Saturday, October 20, 2012

Debriefed #7 – Jeff

This one is a little bit longer than the others for a few reasons. First of all, YouTube lifted my 15 minute time limit. Also, Jeff has been here almost four years and yet I know almost nothing about him, so we had a nice long conversation. And because of this, he got to ask me a few questions, so perhaps the extra time is just a little bit of my Debrief. ;) In any case, I'm obviously not going for length here, so I'd love to hear your feedback regarding the length. Should I have cut it tighter? Our whole conversation was about 50 minutes, so I cut out half of it.

Also, here's the link to the video response from Silverfuturist mentioned in the interview. Once again, a hearty welcome to my 90 new silverbug YouTube followers! And to Joe, thank you for your kind words.

Sincerely,
FOFOA

276 comments:

1 – 200 of 276   Newer›   Newest»
Dra said...

Great. Keep it up!

Wendy said...

SHIT!! not first

Gustav said...

What a lovely group of humble men and women. Thanks a lot to everyone of you for your efforts and knowledge.

Wendy said...

BTW I'm in vancouver, and brought 60 oz of silver with me. Although I don't want to own less silver, I want to own more gold.

Last week I really depleted my digital currency... I bought a new coat and a new car.. I thought trading silver for gold would be a okay idea, although i wasnt happpy with a 53/1 gsr

By the time I left with my one once of gold, it cost me 59 onces of silver.

Wendy said...

HOLY CRAP it's 1:15 am......Goodnight everyone, have a lovley sunday!

Jamoo said...
This comment has been removed by the author.
FOFOA said...

Jamoo,

If you prefer imaginary "financial nous" then good riddance to you. You are part of the problem.

"Great blogs, but I'll never be back."

I can only hope.

Sincerely,
FOFOA

duggo said...

Interesting site. Interesting interview.
I have read some of the FOFOA posts and wonder if there is a list of "must reads". Just to give me a concise start before I get into the FOA posts.

I'm a recovering Silver Bug.

FOFOA said...

Hello duggo,

I have a stats program, which shows me that you are at least the third name used by the [troll??] we know as BaronSilverBaron. Just thought you should know. ;)

Sincerely,
FOFOA

FOFOA said...

BaronSilverBaron,

If you are truly seeking insight many people here will be more than happy to engage you in conversation. But please quit the Troll-like tactics. That's not going to get you what you want here, whether you are a troll or honestly looking for opinions. Just be yourself. Seriously.

Sincerely,
FOFOA

Winters said...

ha. I always wondered what tools blogger give for troll/sock puppet detection. nice.

Bullion Baron said...

I think it's a bit of a cheap shot to lump all Silver speculators/investors into the "bring down JP Morgan" crowd (perhaps that was not the intention, but it does come across that way in the video). There are many holders of Silver who think that side of the spectrum is as warped as clueless as you do.

Personally I don't subscribe to any final "end game" scenario such as freegold or other alternative monetary scenarios, but I do subscribe to the here and now and that a combination of fear and/or greed will ultimately drive people out of devaluing currencies into assets which they believe will protect their wealth.

I think Gold and Silver will play a role in this escape to hard assets and from an accessibility point of view I think Silver is much more affordable to Joe Public.

You can argue that Gold is affordable in that it can be broken down into fractional coins/bars to suit most budgets, but in my opinion when those entering hard assets are provided the choice between a 1g sliver of Gold or a 1oz Silver coin they will gravitate toward the Silver for no other reason that it appears better value. I know when I was buying heavily in late 2008 and had the choice between 2 kilos of Silver and an ounce of Gold, after picking them up in my hands I almost always chose the Silver. That said over the early 2011 spike in Silver I purchased Gold more heavily and now am positioned roughly 50% Gold, 50% Silver by value. I am expecting the Silver to perform better over my investment time frame though.

Anyway great blog and I have been really enjoying the opinions and perspectives provided by these videos.

duggo said...

Dear FOFOA

"duggo" is genuine. "BaronSilverBaron" is not. Thank you for your personal response. I hoped you would catch me. I can use various "disguises" which can hide my true identity. A very useful thing as you never know who is watching. This time I used a genuine OpenId with a real Email address..
On the internet there is the Snake-oil Salesman and there is the Troll. A little "Trolling" can uncover the Snake-oil Salesman. I'm glad to say you are not the former and I am not the latter.
I have downloaded a number of your articles and all of the FOA articles for future reading when time permits. I really would like a small list of step by step articles that are "must reads" .
I have read enough though to have become a recovering Silver Bug. I have now sold 6000 oz of Silver for Gold but still have a long way to go.
This interview and the previous one have shown me what a calm bunch of thoughtful followers you have.
I look forward to the next interview and maybe I could be a little impertinent and ask you to give a little more of your background in the next one.

Regards

"duggo" (BaronSilverBaron has left the room)

Winters said...

Just watched Jeff and then Joe. Nice interview Jeff. Good to see the face behind the sharp as a tack comments.

Joe's delivery is rapid I have to say but it was entertaining and interesting. I'll watch a few more.

BullionBaron: I guess a lot of us also read ZH where the silverbugs are quite rabid.

re: but in my opinion when those entering hard assets are provided the choice between a 1g sliver of Gold or a 1oz Silver coin they will gravitate toward the Silver for no other reason that it appears better value

Some might say that is thinking like a shrimp rather than a giant. A giant saver would choose the exact opposite due to the better density of value. I guess it comes down to whether you think the giant savers or the shrimp savers decisions will move things.

Nice post on the gold stock scrip printing. Glad I own zero stock these days.

FOFOA: Quite happy with the long videos as I am with the long posts. I'm curious as to why your single post on usagold got removed. Was it because it was considered poor etiquette/spam linking to your blog? I could see that point of view given at the time you would have had no reputation.

FOFOA said...

Hello duggo,

Thank you. I can confirm for others, from the stats, that you have indeed been doing some reading!! ;)

I don't like to give out lists of "must reads" myself, but others will surely oblige.

Sincerely,
FOFOA

Dante_Eu said...

Part 1/2

Well, I tried to do a Must Read List:

The Return to Honest Money

Deflation or Hyperinflation?

Inflation or Hyperinflation?

Freegold Foundations

Life in the Ant Farm

The Debtors and the Savers

The Debtors and the Savers 2012

Euro Gold

Greece is the Word

The Value of Gold

Blondie's View

Think like a Giant

Moneyness

Peak Exorbitant Privilege

The Bermuda Triangle of Currency

Bondage or Freegold?

Gold: The Ultimate Un-Bubble

Gold: The Ultimate Wealth Reserve

The Shoeshine Boy

Relativity: What is Physical Gold REALLY Worth?

Credibility Inflation

Metamorphosis

The Gold Must Flow

The Studebaker Effect

Glimpsing the Hereafter

Yo Warren B, you are so OG!

Superorganism Open Forum

For folks with silver baggage:

Kicking the Hornets' Nest

Windmills, Paper Tigers, Straw Men and Fallacious Fallacies

Costata's Silver Open Forum

Costata's Silver Open Forum - Part 2

Focal Point: Gold

Reference Point Revolution!

...Part 2/2 below...

Dante_Eu said...

...Part 2/2...

Fallacies – 1. Paper Gold is just like Paper Anything

For folks with BitCoin baggage:

Bitcoin Open Forum

Bitcoin Open Forum - Part 2

Bitcoin Open Forum - Part 3

Focal Point: Gold

Reference Point Revolution!

Fallacies – 1. Paper Gold is just like Paper Anything

After you are done with reading (including all the comments), you may appreciate these 2 lists:

List 1: Signs 1 - 10

List 2: Signs 11 - 20 (advanced symptoms)


Sincerely\Dante

PS Didn't know I am good at making lists. :-)

FOFOA said...

Hello Winters. In answer to your last question, MK apparently moderated his forum with gusto. ;)

And Dante_Eu… Thank you! :D

duggo said...

@ Dante_EU
Phew! That should keep me quiet for a bit. Thanks.

burningfiat said...

Jeff and FOFOA,

Great interview!
There were some slightly annoying sound codec problems during the interview.
Did you use a dial-up connection, Jeff? :D
No biggy though...

Wendy and Bullion Baron,

I respect your arguments for silver a lot. I mean how can you argue against: "I like my silver" and "It feels better in the hand".

There just isn't a rational comeback!

Guess I justify my small holdings of silver and BTC in the same way :)

Raymond said...

Jeff and FOFOA, thanks for the nice interview.

I do not mind the length at all. With the previous interviews, 15 minutes even felt even a little short.

About recommending people to save in gold, most of my friends and family seem to be comfortable, believing that the government will protect their currency holdings, and they're more interested in owning a house and stuff, which is good for them.

Also, I fear that someone might get angry if you had recommended them to hold gold, and then in the end the paper price could plunge, and the price for physical becomes unknown for an extended period.

Recently, some co-workers were at least interested in learning some history, and I pointed them to the "it's the flow" posts, which I think makes for some nicely illustrated reading :-)

Dante_Eu said...

You welcome, FOFOA and duggo!

Funny thing, you know what brought me to FOFOA blog?

It was Silverfuturist video from October 2010, called:

“Fofoa gives dire silver scenario”

So, Thank You Joe!

I guess it’s a circle of metallism. :-)

PS Before, I could find that youtube video but now it’s gone.


Dante_Eu said...

Stupid me, I forgot one of the most important:
:-)

It's the Flow, Stupid

Nickelsaver said...

Bullion Baron,

"I think Gold and Silver will play a role in this escape to hard assets and from an accessibility point of view I think Silver is much more affordable to Joe Public."

That would put you squarely into the second group that Jeff described...the Hard Money Socialists.

Vincent Cate said...

I have a post I think people here might be interested in. The title is "FAQ for Hyperinflation Skeptics".

http://howfiatdies.blogspot.com/2012/10/faq-for-hyperinflation-skeptics.html

Woland said...

Jeff and Fofoa:

As much as I have enjoyed the earlier debriefings, it was a nice
change to have more of a "mutual interview" , which required the
longer time you devoted to it. I enjoyed a number of Jeff's
comments , but one in particular stood out: "For most people,
the dollar is just like the air." How true, and perhaps the greatest
barrier to an understanding of all that is contained here.

I have my own version of that: "A fish will never know what it's
like to be soaking wet, or , for that matter, bone dry."



Aaron said...

Excellent debrief Jeff and FOFOA.

And just like your long posts FOFOA, the longer the debrief the better!

And thank you for the kind words about FOFOA's blog, Silverfuturist. Keep the video feedback coming.

ps. I still own quite a bit of silver, but for very different reasons than owning gold.

Naughty Slumdog said...

FOFOA,
some stuff came over and over in the debriefs:

Lengths of your posts
I find it normal. You have different purpose than other bloggers. Other blogs are about information or pure communication (comments of some event or similar). Your blog is about education/understanding concepts, which by definition requires a larger amount of effort from the writer and reader. Comparing your blog with others is like comparing Burger King, corporate catering (you know, Swedish buffet stuff) with a neat little Italian restaurant.

Gold bug
I do not believe you are a gold bug. It is something obviously wrong with the global financial set up, something sure need to be changed. No reasonable person will not approeciate your efforts.

Trolls
Surprising how thin is the civility, don’t it ? How do you act when you have no name, no face and people you know can not penalize your behavior, this is the question. Now we have a real proof about the functional use of social norms and the “pressure” society put on us. It’s a good lesson for all people dreaming of making revolution of some sort. What monsters lie deep inside us! As for the blogosphere, just hope that the satisfaction you get overwhelms the discomfort of trolls. That’s it, I guess, 'life is a bitch as so is my wife' …

Naughty Slumdog said...

@Dante_Eu,

good stuff, very helpfull. Frankly is quite a lot of reading!

Jan Klaas said...

I have a major problem with the Free Gold theory

Why would the governments give up their power for Free Gold.

Especially USA, I dont see them giving up their military power.

Doesn't make sense to move from a war-driven world to a solidmoney-driven world * poof * just like that

Dante_Eu said...

@Naughty Slumdog:

Well, "Life's a bitch, ain't it?". :-)

You have to put some effort in order to get something in return.

Michael dV said...

Jan Klass
If you have read much on the site you will realize that a collapse is never a voluntary event. What we observe here is HOW that collapse might happen.
I agree that NO government gives up power voluntarily.

RJPadavona said...

Great debriefing Jeff! I had this eerie feeling throughout the interview that I was watching something from the future. And very thoughtful of you to ask some questions for FOFOA to answer. Good thing an exorbitant privilege has been granted so our host can make longer youtube videos now. I hope he makes like the USG and abuses the hell out of it;)

Oh yeah, the ladies at my house are big fans of They Might Be Giants too!

And just because we love all things yeti.


RJP

Naughty Slumdog said...

@ Dante_Eu

Absolutely correct!

Nickelsaver said...

Jan Klaus,

If you believe that freegold is strictly a shift from a military driven world to a monetary driven one, you don't understand freegold.

Freegold isn't going to do away with military and government. And regardless of your belief in or understanding of freegold, US exorbitant privilege is coming to an end. In this light, freegold will seem to the US as a tangible good, as it would necessarily mean that some other country would not gain that privilege by taking on the role of world reserve currency.

milamber said...

1/2

Thanks all for the replies. I do have a few more thoughts on this that I want to explore though because I am still not grasping what I guess must be obvious to the rest. I’ll do my best to explain my viewpoint/questions…

JR,

That is one of FOFOA’s thoughts that I have trouble wrapping my head around. Primarily because of these other FOFOA(isms?):

"...the US government MUST respond to a currency collapse by printing more currency in order to keep its stooges doing its bidding...”
http://fofoa.blogspot.com/2012/03/ball-of-twine-open-forum.html

“And if prices start to rise as they do in a 'hot' inflation, I propose to you that the USG will not cut back in real terms… The USG will not be outbid for goods priced in dollars. Price is what determines who gets a scarce good, and the USG will not be deprived. They even said so in a recent Executive Order! And where are goods and services prices discovered? In the minds of investors with pensions and IRAs, or at the margin where dollars flow?”
http://fofoa.blogspot.com/2012/05/inflation-or-hyperinflation.html

Why do we think that the US will not move on towards acquiring what they need by force if they can’t get it in a market where they denominate the currency that items are priced in from the physical plane?

If the US can’t get outbid in the market, what stops the US from making sure that the Carrier groups are taken care of?

Again, let me say that I am not questioning the FG thesis. I think it explains (better than anything else) how the IMS works & where the BIS/ECB is trying to take us. What I am having difficulty with, is understanding one doesn't think there is a high probability that this doesn’t devolve into a violent confrontation.

In rereading the thoughts this weekend, these passages really jumped out at me:

Date: Fri Nov 07 1997 22:37
ANOTHER (THOUGHTS!) ID#60253:
…What will be the new world reserve currency once the dollar is hyper-inflated to zero or devalued? E-gold, gold itself or nuclear weapons?
I don't know, but we will all find out!

Date: Tue Nov 25 1997 08:24
ANOTHER (THOUGHTS!) ID#60253:
… Some support not war but would kill to keep what is theirs! It would seem that from the day of birth our financial chaos begins. The end of our struggle is reached but for a moment in time as "checkmate" becomes "stalemate" and fortunate and free are the few who find this time in life!

