Saturday, December 29, 2012

WENDY'S-FREE-FOR-ALL-IN-FREEGOLD-FORUM



Wendy would like you to… "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 ;)"






146 comments:

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

Oh man, I finally have enough confidence that a thread will be on top for a while to come out and engage with the thought provoking people here about how they have so much confidence, and no sooner do I do so than a new thread starts. :(

DM

costata said...

DM,

You can continue the discussion from the previous thread. I'm sure Wendy won't mind. We often have several strands to the discussion.

All,

A case study on the effect of capital flight here:

http://www.forbes.com/sites/jonmatonis/2012/12/27/egypt-imposes-new-cash-controls-at-border/

(My emphasis)

...Egypt which has seen its foreign currency reserves fall from $36 billion in 2010 to $15 billion today dangerously close to the IMF’s recommended coverage of three month’s of imports. Estimates put hard currency reserves at just about $4 billion....

Aaron said...

Hi Daedalus Mugged-

Hopefully FOFOA will forgive me for this OT post, but in an effort to support your confidence to engage with the blog, I've reposted my comment from the previous post.

And so as to not get myself into too much trouble with this OT comment, HI WENDY! I'll miss you in LV, but I'll definitely make the PFG BBQ wherever we decide to have it. I hear FOFOA's got a pretty sweet pool with a grill pool-side.

Comment from previous post follows:

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?

Indenture said...

Wendy: I'll get to something about Appalachia but
DM: ""If I am not mistaken, the amount of CB gold in Europe has gone down over the last decade or so.
Euro Gold Reserves vs. Foreign Currency Reserves

costata said...

DM,

(From the end of the previous thread for other readers.)

I think you have to discriminate between the items you mention:

...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 has been widely documented that copper etc have been used as unconventional collateral backing for debt. If memory serves me foreign direct investment (FDI) is being encouraged by the Chinese government under their current 5 year plan. So you have an internal/domestic stockpiling and an external initiative that exports capital which in turn requires a drawdown of FX reserves due to the FDI.

Gold in the CBs asset reserves, as Aaron points out, is ultimately all about currency. I would use the term currency management rather than "defense" BTW. Capital controls are far more potent weapons than gold (or FX reserves) in targeting a desired exchange rate.

Gold and bonds come into their own as currency management tools when the currency is freely convertible (i.e. no capital controls).

So to be clear, you need to distinguish between domestic stockpiling, FDI and asset reserves. Why a thing is acquired, who acquires it and what is acquired matters to this discussion. It's important to define who the economic actors are and to identify their incentives.

...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.

The "big boys" don't need to add to their gold reserves. It's the "up and comers" who are playing catch up. Can you see that as more and more CBs came on board with gold in recent years it derisked the decision of the big boys to commit to this new regime?

Luke said...

Costa

I assume you were speaking to me when you spoke of the Fed acting as a custodian. Does this mean they have Germany's gold as a liability on their balance sheet? It is assumed that gold is loaned out? I know the ECB holds gold, but I am guessing it is the gold of other countries.

/SleepingVillage/ said...

"Does this mean they have Germany's gold as a liability on their balance sheet?"

Nope:) Owning something -vs- storing something for someone else. Certain countries put their gold in safer places many years ago. A slightly different take(or is it?) on the confidence we'll be hearing a lot about in the near future...

Oh mother tell your children not to do what I have done

Indenture said...

Songs From 'Countdown To 2013 Open Forum'

costata said...

Hi Luke,

I assume you were speaking to me when you spoke of the Fed acting as a custodian. Does this mean they have Germany's gold as a liability on their balance sheet?

As SV points out custody is a service not a Fed balance sheet issue.

It is assumed that gold is loaned out?

Some of the gold bugs are convinced that this is the case. Include me - out - on that theory. (Which isn't meant to imply that it wasn't the case in the 1990s.)

I know the ECB holds gold, but I am guessing it is the gold of other countries.

They have gold that was contributed by the EMU members as part of the capital raising to establish the ECB Eurosystem. If memory serves it's about 500 or 600 m/t.

The bulk of the EMU members gold is held by state Treasuries. The important thing to note is that there are agreements in place that prevent those states from dealing in their gold without the ECB's permission/co-operation.

/SleepingVillage/ said...

Indenture,

Awesome!

If I could only remember the words to the song I've been singing

costata said...

A snapshot of the economic relationship between the EU and Russia (my emphasis):

Cold-war resentments are still at play, as Spiegel noted... The paradox is that the EU and Russia are getting increasingly intertwined in economic terms. Trade is flourishing – $409 billion in 2011. Moscow has given a big hand to shore up the euro by holding 41 percent of its foreign currency holdings in euro.

Around 80 percent of the EU’s foreign investment has been to Russia. Some 20000 European companies have subsidiaries in Russia – 6000 of them German companies. The EU, in turn, accounts for 45 percent of Russia’s exports.


http://indrus.in/articles/2012/12/24/where_russian_money_talks_loudest_21245.html

Time for everyone to accept reality methinks. Russia is back and it's here to stay as both an economic and military power in Eurasia.

NOVO-OGAREVO, December 25 (Itar-Tass) — The capacity of the Eastern Siberia - Pacific Ocean (ESPO) oil pipeline can be increased to 45 million tons per year with the commissioning of its second stage, Russian President Vladimir Putin, who took part via video link in the pipeline putting into operation ceremony.

“With the completion of the second part, certainly, the capacity is expanding, up to 30 to 45 million tonnes per year,” the RF head of state said.

“Partners from countries such as Japan, China, the United States, the Philippines, South Korea, Indonesia, Singapore, Taiwan, Malaysia have been buying our products, and a new blend has appeared that is called ESPO in the international market,” said the RF president....

.... The linear part of the ESPO-2 pipeline makes it possible to pump up to 80 million tonnes of oil annually. The Transneft Company, as the necessity arises, will be increasing the pipeline’s throughput. In 2013, the transportation of oil via the ESPO will be 36 million tonnes, with 21 million tonnes being exported via the port of Kozmino.

The overall length is 4,188 kilometres: from the oilfields of Western Siberia to the ports of Primorsky Krai. The special Kozmino oil terminal near the city of Nakhodka has become the pipeline’s destination: since December 2009 oil has been delivered there by rail. Every year, up to 15 million tonnes of petroleum products were shipped via the port to countries of the Asia-Pacific Region.

Speaking about the launch of the Kuznetsovsky tunnel, the president called it “one more very important, serious step towards the strengthening of the transportation infrastructure of the Far East.” “It liquidates the bottleneck, which hindered the further development of cargo transportation via the Baikal-Amur Mainline (BAM) to the seaports of Vanino and Sovetskaya Gavan, and created a very good basis for the future development of the Far Eastern ports, for increasing exports, modernisation of the industrial base of Russia’s eastern regions,” he said.


http://www.itar-tass.com/en/c154/609589_print.html

h/t M. K. Bhadrakumar

http://blogs.rediff.com/mkbhadrakumar/2012/12/26/russias-oil-splash-in-east-china-sea/

Aaron said...

And I have officially been reacquainted with how awesome the song the Year of the Cat is. I will definitely be bringing in the new year with that song playing throughout the whole house. Thank you once again ampmfix!

Luke said...

Thanks Costa

But who owns gold as a liability on a bullion bank's balance sheet? If it isn't the governments who else would it be, with that size, that would cause a significant rush to physical if/when unallocated accounts start to turn up empty?

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

This was written at the bottom of the previous post, so it does not address all of the points made above in this post. That comes next! Thank you all for helping me think through my 'issues' especially to FOFOA for getting me at least this far. So I guess this is one of 2, but two is not thought through or written yet.

Can't say I have any relatives in Racine, although my geek credibility is usually solid, I don't get the reference. And I have no idea why I show up that way.

As far as the conspiratorial sounding meetings, they are real.
http://www.zerohedge.com/news/2012-12-12/how-handful-unsupervised-mit-economists-run-world

The world's central bankers literally meet at a round table and what they talk about is an absolute secret. Maybe they are sitting around talking about how they can relinquish their power to the invsible hand of the freegold marketplace, but I really doubt it.

And while I agree that 'they' probably learned their lesson on granting exorbitant privelege to one nation, and if they leave well enough alone, freegold would evolve into being. I don't trust them to be hands off enough to let it happen. They have a strong penchant for 'doing something' and that something often involves some transnational institution that no man on the street has ever heard of, and the net result is more power and wealth to the same people who flubbed it to begin with. So I agree, the solution is not to grant the exorbitant privelege to another country like China, but I can easily see central bankers choosing to granting it to themselves, as the BIS or less likely the IMF. I can see bankers believing that them having that exorbitant privelege is a good thing. They probably even rationalize they would use it to 'help' various countries and banks around the world. It is just a coincidence that they all end up massively wealthy and they don't like that the currently traded value of everything in the world hangs on their every mutterring.

And please don't take my various hypotheticals as things I believe will happen, my point is there are possible alternatives. None as good as freegold, but possible. Depending on how fine you want to categorize it, there are either several thousand combinations and permutations, each with about a one-hundredths of one percent chance of happening, or several dozen each with a one or two percent chance of happening. No one alternative is as likely an outcome as freegold, but the large number of possible alternatives add up to a significant possibility of something other than freegold.

Or at least that is the way it seems to me currently, if there are other links the community can share that helped them get their confidence up that freegold will be the outcome rather than would work, I would appreciate it.

Just out of curiousity, am I the only one who is struggling with my confidence in freegold as the very likely outcome, or are there others who are struggling with this?

Daedalus Mugged

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

Wendy, sorry for hijacking your thread. I hope you can appreciate my excitement...you yourself mentioned how one can lose contact with the rest of the world while really exploring these potentially vital ideas.

Indenture, if I am not mistaken, that chart is measured in value, not weight. While the value of the European CB holdings as measured in euros have gone up over that period, I believe the actual amount of metal, in ounces, or kilograms or tons has gone down.

I wouldn't have the confidence to say that except that I just RRTFB, Euro Gold specifically. The left side of that chart is about 405k ounces, and the right side is down to about 348k ounces. Net physical gold seller, not buyer. Does that change your perspective?

And while I appreciate that the developing markets whose reserves were built during the $IMFS are scrambling for gold, wouldn't the big older players whose gold reserves largely predate the $IMFS also be looking to add? If not, why not? Take Germany, export powerhouse. While they are bringing their stack home, they don't seem to be adding to it in a material way.

Costata, I agree that we have to distinguish between actors and purposes, but I think that distinction is less relevant for a country like China than most of the rest of the world. While there is a big difference between the ECB, the german central bank, the german government and siemens, and what they do and why they are doing it, I think that in China, one has to consider it more wholistically. China is a totalitarian state, and ultimately, they are different tentacles of the same creature in a way that is not true of other countries. If a Chinese firm is stockpiling and warehousing copper, or buying farmland in Africa, or an oil company, they are very likely doing it with the knowledge, consent, approval and financing ultimately from the Chinese gov't. While those distinctions are vital in most of the world, I think China (and other more dictatorial states) are a bit of a special case. The only other large country that comes to mind heading in that direction is Russia. But I would not put India or Brazil in that category (just to round out the BRICs).

