Wednesday, December 26, 2012

Countdown to 2013 Open Forum

The world didn't end in 2012 and it's not going to end in 2013, but that doesn't mean things won't change. The one constant—the only constant—is change.

"There are 31,530,000 seconds in a year. A thousand milliseconds in a second. A million microseconds. A billion nanoseconds. And the one constant, connecting nanoseconds to years, is change. The universe, from atom to galaxy, is in a perpetual state of flux. But we humans don't like change. We fight it; it scares us. So we create the illusion of stasis.

We want to believe in a world at rest—the world of right now. Yet our great paradox remains the same. The moment we grasp the now, that now is gone. We cling to snapshots, but life is moving pictures, each nanosecond different than the last. Time forces us to grow, to adapt, because every time we blink our eyes, the world shifts beneath our feet.

Change isn't easy. More often, it's wrenching and difficult. But maybe that's a good thing. Because it's change that makes us strong, keeps us resilient, and teaches us to evolve."
–Tim Kring

Is 13 lucky or unlucky?

Unlucky 13

The number 13 is considered to be an unlucky number in some countries. The end of the Mayan calendar's 13th Baktun is superstitiously feared as a harbinger of the apocalyptic 2012 phenomenon. Fear of the number 13 has a specifically recognized phobia, Triskaidekaphobia, a word which was coined in 1911. The superstitious sufferers of triskaidekaphobia try to avoid bad luck by keeping away from anything numbered or labeled thirteen. As a result, companies and manufacturers use another way of numbering or labeling to avoid the number, with hotels and tall buildings being conspicuous examples (Thirteenth floor). It's also considered to be unlucky to have thirteen guests at a table (Last Supper). Friday the 13th has been considered the unluckiest day of the month.


The Number 13 is a Karmic Number. Number 13 is the number of upheaval, so that new ground can be broken. The number 13 has great power. If this power is used for selfish purposes, it will bring destruction of the self, and in turn, this will bring dis-ease and illnesses. Adapting to change gracefully will bring out the strength of the 13 vibration, and decrease any potential for the negative.


In a tarot card deck, XIII is the card of Death, usually picturing the Pale horse with its rider.

Thirteenth floor

Based on an internal review of records, Dilip Rangnekar of Otis Elevators estimates that 85% of the buildings with elevators did not have a floor named the 13th floor. Future building designers, fearing a fire on the 13th floor, or fearing tenants' superstitions about the rumor, decided to omit having a 13th floor listed on their elevator numbering. This practice became commonplace, and eventually found its way into mainstream culture and building design.

Year 2013 vehicle license plates in Ireland

Vehicle License plates in the Republic of Ireland are such that the first two digits represent the year of registration of the vehicle (i.e. 11 is a 2011 registered car, 12 is 2012 and so on). In late 2012 there were concerns among members of SIMI (Society of the Irish Motor Industry) that the prospect of having "13" registered vehicles may discourage motorists from buying new cars due to superstition surrounding the number thirteen and that car sales and the motor industry, (which is already ailing) would suffer as a result. This concern prompted SIMI to approach the Government of the State and request that 2013 registered vehicles have their license plates age identifier string modified to read "131" for vehicles registered in the first six months of 2013 and "132" for those registered in the latter six months of the year. As of August 2012 the government, bearing in mind the potential loss in VRT (Vehicle Registration Tax) revenue on new cars, are considering the proposal for implementation. When the proposal was released to the media on 25 August, it was met with mixed reception.

American history

The American flag has 13 stripes in honor of the first 13 colonies.

Apollo 13 was a NASA Moon mission famous for being a "successful failure" in that while the crew were unable to land on the Moon as planned due to a technical malfunction, they were returned safely home.


In Formula One, the number 13 is not used. As such, the numbering goes 11, 12, 14, 15 under the current numbering system.

The number 13 is the most-commonly registered jersey number in modern roller derby.

Lucky 13

Several successful sports figures have worn the number 13.

In Italy, 13 is also considered to be a lucky number, although in Campania the expression 'tredici' (meaning 13) is said when one considers their luck to have turned for the worse.

A repressed lunar cult

In ancient cultures, the number 13 represented femininity, because it corresponded to the number of lunar (menstrual) cycles in a year (13 x 28 = 364 days). The theory is that, as the solar calendar triumphed over the lunar, the number thirteen became anathema.


The number 13 in the Coperos religion (small culture in Brazil) is like a God number. All coperos must know that this number can save humankind.

I am not superstitious. But I do wonder what will be written about 2013 after the fact on these types of pages. Will it be remembered as a lucky year, or an unlucky one?

Last year was:

Year of the Surprise

I have an idea for what to call 2013, but I'd like to hear your suggestions in the comments!

Year of the _______

And finally, there's one thing that I'm watching for the next week and a half. It could be a signal of sorts, but I wouldn't put too much stock in it.

Last year this week, during the Asian trading hours the night before Snapshot day (Friday, Dec. 30, 2011), the euro price of gold mysteriously levitated a whopping €32.89 from the previous day's London PM fix of €1,184.16, which would have been a disappointing decline since the October, 2011 MTM Party which marked gold at €1,206.39. I made a comment about the timing of this unusual overnight levitation in this post. In it I noted that "evidence from Sept. '10 and April '11 seems to suggest that year-end and mid-year might be more important [MTM parties] than the other two quarters."

Then, last May, I posted two cryptic tweets:

I will now explain those tweets. The following is almost verbatim from an email I sent Warren back in May explaining my tweets:

Jumbo Shrimp selling 95% of his gold was my Freegold Puke Indicator (or FPI) which fired.

At the time of my tweets, the euro price of gold was €1,211, already below the April and January MTM party numbers. And it was only about €5 above the October MTM party. So my Goldhog day prediction on May 16th was that if we had a June 29 snapshot of around €1,216 or less, it was game on for Freegold. The "window of opportunity" would be open! But if it would be €1,243 or higher it meant another 6 months of kick the can. There’s more to it than just that, but with Jumbo Shrimp’s prediction of the paper gold price collapsing, I thought this was a good opportunity to take the temperature of official support for paper gold.

The thing is, paper gold is so relatively valueless that it’s no wonder when the price falls. The real wonder is when it rises. It’s almost as if someone is supporting paper gold. Remember my old Timing is Everything post? The theory there is that the Eurosystem CBs are actually supporting the paper gold price somehow. That theory came straight from Ari, and it has held true so far. On Dec. 29th 2011, the euro POG magically levitated in the middle of the night from €1,184 to €1,216 so as to beat (in the eleventh hour no less) the October MTM party which recorded €1,206. In the April MTM party it was up again to €1,243.

I don’t necessarily think that there is some target rate of appreciation like 18% p.a. If the Eurosystem CBs are supporting the paper gold price at key times like MTM parties and GLD pukes, I think it would naturally show up as some sort of an emergent pattern. But that doesn’t mean there’s a specific target. It’s just the average of what whoever is doing it considers a reasonable amount: not too high/obvious and not too low/meaningless. Over time, the average would emerge as a steady long-term appreciation in the gold price.

So why would Eurosystem CBs be supporting the paper POG? I have some theories on that.

June 29, 2012 was mid-year Snapshot day and my Goldhog day. Gold was €1,211 on May 16th and I predicted that if it was €1,243 or higher on June 29th it would mean six more months of kick the can. If it was €1,216 or lower it would mean "the Freegold window of opportunity" was open. If it closed anywhere between €1,216 and €1,243 on June 29th it would be too ambiguous to be predictive one way or the other. Of course we got €1,246.62 on June 29th which meant six more months of kick the can.

Well, my FPI fired again last week and now we are a week and a half out from another Goldhog day and, as of this writing, euro gold is languishing at €1,255.94. That's a full €121.48, or almost 9% below October's MTM party, yet still €9.32 above July's. So I'll take another stab at the predictive powers of Goldhog day. But first, here are the results from the last six MTM parties:

July 2011 - EUR 1,043.38
October 2011 - EUR 1,206.39
January 2012 - EUR 1,216.86
April 2012 - EUR 1,243.45
July 2012 - EUR 1,246.62
October 2012 - EUR 1,377.42

This year, because New Year's Day falls on a Tuesday, Snapshot day is actually Friday, January 4th (it's usually in December) and the results will be released the following Wednesday, January 9th. So here's my "prediction" (and remember that I hate doing this stuff):

If the recorded price on Friday, January 4th, 2013 is EUR 1,246 or lower, it's game on for Freegold meaning that the window of opportunity is now open because official support for paper gold has apparently ended. In other words, there may be no system support the next time something breaks. But if the recorded price on January 4th is EUR 1,389 or higher, it's six more months of kick the can. And if it's anywhere between EUR 1,246 and EUR 1,389 (which it is today) then the €PoG will be too ambiguous to be predictive one way or the other.

This is not your typical TA-based prediction. I hope you can tell the difference. If I was interested in TA I would be looking at the $PoG and not the €PoG. This is simply a moment in time when we can apply a specific theory, one that Ari alerted me to two and a half years ago, and take a fresh reading. Like I said, it's just something I'm watching that could be a signal of sorts, but I wouldn't put too much stock in it. Here's a chart of euro gold that will update each time you reload the page:



Boefke said...

Johnny Cash...the only cash that really represents value!

Beer Holiday said...

13 is 12+1 AFAIC, there are four very special numbers, 1, 5, 7 and 12. 0 isn't really a number? but then what would I know.

Here are 5, 7 and 12 explained :-)

duggo said...

I'm actually waiting for the 27th/28th December to make a fairly substantial purchase of Gold in Euros. So here is a chance to tell me if I'm wrong or right and to go for it or hold back until January.

Are any of the "regulars" here game enough to have their suggestion in print as to what I should do?

Dante_Eu said...

2013 – Year of the Antidote

/SleepingVillage/ said...

2013 - The year of ReverbAratioN

Reverberations from the stock market crash were still being felt months later


You're gonna wake up one morning as the sun greets the dawn

I've always enjoyed the #13:)

matrixsentry said...

OK FOFOA fans, the 2012 Compendium is in the can (unless FOFOA posts before Jan. 1) and can be found at the Ron M's Air-Friendly PDFs link in the blog links section.


FWIW, I think 2013 will be the Year of the Mistake. Tactical missteps and political brinksmanship may up the stakes dramatically. Japan is on the brink, Washington is a shit show, Iran is still enriching uranium and Israel is ready.

The stage is set with familiar props. All eyes are looking for what we expect to see. What better time for the Black Swan?

Happy New Year!

Beer Holiday said...

2013 The year of the swan?

Flore said...

2013..year of the hiding

FoNoah said...

Thank you Matrix – you do great work. In 2013 someone very near and dear to me will be following in the footsteps of RJP. I plan to give him all your Compendia and all the Archives as a parting gift. For him at least I know 2013 will be the year of enlightenment.

The Perth Mint opens for business on Jan-02, and I will be there at 10.00am sharp to get paid in full. Two weeks ago I converted 75% of my pooled paper silver into allocated gold at a GSR of around 52.1. (I originally bought at GSR of 36.2 – OUCH! – but I feel comfortable with the decision anyhow).

Can only speak for myself – but I know for sure that 2013 will be the Year of Multiple Orgasms (sorry I mean multiple A-HAs)

Happy New Year to all – Cheers - FoNoah

Beer Holiday said...

I think my circumstances are different to most here, but I'm looking to swap AUD for allocated Perth mint. No good reason, I just like it.

poopyjim said...

2013: Year of the status quo preservation.

If you don't expect much, you can't be let down. ^_^

Aquilus said...

"Year of the Spectator" for me.

I plan on sitting back and enjoying the greatest show on Earth unfold.

Woland said...

2012, 2013.......... 12 + 1 = 13

9 cubed (729) + 10 cubed (1000) = 12 cubed (1728) + 1 cubed
both equal 1729, an interesting number is several ways.

It's the smallest integer that can be expressed as the sum of 2
different pairs of integer cubes. and if it wasn't for that dang 1,
Fermat's last theorem would have been wrong.

Oh, and 13 x 133 = 1729. Who Knew? Just my 1729 c, FWIW

Woland said...

BTW, It's known as the Hardy Ramanujian number. Interesting

burningfiat said...

2013...year of Doom, Hell, Destruction and Ruin \m/

byiamBYoung said...

Dare I say... Year of the moonshot?

@AD, my vote for the biggest surprise would have to be that the Fed formally cranked up the perpetual printer- a move that should have shocked the world- and the wheels didn't fall off of the dollar bus...yet.