For those who say gold is not an asset and is dead! I offer you a fact: "Today, as you read this more gold is traded and purchased than at any time in the history of the world." This ancient, world class money from the distant past is now to be the most fought over asset of the future. In war and life, gold will be your "CHECKMATE"!

Date: Wed Feb 04 1998 20:24
ANOTHER (THOUGHTS!) ID#60253:

…The large modern currencies, of today have only debt ridden economies to back them. They cannot change as debt blocks their path. "To change is to live and to live, some debts must die". The owners of much of this debt must lose if change is to occur. Even the new EURO will not be backed by gold! It will HOLD gold only as insurance against the worst outcome, war.

-----

It seems to me that Another definitely thought that this moving to war was a definite possibility.

cont...

milamber said...

2/2

So I guess to sum up, why do we think that the gov’t will print and authorize its agencies to go & buy what they need, but then when (if) that fails we don’t think that they will then just take what they need using the military?

I mean as long as the security apparatus and the food growing apparatus is being taken care of, I am not seeing why the US can’t fight back? At least for a period of time. Why won’t they take care of those 2.3 million soldiers? Why won’t they use the SPR to keep the military going until there is an outcome that they can live with?

Chris Cook has outlined the fact that there is a lot of KSA oil disappearing into the US right now that doesn’t square up with the demand.

http://www.reuters.com/article/2012/10/16/us-saudi-usa-oil-idUSBRE89F1BK20121016

Possibly topping off the tanks?

I am not at all saying that the US wins, but I don’t think that it is a done deal that they won’t fight. And yes, it is game over when ROW stops buying Treasuries, but maybe they haven’t in part because the US has made some of them an offer they can’t refuse?

Milamber

milamber said...

@ BurningFiat,

Zombies I don’t mind. Pissed off rednecks with guns & ammo and a sudden realization that their “money” is not what they think it is, is another story . :)

I think we will find out how thin that veneer of civilization actually is.

Milamber

milamber said...

@ Jeff,

Great debrief. (and you too FOFOA!) I loved the $=Air observation.

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

Does it matter? I am fairly certain that if I look hard enough I can find wars being fought where the actual reason is not the stated one. All it takes is for some country(s) in the ROW to box in the US within the confines of the IMS rules and that they can’t “innovate” their way out of it (Derivatives, paper gold volume, Fed putting a bid under all assets deemed TBTF, etc).

So, No 21st century new derivative. No new China on the horizon to sell them gewgaws for green pieces of paper to keep the façade going. Once that moment hits (or actually once US decision makers realize that the moment is going to happen & there is NO way of stopping it), I can see the US trying to change the rules again, FAILING, and then there is a decent chance of it descending into war.

Against who & how? I don’t know, but I could certainly see the US demanding X from someone, them not doing it, and the US taking unilateral action against a “threat”. I am not saying that they win, but I am saying that it is not improbable that it won’t happen.

Desperate governments do desperate things.

Or put in terms of your debrief, people that get their air supply will fight like hell to turn it back on. And if they have a couple of SCUBA tanks that allow them to carry on a little longer & their trigger finger works, no telling who or what they are going to decide to shoot.

Milamber

milamber said...

@SleepingVillage

“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.”

Actually, MAD is why I think that predicting timing on this is impossible. From doing a lot of reading at the BIS website, I think it is abundantly clear (at least to me) that CB’s prize stability over all else. They also recognize that market access to oil and oil’s access to gold is the most important item in our world when it comes to keeping guns in holsters. If either side of that gets messed up, then watch out!

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

Absolutely! What I don’t agree with is that this can’t devolve into a nasty violent conflict. If an event happens that forces the US to react, then that reaction can easily escalate into a shooting war.

Consider this:

The US acknowledges internally in a National Security Council (NSC) Meeting that the $IMFS has been exhausted and they are out of bullets to extend it any further. They further decide that whichever country moves first will get the advantage in whatever comes after the current $IMFS.

I wonder if at a NSC meeting (possibly attended by James Rickards) if they could find a nation in their orbit that is consistently threatened by a Persian Shia oil state?

I wonder if that oil state could also be considered as a threat to an Arab Sunni oil state who would secretly sign off on a joint US/Israeli attack because “incontrovertible” evidence had been found of State sponsored terrorism.

Now , not to go all conspiratard, but the US (as well as every other nation) constantly war games different scenarios. I know that Rickards is shilling for his book, but the guy is plugged in. He is not saying anything publicly that his circle in govt minds him saying.

“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.”

I’m thinking that in a worst case scenario, the soldiers (and indirectly their families) will be the 1st ones taken care of.

Milamber

milamber said...

@Dr. Octagon

“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?”

See my post above to JR. I think my argument up thread applies here. (And really they are just extrapolations of FOFOA’s arguments about how the US will pay its stooges & not be outbid).

“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.”

I am not saying that the US will “solve” anything. I am saying that it has not been proven (at least that I can see) that the US will simply stop and lay down. I think there is a very good chance that the US will lash out.

How? I don’t know, but see above for one possible scenario.

Milamber

milamber said...

@anand srivastava

“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.”

That is an interesting statement. I mean hasn’t the hyperinflation already happened? It just hasn’t been exposed because of credibility inflation?

“And what sets the stage for hyperinflation is a period of high credibility inflation followed by the loss of credibility. During our period of high credibility inflation the dollar was invisibly hyperinflated in a near-monetary sense. This has already happened. We are already there.”
http://fofoa.blogspot.com/2010/08/credibility-inflation.html

Also, if the criteria is “a country trying to make war during a hyperinflation”, then I think I would agree with you. I don’t think you can find an example in recorded history that meets that technical definition.

But currency crisises lead to war all the time. All I am saying is I don’t understand how one can be so certain that it is not a possibility in this transition.

“…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.”

See my scenario above. I think you are proving my point. There are lots of valid possibilities for this imbalance being resolved via war. I mean right now, the US is in an all-out Cyber war and currency war against Iran.

Consider this: The US, without due process of civilian, military or any international courtroom is launching drone strikes on other countries soil. And those drone strikes have killed thousands. I am not interested in debating the morality of the strikes (that is NOT why I brought them up). I bring them up because looking at the US’s actions & reactions, I don’t understand how once can be so certain that this transition of the $IMFS won’t devolve into a broader conflict.

Milamber

jeb said...

Jan Klaas,

I believe freegold to be a suboptimal but inevitable outcome for governments, the store of value has been chosen by the producers and freegold is a result, not the cause of that choice. The exorbitant privelidge of the USA has turned into a nightmare and freegold offers a way out although at a suboptimal level.
Some thoughts;
it is the producers, not the consumers who are in charge.
Freegold offers a way for EURO elites to maintain their power, by owning what the producers value.
Hope that helps.
Jeb

Motley Fool said...

Milamber

You say they can simply take the resources they need, the dollar be damned?

Take what from who exactly?

Holding producers hostage at gunpoint has never been an optimal solution.

What are they to take, the crops from farmers? Ha! Alright, take the land..I sure hope your soldiers know how to farm. The oil from oil producing countries? Ha! I hope you like your oil hot. ^^

I could go on, but let's leave it there for now and let me know what you think.

TF

Nickelsaver said...

Lots of baggage coming out in the comments. Good. An opportunity for clarity.

Milamber - I think you over-estimate the reach and influence of the US military. If you take away the Ex Priv, the ROW has no fear. And mutually assured destruction goes both ways.

Jeb - If freegold is suboptimal, are you suggesting that there would be something else you see as optimal. My understanding is that there is no such thing as a perfect system for an imperfect people. As such, freegold could be described as optimal, particularly juxtaposed against everything that has preceded it.

Jeff said...

Milamber,

Why did Another start posting in 1997? Why did the LBMA go public with its trading levels? At the time it looked like the world had run out of time and we were going to get Freegold, before the Euro was ready. Have you read the timeline at the blog linked at my signature?

FOA: (Trail Guide 08/26/00)FOA (TrailGuide: 8/26/2000): "most of this maneuvering took place prior to the Euro being secure. There was a lot at stake if the Euro fell apart at that time. Politically it went something like this:"

a.(late 80s early to early 90s)
US and Europe worked together to bring gold prices down:
to make the dollar good in gold for oil and others
to allow some cheap physical purchases
to allow some long term contracts to be established
to allow the continued flow of oil at reasonable, economy supporting rates
paper gold had not inflated to anywhere near these current levels
- so contracts were seen as supportable
- so contracts and physical were seen on almost equal footing"
b. (early 90s to mid 90s)the supply of freegold on the official level was beginning to run short
so CBs sold openly mostly to each other to create gold selling impression
so mine forward selling was encouraged originally engaging mostly CB gold
- major gold buyers were ready buyers with cash or lend able natural resources
- so naked paper selling began to imitate CB supplied gold
- so same naked paper selling supplied some mines forward sales contracts
- so falling paper gold prices drew out old line/ non oil physical bullion in exchange for paper
- so falling paper prices brought in cheap financiers to sell into this paper demand

market is flooded with new paper and begins to override it's original purpose
by now US knows the Euro will succeed and benefit from a rising physical gold price

c. (mid 90s to date)
US and Europe split,,,, BIS takes Euro side
US encourages London to join it in dollar support,,,, print more paper
Europe and BIS stand to enter the world physical markets if gold falls below $280 before Euro is born
Euro comes online
Oil gold buyers don't like paper gold inflation
Oil stands to raise dollar oil prices if gold markets stay below $280
Europe stands aside and watches knowing what rising oil will eventually do to US dollar / economy
Europe adopts policy of "Freegold" by quarterly marking to the market bullion prices
Europe and BIS stand aside and endorse a flood of paper gold
Eventual demise of dollar contract gold markets draws oil to Euro support
Oil and Europe force Washington Agreement
Oil begins to raise dollar oil prices in effort to crush paper gold markets with inflation induced physical gold demand

Jeff said...

As I alluded to in my interview, the Euro balances the gains and losses of the big players (the only players who matter). Without it someone would lose big, and might have an incentive to act in a way that could lead to war. That was Another's fear in 1997. It was avoided by the CB's supplying the market with their precious..

1997 September 14: by "ANOTHER" (an answer?): This could be an answer directed to the "Red Baron"?
"The CBs are becoming "primary suppliers" to the gold market. Understand that they are not doing this because they want to, they have to. The words are spoken to show a need to raise capital but we knew that was a screen from long ago. You will find the answer to the LBMA problem if you follow a route that connects South Africa, The middle east, India and then into Asia!
Remember this; the western world uses paper as a real value, but oil and gold will never flow in the same direction. Big Trader" [

jeb said...

Nicklesaver, i see freegold as a suboptimal outcome for those that benefited most from the $ standard, think the USA, warren buffett etc.

Goodsalt said...

Two words: "Coherent narrative".

Nickelsaver said...

Jeb,

Ok. Yes, is that light, from the perspective of the here and now, the US would not look at freegold as an optimal outcome.

But, when the can is kicked over the edge, perception will change.

Bullion Baron said...

Winters wrote: Some might say that is thinking like a shrimp rather than a giant. A giant saver would choose the exact opposite due to the better density of value. I guess it comes down to whether you think the giant savers or the shrimp savers decisions will move things.

I think the giants can maintain control for a period of time, but from my observation the shrimps often drive things once the pool of individuals is large enough. It's a good point you make re density of value, however for the most part the giants are unlikely to be holding the physical on their person, so the different is more likely to be an extra 0.5%pa to store their Silver, a small extra fee they may consider paying should they feel Silver represents better value.


burningfiat wrote: I respect your arguments for silver a lot. I mean how can you argue against: "I like my silver" and "It feels better in the hand". There just isn't a rational comeback! Guess I justify my small holdings of silver and BTC in the same way.

There are other fundamental & historical reasons to buy Silver, but from my perspective it will be the irrationality small time buyers and "perceived value" that will drive Silver higher than Gold in the short to medium term. We've already seen the effects that an increased level of public interest can cause in the Silver market (many Mints were rationing and out of various smaller sized products in the early 2011 rush) and that was really only a small sample of what's to come.

Those who have read my blog are probably aware that I think the metals will head into a "bubble/mania phase", something to consider is that we may get another 1980's style bubble (and bust) within the framework of the current monetary system with a final solution to come much later...

Pierre Don Denirio said...

Is humankind ready for an universal embraced money code? Have we lost our hunger for power and our greed? Have we turned gay?

I don't think so.

I understand the elite having been pushing for centuries to get a one world, using WW1 and WW2 as major steps to achieve that goal, establishing the UN and BIS and so forth.

But are we now at that point to go to the next step, without war? Americans losing their pride and balls, without war?

If I look at the news today, it doesn't look like we've lost our national pride one bit. In fact, the crisis has made our national pride stronger, as we desperatly look for reasons of the crisis in people's.

Maybe total war will change our mind?

Side note: I'm not American, I'm not nationalistic. I stand behind a one world socialistic government as the only solution to our long term problems, it is the only way for our virus-like species to survive on this planet. I just think we are flawed in our DNA by greed. It won't go away, I'm really afraid.

...

Is Free Gold the solution to today's problems or the cause of the new great war?

...

Questions questions questions... topics that I rarely find in FOFOA's blog posts and I find it very disturbing that FOFOA leaves governments hunger for powers and personal greed out of the equations.

Woland said...

Hello Pierre;

As your name indicates an European origin, perhaps you
are familiar with the word "doppelganger"? By a bit of good
fortune, a near double of your worries, opinions and perhaps
ideals has already visited this blog, asking all the questions
you ask, and will ask in the future, along with their answers
provided by the commenters. I will leave it to others to direct
your attention to the relevant posts, and comments which will
satisfy (or not) all your questions. Happy reading!

Nickelsaver said...

Bullion Baron<

I take it back. You are not a Hard Money socialist. You are a metals market minded paperbug. This is to say, you see gold and silver as commodities on a dollar-centric continuum.

It is perhaps your intent to "catch the falling knife" when gold and silver collapse from the bursting bubble(s) you see on the horizon. And perhaps there will be opportunities for that again.

But, I would invite you to familiarize yourself with the freegold point of view, buy taking the time to read through the posts.

One of the things that we see happening in the very near future is a collapse of the gold commodities market. This is in a sense, the prime mover for the emergence of freegold.

Additional, we see the holdings of gold by currency issuers (particularly the ECB), as well as the giants(super-producers) as key to the role that gold will serve, as the dollar-centric system comes to an end.

Here is a good starting point for you, if you are inclined to understand this POV:

Once Upon A Time


Aaron said...

Wecome Pierre-

Side note: I'm not American, I'm not nationalistic. I stand behind a one world socialistic government as the only solution to our long term problems, it is the only way for our virus-like species to survive on this planet. I just think we are flawed in our DNA by greed. It won't go away, I'm really afraid.

Phew, enough said PDP. Just do me a favor, try not to freak out (like AD often did) as the answers to your questions start rolling in. Something tells me you aren't going to like many of them, but hell, good luck anyway.

MnMark said...

Any time someone starts ranting about "greed" I know it's time to skip over their comments...they will have little to say that is of any interest because they fundamentally misunderstand the nature of life. Every form of life is "greedy", seeking to use the available resources to the largest degree possible to reproduce and spread and flourish. When Eurasian Milfoil spreads through a lake, I guess you could call it "greedy". When whitetail deer reproduce in vast numbers because their natural predators have been killed off, I guess you could call them "greedy". When I use my mind to the fullest possible degree to create value to trade to the greatest number of people for their money, and thus accrue a billion dollars, I suppose you could call that "greedy". But it's just a stupid, meaningless concept. All of life is "greedy". It is naturally so as a result of the innate drive to "go forth and multiply", to flourish. Only the puritans of the political Left get their underwear in a knot over other people's "greed". It's so boring.

