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465 comments:
«Oldest ‹Older 201 – 400 of 465 Newer› Newest»Forgive me I'm not a great writer and its probably not news to anyone, but this obsession with the gold silver ratio and it reverting to some historical mean grates with me so I had to let off some steam. Feedback is welcome.
http://apiigongold.blogspot.com/2012/11/the-gold-silver-ratio-and-reversion-to.html
The big problem for people arriving at FOFOA and struggling to agree with some of the conclusions, is they come with various preconceived ideas they have picked up and assimilated elsewhere, regarding various aspects of the nature of reality.
When one is exposed to what are often 180° opposite views compared to ones own beliefs, it's natural to quickly become defensive and attack "the bullshit". Most of us have been there to varying extents. Most of us arrived with similar perspectives to the ones we see arriving all the time. We have simply adjusted our own understanding of reality as we have questioned for ourselves which perspectives have the most merit in our own minds.
What is required to better understand some of the more widely-held views here, that just seem so plain wrong at first to most people, is to suspend disbelief. To set aside the particular opposing belief you hold for a little while and substitute "the wrong one", then just take your model of reality for a spin again and see if the replacement part is really wrong or not. Or does that replacement part expose some deficiencies in other related parts of your view, which you realise you need to revisit as well. You can always swap all of those ideas back and be your old self again in no time. If that is the case, you're your old self but with more confidence in your views. Winning!
It's impossible to convincingly rebut a view that you don't first properly understand. If you find it really is wrong - GREAT! We all want to know details of why and how please? But you need to demonstrate a reasonably full understanding of an idea you claim to be wrong, before you can convince others as to why it is wrong and they should follow you in rejecting it.
Thank you!
BB: "My understanding of freegold pricing is that it would be priced naturally in that all fiat / available Gold would = spot price (rather than the current demand vs supply pricing which is obfuscated by paper markets), so if all fiat is the ocean and rises and falls then Gold is the surface or something sitting on the surface and it's height/price represented by the amount of water underneath...?
I don't know why you us "fiat / available gold" instead of 'the gold someone wants to exchange for fiat at a given price'. How about this for the Ocean Analogy. All fiat is the ocean, however, just like a tidal wave, if you took a cross section of the ocean and defined columns of water labeled 'Dollar', 'Yen', ect., the more water in the column the higher the surface level. So, the more currency in a column the higher the gold on top would float. Looking at it from the side in motion over time we would see waves and undulations as economic zones printed currency, dumped it in their column and the price of gold in their currency would rise/float higher.
From the side, over time, it should look like waves.
BB,
I'll try to explain. And I'm confident most of the other discussants will abide.
Jeff said...
"These Giants are not interested in "catching the top" like Western traders. They are interested in storing purchasing power well into the future."
Good for them. They want to amass vast wealth and establish or perpetuate some sort of empire, across generations. That's not me. I want to catch the top (or something near it) and enjoy my life and do some cool stuff. Anyone who wants to amass vast wealth and establish an empire at that level -- a neo-feudal global fief -- is, quite likely, a psychopath and criminal.
Anyone who wants to amass vast wealth and establish an empire at that level -- a neo-feudal global fief -- is, quite likely, a psychopath and criminal.
Or (and I do realise this is much less exciting) a Central Bank, holding tight to it's reserves for the long term and having no need or desire to divest them. For the common benefit of all who use their currency.
Bullion Baron,
"Can you specify where I went wrong in more detail? I don't see how the first couple of sentences are incorrect, they are simply missing detail that you think is relevant."
Your definition of Freegold is fine, except that it omits the MOST important characteristic: that physical gold is freed from the straight jacket of paper gold pricing. As long as paper gold=physical gold, physical can't be correctly valued.
It's like describing an airplane fairly accurately, but leaving out the fact that it flies through the air.
Cheers
Alan,
I didn't say it; that was a FOFOA quote which you put your own conspiracy spin on. I'm not a Giant either, and like you I walk in their footsteps for the revaluation. Unlike you I'm not burdened by your preconceptions about reality, so I won't try to trade my way out of gold at precisely the wrong time. You aren't the only 'hard asset' guy around here. Alfa or beta sees things as you do, and I'm sure HMS will be along to give you a slap on the back for fighting the evil empire. Greetz.
Nickelsaver> thanks for your time to write down your/FG perspective and preconditions: 1/paper gold burning 2/HI event of the global hegemon-US. I've read it numerous times here, it belongs to the FG narrative - I understand it and I don't question it per se.
I'm just very uneasy with the concept that ~6months after global hegemon going through HI event there will be such advanced infrustructure for FG implementation. I'm not necessarily painting here with some doomero ww3 brushes, but this will be the mother of all possible dislocations in terms of global commerce, food distro and what have you.
Simply, times when ants will have even less propensity to safely flash out their pile and not been eaten by some tax scheme etc. Simply, FG comming shortly after hegemons HI will not be comparatively the same world in terms of the remaining individual rights and freedoms, it might be much worse, i.e. ants will be crushed.
Alan:
I want to catch the top (or something near it) and enjoy my life and do some cool stuff.
I don't see how you will enjoy life by catching the top.
Yes to spend you need to convert your gold into cash. But will you spend all your wealth in a very short period.
You do know that cash depreciates.
I also have the same aim in life. But I do understand that gold will appreciate till the crisis, and after that it will revalue to something real high.
I am expecting to be working for some time before crisis. I do earn enough to enjoy my life in the current system. So I don't think I need to spend the gold I have.
When I do lose my job due to the crisis, I will be spending the gold I have for my enjoyment. I will not live in poverty even when I have gold.
There is a small period of time between the crash of paper and revaluation of gold. For that time I hope to have my daily necessity stuff, and hopefully some Euro.
After revaluation I will diversify some of my gold into land and stocks. Before revaluation I don't think there is any better saving vehicle.
What is your plan for the future after catching the top? You will get all the cash you want then what. Will you keep it all in cash and suffer the inflation tax? Or do you have something else that you will do.
I think it has been nicely commented upon by someone else and much eloquent and wiser than me, that the way-shape-and-form how the EU emerges (or not) from this crises will be the telling test for the potential FG establishment. Simply, the europeans still don't have the full structure of their house in order (parts still missing like full monetary and fiscal union, incl. bank union, ecb bonds etc.) Meanwhile, there is ongoing and slowly-rapidly growing h.a.t.e. against anything related to the common union, and it spreads from south even to the core countries as of now. I'm not talking ZH/anglosaxon articles, but on the ground living reality, new member states and old ones alike.
What this FG community has not much discussed is the possible scenario: FG was planned but not delivered, botched by this generation of incompetents. And what to do now? My term is "aborted FG", i.e. forced halfbaked solution because of int/ext preasures inside the EU, which is almost idolized overhere, by people not living there (here).
alfa-or-beta: "I'm just very uneasy with the concept that ~6months after global hegemon going through HI event there will be such advanced infrustructure for FG implementation."
The ECB marks it's gold to market every quarter. so perhaps no more than three months can go by with a gold price at a certain low point. What that price is I don't know but there must be a price that the ECB gold cannot go under or it would crack the books.
alfa-or-beta: Or do you mean something like an international law that states 'no party can be forced to pay a debt in gold'.
Clyde Frog, you're my kinda people!
USAGOLD poster Belgian used to emphasize that the EU is not the ECB, the EU is center left and the ECB center right. And the EU is not the euro.
Oh, and a hello to Belgian, he might visit us again?!
@ Victor TC
"That depends on the U.S. imports and exports, doesn't it? E30/bbl Brent and $80/bbl WTI, both in today's purchasing power. Oil and gold never flow in the dame direct, or do they? Can you hear the sucking sound?"
Basically I am asking if the N America cost of production stands or not. If not then all of the oil sands projects in Alberta will be shut down and there will be an epic depression in Alberta. Allot of sovereign oil companies have projects in the sands because they can own the resource in Canada.
Alan 2102:-
If Gold, as represented by $PoG can allow you to do all the cool stuff then good for you Squire ;-)
...however, Gold is (for my 0.02 anyway) best thought of as a Here-'n-Now asset not associated with such trivial persuits.
You Sir (and we of the "West" generally ...incl Myself) have had the luxury of a life where the "H 'n N" was not a daily (hourly) consideration.
Life, and the day-to-day living of it, is (maybe was) generally predetermined ie:- Tomorrow is going to be 99% the same as Yesterday.
Large swaithes of the Global Population are not THAT fortunate and have to live in a constant state of "readyness and preparedness" ...a "liquid" life and death situation.
Understanding these on-the-edge circumstances of life and you will I'm sure enhance your understanding of GOLD.
Indenture> we all know about ECB's gold sheet. Again, the issue here is simply the question as to wheather after the earth shaking event of HI in global hegemon U.S.A. is there going to be the same and intact ECB to begin with.. There could two speed europe/eurozone, there could be total chaos and some makeshift panic hard metal standard, there coould be some federal fiat-FG based "teutonic-nordic league" without France and the pigs etc.
There needs to be some doze of sober reality, FG is fine theoretical concept for optimistic transition on more or less pinky milky way background.
alfa-or-beta: An intact Euro System you ask. Somewhere I remember something along the lines of, 'If the Dollar fails, and there is not a currency to take it's place, not a reserve currency but a currency traded for oil, then a hard money system would be forced on us and no one wants that for international trade'. (more knowledgeable people will correct me if I'm wrong)
From a shrimp point of view chaos seems logical, from a Giant perspective I do know that 'the oil must flow'.
So we have the Dollar inevitably failing and a world in need of a Medium of Exchange to bid for oil. It is my understanding that the world needs the Euro so I'm not too concerned about it's demise.
alfa-or-beta,
Simply, the europeans still don't have the full structure of their house in order (parts still missing like full monetary and fiscal union, incl. bank union, ecb bonds etc.)
What this FG community has not much discussed is the possible scenario: FG was planned but not delivered, botched by this generation of incompetents.
The latter complaint sounds like a familiar one. As to the former: why do you think a fiscal union in necessary for the EU to function under freegold?
Further, freegold does not *require* the Euro. Sure, having a functional Euro will be of great help, and I admit that if the Euro fails then freegold might be delayed -- *if* such a delay is possible at this time. While Europe and the rest of the world was able to support the dollar after 1971, today is not the 70's and the ROW may have much reduced capacity to provide support.
BullionBaron,
Since, as costata said, reading FOFOA's entire blog and comments is a bit much, if you are interested you can begin with the ANOTHER and gold trail archives, linked to the left on FOFOA's blog. Still a lot of reading material but at least there's not the day-to-day distractions of new comments and new events to analyze.
My understanding of freegold pricing is that it would be priced naturally in that all fiat / available Gold would = spot price (rather than the current demand vs supply pricing which is obfuscated by paper markets)...
This sounds like the old hard money falacy where all currency should be backed 1:1 by (official?) gold. For alternate viewpoints, see:
Moneyness
Moneyness 2: Money is Credit
and maybe this one as well:
Glimpsing the Hereafter
costata,
LOL! Yeah, I wish I had Drew's money. I'd convert it into wealth ;)
You know, I never was very good at those pick up lines. I never could get the punch line quite right.
I once asked a girl "Did you fall from heaven? Because your face is really fucked up." :D
Alan:
Anyone who wants to amass vast wealth and establish an empire at that level -- a neo-feudal global fief -- is, quite likely, a psychopath and criminal.
OMG, that's the best argument against capitalism since Francis, or even K. Marx!!!
Hoarders are evil! Evil-hoarding useless wealth (yellow stones) is indeed criminally and psychopathically EVIL!!!
If you think I'm a jerk and this comment is too sarcasmic, go read the real kick-ass comments by DP, Anand and OBA above!
Seriously, to all those considering getting OUT at top, or at the right time. Out into what? What will you get out into?
To me, the no-brainer test is:
*) Is paper-gold still trading?
If paper-gold still trades at price of over 1% of physical gold price, we're not there yet. Hold onto your real wealth while the promises burn.
I pity the fool who sells his physical gold-wealth in vicinity of par with COMEX or LBMA futures _at any currency price_.
/Burning
RJP, that was a good one!
Burning,
http://2.bp.blogspot.com/_2RIMmCYczdo/SpmmvBQ2fzI/AAAAAAAAAB0/ittAgRrMXNY/s1600/mr-t.jpg
Shit, even Mr. T predicts pain during the fight.
I would say it's none of my, or anyones, business what someone does with their wealth - or their motives behind acquiring an "empire". Yes, some psycho/sociopaths have built empires, but it's by no means a prerequisite.
Lame, socialist-leaning, nosey bullshit.
I know Silver is generally a "verboten" subject but after a couple of glasses of rouge who cares.
Does anyone, like me, find it hilarious that all of the sites like Silver Doctors are begging people to buy their Silver in any quantities at knock down prices when they continually talk about the unbelievable shortage of Silver and it's dastardly manipulation?
In my earlier comments where I impute that stock matters more than flow relative to timing, I should have clarified what I mean by "matters".
Let us say that the Western Central banks do not have nearly the amount of unemcumbered physical gold claimed on their balance sheets (which comprise such official reports as the WGC's on global sovereign gold).
And then let us say that BRICS and the M.E. hold much more real gold than they admit to.
And then suppose that this coming week, we have a few particularly pissed off screaming Giants setting off "still no delivery" panic alarms ... and within days we see the destruction of the current fiat gold market.
What matters in that scenario are the sheople all around you if you live in US Dollar land, going realtime batshit with roaming poachers and other desperados, a marshal law lockdown, desperate government actions, general panic and lunacy everywhere etc... for six months ... as 2 possible CB/BB scenarios play out:
1) NY and LONDON have physical but it is nearly all technically owed to CBs/Treasuries on the strong side of the Freegold currency bloc
2) NY and LONDON have no phyisical gold, but still owe tonnes to the same side bloc.
I for one would like to see a much more balanced reserve spread across nations and sovereigns when freegold emerges.
Yes I think a U$ hyperinflation is nearly as inevitable as freegold, but I think it would be less severe if Europe and the US did in fact have undisputed, unemcumbered physical gold in the amounts claimed by officialdom.
I do beieve that China, Russia, India, and the ME could form an oil/gold reserved currency bloc or monetary Union around the emergence of fregold, though it is clear that China intends to lead the way with the Yuan, even as developed country currencie race to the bottom.
I have great respect for Kyle Bass and am inclined to agree that war may be inevitable, but I think it could be averted if wealth were more balanced.
Value is a simple equation. How badly I want something you have. When value is demystified back to it's core component we are no longer able to trasnfer it "while we sleep", it must be "taken by force".
Yes, byiam, I too was having to stretch my imagination a bit
to picture Burning with a mohawk, shaved head and full gold
chain regalia.
Woland,
Maybe this one is closer ;-)
http://www.youtube.com/watch?v=XVCtkzIXYzQ
On Another note, I told you there'd be zombies, burning paper and bitches from hell :->
http://www.youtube.com/watch?v=1DWiB7ZuLvI
Bullion Baron,
There are a few reasons why I think your analogy works best with gold as the ocean and currencies as the boats. Firstly it allows for differences among the boats in terms of size, weight, price and so on. Gold is homogeneous. It has more properties in common with the water.
Under this new regime gold will value all currencies. In a sense gold will be the new reserve "currency" for the monetary and financial system. The global "currency" that can be exchanged for any other currency regardless of whether any two currencies are exchangeable. The primary reserve asset as it is now for the ECB Eurosystem.