Just my humble popcorn shrimp opinion.

Biju said...

I think the Euro support has gone. Just looking at the 10 year Euro chart, something happened in last Dec 13th, when price dipped well below E1300.

The Euro chart looks broken for the first time in 10 years.

Edwardo said...

Arguably, adolescence, which, as we know, is a time of profound development for human beings, begins a tad earlier than a person's thirteenth year. Suffice it to say that one is really right in the thick of it (it being cha cha cha changes) by year thirteen. I expect our culture, and perhaps the entire planet, will be, as well.

dieuwer said...


the €POG went nowhere during 2002-2005 until something changed during the summer of 2005. After that, €POG went ballistic. Could it be that we revert back to a quiet price range?

byiamBYoung said...

So if on Goldhog day, Punxsutawney Phys sees his aura and the Euro is marked at 1246 or lower, what sort of event would qualify as the "something breaking" that might come along?

Merry Christmas everyone!

dieuwer said...

Also, don't forget that late 2011 the Swiss pegged the franc to the euro. Meaning, they lost control over their huge gold hoard as they now have to do the ECB biding.
At that same time, €POG went into the current trading range.

Stel said...

2013 - Year of the upheval.

Not necessarily freegold but I expect some major paperwealth to be destroyed.

Aaron said...

"As long as the music is playing, you’ve got to get up and dance,” he told The Financial Times on Monday, adding, “We’re still dancing.”

--Citigroup‘s chief executive, Charles O. Prince, 2007

2013 - The Year the Fat Lady Sings

Edwardo said...

Perhaps this is the single best chart available illustrating why The Fed, JPM, and the rest of their ilk should be shut down. I know, I know it's not their fault. Of course it isn't. sarc (way) on.

RJPadavona said...

In case anyone is curious about the Johnny Cash song, the number 13 has some meaning to it. He often sang about prison and in this song he says "I've got the number 13 tattooed on my neck".

The tattoo you'll often see in prison is actually "13 1/2", but I guess that probably wouldn't have meshed well with the cadence of the lyrics. The meaning of 13 1/2 is 12 jurors + 1 judge + a 1/2 assed chance of winning your case.

Since over 90% of cases in the US are plea-bargained, you don't see this tattoo that often anymore. Unless you actually turned down a plea-bargain and took your case to trial, you haven't earned the right to wear that tattoo.

Me, I was a big fat sissy who also had enough sense to know I couldn't win my case. So I plead guilty and have no tattoos :)

And there's your bit of worthless information for the day.


Good luck to your friend. I wish I was lucky enough to have someone copy all our favorite archives for me when I went in. If your friend really takes the time to study that material, he'll be forever indebted to you.


As soon as I started reading this post, the first thought that popped in my head was "I bet Sleeping Village will be linking some 13th Floor Elevators". And of course you didn't disappoint!

Did I ever tell you that every time I think about gold's timeless function, I'm reminded of Roky too?


As for my prediction for 2013? I think 2013 will be the Year of SWHC and RGR stock. But don't get roped into that stock price. Buy the physical! ;)

FoNoah said...

@RJP - Thank you. I was sooo hoping to meet you in LV, but it's not to be. Maybe next time...

@AD: The ENORMOUS surprise of 2012 was that FOFOA decided to reveal himself and many of his good friends. Perhaps you need to learn to think outside the box a little?

Happy New Year. Cheers - FoNoah

/SleepingVillage/ said...

I figured you'd be expecting it, RJP! Haha, it's the natural way.

Hey, did you know Glen Danzig wrote that song (13) for J Cash?

The other 13

Twist of Cain

Edwardo said...

RJP, you may find this of interest.

costata said...


I hope you had a good Christmas and the New Year is kind to you.

My title is too clunky to work but here it is anyway:

2013 The Year That The BOJ Made OBA's Negative Rate(s) An Undeniable Reality

So maybe this could be condensed to:

2013 The Year Reality Intrudes


The following may sound like a truly nutty idea but the BOJ could contribute to creating an even more severe shortage of USG debt instruments.


@December 26, 2012 8:57 AM

@AD, my vote for the biggest surprise would have to be that the Fed formally cranked up the perpetual printer....


In 2012 the Fed went all in with no apparent need to do so at the time. IMHO something systemically important broke in September, 2012. The scale of the response is in inverse proportion to whatever it was. I'm not sure about the nature of the breakdown. It's a matter of interpreting the perspective of the decision-makers.

If you apply the economic theories that inform the Fed's perspective it could have been the cumulative impact of the employment statistics that they monitor. In September perhaps they realized that US employment levels are not showing any signs of coming back up as the Fed anticipated.

Unlike other economic actors who respond to failure as a signal to change course these folks view it as a sign to do more, much more, of the same. Their "economics" tells them that they must increase their efforts to reinflate in order to solve the employment problem.

To an outsider this appears to be lunacy. For observers with a different economic foundation there appears to be no new news and therefore no explanation for this crisis-type response by the Fed. The key to understanding may be to dial your common sense down to single digits and apply neo-classical/neo-keynesian economics.

Anyway, that's my 0.02

Happy New Year everyone.

Brian said...

Maybe 2013 will be the year of 'the new currency'? Feel free to google these quotes.

'The battle lines have been drawn. Talk of a new currency is "in the air".'

'Europe is presenting "a blueprint for a new worldwide currency system" '

'And because the Euro has squandered it's initial promise over the past decade in favor of the dollar faction'

No way, all that initial promise, squandered he says. Bloody hell what a waste.

Who wrote those words, but only after reading Another and Foa twice I believe?So maybe it needed 3 attempts.

No wonder Blondie was the latest to wake up and smell the roses. Keep those donations coming, someone is still stacking plenty of phizzz.

Sam said...

If its going to be bad for business perhaps we will skip straight to 2014.

2013. The Year of successful failure

byiamBYoung said...

I'll take this moment of relative silence to ask a question. I, being shrimpier than many, buy gold by the gram often.

I have browsed many sources, and found that Ebay (surprise!) offers me the best price (gold + shipping) for these small quantities.

Does anyone have a better source they would like to share?

Cheers, and happy holidays all!

Also, since this was part of our holiday silliness, I'll share. Please put down your beverages before clicking,

Pure stupidity

dieuwer said...


maybe an idea to first collect enough dollars to be able to buy at least one ounce of bullion?

byiamBYoung said...


Yes, a good strategy for sure. Real world factors complicate the plan, however. I'll skip the minutia.

When I originally found the gold trail, I faced two inescapable truths: I had no gold, and there was a limited amount of time to get some before
everything went poof. My challenge was one of leveraging a simple man's financial tools to acquire physical. And every day that I had no physical gold was a day that I was outside the reset paradigm.

So, that became my mindset, and it persists today. I love my wife, but we do not share this mindset. Therefore, I am much like a gadfly banging against a window. I stridently grab tiny bits of physical as our finances permit, and in a way that does not disrupt our lifestyle.

We all have different constraints, don't we?


Beer Holiday said...

FGI has really got me thinking, what will jumbo shrimps do, sell out and buy physical as PoG falls lower? Or will the giants suck up everything as the paper gold price goes to zero - i.e none for sale.

Thanks for 1729 Woland.


Maybe jewellers would have small amounts left over to sell at spot. Maybe dipping old circuit boards in aqua regia would yield some below spot, or buy from recyclers. But you'd want to be carful.

You stumped me last time you asked, I think you might be right on eBay.

A PIIG said...

Added some select quotes to my gold silver ratio post.

Aragorn III (10/16/98; 15:40:56MDT - Msg ID:612)
A final thought for all...on the notion of gold value over time relative to all things--particularly a fine suit for a man equating with one ounce. Justlet it go. While some things do correlate well for periods of time, history may bear false witness when looking toward things to come. This is a world not as before. I offer this simple,real-world example. There was a time, not long ago, when gold panners in Columbia were frustrated with the abundance of hard grey "pebbles" that would litter the final washings of their gold. They heavy nuisances were discarded with disdain. Today we value platinum a bit higher than they would have imagined. The modern use redefined the value accordingly.

victorthecleaner said...

Merry Christmas to everyone!


I am not sure there was anything special that happened in September 2012. Why did the Fed go all in? If we follow FOFOA from 'Peak Exorbitant Privilege', then the foreign purchases of US government debt are in decline, and so they simply need to act. And they do so in precisely the way that FOA predicted long ago. No need for any hard feelings against the Fed. They act exactly as they have to as part of the old dollar system. I trust that they understand exactly what they are doing and why, and that they deliberately chose this path.


you are writing (on your blog) that you expect the market to overwhelm the Fed and force negative nominal rates. Never fight the Fed or this time is different?

Why cannot the Fed simply pay 0.5% interest on reserves and at the same time put a bid under any government debt that trades at a yield of more than 1.0% (say)? Then, if there is any significant other class of debt, e.g. agency debt, put the same floor under those yields as well. This would be going all in. And it would certainly prevent short-term nominal rates from going negative, simply because the banks can then offer deposits to their customers at, say, 0.2%.

I would rather guess that when nominal rates go negative, then this happens with the consent of the Fed, either because they think 0.5% would still be bad for the economy, and they simply want to push the pedal to the metal. Or, alternatively, because they want to send potatoes into backwardation and just select the right moment in order to get rid of the dollar.


Herb said...

2013 will be the Year of Economic Dawning Realization.

costata said...


I am not sure there was anything special that happened in September 2012.

That's my point. Nothing of significance appears to have happened. Yet the Fed went into a new round of QE. Around that time unemployment targets and GDP targeting began to be frequent topics of the standard Fed jawboning culminating in the adoption of the so-called Evans rule.

BTW the scenario you outlined to OBA for keeping yields positive doesn't make any sense to me.

costata said...

FDIC Deposit Insurance

This will probably not be news to American readers but may be of interest to others:

1. When the Dodd-Frank Deposit Insurance Provision expires, how will noninterest-bearing transaction accounts be insured by the FDIC? What will be the impact on deposit insurance coverage on other types of accounts?

Beginning January 1, 2013, noninterest-bearing transaction accounts will no longer be insured separately from depositors’ other accounts at the same IDI.

Instead, noninterest-bearing transaction accounts will be added to any of a depositor’s other accounts in the applicable ownership category, and the aggregate balance insured up to at least the Standard Maximum Deposit Insurance Amount (SMDIA) of $250,000, per depositor, at each separately chartered IDI.

For example, if after the expiration of the Dodd-Frank Deposit Insurance Provision a depositor under the single ownership category has $500,000 deposited in a noninterest-bearing transaction account and $250,000 deposited in a certificate of deposit, or total deposits of $750,000, the depositor would be insured for up to $250,000 and uninsured for the remaining balance of $500,000.

Depositors should be made aware that Section 335 of the Dodd-Frank Act permanently increases the SMDIA to $250,000.

I note that the lobbyists for the big banks appeared to get everything they wanted in the changes to the Dodd-Frank legislation. Therefore I assume they are happy with this expiration or they would have lobbied (successfully) for some other outcome. So my question is: What's in it for them?

Herb said...

@Costata - As I understand it, the TBTF banks see themselves as having de facto 100% deposit insurance by definition. That is, they have a competitive advantage over banks that are small enough to fail and thus take their non-FDIC insured depositors down with the ship. To put it mildly, it stinks.

Jesse McL said...

Hi all,

Here's my go at a quick clean-up of those old USAGOLD discussion archives.

If there's any problems with it or if anyone would like the data in a more raw form, just let me know.

Might be a good candidate to PDF-ify, but other's might be better at that than me.

Cheers and Merry Xmas to all.

costata said...


Those deposits are liabilities to banks. They have a vested interest in seeing them go to zero.

Loans = Assets, Deposits = Liabilities

DP said...

2013 - Year of I Need A Dollar

ein anderer said...

Would someone be so kind and explain me this of FOFOA’s sentences above, quote:

»If the recorded price on Friday, January 4th, 2013 is EUR 1,246 or lower, it's game on for Freegold meaning that the window of opportunity is now open because official support for paper gold has apparently ended.«

With other words: Why the physical gold price will FALL when the support for paper gold stops?

If paper gold support stops everybody sees that there is not so much physical gold than paper gold. From my point of view the price for physical gold should rise then!

Confused …

Woland said...

Or, alternatively, 2013, the Year of Schroedinger's Dollar?