MnMark said...

Leftists ranting about "greed" have a fairly exact analogue in religious fundamentalists who rant about "lust". Both of them are seeking to cast a normal human drive as a kind of sin. Both are expecting people to suppress a normal and healthy drive for no other reason than that the ideologue - Leftist or fundamentalist - has an ideology that has declared it a sin.

As long as I earn my money through mutually voluntary exchanges with other people of value for value, it's none of your f$@^%$# business how much money I make.

Pierre Don Denirio said...

@MnMark

exactly MnMark, that's why I don't believe this will work long term :) Or humanity itself for that matter.

I said I stand behind one world socialistic government, but I don't believe in it, at all. It won't work, I know :)

I'll just finish off saying that not every life form has the same level of greed.
Comparing humans with ants, like done before by FOFOA, ants leave the group to die the instant they get sick, humans don't

The Dork of Cork said...

I am rereading “The first world war vol 1″ by Hew Strachan – the “financing the war section” – a must read.

The Germans & French held much of the above ground gold ( not unlike China & Japan $ treasuary holdings today ?)
The UK could “print” more Gold as the Empire had control over most of the below ground stuff in Canada & South Africa.
While India gave it a favourable balance of trade ( I think Europe of today functions as the modern India)

OK there was a run on the BoE………in my opinion because the US became both China & Saudi Arabia in one monster package.
The Bank act was suspended and the clearing banks expected the Gold standard to finish as the BoE would need to issue more notes , but HMT issued the notes (legal tender in Scotland & Ireland)

Keynes hammered home 2 points – the first was the difference between the internal demand for gold and the external.
1. The first was the internal vs external demand for Gold – the 10shilling notes (paying 5% interest) were for the former.
By easing the domestic calls for Gold the Bank had more gold available for exchange purposes.

2. He reiterated throughout the war that it was useless to accumulate gold reserves in times of peace unless it was intended to utilise them in time of danger.
This is the MMT full employment meme in its ancient form.
By maintaining purchasing power Britian could SUSTAIN ITS PURCHASING POWER IN INTERNATIONAL MARKETS AND WOULD RETAIN FOREGIN CONFIDENCE & THEREFORE FOREGIN BALANCES IN LONDON.

But if HMT just issued raw notes into the economic medium – what would have happened ?
Would we have had the War to end all wars ?

Pierre Don Denirio said...

@MnMark

Hehe love the anger you're expressing.

I agree completely with what you're saying, I don't like socialists either, they're trying to live off other hardworkers, for their own selfish benefit

I think you completely missed my point initially, I said socialistic-like borderless is the only way humankind will make it longterm. But like I said, it's not in us. And this is exactly why I oppose socialism.

I want to finish that I have my own savings, I run a business. I just think alot, to understand this world, to understand the people in their core. Just trying to find the truth you know, because there's so much untruth out there.

Bullion Baron said...

Nickelsaver wrote: You are a metals market minded paperbug. This is to say, you see gold and silver as commodities on a dollar-centric continuum. It is perhaps your intent to "catch the falling knife" when gold and silver collapse from the bursting bubble(s) you see on the horizon. But, I would invite you to familiarize yourself with the freegold point of view, buy taking the time to read through the posts.

My intent is not to catch a falling knife from any bubble fall out in the metals, but rather to sell a majority of my holdings into the mania phase of the forthcoming bubble. I will maintain an ongoing position though (won't sell 100% of my holdings).

I'm looking to exit my position when Gold reaches an overvalued state relative to other assets and measurements (e.g. Oil, Stocks, Houses, Wages, etc), rather than looking for where the peak might be in dollar denominated terms. So I wouldn't consider my view "dollar-centric".

One thing I have noticed is that the timing of events/outcomes can vary a great deal to what we expect. Even if freegold does eventuate there may be opportunity to increase ones wealth in the meantime, however speculative that may seem to those who would prefer to sit and wait for something that may be 12 months or 2 decades away if it comes at all.

Watching these interviews has reignited an interest in learning more about freegold and I will look to increase my understanding of the topic, reading back through FOFOA's posts (I have read some time to time over the past several years).

Nickelsaver said...

Bullion Baron,

Thanks for your honesty. Your words brought to mind these words from The Gold Must Flow

Fair warning to all gold bugs who don't understand Freegold

I'll make a prediction right now. As we approach and surpass $2,333, other high price predictions notwithstanding, you'll read articles from all of your favorite gold bug writers making the comparison with the 1980 peak. And if the ascent is anywhere as vertical as it was back in July and August, that comparison won't be lost on a single gold bug. No one wants to miss the top like so many did back then.

So when it starts to fall after a vertical rise, and it will fall, no one will be thinking about those other high price predictions. Instead, they'll be thinking "get out now, just in case. I can buy back in later and make a profit." This group will include all paper gold traders as well as a good portion of the "physical" gold bug community. And because of the "specialness" of that number, $2,333, there won't be any paper gold buyers trying to catch the knife, so it will fall hard. Possibly too hard. No one wants to be that guy who bought on the way down in 1980.

This could potentially be the final shakeout of weak physical hands, because there will be plenty of strong hands catching that physical even though physical buying won't stop the price from falling. Unfortunately for a few long-time gold bugs, the lack of a fundamental and foundational understanding of a much higher value could see them liquidating at the worst possible time in all of history. And that would truly be a shame. At least I have given fair warning. I'm not predicting that this is the way it will play out. Only that it could. And being aware of this possibility has value if it gives you strong hands at a key point in time.

Bullion Baron said...

Thanks for the reminder Nickelsaver, I remember reading that post and thinking to myself "at least I won't get caught selling that early as my price targets with wages/houses in Australia would require around $3500-4000 Gold". And even if I sold 75-90% of my holdings at around this level the final 10-25% left in my care would still be enough for a nice windfall if freegold were to eventuate and revalue Gold at circa $50k an ounce.

I think regardless of whether we see freegold or not those buying at today's prices will have done well. Worst case as I see it, if those stacking Gold in anticipation of freegold hold through a bubble phase that takes Gold to $4-6k, it may only correct to a price that is higher than today (e.g. $2-3k).

victorthecleaner said...


Flore (@freegolds on twitter) has this world map on which he colours every country green whose CB marks their gold reserve to market. The UK is green on that map. I never liked this (this has come up in the comments once or twice), but I didn't have any sound argument to refute it either.

Jim Rickards in his latest interview reminded me of the argument I was missing. Both in the US and in the UK what I would call monetary policy is subdivided into two branches: (1) exchange rate management and (2) inflation/employment targeting.

Both in the US and in the UK, the foreign exchange reserves belong to the Treasury Department rather than to the CB, and the Treasury is responsible for (1) - think of the ESF in the US. The CB is responsible ponly for (2).

This means that in a currency crises (that is exchange rate related), the US and UK CBs are no longer independent of their governments, but rather have the foreign exchange policy dictated to them. Guess what the UK Treasury will instruct the BoE to do? Well, you don't have to guess, you can simply wait and keep following the news...

The Eurosystem has sorted out this aspect, too. Although only a part of the gold (about 500 tonnes) is directly owned by the ECB while the remainder (10000+ tonnes) belong to the individual countries, the governments cannot use this gold without ECB approval. Btw does anyone know a good reference for this?

Victor

FOFOA said...

Is this what you're looking for, Victor?

(b) Foreign exchange issues

The Governing Council decided on the size and form of the initial transfer of foreign reserve assets to the European Central Bank from the national central banks participating in the euro area. … I should stress that the decision on the percentage of gold to be transferred to the ECB will have no implications for the consolidated gold holdings of the ESCB…

Before the end of the current year the Governing Council will also have to adopt an ECB Guideline pursuant to Article 31.3 of the Statute of the ESCB, which will subject all operations in foreign reserve assets remaining with the national central banks -including gold - to approval by the ECB.

Delusional Investing said...

I'm at the gold symposium in Sydney. Jim Richards spoke this morning. No mention of Freegold concepts by anyone (yet). I'll keep my ears pricked.

DI

Delusional Investing said...

Er, Rickards (stupid spell checker)

Phat Expat said...

Oh this is getting good... Would love to have been a fly on the wall of the discussions leading to the Veto (i.e. US/Can):

Petronas rejection may hurt Canadian stocks

Snip:

"Canadian markets could face a bloody opening on Monday after the government blocked the C$5.17 billion ($5.22 billion) acquisition of Progress Energy Resources Corp (PRQ.TO) by Malaysian state oil company Petronas (PETR.UL), raising questions about other, bigger bids and about Canada's willingness to let foreign investors in."

From that same article:

"But Paradis' veto also raises doubts over the outcome of Chinese oil group CNOOC's <0883.HK> C$15.1 billion offer for oil producer Nexen (NXY.TO) and is expected to weigh on other Canadian firms hoping to tap the foreign investment..."

Yeah, you got them FRNs, but ya ain't gonna use them here... Hopefully, or by default, expediting the move to FG.

Michael H said...

Nice interview!

My favorite Jeff line:

OMG FOFOA WHEREZ TEH FREEGOLD

Michael H said...

Oh, and Jeff, that is a great timeline you posted upthread. Kudos to you, mortymer, et. al.

Peter said...

I would really appreciate if someone could point me to a post or article that lays out the reasoning behind the claim that the Saudis have been trading gold for oil outside the market. I have been going through half of the posts from 2008 do far and this claim has come up several times and i have not seen anything more than quotes from ANOTHER that would support this claim.

Michael H said...

Peter,

For the 'further back' history, see

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

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

I'll try to dig up references for the recent (90's on) history.

Michael H said...

Peter,

The blog Jeff just referred to, with the accompanying timeline, might be what you are looking for?

http://revisiting-gordon-brown-bottom.blogspot.com/

Indenture said...

Yetti & The Power Friends

milamber said...

@Motley Fool

“You say they can simply take the resources they need, the dollar be damned?
Take what from who exactly?
Holding producers hostage at gunpoint has never been an optimal solution.
What are they to take, the crops from farmers? Ha! Alright, take the land..I sure hope your soldiers know how to farm. The oil from oil producing countries? Ha! I hope you like your oil hot. ^^”

I say that they can *attempt* to do so. I am not saying that they will w/o question be successful. What I am getting at here is there seems to be certainty that this won’t devolve into some type of shooting conflict, and the more I read (and hopefully understand) the more I think that there is a good chance (not an absolute given) that the IMS imbalances will be resolved via violent conflict.

What I would love to be pointed to, is a logical rational for *why* that won’t occur (or at least is very unlikely to occur). The only concept I have seen is that the US wont be able to supply troops in the field, and thus there will be no violent confrontation. I think I have raised some good questions as to why that topic needs to be revisited. IE, if the US can outbid everyone for goods in the physical plane for its govt stooges, why can’t it do so for the military?

Milamber

milamber said...

@Nickelsaver

“I think you over-estimate the reach and influence of the US military. If you take away the Ex Priv, the ROW has no fear. And mutually assured destruction goes both ways.”

So said another way, the ExPriv has allowed (and so far is continuing to allow) the US military to exert fear on ROW, yes?

Question:

You sell me physical items & I give you lines in the sand or colored paper. I turn physical items into weapons. We become enemies (the reason is not important for this thought exercise). Our animosity cannot be resolved civilly. You demand physical items for your lines in sand that you possess. I quote a southern bumper sticker,

“I'll give you my gun when you pry it from my cold, dead hands”
http://en.wikipedia.org/wiki/I%27ll_give_you_my_gun_when_you_take_it_from_my_cold,_dead_hands

And cock the trigger.

Can you explain to me why there is no chance it won’t be used?

Milamber

milamber said...

@Jeff

“Why did Another start posting in 1997? Why did the LBMA go public with its trading levels? At the time it looked like the world had run out of time and we were going to get Freegold, before the Euro was ready. Have you read the timeline at the blog linked at my signature?”

Yes. I have read that blog (and have been subscribed for updates on that blog for a while and coincidentally enough, Mrt just added a new file to it today). I have also spent several weekends listening to the Nixon tapes (h/t Victor) that have not been transcribed. And that was an eye opener!

AFAIK, we don’t know for certain why Another started posting. I like to think it was because he wanted to let people know that the world as we know it was going to change. But I don’t think we really know.

Same thing on LBMA. I don’t know why the LBMA went public. I think based on what I have read (primarily from Red Baron) is that since Gold was cornered, the time was right to allow the public to see what was actually going on.

“As I alluded to in my interview, the Euro balances the gains and losses of the big players (the only players who matter). Without it someone would lose big, and might have an incentive to act in a way that could lead to war. That was Another's fear in 1997. It was avoided by the CB's supplying the market with their precious..”

And this is the area that I think needs to be explored more fully (or perhaps it has been & I have just missed it):

I think it is erroneous to assume that because someone does not use gold as a SoV that they are not a “big player”.

I do think that all Super Producers who save in Gold IN SIZE are players that have to be reckoned with. But not all players save in gold. There are powerful people/institutions that choose (wrongly!) to not save in gold. They are going to lose HUGE in a move to FG. & I am not seeing why they (and their political lackeys) would not fight it every step of the way, up to and including war.

And perhaps fear of war with a country that is home to the Western Big players who chose not to use gold as a SoV, acts as a break against FG emerging. Especially when that country has a history of intervening in countries when it sees that its interests are threatened. And I am not just speaking of military interventions. I am talking about all aspects of intervention. From the most subtle save the children of Africa campaigns to the US AID office in Russia (that got kicked out last month), the US knows how to play the game too.

Why do we assume that the US will just stop and not continue to fight? And then when it can no longer be held back, when the $IMFS is ready to kill over & FG is finally ready to emerge, the US *ATTEMPTS* to change the rules. And does so with a 21st century version of Connolly meeting with the European finance ministers and telling them that the dollar is our currency, but your problem.
http://en.wikipedia.org/wiki/John_Connally#Secretary_of_the_Treasury

Please note: I am not saying that that particular scenario is going to happen again (it can’t).

But I am saying I don’t understand the logic that says this can’t (or is not likely to) descend into war.
When the $IMFS finally fails (or when the US decides that they cannot sustain the unsustainable any longer), why is the US just going to lay down and roll over? Especially when they stand to lose control the system that gives them an exorbitant privilege that allows them to consume 40% more of the physical plane items than a balanced IMS would let them.

Borrowing from one referenced in the masthead,

To use the Queens English "it ain't gonna happen dude"!" (~Another, Oct 12 1997)

Milamber

milamber said...

@ Jeff

Above, kill should have been keel.

Milamber

Nickelsaver said...

Milamber,

The gun that the US uses is the dollar. And the fear is economic. The Ex Priv gives credence to its military, as those that would oppose it understand it is not merely a matter of military prowess.

And how has the military been used in the past? As a suppression mechanism. Can you show me an example of how the US military was used to conquer and claim the spoils of another nation?

罗臻 said...

Great article by Keen today: The myth of the money multiplier. Quick summary: the loans are the deposits.

Woland said...