This attitude of getting-out-at-the-top misses the point of this transition. It implies that the objective is the accumulation of the biggest pile of currency whereas many here see that only as a means to an end not an end in itself. In other words gold = savings (SoV) and currency = MoE.
RJP,
Ditto
Two nifty tidbits in this report. (h/t JSMineset)
http://www.bloomberg.com/news/2012-11-21/brazil-boosts-gold-reserves-to-the-highest-in-more-than-11-years.html
Turkey’s bullion holdings have increased due to it accepting gold in its reserve requirements from commercial banks.
The Bundesbank declined to comment on the past month’s gold reserves, spokeswoman Susanne Kreutzer said, adding that the central bank reserves 7 tons a year to sell to the Finance Ministry for minting. The year started on Sept. 27, she said. The Bundesbank sold about 0.7 ton to the finance ministry in June and 4.7 tons in October 2011 to mint commemorative coins.
Regarding Kyle Bass, if memory serves he was once described by FOFOA as incomparable. And while that may be true, and while Mr. Bass may be correct about (more) war - it seems to me we already have quite a bit of "war" going on presently- I'll just point out the truism that A.) The world is (more often than not) what we make it, and that B.) Texan, Kyle Bass, is, according to my Lone Star state source, a gun nut.
RJP,
I don't know if you ever heard the following story, but as a former member of the prison population you may find it interesting to know that when Samuel Beckett's "Waiting for Godot" (not to be confused with waiting for Freegold) was first produced, the civilian population was utterly befuddled as to the play's meaning. The inmates, of course, given the nature of their day to day existence understood the play's deeper meaning immediately.
Hello HMS;
I am honor bound to admit an error; the Gracchi do not fit my
earlier formula. mea culpa.
Jeff said...
"Alan, I didn't say it; that was a FOFOA quote"
Yes, I know. Actually, I thought it was A/FOA. It had an A/FOA sound to it -- "western traders" -- though I'll believe it was FOFOA, if you say so.
"which you put your own conspiracy spin on."
What I did was draw a distinction between myself and those who wish to "amass vast wealth and establish or perpetuate some sort of empire, across generations." Not me, thank heaven. I also said that I'm like the "western traders" who wish to "catch the top". I think it is OK to want to catch the top, and enjoy a modestly improved life. (Which is what I imagine to be the desire of most people reading these words.) Better than wanting to establish an empire and rule the world by way of vast wealth. Anyone who wants that is deeply sick, and pathetic.
"Unlike you I'm not burdened by your preconceptions about reality"
Nor am I burdened by yours?
"so I won't try to trade my way out of gold at precisely the wrong time."
Good for you. Good luck, whenever you choose to trade out.
We all place our bets and exercise our options with the best judgement of which we are capable. Good luck to all!
anand srivastava said...
"I don't see how you will enjoy life by catching the top."
Easy. It will open up a number of doors currently closed. Money isn't everything, but it can sure help. I have many creative ideas, awaiting attention and a few bucks.
"Yes to spend you need to convert your gold into cash. But will you spend all your wealth in a very short period. You do know that cash depreciates."
Of course, it would be beyond foolish to trade metal for rapidly depreciating fiat! Any exit decision must be informed by prevailing conditions, not some fixed price target. Ratios are somewhat better, but far from perfect. You have to judge the totality of the situation.
"After revaluation I will diversify some of my gold into land and stocks. Before revaluation I don't think there is any better saving vehicle."
I agree, and my strategy is largely the same.
"What is your plan for the future after catching the top? You will get all the cash you want then what. Will you keep it all in cash and suffer the inflation tax?"
My plan is approximately the same as yours. Why do you think that a physical metals investor would sell out for a depreciating fiat -- or any fiat, necessarily? There's lots of things in this world for which you can trade your PMs. "Catching the top" just means that you perceive a favorable time to change your asset allocation; you perceive that you've achieved a good-enough purchasing power increase with a particular vehicle, and you wish to deploy, or diversify, in some other way. You (Anand) hope to catch the top, also, after which you will as you say "diversify into land and stocks". Good plan. I wish you luck in picking the perfect exit point.
If there is one giant mega-revaluation, that would be great. I've been waiting for one for 15 years, and it may yet happen. Who knows? But it is also possible that the metals will keep turning in those more-than-respectable annual 20+% gains -- mini incremental revaluations -- and at that rate it won't take many years before I'll be set. It helps a lot that I started at sub-300 and sub-6 (au, ag). :-) I suspect that we'll see an acceleration of the bull, as we go into the teen years. I wouldn't be surprised to see years with 30-50% gains. That might just be wishful thinking, but I'll bet not, the way that everything seems to be accelerating. I also don't think that that outlook has to be incompatible with what you are expecting, i.e. the giant mega-revaluation. That revaluation might occur after a continuation (3 years? 5 years? 10?) of what we've seen the last 10 years. That would be the best of both worlds, and I would be overjoyed if it came down that way.
PS: I wrote: "I also don't think that that outlook has to be incompatible with what you are expecting, i.e. the giant mega-revaluation."
Indeed, it has already *proven* to be compatible with what you are expecting, since it has already happened! And it might happen some more.
costata said...
"This attitude of getting-out-at-the-top misses the point of this transition. It implies that the objective is the accumulation of the biggest pile of currency whereas many here see that only as a means to an end not an end in itself. In other words gold = savings (SoV) and currency = MoE."
Of course it is a means to an end! No one here (I hope) wishes to amass gold or currency or any other such abstraction *for its own sake*. It is all a matter of what real things and experiences you can buy with them. Usually: beautiful, novel, interesting, exciting, self-actualizing, delicious, or otherwise attractive things. Especially things that give others similar pleasure.
Is not everyone who is waiting for the great revaluation (to a steeply higher price) seeking to get out at the top? i.e. that new, much-much-higher top? If not, then what moves you? Why are you doing this?
I am talking here about individual shrimp like us. It may be that some number of the super-rich, the "giants", have become demented in such a way that they lust after gold *for its own sake*, or else as a means to some monstrous plan to rule others with their money.
One Bad Adder said...
"If Gold, as represented by $PoG can allow you to do all the cool stuff then good for you Squire ;-) ...however, Gold is (for my 0.02 anyway) best thought of as a Here-'n-Now asset not associated with such trivial persuits."
What makes you think that "cool" = trivial? To me, the idea of helping to improve (let's just say) treatment for malaria is totally cool. It is a huge global problem. Few things would be cooler than to alleviate it. But that's just one example. There's many many others.
"You Sir (and we of the "West" generally ...incl Myself) have had the luxury of a life where the "H 'n N" was not a daily (hourly) consideration. Life, and the day-to-day living of it, is (maybe was) generally predetermined ie:- Tomorrow is going to be 99% the same as Yesterday. Large swaithes of the Global Population are not THAT fortunate and have to live in a constant state of "readyness and preparedness" ...a "liquid" life and death situation. Understanding these on-the-edge circumstances of life and you will I'm sure enhance your understanding of GOLD."
I appreciate what you are saying. It is my fondest wish to be able to make a contribution -- some gesture, however small. That's one of the reasons that I'm looking to be a more successful investor. It is not just for me and my petty wants, though I have a few of those, too. I think that you were thrown off by the word "cool", and read into it shallowness, self-centeredness, perhaps capriciousness and empty-headedness.
I WANT: 1) a red Miata, circa 2005 vintage, 2) a nice little cabin in the Virginia blue ridge outback, and 3) to foster the development of better treatments for malaria. Not necessarily in that order. I want freegold to assist me in getting them, and if it doesn't, I'm going to write a letter to my congresspeople (cc: FOFOA), expressing my extreme displeasure. :-)
@Woland
The ELITES go by many names. Sometimes they derive their power from the letter "i"... sometimes they derive it from human sacrifices and/or anal probes. Of course, now they are attempting to derive ultimate power through FREEGOLD which is their plan to enslave humanity w/FIAT CURRENCY.
@Alan2102
Yes! Hoarding rocks of minimal real-world utility is what gives the ELITE their power to rule over us! Inter-generational wealth is for the EVIL elite i.e. freegolder scum! It is immoral and we must therefore dump it all as soon as it hits a top!
Personally, I have bought every bottom and sold at every top throughout the entire gold bull market. My secret is that I lick a psychoactive toad before I decide whether to buy or sell. This allows me to telepathically channel into the consciousness of London Trader which informs me of my next move. What is your secret?
We catch this top together, yes?
LOL
My secret is that I lick a psychoactive toad before I decide whether to buy or sell.
Alan2012,
Bear in mind my comment was addressed to Bullion Baron. Some of us think in ounces these days not currency when we consider our savings.
I don't have an issue with folks who are planning to cash out of gold at some point and invest elsewhere or use the proceeds to improve their lifestyle. Good luck to you.
burningfiat said...
"If you think I'm a jerk and this comment is too sarcasmic, go read the real kick-ass comments by DP, Anand and OBA above!"
I read them, and responded.
I don't think you're a jerk, but I did not understand your outburst about Marx and capitalism -- subjects that I did not mention.
The two posts linked below may give us some insights into the psychology of people who buy houses and those who park their money in bank deposits.
The first link is to a report on a study comparing people's attitudes to nominal losses versus losses in their real return on housing. The authors conclude that nominal loss aversion drives most peoples decisionmaking.
The test subjects consistently chose the no-nominal-loss option over the real return loss even though both outcomes presented were loss-makers.
http://www.voxeu.org/article/why-housing-such-popular-investment-new-psychological-explanation
The second article discusses the phenomenon of people placing their cash into bank accounts in record amounts. Despite the fact that these accounts often have withdrawal restrictions and pay virtually no interest. I guess it gives them some comfort to be able to check the balance and see the numbers are stable or rising.
http://www.zerohedge.com/news/2012-11-20/largest-weekly-inflow-bank-savings-accounts-record-flashing-red-alarm
Sounds crazy to many here I'm sure but it does offer an explanation for this behaviour.
costata said...
"Some of us think in ounces these days not currency when we consider our savings."
As do I. Usually. But the attraction of thinking in terms of fiat is undeniable -- partly because we've all been thinking in those terms our entire lives. Heck, even FOFOA speaks of $50,000 gold. That's U.S. dollars. And why? Because those are terms to which everyone can relate, easily. He could have said 17000-loaf-of-bread gold, but it would be awkward.
Who can blame us? It has been our point of reference for decades; it won't go away quietly or easily. Even after the dollar is toast, (old) dollar values of things will still be lurking in the back of our heads.
Edwardo,
In the gold market, there's weak hands and there's strong hands. Same thing in prison. Strong hands don't get turned out.
Don't believe those TV shows about 'life on the inside". #NotReality
Just like in the real world, there's gold and then there's mud ;)
Alan 2012
I'm guessing you do not have kids. For those of us with that kind of obligation (and grandkids) the amassing of wealth does not need to be justified, even in large amounts, enough to span generations.
Look at the situation most people find themselves in: they are the offspring of parents without wealth and susceptible to the whims of whatever social or political winds that blow. I'd love to give my progeny the ability to do as they choose. I'd hope they would make noble choices but I hate the thought of them growing up in Obama's America without money, dependent upon the goodwill of politicians and the will of the people.
When the SHTF in Germany in the late 30s those with no money had few options. It makes a difference and while I wish well to all, I can at least ensure a future for those near me.
I would guess that only a very few accumulate wealth for psychologically imbalanced reasons. Most see wealth as security and freedom...the more the better....especially in FG where holding gold does not impinge on others ability to do so as well.
Of course we all have our own plans for when we might divest some of our wealth. However, I couldn't sell a single gram as long as there is a significant tax on the transaction. It is counter to my religion.
Duggo is so insecure about his silver to gold swap. He's sweating about it.
He's begging everyone here to pad him on the back for his brilliant move. Because he doesn't understand 1 shit about why he made the move in the first place. He wants to understand it so badly, but can't.
It's quite entertaining to see such a 1st degree fool at play.
What's worrying is that such people discredit the goal of this blog.
Duggo, I do not expect you to understand this conclusion. There have been given you enough opportunities to reevaluate yourself before.
PS. I thought I'd just say what everyone here is thinking
PDD
People here aren't traders for the most part (at least not in gold). Looking at the GSR, and costata's prior comments (another potential run; possibly a pump-n-dump), there is a good chance for another strong move up in silver.
However, something interesting was brought to light here recently as to what PM the Chinese are exporting (en masse to the West). What was that 'precious' export? It was silver. Hmmm... Now how does that saying go? "Buy what the Chinese are buying and sell..."
Alan2012,
Agreed, this thinking in currency values is deeply ingrained. No blame, no shame on that.
Michael dV said...
"I'm guessing you do not have kids."
Correct.
Do as you see fit for your situation.
I wasn't talking about shrimp like us.
@ Pierre Don Denirio
When a person calls another a fool without really knowing much about that person then you know who the real fool is.
Someone who finishes their bitter little put-down with:-
"PS. I thought I'd just say what everyone here is thinking" Is obviously a coward and needs the "group" to back him up and agree with him.
As for your comment:-
"Duggo is so insecure about his silver to gold swap. He's sweating about it."
You have no idea how I feel. But to put your spiteful little mind at rest I can tell you I'm completely ambivalent about my swap. It doesn't cause me one moments concern. I can "swap" out of Gold any time I like.
Fortunately there are people on this site who have intelligence and put forward considered un-emotional arguments about Gold.
Happily for any newcomer to this site there are very few people like yourself.
Well said, duggo!
Someone once said something like "If you hated the last system, you'll hate the next one too".
I've often wondered about the (deeper?) meaning of this (if any). Maybe there's something for Alan2012 in there. This might sound a bit abstract, Zen, etc., but maybe "There Is No Top".
Giant or shrimp - if we produce a surplus, we save; if we run a deficit, we must dishoard. This is the return to honest money. Revaluation (even once, and even if once is enough) does not change this basic physical truth.
Freegold is not an investment vehicle, and to think of it as such is to misunderstand it. I don't think we can equate "walking in the footsteps of giants" with "get rich quick". If that was the answer, this blog could have been done in (short) one post.
RJP,
Perhaps I've missed something, but I don't understand your reply to me as it doesn't seem to really relate to what I imparted to you.
duggo,
When a person calls another a fool without really knowing much about that person then you know who the real fool is.
Long and strong!
Jesse McL, freegold, which is a theory about the evolution of our monetary system, isn't an investment vehicle, but, at the present time, purchasing physical gold is, by any definition, an investment since the prospect isn't merely to protect one's purchasing power but to enhance it quite dramatically.
Jesse,
Your comment that "there is no top" resonated with me. I can't help but feel that expectations of a sudden revaluation over a very short time period is not realistic and not in keeping with the past.
Something that A/FOA always stressed was the difference mindsets of peoples of Eastern or Western backgrounds. Western mindsets have become enamoured with instant gratification - a "must have now" philosophy. Just look at the fights for merchandise on Black Friday.
I think that a more likely scenario for "revaluation" is a continued, if not somewhat accelerated, annual increase over a period of time.
Is it inconceivable to think that the current USD system may limp along for another ten years?
If so, and at a starting $POG of $1800 then an annual increase of 30% will see the $POG approaching $25,000. Play with the numbers and you see that a price of $55,000 can be reached relatively quickly without a sudden revaluation.