Archer said...

ein anderer, the theorized scenario goes like this:

Upon the collapse of paper gold-which will likely be brought on precisely because some large entity is unable to convert their paper chits into actual physical metal-the price of paper will precipitously collapse as the market realizes with crystal clear clarity (pardon the plentiful purple prose) that the provisional worth of paper gold is an illusion. Physical gold, at the point that the paper market is collapsing, goes into hiding as everyone who has a claim, or thinks they do, rushes to procure the real thing. Those who actually possess physical-in size-already know the state of play and simply let their physical lie very still until such time as a revaluation ensures that they receive, as per the new market dynamic, fair value. There is likely to be a time lag of some indeterminate period between the collapse of paper gold and the re-emergence of physical gold in revalued form.

jojo said...

Just to add to Archer a bit:
This is when the two separate. I expect we will see the "price" of gold fall but just try and go find some physical for that "spot price"...good luck:)
Gold, get you some :)

ein anderer said...

thx a lot for your crystal clear clarity ;)
But when this happens –

»Physical gold, at the point that the paper market is collapsing, goes into hiding as everyone who has a claim, or thinks they do, rushes to procure the real thing«

This means that demand for physical gold is *rising*, right? Why the price will *fall* as FOFOA said? This »goes into hiding« seems to be the point I did not catch very well until now …

Thx a lot for clarifying again!

Woland said...

I know Mish Shedlock, the "broken record" of Deflation, is
not popular around these parts, so perhaps no one reads
him. He does, however, often provide a forum for the work
of Michael Pettis, an expert on China in general, and trade
flows in particular. Mish features an article, "China Reforms -
Ponzi Schemes in Wealth Management....." by Pettis today.

I know Costata has some interest in the "capital outflow"
issue, a specialty of Victor Shih , as well as others. Pettis
claims that, for the decade ending in 2010, there have
been $2.7 Trillion of Chinese wealth outflows, both into
foreign countries and offshore tax havens, via the preferred
mechanism of false trade invoicing. This means that the
$1.2/$1.3 trillion of USG debt held by Chinese Government
entities is ONLY 1/3 of TOTAL private (high net worth persons)
plus public assets which are denominated in non Yuan currencies.
It means that capital outflow is not some future issue, but an
established fact of major proportions.

It also means that Chinese exports have been significantly
understated, or imports overstated (via false import invoicing)
or more likely a combination of the two, for over a decade.
Some of these assets constitute what Fofoa refers to as "nervous"
money, to the extent that it is parked in "liquid" form, rather
than tangible wealth. Thoughts?

ChrisF said...


I guess this means that the London Gold Fixings will simply stop? ... since I understand they are currently the pricing of allocated physical...

jojo said...

This means that demand for physical gold is *rising*, right? Why the price will *fall* as FOFOA said? This »goes into hiding« seems to be the point I did not catch very well until now …

The "price" which is the paper gold price is what falls due to all the longs dumping it. As this price falls, physical becomes harder and harder to find (goes into hiding...who wants to sell it at this point?? only idiots) so yes, demand for phyz goes up as the paper gold price discovery mechanism says the "price" is falling.

Pat said...

Ein Anderer, this part has always left me wondering as well, as this will be the time of most consternation to the unseeing ( read: my wife ). I do not look forward to her going batshit crazy as the "price" of gold plummets; I have imagined/prepared many explanations for when this happens, and I still haven't figured out what I will say.
It has been opined that the paper price could go down to say $500/oz. before complete uncoupling, and I for one cannot imagine that. I would guess even the shrimp shops Apmex; Provident; and the like would shut off purchases well before that number. But who knows?
I think this would be a great post or discussion point for the big heads here to expound upon, as the transition itself, the moment we plan for and await, will be profound, scary, earthshattering, and any prior thought experiments and chats pertaining to this would be of help to everyone.

byiamBYoung said...


I have precisely the same conundrum with my wife. I've explained the nosedive and going into hiding scenario multiple times.

I know it will not help when the whole system goes SPROING! It will be very easy to panic during that transition. Only evil cult member jerks will be able to stay calm.

For me, I have stopped talking about the total amount of gold we have accumulated, and keep a small "sacrificial" stack to sell if the pressure gets too high.

My goal is to get through the transition with our physical savings and our relationship intact!

Woland said...

Hi Pat and byiamBYoung;

The following doesn't constitute investment advice, more like
"marital stability" advice. There's a miners index called the HUI,
pronounced huey. I am sure there are options on the index.
You can buy out of the money puts, if you are cleared for option
trading, and at least you have a paper currency hedge against a
paper gold price collapse. In Fofoa's scenario, gold shares are
losers EITHER way, Freegold OR during a paper collapse. You're
throwing a little money away, but the marital peace of mind
could be "priceless". Also, remember that, when price falls
below production costs, 2500 tons a year shuts down. Oil will
not be happy, no? They may express that unhappiness. Cheers.

poopyjim said...

The true stumbling block of physical gold advocates: the spouse.

Herb said...

I am full of admiration for FOFOA and his distinguished antecedents, but the "collapsing gold price scenario" has never made any sense to me. For starters, it means that the value of all paper currencies (since they are all valued in relation to each other) has to be perceived as rising in relation to gold. Also, even if such event occurred, it would be a 21st Century style "flash crash" that would be over so quickly that it would have no practical meaning for anyone who is not dealing in leverage or derivatives. Unless you have a spouse who spends their day staring at a monitor, it will be over before it is noticed.

Woland said...

Hi Herb;

Maybe an analogy will help. Imagine you have an old fashioned
life insurance policy, the kind that builds up "cash value" over
time. But the main purpose you got the policy is for the life
insurance. Now you notice the price of the stock in your insurer
has started to fall, any you're curious. You do a little research,
and don't like what you find. Company has "accounting issues".
So rather than hang around to find out the details, you cash in
your policy for the "cash surrender value". You buy some term
from a sound company. Your action has been the tip of a chain
of actions which ultimately bankrupts the insurer, causing late
movers to get nothing. Paper gold is a form of "insurance" in
a diversified portfolio of assets. Just like your old life policy
was on you. If the insurance is going to be worthless when you
need it most, better to cash out while you can, no? Cheers.

enough said...

Apmex hedges all physical long positions with paper shorts in futures.

They are well aware of a potencial paper collapse and will take down their site if their wholseale supply feels tight.

Another large bullion dealer I wont name in the USA that normally does NOT hedge, also has told me that if they starting seeing tightness in their supply chain they would shut down and protect their inventory.

Sam said...

Herb -

you said:

"it means that the value of all paper currencies (since they are all valued in relation to each other) has to be perceived as rising in relation to gold"

It's the collapsing paper gold price, not physical. This isn’t an outlandish prediction as paper gold has defaulted once before; we just called it the dollar back then. The collapse in the paper gold price will represent the realization from its holders that it is not backed by gold or the full faith and credit of a nation. In that sense it is worth less than fiat currencies.

ampmfix said...

13 is a lucky number for me, I was born on one... (wife's age distance, mother in law age distance, hotel rooms, and on and on...).

It will surely be the year of the CAT:

or the year of the RESET?

Happy new year all.

vizeet srivastava said...

I think i want more time. Or may be i'll have bullion from loan.

matrixsentry said...


For starters, it means that the value of all paper currencies (since they are all valued in relation to each other) has to be perceived as rising in relation to gold.

I would make a change to your comment in order to clarify things a bit:

"For starters, it means that the value of all paper currencies (since they are all valued in relation to each other) has to be perceived as rising in relation to paper gold."

Yes, paper gold will lose value against currencies. It will do so in a similar fashion as any other impaired debt currently does. When the holders of these claims realize they are holding something that cannot be used to take delivery of physical and settlement in currency will deliver negative real yield, they will dump it to minimize loss. Those closed out claims must be settled in currency and therefore the demand for currency will spike.

I think the best thing that can be done to straighten out a lack of understanding is to RTFB. I read a FOFOA post most every day. Today I re-read Glimpsing The Hereafter. There are some wonderful diagrams in that post that shows how capital will flow when the $IMFS comes undone.

Paper gold is a derivative of physical gold. It is credit or a claim to future delivery, or it is a synthetic construct like an ETF designed to emulate the performance of gold. Then there are the mining equities. Take a look at where each "gold" product lies within FOFOA's modified Exter's pyramids and notice what will happen as capital flows through them on its journey home.

Cash will king and will outperform right up until the point where it doesn't. Then you enter the discontinuity where physical gold will be in hiding, many bids and zero sellers. Your cash will be worthless in terms of physical gold, but very strong indeed in terms of an "asset" that nobody wants, paper gold.

Much like a speculator who loads up on the penny stock of bankrupt company, the paper gold trader's only hope is to pass on his stock to some sucker at a price higher than he purchased it for. When the company exits bankruptcy, new stock is issued and the suckers holding the old stock get to keep a valueless share of company that "no longer exists." So to will the holders of paper suffer the same fate of holding an obsolete security, the gold derivative.

Edwardo said...

Since the condition of The Land of The Rising Sun's finances (mostly) seems to be at the forefront of conversation lately, I thought this might be of interest.

Lemuel Habbakuk said...


I believe some people here don't think highly of Eric Janszen...just curious why? Anybody care to offer me a reason? I've just been reading some stuff by him elsewhere and I'm not sure what he said that upset people...



Edwardo said...

Matrixsentry wrote,

"Cash will (be) king and will outperform right up until the point where it doesn't."

I said precisely the same thing to OBA in a conversation over a Screwtape. The context was different, but, when one ponders it, said difference doesn't mean as much as one might think.

"With the short end of the curve going convincingly to Parity and beyond, DX will go ballistic."

"Yes, OBA, cash will be king...until until it just flat out gets beheaded."

Sat Dec 01, 08:56:00 PM GMT

Pat said...

Matrix, great link ( and other good links within that link ), that really helps. Thanks.

PS I like others I'm sure have indeed "RTFB" but haven't either the memory or more likely the full requisite AHA moments to pull it all together ( and remember the appropriate posts that contain the best info on topics like this one, the great reset ). Again, thanks to you, JR etc. for the trail guidance.

jojo said...

Just my 2C but perhaps we should say in ReReadTheFuckingBlog....everytime Matrix says to, I think, dammit, he's right and I go read an older one.

It really is unreal how fresh they are each time which to me says there's lots that is not sticking to the inside of my head the first or first couple times through a post.

Nickelsaver said...

2013 : The Year of the Withdrawal

spaul67 said...

I’ve been trying to figure out ‘paper’ gold for sometime.

In my mind ‘paper’ gold is just like taking a bet on a horse race. You don’t own the horse and may never want to but you do want some of the action if it wins. So those that buy ‘paper’ gold are just trying to hedge the currency risk in their portfolio. If the value of dollar goes down; the value of a paper gold contract theoretically goes up.

The paper gold market is effectively just taking bets on what the physical price will be between those that actually want to exchange physical metal for currency. The key question is does the excessive volume of Paper Gold Price (i.e. the tail) have a dominating influence on Physical Gold Price (i.e. the dog)? For my part it doesn’t. I would also guess that relatives attempting to liquidate proceeds from an estate (some of which might be gold, silverware etc.) for much needed cash don’t understand and therefore don’t care either. Miners are just trying to pay the bills. Both will sell physical to whoever will buy. On the other end of that transaction is the excess currency that I don’t want thanks to the actions of the Fed (ZIRP, QE-infinity, Trillions in excess cash) among other things that I’m putting a portion of into gold; along with other lesser SoV as a hedge on my gold.

Thus those that buy paper gold are after a different set of objectives than those that exchange physical. Now in a rapid systemic collapse scenario those holding paper gold will at best receive currency (likely also collapsing) on their contracts or maybe not (i.e. think MF Global). Those with physical will be on a completely different track because they will by definition have no counterparty risk save for the stupidity of their governments. Which IMHO is a fact not to be ignored because governments can be both stupid and evil at the same time. This is why you should ‘also’ have at least some other forms of lesser wealth less likely to come under the eye of Sauron. I seem to remember it was a ‘gold’ and not silver ring that Frodo was carrying up to Mt. Doom.

Anyway, I can see a precipitous drop in the price of paper gold localized to the markets assessment of each counterparty’s ability to make good on at least the currency value of that contract and thus become completely decoupled from the physical price. So in short don’t get hung up on the paper price ‘if’ your objective of holding of gold is to bringing a portion of your wealth into the next currency system; should a collapse of the existing paper order occur.