But when you say that the big boys don't 'need' to add to their gold, I appreciate that they are in a better position than say China or Korea, but why wouldn't they want to? If freegold is already baked into the cake, and they know it, shouldn't they be grabbing as much physical as possible as soon as possible, much like the French before the US gold window closed? Wouldn't failure to do so be a treason to their country and their responsibilities as central bankers? How is not grabbing it now that morally different than them giving it away for next to nothing later?

Thank you all, Wendy, sorry again for the hijack, and now I get to read and respond to our host!

DM

costata said...

Luke,

But who owns gold as a liability on a bullion bank's balance sheet?

My guess is the private sector (see below). Let's be clear that despite the fact that banks (including bullion banks) may be clients of the CBs the CBs are not operating with the same aims and objectives as their clients.

During the period Another wrote about the CBs were backstopping the bullion banks (but for their own specific reasons unrelated to the BBs profit motive).

The BBs had a near death experience at the end of the 1990s and they have had over 12 years to put their affairs in good order. Since 1998 the gold miner hedge books were run down, GLD was successfully established and so on. A lot has changed since Another announced that the BBs were leveraged 100:1 and on the hook for delivery of the metal. Don't assume this is the current position.

If it isn't the governments who else would it be, with that size, that would cause a significant rush to physical if/when unallocated accounts start to turn up empty?

Speaking to the issue of who owns any leased gold or unallocated accounts with BBs, IMHO it is less likely today to be a CB and more likely to be private sector economic actors. The CBs only have 30,000 to 40,000 m/t out of an estimated total aboveground stock of 175,000 m/t.

There's plenty of private stock. Perhaps some of the owners still want to earn some income from their gold. If a gold owner has enough power and influence he/she may not be afraid of not getting their gold back.

Agreed, "if/when unallocated accounts start to turn up empty" it could cause a gold bank run.

duggo said...

Continuing fro the previous thread and hopefully not upsetting Wendy I give you:-

Duggo's Dilema

John is a hard-working fellow and manages to buy Gold every month by handing his money over to Bullion-Is-Us. He starts as a "Shrimp" and then after a time becomes a "Jumbo Shrimp". Many Moons later he basks in the fact that he has now become "Mega Shrimp". One night he has a terrible nightmare where he is surrounded by people chanting "If you don't hold it your hand you don't own it", over and over again. He wakes in a cold sweat and determines to cash in his Bullion-Is-Us certificate and take delivery of his 400 oz. London Good Delivery Bar.
The scene changes and the "Great Transition" has taken place. Gold is the equivalent of $40,000 oz. As John is not a Giant and cannot afford to have his Gold sitting around for several generations he decides to sell. John puts his bar into his wheelbarrow and feeling rather Lobsterish wheels it down to the local coin-shop. They tell him they are completely out of cash because a customer sold them a Gold Eagle and they only had $40,000 in the cash box and anyway they never carry $14,000,000 so they can't help him. He decides to find a bank that will buy Gold and he eventually does. The bank clerk tells him that as his bar has "been out of the bullion system" it will need to be assayed. John is told to come back next week and in the meantime the bank gives him piece of paper to say he owns the bar. Bingo! he's back where he started.

costata said...

DM,

I think you are being thrown off course by some fundamentally flawed assumptions. Let me explore a couple of examples from your comments at December 29, 2012 10:41 PM and December 29, 2012 11:13 PM.

..the large number of possible alternatives add up to a significant possibility of something other than freegold..

In a word - no. The existence of "several thousand combinations and permutations, each with about a one-hundredths of one percent chance of happening" does not alter the balance of probabilities.

If one option has, say, a 40 per cent probability of occurring then it is 4,000 times more likely to occur than any one of the others. Each of the "others" competes with the rest. They aren't cumulative in their impact on the likely outcome.

The world's central bankers literally meet at a round table and what they talk about is an absolute secret. Maybe they are sitting around talking about how they can relinquish their power to the invsible hand of the freegold marketplace, but I really doubt it.

The Euro Freegold-RPG architecture isn't designed to diminish the power of CBs. It secures their position and the central banking model by addressing one of the flaws of the current fiat currency system - political interference in monetary policy.

It's the politicians who are at risk of losing some of their power through this new regime not the central bankers.

But when you say that the big boys don't 'need' to add to their gold, I appreciate that they are in a better position than say China or Korea, but why wouldn't they want to?

You are thinking like a private investor and projecting that thinking onto a central bank. This isn't the way they think or operate. It is equally possible for a CB to have too much gold as it is for a CB to have too little gold.

duggo said...

Oops a GLDB bar would be $16,000,000

costata said...

duggo,

He delivers the 400 oz bar to a CB/Treasury agent and it is purchased for currency. Since the currency issuer can never run out of money the purchase price is irrelevant. End of story.

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

FOFOA, thank you for taking the time to respond, I genuinely appreciate your help. And I hope that the effort you invest is helpful to others beyond little ol' me.

I am not sure I fully appreciate or understand the distinctions you are making, as it seems to me that both sytems and process thinking are relevent and necessary. You obviously think I am process thinking, and it is a mistake. But I am not sure I understand. I guess your point that "unfolding of what is enfolded in it so that the future is in a sense already there." presupposes either inevitibility and perhaps even a deliberate systems design process by someone(s) at some time in the past. Perhaps I am colored by my military background, but I am keenly aware of how detailed and well laid out plans tend to go off the rails when they meet someone else's plans in the harsh judgement of reality. Murphy is a painful teacher. Inevitable often ends up evitable.

But ultimately, any system has a process by which it does whatever it does. It seems both perspectives are useful.

I am not sure of what to make of your mechanical vs organic system point. I take it that your previous superorganism posts imply that it is more organic than mechanical, but I may be reading too much into that. Is your point that the 'the powers that be' (probably world CBs) have already agreed to a plan and this is it (very road to roota-esque, mechanical, pre-conceived, and the parts are being designed and falling into place) or that the nature and preferences of the super producers make freegold an organically natural development, like how millions of ants doing what comes naturally to them build a colony none of them could have envisioned? In your mind is the right systems thinking perspective organic or mechanical?

I have to admit my bias here...I rather despise Kant as a philosopher. To my mind he was the philisophical cornerstone of much of the totalitarian horror of the 20th century. I don't trust so called supermen, and mediocrities who think they are supermen terrify me.

I guess part of my trouble is in having a different understanding of process thinking. Your last quote includes "There is nothing above it, below, behind or in front of interaction exercising any causal power on it." which I certainly don't agree with. There are systems, and there are processes, and they do interact, and in complex ways. While they may not be causal in the definitive 'only one possible outcome' sense, they certainly have causal effects dramatically increasing or decreasing the likelihood of certain outcomes on other related systems and processes.

I guess the key thing I don't understand is the process by which the freegold system will come about. The process by which we systemically get from here to there, and why all the other possible paths are cut off or reduced to fringe possibilities. And that is the root cause of why I lack the level of conviction of so many here.

Thank you for trying, sorry my head is so thick I can't understand what you are saying. But I do genuinely appreciate you trying.

Daedalus Mugged

duggo said...

@ costat
It will still need to be assayed before he gets his money and he will be handed a piece of paper. The clerk handing him the paper will suddenly leave to visit a sick relative in Acapulco.

Or

The bar is confiscated because a "Giant" has the same bar registration number allocated to him.

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

Costata, would you mind elaborating on a few of your points?

"The existence of "several thousand combinations and permutations, each with about a one-hundredths of one percent chance of happening" does not alter the balance of probabilities.

If one option has, say, a 40 per cent probability of occurring then it is 4,000 times more likely to occur than any one of the others."

I agree that the other possibilities are not strictly cumulative, they do compete with each other. But the accumulation of a large number of low probability events does alter the balance of probabilities. Ultimately, if one outcome is 40% likely, and there are thousands of other low probability outcomes divvying up the remaining 60%, the 40% outcome is the most likely of the possible outcomes, but simultaneously not likely to happen. There is a 60% chance it would be one of the multitude of others. If you have to bet one a single outcome, it is the way to go, but far from certain.

"It is equally possible for a CB to have too much gold as it is for a CB to have too little gold."
Would you mind elaborating on that? I get how in a freegold world, that can be true, a country might be better off with less gold and more stuff. But if they have confidence that freegold is coming, and gold is dramatically underpriced currently, how are they not better off getting more physical gold now while so many of their assets will potentially be stuck on the monetary plane? In what scenario (assuming freegold) would Germany not be better off if its CB bought more physical gold now after freegold happens?

DM

duggo said...

@ costata

When he turns up at your "CB/Treasury agent" (whoever and wherever he is) John will need lots of "paper" saying that he is the genuine owner. Gold in his "possession" will probably not be enough. By the time the "transition" takes place everyone will be presumed guilty before innocent (especially in the USA). You may remember this story "A judge ruled that 10 rare gold coins worth $80 million belonged to the U.S. government, not a family that had sued the U.S. Treasury, saying it had illegally seized them". End of story.

FOFOA said...

Hello Duggo,

If you have 400 ounces, I would recommend 400 1 oz. coins or smaller rather than one big bar. They will fit in a shoebox and be more convenient to sell in drips and drabs later.

I don't have many readers who tell me how much gold they have (frankly I don't care or want to know), but I will tell you that I have several who have told me they have 400 ounces or more. There's one who has 700 ounces, mostly in odd coins smaller than 1 oz., and of course I already mentioned Jumbo Shrimp who had 1,700 ounces or more. In all of these cases of people who have told me how much they hold and what they hold, it is all 1 oz. or smaller coins except for a few kilo bars and that one 10 kilo coin that Jumbo Shrimp had until last May. And it's all in their possession, be it in the master bedroom closet safe or a safe deposit box or whatever storage solution they came up with. Secrecy is best, so you don't need to tell me where yours is. I know one guy who flew to Singapore with 300 ounces in his carry-on and stored it in the secure and tax-free Freeport facility.

But if you did have a 400 oz. bar and left it at the bank after the Freegold revaluation, so what? You say, "Bingo! he's back where he started." I say, maybe he is, but at least he wasn't there at the moment of peak risk. Did you read my comment here?

No one is telling you what to do with your Perth Mint, Bullion Vault and GoldMoney accounts. All they are telling you is what they've done and what they decided for themselves. Stop being so dang defensive of your decisions! :D Live with them or change them. We don't care what you decide! ;D If you perceive no risk, that's great, and you shouldn't be having terrible nightmares and cold sweats!

As I have written in the past, if you have too much wealth that you cannot take personal responsibility for it, then this crisis will solve your problem for you one way or another. And this is no slight on Bron or the Perth Mint or anyone else. I'm just sayin' that you're responsible for your own wealth in the same way you're responsible for your own decisions. ;D

Sincerely,
FOFOA

ChrisF said...

duggo,

Krugerrands and/or Eagles, perhaps in 1/4 oz. size,
would surely solve this problem. No need to assay coins. I thought this is the whole point of having coins. I have been adding 1/4 oz. coins for this very reason after being convinced of FOFOA's thesis!

FOFOA said...

Oh yeah, and there's one other guy who told me that he bought a 100 oz. COMEX bar through his bank and that HSBC is storing it for him (HSBC is not his bank, but they do have a working relationship). He even has the serial number. But he's now in the process of selling that bar and buying coins for delivery instead. I guess he changed his mind or something. BTW, he bought the bar a couple of years ago after reading my blog, and then he changed his mind after RRTFB AFAIK. ;D

duggo said...