Five, ten or twenty years may seem like a long time to me as a shrimp, but to Giants, especially those of Eastern minds and/or CBs, ten years is "sudden" in the context of inter-generational wealth.
My own goal is to dishoard my gold for property and investment in my own businesses. This decision will not be taken based on price but at the point where I move from being a net producer to being a net consumer. Many business owners can testify to the up and down nature of income from owning a business. It's almost inevitable that I will again become a net consumer at some point.
TristramBoris
RJP,
Tell me this is't funny.
http://www.youtube.com/watch?NR=1&v=1bBe7EwydgA&feature=endscreen
I'm not judging because I think you're an innovater...
RJP,
This too:
http://www.youtube.com/watch?feature=endscreen&NR=1&v=rik5fVQEiEI
Not hippy looking Jesus, or more swarthy looking Jesus, who's probably more historically accurate..
Alan,
I don't think you're a jerk, but I did not understand your outburst about Marx and capitalism -- subjects that I did not mention.
Shit, I want to be a jerk (and brainwashed cult member BTW). I must try harder...
You said:
Anyone who wants to amass vast wealth and establish an empire at that level -- a neo-feudal global fief -- is, quite likely, a psychopath and criminal.
I hope we agree that you can't amass vast wealth without being a super-producer. Right?
You may like it or not, but your view of super-producers closely resembles Marx's view about what is wrong with the capitalist system.
Marx also thought that the accumulation of capital was bad, and one of the reasons that capitalism would be unsustainable. Marxists will also consider multi-generational wealth as feudal or neo-feudal (based on when it was established). Lastly Marx obviously also thought that capitalist accumulation was criminal, because it lead the exploitation of workers. He advocated the establishment of communism. A system where this sort of wealth amassment would be outlawed and/or made impossible.
So there... That is my string of thoughts that lead me to associate your comment with capitalism and Marx.
What do you propose current super-producers should do with their surplus other than accumulation (aka gold-hoarding) if they want to be good citizens rather than neo-feudal psychopathic criminals?
How can they repent?
Should they shut down all their factories and hand over past accumulated surplus to the collective?
/Burning
Hi Costata;
A minor follow up to your link above, re: those posts on the
human psychology of choices, as in houses vs. bank deposits.
A few years ago I was visiting my grandchildren in Seattle, and
had just heard a great talk between Nassim Taleb and his good
friend Danny Kahneman, and I wanted to get her a book by
the latter author, who incidentally was one of the very few
non economists to win the "so called" Nobel in economics.
As it turned out, the book I wanted to get her had not yet
been written, (it has now: "Thinking, fast and slow") so by
mistake, I gave her "Choices, Values and Frames" which is
the summary of all the academic research Kahneman and
his friend Amos Tversy had conducted over a few decades.
This past summer, while visiting again, I discovered my
error - wrong book! On the drive back east, I began
reading it - and found it to be an absolutely compelling
account of how real people, confronted with the dilemma
of attaining prospective gains of differing amounts, coupled
with their associated risks, actually made their choices.
I would say it is as close to the "Bible" on the subject as
one could hope to find. I know you're a reader, both wide
and deep, so if you ever run across it, I encourage you to
have a look. Cheers.
TristramBoris,
As Edwardo pointed out, FG is a theory of what our present monetary system will evolve into. Unfortunately, when I said 'There Is No Top', I really did mean it in the most abstract of terms. From my understanding so far, I fully expect a quite sudden revaluation in physical gold in our lifetimes. Financial crises are not a new phenomenon. What could be new is the world's response to the next 'big one'. That being the demise of our present paper gold market, with FG being the outcome.
By 'No Top', I meant that once FG is operational, there will be a reliable way to move your wealth through time. How is that a 'Top'? It's more like an equilibrium. If you at any point you feel you have too much wealth and you need to net consume some, that is your choice.
My own goal is to dishoard my gold for property and investment in my own businesses. This decision will not be taken based on price but at the point where I move from being a net producer to being a net consumer. Many business owners can testify to the up and down nature of income from owning a business. It's almost inevitable that I will again become a net consumer at some point.
So you're saying that you are going to get out of gold and instead run a business into the ground? That's what net consume means - it means that eventually your wealth, regardless of how you choose to store it, in gold or in productive capital, will eventually be gone.
@Edwardo,
If you know the value of your gold, but no-one else does, and then everyone else realises what you knew already, has your wealth increased, or not? What is your return on investment when you calculate it this way? That's the Zen part... if a tree falls in the woods, does it make a sound?
PDD: "He's begging everyone here to pad him on the back for his brilliant move. Because he doesn't understand 1 shit about why he made the move in the first place. He wants to understand it so badly, but can't. I'm probably the poster child for swapping silver for gold without understanding the full reasons. What would you say FOFOA & costata, I had maybe a 10% grasp on the totality of Reference Point Gold when I swapped? (I know, 10% is being nice) PDD, it sounds like your saying, "Bad duggo! You can't do the right thing until you understand why you should do it." Your approach is difficult to understand. We try and help each other here.
duggo: You described your feelings with the manners and courtesy fitting this blog. Nice!
Jesse
"So you're saying that you are going to get out of gold and instead run a business into the ground?"
No not at all. I own my own businesses at the moment. Due to the uncertainty of economic and business conditions in the UK, combined with high personal tax rates, I currently choose to store the excess production (profits) in the form of gold rather than re-invest them into the businesses.
After 10 years + running such businesses, I am all too aware that profits are never permanent. At such time as those profits are reduced or removed then I will dishoard gold in order to invest further into business. If the business environment at the time makes investment in my current businesses sensible then I will allocate the capital there. If not, then I will direct it to new businesses to maximise whatever new opportunities are presented at the time.
Hopefully you can see that, at times, those who run their own businesses at a profit and are therefore net producers can become net consumers for a short period of time when those profits disappear.
My view of a "sudden" revaluation taking 5 or more years gives me comfort in that I am not trying to time a top and indeed means that I don't believe in a discrete one time revaluation of 10x or 20x or 50x or whatever constitutes a sudden revaluation in the eyes of those who do believe in one.
In the meantime, I store wealth in gold and a small amount of silver.
TB
Tristram,
Yes, I do see your point, and apologies if I was too blunt earlier in trying to make mine. And, yes, unless you benefit from some kind of exorbitant privilege, you will indeed need to dis-hoard whenever your net production dries up. I think this applies universally.
Remember the $55k reval is in real terms. We're specifically not talking about a rise in the paper price of gold. We're talking about gold's purchasing power after a reset. That will by definition be sudden. And once again, you don't need comfort in not trying to time any top, there is no top...
When/if FG occurs as theorized, my gold will lie still. I want to act as a safety net for my extended family, but not a hammock.
@burningfiat, Alan2102
Well if not for these super-strong hands we call giants, gold would move around much faster. Increasing gold's velocity in and of itself does not solve any problems. It doesn't make the economy any more productive, it doesn't make the poor any less poor, and doesn't spread the wealth around.
But by doing nothing with their gold and letting it lie very still, the EVIL, PSYCHOPATHIC ELITE are actually giving Alan2102's speedy gold that extra supercharge it needs to defeat malaria once and for all! Yessss!
A long transition over years is in no ones interest.
FOFOA: The phase transition to Freegold won't come without psychological challenges to the physical gold holders. And my post above seems to be one likely challenge we will face. It also reconciles with the predictions of ANOTHER and FOA. If all we were facing was a bumpy ride up the mountain and an eventual grand short squeeze, it would be quite easy to stand strong.
But also, in all likelihood, it will be lightning fast, like a "flash crash." Notice that I drew the drop as a vertical line, zero in the time dimension. So with a little luck, it won't be that big of a challenge to ride out the shift in price discovery markets. The important thing is that your gold is your savings for the long run. It is not your reservoir for your daily transactional needs. If you have everything in gold you risk having to liquidate during that period of unknown price. You don't want to do that...
Well, I don't see gold's trajectory being typical of what you'd expect to see in a bull market. Instead it will be a reset of sorts, kind of like an overnight revaluation of a currency. I'm sure some of your readers have experienced a bank holiday followed by a devaluation. This will be similar...
Planned or controlled collapses also happen by surprise, because that's how you get the maximum "bang for your buck" so to speak.
This fractional gold reserve imbalance is the one imbalance the media and governments do not want you to know about. This is the one that will RESET the entire system. This imbalance, once corrected, will make central bank fiat currencies sustainable once again. This is why they are net buyers! Here at FOFOA, we like to call it FREEGOLD!
Do I think this magnitude of a reset could happen overnight? Yes, I do. Why? Because that is the way you get the most "bang for your buck". Surprise is the order of the day! "Devaluations always happen by complete surprise as to exert maximum leverage effect."
+1 PJ.
FOFOA: The owners of the majority of the gold understand its power to store wealth. They have been using it in this way for a thousand years, passing wealth on from generation to generation. It's the "old world way." Guys like you and me, we're just tagging along on this ride. And soon, the governments will be too.
What we shrimps do with our gold really won't affect the value. It's what they do that matters. If you've got enough wealth to last generations, you don't blow it. You let it last. This is what they know. This is what ANOTHER meant about gold lying very still. It lies still so that it provides for its owners in the time dimension, not in the flash dimension.
Savings are not going to go into gold. That's not what is happening. Dollar-denominated savings will simply vanish and Freegold will appear. It is not a flow. It is a phase transition. How high gold goes depends not on you and me, but on them. Just get some so you can go along for the ride. Gold provides the ultimate utility to the big money. Nothing offers more "utility" to them than gold. Nothing!!
Jesse McL, the answer to your philosophically based (and what I take to be) rhetorical query is a resounding, yes. But, then, as I survey matters, we are not dealing with the proverbial tree falling in the forest, but, rather, a dormant volcano that is destined to become active. Reasonable minds may, of course, differ on what metaphor or metaphors best capture the present and future condition of freegold.
Hi Edwardo,
True, I was tending to the philosophical.
From a shrimp's point of view, what you originally said about "investing in physical gold" can't really be denied - any shrimp holding a reasonable proportion of his wealth in phys will likely ride out any transition in excellent shape. I guess I was just trying to think like a giant. Alan2012's thinking was just bugging me - realising you are a shrimp is one thing, nothing wrong with it. Being trapped in that mode of thought is quite another.
A portrait of Another?
http://www.youtube.com/watch?v=eIHXhFJ4FoM
Regards
Ozzy
Edwardo,
I wasn't familiar with Waiting For Godot, so I looked it up on Wikipedia. There seems to be several different interpretations. I'm sure after you look over those you'll figure out what I thought you were alluding to :)
Sorry for the misunderstanding.
costata,
Yes, Will is one of my favorites. But the only thing funnier than Will Ferrell is Naked Will Ferrell!
I hope the following lengthy bit of writing does not overtax the
hospitality of this forum. It is a work in progress, so any of your
reactions are welcome, including polite demolition. I take some
comfort in the fact that it can't be much worse than Carl or A.D.'s
past contributions. We shall see.
I have often wondered whether it might be possible to write
a story explaining the functioning of freegold in so simple a
way that a ten year old would "get it". That favorite story of
mine by Aristotle about a family, sitting around the kitchen
table after diner, playing monopoly, was about the best I
could imagine. Still, I thought, maybe I could write something
that didn't even need to refer to banking or the BIS, as he does
at the very end. I mentioned this idea in my old "Heather
has two Monies" comment about a children's book. With that
in mind:
Rock, Paper Scissors; In this children's game, each item beats
one other, and is in turn beaten by the third. Thus, rock breaks
scissors, but is "caught" by paper. Paper is cut by scissors but
defeats rock. The diagram would be a triangle with an arrow
to indicate the relationship.
Another and FOA spoke about a triangle much like the game
of R,P,S, only the names were changed to Fiat, Gold and Oil.
The underlying dynamics were also slightly different, in that
RPS references no "4th quantity". The outcome of each round
of the children's game is fully determined by which one of the
two choices the 2 players make, and all three elements are
purely symbolic. In the "adult game" of "Fiat - Gold - Oil",
one element (fiat) is virtually a pure symbol, requiring no
effort to produce, gold is also a symbol, but requires real
work to produce, and oil is a consumed commodity also
requiring work. So, the "4th quantity", hidden within this
adult game, is the need to mobilize real human effort by
some "force". This leads me to a brief digression.
Throughout most of the history of civilization, the 4
element game described above was missing one of its
modern parts; oil. The real game was reduced to just 3
elements, being Fiat, Gold and Human (or animal) effort
directed toward production. Gold beat fiat, but required
work to bring it into being. Work thus mobilized required
a "real surplus", brought about by other work, which in
turn was either; (1) "forced by taxation in kind, or (2)
induced via exchange for fiat, or (3) expropriated via the
institution of slavery. The fiat had an exchange value with
gold, which varied over time, completing the circle.
So, to acquire (produce) gold, either taxation, fiat exchange,
or slavery was a requirement. Even the theft of gold via
military labor was subject to this iron rule. Gold could of
course be had via direct exchange for one's own surplus,
but it was an extremely rare event for an individual to
produce gold by his efforts alone.
In the modern world, it is oil which has replaced slavery as
the indispensable component of production and exchange,
and fiat has rendered redundant the ancient practice of
taxation in kind. We are thus left with Gold, the wealth
reserve and king of currencies, dependent on fiat and oil
for its very production. Now, before I get to my "children's
book attempt" at an illustration of freegold at work, let me
repeat a quote from Another, which I think has some bearing
on the story which follows: "Oil is the only currency big
enough for gold to hide in", and "Oil could be a currency
on its own". Now, on to my bedtime story.
Hi again Alan:
What I was hoping to do in the previous post was try and establish a Point-of-Difference between your perception of Gold - the (say) $50,000 / Oz ticket to Goods and Services ...and GOLD - the "ULTIMATE" Good / Service.
Darwin once said " It's not the strongest of the species that survives, nor is it the most intellegent (that survives) - It is the one that is most adaptable to change.
If it's "money" you want to make from Gold, there is currently an opportunity in the Gold / Silver Futures-Options Pits playing out ...but to Hold GOLD in anticipation of a $50K+ windfall "dead-ahead" ...I feel you're to be ultimately severely disappointed my friend.
Just as the 18th Century Lead/GOLD Alchemists were ultimately found wanting, so too will their 20th Century Paper/GOLD Alchemist counterparts ...however, not just yet it seems.
A bedtime story:
The nation of Japan, together with their African partner, the
Pygmy Democratic Republic, decided to undertake a joint
space exploration project. Each nation would send one
member aboard the spacecraft. Japan chose its greatest
sumo wrestler, and the PDR selected its strongest man. Since
the PDR was a large oil exporter to Japan, the spacecraft was
namer Petro Friendship 1. Once the ship reached its planned
orbital position, a joint space walk would take place, with
the activities of the astronauts televised to their homelands.
No tethers were to be used, as each man wore a small jet
for maneuvering outside the ship. The larger man wore a
spacesuit of golden color, symbolic of the land of the rising
sun, while the smaller wore a suit of green and black, symbolic
of his verdant land and its oil riches, and an oval framed
image of the PDR president.
As the time for the spacewalk arrived, some dispute arose
between the two; perhaps a matter of who would exit first,
or some such triviality. After both had exited the craft, the
dispute intensified, and they began shoving at one another.