Physical gold in short is an insurance policy on the paper system of wealth that historically has ‘always’ collapsed at some point. But just because something is inevitable doesn’t mean it’s imminent. In my mind I don’t see why the USA cannot follow the example of Japan. Thus while the USA paper system may ultimately collapse in terms of ($/stuff) it could be many decades from now or tomorrow take your best guess. Which just so happens to be the same reason people buy insurance (currency or otherwise) in the first place they don’t want to guess.

In short, an investment portfolio without at least some physical gold is like owning a house without fire insurance. But unlike fire insurance gold has ‘always’ retained some real residual value (oz/stuff) at all times. So in that respect gold is a whole life counterparty risk free insurance policy on your other investments, better known as real wealth; which will be just resold into the physical market by your next of kin.

Sam said...


I'm trying to picture a dog with a tail 100 times larger than it's body

ein anderer said...

Thx, Pet & jojo.
My mistake seemed to be that I thought that the twice daily gold price fixing was a physical gold price fixing.
If not (as I understand you all) things become clearer. Sure! Price must fall if "owners" realize that there is no value behind their paper.
And sure! Physical Gold will shine as the one asset untouched by any kind of turmoil.
Ok, so let’s wait for January 4th next …

matrixsentry said...


Physical gold in short is an insurance policy on the paper system of wealth that historically has ‘always’ collapsed at some point. But just because something is inevitable doesn’t mean it’s imminent. In my mind I don’t see why the USA cannot follow the example of Japan. Thus while the USA paper system may ultimately collapse in terms of ($/stuff) it could be many decades from now or tomorrow take your best guess. Which just so happens to be the same reason people buy insurance (currency or otherwise) in the first place they don’t want to guess.

I highly doubt the US will travel the same trail as Japan has. Consequently, I do not believe the US has decades left to exploit its Exorbitant Privilege.

The Japanese have a firmly entrenched and cultural penchant to save, and they save in their own debt. Americans on the other hand have a well demonstrated and insatiable appetite for consumption and resulting debt load. US debt is held all over the world and not primarily by its citizens.

Do you see Americans becoming compulsive savers? Do you see them becoming compulsive buyers of US debt?

I don't. Nope, I think the Fed will continue its buying US debt in a big way and will accelerate the process that Japan has been going through these last decades.

One Bad Adder said...

VtC: -
...and a Happy New Year to you Sire.
The Fed (IMHO) is master of the Debt side of the Ledger and until fairly recently (c2005ish)"managed" the Credit side via FFR adjustments. To my way of thinking this is currently not the case and it's all they (and their ilk) can do to keep the Yield Curve (sans the short end) in the game.
costata pointed to the change (as of Jan 1 '13) in FDIC obligations which can only exacerbate the "problem" I feel.
Ed: - "Cash" is such a generic term nowadays eh?
In the current climate, the "best-Cash" appears to be T-Bills on constant roll-over ...or so it would seem to me.

One Bad Adder said...

spaul67: -
Good post Squire ...and I concur with "most" of it.
The two-headed monster that is $US is certainly perceived differently at home and abroad I feel which gives rise to a large degree of misunderstandings (which I might add I'm not immune to;-)
Gold also can easily be misunderstood / misconscrued.
Thinking of the "insurance" aspect of Gold in a modern Portfolio however tends to relegate it to subservience status ie: ultimately reliant upon third-party "evaluation".
In MY play-ground, Gold is thought of as the fulcrum of my Teeter-totter - not a part of the "game" but intrinsic to it. That way it's not "valued" as part of the playground implement ...however without it the Teeter-totter would be no more than a piece of wood on the ground ie: no "fun" at all.

byiamBYoung said...


"The Japanese have a firmly entrenched and cultural penchant to save, and they save in their own debt."

In this recent article on Japan, the author touched on the Japanese savings trends. If he is correct, Japanese rates of savings are now precipitously dropping as more and more older Japanese are retiring and beginning to dip into their nest eggs.

"Japan’s savings rate is now just 2% and falling — a far cry from the 44% savings rate it recorded in 1990. If it has not dipped into negative territory already, rest assured that it will soon."

As a result, a significant amount of the Japanese debt may soon need to look outside Japan for buyers.


spaul67 said...


I agree with your general view on USA debt vs Japan, and yet it would seem that since 2008 we have expanded the currency supply well beyond the tipping point; and yet nothing happened.

It would seem that the deflationary headwinds were well balanced by the expansion in the money supply. Should you be right and the velocity picks up causing a collapse I could easily see the ‘solution’ being that the 0.01% are made whole while the Pensions/401K/IRA of the shrimps are allowed to go to near zero completely balancing the equation; thus setting up the ‘need’ for the Guaranteed Retirement Annuities GRA for the other 99.99%. Basically what was once ours and stolen is replaced by a ‘new’ guarantee that our future taxes will make us whole should we live long enough to be eligible for own money, now paid twice with a purchasing power TBD to boot. What a deal.

If I come across as not trusting the kleptocracy running the largest ponzi scheme in human history you would be right.

In the scenario above enough credit/debt will be destroyed to balance off the ‘new’ money used to make the kleptocrats whole. Thus there will be no ‘net’ expansion of the money/credit supply needed to drive what you view as an inevitable hyper-inflation let alone a major revaluation of gold relative to currency ($/oz) or other goods/services (oil/oz) for that matter.

Given that kleptocracy is kept in power by those living on the welfare plantation, don’t expect any mass revolution either for what will be the greatest theft in human history.

Row well and live, you evil net producers.

About the only thing I can see that will shut this little cabal down is if a point is finally reached in which net production is insufficient to cover net consumption.

Indenture said...

spaul67: I have no doubt that if TPTB want to reallocate Pensions/401K/IRA into other accounts they can but how is propping up TBTF Banks going to slow the velocity of the rest of the worlds dollars into the physical plane?

Woland said...

Ah, the Japanese. Old habits die hard. But when the sales of
adult diapers exceed those for newborns (HT Kyle bass) then
savings patterns may begin to change. Or so he thinks. Who

matrixsentry said...

I am really on a roll today! Just RRTFB (love it jojo!) What a monster post Peak Exorbitant Privilege is! It is all there and only reinforces my belief that we will not need decades to see the results of the hyper-inflated USD.

I read it slowly and did not move on until the gravity of each sentence was fully measured and appreciated.

This blog is found treasure, plain and simple.

John Fry said...

Our very own Belgian sums it up quite nicely, and gets a thumbs-up from Jim Sinclair to boot. Fancy that!!

Edwardo said...

I know Costata keeps up with Jim Sinclair's site so perhaps he has noticed what appears to be a change in emphasis regarding the dynamics informing gold's prospective behavior. I, for one, haven't heard of anything on General Jim's site that sounds more like Freegold.

Edwardo said...

So that was our JR junior was it?

Aaron said...

Hi Ron-

I'm some 80 pages deep into Age of Inflation and it's becoming more clear with each page this whole situation was baked into the cake.

2013: The Year of Clarity?

JS posting an email from Belgian. Simply amazing.

/SleepingVillage/ said...

More and more talk along the lines we're all familiar with lately. Seems everything is falling into place...

From a guy that Gets Rhythm I think I can hear something off in the distance:)getting louder every day...

Les Sinners?

Wendy said...

HOLY COW (or petunia the pig) i've read JS daily since 2007. I have noted his views evolving over the years, but posting B's email is awesome. Welcome Jim :D

Regarding Japan, after 20 years Japan's savers are now net retirees...................

to be continued ;)

Wendy said...

I meant to type that I have noted an evolution of his views................... I'm typing on a teeny-weeny stupid keyboard

Michael dV said...

just so you know I DO read the binary (I have a vocab of over 1111 words. Like we say there are 10 types of people in the world...those that understand binary and those that don't.

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

Michael Pettis is a perma-bear on China. He is too much of an academic entrenched in his (western) way of looking at things in China. He has made numerous bearish forecast over the years and non has materialized.

Stephen Roach reads China much better.

costata said...


I just lost a long comment in Blogger on that Shedlock post of the e-mail from Michael Pettis. I'm too pissed off right now to recreate it. I'll get back to you later.


costata said...

Hi Edwardo, Wendy et al,

Yes, it was a pleasant surprise to see Belgian pop up on Jim Sinclair's site. I thought Belgian's brief synopsis of the Euro Freegold-RPG architecture was very good. Go Belgian!!

In relation to JS evolving thinking about the role of gold and currency in the new regime I think he is treading a well worn path. It wouldn't surprise me if his contacts in the world of high finance were responsible for his belief that some kind of SDR/basket would be used as the replacement reserve currency for the US dollar.

It appears that some economic actors cling to the notion that the ROW will accept an IMF sponsored "solution" to this end of life crisis for the $IMFS. The IMF was, is and apparently will continue to be controlled by the Anglo-American faction. I doubt that the other economic actors will accept a "solution" from the IMF acting as a frontman for this faction of the status quo.

This "meet the new boss, same as the old boss" stuff is getting stale. The world needs a viable solution, a "new Bretton Woods" as Paul Keating called it. And there is one waiting in the wings.

costata said...


Regarding your comment at December 27, 2012 6:28 AM on the e-mail from Michael Pettis that Mish Shedlock posted . On a long ago thread I described Shedlock as an observer not an analyst. He comes up with some interesting material from time to time. His popularity, or lack thereof, shouldn't be an impediment to posting good material here.

There is plenty of material corroborating the capital flight, migration of wealthy Chinese and the false invoicing. There is however a big problem with that report from Global Financial Integrity on illicit flows from China.

I read this report in October. If anyone wants to read it the link is here:

I was very interested to find that report. It was mentioned in an article from Reuters. It got my attention because if it was true poor old Uncle costata would have had to re-evaluate his interpretation of the China story. As it happens it wasn't necessary. This comes from Page 13 (of 26) of the GFI report (my emphasis in bold):

If no adjustments for intra Chinese regional trade are made, then estimates of illicit outflows grow at 1 percent per annum in real terms over this period, a much slower pace of growth than is derived by correcting for intra-regional trade. While unadjusted outflows also increase in nominal terms, they undergo a steady decline in terms of GDP from 13.1 percent in 2000 to just 4.4 percent in 2011.

There are several indications that a scenario without adjusting for intra-Chinese regional trade is likely to be unrealistic. For one, the rate of growth of illicit outflows (1 percent per annum) falls far short of real economic growth (10.2 percent per annum) with outflows actually declining in real terms in the period before the crisis.

This is overly optimistic given that World Bank governance indicators related to control of corruption, political stability and absence of violence, rule of law, and other measures show a significant deterioration over the period 1996-2010. For this reason, we do not present a separate table showing developments in illicit outflows that does not adjust for intra-regional Chinese trade.

Translation: We don't present the unadjusted data because it contradicts our preconceptions.

This siphoning of wealth out of China has been ongoing for a very long time. For much of the period Pettis is referring to there was also a substantial inflow of foreign direct investment (FDI) and "hot money" inflows that bypassed China's capital controls. My reading suggests to me that there is sustained capital flight out of China at present.

A shortage of US dollars in their banking system is a tell-tale sign. I would be watching for further decreases in their FX reserve holdings of USG paper despite continuing trade surpluses as another indicator.

But as always the data coming out of China can be contradictory, misleading and confusing. FWIW I think Pettis big-picture analysis is spot on but over short timeframes it is less useful leading to the kind of observation that 'tintin' posted above.

costata said...

Lemuel Habbakuk,

Re: Your question at December 27, 2012 10:57 AM

The only person at this blog I can recall criticising Eric Janszen is JR in his debrief. I guess you'll have to ask him.

costata said...


That's how I'm seeing this FDIC guarrantee expiry. I can't imagine a CFO spreading their cash around 100 banks in order to secure a FDIC guarrantee on all of it. So where do these deposits go to? IMVHO into USG debt instruments because regardless of whether they are safe or not the CFO won't lose their job over that decision.

sean said...

2013 - the year of reality! :)

Max De Niro said...

2013 - the year of more of the same (please)

Andy said...
This comment has been removed by the author.
enough said...

Jim Willie is eccentric to put it mildly but these are interesting comments from his new piece........

"Clinging to precious metals mining stocks is not part of my forecasts, a decision made back in early 2008. They are bound in paper wealth, subject to inflation in share dilution just like the USDollar, vulnerable to jurisdictional confiscations, and at the mercy of labor unions whose production is increasingly halted. Unfortunately, too many fine people within the gold community, including GATA, hold firm on hope, regulators, and mining stocks. Not here! The major financial networks rely upon advertisement revenue from Wall Street, fund managers, an market exchanges. GATA has a business model that has one key vulnerability, with strong links to the mining firms."