@ FOFOA
I have read what you have said, now and in the past. I am certainly not defensive. I am try ing to inject a bit of humour into the proceedings that seem to be concerned with the minutia. There seems to be a great deal of intellectual sword-fighting with words and little with practicality. Maybe I've missed this because I'm not an ardent reader of everyone's comments.
Sometimes (many times) my posts might seem stupid to the "great minds" sitting along side you on Mount Olympus but never-the-less there could be many out there too worried to ask obvious questions.
So if it's too upsetting and tedious I can keep my own council. I'm certainly not advocation BullionVault, Perth Mint or GoldMoney and possibly these and others have been discussed in the past but there are new readers.
Now I will be told I'm too defensive again. Hey Ho.

FOFOA said...

No, Duggo, you just come across as being defensive to me. I'm happy if you're just injecting humor and trying to inform others with light-hearted stories about average Joes with terrible nightmares and cold sweats! ;D

The defensive part seems to me to be that if we cannot convince you in simple, direct terms that there is a risk in holding gold in fully reserved certificate form that we shouldn't even mention it. But in fact there are a lot of things that I will only hint at on this public blog and leave it up to you, the reader, to think it through on your own. And there are many reasons why I might hint at something rather than hash it out publicly in all of its gritty detail. Many reasons, not the least of which being that I have no desire for a public debate on some topics.

Sincerely,
FOFOA

FOFOA said...

BTW, did you start your youtube page yet? :D

Pat said...

Ahem, back to our regularly scheduled program...
I can't remember when I first tripped onto FOFOA, probably a link from someplace like Zerohedge or another high traffic blog. But it has been 2-3 years, and I'm quite addicted and I read every post and every comment. Both in their unique ways give much insight, good humor, and excellent adult discourse. It is so sweetly civil here it's almost sickening, I'm afraid I'll develop diabetes. I keed, I keed. That is actually the most refreshing thing, you don't have to sift through so much sophmoric flotsam and jetsam commentary on the more mainstream blogs. I will say this blog solely has guided me to my own gold/silver ratio, which is very little silver now.
I also read JS daily, and a few other sites, and I will say no matter the disagreements on peripheral issues, I see some core consistencies: get your SoV out of the system!!
Yes, a few silverbugs think silver will outperform gold, a notion pushed hard ( read: being sold ) from certain bloggers with a non-open mind agenda and pretty piss-poor rationale to me anyhow. Still, better than fiat I suppose.
Since I am not in a position to buy a small farm, raise my own food, get off the grid, I am all-in in regards the key theorems of Freegold.
Off to airport maybe more later.

enough said...

Spreading the Wealth around......literally

Owning many small weight bars and coins allows one to physically spread the risk of siezure.

One can hide their wealth piecemeal in a multitude of spots and mitigate the risk of having their entire stash stolen.

I could not think of anything dumber than having one's entire stash in a single big brick.

There are also many coins with interesting designs and images that can be purchased for maybe 1% greater premium than large bricks.

Gold wealth is something that can be enjoyed and appreciated for it's artistic characteristics !! Much more so than digits on a monthly paper statement or even a boring gold brick..........

Mircea said...

http://www.youtube.com/watch?v=IDsnCrSfzCQ

Indenture said...

duggo: "John is told to come back next week and in the meantime the bank gives him piece of paper to say he owns the bar. Bingo! he's back where he started. " Just buy one ounce bars or coins in the first place and solve your problems before they arrive. I think this is the simplest advice anyone can give. You are out of paper as much as you feel comfortable and you have physical in small increments because of the 'transition' and now you have but one choice left and that my friend is the personal choice of where you will store your physical. I say buy a cheap Hawaiian Ukulele, fill it with bars and put it up on a high shelf. In sight out of sight.

DM: "I guess the key thing I don't understand is the process by which the freegold system will come about. The process by which we systemically get from here to there, and why all the other possible paths are cut off or reduced to fringe possibilities. And that is the root cause of why I lack the level of conviction of so many here. " I personally look at the Euro architecture and feel comfortable.

Wendy: Indenture is just a small town mountain boy living in the same house he grew up in trying on an almost daily basis not to pronounce the word 'there' with two syllables.

Indenture said...

enough: "Gold wealth is something that can be enjoyed and appreciated for it's artistic characteristics !! Much more so than digits on a monthly paper statement or even a boring gold brick."
2013 1/10 oz Gold Lunar Year of the Snake
1/10 oz Gold Chinese Pandas
1/10 oz Gold South African Krugerrand
1/10 oz Australian Gold Kangaroo
and of course Gold Eagles - 1/10 oz
Any one of these is a these could be a great way to introduce a child to the concept of storing value in an item instead of in electrons.

Phil_O_Dendron said...

I hate to hijack this thread hijack but Wendy asked us to:

"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 am relatively new to this site but I have been reading sites like ZH, Sinclair,
Chris Martenson, and other for a couple of years. I am not sure how I got here it was
probably a link from ZH.

I have known that something was terribly wrong with the nation, economy, society and
world in general for some time but I was unable to figure out what it was. Martenson's
Crash Course was an excellent educational tool

I am in the Los Angeles area but prefer more rurals areas because I like to do things
like hunting and fishing. Pretty hard to do in Southern Calif.

A few years ago I got interested in Gold Mining. No not studying mining companies but
actually going out and digging it up. I am a member of a group with some mining claims
in Northern Calif. and I have done some mining in Alaska also. I never sell the gold
that I mine but either keep it or have gifts/jewellery made for the women in my life.
Actually having access to a mining property will potentially have significant benefits
after the reset/transition.

I recently retired and am now able to spend more time doing things to prepare for what
ever comes next. Also, it now allows me to spend some time playing Holdem Poker. I do
enjoy the game and who knows... maybe I will someday be the oldest winner of World Poker Tour

poopyjim said...

Ooo a chance to talk about myself.

where are you from

I have lived in the eastern US 95% of my life - PA, VA, and DE. The nicest to live in was NoVA, specifically the D.C. area. Lots to do and lots of good food. But it is also expensive...

who do you know

I keep to myself.

how did you get here

Zerohedge transplant, summer 2010.

what do you like and don't

I like dogs, red wine, hot women, and hot food. I don't like work.

do you have a life beyond this blog

No.

whatta you do for fun??

Video games, alcohol consumption & any other available form of debauchery.

@FOFOA

Perhaps we could call your category the "simple causality process thinkers" or PT for short. "Process-thinking" in this context says, like you do, that anything is possible.

Anything can happen, right before your eyes! Whatever you're expecting, expect a surprise! :D

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

Indenture, I see how the euro could work, but am not as comfortable that it will work. Why do you have such conviction that the ECB and the various central banks can remain independent of the political forces rampaging over the continent? I can see how the euro could survive the challenges of the PIIGS+France, but I don't see it as a certainty. While I appreciate the freegold advantages of seperating the monetary and physcial entities, there are also powerful reasons why they have been virtually always unified. I see the euro as a promising experiment, why do you derive such confidence in its expected success?

DM

enough said...

fun with gold..........

one can find the "Seal of the Great state of California Grizzley" for +2.75% and these are the only state issued gold rounds in the USA and minted from ore mined exclusively in the fore mentioned state.....


http://www.beastcoins.com/Topical/Bears/USA/USA-CaliforniaBearTokenTenthOunce.jpg


http://www.flickr.com/photos/lawrence_chard/7131837011/


http://www.cointalk.com/attachments/68962d1266770875-coin-010.jpg

http://www.apmex.com/Product/35283/1999____1_2_Oz_Cripple_Creek_Mining_Gold_Coin_9999_Fine.aspx

http://ocgold.com/blog/wp-content/uploads/2011/11/Kingdom-of-Bhutan-Gold-Coin.jpg


http://coins.ha.com/c/item.zx?saleNo=3016&lotIdNo=105002#Photo

http://www.apmex.com/Product/63091/default.aspx

http://www.apmex.com/Product/73424/Mexico_1992_250_Pesos_Gold_Proof_Jaguar_KM558.aspx

http://images.cloud.worthpoint.com/wpimages/images/images1/1/1009/21/1_459c819dbb1a8023ffa390dff2e82ca8.jpg

http://ocgold.com/blog/wp-content/uploads/2010/09/10th-oz-Cat-Isle-Of-Man-Gold-Coin1.jpg

http://www.apmex.com/Product/38043/Gibraltar_1_Royal_Gold_Uncirculated__Dogs__1_Oz_AGW.aspx

http://www.gainesvillecoins.com/products/161786/1990-pride-of-australia-$200-proof-gold-platypus.aspx

Woland said...

R U N A Love/Hate relationship?? - Perfect 2013 gift!!

1997 FDR $5 GOLD COMMEMORATIVE, MS70, "only" $1049.00

APMEX "clearance" priced

ampmfix said...

Cheers Aaron!

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

Poopyjim, not sure that Mickey D's commercial was meant for me, the subject of the preceding comment, but (this sounds more defensive than I mean it to, apologies in advance) it is my lack of belief in magic that causes me to ask these questions. I believe there are system and processes that interact in complex ways, and I am trying to understand them. Right now it looks very magic, or even underpants gnome-esque:
1) Collapse of the current $IMFS
2) ???? / MAGIC!
3) Freegold

But rather than assume that y'all believe in magic, I assume you understand the mechanisms, mechanics, systems, and processes in part 2, and that I don't. So I am asking people who seem to understand step 2 to explain it to me. I gather that 'the Euro' is the bulk of it, but I don't understand why there is such conviction that it works and leads to freegold. Possible, but I lack the collective conviction because I lack your understanding of step 2.

If it is something I am expected to accept on faith, that will reinforce my uncertainty. Because I don't believe in magic.

Perhaps part of my challenge is that I have a working understanding of chaos theory and non-linear systems and how doing more of the same, and 'what has always worked in the past' can lead to radically unexpected outcomes. Perhaps that is why I can accept step one so easily and have so much trouble with step 2. Breaking a system is always easier than building one.

Robert Mix said...

Wendy introduced a fun idea, so I'll play too.

"where are you from"

I am from the eastern USA, but count my years in Texas as the most formative.

***

"who do you know"

Other than my family no one of consequence.

***

"how did you get here"

I got here via a link from dollarcollapse.com in late 2009.

***

"what do you like and don't, do you have a life beyond this blog"

Like: gold, reading, travel, freedom, warm weather

Dislike: tyranny in all forms

Life beyond this blog? Some, my blog, ZH, my work w/ Peru buying bearings...

***

"whatta you do for fun??"

Fun? Que cosa es "fun???

***

"And anything else one might want to add :D and most importantly, how long have you been visiting this blog."

Nassim Nicholas Taleb (he wrote enormously influential "The Black Swan" in 2007) new book "Antifragile" is excellent, I am about 15% through it. Antifragile is the opposite of fragile (the opposite of fragile would NOT be "robust", "resilient", "strong", etc.). Antifragile things get STRONGER under stress.

Our banking and financial system would count (and do in his book) as fragile.