Hi Milamber;

I'm not saying this as a criticism, I am just asking you to
kind of walk me thru the scenario of which you speak.
The rich and powerful whose assets are all in paper, and
who as a result would lose most of their wealth, would they
not also lose much of their power and influence too? How,
in the aftermath of the crisis envisioned by Another, would
they force the government to act, and how would such
actions restore their lost wealth. As I recall it, exorbitant
privilege was seen as being given, not taken.

Aaron said...

Hi Milamber-

Your major concern or at least the concept you are trying to work out in your head as I understand it is whether or not the US will wage more war as the USD crumbles in an effort to try and steal stuff from other people/nations, yes? Do I have that right?

Let's assume your worst scenario and say, Yes, war wil result. The US will invade more nations and try to steal their stuff.

So what?

burningfiat said...

Aaron and Milamber,

So what?

This is where the zombies and/or armed rednecks come into play, right? :D

Edwardo said...

NC weighs in on, among other things, the state of play vis a vis the EU's banking union initiative.

http://www.nakedcapitalism.com/2012/10/europes-summit-that-wasnt.html

Dr. Octagon said...

Milamber - these are good questions. You ask "I mean as long as the security apparatus and the food growing apparatus is being taken care of, I am not seeing why the US can’t fight back? At least for a period of time. Why won’t they take care of those 2.3 million soldiers? Why won’t they use the SPR to keep the military going until there is an outcome that they can live with?"

I assume you're familiar with the I, Pencil essay, which gets into all the independent supply chains that ultimately culminate in the wooden pencil. Think of how this also applies to the needs of the military, which are even more complicated.

Aaron said...

Ok Burning, no need to bring RJP into this. ;-)

byiamBYoung said...

"Bundesbank has begun the process of shipping 50 tons per year from the Fed back to Germany..."


http://www.zerohedge.com/news/2012-10-22/german-court-demands-bundesbank-audit-sovereign-gold-holdings

Woland said...

For an interesting comparison re: the attempt to seize
natural resources, one can look at the 1922 "ruhrkampf",
in which the French attempted to forcefully acquire the
coal deliveries stipulated in the Versailles treaty. It didn't work,
and lasted but briefly. Just imagine how easily oil infrastructure
could be sabotaged, eliminating exports, and how the most oil
dependent economies in the world would quickly implode. Not
a plan which would receive world support, IMHO.

Jeff said...

Milamber,

Victor and MF pointed out to you in the last thread how the US will benefit from freegold by having their debts devalued and keeping their gold. Sounds to me like the US is prepared for that scenario without war.

As for the paper hoarding giants, to the swiftest goes the victory.

Trail Guide (10/24/00; 10:58:56MT - usagold.com msg#: 39784)

Do banks and other holders of debt instruments
(loans, mortgages, gov't and corporate bonds) want their wealth withered by hyperinflation? I don't believe for a moment that the creditor class is this egalitarian.

==============No Traveler, I doubt the creditor class as a group is seeking to remove the financial inequalities that separate people through this coming process of hyperinflation. Far from it. As I stated above, the credit hyperinflation has already occurred. It's there, inplace as we speak. What is now faced by this non egalitarian lending crown is the choice of: having their debtinstruments defaulted on and losing everything,,,,, or playing let the fastest runner win the game!

My friend this is the choice you get when the currency your assets are denominated in hits theend of it's "timeline". Human nature has followed this path for thousands of years. You know the old joke about outrunning the bear?

Well, these lenders will influence our financial policy as such. They will try to get their debt securities liquefied first, spend the fiat and in this process out run you and I. Leaving anyone they can beat to the mercy of the hyperinflation bear eating their remaining fiat assets.

victorthecleaner said...


FOFOA,

thanks, yes, that looks quotable.

Victor

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

Great debrief Jeff and FOFOA!

Bjorn said...

Milamber.
Regarding the paper saving giants trying to fight FG. You can't fight what you don't see coming. I think your other concerns regarding war are valid, although I assign that scenario a rather low probability for all the reasons MF, Jeff and others have given...

Michael dV said...

from a Casey report


Investors are shifting from paper to physical.

I began to watch this trend after it was reported last year that billionaire hedge fund manager John Paulson dumped his shares in the ETF GLD, opting instead to purchase physical metal. Since then, the shift out of paper proxies for gold and into the metal itself has picked up steam, and it's now clear that a new investor trend is under way.

Jeff Clark was the author
it came as an email attachment so I don't have a URL

milamber said...

@ NickelSaver

“The gun that the US uses is the dollar. And the fear is economic. The Ex Priv gives credence to its military, as those that would oppose it understand it is not merely a matter of military prowess.”

NS, very interesting thought! I agree with you that in the day to day, current *$IMFS* BOP issues are resolved civilly. But what do you think the US might be tempted to use in a future where that dollar (and everything it represents) is threatened? Remember, the dollar only has value as long as everyone*believes* it to have value (because they can get real physical items for it in trade). Don’t we all agree that once that tipping point is reached, and terminal velocity sets in, it is game over for the dollar as we know it!

Don’t you think the US govt will fight that until it collapses? With everything at its disposal? Isn’t this what all empires do when they collapse? They don’t go quietly.

“And how has the military been used in the past? As a suppression mechanism. Can you show me an example of how the US military was used to conquer and claim the spoils of another nation?”

Well I would argue that suppressing another nations intentions so that a third country does your bidding or comes into your orbit is the same thing. You also have to understand that historically US military power is subtle (OK sometimes not so sublte), but it always there in the background acting as a counterweight or if we go back to the poker analogy, a pair of Aces, but the other plays aren’t certain.

But anyways, let’s take a look at what the US has done in this regard:

-America’s founding and what we did to the Indians that were here when we the WASPS arrived. They got booted off their land. A lot of times through the US military (Trail of tears, How the American West was settled, etc)
http://en.wikipedia.org/wiki/American_Indian_Wars

- The Monroe Doctrine
“On December 2, 1845, U.S. President James Polk announced to Congress that the principle of the Monroe Doctrine should be strictly enforced and that the United States should aggressively expand into the West, often termed as Manifest Destiny.”
http://en.wikipedia.org/wiki/Monroe_Doctrine

- The Spanish American War
http://en.wikipedia.org/wiki/Spanish%E2%80%93American_War

- Mexican American War
http://en.wikipedia.org/wiki/Mexican%E2%80%93American_War

Now. I could do the same thing for every other country that has been a power. And compared to them, I think the US would come off looking pretty damn good. So my criticisms of the US are not from the left wing, lets sing Kum-Bi-Ya and all get along.

I think history shows that war is just another arena where Nation States compete. To me that is what the Euro is all about. To make sure that this transition doesn’t descend into violent conflict. But I think we are remiss to not explore how this could happen and what does that mean for navigating this transition.

Milamber

milamber said...

@ Woland

“I'm not saying this as a criticism, I am just asking you to
kind of walk me thru the scenario of which you speak.”

Criticisms are asked for and welcomed. If I am wrong in pursing these questions, please point it out. It won’t be the 1st time :)

“The rich and powerful whose assets are all in paper, and
who as a result would lose most of their wealth, would they
not also lose much of their power and influence too?”

Very good question. I think so, but will they lose their influence immediately? I mean during a crisis situation, I have to think that political allies that are seeing their world blow up, won’t just sit there and commiserate in the bar. So I think that while that is a good question, we need to think about how the losing of the influence would play out & what could happen in that interim time period. And also keep in mind that some of these entities control things of value as well that just happen to not be gold. They would still have some sway in govt.

As an example take the following list of the top 8 American companies by market cap (in Billions US$):

1 Apple Inc. $623.78
2 Exxon Mobil $427.64
3 Microsoft $250.01
4 Wal-Mart $249.71
5 Google $245.97
6 GE $240.44
7 IBM $239.29
8 Chevron $229.93

I have to think that they will still have influence. And that is just the top 8 publicly listed companies.

“How, in the aftermath of the crisis envisioned by Another, would
they force the government to act, and how would such
actions restore their lost wealth. As I recall it, exorbitant
privilege was seen as being given, not taken.”

That is what I am trying to think through. But I don’t think something is not possible just because I haven’t figured it out. When (Not if) the US loses the exorbitant privilege, it stands a chance of becoming a failed state, as opposed to a state with just a lower standard of living. And yes, as I type those words, I see them and realize how stupid that sounds. But then I think of all of the deluded Americans that think that they are the cats meow. And I see that a lot of our wealth is a fiction and that even with that fictitious wealth we still have a socialistic parasitic state that is constantly expanding.

People on disability rising.
SNAP recipients rising.
Medicare expenditures rising.
Fed Deficit rising.
Etc, etc.

So without that exorbitant privilege, what stops the US from imploding? And if the US implodes, what stops it from using war to distract the masses from the fact that it happened due to a a self inflicted wound when there are so many foreigners we can blame?

Milamber

milamber said...

@ Dr. Octagon

“I assume you're familiar with the I, Pencil essay..."

Yes. I think I saw that on FOFOA’s blog some time ago. That was the first time I had seen it. And yes, I think I understand how that would impact the needs of the military. But are you saying that logistical difficulties will prevent the US from doing whatever it can to maintain its ex priv?

Milamber

milamber said...

@Jeff

“Victor and MF pointed out to you in the last thread how the US will benefit from freegold by having their debts devalued and keeping their gold. Sounds to me like the US is prepared for that scenario without war.”

Yes, that’s why I would love for Ender to be debriefed. Because whenever I see someone write about how the US will move to FG, I go back & reread Enders comments with FOFOA from 2009:


"Hm… I think ‘a’ real message in his words was along the lines that - your money is not what you think it is and it doesn’t work like you think it works.

FOFOA, what is more valuable – gold or fiat?

Only after exploring this question will you see that the US treasury will NOT adopt Freegold as an acceptable possible solution. The only way in which the US treasury will consider this is if the entire world conspires against it and forces it to happen. Can this happen? Once again, after exploring the above question, you will see that other states will also NOT push this avenue in hopes of becoming the next ‘king of the hill.’ But, the eventual outcome is Freegold or ‘death by a thousand cuts’. Ultimately, it is the people of the world that must stand for Freegold and that will take time."

http://fofoa.blogspot.com/2008/09/freegold.html?showComment=1222199820000#c844702083774076760
--------


…“Leaving anyone they can beat to the mercy of the hyperinflation bear eating their remaining fiat assets.”

Agreed. And when those people (nations) feel that bear, how will they respond?
http://en.wikipedia.org/wiki/Wag_the_Dog

Milamber

DP said...

RE: MichaelDv @ 11:52

JR said...

HI Milamber,

I'd encourage you to take a moment of quiet reflection:

Only after exploring this question will you see that the US treasury will NOT adopt Freegold as an acceptable possible solution. The only way in which the US treasury will consider this is if the entire world conspires against it and forces it to happen.

I see Ender saying the US has an exorbitant privilege they will not give up, rather, this exorbitant privilege will change when the rest of the world stops supporting it.

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

Ender asked: FOFOA, what is more valuable – gold or fiat?

Here's a FOFOA quote - Nothing is more valuable than a functional printing press. Not even gold. ;)

So what do you think the US will do when they lose their exorbitant privilege and their currency collapses? It would seem they might do what is necessary to protect/restore that which is most valuable to them - their currency aka "printing press."

========

Maybe its just me but I read what you post and I'm like exactly, so why does Milamber keep disagreeing?

Dr. Octagon said...

@Milamber asked "But are you saying that logistical difficulties will prevent the US from doing whatever it can to maintain its ex priv?"

Yes, that's what I'm saying. "The military" is the end of an incomprehensible number of very long supply chains. I can understand your argument that the government could use infinite currency to keep direct employees and immediate suppliers "taken care of". But I do not believe that even the most powerful military in the world has enough power to force their will on every stage of that supply chain. Even though, I agree, they will try. At some point in the supply chain you'll have worked your way back to some other country (e.g. rare-earths from China) or some critical supplier who has failed (such as a semiconductor manufacturer).

With today's just-in-time everything, I expect this would become a serious problem in a matter of days or weeks.

ampmfix said...

Very worrisome: how much of the 10k phys tons EU should have are NOT under direct European control (re latest German gold news)? that is a game breaker or another kick down the road for the IMF$, or isn't it?, please enlight, thanks.

RJPadavona said...

Aaron,

If I could retweet and double plus favorite that comment, I would!

Milamber,

Don't be too hard on armed rednecks. If your war scenario comes to pass, they'll be the main ones fighting against all those horrible things in the Executive Orders. Trust me..... I know rednecks ;)

But yeah, #FuckZombies. They suck.


RJP

Aaron said...

RJP ;-)

Yet another reason I love FOFOA's debriefs. I can finally read your comments and apply the appropriate amount of southern drawl.

Woland said...

Hi Fofoa;

From time to time, I receive the latest missive from Paul
Brodsky, of QBamco, and sometimes it shows up a little
later over at Zero Hedge. I haven't checked over there as
I write this to see if it has arrived yet. In the letter:

He advocates the "Chicago School Plan Revisited" approach
of a fully reserved banking system, with money sponsored
and distributed by federal governments. (so far, so bad)
BUT THEN,
"In order to check the lack of constrain on Government
spending which would automatically result from this, (me:
as in MMT) and quickly lead to the demise of the monetary
system, he proposes that ONE of 3 constraints would need
to be proposed (adopted) in concert with the above.

1. Gold would need to float freely ( me:not be managed as
is now the case) and not be taxed, so that it offers an un-
adulterated safe haven savings outlet, thereby acting as a
natural disciplinary threat to fiscal profligacy".

2. A gold standard (NOPE!!)
3. Don't ask. it doesn't work.

So there you have it. Freegold it is, but with the govvies
replacing the banks. I'll just stand back from the hornets
nest I kicked and let the group have fun. Anyway, I thought
you would like to know. Cheers.

Aaron said...

Hi Woland-

Looks like ZH has finally caught up to you.

QBAMCO On Nominalists, Realists, And The Madness Of 'Chicago Plans'

somanyroadsinvesting said...

Like the interviews.

I would love to see an interview of FOFOA with a couple of different experts in the LBMA or loco london trading mkt. I personally do not know enough about these mkts to comment. But it appears a major premise of the Freegold thesis is that gold is somehow not 'freely' traded now or however you want to phrase that. I think it would be helpful to have a couple experts with different views debate this somewhat complicated topic in detail. I usually dont see much discussion of that here.

Also was curious what the current consensus is on timing. I can say with certainty that the $ system will end someday but when that day is I have no idea. I do think it matters. Because if we are talking about something longer than all of our lifetimes then our energy would probably better used elswhere. If we are talking about 5-10 yrs then that is a different story.

victorthecleaner said...


ampmfix,

Very worrisome: how much of the 10k phys tons EU should have are NOT under direct European control (re latest German gold news)?

If the Europeans are serious about ending the dollar, they need zero gold in order to accomplish this. See my comment on Rickards' book.

Victor


Alex in Montana said...

Just want to say thanks for the site, the interviews and putting a face and personality together with your thoughts.

burningfiat said...

Milamber,

Soviet Union!
That super power collapsed pretty quietly...
Where was all the wars with neighbouring states at the moment of collapse? Why didn't they nuke the West while they where collapsing?

Yes, there was a lot of regional military dominance (Afghanistan) in the years before, but not much action during the collapse (they couldn't afford it).

Maybe the Soviets were just too busy with down to earth concerns like food, heat and stuff, to really care about world domination and evaporating global power?

IMHO you have the whole war/collapse thing bass ackwards. Historically Super powers/empires collapse seems to be preceded by costly wars.