Now, a shoving match in space between such unequal bodies
is somewhat different than the same thing on earth, and as
they were propelled apart, the pygmy rapidly, the Sumo
slowly, the former was lucky that his magnetic boots caught
hold of the ship. The giant, using his jet pack, returned to
the struggle, but as he pushed as hard as he could, this time
(since he was pushing against not only the mass of his ship
but the entire ship as well, it was he who, reacting against
his own strength, went sailing off into space, golden suit
shimmering in the sun, as the small man crept back into the
ship.
The moral of the story; even a giant of gold may be defeated
by a pygmy, if the latter has the firm backing of oil.
The end. Greetz.
Hi RJP,
I knew when I decided to discuss Waiting For Godot I probably should have just come right out with what I had in mind. Reading the Wikipedia "interpretations" was amusing, because, among other reasons, none of the interpretations seemed to touch on what is arguably the key idea of the play.
Whatever other deeper meanings may have been inferred or imposed on the play over the years-in most cases to Beckett's disgust- one thing that the playwright did quite clearly was show, right in the play's title that, overwhelmingly, we live our lives in a state of expectation. In the main, or so it seems to me, for obvious reasons, folks behind bars understand that better than most.
In the meantime, we denizens of FOFOA's blog are waiting for freegold.
OBA, lovely thoughts! I like the way you always try to bring the discussion down to the fundamentals like in: http://fofoa.blogspot.com/ncr/2012/01/yonder-thur-be-dragons.html
Sell the cab driver and buy the Maglev ticket. No instant gratification, but it'll pay off for the ones with confidence and patience.
Why settle for a Hold, when you could have a Stronghold?
If you guys don't adapt to change and familiarize yourself with the mechanics of the current $IMFS collapse and the ensuing function change of physical gold, there's a good chance you'll be damned to make huge mistakes based on old-paradigm trader-like thinking...
/Burning
PS. OBA: Any updated thoughts regarding timing of OneBadAdderGeddon?
Edwardo said...
"Jesse McL, freegold, which is a theory about the evolution of our monetary system, isn't an investment vehicle, but, at the present time, purchasing physical gold is, by any definition, an investment since the prospect isn't merely to protect one's purchasing power but to enhance it quite dramatically."
Thank you, Edwardo. I was about to write something similar.
From the standpoint of the individual investor (rather than global monetary system theorist), "freegold" is very much an investment vehicle -- perhaps the best of all time, if it actually transpires as expected.
Edwardo,
Very true. Waiting is no fun. I rarely ever know the date because I developed a habit of never looking at calendars.
So, for the record, don't ever rely on me to tell you when's the next MTM party, because I have no idea ;)
TristramBoris said...
"I can't help but feel that expectations of a sudden revaluation over a very short time period is not realistic and not in keeping with the past."
Not in keeping with the past, true, and perhaps unlikely, but why do you think unrealistic?
"I think that a more likely scenario for "revaluation" is a continued, if not somewhat accelerated, annual increase over a period of time. Is it inconceivable to think that the current USD system may limp along for another ten years?"
Not at all inconceivable. I mentioned this in a post up thread: the likelihood of ongoing annual mini-revaluations, perhaps into the 30-50% per year range. That's optimistic, but a real possibility, IMO.
"If so, and at a starting $POG of $1800 then an annual increase of 30% will see the $POG approaching $25,000."
Right. At 30% annually, $25K in under 10 years. What a lovely thought! And if we get there suddenly, much sooner, then so much the better.
just imagine the price of oil...
... making far more of the domestic energy resources with the US viable, and therefore energy self-sufficiency a realistic possibility.
Right, Victor?
RJP,
I'm lovin' the Townes VZ you've been throwing down here. Something about Lungs always grabbed me. Ever hear Dax Riggs' cover of it? Possibly my favorite vocalist of all time.
Gather up the gold you've found, my friends, but remember...Money can't make the man
Hey Burning -
I went to GOLD (late 90's), due to "Timeline" issues with the Global Fiat regime.
I think we all got a "wake-up-call" c 2001 when the Euro/Freegold transition was stymied by "events" ...which essentially meant the System du-jour was destined to run on ...well past it's use-by-date.
How/when it will end is anyone's guess?? There ARE however clear pointers indicating the END has in fact well and truly BEGUN!
Rest assured Burning, the current regime will not pass "because of" a loss of Faith in Fiat Currency (ie: HI) ...rather "despite" a complete Global Faith in Fiat ...IMHO.
RJP,
LOL
Woland,
Another addition to my reading list. Thanks.
All,
Re: Sudden Currency Devaluations
In order to provide the benefits sought by an economic actor who is both sovereign debtor and currency issuer a devaluation has to be sudden. If it is telegraphed in advance the market will front run the devaluation by raising interest rates on government bonds etc.
For a sovereign in the position of Japan's government this represents the worst case scenario - collapse. ZH have posted several pieces written by Andy Xie discussing this issue. If the JGB market collapses first then the currency could collapse along with the government.
If they can engineer a sudden currency devaluation of, say, 40 per cent then the quickest way for foreign investors to lock in that discount on every asset priced in Yen is to buy JGB. Possibly one of the few ways to do so in size. So the goals are sudden devaluation and maintaining the government's ability to borrow at low interest rates.
DP, don't encourage Victor. Though I will say, he seems to see the massive increase in oil production as coming from the Middle East, not the shale daydreams of US politicians and drillers. SA reserves are a black box, so we can only wonder what their limits are. Unconventional oil production in the US offers no such uncertainty.
Not up to date with all the comments by a long shot, but can anyone please explain (in step-by-step detail for idiots)how/why the $POG will actually FALL before the paper-Gold markets collapse?
There’s a high probability that I will no longer be on this planet when FG comes along. So I’m trying to explain to my son the idea of Prechter’s 15-mins of fame and to make sure he understands NOT to sell our stash in panic when the $POG falls below $500.
Naturally he asks me the obvious “in an approaching HI environment, how on earth can the paper-$POG fall?” At that moment I realise that I accept a lot of what I read here on faith and on trust, because of the utmost faith and respect I have for those here who truly do understand – without understanding the fundamentals for myself.
Thanks - Cheers - FoNoah
costata said... This attitude of getting-out-at-the-top misses the point of this transition. It implies that the objective is the accumulation of the biggest pile of currency whereas many here see that only as a means to an end not an end in itself.
I'm measuring Gold as a ratio vs other assets as I intend on exiting into other assets as they become cheap relative to Gold. I am not trying to pin point an exit from Gold based on a $ figure.
So my personal goal is not to accumulate the biggest pile of currency, but to use the extreme overvaluation of Gold at the peak (relative to land/wages/stocks, etc) to increase my wealth.
FoNoah,
I'll offer up my thoughts, and then maybe some of the other here who know better can revise/refute/replace my words.
As I understand, the price of gold (paper as well as physical) will rise to a peak at which traders and profit-hopers will be overcome with the compulsion to bank said profits. The top will be so lofty that many who fear missing the moment will sell in earnest. The price will begin to plummet.
Two camps holding gold (paper and physical) will be watching this sudden dive. The paper holders will rush to get out of their positions, not wanting to hold a deflating asset.
The physical holders will break into two camps. The weak hands will panic, and, fearing that a gold bubble has burst, will join the fire sale and dump their gold.
The strong hands, knowing that this is a highly potential scenario, will lie still as the price of gold (physical as well as paper) drops precipitously.
The price will continue to drop, and the realization will wash over the gold community that the paper assets are failing, and the physical gold is withdrawing from the market. Critical mass will manifest itself, and the separation will occur.
Paper assets will continue to go to (near or actual) zero. Physical will go into hiding.
All the while, those with the means to gobble up the weak physical gold will be voraciously buying.
Then we eat Spam for a couple of months and wait for the new paradigm.
I sincerely hope you far outlive your prediction, and share with your family the realization of a new, better world on the other side of the revaluation.
Cheers
Hi FoNoah - I sincerely wish you a long and happy life Sir.
GOLD can be and is a most difficult subject to (a) get your head around ...and (b) then to pass on this understanding to younger generations.
Really, anyone with $-earning capacity extending say >20Yr's are not really interested in GOLD per-se given their ability to earn, or otherwise obtain "money".
As to your query, the anticipated $PoG price drop will reflect the counter-party risk associated with holding a PaperGold proxy when TSHTF.
You can observe on a daily basis $PoG / S rising and falling in tandem with (lets call them) "future expectations" (Stocks, Bond Yields etc)so...
...when the various Market participants run-for-cover into the PRESENT (Short-T's / Cash)
These future "Investments" (Stocks, Bonds, $PoG / S etc) will ALL suffer the same fate. FWIW.
Bullion Baron,
Applying your logic the valuation method you use to determine that gold has reached "extreme overvaluation" will be critical.
I find it ironic that you don't appear to consider gold to be a form of "wealth". To effect this exchange you may have to identify buyers for your gold with a perspective on it that is the polar opposite of yours - that gold is wealth.
Can both parties be right or is this a strategy based on finding a "greater fool" to unload onto?
Lovely story Woland thank you :)
DP I meant to ask you something, but I forgot. I'll remember later.
DP,
Right, Victor?
Jeff,
DP, don't encourage Victor.
Has already happened. As tweeted: The ROW will press the reset button before the U.S. are energy self-sufficient. Simply because neither Europe nor China will ever be.
The reason is this: There is little oil in America under $60/bbl, but a lot above $80/bbl. There is a lot of oil in the ME for probably as little as E30/bbl. All figures in today's purchasing power.
1) Once U.S. is energy self-sufficient, they can theoretically default on all their debt that is held by foreigners. Then, they just have to make sure that the ROW cannot get their hands on the E30/bbl oil. But, sadly, they know how to do this, and they have quite a bit of experience in implementing that scheme. That's what you wanted to say, OBA, is it?
2) If the dollar loses its oil settlement function before the U.S. are energy self-sufficient, they will have to do business with the ROW.
The ROW cannot afford to risk (1).
Victor
burningfiat said...
"You said:
Anyone who wants to amass vast wealth and establish an empire at that level -- a neo-feudal global fief -- is, quite likely, a psychopath and criminal.
I hope we agree that you can't amass vast wealth without being a super-producer. Right?"
I'm not clear on the meaning of "super-producer", so I don't know how to answer.
I do know however that one can amass wealth in legitimate ways, and illegitimate ways. Many great fortunes were the product of theft. This is well-documented. I'm sure you're aware of it.
I also know that it is possible to use one's wealth in mean, immoral ways -- ways that seek to control, retard, enslave, and murder others.
One outstanding example of this was King Leopold II of Belgium, who used his wealth and power to perpetrate perhaps the biggest genocide in history, in the Congo. In the process of this great crime, he became even more wealthy. Thus, he was an example of both of the things I just mentioned: using and acquiring wealth illegitimately.
Was Leopold a "super-producer", just because he was very rich?
BF: "Marx also thought that the accumulation of capital was bad"
I know very little about Marx. But one of the few things I do know is that Marx did not think the accumulation of capital, or capitalism, to be bad. He thought that capitalism was a historical developmental stage, after which would come socialism. If you were to accept that, then saying that "capitalism is bad" would be like saying "adolescence is bad". It is obviously not bad; it is just a stage of human development -- after which come other, presumably higher stages of development.
BF: "Marxists will also consider multi-generational wealth as feudal or neo-feudal (based on when it was established)."
Well, bully for the Marxists. Why should I care? I didn't say that multi-generational wealth was feudal.
BF: "What do you propose current super-producers should do with their surplus"
If they have vision, imagination, compassion, and overall worth as humans, they might try supporting economic, social, artistic, spiritual, educational, medical and other human development. Bill Gates, for example, thought it high time to divest himself of several tens of $billions, putting it to work where it can do some serious good for fellow humans. In doing this he demonstrated moral character.
BF: "Should they...hand over past accumulated surplus to the collective?"
"The collective" means, I assume, society's numerous institutions devoted to development as just mentioned. One answer to your question, then, is: perhaps they should, depending on how the surplus was acquired. Was it acquired legitimately? Another answer is: perhaps they should, depending on their own moral, intellectual and spiritual development.
@byiam and OBA
Thanks very much for your well-wishes and explanations. I can see where you are coming from and can understand your broad perspectives. Unfortunately I tend to get bogged down in the eddies and turbulence of the river, rather than being able to jump right up and accept the view from the mountain-top . . .
So, focusing only on the (price discovery mechanism of zero-sum Comex) would I be stretching the friendship if I were to ask where my analysis/understanding below goes wrong:-
In the early stages of inflation, when a Starbucks goes above $15 and paper-Gold will be say $5000, the longs are smiling and everything is as it should be.
Then real full-on in your face HI begins to rear its ugly head. (I am assuming this is the period before the rubber band actually snaps – surely HI cannot really happen overnight??).
Initially it is possible that ignorant-$$ might flood into Comex long positions expecting hefty paper-gains (some might even believe they might get physical) – but very soon (days/weeks) all longs will realise that they must liquidate their positions and buy cans of peas with whatever $$ they can recover.
At this point it is easy to say that the $POG will plummet, as all the longs rush for the exits, just like in 1980, and just as byiamB predicts above. But the problem for me is that at this point the shorts will also be stampeding out of $$ as well, wanting to buy the same real stuff with whatever $$ they can recover. It won’t be a question of how many $$ (lines in the sand) they can get – it will be a mad scramble to grab whatever real stuff they can lay their hands on at any cost right NOW. Also any shorts who might have previously contracted to deliver physical will now most certainly default – which in itself is price affirming rather than price deflating.
So with BOTH SIDES of all Comex contracts stampeding for the exits at the same time –I can only see wild volatility but no permanent price “equilibrium” in either direction. In a situation of white noise, prices could just as easily end a session UP or DOWN? But then, since no new $$ would be coming into the market, it would soon have to shut down due to lack of trading volume?
With just this blinkered view of Comex, where am I going wrong/what am I missing?
Thanks – Cheers - FoNoah
@OBA
Really, anyone with $-earning capacity extending say >20Yr's are not really interested in GOLD per-se given their ability to earn, or otherwise obtain "money".
You sure hit the nail on the head with that observation. My ex-investment banker twenty-something son just returned (to Aus) from New York where he attended the Tiger Global annual conference. (They own the majority stake in his new online retail flash-sales business). I asked him if any of his old Wharton, now Wall-Street buddies were concerned about (or even talked about) the precarious economic situation over there. Nary a word mentioned – they are all brimming with hope and optimism as all twenty-somethings should!!?? And as for Gold . . .what Gold??
My wife recently asked me – “What happens if this Fofoa guys is wrong?” I told her “Then we have the perfect hedge with our twenty-something entrepreneur son . . . “ How greatly we are blessed.
Cheers - Fonoah
One Bad Adder said...
"If it's "money" you want to make from Gold, there is currently an opportunity in the Gold / Silver Futures-Options Pits playing out"
FUTURES?! Yikes! I wouldn't dream of it. Even options are much too risky for me. Any paper is too risky for me.
There's an old joke: People enter the futures markets with wildly different amounts of money to invest, but somehow, amazingly, they all end up with the same amount: zero.
What I want to make is purchasing power. The particular (MoE) vehicle through which that power is expressed is a trivial matter.
"but to Hold GOLD in anticipation of a $50K+ windfall "dead-ahead"... I feel you're to be ultimately severely disappointed my friend."
So, you don't think that FG will happen, with $50K gold? I don't put a high probability on it myself, but I think it possible. More likely, incremental gains (like we've seen, or better) amounting over a few years to handsome appreciation.