I was curious last night, and looked in the Index of his book, as I was thinking that is the dollar (et al) are so fragile, then WHAT would be antifragile? I was looking for the word "gold". Funny thing, Taleb did not think of that... The only mildly negative comment I would have so far on his great new work.

My recommendation: BTFB!

One Bad Adder said...

Oh enough, enough - my mouth is watering ;-)

A bit of OBA history if I may?

There are probably not too many gathered here who can actually recall the days of circulating Silver Coinage?
When in my mid-teens, we here in Oz were using Copper and Silver (50%) coins on an every-day basis. Gold was held by the Gov't as reserves . TPTB opted to go to cupro-nickel coins (mid-60's) ...and this one act was sufficient to implant a degree of scepticism in my head that is still alive and well to this day.
In those days, holding Gold was just a pipe-dream as, apart from being too expensive there was lots else to occupy the thoughts of a young man.
Once married and having kids, Gold still took a back seat however, due largely to my personal Systemic scepticism, many hours discussion with an Uncle I was fond of ...and escaping for some fossicking whenever the mood struck, I managed to keep "in-touch".
When I think of the countless hours I spent in persuit of "native-gold"and concurrent "rewards", let me say right here and now ...from past bitter experience - the most cost-effective way of obtaining Gold is simply to BUY IT!

So ...on to the mid / late 90's. Having acrued a small degree of "wealth" ...and, due largely to the systemic scepticism instilled in me since the 60's, I came to the conclusion systemic "timeline-issues" were due to surface "real soon"...so I moved all my liquid assets into Gold Bullion.
For a Security-Blanket (c '98ish) I started following the Gold Blogs of the day and ended up at USAGold where I was treated to a smorgasbord of Gold-minded thought.
The last 15 years hasn't changed my basic outlook and I'm totally comfortable with - my Family, my Work, my latent Systemic Skepticism ...AND my Gold!

Congratulations to FoFoA for creating this Blog dedicated to the Thoughts of Another (and others) ....and long my it prosper.

poopyjim said...

Hi ae44,

Poopyjim, not sure that Mickey D's commercial was meant for me, the subject of the preceding comment, but (this sounds more defensive than I mean it to, apologies in advance)

It was not targeted at you but the group of posters to which you allegedly belong (I trust FOFOA correctly categorized you as such b/c I have scrolled past most of your comments - no offense).

1) Collapse of the current $IMFS
2) ???? / MAGIC!
3) Freegold


3 is what remains after 1. It is more like the end of magic - the end of the magical dollar and its associated farcical nonsense. I see it as a return to the real world (for us westerners anyway).

Right now it looks very magic, or even underpants gnome-esque...

So I am asking people who seem to understand step 2 to explain it to me.


I offer a simple self-help solution: RTFB.

Recommended reading:
Credibility Inflation
How Can We Possibly Calculate the Future Value of Gold?
Greece is the Word

mr pinnion said...

@ae44etc.
"Breaking a system is always easier than building a new one"

I think the idea is TPTB have been building the new system inside the old one.And aparently it s taken a hell of a long time.
A bit more patience and all will be revealed.... http://www.youtube.com/watch?v=pLarnRoFlS8
Of course, nothings certain.

Regards
Ozzy

burningfiat said...

ae44bf5a-2cce-11e2-94ad-000bcdcb8a7,

32 hexadecimal chars == 128 bits, your name could be an md5sum? Maybe a blogger internal user id, if you say you didn't make it yourself...

Other than that: What poopyjim said. There is no number two... Freegold is what will be left (appear underneath) when this system dies.

/Burning

Ps. Happy New Year Wendy! You look ready to party, LOL!

One Bad Adder said...

xyz aka DM: -
As an X-Euro-sceptic I choose not to rely too heavily on Freegold-by-decree as seems to be a common thrust hereabouts.
Systemically, there does however appear to be a genuine and on-going collapse into the "present" which is consistent with a currency system in it's death throes.
A "system" based on the "present" is no system at all ...and so it's logical to assume TPTB have feverishly been cobbling together the next "system" for Years now ...and the Euro-System appears to be IT (IMHO) .
Is it not conceivable this NEW System will, of necessity, entail lots more than a cursory doffing-of-the-hat in Golds direction ...given that Gold is formostly and uniquivocally "of-the-present"?

enough said...

American by birth, naturalized UK citizen

Currently reside in the USA

Discovered FOFOA in 2010 via google search which lead me to an article that contained blog link....cant remember which one.

Likes: my big ole 11 year old black labrador retrievers (roxy & brody), adopted cat (Juicebox), Girlfriend (Sharon). I like all animals and never cease to be amazed by the wonders of nature.

Dislikes: most people, cities, hypocrites.

Favorite activities: Donating to FOFOA, collecting gold coins, Hiking, RVing, target shooting, growning things, watching the human race crash and burn even if I have to go down with the good ship homo sapien.

What will I do with my freegold wealth: open the largest animal rescue and shelter in the world

duggo said...

Update on John
He did what he initially planned to do. He updated his holdings equally in BullionVault and GoldMoney. He likes the flexibility of currencies and travelling light if the need arrises. Perth Mint fell out of the picture as there was too much down-side in currency exchange. He also is updating his holding in physical with the main concentration on Sovereigns as he is British. He was also amused by the narrow response from responders who seem to carry too much baggage and are not able to think outside the box. He tells me that the idea of Freegold is a nice idea but will likely never fly in his lifetime. He likes the steady rise in PMs as preference over any lottery-ticket get-rich-quick "transition". He has also told Duggo to "not be too defensive" because the people who say this are only trying to helpful but at the same time need to defend their own positions.
All in all a pleasant diversion.

costata said...

Hi Wendy,

My travels began with a heightened interest in economics because it seemed to me that this was the key to the ecological damage humans were/are doing to the biosphere.

Economics became my hobby. Along the way I became disaffected with fiat currency and purchased gold with the main aim of reducing our counterparty risk. I spent a long time in the commodity money camp until the inconsistencies and contradictions drove me out of it. The same is true of the Rothbard/Rockwell "Austrian" economists. If I had to identify with an economics school today it would be their Austrian/Classical forebears whose legacy R/R have corrupted.

If memory serves me, I stumbled across the writings of Another before I visited this blog for the first time. I read FOFOA's posts for about 6-9 months before I posted a comment. Back then you could still comment here anonymously so that would date my involvement if FOFOA can remember when he switched over to the current regime.

FOFOA prompted me to revisit Another's work and to explore FOA's writings. I started posting comments because FOFOA was spending a huge amount of time in the comments defending his posts. I decided he needed a hand so he could concentrate on his writing. Eventually that led to private correspondence.

I live in my head and it lives in Sydernee, Awstraylya. Fortunately I no longer work the long hours I used to so I have time to explore things that interest me. I spend a lot of time at this blog (obviously) but I manage to do a great deal of reading as well.

Posting links to (hopefully) interesting and relevant material and engaging in the discussions here serves two purposes for me. It's part of my learning process and a way to "pay back" for the help I received from others along the way.

costata said...

DM,

Regarding your comments at December 30, 2012 8:32 AM and December 30, 2012 12:37 AM. I think this discussion highlights the problems that arise when we try to speak in generalities about this topic. Unfortunately a different set of problems arise when we delve into specific examples. It's a challenge either way.

For the moment I want to continue to explore this issue of flawed assumptions. For example this response to Indenture:

Why do you have such conviction that the ECB and the various central banks can remain independent of the political forces rampaging over the continent?

At present the ECB is independant, they have strong legal protection securing that independence and they appear to be complying with their mandate. If that changes then we will have to reassess. So let's deal with what IS as opposed to what might be.

The Euro Freegold-RPG architecture is intact and ready to provide an alternative system to the $IMFS. It doesn't require a pathway to implementation. It has been implemented. It doesn't require adoption by other players either. If the $IMFS collapses it stands tall among the wreckage. The Euro gold price will then price every other currency in gold via the Euro's exchange rate with those currencies.

Returning to this probability issue, having a cluster of low probability events doesn't reduce the likelihood of a high probability event occurring. If you represented the 60/40 split you described graphically it would look like a needle-like spike with two flat lines either side. Every 1/100 percentage point possible-event in the flat lines would still be a 4,000:1 probability compared to the single, 40 per cent probability event.

If you are seeking absolute certainty you are in the wrong place. The best we can offer is a set of arguments and a lot of background research that presents a strong case that gold is the least-risky/most-likely option to replace USG debt instruments as the primary asset reserve in a new IMFS.

If you want a single argument to support this assertion here's my choice. Gold is already the primary reserve asset in the current system for 2/3rds of the world's population and the majority of central banks.

The Bretton Woods $IMFS was based on gold backing the US dollar. Gold isn't the "heir apparent" it is the incumbent. Since 1971 we have had an imposter on the throne. If it's easier for you to come to grips with this Freegold-RPG development by thinking of it as going backwards as opposed to going forwards feel free to do so.

Freegold-RPG isn't revolutionary but the Euro IS. Understand the Euro architecture and its history and everything else may fall into place for you.

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

Poopyjim,
Thank you for responding. I have RTFB, and am RRTFB, and appreciate pointers to posts that specifically adress the point I seem to be struggling with. I have read every post FOFOA wrote, although not all of the comments, and I seem to be missing something that the rest of you seem to be getting. Any pointers towards posts that help any of you understand what I am struggling with are greatly appreciated.

You linked the Future Value of Gold post, but I didn't see much in it that addressed what I was struggling with. It was almost all about how to think of what gold may be worth in the new system, not how and why the new system will come about. The credibility inflation post was mostly about the collapse of the $IMFS system. I am not struggling with that...the present system will end because it must. The only aspect that really brushed up against what I will call 2 (the mechanism bringing about freegold) was around the Freegold Monetary Triangle, and even that was less about the mechanisms to bring about freegold than that when the fiat denominated debt assets blow up (repaid nominally, all real value destroyed) gold is all CBs have left.

I get that. But it doesn't mean the only possible response is freegold. AFAIK every previous reserve currency crisis has been met with an international conference which implemented a new system. And each was worse than the last. The gold standard has its problems, but was replaced in 1922 by the worse gold exchange standard, which was followed by the worse Bretton Woods dollar gold standard, which was made even worse with the closing of the gold window and the current $IMFS standard...the worst of all. When this one fails, with potential for catastrophic economic damage, and dramatic reductions in international trade, the political pressure to 'do something' will be overwhelming.

So maybe when this system fails, and it will, 'they' will sit back and 'let' the superorganism create optimal freegold system? Seems unlikely, the pressure to 'do something' will be overwhelming. Since they are zero for four, why are y'all so confident that they get it just right this time? Betting that they either do nothing and 'let' freegold happen, or do something and that something is freegold does not seem at all certain to me. I am not proposing that I am aware of anything better, but they have made it worse every time before, I lack the confidence that so many here have that the new system will be the just right freegold.

It is exactly that understanding of the system or mechanism or linkage that causes freegold to come about I am struggling with.

DM

dieuwer said...

@costata,

Agreed, "if/when unallocated accounts start to turn up empty" it could cause a gold bank run.

Surprised that the MF Global fraud did not cause a gold bank run.

jeb said...