Wars lead to empire-collapse. Collapsing empires doesn't seem to engage in wars.

Can you please explain, how is the USA Empire different than the Soviet Empire, collapse wise? Why will this case be different?

/Burning

ampmfix said...

Thanks Victor.

JR said...

Hi ampmfix,

VTC does s good job of showing how the ROW could use a dirty float to break a US attempt to confiscate gold and then institute a gold standard.

But suppose the issue is not to institute a gold standard, but simply to confiscate their gold. Wouldn't that mean the US dictates the terms of the game.

Briefly, no. Gold is no good, its just a means to an end. Distinguish between "usable" wealth (goods and services) and "useless" physical wealth (gold). Useless wealth (stored purchasing power) is no good if you can't translate it into usable wealth.

http://fofoa.blogspot.com/2012/08/macrofreegoldnomics.html

costata said...

I think we often over-emphasise gold in the discussions here and devote too little attention to currency and international trade. I think JR hit the (biggest?) nail on the head with this response to Milamber (my emphasis):

I see Ender saying the US has an exorbitant privilege they will not give up, rather, this exorbitant privilege will change when the rest of the world stops supporting it.

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

Ender asked: FOFOA, what is more valuable – gold or fiat?

Here's a FOFOA quote - Nothing is more valuable than a functional printing press. Not even gold. ;)

So what do you think the US will do when they lose their exorbitant privilege and their currency collapses? It would seem they might do what is necessary to protect/restore that which is most valuable to them - their currency aka "printing press."


One of the archivists can provide the link to the post where FOFOA discusses network effects and the impact they have on the US dollar.

I would also point to this snippet below from Chuck Butler's Daily Pfennig. FWIW I think this ongoing chatter about China wanting to "replace" the US dollar as THE reserve currency is misguided.

The pathway to internationalizing their currency and breaking their dependency on the US dollar is to exploit the network effect - expand the use of the Renminbi in international trade.

If they can't accomplish this then making their currency fully convertible will turn it into a bigger version of the Australian dollar and the Mexican peso - a speculator's plaything as opposed to a trade currency.

From The Economist. "The renminbi / yuan is displacing the dollar as a key currency. In a speech on the same day, a deputy governor of China's central bank pointed out that China no longer hovers up dollar reserves with its past abandon. And according to a new study by Arvind Subramanian and Martin Kessler of the Peterson Institute for International Economics in Washington, DC, the dollar's influence is waning in the emerging world.

Currencies that used to shadow the greenback are no longer following it so closely. Some are floating more freely. But in other cases they are steadily falling under the spell of a different currency: the yuan.

The greenback has in the past played a dominant role in East Asia. But if anything, the region is now on a yuan standard. Seven currencies in the region now follow the yuan, or redback, more closely than the greenback."


This Euro Freegold-RPG project is about a number of things but securing the ability to continue international trade casts its shadow over everything.

Revisiting network effect is long overdue FOFOA. What sustains the US dollar as the international reserve now that the Fed has to monetize most of the USG paper? CBs are buying gold but the US dollar continues to hold sway despite two years + of waning support? Why is the oil:gold ratio so important that the US will damage its own economy with expensive oil to maintain it?

Perhaps it would be worthwhile exploring how gold could "flow" without flowing at all under this old/new regime Another described. Perhaps you could also discuss the relation between fiscal policy and monetary policy using the EU as a case study. Is one subservient to the other? There are a number of posts in your body of work you could draw upon to update the network narrative.

Anyway that's my 0.02

Cheers

罗臻 said...

The Fed has to monetize USG paper because if it didn't, it's 2008 all over again. USG is the borrower of last resort. Without USG, there would be a shortage of dollars to repay existing debt.

USG paper is the only thing holding up the U.S. economy and the global financial system. Thus, if your model looks at the best action for USG, they have two: continue propping up the system and move towards hyperinflation, or pull out the rug and let currencies like the yuan hyperinflate to oblivion when they fire up the printing presses to avoid their own Great Depression.

costata said...

Structural Support For The $IMSF

Absolutely stunningly brilliant piece of analysis here (h/t JSmineset for the link). The author's Bio is below in case anyone wants to learn more about her.

http://www.economicsvoodoo.com/quantitative-easing-0-1-2-3-and-federal-reserve-banks-love-affair-with-its-member-banks-and-mortgage-bonds-levitating-the-black-hole/

If this data is sound - here's the hand off of structural support for the $IMFS (my emphasis):

The chart below shows a simple year to year change in the largest banks’ holdings of U.S. Treasuries and other securities. Since the banking and financial crisis in 2008, the largest banks added incrementally more U.S. Treasuries holdings to their balance sheets in four years than the past 20 years combined.

This serves the dual purpose of helping to capitalize the banks and as the few remaining buyers of U.S. Treasuries as the Federal Reserve “monetizes” or prints dollars to make up the rest. If the past four years is any indication, 2013 looks to be a bigger year as the few seeking safety in U.S. Treasuries may be found at the largest banks.

And, again if this data is sound, here is the loss of structural support for the $IMFS (my emphasis):

From a different perspective, if we look broadly to the currency composition of foreign central banks (IMF COFER), relative holdings of U.S. dollars and U.S. Treasuries to total foreign exchange reserves have dropped by over 60% from the height in 2000 of 56% to 34% in 2012.

The often-cited 62% of central bank foreign exchange holdings being in U.S. dollars overlooks nearly half of currency holdings that are unreported, the growth of which has been driven by emerging and developing economies – presumably led by China.

Emerging and developing economies have grown to account for about two-thirds of the world’s central bank holdings of foreign exchange reserves as their relative holdings of U.S. dollars have quietly gone in the opposite direction… and some portion quietly into accumulating gold.

Now I have to interject again here. Name the one institution that has the data feed to allow it to monitor this transition by central banks? Of course, it's the BIS.

Increasingly, bi-lateral trade agreements among other nations exclude the use of the U.S. dollar as payment for international trade, once the domain of the U.S. dollar as the world reserve currency. Other countries see what is unfolding in this country but it is unclear if the American public sees it.

Lan Pham Bio:
http://www.economicsvoodoo.com/sample-page/

And her story in more detail here:
http://www.economicsvoodoo.com/welcome/

costata said...

One more extract from the Lan Pham post:

The unlimited part of the capital infusions [to Fannie Mae and Freddie Mac] by the U.S. Treasury comes to an end on December 31, 2012. Coincidentally on September 13, 2012 the Federal Reserve announced QE 3 that it will print essentially unlimited dollars to purchase Fannie Mae and Freddie Mac mortgage bonds for as long as it takes.

Handy explanation for the timing of QE3 and its focus on MBS. And it provides another convergence to add to the list that prompted Uncle costata to nominate January 2013 to the end of 2015 as the period in which the transition will occur.

Blondie said...

To whom it may concern,

It has come to my attention that some of my recent posts on my own blog may be being interpreted by some as an attack on the words of FOFOA. I can see how this may appear to be the case, but would like to assure you that this is not my intent.

FOFOA has consistently demonstrated to me throughout the time of our association an unparalleled integrity in both word and deed, so I do not wish to show any disrespect, intentional or otherwise. If I thought he’d been unreasonable at any time, I’d just come out and say it, but he never has, so I can’t. There are in my experience exceedingly few people about whom this could be said, and I’m certainly not one of them.

For your edification: my posts are statements of my own perspectives as they relate to the purpose of my blog; as they relate to my own thinking. I will tie them all together as a single narrative in my own time and in my own way. Feel free to examine them yourself if you wish, but please don’t infer that I’m attacking or challenging anything other than my own perceptions with them.

I am questioning my own premises, and in doing so my understanding of the premises of this blog. I feel something fundamental has been overlooked/is missing, and I was not finding the comments section of this blog beneficial to my efforts to identify it, which is why I am not currently participating. This is not a criticism of this blog nor its participants, just reflective of the fact that the conversation is mostly well away from the areas I want to be.

While I am attempting to remain impartial, the case for gold does not appear to me to be diminishing, but rather the opposite (I am just as prone to confirmation bias as anyone).

Sincerely,

Blondie

milamber said...

@ JR,

Well I may certainly be missing the nose on my face because I am fixated on my hair in this situation. So I will see if I can state my disagreement as clearly as possible.

“I see Ender saying the US has an exorbitant privilege they will not give up, rather, this exorbitant privilege will change when the rest of the world stops supporting it.”

==============
Right. The US will not give it up. I am saying that they will do everything in their power to not give it up by continually keeping the ROW supporting it through the strings they pull in the $IMFS as well as the subtle power their 11 aircraft carriers exude as they patrol the Gulf and Indian Oceans.

I submit we should explore what that means in a geopolitical context up to and including nation state war as it relates to the ROW supporting the $IMFS. Furthermore, if the US fails in its mission to keep their ex priv, and the rest of the world stops supporting it, what are some of the possible ways that we might expect the US to react to that loss?

“Here's a FOFOA quote - Nothing is more valuable than a functional printing press. Not even gold. ;)”

Agreed. The key word is functional. The US will do everything in their power to keep that printing press functional.

“So what do you think the US will do when they lose their exorbitant privilege and their currency collapses? It would seem they might do what is necessary to protect/restore that which is most valuable to them - their currency aka "printing press."

Maybe this is where I am missing the point. I think they will do everything in their power to prevent FG from happening, as Ender said, because they don’t want to lose their $IMFS printing press.

Ultimately, I don’t think that they will be successful. I do think that they can delay savers changing their perceptions though. Further more, I think that a US currency collapse has dire implications for the US and consequently the world. We should examine those implications & think about how that can play out.
========

“Maybe its just me but I read what you post and I'm like exactly, so why does Milamber keep disagreeing?”

My “disagreement” has to do with the assumption that once one of the two potential triggers for FG happens (either the paper gold market collapses or the $IMFS implodes due to US hyperinflating), then there will be a few hours, or days, but no more than a couple of weeks of uncertainty before FG emerges. And then everything will be more or less normal except for the paper gold market will be no more, the dollar will (possibly) have hyperinflated & the US will see roughly a 40% drop in their standard of living, and thus will not be able to react to what has occurred (is occurring) with the most powerful military the world has ever seen.

So my disagreement is not so much with FG theory itself, but it is more with the mindset that this will be a little bit of rough sailing for a little while, but as long as you have physical gold, everything will be hunky-dory.

I think that gold is the best portable physical store of value that gives you the best chance of shuttling your “wealth” from one time dimension to another (wherever & whenever that may be). But I don’t think that this transition is going to be as seamless as some think, primarily due to the fact that the US is going to fight it every step of the way from occurring.

Milamber

answer2me said...

One more extract from the Lan Pham post:

The unlimited part of the capital infusions [to Fannie Mae and Freddie Mac] by the U.S. Treasury comes to an end on December 31, 2012. Coincidentally on September 13, 2012 the Federal Reserve announced QE 3 that it will print essentially unlimited dollars to purchase Fannie Mae and Freddie Mac mortgage bonds for as long as it takes.

Handy explanation for the timing of QE3 and its focus on MBS. And it provides another convergence to add to the list that prompted Uncle costata to nominate January 2013 to the end of 2015 as the period in which the transition will occur.

Coincidently this timeline fits perfectly within Martin Armestrongs economic confidence model.

milamber said...

@ RJPadavona

“Don't be too hard on armed rednecks. If your war scenario comes to pass, they'll be the main ones fighting against all those horrible things in the Executive Orders. Trust me..... I know rednecks ;)”

I hear you. When the Dukes of Hazzard got cancelled, my family boycotted CBS for 3 weeks. :)

As a 5th generation Texan, I am as red as they come, and I know the ones that I associate with are gonna be some kind of pissed when they finally realize they have been had. The ones that are paying attention think that the way to protect themselves is with Silver and lead, and they are itching to get them “Arabs” in Persian Iran. :/

Just imagine if there is a NeoCon in the WH to whip the Jingoism up and blame the implosion of the $IMFS (which will be seen by J6P as a drastic drop in the Standard of Living) on them foreigners & there will be lots of folks ready & willing to go “kick some ass” for the ‘merican way.

Milamber

milamber said...

@Burning

“IMHO you have the whole war/collapse thing bass ackwards. Historically Super powers/empires collapse seems to be preceded by costly wars. Wars lead to empire-collapse. Collapsing empires doesn't seem to engage in wars. Can you please explain, how is the USA Empire different than the Soviet Empire, collapse wise? Why will this case be different?”

I freely admit that I may be bass ackwards on this. And I would be thrilled if the US’s descent is as peaceful (overall) as the Soviet Unions. But I think there are some key differences that need to be discussed as it relates to the Soviet collapse:

Where is the Western Perestroika? Or Gorbachev? Without Reagan realizing how close we came to Nuclear war in 1983 (http://en.wikipedia.org/wiki/Able_Archer_83) and w/o Gorbachev to reciprocate and genuinely want to reform the Soviet Union, it would have been a whole lot bloodier.

Who is going to reform the $IMFS so that it doesn’t blow up? I don’t think it can be done.

Also, the Soviet Union was never the reserve currency for the world like the dollar is. And also keep in mind that the standard of living for the avg soviet citizen wasn’t exactly hopping during communist rule. So it is not like the lifestyle shock was that severe.

For a first hand account of the Soviet collapse & thoughts on what an American collapse might look like, I rec that you read Dmitri Orlov’s book Reinventing Collapse: The Soviet Example and American Prospects
http://www.amazon.com/Reinventing-Collapse-Example-American-Prospects/dp/0865716064

Also read Joseph Tainter’s book The Collapse of Complex Societies (New Studies in Archaeology)
http://www.amazon.com/Collapse-Complex-Societies-Studies-Archaeology/dp/052138673X/ref=sr_1_fkmr0_2?s=books&ie=UTF8&qid=1350963093&sr=1-2-fkmr0&keywords=paynter+societal+collapse

Tainter’s book is the de facto standard on understanding how & why complex civilizations collapse. Even though it almost always boils down to some type of energy constraint that can’t be resolved, War is always part of the equation. Even in collapse.

So you don’t consider The 2nd Iraq invasion/occupation a war? Or the invasion and occupation of Afghanistan a war? What about the cyber & currency war against Iran?

Historically, empires engage in wars all the time for a variety of reasons even when they are collapsing, and in some cases to try and prevent the empire from collapsing. As it relates to this particular conversation, they go to war to try and forestall collapse by attempting to redirect anger at an external source as well as by having potential rebels killed in battle far away from home.

Some examples to study would be:
Roman Empire
Archamenid Empire
Qing Dynasty
Russian Empire
Mongol Empire

Milamber

Peter said...

Michael H

TYVM for the links, looks like i got some reading to do :)

anand srivastava said...

@Milamber
Maybe this is where I am missing the point. I think they will do everything in their power to prevent FG from happening

I don't think they are even aware of FreeGold, so I don't see why they will be putting in any effort to prevent it.

They have only 1 priority, to avoid having to fire all of their employees. To stop spending the money they do. For that they need the printing press. The pride, the reserve status is secondary.

They will do everything to keep the reserve status for as long as possible. But they will not attack the big countries. They have never done that. They can never do that, as that would be suicide. Attacking Iran is a possibility. But they will not attack China or Russia, from whom the biggest threat to their reserve status is coming.

I am not sure they will be able to blame anybody else except Terrorists. And they will not be able to terrorize anybody else but their citizens. It does suck to be a US citizen at this point in time.

