08/05/2240447/widening-of-panama-canal-will.html

Also, given the reality, and I think it is a reality, that Panama falls within the still active Monroe Doctrine, a political construct which dictates that certain territories must, for national security reasons, fall within the U.S. sphere of dominance, excuse me, influence, this development should be yet another eye opener about which way the winds of change are apt to blow.

I notice that the discussion of installing the Euro as legal tender is mentioned as part of a program that would include continued use of the dollar. My guess is that apparent gesture of inclusion is just that, merely a gesture, tossed out to ward off unwanted attention by Uncle Sugar. Panama doesn't wish to invite U.S. ire, ergo the language about the Euro existing alongside the dollar.

milamber said...

@ Anand,

“When the paper is burning, people are more concerned with just surviving. USA will not have enough capital to wage a war. War requires capital. Most countries get into HI due to the capital used during a preceding war. They don't fight wars when they are getting into HI. “

Oh really? Or to paraphrase FOA (and turn it around), “Your capital is not what you think it is.”

Right now, we live in a world that still denominates a large portion of its wealth *IN THE PAPER MARKETS* in dollars. And yet the entity that “backs” those dollars is broke. But it really can’t be broke, as the Maestro said back on Aug 7, 2011:

David Gregory, moderator of "Meet The Press" on NBC: "Are U.S. treasury bonds still safe to invest in?"

Alan Greenspan, Former Chairman of the Federal Reserve: "Very much so. This is not an issue of credit rating, the United States can pay any debt it has because we can always print money to do that. So, there is zero probability of default."
http://www.realclearpolitics.com/video/2011/08/07/greenspan_us_can_pay_any_debt_it_has_because_we_can_always_print_money.html

Now, I think that most on this blog (myself included) would think that is insane, but it doesn’t matter what I think (or what you think either). Because if enough people have confidence to continue to use the dollar as a SoV as well as the MoE, then there will be plenty of “capital” to pay soldiers, and defense manufacturers to wage war.

And don’t forget what the Fed/Treas did back in 2008. There were lots of entities that should have gone broke, but the Fed/Treas took on those obligations and made them whole.

So again, the modern working definition of capital is different than the traditional one, IMO. And it will be valid right up to the point where it is not.

Milamber

milamber said...

/SleepingVillage/

“I guess we have to remember that the "pros" at this table are pros for a reason.
Tough guy brings a gun to the table - I flash him my C4-packed sexyvest and hand him one of two detonators :) Fun game? M.A.D.-ness :)
A world destroyed by nuclear war benefits who?
You may think the US calls, or could call, all of the shots, but they don't. They might push around Libya or Iraq, but they're not gonna push China or Russia or any of the other pros.”

SV,

Thank you for making my point. If people bring weapons to a poker game, then we are no longer in the realm of currency’s competing for SoV or MoE usage. We are in the realm of settling disputes via violence. Which is what humanity has done when they couldn’t resolve their disputes civilly in a legal forum.

And I am not saying that the US calls the shots, but I am saying that the $IMF faction poker players are just as smart as the ECB/BIS poker players. And the $IMF faction is not just going to go quietly into the night.

And don’t forget this statement:

“Under international law, the US is still an OUTLAW when it comes to gold!”
http://fofoa.blogspot.com/2009/08/confiscation-anatomy-different-view.html

So what happens when you tell an outlaw that he is violating the rules?

Rules? Rules? We don’t need no stinking rules.
http://www.youtube.com/watch?feature=player_embedded&v=nsdZKCh6RsU#!

The US are already outlaws, so when push comes to shove and the US hyperinflates or the paper gold market blows up and the exchange of real physical items for lines in the sand or green pieces of paper ends, and the Superorganism forces the US to live within its means, I don’t understand how one can discount the possibility that it will devolve into war.

Milamber

milamber said...

@ Jeff Snyder,

Excellent points. But in todays environment, as long as the US can sell their Bonds then they can create the “capital” they need, with the Fed making sure it retains “value”. And it will work right up until the day that it blows up. For more details on that, see Madoff, Bernie.

Milamber

milamber said...

@ BurngingFiat

“Gerald Celente: “When People Lose Everything, They Have Nothing Left To Lose, And They Lose It” :-)
So 100% paper savers lose (approx.) everything. What money will they use to go to war/fight Freegold?
If you have saved over ~3% of your wealth in gold, you'll be a net. winner in Freegold. Why fight it then?”