PS: I have the impression that most participants here foresee a $50K+ windfall dead-ahead (say, 5 years, or probably less). Is that correct?
I think it's time to assemble the first annual freegold conference
I'm proposing the last weekend in January in vegas!! I'm thinking the luxor, it's inexpensive and on the strip. I am very open to off strip venues as well as downtown vegas.
comments are welcome
Fonoah: "My wife recently asked me – What happens if this Fofoa guy is wrong?"
Tell her that you've still got a great, solid growth investment that will almost certainly float your boat (and then some) through the coming difficult times, and do so better than just about anything else. AND, it so happens that this investment comes equipped with built-in "call options" (so to say) on a wild mega-revaluation/windfall. What's not to like? Heads you win. Tails you win x 10.
costata said... Applying your logic the valuation method you use to determine that gold has reached "extreme overvaluation" will be critical.
I find it ironic that you don't appear to consider gold to be a form of "wealth". To effect this exchange you may have to identify buyers for your gold with a perspective on it that is the polar opposite of yours - that gold is wealth.
Yes the valuation method will be important, however my plan involves scaling out rather than aiming for the exact peak (and I will maintain a core position, approx 10% of investment capital, though if we saw a freegold revaluation I would probably offload the final 10% as well).
Of course I consider Gold a form of wealth, as did those both selling and buying at the peak of past major asset bubbles. If Gold does form a bubble you don't think there will be speculators buying at the peak expecting the metal to rise even higher?
Bullion Baron,
What if Jim Sinclair is right and gold retains 85 per cent of its revalued price after it rejoins the IMFS in a new role and remains stable at that price?
Scaling out would be a losing proposition on that basis.
Since you consider gold to be wealth, how do you determine the relative merits of this gold form of wealth compared to the other asset classes you have mentioned?
You have mentioned ratios. Are you basing your analysis on historical ratios? Many here anticipate a new paradigm we call Freegold-RPG. Which of the historical ratios will remain reliable if it's a new paradigm we find ourselves in?
Alan2012,
Many here don't think in terms of windfalls from the gold revaluation that we anticipate. It has been noted in the past that the price of gold is hardly ever discussed in these threads where FOFO informs me we now have over 40,000 comments. The current POG is generally only referred to if something interesting occurs or there's a specific reason to mention it.
Bear in mind too not all of the discussants are from the USA. Local currency exchange rates will be a factor as well. What will gold be valued at in rupees after the revaluation? (for example)
Cheers
Bullion Baron,
One other point before I have to log off:
If Gold does form a bubble you don't think there will be speculators buying at the peak expecting the metal to rise even higher?
A former Merrill Lynch broker by the name of Stewart Thomson has expressed the opinion that silver (and gold) may trade on Comex with no margin before this is all over. More and more people are coming round to the notion of five figure gold prices. Who's going to be speculating if they have to stump up that kind of bugs bunny? (My emphasis below)
Graceland Updates 4am-7am
May 3, 2011
1. The maintenance margin to trade silver with leverage is now $15,000. If you bought at $4 an ounce, the cost to buy 5000 ounces, fully paid for, would have been $20,000. The value of 5000 fully paid ounces of silver is now almost $250,000.
2. I believe leveraged trading of silver will end before the silver bull market ends. Silver fell $7 an ounce on Sunday night. That's a $35,000 move per contract, and more than double the margin put up by the average leveraged player.
http://www.safehaven.com/article/20852/gold-technicals-the-power-of-hsr
As they say, travelling provides you with another perspective and opportunity to contemplate. In the past days lot of nightly train travels, most of the time solo in darkened coup. And I've seen things, a lot of things, incl. giant coal trains, houses, factories, cattle and land - all that even in case of economy suddenly crashing or burning 9/10 productive assets in a war, means simply one tiny oz. can still soak a lot of the physical world of human perspective around us. I'm now persuaded FG believer, but that doesn't mean I'll be parking my ant-hill-mobile in the Elvis All-Inn motel, perhaps too sheepish for that.
Fonoah,
Re. your 20 something go-getter son. Very interesting. Maybe his lack of interest is because of a lack of 'savings' or the perceived need to even think about savings. One of FOFOA's main points for me is the that the world's problems are actually the fault of the 'savers' !
Please could you ask your son what your wife and you should put in a secure safe deposit box for him now that he can only open in 25 years.
His answer would be very interesting.
Good idea Wendy… I like the date you picked. If enough people commit, I will be there. I saw that in an earlier comment you told Michael dV (dV = Las Vegas) that you are going there in January anyway. So you thought you'd suggest a Freegold get-together around your already-planned trip? Hehe. Pretty smart for a silver hoarder! ;)
The Dutch forum had a Freegold meeting in mid-October and they had 40 people in attendance! "Belgian" from the A/FOA archives spoke at their meeting and I Skyped with him, Freegolds and Pain d'Or right before it started. I could see the excitement of the gathering, so I think it's a good idea!
Luxor is a decent location. The Giants with big pocketbooks can stay right next door at the Mandalay Bay… and so can the poker players!
Sincerely,
FOFOA
fonoah
The simple explanation is this. The paper gold markets are just that, paper. The drop in price will be the effect of that realization, that that paper cannot mature into gold.
While the paper promissory price may drop, you would not be able to get physical (in size) at that price. I suppose some fools may sell into that drop, but I would not count on getting lucky in buying some.
TF
@TF:
I suppose that 99% of us here don’t buy ”in size”. There may be some bargain deals down the road.
About Las Vegas conference:
Great idea, I hope someone get’s it on the video!
Also, silverfuturist could do an introductory yoga course?
I would love to see for example FOFOA trying to do the so-called “crow pose”. :-)
Hey I have a question...
Is there an amount of currency, $X, (let's say denominated in $USD, cash and/or close-to cash liquid equivalents), whereby some nutter who was in possession of said amount, but not in possession of any wit or reason, could bid for physical gold at say spot + 2%, and succeed in crashing the paper market?
Does $X exist? Or would he simply run the price, and lose his cash, and the system would carry on as before?
Widening the question slightly, does there exist $X, together with some strategy S (which might be something other than "bid spot + 2%"), which would with >99.999% certainty crash the paper market?
Does either $X (perhaps together with some S) exist? If so what are they? Estimates? Guesses?
And a meta-question: Is it even meaningful to ask this?
Cheers,
Jesse.
Jesse Mcl
Sure. I guess if he stood for delivery for 1000 tonnes of gold, that would be enough to break the market. A smaller weight might work, but at that level, it is certain to do so.
Not that he would get the physical of course, they would simply suspend the market. :P
TF
JesseMcL,
Is it even meaningful to ask this?
No
MF, without getting too conspiratorial, would 'back room' deals to deliver physical continue to be done in this scenario (eg. Oil) even while "they" had suspended the market?
Costata, thanks, I promise not to belabour this one in that case :) Though it's difficult sometimes to further one's understanding when apparently even the questions that need to be asked are not clear.
Cheers,
Jesse.
Jesse
Hmm. If we are talking about a market breaking event, then I suppose such deals would also be suspended. Remember that at present they actually get gold at a deep discount. IF TSHTF it would be better to let the market revalue, and send them gold at the revalued price.
Costata is perfectly correct that this is not really a sensible question. :)
MF
Ps. This is simply speculation on my part ofc.
costata said... What if Jim Sinclair is right and gold retains 85 per cent of its revalued price after it rejoins the IMFS in a new role and remains stable at that price? Are you basing your analysis on historical ratios? Many here anticipate a new paradigm we call Freegold-RPG. Which of the historical ratios will remain reliable if it's a new paradigm we find ourselves in?
Yes basing exit on historical ratios we've seen over the past 100 years. I link to 4 of the key ratios I am watching in this post (toward end of 'Price Targets' section):
http://www.bullionbaron.com/2012/09/saddle-up-for-bubble-phase-in-gold.html
If I sell out at $5000 and the price of Gold goes to $50,000 or higher then so be it. I will still have my 10% position which is still much more than average joe on the street.
What will you do if Gold goes to $5000, but then drops back to $1500 and remains in another 20 year bear market? I don't think Gold will do this, but 'what if' questions are pretty pointless.
Even if I sell out very early I will still have increased my wealth substantially from a few years ago and will be happy with the gains I've made and probably own my own home freehold as a result.
Thanks MF. Yeah Costata is probably right. I just had this crazy image of Bill Gates or someone bumping his head one night, waking up the next morning and unwittingly managing to usher in Freegold! :)
Cheers,
Jesse.
Hmmm...
http://www.nanowerk.com/news2/newsid=27639.php
"The ability of gold to strongly absorb laser radiation and convert it into heat renders gold nanoparticles an ideal tool for a variety of biological applications. This property has been exploited for selectively destroying cancer cells and for the molecular dissociation of DNA strands."
Jesse
Fwiw, here, in essence, FOFOA speculates that 130 tonnes or so should be enough.
GLD Talk Continued
"If we suddenly see a puke of, say, 10% of the GLD inventory, I’d say it’s game over starting there."
TF
Ah yeah, I remember reading that post. Looks like exactly what I need to re-read. Thanks for the reference MF.
@Bullion Baron
If I sell out at $5000 and the price of Gold goes to $50,000 or higher then so be it. I will still have my 10% position which is still much more than average joe on the street.
Do you assign a 0% probability to hyperinflation in whatever locale you reside? If you cash out before HI, nearly any asset you trade your gold for (except for maybe things like fine art, antiques, etc.) has the potential for significant further devaluation.
Aw, Wendy. I'd a hoped you'd a chosen Deadwood. I passed
thru there this summer. So much more..... authentic. Great
idea, though. Cheers.
Victor, what data do you have to support a case for US energy independence?
Here is detailed forecast:
http://www.eia.gov/forecasts/aeo/pdf/0383%282012%29.pdf
and a good interpretation:
http://oilprice.com/Energy/Energy-General/Looking-at-the-Fight-for-US-Energy-Independence.html
Thanks OBA,
Rest assured Burning, the current regime will not pass "because of" a loss of Faith in Fiat Currency (ie: HI) ...rather "despite" a complete Global Faith in Fiat ...IMHO.
I agree that's the most likely order of things to come!
What are you watching, when you suggest that the end may have already begun? It makes sense that the move from the Future to the Here n' Now is already beginning, given the risk of fiscal cliff induced recession in the USA.
This maybe?
http://finance.yahoo.com/echarts?s=^IRX#symbol=^irx;range=6m;compare=;indicator=sma%28200%29+volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;
Woland: I wonder how 'Rock Paper Scissors Spock' can fit into the equation.
RJP: 'Heartworn Highway' is beautifully pure and presented with honesty. A song which elicits an emotional response is worth a second listen.
Fonoah: what about The Waterfall Effect
Bullion Barron: "So my personal goal is not to accumulate the biggest pile of currency, but to use the extreme overvaluation of Gold at the peak (relative to land/wages/stocks, etc) to increase my wealth." Just remember that the word 'peak' implies a parabolic trajectory. The Freegold price simply reaches an equilibrium, floating balance. The perception of your words implies a fall after the peak. (byiam said it much better)
Wendy: My nine year old son has always wanted to see Vegas!
RJP: You up for a flight together? I can send you video so you can look in my eyes, see the evil hoarder inside, and feel comfortable knowing we are a kindred spirit. Then again I already passed the Andy Griffith test.
JesseMcl: "Though it's difficult sometimes to further one's understanding when apparently even the questions that need to be asked are not clear." Praise Ganesha we have trail guides.
Regarding the availability of physical gold when the market suffers a massive dislocation (which will likely be the result of some very large player, i.e. giant, not being able to convert his or her paper into physical)I can't help but think of the event horizon of a black hole where infinitesimal amounts of light escape the massive gravitational pull of the collapsed star. In short, there will still be very small amounts of physical gold (small by weight that is) that will be available here and there.
Let me expand on Baron's idea. Suppose we believe in mortality and relative short span of individual's both physical and mental strenghts. So far so good, right? Now, for a given scenario of smaller incremental YoY revaluations (extended path of recent past) we can expect some real gains in few years time, by only dedicating small fraction of the pile, which can be moved into land of your choosing today etc. At that point you have a starting patch in your desired location (and or choosen by other subjective conditions) - you can start slowly cultivate, NOW. While most of your anthillions are laying still and waiting. After the FG flash you just ponny up for whatever expansion in terms of additional patches, cattle, machinery, whatever. And still setting aside something for the longterm saving, as you guys like multi generational.
Contrasting this approach with zero prep activity before FG one can sense it's very different. After FG you are now for sure "rich saver" with interesting all inn anthillions but beside that, you have zero anchor in the physical plane. By waiting you lost precious time perhaps of your prime years on this planet to cultivate your dreams.
Obviously for the "overnight" FG flash imminent scenario (are we there yet?) it makes no difference, so stay put in pure anthillism.
I guess this is a point Baron, me, and others stressed couple of times here and were not properly understood. Life and individual plans are too short and precious not to part away with small fraction of the stash before the big thing comes along.
We are not giants, which are covered (born into situation) with 5x mountain lodges, 10x estates, 4x factories, 2x governments, .. , all diversified around the world on different continents, who just don't have to think in ant fears, wants, needs and desires.
Edwardo, maybe you could run a Craigslist ad and buy from a gullible shrimp, or call your dentist and see if he has any dental gold to sell. Maybe instead of saying gold goes into hiding we should say the buyers come out of hiding?
FOFOA: "…when the dollar market is destroyed, noone will know the currency value of gold thru an official market." – Another
The key to his statement was "thru an official market."
Why are you worried about how long gold will "lay quiet?" Are you worried you won't be able to sell your gold to cover your expenses? Au contraire! You will be able to sell your gold! You just won't be able to buy. FOA wrote, "dealers would mostly be making a market on the buy side only."
You won't be able to buy any more gold, unless you are willing to outbid (pay more than) all the other bidders for the scarce scraps that are being liquidated by a few shrimps like you to meet personal expenses.
APMEX will report "out of stock" on everything. There will be no known price to advertise, even if they had inventory. You will call several dealers when you are ready to sell and ask for their bids on your Maple Leaf. They will either spit out a bid that will take your breath away, or they will say they'll call you back after they get bids from their buyers. You will sell to the highest bidding dealer, but you won't buy any gold unless you, yourself are the highest bidder.
An official market transmits an official price because somewhere on the supply chain a dealer won't pay more because he can get it from the official market maker at a known price. Or, he won't sell for less because he can sell to the official market maker. Dealers won't be selling their own inventory while gold is in hiding. They'll only be bringing buyers and sellers together through the "auction process" and they'll be earning a spread. The dealer will pit his buyers against each other just like you will pit the dealers against each other...
During this time, after the paper market has failed, that GIANT sucking sound you hear when you call your dealer and mention that you have some gold for sale will be the CBs and Giants somewhere at the other end of the dealer network with their unlimited currency, their insatiable demand for gold, and their standing over-bid acting like a giant concubine sucking a golden golf ball down a tiny hose. Let's call these Giants and CBs "the buyers of last resort" for gold. Another said they stand ready to buy any and all physical gold offered for sale.
ANOTHER: Sir, the plan is good, the question is, "how good is your broker"? Noone can know how thisworld change will come about, in specifics. The gold market may lock at $400? Or $4,000!
When the public perception does come to understand, many entities I know of will not bebuying "at the market" as your broker will. These ones, they will be "above the market","well above the market"!