"The Jackass does not align with the expectation of mining stock rise. The stocks are paper wealth in a new era of paper wealth implosion, during which inflation of shares through dilution is rampant. My full expectation is for physical metal prices for Gold & Silver to rise, while mining stocks continue to fall in value from dilution and reduced metal output. The leverage is a mirage when large deposits are seized by desperate foreign governments in need of income. What on earth is complicated about understanding this point?? The leverage is a mirage when workers are the focal breakdown point for a higher cost of living. If workers cannot afford to feed their families and survive, mine output will suffer. What on earth is complicated about understanding this point?? The leverage is a mirage when rising mine operation costs must be handled, by the simple practice of share dilution. Combine with regular executive stock options, and the dilution on stock shares is huge. What on earth is complicated about understanding this point??"

Sounds like a FOFOA, FOA, ANOTHER fan.....

Woland said...

Hi Andy; Great detective work. As I am an infrequent reader
of EJ, could you provide a few dates to EJ's comment section
where this occurred. I too was puzzled by JR's comment, but
now understand his indignation a lot better. Thanks.

Jesse McL said...

I've found a temporary home for that USAGOLD discussion archive clean-up I did... it's here:

Same contents as in that zip I linked to up-thread. I do find it easier to wade through this cleaned up version as it's by month, rather than by day as in the original, and it omits a lot of surrounding fluff.

My vote: 2013 - Year of the Dollar (it will gain and gain, until is doesn't).


Woland said...

Um, Andy, now you've made me feel like I'm talking to Art,
or Harvey the rabbit.

Jesse McL said...

Also, one thing I noticed about the original was that the comments were not in their proper order (eg. ordering by date or msg id). So that is also fixed in the cleaned up version.


Woland said...

Trappist monks take a vow of silence. In my case, I'll just call
it a STFU pledge. Until after Vegas, anyway. So, a few last
minute housekeeping chores.

1. Costata, thanks for your detailed reply regarding capital
flight. My biggest curiosity is not about the portion that
has already found a tangible home ( like Vancouver R.E.)
or what the percentage rate of outflow decline was when
measured against a rising (10%) rate of GDP. It is about
how many hundreds of billions, (or trillions?) in forex
denominated assets remain liquid, and hence potentially
"ready to panic" in the Fofoan sense,in Chinese "unofficial"
hands. The "official" we have a handle on.

2. Regarding my now incomprehensible reply to Andy, the
assertion was made that some dishonorable behavior
occurred in the EJ comment section, having to do with
discussions here at FOFOA, and the thoughts of Jacques
Reuff, and that this was "official" as opposed to reader
generated. No attribution was provided at EJ. to said
discussions, but (??) some disparagement was.

3. I was a little disappointed that only Beer Holiday cared
for my 1729 comment. I'd have thought Wendy, given
her maths background, might have liked it as well. Che
sera sera. Anyway, following up on that orphan topic,
and given that Fofoa has many readers in India, I thought
the following link might be in order: "Researchers
unlock Formula written by brilliant Indian Mathematician
on his deathbed". It concerns mock theta functions, and
of course the Indian mathematician in question is none
other than Ramanujian.

Th,th,th,th,that's all, folks!!

Jawed Ali said...

Get your own home based job in data entry, copy pasting, clicking and different more jobs

Phil_O_Dendron said...

Thanks to all commenters here for valuable information. I have been following this site for a while and I must say that it is a daunting task to not only try to read all of the material thant came before but also try to keep up.

I have a similar set of issues with my "spousal Unit". She still believes that all will someday get "back to normal". It is my plan not to share the things that I have prepared for until after the reset. As much as I would like to have a partner in this preparation I know that for me this is the best approach.

Again thanks to all for the time and effort that you put into this blog.

matrixsentry said...

Why stop now? Just finished Moneyness 2: Money is Credit.

A fine prescription indeed for the Hard Money Socialist, either lingering within or loitering here at the blog trying to enlighten the Evil, Time Mis-allocating, Brainwashed, and Gold Hoarding Jerks.

2013: Year to RTFB or RRTFB!

3 days to re-read 2012, not so bad at all!

Aquilus said...

@Jesse Thank you very much for taking the time to put the archives in this nice format.

@Matrixsentry It took me from May to August to get through the whole blog, and you're so right about realizing what the posts meant once the perspective is there. So RRTFB for me too :)

@Woland I enjoyed your number posts too, just did not get a change to comment.

Michael dV said...

2013 for me will be the year in which things fall apart or in which we observe the incredible power of inertia. If we observe more of the same then I will admit that I have far less predictive abilities than I ever imagined.
In 2012 I watched several events pass with not even a blip. I expected Spanish and Italian refinancing needs to cause problems...nope...not an issue. I half expected some failure in Fed have manipulation down to a pseudoscience. I thought maybe Treasuries would falter. That did not happen and now we see that they are scarce and the world is worried that there might not be enough of that good good thing.
There seem to be plenty of potential issues which could cause disaster. I stand in amazement at each passing year the economy continues to function....such as it does.
But....human life will end soon so why worry:

I'm not sure if this is his YouTube piece that states this will happen by 2017 but his message is "new data....worsening prognosis'.
I am not a climate worrier but he claims we are doomed by the end result of the rapidly worsening effects of exponential cumulative additions of the whole CO2 methane thing, you know the story.
I'm bothered by his recognition of positive feedback effects but no mention of negative feedback effects. Anyway we are doomed and he is living 'back to nature' and seems to be enjoying himself.
Just a little something to put freegold into perspective. Enjoy (if you are a depressed masochist).

Jesse McL said...

@Aquilus you're welcome.

Just noticed this too... seems the forebears to this subject also considered the number 13 worthy of discussion:



mr pinnion said...

2013 year of the feeble excuses.


Flore said... ... r_2012.pdf

page 251 Draghi on OMT

Question: My first question is on inflation expectations. After OMTs were announced in September, we saw a very strong increase in gold prices, with €3 billion going into gold ETFs and ETCs just in that month.
Is that a sign of speculation or of increased inflation expectations?
My second question relates to unit labour costs. You said that there has been visible progress in the correction of unit labour costs.
Most economists say that unit labour costs are not a good way to measure competitiveness because you have this unemployment productivity.
They say that one should look at the GDP deflators because there we do not really see any great progress being made. Are they right or wrong?

Draghi: The increase in gold prices is exactly that. Why this should depend on OMTs is a mystery to me. <-----------------------------
We are constantly looking at inflation expectations over several horizons, and no matter what horizon we look at, we continue to see that they are solidly anchored.
To ask whether the price of a specific asset forecasts an increase in the inflation rate is always a very risky question.
You see asset prices going up and down, and to infer from an increase in the price of one asset that inflation will go up, and that inflation will go up because of OMTs, which haven’t created any liquidity yet, is really a very rash assumption.

Andy said...

Sorry Woland, wasn't my intention to make you look crazy. Spoke my mind on something that had frustrated me for a while but once I published and read, decided it sounded disparaging while also not adding any value. Deleted it and going back under my rock.

mr pinnion said...

Feeble excuses, generally speaking.Not in the FOFOA crew sense(although it might be).Just to clarify :D

Aquilus said...


Would this do for your mini-purchases?

This is a reputable outfit.

KnallGold said...

7 days post end of world, 3 days remaining until 2013 and then you can count 6 days for the 3 Kings to arrive. Looks like life is still great.

Just finished watching the latest Kommissar Wallander, perfectly done.

All the best,

Wil Martindale said...

2013 will be a case of "SOSDY".
On Jim Willie, I've mentioned the jackass here b4 and got high-browed, but here again, as with Rob Kirby they eventually come around to Freegoldism, though generally from a different angle.

In Kirby's latest missive he talks about "Super Mario" at Goldman in 2001, and how he wrangled Italian debt (a la Goldman's "Grecian bend") to help them gain Mastrichtness. And now he's the head of ... drum roll please (not).

Most of the "spit and fume" Barnhardtites generally get around to some level of freegoldism after they've taken their medication and sat in a dark room for a couple of hours.

Same Old Shit, Different Year ...

FoNoah said...

Geez Matrix - you are on a roll, and can I please have what you're having...

@Andy: How can you delete a comment you've already published?? That's exactly what I need to learn. Can you do it in old threads too?

How come none of the Americans over here are discussing the Fiscal Cliff? Very strange.

Cheers - FoNoah

Wil Martindale said...

The fiscal cliff is a mirage, there's nothing for us real Americans to talk about over it when you consider that all debt is "protected" by a 1.5 quadrillion dollar debt mirage that will be "satisfied" by a reflection of itself.

American's have prozac, viagra and Kabuki theatre, what's to discuss ??


FoNoah said...

Every time (all the time) I ask a stupid question (any question), I suddenly discover the answer right in front of my nose. OK - so now I see a little trash-can after the date/time that will delete my latest masterpiece (trash). I'm not going to ask if all my earlier comments also have trash-cans...

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

Woland and Costata,
Should Chinese capital flight weaken the RMB exchange rate?

If so, how do you explain the fact that the RMB/USD exchange rate has been generally rising over the past 3 or 4 years?

enough said...


IMHO, best value on mini gold is the Mexico two peso coin.

.0482 oz. of 90% fine gold which can be purchased for +$5 over spot per coin on ebay or from various dealers. This works out to just over +$100 to spot on a per oz. basis.

I could not help but notice the 1 gm. pamp suisse bar was +$11 per coin or +$340 to spot on a per oz. basis.

FoNoah said...

Thanks Wil. Does your answer perhaps also explain in an oblique sense the "Conspiracy of Secrecy" that surrounds FG? Everyone (who needs to know) knows where we have been and where we are going - so what more is there that needs to be discussed (in public)?

costata said...


It is about how many hundreds of billions, (or trillions?) in forex denominated assets remain liquid, and hence potentially "ready to panic" in the Fofoan sense,in Chinese "unofficial" hands.

I think that one of the main points of Victor Shih's research and analysis is that private capital flight can force a reduction in China's FX reserves. This FX doesn't need to be in "unofficial hands" to cause this to happen.

There seems to be a lot of confusion about this issue. China's currency is not fully convertible and they have capital controls in place. There is no private FX market in Yuan/$US in which to make an exchange in size. An importer who wants to exchange Yuan for US dollars has to approach their bank in China. If their bank has insufficient US dollars they must obtain US dollars from the government.

If the demand for US dollars within China exceeds the surplus generated by trade then China's FX reserves will fall.

The flows indicate that there is no "panic". Wealthy Chinese have been gradually shifting some of their wealth offshore and they continue to do so. The GFI report's methodology presents a picture that appears to be unrealistic. On the other hand the data they are ignoring corroborates a different interpretation.

The rate of capital flight slowed when China dropped the US dollar peg in 2005. The Yuan appreciated around 30 per cent against the dollar in the years following providing an incentive to be long Yuan. If, contrary to popular belief, the Yuan is no longer unervalued against the US dollar then risk and reward dictates the direction of the flow of capital.

Fortuitously it appears that Japan is about to step up to the plate and buy USG paper in size alongside the Fed. The demand for "risk-free" assets in the banking system and from corporations post-01/01/13 adds to demand. So the game continues for a while longer. I wouldn't put any bets on 2013 being the year when this $IMFS comes crashing down.

byiamBYoung said...


Thanks, those who offered some mini-purchase options. I will check them all out.

Being one who is playing catch up after my late breaking ah ha moment, I have always valued getting the physical shiny rock in hand ASAP, and have been willing to pay a premium for that.

As my smallish but sincere stack grows, I surely will reach a point where I am more relaxed (because I will have a physical position), and can then be more discriminating about price. I look forward to that time.


Thanks for the marital advice! I have not ventured into options before, but I'll look into it, with trepidation.


We drag our spouses toward the transition together, yes?


Thanks for the nudge to reread Peak Exorbitant Privilege. Just finished it and have a new appreciation for the clarity of the message.

One last thought-

What about a movie, "Goldhog day" (What's Bill Murray doing these days?), where the world economic picture keeps deteriorating, but every day we wake up and nothing has changed? Hmmmm...


costata said...


Should Chinese capital flight weaken the RMB exchange rate?

In theory it should.

If so, how do you explain the fact that the RMB/USD exchange rate has been generally rising over the past 3 or 4 years?