Maybe I am not making my points clear. I am not fighting saving in gold. I am at the 50% percent Inn (maybe because I only understand half of this?). What I am trying to wrap my head around is the idea that this time humanity will be smart enough to work out these imbalances w/o violence.

And think long and hard about what you wrote. If you come through this beautifully and your neighborhood, city, state, nation doesn’t, hows that going to work out for you? Celentes statement is even more important for someone who comes out “ahead” when everyone else loses everything.

“I guess, paper savers who realize the truth before transition will just go and buy as much phys. gold as possible if they are smart. Paper savers who realize the truth after transition will be wiped out and thus not really a force to worry about.”

I guess we will disagree on that one. Lots of angry unemployed people who just realized that they have been snookered their entire lives tend to not be the most rational of people.

“Of course you're right that things can be delayed by different political tricks being played...
I just think that there is a natural limit to this delay. “

I agree that there is a NATURAL limit, but we have well exceeded that IMO.

“When everything has been put up as a collateral, no more sane credit expansion is possible.”

Uhm, I think we are well past SANE credit expansion, aren’t we?

“Well, then we can try to expand monetary base to keep the borrowing going. But how long can this go on, before it leads to increased inflation, then confidence collapse, then outright HI in an attempt to keep Gov. functioning?”

It will go on right up to the point of collapse. How we think that it will then not devolve into war/global anarchy whatever is what I am trying to understand. I think there is a high probability that it will.

“…And once this spiral really gets going it will quickly go exponential, and the drama will be over in a couple of days...”

I think that is correct. The drama will be over.

The nightmare will only be beginning.

Milamber

JR said...

Hi Milamber,

The US are already outlaws, so when push comes to shove and the US hyperinflates or the paper gold market blows up and the exchange of real physical items for lines in the sand or green pieces of paper ends, and the Superorganism forces the US to live within its means, I don’t understand how one can discount the possibility that it will devolve into war.

A thought from FOFOA:

It will be nearly impossible for the US to wage war with the collapse of the dollar. The US military is extremely expensive to run. A single aircraft carrier has a crew of 6,000 people on the one ship. And they travel in groups. And we have 11 carrier groups. And that’s just part of the Navy, which is just part of the military. Our government stooges will be more concerned with the purchasing power of their own paychecks when that time comes. And there’ll be no way for them to pay the 2.3 million members of the US armed forces in real purchasing power. Think about it. In a war you are fighting, not spending your money. And so what do you do if your money is losing all value while you’re busy fighting?

2.3 million soldiers will not fight when the dollar collapses. Period.

Freegold is the obvious “global solutions superset”! It is simply a change in preference by the savers. As soon as the ROW stops buying Treasuries, the US cannot wage war. What’s more simple and elegant than that?

burningfiat said...

Hi Milamber,

Thanks for your comments. 50% Inn, not bad! :)

I wasn't talking about you specifically in that paragraph though. I meant generally: I don't think people with over 3% of their savings in gold will fight the new paradigm if/when it arrives because they will be net. winners...

I get your point:
Sitation could devolve into war before $IMFS dies (who specifically is it again that has an interest in this?). It could devolve into a zombie-land after transition with the former paper-savers starring as zombies...

I don't agree with this, but I'll think about it a bit more, before I answer...

/Burning

Jeff said...

Who will you shoot first, your european allies? Your oil supplier? Your creditor? The whole world at once? Please...

Mr Allen: What would the impact of this revaluation of gold and currencies do? It would instantly shift economic and financial power into the hands of those who own large amounts of gold: CB's, Saudi's, Roths et al. It would mean that gold/oil would be THE CENTRAL POINTS OF ECONOMIC REFERENCE. It would mean that currencies would be devalued by a factor of 1000 in relationship to the new standard of gold ( as a proxy for oil wealth ) It would upset an awful lot of people. There would be no TARGET to shoot at or take over, however, because all other oil producers would immediately jump on this band wagon. Its a simple matter of what an interested party is willing to receive for their goods. Venezuela, with gold and oil reserves and production capacity, would be one of the wealthiest nations on earth. The world would be turned upside down geopolitically, wouldn't it. Literally "..the 'have-not's of the world will become the 'have's.."

/SleepingVillage/ said...

Milamber,

It seems you might be underestimating the (real) threat of MAD - mutually assured destruction. Which was the point of my silly take on the poker analogy. A war that lasts all of maybe one or two hours? This is not the reason wars are fought. When both sides lose or fail to gain anything, there's not much point.

Would we agree that the other side has emergency weapons by which to expediate the demise of the $IMF?