Will you bid $1,000 when your broker screen shows $475? Imyself, as a country will be "there"! You sir, will stand well behind most in line.
Every day, as I read the newest addition to the comments,
I am puzzled by one observation. It seems that there is an
extraordinary preoccupation with speculating as to "how,
exactly", the transition from the present fiat petrodollar
world to the new system, with gold as the reserve asset and
the euro as the transaction currency, will occur. The reason
I find this speculation curious is because, apart from being
unknowable in its details, we have been shown AN alternative
method by an "unimpeachable source". Not that this is GOING
to happen, only that it could. (somanyroads to freegold???)
High oil prices got ya down? Well cheer up, Bunky! I've got
good news. A couple of BIG oil producers are going to give
you a break. No more $110 Brent, how about $50. All they
want is 1/1000 oz of gold per barrel straight up, or $35
cash, plus say 1/2000 oz as a kicker. Hell, that's about
$1.75 at today's prices, right? Lets run out and buy some!
Oops....well, you know the rest of the story. No need for some
Giant not to get filled, or Bill Gates waking up at midnight
and deciding to go all in on bullion. Someone once said,
"Oil is the only currency big enough for gold to hide in", or
something to that effect.
You might ask, why would those A-rabs give us a break
like that?? That's an "extra credit" question, but should
be a slam dunk for all red blooded Fofoans. Greetz.
By the way, PJ, "We catch this top together,yes?" - Priceless!
Woland, great observation, seems that Turkey-Iran goldoily deals and others are pushing this avenue already.
To those predicting a gradual rise up to freegold valuations, I can't see how that would possibly work. Either paper gold is trading at par with physical, or it isn't. Either the bullion banks have sufficient reserves to provide credibility to their paper, or they don't. There's no "in the middle."
We can't smoothly rise from today's price to $50,000+ in real terms with paper gold still trading at par with physical the whole way up. The disconnect of paper gold and physical gold (along with gold's functional change) forms the basis of that high valuation. So paper gold can't possibly die a nice, slow death. One second it's trading at par, the next second BYEBYE. Just my 2c.
P.S. @Woland THX!
SV,
Nice!
Indenture,
Heartworn Highways is actually the name of the documentary that clip was taken from. The song is called 'Waiting Around To Die". Glad you liked it.
FG conference sounds great, but sorry, I don't fly. I was subjected to enough patdowns and strip searches against my will, so it's my policy to not volunteer for these intrusions. So, maybe a road trip. Except a pilgrimage to see a yeti instead of a moose :)
Jeff,
I know it sounds a bit comical, but that is exactly what I have in mind, specifically with regards to craigslist where prior experience leads me to think that there may be some opportunity for buyers.
foNoah: -
Hello again fellow Ozzie ;-)
Motley Fool (above) said it very well my friend.
There is a very good reason GOLD sits at the base of Exters Pyramid and is "imprisoned" in Vaults ...none of which has to do with the banal, transitory nature of Comex, currency systems and whatnot.
GOLD transcends Money (etc) foNoah.
That reason is that GOLD is "of-the-present" ie: Once it's cobbled into (say) 400 Oz +or- Good Delivery Bars, it can and does confound time.
(Those of us who have visited the Museum of Antiquities in Cairo and gazed upon King Tuts Funerial Mask etc will appreciate my drift.)
When something ONLY has a "present" ...it is nigh on Immortal.
If you (or I) could (can) sufficiently harness our own mental capacity, wee too can become "of-the-present" / Immortal perhaps??
Now Alan ...that WOULD be Cool! ...;-)
Burning: -
Not "may" Mate ...has!
Once the Long : Short BondBill Yield Ratio got above the 4-5 range, the End Began!
Other Flags of note: - Fed losing control of the short rate c 2005.
Bond Index "price" topping $1.24. c 2009
"Current" state of curve (on life-support)
...amongst many others.
Wendy
Vegas? I'll be there!!!
For those others considering...Las Vegas has great out-of-doors opportunities. Red Rocks is world class rock climbing. Mt Charleston has (less than world class) skiing and boarding. There are great hikes. Lake Mead has all the usual water activities. One can also do heli rides over the town and plane rides to the Grand Canyon. The GC is however a 4 hour drive...it looks so close on maps but there is this huge ditch in the way (the GC itself).
The weather can be fantastic. It can also be freezing in January. It is a crap shoot.
Anyway, even if you are not into nature there is always the Strip. I went there once and it was OK.
In reply to Bullion Barons post on his blog
me:Pull up a chart of the price of gold in Indian Rupees.
http://www.marketoracle.co.uk/images/2010/Mar/gold-28-1.png
So for a few billion people, gold has already been the one asset which defies the usual bubble trend.
BB: The very nature of a fiat currency system (ongoing inflation) means that asset prices will tend to rise continuously over time. I don't really see the Indian Gold chart as a single bull market. There are several 5-6 year periods where the nominal price drops or is flat before surpassing the previous peak.
me: But do you see any obvious sustained bear markets similar to the USD priced bear market in the 80's ? I don't.
And rising asset prices continually over time is not true. Im assuming you mean that stock indexes like the DOW have increased over time too. But that is false because it doesn't account for the stocks that leave and enter the index. If you want to compare the DOW to gold since say... 1965 then you would have to take the 30 stocks that comprised the DOW in 1965 and compare the value of that list to the value of gold today.
bb: M, no there is not a sustained bear market, but I wouldn't expect there to be one given the higher rate of inflation in India. It's to be expected that anything would rise faster in a foreign currency (INR) if that currency is inflating at a higher rate than the currency (USD) that the asset (Gold) is measured in.
I am not talking about a specific asset class when I say that they should rise continually in price.
me: Is there really A higher inflation rate in India ? (An emission more money in India then in the US) Or is there just less willing buyers of their inflation on the world markets and locally (because of gold ;) ? I think the latter. They have rising prices in India but they have less inflation then the US.
bb ?
FOFOA:
"Good idea Wendy… I like the date you picked. If enough people commit, I will be there. I saw that in an earlier comment you told Michael dV (dV = Las Vegas) that you are going there in January anyway. So you thought you'd suggest a Freegold get-together around your already-planned trip? Hehe. Pretty smart for a silver hoarder! ;)"
I thought it was pretty clever myself :D
OK Luxor it is. I like that area because there's a HUGE Ross's a couple of blocks away.
Woland, deadwood (wherever the hell that is) next time ;) I agree vegas is anything but authentic, although it's fun!
Indenture your son is in for a treat. The New York New York is just across the street, and it has a massive roller coaster.
infact I challenge all to ride that roller coaster, get your pic taken (they do it for a small fee) and we'll ask FOFOA to post them =8o)
RPL don't blame you a bit, but couldn't you drive then?
Michael dV said...
Wendy
Vegas? I'll be there!!!
Awesome Michael.
Hey M, are you in to getting out of the great white north for a weekend?
I mean RJP, sorry for doing that again Ronny
poopyjim> about gradual rise, it's not mantra or plane or anything definitive or set in stone. We talked about it simply as option 1. dis-continuation of recent trend, after the rise from late 90s lows it hit the level/ceiling around €1.4k few years back - it might not be the end of gradual phase. As opposed to option 2. as overnight flashnanosecond FG gigablick.
However, we can very well have timely graduation as 1. -> 1b./c./.. -> 2.
In such a scenario, 1b./c./.. (TPTB can perhaps even withstand €2.5-4.5k) could be THE time for very partial antsy conversion to other hard assets (land footpeg), but leaving the bulk of anthillium for the phase 2.
In such a scenario, 1b./c./.. (TPTB can perhaps even withstand €2.5-4.5k) could be THE time for very partial antsy conversion to other hard assets (land footpeg), but leaving the bulk of anthillium for the phase 2.
I submit that this will be THE time to completely screw oneself to the extent one liquidates one's gold. However, to each his own. Not everyone is gonna be able to ride this thing out, especially not those who view the world with currencies at the center.
poopyjim said... Do you assign a 0% probability to hyperinflation in whatever locale you reside? If you cash out before HI, nearly any asset you trade your gold for (except for maybe things like fine art, antiques, etc.) has the potential for significant further devaluation.
Australia, and I do think it's unlikely we see hyperinflation here, although maybe that depends on the Government/central bank response to the mining bust that is playing out here at the moment. However, if I have transferred 90% of my metals into a freehold property & still hold 10% of current stack I would still be well positioned for hyperinflation. A well stocked cupboard might be a better asset to have than Gold in such a scenario though.
M said... me: Is there really a higher inflation rate in India ? (An emission more money in India then in the US) Or is there just less willing buyers of their inflation on the world markets and locally (because of gold ;) ? I think the latter. They have rising prices in India but they have less inflation then the US. bb?
Sorry, I had not forgotten your questions, simply ran out of time this weekend to look up the details. You may be right, perhaps the US monetary supply has increased the same or more than India's (but larger demand for USD allows them a lower rate of price inflation)... do you know this for a fact? e.g. can you provide the data to backup your assertion?
Does the flow still matter after all trading stops (dead horse grunts)??
Or, in the context of recent posts, and the gentleman who tries yo explain the falling price of fiat gold as the LBMA / COMEX fails ... here is one explanation:
http://www.marketoracle.co.uk/Article36704.html
And yet, where is is written:
"The ability of the banks to deliver gold on demand breaks down. At some point, a given bank will have to deliver more than it has in its vaults, as very little of what has been sold exists. That bank will then fail to provide the gold to the owner on that given day."
HOLD THE PRESSES ... there is not even a "medium" giant in the world today who expects same day delivery of gold in size "on that given day".
What is playing out today is a very S L O W run on paper claims. Like Bunde asking for 150 tonnes a year over the next three years. They ask this way to: 1) Not appear as a screaming giant, and 2) Give the "good name" of the FRBNY time to source the gold they need to fulfill. Many more Gaddafis can fall within 3 years, look how quickly Chavez repatriated, and how well publicized this return of gold was.
There may be several medium giants who are on the tail end of the short list, getting nervous but remaining patient. Their year long wait does not ever go to press (nor do they want it to). Yes in these times, with this slow protracted run, the Kitco price does hold and the flow most certainly does matter. The can is still kicked, and Bernanke does play the long bluff waiting game between expectaions and actions this time around, always observing the markets response to expectations alone.
For those who agonize about the length of time it has taken for the fractional bullion market to break down, it is worth noting that many medium "giants in waiting" will never scream "still no delivery" even after their last allocation is received, as there is always more to come if the system holds.
We know it will not lock at $400. But will it lock at $4000?
Matters outside the purely monetary plane will no doubt play a large role.
Many more Gaddafis can fall within 3 years, look how quickly Chavez repatriated, and how well publicized this return of gold was.
...
Matters outside the purely monetary plane will no doubt play a large role.
Yes, finally someone makes the point! Do you freegolders really think Uncle Sam is going to lie down and let his precious Bullion Banks die a natural death? Uncle Sam ain't goin' down like that! Why do you think USA is letting Iran engage in the Oil-for-gold deals? They are getting that pig plump for a nice cookout! BB's need more reserves and USG has all the guns necessary to get them!
The ELITE have dictated that there shall be no limit on the drone bombings, death, carnage, and chaos inflicted upon RoW in the name of preserving the bullion banks! BWAHAHAHAHHA! Now if you'll excuse me, I have to put my toad back in his enclosure.
Greetz,
HMS
Personal view on Freegold:
The old saw is "Bulls make money and Bears make money, but Pigs get slaughtered."
I'm a retired pensioner and sold some to put a down payment on my house. I didn't buy it outright as I could have as I would have been giving up a rising asset (gold) for an asset that is generally flat or falling (housing). At a price in my mind I will sell some more to pay off the house. This will leave me in a paid-for house and a still substantial amount -- for a working guy -- to carry my retirement, defend myself from a hyper-inflation and leave a legacy for my son. If I miss some of the gains I might have had had I sat tight waiting for freegold, then so be it. But life is to be lived (please pardon the cliche').
The arguments for freegold are logical and compelling, but that does not mean it will happen. I was introduced to a concept called "the cussedness of whole systems" which essentially means that systems tend to maintain themselves and revert to the mean. Gold at a freegold price seems clearly outside the mean valuation (a phase transition). A happy thought, I'll grant ya.
Gold is clearly heading for a very high price. I was an aggressive buyer from 2003 to 2010 and have realized substantial investment gains to date though I think of gold as primarily a secure savings medium as most here do.
My initial view was to hedge my pension. If I was right I'd make substantial gains and not have to worry so much about a pension failure. If I was wrong then I'd still have my pension. So far I (we) have been right.
At the time I started buying gold, Apple stock was around $20/share. I chose gold for all the good reasons FOFOA talks about and my primary concern was security. Apple would have clearly been a better bet, but then again I was not betting nor investing, but saving. I somewhat understood gold and clearly did not understand Apple (still don't).
My one other thought would be for us all to remember that economies are first and foremost about people and living ('making a living'). The banksters, etc. would have us believe that the economy is their speculative toy and at this point their view seems to be winning.
Anyway, just some personal thoughts.
HMS;
I worry that your impeccable analysis and logic may be undercut,
for some new, inexperienced readers, by your signature "laugh".
It gives the appearance, however unintended, that you might be
driving "without a spare". While I personally find it charming, well,
think of the children.......BWAHAHAHAH.......IS rather scary.
Greetz
@ KindoBlue
"My initial view was to hedge my pension. If I was right I'd make substantial gains and not have to worry so much about a pension failure. If I was wrong then I'd still have my pension. So far I (we) have been right."
Kindred spirit.
My hedge was in paid up properties no debts and Silver. FOFOA was the catalyst for a change into Gold.
Timing is everything. After making sure my nearest and dearest are taken care of the object of the exercise is to cross the line into eternity with everything spent and a grin on my face.
"Timing is everything. After making sure my nearest and dearest are taken care of the object of the exercise is to cross the line into eternity with everything spent and a grin on my face."
Nice sentiment, Duggo.
poopyjim> Sorry, but that's like talking to a wall, I was clearly not talking about liquidating nor centering worldviews around the concepts about currencies! Luckily, Wil Martindale just addressed the very same topic 2post after you with more reason.
@ Bullion baron
"You may be right, perhaps the US monetary supply has increased the same or more than India's (but larger demand for USD allows them a lower rate of price inflation)... do you know this for a fact? e.g. can you provide the data to backup your assertion? "
I'm fairly certain, yes.
India ran a slight current account deficit in the 90's, a big one in the early 2000's and they are positive now. Govt debt to GDP is around 40 to 60% on average. They live in the real world.
@ Wendy ? i tend to leave the great white north now and then. At least twice a year.
BB and M,
This might feed into the discussion about the Indian rupee gold price history.
http://www.kitco.com/ind/Hamilton/20121123.html
Adam Hamilton writes (my emphasis):
...the broad US money supply, MZM today, has ballooned from just $853b in January 1980 to $11,270b today! This is staggering 1222% monetary growth, which equates to a compound annual growth rate near 8.4%.
I'm not a big fan of MZM as a measure of the money supply but all of the 'Ms' show some pretty impressive expansion over longer timeframes.
The following is also worth noting by those who are wondering how this $IMFS has managed to stay alive for so long.
... So back in the 1970s when interest rates surged from 4% to 16%, bond investors were devastated. If they were in longer-term bonds and didn’t hold to maturity, they could have taken losses of up to 75% of their capital on rising rates.