FWIW this is my opinion. The capital flight was overstated in earlier years. The picture was blurred by the flows between Hong Kong and the mainland. The trade surplus was much greater than the official figures suggest.

China's government was more concerned about "inflation" in the prices of imports such as food than trade friction with the USA. Allowing RMB to appreciate helped to reduce prices. Now that "inflation" appears to be tamed and capital flight appears to have increased they could be combatting weakness in RMB.

Lastly, FDI and the substantial increase in two-way trade between China and other markets outside the USA (and the EU) has generated demand for other currencies.

Wendy said...

Woland, your 1729 didn't go unnoticed. interestingly if you play a bit with FOFOA's MMT gold range of Euro 1246-1389 and convert it to US gold price using todays 1.3216 Euro/$USD $1645-$1833, the midpoint is $1739.

a close coincidence? I'll be watching how this plays out :)

Aaron said...

byiamBYoung said...

One last thought-

What about a movie, "Goldhog day" (What's Bill Murray doing these days?), where the world economic picture keeps deteriorating, but every day we wake up and nothing has changed? Hmmmm...

Very nice, BYoung. I just spilled my beer laughing.

costata said...

From Jim Sinclair another mention of Belgian (my emphasis):

15. That means that the price of gold as the other central bank asset must rise in the free market significantly so that the balance sheets of the Western world central banks begins to heal and maybe even balance.

16. The mathematics of the price of gold are well in excess of the two magnets now functioning at $2111 and revolving around $4000.

17. Marry this concept to the recent memo of CIGA Belgian and you have the total solution to the present problem that no other mechanism can produce. This will be initiated not by the USA, but by Euroland, Russia and China.

Now add the text of the discussion of earlier this week on the ascendancy of the euro as we enter the final chapter of the Monetary Crisis of 2008....

Them balance sheets gotta balance (somehow).

Edwardo said...


Almost exactly two years ago, I wrote to Jim Willie and mentioned Freegold. I strongly recommended that he read up on it. Perhaps he has, and it's implacable logic is beginning to show signs of penetrating.

costata said...

This article contains some interesting material:

I'm wondering if hedge fund liquidations could be a contributing factor in the GLD pukes. A few snippets below (my emphasis).

....Zero Hedge posted that Morgan Stanley Wealth Management recommended that its clients dump two of John Paulson’s funds. As MS clients redeemed their shares, the hedge fund giant became a forced seller of gold and gold stocks.

What complicates the gold market is the fact that Paulson is such a big fan of the yellow metal that he offers a “gold share class” to investors, meaning shares are denominated in physical gold. The drawback is when an investor redeems shares, his firm has to convert from gold back to dollars, which forces him to sell his hedged position in the SPDR Gold Shares ETF (GLD).

The unfortunate consequence of his actions is a short-term decline in the gold price as the market adjusts.

And this bit of historical data may explain gold's behaviour this year (my emphasis).

As we have mentioned before, gold miners tend to perform poorly in the year of a U.S. presidential election. Regardless of which party is in the White House and which party wants to take it back, going back to 1984, the Philadelphia Stock Exchange Gold and Silver Index (XAU) has declined an average of 18.4 percent in the year Americans are busy thinking about voting for a leader.

It’s not the end of the world for gold and gold stocks. Take a look at what happens the year following a U.S. presidential election: Going back to 1985, the XAU historically has increased substantially in post-election federal years, rising 23.4 percent, on average.

John Fry said...

Anyone watching $IRX? Down over 85% today. Hoping OBA stops by to comment.

Michael dV said...

I agree with the small Mexican peso coins as being the best deal. The only other small weight item I have found close to spot was the 2 gm bars I purchased in China. US and Canadian 1/10 and 1/20 are more expensive per ounce.
The only issue I have encountered has been a claim that the 50 peso has been a counterfeit problem. It is 1.2 ounce however and probably easier to fake.

Wendy said...

I'm all caught up - go figure. It can get a bit slow here after a week or so of a new post. FOFOA might I suggest a title for a possible last 2012 post? FREE-FOR-ALL-IN-FREEGOLD: tell us your story ;)

where are you from, who do you know, how did you get here, what do you like and don't, do you have a life beyond this blog, whatta you do for fun?? And anything else one might want to add :D and most importantly, how long have you been visiting this blog.

i say most importantly because your answers will likely be different, depending on how long you've been reading, particularily the one about do you have a life beyong this blog :P.

I remember losing a couple of months of any real world contact when it learned about this blog and USAgold, and the trail. That was a few years ago. Also my ocasional hiatus to the basement to rummage through old boxes of FOA and Another from time to time.

There's alot of amazing stuff in this neighborhood!! RTFB ;)

Just in idea ;)

Go said...

Ive also been working on the archives. Ive made it through 1998 & 1999. They area available at I hope to get through the rest this weekend.


tintin said...

"The picture was blurred by the flows between Hong Kong and the mainland. The trade surplus was much greater than the official figures suggest."

This reminds me of the (physical) gold imports of 50~70 tons to China from Hong Kong.

One other aspect I'd like to mention: the western media are inherently biased when assessing/reporting on China due to their loathe/hatred of the Chinese political/governing system. The success of China is a living proof that the "universal" value promoted by the failing western centres are not universal at all, and there are alternatives. Like recent reuters report on the wealth/assets of the 8 Chinese families of the Mao era generals. What a load of rubbish. It displays a true misunderstanding of modern China, but perhaps intentionally so, in its vein effort of trying to stoke colour/flower revolutions in China.

I am Chinese.

duggo said...

Nice "Independent" interview.

costata said...


Point taken. Thanks for the Chinese perspective on China.


Flore said...

Well, we got Jim on board .. We took him out of the brambles

ae44bf5a-2cce-11e2-94ad-000bcdcb8a73 said...

I know, I know, RRTFB. Long time lurker. My understanding is not what it should be, and my (insufficient) PM ownership reflects that (mis)understanding. I think I get the gist of freegold, how it can serve as the focal point and intersection between the physical and monetary planes, how the properties that made it serve those purposes across millenia and cultures are still there. The reference point that everything else is priced against either directly or indirectly. And I get how serving that role requires a much higher conversion rate between gold and the USD currently serving much of that role. And I get that silver will not follow gold in that role, and I appreciate the appeal of being able to just save in wealth without being forced into a speculative investment just to preserve purchasing power. And I get that gold has to float, it can't be a gold standard, and why, and I understand the difference between clear unambiguous title, ownership and control of physical metal is different than a credit challenged promise from someone else to give me metal later.

So the thing that I am struggling with is the inevitibility of it. I get that it is possible and logically coherent, and I get that 'the giants' be they CBs or the uber wealthy/productive want or prefer this outcome, what I don't fully appreciate is why it is the only possible outcome. Not that I have another candidate so much as that I am not convinced that this outcome is inevitable. I get how the transition would be destabilizing in many ways, but ultimately it would be a 'better' more functional system than what is in place. My concern is that we're human, we do stupid crap all the time. If you doubt that, turn on the boob tube. My concern isn't that freegold wouldn't work, but that we as fallible humans don't do it. After all, we haven't done it yet.

My concern is not with the freegold concept, it is with humans. What is to say that the next monetary system isn't something less worthy than freegold? What's to say the next eighteen monetary systems over the course of the next millenia aren't freegold. Not that any of them are as good (in both the effectiveness and moral sense) as freegold, but that there is not another summit of the big and powerfil like at Bretton Woods and they decide on something else suboptimal, and have the power to enforce it.

I know the answer is RRTFB, but the trail and the blog is a huge place, if anyone has any particular posts they think would help me over this specific point, I would greatly appreciate the point in the right direction.

Thank you in advance, both for helping me understand what I do and for any further assistance.

Marilyn said...

Fofoa, looks like things may be getting setup for your 2013 prediction to come true.

...funny how confused the HMS folks are there:-)

Barry Michaelmore said...

What the Dickens do you mean, duggo?

Whatever you've heard, I was setup!

There were eight people at the house, there was no blood, nobody saw anybody injuring him. Two paramedics, two coppers see nothing, eight people in the resuscitation team see nothing.

The injuries were caused by persons unknown at the hospital when the body was unguarded.

KindofBlue said...

Hello ae4________________________________!

I had a similar question to FOFOA recently and the short answer was that gold will separate in price from everything else because it has to. The economy would completely break down if, say, oil took a moon shot. Even Jim Sinclair has apparently turned the final corner and is now referring to gold as a 'wealth reserve' as opposed to a currency. He's talked for years of a 'gold certificate ratio' for measuring CB liquidity (not convertibility), but he now seems to see it as the wealth reserve needed to balance all the damaged balance sheets.

We humans can certainly muck things up, but I have to agree with FOFOA that freegold is now the highest probability outcome.

Indenture said...

FoNoah: You can delete your comment and it won't be on the blog but many people have e-mail notification which sends them the comments so once you hit 'send' your words are set free. This reminds me of one of my Family Laws. My Grandfather said, "Never write anything unless you want it posted on the courthouse door".

Matrixsentry: I fell into your trap also and reread Peak Exorbitant Privilege ""But with the system that began around 1926 and still exists today, we end up with a situation in which one currency's reserves are actually deposits in another currency zone:" "The real problem was and is the common thread I mentioned earilier: the monetary privilege that comes from the rest of the world voluntarily using that which comes only from your printing press as its monetary reserves. It was and is, as Jacques Rueff put it, "the outcome of an unbelievable collective mistake which, when people become aware of it, will be viewed by history as an object of astonishment and scandal.""

ae4_________________: I would take Matrixsentry's advise and read Peak Exorbitant Privilege. The short answer is gold is already on the balance sheets of Central Banks along with 'dollar notes' and when the 'dollar notes' are no longer capable of supporting the leveraged debt the gold is there, waiting to serve it's next role. There is no other choice.

tintin: If I may ask, so that I can place rough geographic locations, where do you live? The cultural and social influences we all bring to the table are important for a greater understanding of each persons point of view.

byiamBYoung said...

@ ae44bf5a-2cce-11e2-94ad-000bcdcb8a73

*WARNING* THe following is what I THINK I understand. Stay alert for smarter folks' comments downstream that may correct my possible misstatements.

For me, Peak Exorbitant Privilege (which I just happened to reread) gives a strong sense of the inevitability of a transition ahead.

Focal Point Gold clarifies for me Gold's unique role as the natural "go-to" store of value. The fact that gold has already been chosen by giants all over the world to perform this role drives the concept home for me.

Euro Gold is a good anatomy of a currency that works in the context of a Freegold system.

When the intevitable withdrawal of the dollar's exorbitant privelige happens in full force, the giants (and others) will cling to the gold, and as fiat currencies collapse, the Euro will eventually stand out as a more stable currency, because of the way it adjusts its value vs gold.

Other currencies that follow a similar approach to the Euro will gain/retain stability.

Bada-bing. Freegold.


Indenture said...

Focal Point: Gold
Euro Gold

duggo said...

@ Barry
Do you think Savile was on duty at the mortuary? I believe it was a set-up. Somebody upset someone "important" or knew something he wasn't supposed to.
Two of the ways they stop people talking. One is to have something on them that can be used. Two they are given a Knighthood to shut them up.

mr pinnion said...

JS is going full on FOFOA nowerdays.
Where have i seen this chart before.

Has he just 'got it' now , or known all along?

Funny how JW is just starting to see the light at the same time.


Jesse McL said...

@Go I like the YOOtheme, much prettier :) I have all the posts from that archive in raw form (more than 150,000 of them!). So if it would save you any time I can provide them in whatever form you like in order to theme them nicely as you have done.


Brian said...

@ ae44bf5a-2cce-11e2-94ad-000bcdcb8a73

This is the wrong place to ask about inevitability, as the one thing you can be certain of is that all freegold cult members will tell you it is inevitable, with most not understanding global geopolitics and the variables involved in transitions to new global systems. As you point out nothing is inevitable when humankind is involved.

Whatever comes next is likely to involve gold at a higher price than today, that is the most important issue if you are looking for somewhere safe to save.
Good luck.

Flore said...

When Belgians appear.. they do thing thoroughly..

Greetings ..out of Belgium

byiamBYoung said...

Hi Brian,

Okay, lay some global geopolitics and variables on us. I, for one, would be keenly interested in reasons why the super savers in the world, especially those who already store their wealth in gold, wouldn't continue to do so as the $IMFS continues to become more and more threadbare.

The historical buyers of US debt have stopped buying, and the fed is filling that ever increasing gap with vapor bucks. Do you see this trend reversing?