They can only try to keep their reserve status and attack Iran till the point when they are able to fulfill the requirements of the military. This point is much earlier than the wheelbarrow phase of HI.

HI doesn't happen in a few weeks. It goes slowly. I think we are still a couple of years away from the wheel barrow stage. Freegold will arrive before that point. The US will not revalue their gold or utilize their gold, before the wheelbarrow phase. It doesn't make sense for them to do that. I would think there will be a couple of years worth of pain in the future of USA. But it will be after revaluation, so people with gold should be able to live comfortably, with some luck.

Michael dV said...

anand
love your optimism

costata said...

Milamber,

I was going to stay out of this war and peace discussion but it keeps going round and round. America will be the biggest winner from the transition to Freegold-RPG.

A blistering HI to default their debts and a gold revaluation to recapitalize their financial system will put the USA right back on the top of the heap (but as a "first among equals"). And the PTB will get to keep the winnings from the decades of exorbitant privilege.

Also in your response to burningfiat at October 22, 2012 9:15 PM you wrote:

So you don’t consider The 2nd Iraq invasion/occupation a war? Or the invasion and occupation of Afghanistan a war? What about the cyber & currency war against Iran?

I sure do! There is your warring right there.

Historically, empires engage in wars all the time for a variety of reasons even when they are collapsing, and in some cases to try and prevent the empire from collapsing.

Yes, "even when they are collapsing". The last 12 years have been precisely that - a (slow motion) collapse.

The USA will not initiate WW3 or anything remotely resembling a war on that scale. The ingredients aren't there to draw in other countries. More military actions - sure - the US economy is structured for war like no other nation state before it.

Personally I would be more concerned about domestic repression if I was an American. Sometimes demons can be cleverly disguised ;)

Did you notice that they went for the National Guard as the preferred source of their cannon fodder in Afghanistan and Iraq? They de-fanged any State Governors who might have challenged them later and tested the willingness of the State (republics) legislatures to rollover for the Feds.

At some point I will dig out and repost some links on a major US foreign policy change initiated last year. It describes a pullback from a global dominance goal to a dominant role in the Pacific region. It's the Asians, South/Latin Americans and others in the Pacific who should be entertaining the fears about future military conflict that you are expressing.

A lot of the stuff you are coming out with on this topic is a rearview mirror vision projected on the future.

(BTW I also think Jared Diamond's book "Collapse" should be on that list as well. "Guns, Germs and Steel" by the same author might be a worthy inclusion as well.)

I can't pass on this either:

And also keep in mind that the standard of living for the avg soviet citizen wasn’t exactly hopping during communist rule. So it is not like the lifestyle shock was that severe.

I think Orlov's sense of humour (admittedly he's very witty) leads him to make light of the extent of the crash in lifestyle, life expectancy and economic fortunes in Russia. Happy to provide a few stats to back up this claim. IMHO that episode should be recorded as the most effective use of economic warfare techniques in economic history.

PS. Blogger desperately needs a custom spellchecker. Burningfiat almost got published in this comment as bunringfiat!

JR said...

Hi Milamber,

Getting closer ;)

Maybe this is where I am missing the point. I think they will do everything in their power to prevent FG from happening, as Ender said, because they don’t want to lose their $IMFS printing press.

They will do everything in their power to keep their printing press going, since that is what is most important. Dollar failure and freegold are separate events. They are distinct:

Confiscation Anatomy - A Different View

"As I have explained many times, freegold and hyperinflation are separate events. Freegold is the establishment of a physical gold market after the paper gold market is arrested through default, breaking the dollar's grip on gold, and also breaking the dollar's international settlement function.

The first way this collapse could play out is a quick devaluation of the dollar, say, over a couple weeks, followed by the emergence of freegold. Think of it as the riverbed at the bottom of the waterfall.

The second and more likely way this will play out is with hyperinflation thrown in, perhaps lasting many months or years after the initial plunge/devaluation. The overwhelming evidence that this will be our path is the political control the Executive Branch is exercising over dollar monetary policy."

JR said...


From the Treasure Chest

This may apply to your question. Someone asked me last week:

"You’ve said hyperinflation and freegold are separate events. I can only imagine them all rolled up in one messy ball. Would love to know how you see the separate events relate to each other as they unfold separately, if you haven’t already covered it."


I replied:

"They will most likely be rolled up in one messy ball. But thinking about it in that way makes people miss that they are distinct, discrete events that will be happening at the same time. For example, if hyperinflation takes the price of everything up 1,000,000%, gold will go up 40,000,000%. But only gold. Everything else, silver, cans of peas, etc... goes up 1,000,000%. So gold's FREEGOLD rise (that extra 40x rise) is in REAL TERMS because it is relative to everything else REAL. While everything else only rises in NOMINAL terms. Can you see the difference?"

JR said...

Blondie's View

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

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

JR said...



So a question for you Milamber?

What's the gold/oil ratio people are often talking about?

costata said...

answer2me,

It's not a coincidence. I think Martin Armstrong's work on cycle theory is impressive. I was tempted to tighten up the timing to 2013/2014 out of deference for his work and only extended the period to the end of 2015 to absorb his major turn date.

I give his capital theory a big, fat "F-" (for example) and disdain many of his assertions about the nature of the problems in this system and his "solutions".

Cheers

duggo said...

I have now read "It's the Flow - Stupid" and "Honest Money" as supplied by Dante_Eu. 25+ more to go.
This maybe premature to ask now but I am puzzled. I think I'm right in saying that there are two markets for Gold. I presume this is still the case today. One the public sees which is manipulated because it competes and acts as currency. The other is a SoV and is "secret". The "secret" market for Gold is for the transaction of large amounts and operates at the real value of Gold. I hope I'm correct here.

My question is:- given the time involved wouldn't this "real" price be known by now? Wouldn't GATA, Sprott and Turk etc. know the true price of Gold? Wouldn't a "whistle-blower" have made this common knowledge by now?

costata said...

answer2me,

Obviously that should have read:

I was tempted to tighten up the timing to 2013/2014. Out of deference for his work I extended the period to the end of 2015 to absorb his major turn date.

I thought I pasted the final change. Doh!

Bjorn said...

Mmmm Bunrings!

Bjorn said...

duggo. There was this character known as Another who was blowing a whistle about that a while back.. ;-). Thing is, nobody believed him when it turned out he (they) was a bit off on the timing....

Except us evil brainwashed lot here that is.

costata said...

DP et al,

(DP, see below one of the reasons I have been referring to Australia as an "economic colony" for a long time. All, read on to see how the colon fits into that description.)

I was on the way back to my hermitage and not intending to post another comment but I checked in at Macrobusiness blog on the way and found this (my emphasis):

..Mike Novogratz, the fabled co-founder of $47 billion New York-based hedge fund giant, Fortress Investment Group...

“Australia has been a region that punches above its weight in terms of the importance of its currency market as a casino of the world,” says Novogratz, who is heading Down Under to talk all matters macro at Citigroup’s annual investment conference in Sydney this week.

“In reality, the volume of AUD that is traded relative to the size of the economy is crazy, but because of it you have developed a strong trading culture.”


Yeh, thanks Mike. Go FY and likewise all of your ilk as well.

http://www.macrobusiness.com.au/2012/10/australian-dollar-the-casino-of-the-world/

It backs up what I was driving at in regard to China in my comment at October 22, 2012 4:48 PM on this thread. To whit:

The pathway to internationalizing their currency and breaking their dependency on the US dollar is to exploit the network effect - expand the use of the Renminbi in international trade.

If they can't accomplish this then making their currency fully convertible will turn it into a bigger version of the Australian dollar and the Mexican peso - a speculator's plaything as opposed to a trade currency.

victorthecleaner said...


A couple of comments.

The US government knows about freegold, that's for sure. If they didn't get it in the 1970s around the Kissinger-Ender discussion that I posted a while ago, they have certainly known that it is a possibility when the Jamaica conference "failed" (in their view) and both gold and foreign exchange was a possible international reserve. With the introduction of the Euro, it is virtually a certainty, albeit with unknown timing.

On the question of why is supporting the dollar right now, I took a look at the foreign holders of treasury debt

http://www.treasury.gov/resource-center/data-chart-center/tic/Documents/mfh.txt

you see that the main increase over the past 12 months was in: Japan, Switzerland, Singapore, Brazil, Ireland, Taiwan, Belgium, Norway, Caribbean Banking Centres, Taiwan, Luxembourg, Singapore. Not China. Not OPEC.

In Japan, I guess it was the government/BOJ with their currency interventions. Taiwan, Brazil, too? Norway is apparently out of the loop and got their sovereign wealth fund out of Euros into other currencies, apparently dollars. They'll figure out how good this strategy is. But for Switzerland, Ireland, Belgium, Caribbean, Luxembourg, Singapore, I guess the buyers are banks or their customers rather than the governments and CBs.

Now I have a question. Are these banks flat US$, i.e. it is their customers who have the exchange rate risk? Or do the banks have the T-bonds in their own books and somehow hedge the exchange rate risk elsewhere? If it is the latter, I guess the currency market might have become a bit unstable.

Victor

Woland said...

Hi Victor: I'm pretty much an ignoramus in this area, but
the yen is awfully strong given the mess they're in, and they
aren't accumulating the trade surpluses they had been, so
where do all the new dollars come from? It makes you wonder
if perhaps China is buying some yen with their unwanted dollars,
which has the added benefit of keeping Japan weak? Then Japan
has to do something with them, so they buy treasuries?
Just curious.

Robert said...

duggo, why would anyone blow a whistle? Why would either the buyer or seller want to disclose their actual price? There seems to be no incentive to do so.

What I think is a far more interesting question is this: Why wouldn't a giant fill at least part of its order at the lower spot price ? The answer cannot be "because that would break the market." To put it another way: I acknowledge there is not enough low lying fruit to satisfy the giant's appetite. The giant needs to get the fruit at the top of the tree. But after nearly filling his basket with fruit from the top, doesn't it make sense for the giant to at least grab the low lying fruit that is available? If the giant has already filled his basket, why should he care whether his final grab breaks the market?

FOFOA said...

Hello Robert,

You asked: "Why wouldn't a giant fill at least part of its order at the lower spot price? The answer cannot be "because that would break the market."… If the giant has already filled his basket, why should he care whether his final grab breaks the market?"

Perhaps this, from The Gold Must Flow:

Also, billionaires aren’t as concerned with profiting from revaluation as they are with simply preserving what they already have.

Another quick quote (of myself) from Think like a Giant:

You probably have more money than anyone else. At least you have more than 99.999% of everyone else. So would you like to double your money? I think not. At some point you’re like “holy shit, look what I got” and you don’t dare want to buy anything that’s likely to deliver you another windfall and draw more attention to your wealth than you’re already getting. So if you hear about Freegold, are you gonna pile in?

Your biggest worry is keeping what you’ve already got… not getting more. You’re even willing to lose some just to keep your profile as low as possible…


Sincerely,
FOFOA

DP said...

Costata,

Quite.

an ANT and Dec said...

If I may, I would like to ask some questions pertaining to the Oil-Gold-dollar subject.

If I understand it correctly,

1970-2000:
1970 US needs higher price for oil in $ to bring new production online.
Higher price would result in US soon running out of gold at the fixed exchange rate, so they renege on the gold standard.
For Saudi, for the oil to flow, gold must flow to them as oil is more valuable left in the ground than in accumulating ever inflating dollar tokens.
As no more gold standard, then Saudi deal: 1 bbl = $ price + Y% gold. System set up via miners, bullion banks etc to facilitate.
To keep the oil flowing, gold-oil ratio must be maintained, therefore gold price suppressed via paper gold market.
Credibility Inflation period.

2000 – present
Introduction of Euro and Washington Agreement. US $ loses its grip on gold which begins its march higher. Therefore oil must rise in order maintain the ratio.

Please correct me on above as needed.

So, to the present day and questions related to the current price of oil and actions by Saudi.

We see an oil price say $100 average brent/WT.
At the margin, the heavy oil, deep sea, tar sands etc need $80. So one could argue the downside to price is capped here for the longer term. As any sustained period below this would take this supply out and the oil is required by the market so we cant expect the price to stay below this (assuming no mega deflationary demand destruction).
On the upside, we know that above $120 the economy starts to struggle and the high prices cause recession so the price has natural break mechanism to the upside.
Now, we also here that Saudi needs $100 to balance its budget (but I expect @Victor is going to argue that’s because they are spending dollar tokens on military gadgets and the like as they cannot get the gold and that the Saudis don’t really need $100). OK.

So, my first question is, considering the $80-$120 range above. What influence in the bbl price today is the gold-oil ratio? The above would imply that today, this is a small secondary factor?

Now, we see that Saudi increases production, for no demand perspective reason. Why are they doing this?
1. Getting ready for some military event with Iran by US and stockpiling to release the oil and crush any spike price?
2. They want to reduce the price and kill the competition at $80 bbl? Then I ask, why would Saudi do this? Firstly, this would imply that the $ gold price has to reduce, yet this is constrained to the downside because of euro gold. So this action likely means less Y% gold for Saudi. Secondly, why is so important for Saudi to kill this competition, there is enough demand for their product and it also assumes that other produces have enough production to deliver the supply lost?

Any guidance is appreciated.

Edwardo said...

I'm glad you also liked that piece, Costata. I considered posting it, especially since one of its key paragraphs asserted something that I said here many months ago, namely:

"I. QE0: Insolvency of the Largest Banks in the Federal Reserve System

The most significant QE was not even called QE. It was the suspension of the Financial Accounting Standards Board’s (FASB) mark-to-market accounting rule 157 in April 2009. The rule required banks to value assets on their balance sheets at current market price or fair value, but since 2009, became what the banks hope it is worth or what they paid for it."

ampmfix said...

Thanks Jr, (sorry to barge in on the thread...) maybe I am too narrow and manicheist but, my doubt really is: since gold is 65% of the ECB reserves, Europe should not allow to have any of its real physical gold encumbered and/or outside the EU borders. The Germans must be worrying sick for not having all their precious home, no? what can be done? remember the "...don't hold it...don't own it". I don't see where your linked info applies here... Thanks.

costata said...

DP,
Great, I love talent. Don't care what convention says one should expect it to look like. Thanks mate, from the heart.

an ANT and Dec,

Economies (like people) acclimatise. If the temperature (prices) rise too quickly they can't adjust. If they (prices) rise slowly people can cope all other things being equal.

DP said...

Speaking of loving talent and going against convention with regards to what it should look like… when are we gonna see you debriefed? :-)

costata said...

an ANT and Dec,

Sorry my earlier reply was self-indulgent (relative to your comment) and abstruse. It doesn't matter where the German gold is. What matters is who owns it and the club who decides these matters. Germany is part of the club. Location is a matter of convenience once possession (ownership) is clearly established.

ampmfix said...

Costata,

So, if the US says to Germany: "sorry but we are keeping your gold" nothing happens?
Are you saying this cannot happen? will not happen?
I am talking stealing in broad day light just because we are stronger and we need it. This is similar to going to war without going to war, that is what I am fearing. If that happens, then the euro will have less than 10k tons, we are talking a fight to the death between the euro and the dollar all the time here aren't we? so why wouldn't the US do it, before rolling over? (FYI, the US sunk their own Maine in 1898..., so we shouldn't be astonished by dirty actions in times of need).