As Antal Fekete is fond of pointing out during the 30 year US bond bull market every halving in the rates on bonds provided a doubling in the capital gain.
I point again to that comment I posted recently about "nominal loss aversion". So you have "old" money locked in trying to avoid realizing losses and "new" money pouring in to capture those easy profits from falling interest rates.
Institutions that only need to deliver nominal returns have a different "mindset" to individuals concerned about their personal savings.
And this multi-decade boom was fuelled by plenty of liquidity and the willingness on the part of other governments to support the $IMFS.
And this is where are we at today (my emphasis):
Meanwhile today the starting point for yields isn’t 4%, but 0.16%. So if they merely climb back up to 5% like they were before the stock panic, that is a 31x increase as opposed to only 4x in the 1970s!
FWIW I'm not convinced that negative real interest rates are the cause of a rising gold price. I think it is equally likely that negative rates go hand in hand with currency debasement and gold responds to fears about the reliability of the currency rather than a reduced opportunity cost of holding gold.
I note how averse many investors are to volatility. Perhaps another facet of nominal loss aversion. In the same vein, even today, Keynes observation about the inflation tax holds true today "which not one man in a million is able to diagnose".
Cheers
This looked interesting with respect to U.S. energy independence. Hat tip JSmineset.
http://www.nytimes.com/interactive/us/natural-gas-drilling-down-documents-4.html
In this short article Alasdair Macleod nails the one of, if not THE, key problems and the likely source of the next collapse - shadow banking.
According to other studies I have seen it's mainly based on "collateral chains" and "re-hypothecation". And you can trace many of these collateral chains back to sovereign debt. Hence the desperation to make this debt sound.
..to make sure sufficient collateral of good quality continues to be available.
"Good quality", LOL.
The Fed, along with the other central banks is effectively trapped: it can no longer manage the money supply in accordance with its mandated objectives.
Have to disagree with him in putting all central banks into the same basket but he's dead right about the Fed. I think people will be shocked when the inflationary 'energy' of currency debasement emerges in prices with a vengeance
...As well as conventional bank lending, there is also shadow banking to consider. The Global Shadow Banking Monitoring Report 2012 tells us that at $23 trillion for the US alone, it dwarfs reported bank lending....
.... Now consider what happens if interest rates are forced upwards by the economic recovery, clearly signalled by the bank lending statistics in the chart above. The value of this collateral will fall, and anything more than a modest interest rate increase will risk collapsing the entire financial system.
The Fed, along with the other central banks is effectively trapped: it can no longer manage the money supply in accordance with its mandated objectives. It is now the Fed’s primary function to worry about shadow banking, over which it has no direct control, other than to make sure sufficient collateral of good quality continues to be available.
http://www.goldmoney.com/gold-research/alasdair-macleod/shadow-banking-the-next-landmine.html?gmrefcode=dollarc
Hey costata, are you going to come to vegas?? Mrs. costata would love the discount outlet malls.
I recall that she likes handbags, and I believe there is a discount 'coach' store in the mall. Certainly that is worth a little plane ride from your down under? :)
Eduardo
the NYT 'article' is actually hundreds of unorganized pages of articles, emails and graphs. It is not organized in any manner, not even by date. Some of the emails date to 2007 and are opinion with a few facts.
Porter Stansberry's latest breathless 'End of America" type video would have us believe the shale/oil/gas play is the biggest petri event in over a hundred years and will (literally according to Porter change the course of history.
I have followed this play for about 2 years. Occasionally I read that we will never want for energy again followed by another that states the wells peter out early and will need to be re-drilled more frequently than is economical. I have seen both types of opinion repeated every few months.
Ultimately there is a huge difference of opinion on the shale play and I do not know who to believe.
It really could be earth shattering (literally and figuratively). It could also be a scam or something in between (if the analysis works at $15 gas but not at $3.50).
Whatever the truth I do not see the income and benefit from this source coming in time to change much in the next 3 years. Porter says by 2015 it will be so obvious that Obama will be set for a 3rd term, hailed as a hero for restoring America (while he sucks every dollar he can in various payments for leases and licenses.
Do we have anyone on the inside of one of these deals? Even the facts about well life span would be helpful.
FOFOA, might those that intend to go to vegas email you so that we have an idea of the number of individuals? Perhaps then with the help of MikedV we could plan a loose itinerary that would include group outings, functions etc.
Hi Wendy,
Unless they speak French in Vegas there's very little chance of getting her on the plane. For my part, while the TSA is still groping people I'm reluctant to visit the USA again.
costata
your feelings about flying in the USA are shared by many Americans. I also fly only when needed. I will drive a long way to avoid getting on a plane and putting up with the TSA. My feelings about this country are increasingly gloomy as Americans seem not to care about the massive loss of liberty we have seen in the past 11 years. and it is not just the TSA. the cops are pushing their authority to the limit. It is really a them vs us place now.
Hello Wendy,
The interest so far has been a little underwhelming. So if your idea is to pick up any momentum, I'd imagine it would happen right here in the comments rather than my email inbox. But of course anyone can email me if they want to. As far as Michael dV planning some outings, maybe if Edwardo comes Michael could take him out to the range and show off his Barbie dolls for guys! ;D
Sincerely,
FOFOA
Michael dV,
I think a lot of Americans fail to appreciate how much admiration the world had for your Constitutional Republic and Bill of Rights. Watching it being trashed completely used to depress me. These days I try to keep the emoition out of it. There's been a gradual erosion of many rights in Australia as well but it hasn't become as adversarial here as it appears to be in America.
FOFOA,
I decided to have a crack at responding to the critics on that Screwtape Files thread that was linked here recently. I've been trying to keep the size of my comments smaller but given the topic it requires a lengthy response. Coming soon.
Multiple Gold Prices
Part 1/3
There's been a discussion over at Screwtape Files regarding an issue raised by Another. Some people are questioning how gold could have different values at the same time. Others have attempted to explain this including FOFOA of course. I'm going to try a different tack and see if I can answer these critics. (I’m placing the comment here because the Screwtape thread appears to have petered out.)
This notion of multiple prices for gold isn't as outlandish as it may seem at first glance. Let's take a look at a real world situation where something as ordinary as a US dollar has multiple prices simultaneously. The key privilege that separates the various economic actors in the following example is a banking licence and the rules banks operate under.
For the sake of simplicity let's assume that the banking system is operating on a fractional reserve ratio of 12:1 and their capital + deposits are the only sources of funding for banks. For every eight dollars worth of deposits a bank can lend out one hundred dollars. Banks wouldn't form a syndicate with 7 depositors to make this $100 loan. The profit sharing is done via the payment of an interest rate on customer deposits.
The banks compete for deposits and offer different rates depending on the size of the deposit, the term and their need for deposits. Different prices for borrowing a dollar expressed as interest rates - hence $1.02, $1.03, $1.04 etcetera (under saner interest rate regimes). So a dollar already has more than one price than the number printed on it depending on whether it is in your pocket or in your account with a particular bank.
Now let's assume that the interest rate the bank is charging on, say, a credit card loan is 15 per cent and ignore the operating expenses and just look at the gross returns. We'll also assume that the balance on the card is constant.
A private citizen with a dollar in their pocket has precisely $1.00 worth of spending power. No more no less. But for this licensed bank every dollar deposited is worth up to $12.00 ($1.00 x 12 FRR) in purchasing power and around $1.88 in annual cash flow (0.15 x $100/8). If this income stream is likely to continue for several years it could also have a different capitalized value (price) if the bank decided to sell its loan book but we’ll ignore that here.
Continued/
/Continued
Part 2/3
If you think $12.00 is a ridiculously high "price" to put on a dollar in the hands of a banker then investigate the history of banking frauds and crises. One of the most common and easiest ways for a banker to make illicit profits is through related party loans or related party transactions. Basically take in a dollar in deposits and make a loan at 12 x $1.00 to a related party who acquires assets or speculates with the funds or make a loan to a genuine borrower who buys an asset at an inflated price from a front man related to the banker. Of course very similar scams happen in stock markets too. All just variations on a theme.
Now let's bring in one other economic actor - the currency issuer. They can produce a dollar for less than 3 cents. What’s the price of a dollar to them? Just to complicate matters even further: Why is a dollar worth four quarters that have a melt value of about 20 cents? So in this example every dollar has a range of prices that are simultaneously 3 cents, 20 cents, $1.00, $1.04, $1.88 and $12.00. Take your pick.
Gold is no different from a currency in this respect. The Comex spot price IS the price of gold - except when it isn't - but it may or may not price it correctly. There is no universal, constant value for anything. Currently gold's value (price) depends on the privileges of the economic actor holding the gold and the rules they are operating under. Markets are there to discover prices not to disclose a pre-determined price or some ‘intrinsic’ price. That's the theory anyway.
In practice, markets don't always succeed in performing this price discovery task successfully. Many here would argue that paper/electronic markets today are not discovering the fair market value (price) of physical gold as a result of the leveraged paper claims trading on an equal footing with physical gold. I would go further and argue that price discovery isn't possible in open exchanges when most transactions are conducted off-market. And even where most transactions go through an open exchange the rules determine how effectively prices are discovered.
Continued/
/Continued
Part 3/3
As Bron Suchecki of Perth Mint fame has frequently pointed out there is currently no divergence between the price of physical gold and the price of gold in the paper/electronic market. But that doesn't mean Another was delusional in saying this (my emphasis):
With gold discounted to it's production cost and below, those that have it can trade it for it's monetary value. Make no mistake, the BIS knows gold in the many thousands. The future "reset value" of gold is the key. "support the dollar with oil and the currency system works" "fail the currencies and the dollar will come off the oil standard and the BIS will reset gold to $10,000+ with many conditions"
If you were involved in deliberately suppressing the price of a good would you put the same value on it that the public does knowing it is currently under-priced? Also that was written in 1997 before the Euro was successfully launched. The threat of oil bidding for gold has apparently passed into history. But the threat that the dollar will come off the oil standard is alive and kicking. (Likewise its dominant role in international trade through currency swaps and so on.)
The international monetary and financial system can't function sustainably without capital backing it and collateral against which to secure debt. In the past few decades the ultimate backstop of this system has been an oil backed US dollar and "risk-free" sovereign debt (and the support of many governments worldwide). Like a bankrupt but operationally viable company the only way to rehabilitate the balance sheet of this system is to inject capital.
Under IMF rules we currently have a two-tiered physical gold regime. In the IMF members CBs and Treasuries gold is “monetary gold” while in private hands it’s “non-monetary gold” – a commodity. So the key phrase in that quote from Another is "future reset value".
When the artificial barrier collapses between these two tiers of physical gold holdings then ALL of the gold stock will come into play on an equal footing. Both to replace the US dollar as the primary reserve asset in a new IMFS and to provide credibility for the currencies (the base money) at the base of the inverted credit pyramid. If it is used to back any remaining sovereign debt it will require an even higher gold price to "reset" (recapitalize) the system.
@ Costata
"while the TSA is still groping people I'm reluctant to visit the USA again".
My sentiments entirely.
"Unless they speak French in Vegas there's very little chance of getting her on the plane. "
Do you live in France? I live in Antibes.
Costata> "I would go further and argue that price discovery isn't possible in open exchanges when most transactions are conducted off-market. And even where most transactions go through an open exchange the rules determine how effectively prices are discovered."
Great article, given the quote, under the likely scenario of global stagnation or negative growth, and the rising trend of regionalization (balkan.) meaning more bilateral trades than "free world markets" isn't there possibility of some sort of "aborted FG" where different amount of oz. is flowing for Iranian, Russian oil and gas, and again quite different amount elsewhere etc.? Basically, multi tier obfuscated gold valuations or large spread?
I'd be most grateful for your help with a reference.
At some point around 2000, the U.S. must have decided that they would not sell any of their gold, and as a consequence their gold was labelled "deep storage" and "working stock of the mint". In particular, none of their gold is called "exchange reserve" or anything like this.
There was a statement by Greenspan and Summers around 2000 that they wouldn't sell any gold. I think I remember that it was discussed in the archive.
What is the reference for this.
Thanks in advance for any hint.
Victor
Yes, Michael dV, the NY Times piece is a hodge podge of none too well collated information, but at the same time there is a theme that comes through which is that, pretty much across the board, these putatively vast resources are overstated quite dramatically. I have a very limited personal exposure to this latter day energy rush since I, courtesy of my late grandmother, own the mineral rights to some land that is now being leased by a small energy concern. Suffice it to say that there is a lot of money to be made flipping such leases without actually developing the parcels of land, or, at least, not developing such parcels for years on end. In the meantime, financing gets tapped, and activity of a sort occurs that leads folks to expect outcomes that may be nothing more than a chimera.
Some things don't evolve much, despite the trappings of change, and the U.S., which historically is a land of hucksterism and scams, remains, in large part, just that. In the meantime, we collectively blow such ample smoke up our own keisters that one wonders how we, as a nation, could ever have had an "energy problem". In the meantime, I hope that some real attempt to extract oil on my little patch of dirt occurs and that they are successful, but, for now, I am just grateful for the payout I have received to date.
As for Porter Stansberry, he's a huckster of sorts as well, and his record would seem to be less than stellar. Perhaps he will be correct this time, but experience lends to skepticism.
Does this help, Victor? He's referring to the reclassification of US gold which happened in 2001. I don't know the Summers/Greenspan quote of 2000 to which you are referring:
FOA (04/23/01; 20:30:04MT - usagold.com msg#67)
Replies and Custodial Gold
Hello Gentlemen,
I suspect the gold in West Point was reclassified in a show of good faith to those that own some international gold paper… Eventually, the US will walk right up to the gold window with the intentions of selling, only to fall away as they stare at a mountain of foreign CB dollars.
"""We watch this new gold market together, yes?"""
Thanks
TrailGuide
As for the idea of a trip to Vegas, I wish I had the flexibility to make such a journey, since meeting some number of my fellow FOFOANs, perhaps visiting the firing range with Michael dV, laying down a few small bets at the tables, and partaking of the buffet at The Bellagio-yes, I have visited the gambling mecca before-and immersing myself in the other wonders, such as they are, of Nevada, is tempting. However, as I and my wife are the parents of two small children, I will have to decline.
"ECB Appoints New Board Member Despite Objections Over Gender"
http://wallstcheatsheet.com/stocks/ecb-appoints-new-board-member-despite-objections-over-gender.html/
A nice reminder here, Wikipedia's entry on Meritocracy seems to have grown substantially since FOFOA put it up on the table.
http://en.wikipedia.org/wiki/Meritocracy
Best Regards,
KG
Thanks, FOFOA.
Here is something to read: Central Bank Gold Leasing.
The status of the essay is "almost complete", and I'd be happy about any sort of comments/corrections/etc.
Victor
Really, I had a thought yesterday about Las Vegas being the Mekka for gamblers (still playing the Roulette occasionally)! Oh Wendy, mentioning Vegas to a player is like saying "candy" and "gift" to a kid ;-)
Unfortunately, traveling is out of question these days...
Had an engine damage recently on my winter car (cylinder head gasket), not sure when its ready again...we have a snow forecast for later this week, but we have good train and bus connections here.
Oh, and a good friend of mine's wife is pregnant, due for mid-January- I prefer to be around, maybe I'll be godfather for him. I'll reserve a nice Gold coin, guess he will also be a Goldphile as the mother is Thai.