DM, let me try. I don't know bugger all though..
Systems end, The creaters of the euro know this so they set up the euro to take over when the USD was no longer viable as a reserve asset.
The problem with the current system is something to do with Triffins Dilemma. Solving this dilemma involves splitting the reserve asset from the medium of exchange.
Gold is a Schelling Point, when shit goes wrong central banks fall back to something they know, the Euro creators know this so they used Gold as their reserve asset.
Gold is also the reserve asset of oil states. So the euro zone own something the Oil producers want.
Gold has no marginal utility value.
There has to be a market for gold for producers to store their excess wealth in, oil states are essentially swapping one commodity for another, when Gold doesn't want to bid for USD in size then the producers will have no use for the USD and will look for another currency to purchase gold in, a more stable currency, gold will be bidding for Euros and oil will need euros to buy gold.
The political need to do something has been around since the 60's, when the USD failed there was no other system ready to take over so the world supported the USD until a new system was in place, the new system is the Euro and its ready to go. It wont be perfect and the monetary system will always evolve but we're just positioning ourselves the same as central banks and the producers.
Its either free gold or central banks plan on making lots of jewellery.

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

Poopyjim, BTW, thank you for the link to the greece post. I am struggling with it, and re-reading it several times, but it is more on point to what I am wrestling with than any of the other suggestions so far. For example, while I was thinking:
1. Hyperinflation/collapse of the $IMFS
2. ?????
3. Freegold

that post presents it is as more

1. ?????
2. Freegold
3. Hyperinflation/collapse of the $IMFS

Is that everyone else's understanding? I haven't found what I am looking for, but I seem to have a better idea of what I am looking for. Can anyone else point me towards other related or similar posts?

Costata, I appreciate your patience with and continued engagement with me. I appreciate that certainty/inevitability is not to be had, but I think understanding the mechanisms, systems and processes can move from a relatively low confidence to the much higher confidence others have.

If I understand your point, the euro mechanism is in place, and when the dollar falls, it will pick up the pieces, and there for freegold will be. Certainly possible, no arguement.

I see two key factors that seem like bigger risks to me than you.

First the 'do something' risk of another CB/NGO Bretton Woods style summit leading to some other system to deal with the crisis. Could be a new improved SDR to prop up the $IMFS system, or a different currency block trying to create an answer (China/Russia/Mideast?) or something else entirely. But the worlds CBs don't meet regularly to do nothing when the system gets unstable.

The second is that the Euro cracks under pressure. Could be a split between a 'hard' northern euro and a 'soft' southern euro, or the strongest or weakest countries leaving the euro, or straight up defaults by sovereign members, or the ECB printing to prevent the sovereign defaults, could be political pressure related to 50% youth unemployment among some PIIGS, etc. Europe may not be in as bad shape as the country bloated on decades of exorbitant privelege, but it has some serious problems and political issues. At the end of the day, this Euro is a really new idea, to seperate the monetary from the fiscal entities...after all the academically correct monetary policy for Germany is not the same as the one for Spain. There is inherent pressure and tension there, why are you confident this experiment will work? Again not saying it could not work, only that I have more doubt than you seem to.

Are there any posts here or resources off site that give you such confidence that the euro will work in its current form?

And relating it back to the first part of the post from the greece post, it seems that part of the 1. ???? is that the ECBs will make a political call to create freegold rather than allow sovereign defaults or defections from the euro zone, ultimately destroying the $IMFS. That would be a tough thing to pull the trigger on (at least for me), are y'all confident they will do it rather than let, say Greece, or Ireland out of the euro? I can appreciate the importance of keeping Germany, France, Spain, Italy and maybe Poland and the rest of the smaller 'core countries' together. Are you confident they will blow up the current (admittedly doomed) financial system to prevent a Greece or Portugal from slipping out of the Euro? There is a difference between knowing we are all going to die and pushing someone off a forty story building, even if they are 100 years old and in deteriorating health. Not to say that Greeks or Portuguese are less worthy, but I could see Germany and France being unwilling to bankrupt almost every pension fund and insurance company in the conflagration that is the transition from the old system to the new. Not saying I think they won't do it so much that I have a lot more doubt than most of you seem to.

Apologies to Wendy for high jacking your thread, and thannk you again to those who have tried to help me, and thank you in advance to anyone else who does.

Daedalus Mugged

byiamBYoung said...

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

You sure seem to grasp the concepts written about here very well. It seems (to me) that you are very close to full agreement with them, too.

I think our difference in view is a very small one. If I understand you, you wonder what will make Freegold come into existence after the $IMFS fails, and assert that our fallible leaders could blunder and choose a different system. RIght?

As I understand it, what we call Freegold is all about the natural structure, essentially already in place, that will not collapse as the $IMFS implodes. While paper gold will lose all value because it cannot deliver what it seems to offer, physical gold will remain, and will be undeniably the superior store of wealth that it currently is for most of the world. Nobody will have to do anything to make this so. It is so already.

Nobody will need to do anything to stabilize the Euro, it is already stabile, and will be able to remain so even after the dollar hyperinflates. It will adjust to reflect the changing valuation of gold, as it does quarterly now.

Our leaders might try to create something new. But whatever they conjure up would have to compete with the surviving store of value that has stood the test of time and remains the chosen store of wealth for most of the planet. It would also be going up against an existing, widely held currency that is currently designed to weather the collapse and come out of it stabilized.

Then they would have to impose it on a really skittish population that has in the meantime noticed that gold remains and the Euro is stabile. That sounds really hard to pull off.

At least it does to me :)

Cheers





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

Let me try a different track. I don't think so, but maybe my misunderstanding is not the mechanism to bring about freegold and confidence in that as outcome, but maybe I misread the community's confidence.

Is freegold:
A. A near certainty, very highly likely
B. More likely than any other single outcome, but there is a material probability (> 25%?) of it not happening. (Even if it doesn't happen, counterparty risk free physical gold is still the best way to position yourself.)

I am in B struggling to get to A, where I think the rest of you are. But maybe that is my mistake, are y'all as uncertain as I am, but not sweating it because your actions would be the same?

byiamBYoung said...

Happy New Year Wendy / FOFOA / All,

For the record, I live in the Southeast USA, with my wife and our youngest child (of four), two dogs and a rabbit.

I've created and run a number of businesses. I've sold a couple, and had a couple blow up in my face. In the fall of 2008, I found myself looking for a job after decades of self-employment. While I looked, I watched the financial meltdown on TV. What a creepy time!

That was when I became fascinated with economics, and the plight of US economy in particular. It took a couple more years of bouncing around the web doom and gloom sites before I found FOFOA's blog.

I couldn't recall for certain, but I now believe the first post I read was "Deflation or Hyperinflation?" in April of 2011, and then Costata's Open Silver forum and the Bitcoin series (which paged very slowly because my laptop was dutifully mining away at the time. I think my mining grand total amounted to 0.14 Bitcoins).

I remember excitedly telling my wife about this strange blog where the posts read like novels and where mind-blowing information came paragraph after paragraph.

Eventually, I was reading every post, including the comments. I still do. It's usually the first thing I do in the morning and the last thing I do at night.

Part of my work involves maintaining a blog sponsored by a Fortune 100 company. Being aware of the resources that go into that effort gives me a greater appreciation for the uncommonly powerful draw of FOFOA's blog. I think it is because it has everything: mystery, discovery, enlightenment, and hope for the future. The comment section is a big part of that.

Outside of this blog, I do a lot of cooking and the usual family stuff. I also enjoy yelling at the TV, especially when our president is blathering about something.

If we can get this dollar collapse over with sometime soon, I'll likely take on more hobbies :)

GoGo 2013!

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

I was writing my last message while Costata posted his. When in doubt, go with Costata, as I am generally a bear of very little brain.

Cheers

Börjesson said...

DM,

As far as I have understood this theory, the euro is not required for Freegold. If the euro fails, Freegold will happen anyway. What the euro is there for is to enable a smooth(ish) transition to a new system when the $IMFS dies, without the utter chaos and complete breakdown in international trade that would happen otherwise. But the end result is the same.

Others will correct me if I'm wrong. I'm not claiming to have understood this stuff yet!

costata said...

dieuwer,

Surprised that the MF Global fraud did not cause a gold bank run.

I'm guessing there weren't enough people affected or perhaps the message won't sink in until, say, Kim Kardashian get's ripped off and goes public with the news.

I'm not sure a bank run in gold is even possible these days. What would it look like? What signs would you look for?

That said, I have been wondering if there is capital flight in gold occurring right now. The proliferation of new repositories and the expansion of existing facilities has been an interesting development during the past few years. It seems to be gathering pace.

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

byiamBYoung, thank you again for responding. I am in agreement and am mostly there. What I lack is confidence. I know the $IMFS will end, and think freegold could work. What I am missing is the certainty that it will be 'implemented'

To your point, it could already be in the form of the Euro. While you see Euro stability, I see Euro instability. Not fatal flaw must crash, but lack of confidence. I agree that it could survive in a way that the USD cannot, but I lack your confidence it will survive the political challenges it faces.

If indeed the Euro was deliberately systemically designed and implemented to support a freegold successor to the $IMFS, why have european CBs been net sellers of gold for the last decade? They seem to have stopped selling, but they aren't buying. Why not? Shouldn't they be?


How do you all see the current tensions with the Euro resolved? How does Spain or Greece or Ireland recover from sovereign debts that are essentially unpayable in value? Does the ECB print like the Fed, BOE or BOJ? Or do they hang on until freegold and pay off debts with much more valuable gold reserves? Default? Something else?

Does the ECB set its monetary and interest rate policies as appropriate for core/developed europe or peripheral/developing europe?

50% youth unemployment in some of the countries scares me...in previous eras that kind of unemployment led to social unrest, revolutions or ugly political outcomes. Even if ECBs are willing to push the big red button to nuke the current $IMFS, that doesn't mean all the countries choose to stay if some of the more extreme political elements continue to gain strength.

I probably ought to post that Darth Vader "I find your lack of faith...disturbing" clip before someone else does. :)

costata said...

DM,

I can't speak for anyone else but the following certainly applies to me:

not sweating it because your actions would be the same

Long time readers will confirm that Uncle costata is on the record as stating that our original reason for going into gold was to reduce our exposure to counterparty risk.

Our original strategy was clumsy and we would do it differently if we were starting out today but that doesn't alter the fact that we were motivated by aversion to counterparty risk long before I discovered this blog.

Forget Freegold-RPG for a moment. Try to put yourself into the mindset of a central banker Governor with responsibility for your country's FX reserves.

Think of gold as just another currency. Line up the currencies in your mind. Presumably Euro is crossed off your list for various reasons you have mentioned. The US dollar is scratched for obvious reasons.

Which FX option do you go to for minimal counterparty risk due to the policies of the issuer? Swiss Franc?

If you as a central banker select gold as your preferred option how risky is it for a private citizen to select the same option as you?

I am in B struggling to get to A, where I think the rest of you are. But maybe that is my mistake, are y'all as uncertain as I am, but...

We are all uncertain about the future. That is the lot of humanity. The confidence that many here exhibit is based on the fact that no one has come up with a viable alternative to challenge the Euro Freegold-RPG architecture thus far.