I bet soldiers love getting paid in worthless dollars while their families and loved ones sit at home in a collapsing, riot-filled mess of what used to be home.

...and Justice for All



Jeff said...

ANOTHER: To answer the "military" question, asked at the begining of this article, I say:

The massive increase in the "reserve currency" price of gold would, no doubt be ushered into the USA house of congress as a godsend answer to Americas debt problems. With the "full production" of oil, now viewed as a sure thing, The world may well see the USA send the military into the Middle East just to ensure that this "deal" is not disturbed. After all, it is oil that will be massively devalued by gold.

/SleepingVillage/ said...

JR,

Thanks for that. Sums that up far better than I did... in your and FOFOA's usual style:)

Dr. Octagon said...

Milamber - if the US has reached the point of currency collapse, then what will it use to pay the military forces, to buy fuel needed for military ships & vehicles, to buy supplies like food, etc? The military is not self-contained, relying on people and companies to keep it operating, who today are happy to do so in exchange for US issued currency. If the currency is not acceptable to those suppliers of stuff or to the people following orders, will the military continue to survive?

Even if it did, what can a military do about a currency collapse anyway? Threatening other countries or citizens does not seem like it would solve anything.

Woland said...

Not that you need any praise from me, JR/SleepingVillage,
but:
Um, like Dude, can you say Invergordon Mutiny? I knew
that you could!

Lord Sidcup said...

JEFF SNYDER

Thanks for your posts.
Really excellent and informative.

anand srivastava said...

Milamber:
You forget "When the paper is burning".

When the paper is burning there is no capital. People are not trying to make war, they are trying to survive. Check history and if you find an example of a country trying to make war during a hyperinflation, show it to us.

Its not like hyperinflation is a new phenomenon.

Also generally wars trigger hyperinflations.

Yes, I understand US can attack Iran, but it will do solely to cause a hyperinflation, not to avoid it. I also think it makes sense for US to do so, but the only trouble is that the USG will be blamed for the resulting collapse of the system. That nobody wants to do.

If you haven't been paying attention, the FED has very clearly said that it wants a weak dollar. The only reason Dollar is not becoming weak is because there are other countries that do not want a weak dollar and are buying dollars, eg Japan, Australia, Brazil. Check out who bought Treasuries last year. China didn't.

I think war would be a desperate attempt by the USG to get a weaker dollar. I don't think they want HI very soon, but they don't mind high inflation.

Michael dV said...

With regards to freegolf ( I meant freegold, wonder if freegolf is in our future too, only one keystroke away from each other) POG.
Years ago a friend was discussing a source of income. In his decision making process he ultimately had come to realize that often differences of even an order of magnitude just don't matter because they would not change his lifestyle. He might eat a li complete freedom from work.ttle higher on the hog but would still be eating hog as opposed to caviar.He would fly first class but would not have a private jet. He could work less but not have complete freedom from work.
This thought has influenced me. I stress less because really, every penny does not count.
If FG POG is 10k or 50k it will all be the same in the big picture. In this case it WILL influence my lifestyle. For now...
http://www.dailymotion.com/video/x1w4r3_tom-petty-the-waiting_music

Dante_Eu said...

I also think, that figure of 55.000 US$ per ounce, in today’s purchasing power, should never be mentioned to someone you are trying to get interested in physical gold (or freegold). That figure right there, puts you in lunatic camp in the eye of the observer. Eventually you can mention revaluation, but never mention by how much, or back in the lunatic camp. And really, the exact figure is unimportant. The fact that the physical gold will be brought out from the shadows of darkness into the rays of light, is what’s important.

I remember first time reading FOFOA article. Initial reaction:
“Oh man, that dude completely crazy!”

Then I thought “Ok, it should be easy to discredit.”, so I started reading.

While reading:
“Ok, didn’t know that, didn’t know that either, that makes sense, that makes sense to, well thought there, ok can’t argue on that one, oh man…now I understand, why he/she does as he/she does, ok now I see why it would not work, ok now I see why it should work….oh, man...WTF was I thinking about in the first place!?....”

It really is a personal journey and you have to do it on your own. Or you’ll never understand it. It takes time and effort, though.

Franco said...

Michael H said:

Franco, what is the tolerance implied by the figure 'a bajillion'?

I'm not sure what you are trying to bait me into, but everyone knows that there is no such thing as a 'bajillion'. Now, if you meant bazillion, then the implied tolerance is +/- 5.27%. Don't ask me how I know this.

Michael dV said...

the above should say 'he might eat a little higher on the hog...
I blame blogspot (and George Bush) for all my mistakes...

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