DP said...

A little more salt for that wound, Costas

RT @JamesGRickards: Main takeaway from #GoldSymposium in #Sydney: Chinese are buying gold mines in Western Australia faster than lawyers can write the contracts

Woland said...

Hi Ampmfix; Can Germany say, "Sorry we are keeping Ramstein?"
Gold the US can mine, or purchase. Not so Ramstein. My 2c

Jeff Snyder said...

@ampmfix,

While admitting that the US has no honor and is certainly not motivated by altruism, assuming that the US in fact has its 8300 tons of gold, your question reminds me of Fofoa's assertion that in order for FG to solve the world's international trade problems, the gold must be held widely enough - though that doesn't necessarily mean by its government or banks. It has no intrinsic value. If one person has all the gold, the gold is essentially worthless. If the US needs a functioning system of international trade, and since it needs oil and presumably wants an export market for its surplus food production and other things, it does, aren't there limits to how far it can go to expropriating the gold of other major players in world trade?

One has to wonder why Rickards has made it his business to stir up trouble in this regard. He is constantly reminding players on the world stage that a good portion of their gold is held in London and that if the US wanted to, it could simply keep that gold. Rickards is a government insider. What is his game, here? If the US wanted to be Machiavellian about it, the less said about this the better, but Rickards trumpets it in every country he visits.

Jeff Snyder said...

Sorry, I meant held in London and NY

JR said...

Hi ampmfix,

okay, can you tell me why "I don't see where your linked info applies here"

One more Comment to Moneyness

Rickards predicts the USG will take Germany's gold as a response to the collapse of the dollar. Does this make sense in light of the USG's needs at that time? The USG won't need gold or money. It will need continuity in a trade inflow of the real goods and services needed to run a large government and military.

FOA also said the USG would do these two things: hyperinflate the dollar and ship ever higher priced gold in defense of that failing dollar:

FOA (08/24/01; 10:54:30MT - usagold.com msg#101)

…the US will find itself shipping ever higher priced gold to defend an ever lower valuation of dollar exchange rates. With the world credit gold markets paralyzed in default and dollar credibility placed in question along with American economic stamina; physical gold will return to official hands in Europe in exchange for Euros. A paradox observed as high gold places more demand upon Euros and sends the dollar ever lower.

A little different than Rickards' prediction, wouldn't you say?[...]



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


ampmfix,

Which one makes more logical sense? The USG tries desperately to keep the goods and services it needs flowing in? Or the USG tries to hold the world hostage...

a hint:

if the US dropped out of the BIS to secure sovereignty over its confiscated gold, the BIS would halt all international dollar traffic and probably try to use those dollars to buy gold on the international free market.

ampmfix said...

Hi Woland, thanks, I don't know what would happen in a total disaster scenario like milamber was mentioning, that is what I am trying to ascertain. Maybe the US would just retire from its bases? who knows, I am not so sure things will not turn into something unforeseen.

JR said...

so ampmfix,

I wrote:

Gold is no good, its just a means to an end. Distinguish between "usable" wealth (goods and services) and "useless" physical wealth (gold). Useless wealth (stored purchasing power) is no good if you can't translate it into usable wealth.

http://fofoa.blogspot.com/2012/08/macrofreegoldnomics.html


Do you disagree the US needs foreign goods and stealing gold = international trade halts. Is the dollar that stable - the ROW might not want to initiate FG, but the US steals the gold and everybody just keeps supporting the exorbitant privilege as oil continues to be invoiced in dollars and the $IMFs rolls on?

Is it still true that: "I don't see where your linked info applies here"

Edwardo said...

ampmfix asked:

"So, if the US says to Germany: "sorry but we are keeping your gold" nothing happens? Are you saying this cannot happen? will not happen?"

In answer to your second and third question, FWIW, Jim Rickards has suggested the answer to both is yes. I don't think it's likely, but then I'm not in the know.

jojo said...

All Your Base Belong to us?

Indenture said...

costata: "A blistering HI to default their debts and a gold revaluation to recapitalize their financial system will put the USA right back on the top of the heap (but as a "first among equals").

How quickly do you see this blistering HI taking place? Could the HI be allowed to (or even flamed) into a frenzy so the devastation to the public is minimal? Hyperinflate over the weekend with RPG emerging Sunday night? (Because the US will fight for $ Reserve Status till the end even if it means destroying the lifestyle of Americans?)

ampmfix said...

Thanks much JR and Jeff Snyder, yes what you say is logical. I am just more geared into the Mad Max scenarios because of seeing the horrors that history shows us, humans haven't changed much in 10000 years so when the SHTF, I only envision terrible outcomes. I owe you a beer! (or some home made fruit liquor in my cavern).

matrixsentry said...

This idea that the US can and will simply move on Germany's gold, presumably other sovereign gold as well, is really not that interesting to me. If the US did indeed confiscate this gold it would likely do so with the covert blessing of the sovereign in order to extend the life of the $IMFS.

If the US was suddenly in possession of everyone elses gold, would its trade deficit magically disappear? Would the USG budget deficits magically disappear? Would the rest of the world continue to feed the insatiable US appetite for subsidized goods as a consequence of it's exorbitant privilege?

The US is already a golden outlaw. Does the rest of the world simply shrug and say "oh well, I guess they got us again?" I don't think so.

It seems to me the only use for other people's gold would be to defend the dollar. If gold was allowed to flow in defense of the dollar, nobody in their right mind would ever choose FRN over gold. There would be flow alright! That leaves the current status quo that cannot be sustained, where the gold sits as window dressing in an attempt to install credibility in the US and the USD. Who cares whether the US has 10K or 20K in gold if it can never see the light of day?

As long as the $IMFS is functioning it could be argued that gold within the system itself could be mobilized in its defense. We know that the phys. gold doesn't really move that much, just the claims to it. It really does not matter where the gold resides if the player is part of the club and still interested in playing the game.

A big move to bring gold home suggests a player senses the nature of the game is going to change in the near future. It would also be a signal to the rest of the players that the game is changing and as a result they too would be inclined to get their gold in hand. In short order the entire super-organism would be moving in a similar fashion to "get the gold".

Freegold.

As a retired Naval Officer I too was very concerned what my former employer was capable of. I realized after some contemplation that I was really most concerned about intent. The USG is certainly capable of anything and everything, no matter how unspeakable it may be. Think psychopath. However, what they are capable of and what they can successfully execute are two distinctly different things.

The USG will get away with as much as the super-organism chooses to allow, nothing more.

elgrilo said...

[newbie_comment]

On Structural Support For The $IMSF:

It seems like after Europe, China, Japan and the US banks there is not another “entity” in the system that is willing and big enough to provide structural support for the $IMFS by buying US Treasuries in sufficient quantity. Hence, once the banks can’t hold it anymore I understand it is Game Over for the $IMFS.

I would like to throw out a couple of questions:
- What will be the limit for the banks? Will they ever back off buying treasuries at some point (like Europe and China did) or will they buy UST until their balance sheets implode?
- What other unknowns would need to be known in order to further narrow down the timing for the phase transition?

I like this 01/2013-2015 timeframe. I’m a very tiny ant so I am not as resilient as the Giants :) For me, timing is important with regards to trying to establish my desired Au position (how aggressively do you save). In addition, seeing the end of the tunnel (not that I ever doubted that there was an end) makes it easier to sit tight during the short term turbulences that we will encounter.

It gives me chills how all the pieces of the puzzle are falling into place!

Thank you all for all the great comments. I’ve been learning something new every day for 2.5 years now (while also trying to improve my English :) ). I'm also loving the debriefs, after the shock of seeing FOFOA and his curtains for the fist time :D

[\newbie_comment]

byiamBYoung said...

About those curtains, shouldn't they be shinier and goldier?

RJPadavona said...

Hey milamber,

I knew you were from Texas. I remembered you talking about it before, but I forgot. I can't keep up with everything. All you rednecks look alike to me anyway :)

I suppose any scenario is possible, even if highly unlikely. As long as the $IMFS is still up and running, then of course some attack or "attack" could happen on US soil and get the people's veins flowing with red, white, and blue again.

But after a currency collapse? I doubt it. Without mentioning the points others have made about no funding for it, I just don't see very many people being "patriotic" when all their paper savings have been wiped out. And I don't think the public will fall for blaming the "furreners" for our problems this time. The genie's out of the bottle. Our debt levels and all the spending by the USG are a well known fact. I deal with the public for a living and they are very well aware of it. We can thank the internet for that. Without it, folks would still be completely in the dark about all things monetary.

And to paraphrase costata, the US gets to put the "cherry on top" of their role as the largest deadbeat debtor the world has ever known. They get to shit all their creditors with the push of a button and a one-time huge gold revaluation. It's a no-brainer to me. I mean, what would you do? Would you wipe away your worries with the push of a button or take a chance on fighting a war that you most likely won't win? Like I said, anything is possible, even if highly unlikely, but I tend to think the 'path of least resistance' will prevail.

PS: Don't you watch 'The Walking Dead' on AMC? It's the armed rednecks who're killing all the zombies ;)

"In working on this project, I was personally shocked when I discovered that we absolutely NEEDED armed rednecks in order to set Zombies free-- free from their own, personal Hell on Earth."

Sorry for that, Ari. But you inspire me in more ways than you can ever imagine ;)


RJP


matrixsentry said...

Interesting times.

My journey here was really a tour de force. I ended up visiting many camps along the way to sample their hospitality. One of those was the sovereign money camp, populated with people like Bill Still and Nathan Martin (former airline pilot turned blogger). I suppose I was attracted to the idea of sovereign money because I somehow sensed that money was really a mental concept and literally anything could act as unit of account and exchange. I had just left the HMS camp because I found them to be a bit silly and living in a past that held little to no relevance to the present.

What made me say goodbye to sovereign money bugs was that they had no real answer to who would actually limit(in what manner) the sovereign when it takes over the money system from the banks. It seems Bill Still had faith in the rabble mob and its capacity to reign in the elected government. Yeah right! Nathan came up with an idea of 2 independent councils, one that administers the system and its money supply while the other compiles economic data that the other council would use. The details aren't really important, it was ridiculous. There was a death penalty involved if someone on either council was found to be compromised by special interests! No shit.

I was amused to see the Zerohedge article on the Chicago Plan revisited. It essentially is a sovereign money scheme. The question is posed at the end, who limits and controls the sovereign? Same old question. The conclusion is that one of 3 things must happen to sustain such a scheme:


1. Gold would need to float freely and not be taxed, as it is today, so that it offers an unadulterated safe-haven savings outlet for those who fear the eventual diminution of purchasing power (thereby acting as a natural disciplinary threat to fiscal profligacy), or;

2. A gold standard would need to be imposed and honestly maintained (perhaps using the devaluation and re-pegging we have often described), or;

3. The fiscal/monetary agent would have to suppress the flow of capital into safe-haven assets thought by nervous savers to offer better prospects for future purchasing power retention than traditional financial/leveraged assets (e.g. precious metals, scarce resources and operating utilities).


So Freegold, or a gold standard that cannot work, or the current status quo or worse. The worse is of interest this morning I guess, where the fiscal/monetary agent is no longer satisfied to play with the levers and manipulate expectations in order to steer capital away from competing stores of value. Now it limits access by brute force. Confiscation, punitive taxation, war, etc.

I think some gravitate to solution 3. because it is currently what is holding the $IMFS together and is all that anyone has ever known. We know that control is being lost and the management of expectations mechanism is coming undone. The natural inclination is to believe the government will resort to the boot when we slip free of the velvet handcuffs.

As has been noted, the USG will endeavor to fix the broken printer. Freegold is far more conducive to normalizing the world to something that is recognizable to the present day situation.








matrixsentry said...

OK, I want to add HardSocialist to the list of people who need to be de-briefed. This guy is a visionary! He is the toast of Twitter!

Woland said...

Speaking of "broken printer", over at Barry Rittholtz's The
Big Picture blog;

The new 2013 order for currency to be printed is in;

Total Value...............473 billion
100's............440 " average lifespan 18 years
1s and 5s 10 " " " 4.5 "
20's and 10s 23 "

Just a warm -up?? (available in regular or extra crispy)


Bjorn said...

@Matrix
I assumed it was one of DPs personalities. :-) If it´s not, then I heartily second your motion.

John said...

Okay, I've been a lurker for a while, but have a question for you all.

Is there anything the U.S. could do, even just theoretically, to enact FreeGold? Would it simply be a matter of balancing the trade deficit with gold? Obviously, if that is the answer, that is not politically tenable. That would take a lot of gold! Is that one of the reasons that hyperinflation is the likely precursor to FreeGold?

Indenture said...

German Gold

burningfiat said...

John,

May I highly recommend:

http://fofoa.blogspot.com/ncr/2011/04/reference-point-gold-update-2.html

As an answer to your question.
The perhaps surprising aspect is that US gov. doesn't have to sell a single ounce...

/Burning

Edwardo said...

I think this story is relevant given some of the subject matter under discussion here of late, i.e. warfare and the ushering in of freegold.

Michael dV said...

RJP
I think your assessment is correct. I too talk to people all day long and at a minimum they know 'something' is wrong and it is a problem with the government. I see a great sadness like in the Depression as opposed to a great furor like after Pearl Harbor in our future here in the USA.

Woland said...

Matrix:

Thanks!! Now I know where to go when I need 2 B cheered up!!

Michael H said...

duggo, Robert,

In my view, there is a distinction between two different 'valuations' for gold and two different 'prices' for gold. You seem to be thinking of the latter situation, whereas the former is more likely to be reality.

I.e. if you sell oil and want gold in exchange, you don't really care about the price of either item, only how much you give up of one to get the other. Prices don't even enter into it. Possibly even the ratio of prices don't really matter, either (in the case of oil, for example, what you care about is how much gold you are left with net of expenses, so the basic gold:oil ratio may not tell the whole story).

And if you are a CB looking for gold, you also have to put a value on 'international stability', as well as 'international cooperation' i.e. peer pressure.

The reason GATA, etc. haven't found out about it is because the gold was never exchanged at a second 'price' and so there is no paper trail to follow.

...

costata,

You are on fire. Glad to see you active again in the comments section.

victorthecleaner said...

ANT and Dec,

1970-2000: 1970 US needs higher price for oil in $ to bring new production online.

I'd say 1970-1981. Around 1980, the ROW must have decided that there is no viable alternative to the dollar, and when "Volcker stopped the inflation" (which is only half of the story), everyone else started supporting the dollar again - otherwise Volcker would have simply had no chance.

I'd date "the old agreement on the gold/oil ratio" around 1981/2, the one "that went out of the window with the first gulf war" (1990/1). So between 1981/2 and 1990/1, there was already firm international support for the dollar in place, guaranteeing that oil is sold for dollars by promising the ME some gold/oil ratio.

After "the old agreement" had gone out of the window in 1990/1, I guess, the expansion of the London paper gold market started in order to entice Western private holders to sell gold and in order to allow the oil countries to purchase claims on forward gold to be mined in the future. So between 1991 and 1997, the gold/oil ratio was stabilized using the London (paper) market. In 1997, the system had become so unstable and Big Trader (China) started buying too much. The European CBs had to bridge the period 1997-1999 by selling some of their own physical (or by leasing it and shipping the physical, knowing they would not ask for it to be returned - this is the origin of the post-1999 European official gold sales according to the Washington Agreement).