I almost never direct people to my own comments on earlier threads but, in order to make a point, I want to direct you to three comments from a thread discussing "Arguments Against Freegold" which appeared earlier this month.

http://fofoa.blogspot.com.au/2012/12/arguments-against-freegold.html?showComment=1355214756940#c8319751348674491851

http://fofoa.blogspot.com.au/2012/12/arguments-against-freegold.html?showComment=1355289544585#c825084304919789936

Here's the key passage from the third comment at December 13, 2012 12:29 AM on Page 2 (201-400 comments):

...So this 'theoretical pathway' is also my argument against Freegold-RPG.

1. The formal re-adoption of the pre-1968/71 gold exchange standard and;

2. A currency peg between the US dollar and the Euro and;

3. A 180 degree turn in USG policy and;

4. Formal default by the US Treasury and restructuring of USG debt and contingent liabilities.


How likely is this?

(Note: I corrected a typo in the third comment.)

Wendy said...

Hello everyone,

Thanks to those that shared their stories ..... to those that apologized for hijacking: not necessary. This is a free-for-all post, and btw, it's not mine, it was just my little idea ;)

I LOVE how you accessorized my image FOFOA :D

Aaron, hope you make it next time :)

Phil_O_Dendron said...

@costata

"...
3. A 180 degree turn in USG policy and;

4. Formal default by the US Treasury and restructuring of USG debt and contingent liabilities.

How likely is this?"

I think that we all know that this will never happen voluntarily. Any group that can call a reduction in the rate of increase a decrease in spending has no intention of ever facing reality until made to do so. The USG will continue to use every trick to kick the can until the collapse.


costata said...

DM,

If indeed the Euro was deliberately systemically designed and implemented to support a freegold successor to the $IMFS, why have european CBs been net sellers of gold for the last decade?

If you change the word "support" to - complement - and insert the words - early years of - "the last decade" you would be a long way down the track.

They seem to have stopped selling, but they aren't buying. Why not? Shouldn't they be?

Clearly they judge what they have to be sufficient.

Returning to that comment about having "too much" gold, the Swiss National Bank wouldn't benefit from having more gold today. Their currency management challenge is overvaluation of the Swiss Franc.

If they had 10,000 m/t of gold it would just make the currency more attractive - more of a perceived safehaven.

costata said...

Any group that can call a reduction in the rate of increase a decrease in spending has no intention of ever facing reality until made to do so.

Amen, Phil.

This reminds me of one of my favourite little quirks of the dominant school of economics. They include reductions in debt as part of their calculation of the rate of savings.

Placidus said...

This is my first post. I found this blog in 2009. It is the only viewpoint that favors gold ownership that makes sense to me.

My favorite posters are Blondie, Jeff, MatrixSentry and JR. They, among many others here, appear to have a deep grasp of this topic.

I am not sure I have the intellectual capacity to ‘get’ everything here. I follow the general idea of FreeGold system where gold and currency coexist (gold = free floating store of value and currency = medium of exchange). Beyond that, I am lost in some of the other details, such as HOW the transition will occur. As I understand it, the transition will arise because the fractional reserve system for gold will break. The true currency price for physical gold will then become widely known (over months or possibly even years). The forces responsible for the breakage are mysterious (to me). A second, and perhaps not unrelated issue, is the hyperinflation of the dollar (which has already happened). Yet …. who continues to provide this structural support for the dollar in 2012/13 and beyond? Why?

My personal story: I have been afraid of the “Prechter Crash” since 1991 (I was bearish even before he was). I missed the great bull market of the 1990’s. I cannot take funds out of my retirement and my options are Money Market, Bonds, or Stocks. I have been in Money Market since 1991 (oops). I tried and tried to figure a way to get the funds out of retirement, in order to buy precious metals, but it is not possible. Finally, in 2004 I began to accumulate precious metals at 50% gold, 50% silver (by dollar price) using excess earnings. In 2010/11 (thanks to this blog) I traded most of the silver such that it is now 50% gold and 50% silver (measured by mass). This action alone has resulted in a much greater sense of peace. One thing remains, which keeps me from having total peace … timing of the transition.

As I understand it, Giants do not care when the transition happens. They are ready to pass their gold on to the next generation. Where I differ from a Giant is if I have to survive in retirement in a $IMF world. I made poor choices with retirement investments. I will not spend any gold (pre-FreeGold). Moreover, in a $IMF world, my gold will not get me very far anyway. I could decide once and for all that stocks are the best way to ‘store my retirement value’, but I cannot get Prechter out of my system. The ‘crash’ is always right around the corner. If FreeGold happens before retirement, then I am fine anyway. If it happens after retirement, then what I do now with my dollar investments matters a great deal. Therefore, one collateral benefit of fully understanding FreeGold is confidence in the timing of the transition, such that one can KNOW that one’s physical holdings will likely matter a great deal on a personal level. As for me, I have partial peace knowing that at least my children will likely benefit. Otherwise, I believe it is imperative to stay healthy and fit and stay on top of one’s field, if at all possible. (This is also wealth). This means balancing huge efforts in my profession, together with a modest amount of reading on this blog.

Happy New Year to all…. And thank you FOFOA!

Indenture said...

Here you go DM, something unexpected. Push for digital currency or a new dollar backed by food, not oil

RJPadavona said...

For those who've seen my debrief, most of the questions Wendy asked are answered there. So I don't have much to add.

So how about I pimp a new tool I've been using? I highly recommend it to anyone interested. For those of you who store value in BTUs as well as gold, there's a new manual log splitter on the market. It's called the Logmatic and it's made in Norway. To my knowledge, it's not sold in stores in the US but you can order it here. There's a video on that page (and more videos on youtube) so you can see the science behind why it works so well.

I used it for the first time today (it was a Xmas gift) and I split enough wood in about 45 minutes to fill up my entire truck bed. It's very ergonomic and beats the hell out of an old timey go-devil. In fact, it works so well, even women and children can easily split wood with this thing. Hey, there's an idea for all you fellas whose wives have been busting your cod sack about buying gold: Send her outside to split wood and maybe it'll take her mind off of how much gold you're buying ;)

========

I think there's another question that could be added to Wendy's list: What do you plan on getting out of the time you've spent at this blog?

Well, that answer is easy for me because I'm not too hard to please. I just want to have a great time watching this new gold market together with my Friends. And I also want to just continue doing what I've been trying to do my entire life. As you know, sometimes that hasn't worked out so well for me. But thanks to what I've learned here at this blog, my life has been made so much more simple. The more complications you can take out of your day-to-day, the more free you can truly be.

Happy New Year to all,

RJ

PS: Don't forget that if you want good fortune you gotta eat hog jowls, black-eyed peas, and cabbage on the first day of the year. And maybe buy some gold too ;)

byiamBYoung said...

@Placidus,

"As I understand it, Giants do not care when the transition happens. They are ready to pass their gold on to the next generation."

That is one of the most clarifying statements I have read in a while. I would bet you are right, the giants of the world do not care what the timeline is. THeir lives are so insulated that it is not an issue.

That could go a long way in explaining why we are in this prolonged stasis.

NIce to hear from a new voice!

Cheers

Aaron said...

Welcome Placidus and thank you for your first post. You've covered a lot of ground in your comment with many excellent questions. I'd like to focus on a few ideas that spoke to me.


The true currency price for physical gold will then become widely known (over months or possibly even years). The forces responsible for the breakage are mysterious (to me).

Credibility in the physical gold markets for starters. There are many flavors of gold floating around out there. Some contracts are denominated in the currency value of gold as in, "I would like a futures contract which entitles me to purchase $100,000 of gold". Other contracts are denominated in a certain number of ounces of gold as in "I would lke a futures contract which entitles me to purchase 60.222 ounces of gold."

One important point here is that even if your contract is crafted around a specific weight of gold, the courts can't force a counter-party to deliver what they don't have. Courts can only enforce cash value of damages to the plaintiff. If you have a contract to buy a tractor and your counter party doesn't have any tractors, how can the courts force your counter party to award you a tractor?

As such, one of the warning signals I'm looking for are folks with gold contracts (in weight) reporting forced cash settlements.

A second, and perhaps not unrelated issue, is the hyperinflation of the dollar (which has already happened). Yet …. who continues to provide this structural support for the dollar in 2012/13 and beyond? Why?

The Fed. To keep the system glued together as long as they can to milk whatever they can out of the system before the big blow up.


Therefore, one collateral benefit of fully understanding FreeGold is confidence in the timing of the transition, such that one can KNOW that one’s physical holdings will likely matter a great deal on a personal level.

I'm sorry to say it, Placidus, but good luck with trying to time this event. Can anyone predict the next earthquake in California? No, I don't think they can.

Aaron said...

That should read:

I'm sorry to say it, Placidus, but good luck with trying to time this event. Can anyone predict the next earthquake in California to its precise date given the data we have collected thus far? No, I don't think anyone can.

byiamBYoung said...

Aaron,

"As such, one of the warning signals I'm looking for are folks with gold contracts (in weight) reporting forced cash settlements."

Yes, absolutely. Where can this kind of information be visible?

Hapee New Year Everyone! Stay safe!

(Translation: tie a rope around a fixed object and then your ankle, and then proceed to drink like a fish.)

GoGo 2013!

victorthecleaner said...

Daedalus Mugged,

why have european CBs been net sellers of gold for the last decade? They seem to have stopped selling, but they aren't buying. Why not? Shouldn't they be?

IMO the European CBs gave up title to physical gold until about 1998. Yes, they booked some 'sales' later, but as far as I understand, they had already leased the gold before 1998, the leased gold had been physically removed, and they only acknowledged the fact after 1999 by selling on paper what had long been on loan. More details here.

Why have they not been buying? Indeed the Eurosystem hasn't - apart from tiny quantities apparently to mint commemorative coins. Hasn't the BIS purchased some 450 tonnes on their own account since 2000? Misplaced the reference - haven't had time to carefully go though it.

In any case, it seems that since 1999 it has been the developing countries' turn to buy gold. Why? If you want to start a new system of international settlement, then everyone should have sufficient initial capital. The Euro zone already has more than enough.

Secondly, why should a CB own gold? They just need enough in order to buffer some temporary imbalances. The majority of the gold should be owned by the people. Yes, that's a "small government"/"free economy" approach as opposed to the U.S. "big government" ideology. Why not? It works better after all (as you can see from the import/export figures if you care).

How does Spain or Greece or Ireland recover from sovereign debts that are essentially unpayable in value?

They'll restructure their debt (again), aka partially default.

Does the ECB print like the Fed, BOE or BOJ?

No. IMO they will print only in order to prevent consumer price deflation and in order to maintain their 2% inflation target, but no more. This probably tells you that there will be further sovereign defaults. Why not? That's good policy after all.

Does the ECB set its monetary and interest rate policies as appropriate for core/developed europe or peripheral/developing europe?

As part of their SMP, they have directly purchased government debt of specific countries and then sterilized it by offering term deposits to everyone. This creates inflation in some countries and reduces it in other countries. So we see that they have not only targeted 2% inflation on average across the Euro zone, but also applied some fine tuning. Most of the fine tuning is probably done as part of the bank refinancing operations, but that's very difficult to disentangle.

Victor

costata said...