Did someone mention Barbie Dolls for guys? :)
http://www.youtube.com/watch?v=hJhs6zQhSfk
TB
Hello Fofoa;
Perhaps you might propose a number that would constitute a
"quorum" re: Las Vegas, (for example a dozen??) and then see
if we could fill it? Just a thought. I would come.
Re: Vegas
I'll put a real tentative "maybe" on it, depending on how many others are planning on going. Wouldn't be flying myself, I'd drive. I've never been to Vegas. Casino is one of my all-time favorite movies; I highly recommend it to anyone who hasn't seen it. From what I understand, Vegas is more like Disneyland nowadays, not as cool as it used to be when the mob was running it, lol.
Regarding the gradual stripping of our rights & freedoms in the US, it is pretty sad indeed. I think a lot about this concept of political will; it applies to more than just the printing press. I think no matter how unambiguous the charter a country has for limiting government and thereby preserving liberty, the political will always erodes it. I think the majority of people, sadly, are unthinking collectivist automatons who would gladly sacrifice any amount of liberty for material gain. If it weren't for reality periodically intruding on the body politic's collectivist fantasies and the resulting collapse, we'd have no freedoms at all. Thankfully, we're approaching such a collapse.
Recall the Executive Order highlighted in Ball of Twine Open Forum. There's a FOA quote in that post that seems appropriate: "They will not be pushing on a string; rather picking up the ball of twine and throwing it!"
So here's an update on this theme in the context of something I hear about every day - the "fiscal cliff." For example, this article - White House issues new warning on 'fiscal cliff'
"WASHINGTON -- On the heels of record sales over the Black Friday weekend, the White House warned that automatic federal tax increases set for next year could hurt the rest of the holiday shopping season and would likely crimp consumer spending by about $200 billion in 2013.[...]
These tax increases are part of the so-called fiscal cliff -- a combination of mandated fiscal spending cuts and higher taxes that are slated to kick in next year and that on the whole would hit the economy by more than $500 billion and likely send the country back into recession into 2013.
So the White House says we can't raise taxes and cut spending... because it would slow the economy. See that - the White House doesn't want to **contract the monetary base** because it will result in [insert your favorite fear-mongering phrase like "econgedden"].
Recall the simple formula from Moneyness:
So the volume of the base is expanded when the government spends, and it is likewise contracted when the government taxes and/or sells Treasuries to the private sector (including our trade partners like China). But when the government spends in excess of those two operations (taxing and debt selling), the base volume is simply expanded.
When the USG taxes more or spends less, base money contracts. When the USG spends in excess of taxes and debt sales (which we know are FED funded in ZIRP world full of QE), we get a growing monetary base.
So when you hear the phrase "fiscal cliff," recall Moneyness and remind yourself what this all about - they are "picking up the ball of twine and throwing it!"
FOA excerpted in "Just Another Hyperinflation Post - Part 1":
"My friend, debt is the very essence of fiat. As debt defaults, fiat is destroyed. This is where all these deflationists get their direction. Not seeing that hyperinflation is the process of saving debt at all costs, even buying it outright for cash. Deflation is impossible in today's dollar terms because policy will allow the printing of cash, if necessary, to cover every last bit of debt and dumping it on your front lawn! (smile) Worthless dollars, of course, but no deflation in dollar terms! (bigger smile)"
[...]
"Yes, even my untrained eye can see that we are approaching the end of a currency life cycle. When all of the debt can no longer be rolled over, the world does not end. It moves on, into another fresh system! This current contraction will not create a deflation as it did in the past. It will involve a rollover that will balance the losses for some with the gains for others. Will your wealth balance in this event? FOA"
JR: - As much and all as my respect for FoA knows no bounds, the two Paras above seem contradictory?
If I might - it seems FoA was implying a NEW System (Euro / FreeGold) would be introduced BEFORE the DE-flationary aspects of the existing currency-system ($ / IMFS) became apparent.
Of course we all know this didn't (hasn't yet) eventuate(d) ...and so we are to "endure" the (DE-flationary) effects of the Currency du-jours Death-rattles ...Yes?
The clock strikes midnight. The king is still king, and
the prince is still prince. But the carriage has reverted to
a pumpkin, and the horse and footmen to mice. Meanwhile,
Chervontsy fall like rain within Moscow's Variety Theatre.
Are they real? Or was all this a dream?
Very behind right now, so apologies if this has been posted:
Flight Records Say Russia Sent Syria Tons of Cash
And for fun:
Californian heating technicians unearth $300K in gold dust performing installation
And for fun part II (for Texan):
TCU 20.............tu 13 :)
Milamber
JR: In Matrixsentry's posted "JR's Favorite Reading List" are the posts in the order in which you suggest a virgin should begin reading?
and anyone want to try and make a timeline flow chart of Freegold? The end of the gold standard and the two tier gold pricing system, and significant oil occurrences, with beginning of Euro, price of gold along timeline of course, toss in some Fed numbers and generally list the important moments along this path because so many necessary steps stack up on top of each other a picture just seems appropriate to be able to attempt to understand the main, fundamental movements and how they influenced each other.
One of you could jot something down, scan it, and it would be more than the collective currently has. (I would ask FOFOA but I don't want to be rude)
Indenture that seems like a great idea!
I would like to propose something additional to our gracious host: a poll on the timeline and a poll on how much each understands is enough.
"how much each understands is enough", weightwise of course...
phew, just caught up to 10+ days of comments.
Good stuff. Nice interview Michael H.
FOFOA=Fozzie Bear ....I like it (smile) :)
The dust up over Duggo was funny.
Does everyone recall how rude and trollish Duggo started out? Perhaps it's his trolling entrance as BaronSilverBaron, his outing by FOFOA, and then his 180 and supposed sales of all his silver that causes some to be apprehensive about him???
I will only say that your complete 180 after 5 minutes here is odd. I'm not convinced there's not a long con troll being employed by Mr. Duggo, aka, Baronsilverbaron, and many more avatars (according to him)
but whatever, have at it Duggo.
I will have to attend the FG conference we have after the transition as I am too pinched right now for anything other than food,gas,and shelter. Oh and shells for my benelli. But I eat what I shoot even if it's fun as hell.
Every time I go through cabella's catalog looking for new cool things to buy to further my quest for waterfowl, I remind myself how many ounces or grams of shiny yellow rock that could buy right now so I put that fancy new set of decoys aside and convince myself to wait.
I poorly tried to explain to Fozzie last week how much different my thinking has changed in the last year. I owe it all to this blog and many of you so thank you all.
A couple weeks back in deer camp, I managed a week signal and got the page to refresh and was treated to some awesome back and forth by Costata, Blondie, VTC and others...just awesome so thanks everyone.
JoJo
Hmm
Anyone with idk a year spare time and librarian background?
The recent comment by costata has merit ( and also the critcism by somanyroads on STF).
I was thinking we should prolly have a go at labeling all posts and comments by topic and creating a forum where discussions on said topic are reposted.
This will be a handy reference guide, and save us all a lot of hassle when newbies show up with the same old questions.
Then we could focus only on undeveloped ideas.
Perhaps we can form teams. Haha.
TF
Hello, I am busy working through the paragraph below from Moneyness. Am i correct that when FOFOA uses BOP below the real meaning is, Current Account (exports-imports)which in 2011 was (559B)? Also, reading the first tranche of comments after Moneyness, I could not see this paragraph discussed in detail which i would have expected considering the significance and the implication as it relates to the purpose of QE? Any pointers to a trail of comments where this is discussed in detail would be greatly appreciated.
FOFOA:
USG=US Government sector
USP=US Private sector
BOP=Trade balance for both sectors combined
We know how much the USG is living above its means. That's the budget deficit. And we also know how much the USG+USP combined are living above their means. That's the BOP. So the "identity" looks something like this:
USG+USP=BOP
The annual USG budget deficit (how much the USG lives above its means, with means equaling taxes) is about $1.4T. And the BOP is about $565B. So we get this:
USG=$1.4T
BOP=$565B
$1.4T+USP=$565B
Or stated another way:
USP=(-$835B)
So the US private sector is actually living below its means by $835B if we isolate it from the government sector. The government sector, on the other hand, is living way above its means with 60% domestic support and 40% foreign support. Stated another way, the US private sector is providing the USG with $835B in goods and services in excess of taxes, or 60% of USG's "deficit consumption."
Viewed this way, there's only one way to reduce that trade deficit (inflow of free stuff): reduce the size of the USG monstrosity. Unfortunately, the USG is totally incapable of voluntarily shrinking itself, especially because it issues its own currency! The real problem, the heart of the matter, the reason why the dollar will and must hyperinflate, is that the US trade deficit, on the physical plane, is structural to the USG who issues its own currency. Simple as that.
an ANT and Dec
"Am i correct that when FOFOA uses BOP below the real meaning is, Current Account (exports-imports)which in 2011 was (559B)?"
Yes. $565B from FOFOA's example though.
Yes, we have discussed the relation to QE^infinity, noting that in essence it is there to make up the shortfall.
TF
Ps. Unfortunately I cannot direct you to relevant discussions.
Pps. So how bout them librarians? ^^
jojo
good duck hunting 2 hours out of Vegas (in season) at Key Pitman and Sunnyside as well as other ares. I do not hunt water fowl but friends who do say they occasionally do well there.
There are likely many better places between you and Vegas but at least we have something.
If however one is thinking of survival on ones hunting efforts here in Nevada....well there will be a lot of hungry hunters. Game is sparse and has declined a lot in the past 30 years as told by friends who have huntd here for years.
duggo,
We live in Australia. Mrs costata is an ardent francophile.
alpha-or-beta,
Basically, multi tier obfuscated gold valuations or large spread?
I don't think this is likely except in so far as gold will have a different price depending on the currency you are using. I think arbitrage would take care of any mispricing within a particular currency zone.
Cheers
http://www.goldmoney.com/gold-research/newsdesk/gold-closing-in-on-yen-price-record.html?gmrefcode=dollarc
Gold has clearly broken out of a period of consolidation versus the yen, with Japanese politicians seemingly at last convincing the markets that they mean what they say when they state they want a much weaker yen. Priced in yen gold is now within a whisker of its all time high around ¥146,000 per ounce.
It will be interesting to see if gold begins trading on fundamentals in each currency zone. We had a taste of this when Greece blew up and British sovereigns were reportedly changing hands at much higher prices there compared to the UK.
Another outstanding article/research paper from Victor The Cleaner!!
Central Bank Gold Leasing
Congratulations Victor! I imagine this is a post you've been thinking about writing for more than a year now. I had to go back and find the comment where I imagine you started thinking about this post. It was July 23, 2011!
Blondie asked you: "Where is the evidence that CBs ever lent physical, and not just paper gold?"
And you replied: "The outflow of physical from the FRBNY vault. There is some book by Dimitri Speck, I think, but it is in German (?) and I don't have it, in which he analyzes the inventory reports of that vault and tries to figure out how this is related to the gold leasing operations of the European central banks in the 1990s. You can perhaps google him and just ask him.
Victor"
Victor, here's another reference to "deep storage gold" by FOA, which even ties into some themes from my Moneyness 2 post:
FOA (07/31/01; 21:14:43MT - usagold.com msg#86)
Political Gold
===================
Current events
===================
There once was a time when citizens owned their trading vehicles; all wealth, including gold, was free to barter. Then ruling authorities stamped most of those gold trading vehicles as "legal tender" and made them money objects; dependent upon value associations instead of barter. No doubt to collect taxes as running nations was a costly affair.
Extending the point:
Around 1975 Americans were given the legal right to own gold again. Many did not then, nor do they today, see any reason to own gold as their treasury has gold with which to back their currency. The logic of this perception is clear and simple to the casual observer. However, take out one US legal tender dollar and read its cover carefully? Does it say it is your currency? Is your name on it?
The US dollar is a note, a security that specifies a value the holder is owed. You may keep it or spend it or even trade it, but it does not belong to you. It belongs to the US Treasury and is created by the Federal Reserve; both political entities. What a person owns, when holding a dollar, is the value that note is tradable for; the value that is owed to you and said dollar note represents. In every way it is real money; in that its value is in its tradable value association; not of itself. If the dollar itself had real value, its use would constitute barter; not the use of TrailGuide's money concept.
If you think you own the currency of this country, understand this one item: the political entity that the dollar is owned by, can cancel its legal tender status at any time. Thereby removing your use of its holdings!
Cont…
2/2
Extending further:
The only gold Americans ever owned, prior to 1933, was the very gold coins they carried. They owned it because it was a true barter vehicle. Even if the Treasury removed its legal tender, "money aspect", from said gold coins, you could still barter the value contained in the gold. By 1971, Americans owned no gold and all gold held in the name of the US Treasury was "Political Gold" owned by the government.
The perception, by some, was that because the government owned the gold, the citizens own it too. This flows from a similar convoluted logic; that stock holders of publicly traded gold mines own the underground gold. In reality, if the mine was dissolved, both processed and reserve gold would be sold and "Legal Tender" money would be distributed to its owners. Not gold.
The same is true for Political Gold. All gold held by the state, unless distributed first to its citizens, is subject to worldwide "Legal Tender" political claims first. The precedent for this is clearly revealed as the Swiss must ship their "Political Gold" to others first; while sending currency to satisfy gold claims against it.
As the IMF has recently extended this protocol, swapping gold at different values, to settle political debts; this action further justifies the US being able to use its gold to defend its currency's settlement function. Aside from the US minting eagles for public sale and it being against the law for gold reserves to be sold outright to open bidders.
==================
To draw a conclusion from this "current event":
Deep Storage gold
Americans have the right to buy and own the "Wealth Of Ages". As events draw to a close upon dollar use, we can expect outright use of America's "Political Gold" in restraining the speed of its currency's burn. To compete in the new architecture of a Euro System currency, unrestrained trading of gold will advance its dollar and Euro price significantly. With political pressures to tax private physical gold trading as low as possible, expect enormous taxing and windfall profits rules to impact all other forms of gold ownership. Indeed, long before such changes are in place investors will rush to be in the correct ownership place, well ahead of the fact.
Of Fiats and Gold:
It is ironic that both roads have curved as time moved on. One returns to it's roots, as a wealth value today, few have ever know. The other becomes the money a modern future requires. Both on a different path and building for our better future.
Next time I will discuss; what one should realy expect to see when all paper burns; and how close political events are saying we are to that fire!
Thank you for taking the time to come here and listen to these talks. I wish you well and good night.
=======================================
Ok, everyone please leave the Trail as you found it,,,,,, no trash or drinks. (smile) We will meet here for his next talk when it comes. I'll comment in between.
Thanks
TrailGuide
FOFOA:
"The interest so far has been a little underwhelming"
True, so far, but it's early in the game. We have a maybe from woland, jim, and indentured. Mrs. costata might be placated if she were to stay at the Paris where they sell handbags AND awesome crepes :)
and yes I too hate flying to the US, and every year I swear never again (shrug).
I was in your USofA yesterday and the weekend before (I live 7 miles from the border) and every now and then I get pissed off at the boarder crossing and don't return for months.
Re: Vegas
I would consider coming. Have to see what work and family schedule looks like, but it would be fun to meet everyone.
I also have a "maybe" from Sleeping Village and very weak "maybe, we'll see" from someone I won't mention, but his name starts with an E and ends with an R.
yeah aquilus and sleeping and E/R
+1 :D
VtC,
I second that commendation from FOFOA on your post about gold leasing. Tight, well constructed series of arguments to support your interpretation of events.
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