I get roughly the following schedule:

1971-1980: US/UK want dollar oil price high (in order to develop their own resources and to become independent of ME oil)

1980-1990: Rest of world wants dollar gold price low (in order to support the dollar). Note that if the gold/oil ratio becomes too high, there is not incentive for oil producers to demand dollars. They would go straight for gold (or, if there is a freegold currency such as the Euro, perhaps for that, but we are not there yet).

1990-1997: Rest of world wants dollar gold price low and they are so good at it that the gold/oil ratio remains stable even if the dollar oil price falls. Very nice for the economy. Unfortunately, too much leverage in the paper gold market and once China starts buying like mad in 1996/7, the thing blows up.

1997/8: Euro CBs start selling some of their own gold in order to lend life-support to the London gold market until the Euro is introduced.

1999: Euro CBs pull the plug (Washington Agreement) and stop supporting the London gold market. Signal to the BBs that they are left alone (still get some emergency help from Gordon Brown?), and signal to China that now it is China's turn to support the dollar if they so wish.

2001-today: Nobody is holding the dollar gold price down any longer. The US cannot sell gold (have defaulted on their gold debt, is a credibility issue). Europe has decided not to sell (not that there is no physical gold leaving the FRBNY vault after 1999).

If US want to stabilize the gold/oil ratio, the only way out is to raise the dollar oil price. Bad for the economy, but as long as the gold/oil ratio remains in the historical range of 10-20, oil producers still sell for dollars.

It gets more and more difficult though. I suppose there is still not sufficient physical gold to go around, and oil producers withhold production which drives the dollar oil price up. If that's not enough, there is a certain style of "foreign policy" that helps driving the oil price up (see Iraq, Libya, Iran).

US oil production responds to increased price, Canadian production responds fantastically, but as of today, America still imports about 3.5 million bbl/day (worth about $130bn per year - I have included only imports from outside the American continent here).

If you take a look at gold/$ since 2002, you might think there is an agreement on a 20% annual increase. The best fit is 19.56% as of summer 2012.

...

victorthecleaner said...

Now, we see that Saudi increases production, for no demand perspective reason. Why are they doing this?

Yes, I also think that SA is producing about 1mm-2mm bbl/day more than is consumed. And a lot of this is shipped to the US and apparently not consumed. The 'missing' oil is probably around 200-300mm bbl.

Marshal Auerback thinks it is inside the SPR, but still owned by SA. As of today, the SPR has a listed inventory

http://www.spr.doe.gov/dir/dir.html

of almost 700mm bbl. That would be about 9 months worth of non-American imports.

Why are they doing this? As you say,
(1) Once there is some military action in the ME, they have enough inventory in order to keep controlling the price.
(2) Saudi Arabia is shutting down the special deal with the US and deliver on all the forward sales. FOFOA speculated this already in March of this year when the anomalously large shipments from SA to the US started. But so far, nothing has happened.

"Killing the competition" by SA is a done deal in my opinion, but only after the dollar has ceased to be the oil currency. When? No idea.

My understanding is as follows:

Saudi Arabia has little incentive to stop selling oil for dollars. They know that once they stop, the dollar will be in serious trouble and gold will hugely go up in real terms. But oil is tied via the economy to the general price level, and so oil cannot go up much further. So once SA stop accepting solely dollars, the gold/oil ratio will explode - Another has called it "gold devaluing oil". I think SA knows that this will happen one day, but they have no incentive to accelerate this process. Same with many other oil producers. They have enough dollar reserves and can now limit production and leave the oil in the ground. No need to act.

The problem is that slowly, everybody gets painted into a corner. Europe has made sure that the dollar gold price keeps increasing (they basically forced Asia into a race for the available gold). The US have to stabilize the gold/oil ratio. Unfortunately, this implies an increasing dollar oil price which is bad for the economy. Everyone knows this will end badly, but nobody has any incentive to move.

It seems that China has moved though. By ceasing to monetize Treasury bonds in the summer of 2011. Since then, the dollar has been supported only by investment money, a lot of which is probably just trying to escape from what they call the "Euro crisis" (which is BS and which is going to hurt them seriously). But (hot, muppet) investment money is disloyal. It will leave as quickly as it came once the tide turns.

If I had to guess who will push the $IMFS over the cliff, I'd say it has already happened, and it was China who triggered it in 2011. Now the fuse has been lit. Everyone else (Euro zone, oil producers) is sitting tight and watching.

Well, according to what costata cites, the CBs have offloaded quite a bit of dollar reserves to the commercial banks and their customers. Everyone gets what they deserve?

Finally, I wanted to add that I agree with costata that the US has a huge incentive to HI the dollar, and to do so in a flash that surprises everyone, and only afterwards to use their gold.

Victor

Nickelsaver said...

Michael H,

Thank you for representing in clear fashion how "the price of gold ISarbitrary"

John said...

Burning,

So simply marking the US gold to market prices would enact FreeGold? I'm failing to see the connection.

milamber said...

Thanks to all for the responses. My work schedule just got changed, so it'll have to wait to get back to you ( I thought I would have more time this week)

But real quick before I head out:

G/O ratio is essentially what KSA uses to determine if the oil is going to flow. As long as they can exchange $ for G at a reasonable ratio (I think the avg has been 10-20) then the oil flows.


RJP,

"Hey you! Dumb ass! Hey you in the tank! Cozy in there?" :)

Costata,

Thanks for your comments & the link to VoodooEconomics. That is a must read/site to follow IMO.

Jared's collapse is good, but he tended to view everything from a purely environmental perspective, IMO.

Out for a few days...

Milamber

Nickelsaver said...

John,

The reality of a future freegold economy is made clear in the complete understanding of "... where we have been", together with where we are right now.

We have, at present, credibility deflation of the dollar, as well as credibility inflation of gold (obscured by a paper gold market).

We see that the flow of credibility is shifting from one to the other. And this flow into gold is a mixed bag which which will ultimately end with the credibility collapse of paper gold, giving way to a physical only market for gold.

The MTM gold on the ECB balance sheet represents the forward thinking of its designers, in that it anticipated this flow of credibility.

It does not require itself to initiate freegold. It is positioned simply to perform in it upon its arrival. And its arrival requires all of the entropy of the current system to be exhausted.

As for how and when that will happen, you are in good company with those who are wondering the same thing.

Nickelsaver said...

John,

The reality of a future freegold economy is made clear in the complete understanding of "... where we have been", together with where we are right now.

We have, at present, credibility deflation of the dollar, as well as credibility inflation of gold (obscured by a paper gold market).

We see that the flow of credibility is shifting from one to the other. And this flow into gold is a mixed bag which which will ultimately end with the credibility collapse of paper gold, giving way to a physical only market for gold.

The MTM gold on the ECB balance sheet represents the forward thinking of its designers, in that it anticipated this flow of credibility.

It does not require itself to initiate freegold. It is positioned simply to perform in it upon its arrival. And its arrival requires all of the entropy of the current system to be exhausted.

As for how and when that will happen, you are in good company with those who are wondering the same thing.

burningfiat said...

John,

All right, Maybe US Gov. MTM'ing their reserves would not be enough? Who is this little ant to tell?

If the world still didn't get the message, US Gov. could say: "All right boneheads, as you still don't seem to understand, from now on we will buy all your gold. Starting at the price of $10K".

Let's see where the gold market goes from there?
Hey! Look at that! US gov. still hasn't lost an ounce by this strategy... Amazing, huh?

/Bunring ;)

an ANT and Dec said...

Thanks Victor, that is excellent information.

#Saudi Arabia is shutting down the special deal with the US and deliver on all the forward sales. FOFOA speculated this already in March of this year when the anomalously large shipments from SA to the US started. But so far, nothing has happened.#

Why do you think SA shuts down this special agreement. What is the something you expect to happen?

Other than FOFOA/FOA/Another, do you have more sources that help to corroborate the timings, fit the pieces together?

Jeff said...

Hi ANT,

If you are looking for historical documents I suggest you see Mortymer's anotherfreegoldblog, also his RevisitingGordonBrownsbottom, linked in my signature. You will have to read between the lines; on the other hand, why do you suppose so many research, white, working, and official papers discussing gold came out from the 1960s through the creation of the euro, and that discussion seems to have stopped? Maybe the work is done, and everyone is just waiting now.

anand srivastava said...

I don't see how USG can revalue gold. Yes they could try to buy gold in the open, but that will probably not happen, assuming that the USG will not revalue gold before HI.

Rest of the world will not prefer to sell gold in USD terms because of the HI there. US People will only sell so much gold as required for their survival. So this strategy doesn't help US.

I would think this strategy works well for Euro, as its currency will be stable during USD HI. Other people will sell their gold, to obtain Euros, in non Euro countries as well.

Once revalued in Euro, the USG can then recreate a currency by lopping off several zeros from the USD, and possibly pegging with Euro. Also they will bring out their gold and use it for reserve.

It will be easier for USG to defend their currency after the HI, as their deficit would have gone down in real terms. They would also have probably reduced their expenses a lot.

burningfiat said...

Anand,

I don't see how USG can revalue gold. Yes they could try to buy gold in the open, but that will probably not happen, assuming that the USG will not revalue gold before HI.

I agree to a large extend! And I actually also think FOFOA agrees, and agreed when he wrote "Reference Point: Gold - Update #2".
I think of this discussion with John as a "what if" question.
John's original question being:
Is there anything the U.S. could do, even just theoretically, to enact FreeGold?

So yeah, theoretically it could be done... Is it likely? No!

It will be easier for USG to defend their currency after the HI

Agreed!

H. M. Socialist said...

Bah! So you freegolders want to debrief me eh? Maybe I would do it, but I am afraid the bright light of my hard money knowledge would burn your eyes! You would have to be careful not to watch it all in one sitting or you will truly go blind as the falsity of your so-called freegold is annihilated by the light of my hard money truth!

Just a preview of my incredible knowledge: did you know that fractional reserve banking effectively increases the money supply by enabling credit to circulate as money? It is true. How will your freegold stop the banking elites from robbing the people if you don't eliminate FIAT CURRENCY which allows these bankers to lend out something they don't have?

I have pored through every article on this site and the archives multiple times (I can speed read), and not once have I seen this issue addressed.

Greetz,
HMS

Franco said...

H. M. Socialist: you are funny

Michael dV said...

HMS guy
you are our second speed reader lately. You are quite a breed apart!

Michael dV said...

Anand
I do not think the USG will be able to 'defend their currency', not if it is the same dollar. I suspect there will have to be a restatement of the currency to wash away all prior claims. The USA will have to emerge with a sparking new piece if paper that is clearly differentiated for what we have now. It will likely have the dollar name (maybe not) but my guess is it will have better colors and maybe cool 3D features. In this way the American public can be confused into thinking that part of the reason for new money is to improve the look and feel of cash. At the root however will be the need to break any claims against the dollar we now have and against any claim on the gold that used to back it up....a fresh start for a new, improved monetary system.

Jeff said...

HMS,

Which is the bigger threat; the illuminati oligarchs systematically turning the world into a giant prison camp from which to harvest your organs in the final act of their 1000 year fiat money fiesta? Or those whiny, Trabant-driving moochers living off your outrageously high taxes, stealing the sauerkraut off your hard-earned weinerschnitzel? Or are they in cahoots?

Greets!

p.s. Please don't show us your weinerschitzel.

matrixsentry said...

I want a HMS vs FOFOA cage match!

/SleepingVillage/ said...

Would it look like this?

Marc said...

I am new to this blog. Heard Joe, Silverfuturist, mention it.

I have read "The Return to Honest Money". Have to get use to reading FOFOA long writing style.

Have watched all Debriefed videos on you tube.

I thought best place for me to start is in reading all of "Another's" post. Just finished about reading about 75% of them.

Any others that are new can find Another's posts at http://www.usagold.com/goldtrail/archives/another1.html

After finishing Another's post, I will read a few post on here.

I do like the idea of free gold and not a return to a fix gold standard. I do like both gold and silver, but do realize that silver did drop in price during last major super cycle.

I will hold off questions until I read more of the excellent posts of many.

Since you guys have shared so much, I will pass a subject area that have been very enjoyable to me. It is Nikolai Kondratiev and his cycle theory. A few sites post his work. Basically, western economy goes through cycles. His work was later broken down in 4 cycles, spring, summer, fall and winter. Some believe we are in dead winter right now which makes gold the best investment.

Just received, The Long Wave Cycle by Nikolai Kondratieff.

Winters said...

re: the deployment of the US military when SHTF.
I'm wondering whether the military is likely to be deployed domestically.

When the messy ball of HI/FG hits then along with people's $USD savings, the procession of cargo ships into the US will quickly evaporate unless gold starts to flow from the US coffers to the widget makers in China/Germany/etc.

It seems more likely the army etc will be needed to maintain order when people can't go down to Walmart and fill up the cart with cheap Chinese goods.
They might also be otherwise occupied enforcing executive orders from the Govt to ensure it's feeding tubes stay in place while the flow of gold is organised.

It seems unlikely they will head to Shenzen and storm the factories to force iPad shipments to continue. The Chinese may be busy themselves when all those factory workers suddenly face a drop in demand as the USG goes cold turkey on it's consumption habit.

Just thinking out loud.

Aaron said...

Hello Marc-

From FOFOA's Just Another Hyperinflation Post - Part 1:

I tend to agree with 99% of what the deflationists write. For the most part they are masters at analyzing the minutiae and then painting it into a grand macro picture. I like the Kondratieff cycles and I agree we are in the winter cycle. In fact, almost everything most deflationists describe will probably happen, in my view.

Woland said...

Jeff: Keep speaking truth to power!! (also) via Bloomberg:
"Coastal Chinese cite shortness of breath as U.S. shipments
of oxygen, nitrogen (via empty containers) continue to fall."

RJPadavona said...

Hey MdV,

It's true that the public at large know something is very wrong. Although some seem to be content blaming Obama, most folks I talk to take the position of "throw em all out".

And even though we hear plenty of talk from our leaders that China are cheaters and currency manipulators etc, what I hear from the man on the street is that we've been sold out by our own government. Most blame free trade agreements and GovCorp collusion. Doesn't sound like a group of people who plan on putting their life on the line for a gang of profligate spenders, does it?

I agree with whoever said it earlier (I believe it was costata) that future conflicts in the US will be of the internal persuasion as opposed to foreign ones. I hope it doesn't come to that, but I sure am glad I've got the DNA for it ;)


RJP

Edwardo said...

Pardon the non sequitur, but I could have sworn that the photo that goes with the Deutsche Bank Explains Why We Hoard Gold post no longer seems to have the caption that read something along the lines of "This is a picture of one of my reader's personal hoard."

Aaron said...

What's up Edwardo-

My bad. I asked FOFOA to take the caption down.

FOFOA, you can put that caption back up if you want to.

costata said...

Woland,

Here's why the Yen has been so strong.

http://www.kitco.com/ind/Saville/20121010.html

... over the past 20 years the annual rate of growth in the Yen supply (Japan's monetary inflation rate) has oscillated in a narrow range around an average of only 2%, and that it is presently near this long-term average. This is illustrated by the following chart.

The fact is that of the major currencies, the Yen has had by far the slowest rate of supply growth over the past two decades. That's why the Yen has maintained its purchasing power and why it has been a relatively strong currency on a long-term basis despite the many blatant short-term negatives...


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