VtC,

This may be of interest to you. I picked this up from GATA.

http://www.gata.org/files/IMFGoldLendingFullStudy1999.pdf

Extract from Page 30 (my emphasis):

Developments in gold lending*

48. Gold lending and borrowing, which began to develop in the early 1980s have
expanded sharply over the past decade. The outstanding amount of gold lent to bullion banks by private and, especially, official holders of gold is estimated at 4,725 tons at end-1998, compared with an estimated 1,200 tons at end-1988 (Table 5).

The gold lending market has provided a major opportunity for central banks to earn a modest income on their gold holdings.

*Official information on gold lending is virtually nonexistent. Consequently, the following information is largely drawn from private sources.


Close enough to some of the figures that you have come across.

Wendy said...

RJP, that splitter is indeed a thing of beauty. This is the first year in a dozen that I am not heating with wood .... I got sick of splitting andd chopping. I tried to entice my friends with a FREE workout that guaranteed zero back-fat, but they didn't bite :(

Wendy said...

Mikedv, I recall (about a month ago) you mentioning a wood stove with a secondary chamber: not necessary! todays stoves have a brick lined shelf, to allow the smoke to remain in the primary chamber long enough to burn.

The smoke will burn only if the fire is hot enough. If you see smoke coming out of your chimney you are burning too cool, wasting heat, and creating an unsafe chimney.

I apologize to others for what may appear to be random trivia ;)

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

byiamBYoung said...

Yes, absolutely. Where can this kind of information be visible?

If this becomes an issue BYoung my guess is we are going to hear about it on FOFOA's blog pretty right quick.

costata said...

This is way off topic but it's just such a great example of the crap that passes for economics that I can't resist posting it.

Bruce Krasting has done the post linked below sending up Paul Krugman for his belated "discovery" that technology destroys jobs - LDO says Krasting.

http://www.zerohedge.com/contributed/2012-12-30/krugmans-epiphany

Here's The Krug himself:

http://krugman.blogs.nytimes.com/2012/12/28/policy-implications-of-capital-biased-technology-opening-remarks/

Krugman's answer is to tax capital to fund the "social insurance system" since labour's reduced share of income is "still there" in the form of capital.

There's just one teensy weensy problem with both Krasting and Krugman's beliefs. They have no basis in fact.

Henry Hazlitt nailed it back in 1946 in his book "Economics In One Lesson". (Extract from Part 2/7 "The Curse Of Machinery".)

Mrs. Eleanor Roosevelt, indeed, in a
syndicated newspaper column of September 19, 1945, wrote: “We have reached a point today where labor-saving devices are good only when they do not throw the worker out of his job.”


Would anyone like to take a stab at answering why the Great Depression lasted for over 15 years?


Wendy and RJP,

Get out those nail files and butter knives and start splitting wood.

I hope everyone has a Happy New Year (except Paul Krugman).

Michael dV said...

Wendy
Rockit stoves/ I was so impressed I just had to share. Several YouTube videos. The exhaust was CO2 and H2O per the builders.

Wendy said...

Mike chem101>>>>> products of COMPLETE combustion alwayys=CO2 and H2O

the trick is complete combustion :)

FOFOA said...

Hey Wendy: Stored Sun! (Who is that guy, a bad Mr. Rogers copycat or something? ;)

Wendy said...

your high school chem teacher FOFOA? It's guys like that, that give geeks a bad name ;)

J said...

I'll play along

Where are you from? NY, USA
Work - Kabul
Home - Bangkok

How did you get here? Link from the old GIM forum

whatta you do for fun? Get away from my current location.

How long have you been visiting this blog? Early 09

Edwardo said...

costata wrote:

"This reminds me of one of my favourite little quirks of the dominant school of economics. They include reductions in debt as part of their calculation of the rate of savings."

This is just the sort of jiggery pokery that Jacques Necker trafficked in back in the days that led up to The French Revolution. When Clinton uttered his immortal words- no, not "I didn't inhale", but, rather, "that depends on what the definition of is is" that should have been a very big clue that the U.S. was not only no longer in Kansas, but it wasn't even in the lower forty eight.

As I'm sure you know, the dominant school of economics is the one whose doctrine best serves those who rule. Keynes and his brand of economics, what with its easy to abuse emphasis
on counter cyclical spending, was the clear winner in our century of nominally democratic (otherwise interpreted as corrupt) governments in the West.

Now, if you would like to have a good laugh at perhaps the (Keynes's school's) most useful idiot go here.


costata said...

Wendy,

COMPLETE combustion

I remember when women used to describe me in those terms. Memories, sweet memories!

Tyrannyofthepresent said...

Caution: GSR/silver post. Feel free to ignore.

A discussion on another blog:

http://apiigongold.blogspot.co.uk/2012/11/the-gold-silver-ratio-and-reversion-to.html

has upset the homeostasis in my brain on drivers of the GSR, so I wanted to invite further comment from the sharp minds here on one specific point.

Trying to be brief, we have concluded that all other factors are just subsets of supply and demand for the two metals. Personally I have gone on to conclude that the supply in turn resolves into geological and sociological supply.

Mechanisms exist whereby every supply and demand factor and the price ratio all influence each other.

I observe that whenever the price ratio has diverged significantly from the geological supply ratio, the result has been a shift in the sociological supply ratio that has ultimately led to a GSR similar to the geological supply ratio. In other words geological and sociological supply appear to have displayed dynamic equilibrium behaviour.

This supports my blather elsewhere on the discovery of the Americas. That discovery affected the effective geological supply ratio for a couple of centuries and the composite supply ratio therefore permitted a higher GSR for a couple of centuries.

Giants, CBs, monetisations and all the rest of them fall into the sociological category. With all due respect to them. Landfills and hoards are perhaps an intermediate category - they are at least physical phenomena.

Will anybody who cares and knows about this point please answer this specific question:

How or why can a homeostasis be maintained over a century in which the sociological supply ratio remains sufficiently independent of the geological supply ratio to allow a high GSR and a low geological supply ratio to coexist?

costata said...

ToP,

I observe that whenever the price ratio has diverged significantly from the geological supply ratio, the result has been a shift in the sociological supply ratio that has ultimately led to a GSR similar to the geological supply ratio.

In other words geological and sociological supply appear to have displayed dynamic equilibrium behaviour.


BS actually. Observe - China is the third largest producer of silver today. The silver was always there. Yet, when China used silver as a currency they mined, refined and coined almost none of their inground silver.

Why?


Tyrannyofthepresent said...

PS on GSR

If anyone wishes, I can post or link to a diagram explaining how each of the negative feedback mechanisms works.

I am offering this because I cannot imagine a way of maintaining a belief in a long-term high GSR and low geological supply ratio other than by contesting at least one and probably several of the negative feedback mechanisms (because if one fails, others that operate in the same direction should compensate).

Tyrannyofthepresent said...

Costata,

"... geological and sociological supply appear to have displayed dynamic equilibrium behaviour."

Your comment: "BS" + a reference to a single time and place when a huge international arb was slowly being worked off.

OK.

Can I just check that your response to the principle itself is truly "BS"? It would be interesting to know, since I know you have thought long and hard about this, so I am guessing that you are not being flippant.

In which case I will have to post my diagram and get you to point out which of the arrows is full of the aforementioned substance.

costata said...

ToP,

I'm struggling to figure out where to start with this. Silver was money in China when they weren't bothering to pull it out of their ground. They were trading. So they didn't need to create more money. Their trading partners needed money because they ran out of things to trade. Hence opium.

Cheers

Jeff said...

AE asks 'why have european CBs been net sellers of gold for the last decade? They seem to have stopped selling, but they aren't buying. Why not? Shouldn't they be?'

Perhaps there is an agreement by western CBs to allow the BRICS to acquire gold, in the interest of widening distribution?

Tyrannyofthepresent said...

Costata,

Thanks for making the effort. Here is just one 5 minute source:

From: http://www.sycee-on-line.com/Sycee_history.htm

"Such a surge in silver's usage put upward pressure on its price. Domestic growth in supply could not keep pace with the demand, since during the Ming Dynasty, even with the addition of Yunnan's silver output, China’s annual production never exceeded 340,000 taels of silver. Even late in the Ching Dynasty (1644-1911), production only increased to 460,000 taels per year, less than the peak production of the Sung Dynasty. This left tremendous room for great quantities of foreign silver to fill the void."

My interpretation: they were doing their best, but demand was too great. Technological limitations? What do I know?

Hence, no doubt, the world-beating century-long arb.

No relevance to the overall principle as far as I can see. I am trying to zoom right out here.

To me it looks as if the principle DOES play. If it looks to you as if the principle does NOT play, that is interesting in itself.

I think I know why it does play, hence the diagram. Which I will post somewhere when I get round to it. If you can see that enough of the feedback mechanisms I have posted are BS to allow it to tolerate a high GSR, and if I agree with your analysis, well then QED by you and I will depart again with my Freegold smile restored.

Meanwhile, thanks for your time.

Tyrannyofthepresent said...

Costata,

It is too simple to justify being drawn out in diagram form.

+ GSR -> + Au/Ag mine output ratio, + Au/Ag landfill supply ratio, + Au/Ag dishoarding ratio, - Au/Ag hoarding ratio, - Au/Ag industrial demand ratio, - Au/Ag jewellery demand ratio -> - GSR.

Local Veblen behaviour -> + GSR, see above for reversion via other mechanisms and in other places via arbitrage. Positive-feedback loop, will tend to burn out.

Local gold-only mine nationalisation -> + GSR, see above etc. Requires repression, so will tend to be circumvented.

Local gold monetisation resulting in Giffen behaviour -> + GSR, distress will be alleviated by seeking elsewhere etc.

Universal Veblen behaviour -> + GSR, reversion via other mechanisms.
Universal gold monetisation resulting in universal Giffen behaviour -> + GSR, see above etc.

Universal gold-only mine nationalisation: 1) exhaustion of private hoards in failed attempts to arb the ratio back. 2) Requires considerable, global, government repression. 3) Successful, sustained high GSR.

Universal mine nationalisation appears to work by creating and then maintaining an artificial geological supply ratio. It would be difficult to maintain this level of control in practice, even with a tyrannical, coordinated global government.

Failing that, the multiple drivers mentioned above will push the ratio back in every scenario that I can imagine.

dieuwer said...

Only a few days left to "rescue" paper gold. €POG at 1260...

/SleepingVillage/ said...

Stored sunlight:) I love it. People like Richard Feynman actually deserve and earned their Nobel prize(and much more), and people like Krugman with his shitty beard haven't yet earned theirs... nor do they deserve it.

What's with shitty economists with shitty beards anyway?

Ore em' said...

As for me, I'm in PEI, Canada's smallest province. I have been lurking since more or less the beginning of my journey on the Trail, which not coincidentally happened to coincide with FOFOA's blog (late 2009, early 2010, probably via ZH). At that time I was completing my law degree and MBA. This was during the beginning of the financial crisis, and I actually did an independent research paper on the history of financial crisis as part of my MBA. I was also enrolled in what was known as the Student Investment Fund, which is a CFA preparatory course that also manages funds for the Provincial pension management corporation, and sat on the University's endowment board.