Central banks, Central governments, and giant savers all over the world have accelerated their gold purchases. Do you see this trend reversing?

The Euro was specifically designed to ride the wave of a rising gold price, to provide a stable currency as fiat currencies collapse under the weight of their own debt burdens. Do you see an alternative MOE that will perform this task better?

The world may be full of people who won't get it, but the majority of this transition is baked in to the cake. The only wide open question is one of timing.

Sorry to return fire, but your broad brush statements would be far more convincing with a little flesh on the bones.

If you have some factual arguments, bring 'em. We are here to hone our understanding through an exchange of ideas.

And to support the cult, of course ;)


Luke said...

Does anyone have a link to the gold held on CB balance sheets? It is my understanding that the fed holds very little gold for itself, but rather it holds the US Treasury's gold, and not even most of it.


Edwardo said...
This comment has been removed by the author.
One Bad Adder said...

Hi John Fry: -

Yes it ($IRX) took a bit of a jump on Friday. The Auction results posted on Thurs were pretty well "as expected" and as I'm used to seeing current data reflecting "only" the Auction results lately (give or take), it came as a surprise. This was pure secondary market action and will bear watching into the new year.

Edwardo said...

I can't speak for others, but the notion of inevitability is one I would only apply to a select few phenomenon where the future conduct of human affairs is concerned.

With respect to Freegold, relative to other scenarios I've encountered, it appears to have a great deal in its favor conceptually. Thrown into the bargain, from a practical standpoint, developments in the world of global finance seem to be accumulating in a way that are conducive to the ultimate realization of a physical only gold market.

In a world where change is a constant, but, equally, with no certainty as to what said change will entail, that's about all anyone can reasonably ask for.

BTW, regarding the question concerning Bill Murray, he's starring in a new biopic on F.D.R. called Hyde Park on Hudson.

ravinghenk said...

From Gata:

(1974) ""Emminger [VP BuBa] said that in connection with gold he wanted to bring up one small point. Some German periodicals, particularly the Wirtschaftswoche, had reported that the recent U.S./Saudi Arabian agreement for investments in U.S. Treasury bills contained a gold clause. He knew this was not true [ :-) ] , but if we [USA] could find occasion to make this clear it would be helpful since the supposed fact was used to argue that even the U.S. had to agree to this 'comeback' for gold."

Marilyn said...

"So to all those who are confused why a 1.5% drop in the market constitutes a bloodbath, now you know: with no hedges on, with massive margin exposure on, and with everyone all in, the last thing the market can sustain is selling, any selling, or else the dreaded margin calls start coming in and PMs have to satisfy margin insufficiency with more selling, setting of an avalanche of even more selling, which ends where, nobody knows. In fact one can argue that in this context a modest 1.5% drop may have a greater impact on sentiment and positioning than a whopping 10% drop did as recently as 2008 when everyone was more or less positioned to expect precisely such a thing. Because if one is 99% levered, a 1.5% move lower just wiped out all equity."

Looks like 2008 again, and paper gold is about to get sold off to meet massive margin requirements. Hope the powers that be can keep the price propped up enough to keep Physical from going into hiding this time.


The Dork of Cork said...

I find the Irish car reg story funny but we could do without another 70 or 80,000 new private cars this coming year as we cannot pay to oil bill for the existing fleet and yet because of the Euros design we depend on the waste via tax as we cannot print domestic currency to fill the demand hole.

The euro is in a advanced stage of breakup because of this.

From the IEA December oil market report.


"On the surface, the oil market appears calm. With so much in the world seemingly on the brink, crude

price trends look as close to a flat EKG as they have in months. Prices have been easing, but gently,

within a relatively narrow band, in stark contrast with the wild roller coaster ride of earlier this year. On

closer examination, market fundamentals tell another story.

Recent data have helped to show two key areas of almost violent structural change in sharp relief. The

first has to do with an apparent acceleration in the eastward shift of global oil demand growth. Latest

data show European oil demand underwent the steepest contraction y?o?y in 3Q12 since the 2008?2009

financial crisis, even as Asian oil demand remained remarkably robust.

While there clearly are similarities between Europe’s situation now and then, the differences are even

more striking. The last time European oil demand nosedived as it did this summer, international oil prices

had been in freefall. Not only are crude prices holding up, but European consumer prices hovered near

record highs this summer, buoyed in part by a weakening currency. This was likely part of the reason for

the dip in demand.

Three years ago, Europe was broadly in sync with Asia and the rest of the world. Today, there is a clear

contrast not only in oil demand trends, but also in economic growth between Europe and Asia. North

America falls somewhere in the middle. Everywhere, uncertainty prevails. China is sending out mixed

economic signals. Meanwhile, whether the recent plunge in European oil demand is part of a trend or

just a one?off is unclear. Early data show demand bouncing back in October, but may be revised.................."

The Dork of Cork said...

Three years ago, Europe was broadly in sync with "Asia and the rest of the world. Today, there is a clear

contrast not only in oil demand trends, but also in economic growth between Europe and Asia. North

America falls somewhere in the middle"

So someone or something stopped the flow 3 years ago.

But why and indeed who ?

For me the symbol of 2012 is the tramway of Jaen. (Southern Spain)
Carrying unpaid passengers in the Spring of 2011 but even now in a testing limbo for lack of euro tokens.

We live within a malfunctioning political construct - not unlike the previous Soviet.

All that Heroic (see stupid) Irish sacrifice (100billion euros now I think) to “bail out the core” - and still it implodes.

Something is wrong with the machine me thinks.

costata said...


It is my understanding that the fed holds very little gold for itself...

Correct. It holds certificates (issued circa 1934) from the Treasury but they aren't a claim on the US Treasury's gold.

.. but rather it holds the US Treasury's gold, and not even most of it.

The US Treasury holds the gold in its own repositories. The Fed acts as a custodian for gold belonging to third parties such as Germany.

One Bad Adder said...

Yes Marilyn ...if you care to check the previously posted "Daily" $IRX it can be said the flight into "T-Bills" front-ran the SM Rout ...which is totally indicative of what I'd expect at the Zero-Yield point.

We watch!

spaul67 said...


“spaul67: I have no doubt that if TPTB want to reallocate Pensions/401K/IRA into other accounts they can but how is propping up TBTF Banks going to slow the velocity of the rest of the worlds dollars into the physical plane?”

Good question; my bet is that they will use the ‘hard’ assets acquired (i.e. not debt) in converting our Pensions/401K/IRA into GRA to soak up the excess currency abroad. GRA will then just be rolled into the existing SS Ponzi scheme and then means tested with ever increasing eligibility ages and/or encouragement of smoking and other life shortening addictive activities. Funding problem solved because most smokers don’t live to 70.

Plus the Mortgages the FED is busy acquiring could also come into play. At current rates the FED should own most mortgages in about four years. Keep in mind that the debts acquired during the revolutionary war were cleared via land.

I’m really only sure of about three things;

1) There are more claims on wealth than exists or will exist in the next 100 years ‘at’ present prices ($/stuff).

2) The Kleptocracy will find a way to weather the come storm better than most.

3) For us shrimps, the more self-reliant you can be the better it will be.

Keep in mind that the 0.01% the government industrial complex and the banks are all one in the same. This last election proves that the Kleptocracy no longer needs any support from the net producers in order to remain in power. As such they are free to feed off of the net producers like the parasites that they are kicking back only a little bit of the sugar to keep the Obama phone crowd voting for them election after election.

The only tipping point I can see is when net production is insufficient to keep this little cabal going. At which point all the welfare kings and queens are going to turn on everyone, the 0.01% will flee to their various international villas, leaving those of us who remain the tough task of restoring order and balance, one parasite at a time.

If there is any justice, anything that the 0.01% can’t physically stuff into their private jets won’t be theirs should they ever return. Let’s call it the sunshine patriots’ tax. I would add that given that it was the 0.01% that saw fit to sell out our nation before they fled; any foreign ownership would also become null and void as well.

The USA would thus have new birth of freedom and return back to the limits of Constitution.

Jefferson places the cycle above at about 150 years or so.

costata said...


All things are possible. Acknowledging this fact it is perhaps wrong to speak of Freegold-RPG as being inevitable. But we deal with the balance of probabilities here.

If there is no viable alternative then the likelihood of the only viable option not emerging as the winner becomes vanishingly small.

It's also a human trait to kick the can down the road rather than deal with problems. Triffin's dilemma could have been dealt with in a different way in 1971. The Nixon administration chose not to do so.

Ronald Reagan had a campaign spot filmed in 1980 in which he pledged a return to the gold standard - it was never used. Reagan set up a commission to examine a return to the gold standard - Ron Paul, Lewis Lehrman and Murray Rothbard blew that opportunity with their hairbrained proposal.

Time and again there have been opportunities to chart a different course since then and they were passed up. Perhaps there will be some kind of miracle that saves the $IMFS. Perhaps a statesman will emerge who can drag the USA onto a different course of voluntary restraint, humility and austerity.

Perhaps, perhaps......

Until we are presented with a viable alternative to the Euro Freegold-RPG architecture that is also politically feasible many here will continue to argue that this will be the regime which emerges from the demise of the $IMFS.

costata said...


Could this action in "T-bills" be a one off in response to the expiry of that FDIC guarrantee on 31/12/12?

One Bad Adder said...

cos: -
Dunno mate, It IS the silly season so I'm not too confident with this move ...yet!
The FDIC change WILL have a bearing ...and the action WILL inevitably be found in the secondary market however - I doubt it'll be of sufficient volume "under normal market conditions" to keep the thing at or about parity.
Many a Camels back has been broken by lesser straws tho cos ;-)

costata said...


As you know I'm no trader but a lot of what's happening in various markets looks to me like "silly season" activity on thin volumes. I suspect that this isn't IT.

Happy New Year to the Adder clan.

ae44bf5a-2cce-11e2-94ad-000bcdcb8a73 said...

Thank you to those who responded, especially Costata, Indenture and ByiamBYoung. And apologies for the way my name shows up, not sure how to fix it. Call me Daedalus Mugged, or DM or ae if that is easier than that string.

I reread the linked posts, and some but not all of the material linked in them, but it left me...unsatisfied. As always, when I reread something from our blog host, I get something more out of it than the first time through, but in this case not what I wanted.

Peak Exorbitant Privelege was certainly a good read and good refresher, but what I mostly took away was the 'inevitibility' of the collapse of the current system, not that it would be a freegold system which follows it. It talked about how the European central bankers screwed up by granting the privelege to the US in 1922, and the problems with the system reform at Bretton Woods in '46, and implied the mistake in not grabbing more gold before the window shut in the late 1960s through 71. So the worlds' bankers are zero for three. Maybe they hit it out of the park and get it right next time, but it doesn't seem like the lock of the week.

For the Focal Point Gold link, it reinforced that the system will collapse, and that silver is not and will not be gold. Not confidence that the next system will be freegold so much as what won't work. Won't work doesn't mean won't be tried, or that the better solution will be implemented.

For the Euro Gold link, I took away that the Euro will inflate and the dollar will hyperinflate. I have less confidence that I really or fully understand this, but I did not take away that freegold must be the next system. I get that the Euro could function as the MoE while gold serves as the SoV, but I have less confidence that it would work. The key premise is that the ECB cannot be made to print to cover the profligacy of the governments, but events since this was published a year and a half ago seem to indicate that while the gov'ts may not be able to force the ECB to print, doesn't mean the ECB won't print. It seems they will. And even if within the current structures they can't be forced, the structures can be changes so ECB can be forced to print. When the guys with the guns tell the guys with the printing press to print, they either print, or there are new guys who come in, clean up the blood and corpses, and then print. And even cleaning up the blood is probably optional.


Daedalus Mugged

ae44bf5a-2cce-11e2-94ad-000bcdcb8a73 said...

continued 2/2...

Costata, while I have seen the problems of other approaches outlined, I don't see them as foreclosed...the fact that they won't work as well as freegold does not mean that those who get to make the call don't see some advantage to pursuing those courses. For example, I could see a country like Mexico with rich silver resources trying to remonetize silver. I understand why it won't work long term, but that doesn't mean it won't be tried. And it would be a sight better than where we are today systemically. Or China could do a deal with the oil Sheikh's to use something else like some other obscure rare earth metal they have a lock on, and if you want gulf oil or Chinese stuff, you better have it. Not likely, not going to work long term, but it could put off freegold for a few decades. Ultimately, freegold could easily become the ideal untested solution while we try to go back to the seashells of some rare mollusc from the depths of the Marianas trench. After all, we appreciate the value of a durable, otherwise useless substance that is difficult and expensive to get with a limited rate of growth in supply as a reserve asset. I get that history and the presence of gold on CB balance sheets makes gold more likely rare shells, but not by any means inevitable.

Again, not an attack on the idea of freegold, or that it would work, so much that I lack the confidence that so many here seem to have in spades that it will be implemented. Freegold to some extent is men and governments with a lot of power agreeing to relinquish some of that power. Not that it can't happen, but I don't see it as a certainty.

Happy Holidays all, and wishes that the new year be full of riches in the physical and moral planes for all of FOFOA's readers.

Daedalus Mugged

Edward Ross said...
This comment has been removed by the author.
tintin said...

I live in a smallish OECD country.

costata said...

From Doug Noland's wrap up of 2012 (my emphasis):

With a determined Draghi aligned with the election-minded Merkel government and an unleashed Bernanke Federal Reserve, the market environment was suddenly transformed. Draghi explicitly warned the hedge funds to cover their European short positions – and the speculators quickly appreciated that policymakers were making it advantageous to be positioned leveraged long.

This was a key turning point IMHO. The "adults" climbed out of the big (debt/bond) pool and disciplined the "teenagers" messing around with the "kiddies" shallow pool (of short term speculation).

European debt instruments were transformed from being the global leveraged speculating community’s preferred shorts to their best performing speculative longs. Indeed, with the ECB having negated European “tail risk,” the prevailing catalyst for global de-risking/de-leveraging had been suppressed.

A period of virtual panic buying ensued – in Greek, Spanish, Italian, Portuguese bonds; in the euro; in European equities; in emerging market securities; and in U.S. corporate debt and equities. In short, an historic short squeeze spurred huge rallies throughout global risk markets. Performance-chasing and trend following markets went into overdrive.

FWIW I think the next milestones in 2013 will be:

1. Clear evidence that the EU banking union is on track and the problems in the banking system are being dealt with.

2. The EU moves into a sustainable, positive primary balance as Christian Noyer predicted recently. (Hopefully, then this ridiculous "death of the Euro" meme will itself expire.)

3. After the German elections the discussion turns back to haircuts, debt restructuring and the "European Redemption Pact" will be dusted off and put back on the table.

Article discussing the ERP and other issues surrounding it here:

Then the eye of Mordor turns its gaze on the USA. But, of course, that's merely my 0.02.

dieuwer said...


Mordor is the bad guy. If it will be gazing on the USA, does that mean the USA is the good guy?
Maybe you have your tales mixed up.

costata said...

Daedalus Mugged,

It's interesting that you canvass this alternative:

Or China could do a deal with the oil Sheikh's to use something else like some other obscure rare earth metal they have a lock on, and if you want gulf oil or Chinese stuff, you better have it. Not likely, not going to work long term, but it could put off freegold for a few decades.

One of the arguments against platinum as an alternative PM asset reserve for the CBs is that there are only a couple of major platinum provinces. Therefore platinum has geopolitical risk. The much wider distribution of gold (and silver) argues in favour of both metals as a better alternative to platinum.

Gold in the ground will be just as important an incentive to support this new regime as gold reserves in the vault. People also tend to overlook the hundreds of millions of ounces of non-bullion jewellery that exist around the world. Gold has a very powerful network effect going for it which isn't obvious to everyone at this time.

And let's not forget that China has already voted with its feet in the gold vs. whatever debate. But I have to agree with you to some extent. The Euro Freegold-RPG architecture should be seen as the winner by default rather than a contender that siezes "the title" from the reigning champ.


costata said...

dieuwer said...

Mordor is the bad guy. If it will be gazing on the USA, does that mean the USA is the good guy?

I have the same crew in mind who are profiting from the GFC. Call them by whatever label you wish - Wall Street, London, Speculators, Banksters.....

Team "Mordor" is the crew who will merely see the vulnerability of the USA as a profit opportunity.

byiamBYoung said...


Speaking only for myself, of course, I can accept your position as legitimate. While I am overwhelmingly and increasingly convinced that Freegold is where this pony ride is headed, I can concede that it is rational to recognize the wafer thin separation between "inevitable" and "really really really super-likely."

Please continue to offer alternative views or facts. This really is a place for sincere evaluation of the whole range of ideas.

Happy Holidays to you and the whole ae44bf5a-2cce-11e2-94ad-000bcdcb8a73 family.

(I'm guessing that monogrammed towels cost you extra.... )


Aaron said...

Hi Daedalus Mugged-

In addition to Costata's sentiments I would like to add -- and to be clear my thoughts below are a great oversimplification of very complex topic -- that CBs have/are positioning themselves for exactly that -- Freegold. Whether they wanted to or not, that is what they are doing. CBs around the world are buying gold for their official reserves and marking it to market. In my eyes there are so many data points out there to corroborate the idea of gold taking over USTs as the next reserve asset, but keeping it simple, look at CB balance sheets. CB reserves have but one purpose, to defend the currency issued by that CB. That's what reserves are for! Currency defense! And you've probably also noticed none of the larger CBs are stacking USD denominated promises for reserves in any meaningful amounts. That job has been taken over by the Fed with some willy-nilly support from a few small nations.

I don't expect this trend to reverse, do you?


costata said...


(I'm guessing that monogrammed towels cost you extra.... )


Another snippet from that brilliant wrap up of the credit markets from Doug Noland (my emphasis):

December 24 – Dow Jones (Tatsuo Ito):
....... The central bank Thursday announced the details of the program in which the BOJ provides cheap funds to commercial banks in return for an increase in their loans, an attempt to pump more money into the real economy.

But in a rare admission they were also targeting the currency's value, BOJ officials said they hoped it would spur money flows overseas and bring about a weaker yen. ‘If firms using the scheme convert the yen into foreign currencies when they increase their M&A activity globally, that would strengthen money flows that correct the yen's strength,’ BOJ Gov. Masaaki Shirakawa told a news conference…

...after the central bank also decided to increase its purchases of government debt by Y10 trillion ($119bn). The governor said the program was an ‘unprecedented’ step for central banks in that it allowed banks in Japan to use the money from the BOJ for lending to non-Japanese firms overseas, including hedge funds, and in foreign currencies.

This is truly "unprecedented". Depending on the composition of the FX reserves that Japan is sitting on this lending "and in foreign currencies" could get interesting. It could take the currency wars to a new level. Capital controls are now on the menu du jour IMVHO.

ae44bf5a-2cce-11e2-94ad-000bcdcb8a73 said...

byiamBYoung and costata, thank you for engaging with me, I appreciate it. Costata, you are right that the Chinese seem to be voting for gold, but they also seem to be voting for anything that is not dollar denominated, including silver, copper, african farmland and foreign oil companies where they can get approvals. It is pretty clear that they are not willing to take more lines in the sand (to use FOFOA's reference to dollars in reference point gold) but I don't think they are fully decided on gold, and even if they are, they can be rather fickle and change their vote if they see some advantage.

byiamBYoung, I can appreciate that nothing is inevitable, and I can even say that freegold seems more likely than not, but would you mind expanding on how you get from more likely than not to "really really really super-likely"? It is exactly that confidence which evades me. And if it is right, it is that lack of confidence which is preventing me from going all in.
For those who may want a hypothetical alternative scenario (admittedly less likely, and will not work as well as freegold) Let's say at one of these monthly CB meetings in Switzerland, they decide that there is not 'enough gold.' I know price solves the enough problem, but they made that mistake post WWI, and let's hypothesize that they repeat it. They decide it is to be silver, the other metal with a monetary history, and there is more of it. Plus because no central banks have a lot of it, it is more 'fair' to start with something that puts no one at a particular advantage or disadvantage, plus europeans have more silver than gold resources. So silver it is, they declare a price of $300 per ounce or equivalent in euros etc, but increasing by 8% per year. The price is high enough that it virtually eliminates all of the industrial uses of silver, so it becomes a purely monetary metal. And the fact that they are increasing the price rather than trying to defend a fixed price long term is better than a straight silver standard. Most countries hit silver mines with a windfall profit tax of 75% of price paid for silver to alleviate some fiscal pressure. I appreciate this is sub-optimal, but is it or other scenarios similar to it so remote as to make freegold virtually inevitable?

I've never monogrammed towels, but if I do, I am totally usuing DM. Thanks to everyone who can help me improve my understanding.

/SleepingVillage/ said...


It has been a pleasure reading your words. Some people come here with a bit of a chipOTS/attitude, thanks for being cool.

Man Who Paints The Pictures

ae44bf5a-2cce-11e2-94ad-000bcdcb8a73 said...

Aaron, I agree that no CBs other than the politicized US Fed are adding to the UST stacks. But I am not sure that I see lots of CBs adding to their gold piles. Some emerging markets certainly are, but I don't see much of it in the anglosphere or developed Europe or Japan. If I am not mistaken, the amount of CB gold in Europe has gone down over the last decade or so. Among the G7 is anyone materially adding to their stack? More emerging markets like China, Russia, Turkey etc, sure. But lots of the big boys don't seem to be adding. It almost looks like the old guard versus the new, and the up and comers don't always win.

/SleepingVillage/ said...


FWIW, I don't think anyone will be choosing silver any time soon:) The choice was made long ago. The fact that central banks own zero silver is the BIG hint;) among other factors. Keep on reading and you will see what I mean. In due time you will have all the confidence you need.

Sometimes to win, you've got to lose;)

byiamBYoung said...

DM (I'll always think of you as ae44+),

One item which bolsters my feelings about our direction is the idea that, in hindsight, granting the exorbitant privilege to the USD (although granting such privilege to any other currency would have likely yielded a similarly dysfunctional result) created such an intractable problem for the rest of the world that such an initiative would be stridently opposed by many during a reset. The concept of any currency ever again attaining such an unchallenged reserve status seems deeply unlikely during any times we will live through (NO guarantees of anything in the long run, though).

That fact alone leads to the conclusion that currencies will instead pursue separate existences, and within this global patchwork, we can expect all to attempt to maximize their global competitiveness. But the key takeaway I get from this line of reasoning is that a global reserve currency a la USD is going to be a non-starter.

I'll suspend my objection about "not enough gold," although it is more divisible than most commodities.... Okay, I didn't suspend anything. You can pound this stuff into incredibly thin sheets. It's practically the most divisible material on earth. Remember I said practically. OKay, moving on...

I'm thinking that at that CB monthly meeting, while everyone is wearing their beaver fur lodge hat and deploying the secret lodge handshake, when someone suggests silver be the new SOV, everyone else (especially those holding tonnes of gold) will be all like, "Oh Snap. Hoard all of the silver you want. I've got this stuff, gold. I'm all set."

And every other giant in the world will chuckle and agree.

You said,

"Plus because no central banks have a lot of it, it is more 'fair' to start with something that puts no one at a particular advantage or disadvantage"

I would say that the last thing the framers of a new world currency paradigm are interested in is anything that is fair, above what would give their constituencies the global advantage. No one gives a damn about fairness. It's all about ME-ness. IMO, it Always has been. Always will.

"So they declare a price of $300.00 per ounce"

IMO, In such a case, the rush to sell silver in order to take the cash and buy gold would lock up the marketplace.

My conclusion, based upon my personal opinion, is that we must return to the Freegold model as the more likely manifestation.

We have to go somewhere when TSHTF, so a more likely direction needs to present itself pretty soon, or we all will follow the path that is least resistant...because that's what we do.

Maybe smarter folks will ring in and educate us both!


Michael dV said...

are you related to the
ae44bf5a-2cce-11e2-94ad-000bcdcb8a73s from Racine?
How does one come upon a username with all constants and no variables?

byiamBYoung said...

@Michael dV

Geek props!


ein anderer said...
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ein anderer said...
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ein anderer said...

»Friday the 13th has been considered the unluckiest day of the month.« (FOFOA)
Yes, with some deeper reason. In those days in very old Europe the week counted 14 days: One moon cycle equaled two weeks.
The 13th day of these 14 day weeks -- the days before full and moon new moon -- were said to have some influences not so convenient to »business« and decisions. Better to have these 13th days off: and have some LOVEly time with friends and family. The day was called Freya’s day, Freya = the deity of Love. Therefore Friday: a lucky, sweet day (as long one is not working so much …)

Beer Holiday said...

2013 the year of inflation.

Thanks to too many beers and >40 celcius heat.

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