Suffice to say, I was never even remotely interested in drinking the MMT kool-aid, even before reading FOFOA's work. My BS meter was perpetually on overdrive whilst consuming the CFA/Keynesian version of reality. In many ways, I was just a fly on the wall (although I'm far too outspoken to have not expressed my exceedingly-different opinions). It was fascinating to see the group-think and dynamics of those environments. It reminded me of being in a religious group, in that any proposition or argument that might undercut the status quo is dismissed out of hand and considered inherently ludicrous, regardless of any logical validity it may have.

All that said, my monetary "journey" began long before that when I was probably 8 or 9 and heard on the radio about the Canadian government deficit. I remember asking my father how it was possible that they didn't have enough money - why didn't they just print more! Needless to say, I found his answer to be wanting.

Since that time I've always been fascinated by money. But not in the "oh my god, I want to make lots and lots and lots of it" kind of way, more in the "what is it?" kind of way. However, in the journey between asking my father a question he couldn't answer and this blog (which was presaged/accompanied by seeing Zeitgeist, Money as Debt, Money Masters, ZH, etc.), all I really encountered was endless discussion of "how to make it", the vast majority of which involved, from what I could determine, large amounts of smoke, mirrors and snake oil. And the economists, with their magical math, were even worse!

As for my present situation, after 3 or so years of working in a litigation law firm, I am working in a quasi-legal job overseeing paperwork for contracts with government, private industry, etc. But that is just my day-job, as my true passion is my recent startup enterprise, a 204 acre organic farm. We are doing what is known as permaculture and food forestry, which is a novel approach to food production wherein we attempt to "biomimic" a natural forest ecosystem, with the exception of replacing the low-value fibre-type trees in the forest with more valuable fruit-bearing crops.

Permaculture is a portmanteau of permanent and agriculture, and as the name would imply, it is food production that is sustainable in the long, long, long term. In many ways, I see similarities between it and freegold. If you're interested, I suggest you watch some videos on youtube from Sepp Holzer - he is the ANOTHER of what we're trying to do!

mr pinnion said...

Happy New Year to team FOFOA.
Hope 2013 brings lots of 2014 for everybody(lets not get too ambitious).

Regards
Ozzy

Pat said...

Hmmm- paper gold quite active for a supposed quiet holiday-like day. Looks like price of Euro-gold will be in FOFOA's limbo ( indeterminate ) price range come Jan 4.

Ore em' said...

RJP - that's a fantastic contraption! It decreases the effort required to prepare the fuel for the "input" side of the wood heating equation. However, might I suggest you also consider decreasing the actual volume of fuel required by 90% or so? Sound impossible? I know - it's almost as crazy as suggesting gold can undergo a 3000% increase, but I swear it's possible! Here is a link explaining how the technology works,

http://www.richsoil.com/rocket-stove-mass-heater.jsp

It is as elegant and simple as Freegold, and simply makes use of our understanding of physics to combust wood much more efficiently. I can also attest that, having built one of these on my farm this summer with the help of Ernie and Erica Wisner (the leading experts on rocket stoves) that it does indeed work exactly as advertised. Amazing!

Ore em' said...

Robert Mix,

You made a comment about Taleb's book Antifragile. I've only read an excerpt, but his logic seems spot on to me, and applies perfectly to Freegold. I truly believe that ANOTHER et. al. set out to build an antifragile monetary paradigm, and am hopeful that they succeeded in doing so.

I would also argue that what we are trying to do with our permaculture farm is to build an antifragile food production system, one that is able to dynamically sustain, buffer and regulate itself against changing external conditions, be they related to climate change, peak oil or the depletion of resources currently required in mass food production. I am also hopeful that we will succeed in doing so (based on prior examples and successes, i.e. Sepp Holzer).

ampmfix said...

53, spanish/swiss/brazilian (not a national yet...), 2 kids 4 and 1, I am a dad-grandad! MSEE 1984. Arrived here in june 2010. Read all posts and comments, and I need the comments since I am very slow on economics stuff. Oh! I have a cat too! Lately this blog is 80% of my private life. But my thing is really guitar, chess and cosmology, go figure...
Good 2013 all.

One Bad Adder said...

TotP: -
Boy you DO take your GSR seriously ...don't you?
FWIW and IMHO, I'm anticipating a reversion to the mean ...and some! just prior to a Systemic upheaval ...upon which it is my intention to "cash-out" my Ag for Au.
50:1 was my get-in point (several years ago) and an exit strategy will commence c 25:1.

What I "really" think however makes ANY comparison one to the other a moot point.

dieuwer said...

The paper gold timeline reminds me of a traffic light:

1) Green (€POG>1350): Go ahead paper gold!
2) Orange (1250<€POG<1300): Be careful paper gold, it is almost red, you can go ahead if you're quick!
3) Red (€POG<1250): Stop paper gold, games' up!

ampmfix said...

18 pound cat

ampmfix said...

smells like FG spirit is just around the corner...

Indenture said...

2013 The Year Of The Removal of Obstacles

Yaktrax I will never walk in the snow/ice without these. Absolute necessity. I keep them right beside the winter work gloves on the way out the door.

"where are you from"
East Coast of US
"who do you know"
Maybe one or two of the names you guys throw around here from the field of economics.
"how did you get here"
Greed. I was looking for the highest price of gold and the reasons behind the prediction.
"what do you like and don't, do you have a life beyond this blog"
I like the clarity. After years of reading and questioning and asking and learning I have reached a place where I can see, in my own limited way, the two realities of the $IMFS and the Euro Architecture. There is a strange simplicity of allowing the Dollar System to naturally collapse under its' own weight and at the same time the already present Euro Gold System is ready to take it's place. The understanding of the value of gold, priceless.
A life beyond this blog is possible. If you don't read any economic news, don't talk any US national financial news or don't physically pay with currency because the piece of paper represents so much more than it did before reading FOFOA then yes, it is possible to have a life beyond RPG. The wife and son also get in the way of reading FOFOA but school is about to start again so I will have half that problem solved :)
"whatta you do for fun??"
I collect large rocks to build a castle, play guitar and dance with my wife and sun in moonbeams of satisfaction.

Zenscreamer said...

Hi! I don't comment a lot, but I've been here a long time. I've been on a long strange trip for five years or so when investing became less like playing with toys and more like a russian roulette. In any case, after the denial (I was in cash for the crash) I realized that I had become completely skeptical of absolutely everything everyone was telling me and I needed to start over from first principles. My grandfather had given the whole family gold coins and I knew what real wealth was when I felt it; step one was in place. I am an avid information surfer and actively pursue a dynamic synergy of related ideas, and the discoveries have been coming so fast for so long now I have a hard time looking back, but I found FOFOA through some gold blog or other, possibly Kitco.

Fourteen months ago I spent weeks putting down in text a master strategy to try and control all the factors which could affect the situation experienced by my family, and since then I have worked to make progress in mitigating all risks. Last November we got our concealed carry permits; in February we put in a backup generator and a brought in a week's worth of propane to run it; in April we stopped eating sugar and carbohydrates and have since lost over 65 pounds each; now I'm learning to preserve food with bacterial cultures. One thing leads to another in an unending fractal spiral of change; one domino pushes another.

We live in New England, and have two nearly-grown children; finishing raising our teenager is our primary occupation. We also train in and teach Tang Soo Do, in which we are 2nd Dan black belts, and recently committed to test for 3rd Dan in April. I am energized by the increased strength and stamina of the new body I had no idea I could create so quickly. I am also learning Tai Chi with a particular interest in joint manipulation.

My hobby is to participate in community theater, with an emphasis on musicals; I am a soprano, and a bit of a diva. I would say that it is "fun", but generally that's not true as I'm also an introvert and I find most people very draining, but as increasing my social connections is on my list of strategic priorities, I try and keep with it. I also am the family historian, so I like to dig through old photos and documents and try and make some sense of them; I've discovered that some of my ancestors were quite fascinating: one of them was burned at Salem as a witch!

byiamBYoung said...

@ampmfix,

18 pounds? You sure that's not a Puma?

Cheers

Michael dV said...

ToP
I have not ben following the whole topic but can you not imagine a complete breakdown in the GSR if gold were to be a wealth asset and silver a purely industrial commodity? Perhaps the ratio might vary wildly as gold price stays relatively constant while silver price has its highs and lows dependent upon usage and supply.

Michael dV said...

Zens
after the longest reveal yet...I still do not know your gender, very cleaver.

poopyjim said...

@zenscreamer

Very interesting, I see you are quite the prepper!

Your post reminded me of a couple other tid-bits I forgot to mention that folks might find interesting:

I trained Brazilian Jiu-Jitsu for about 10 years off and on, only stopped because of a herniated disc in my back.

I have a fetish for butterfly knives, and in fact there is a video of me I made back in college doing various aerial openings/closings which might still be floating around somewhere on the 'net... if I find it I'll post it.

Zenscreamer said...

@Michael -- I wasn't trying to be clever -- not many grown adult men sing soprano!

@poopyjim -- I try not to think of myself as a prepper, but my Dad did raise me to "imagine the worst possible scenario, and if you can handle that, you're ready for anything." Unfortunately, I've got a lot of imagination. That said, I'm incredibly lazy. The favorite food plants in my yard so far are asparagus, rhubarb, and jerusalem artichoke, all of which grow themselves with no input from me! I'm sorry to hear that a back injury got you out of martial arts -- I suffered a pinched nerve two years ago and I'm just getting back into regular training myself. I loved it so much I couldn't give it up. :-)

Ore em' said...

@poopyjim - I also train jits, been at it slightly under 2 years, and I love it. Been off sick for the last 3 weeks and it's killing me to not be training, which in and of itself is a bit of a miracle given my natural proclivity for extreme laziness.

poopyjim said...

@Ore em'

I know how you feel. I freaking loved jiu-jitsu. Nothing beats the visceral feeling of grappling and triumphing over your opponent. Honestly I still feel like I lost my purpose in life now that I can't train anymore.

milamber said...

FOFOA:

2013: The year of "I don't really care when the $IMS collapses, because I have already converted my "savings" into physical gold"

Zenscreamer:

I caught the soprano part :)

@Wendy
Im a Texan living in Texas :)
Don't really know any one relevant to this list;
got here when Mish was being, well Mish back in 09 or 10;
yes, unfortunately. I would love to spend more time here. Very fascinating.

For fun, I take long walks on the beach while holding an AR-15 Assault rifle killing whales that snorkle in Galveston bay :)

JK, I used to love to golf until an injury took that away. Now I just enjoy peace of mind and watching my kiddos grow, with my wifey at my side!

Happy New Year all!

Milamber

Michael dV said...

milamber
shame on you .223/5.56 is NOT a proper whale shooting round...

Michael dV said...

milamber
PS can I come and live in Texas if Feinstein's bill passes and Texas secedes?

costata said...

TOTP,

I'm currently working through the implications of a theory called “The Monetary Approach to the Balance of Payments” to explain the impact of historical trade flows on monetary flows.

Here's a link to a paper that discusses three theories and how they may have interacted in China during its silver standard period.

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1799983

I'm having big problems with my connection this morning so if I don't respond quickly it's not because I'm ignoring anyone. FWIW it's 2013 here and no sign of a total collapse of the $IMFS (but it isn't lunch time yet).

Cheers

Abstract:

The present paper demonstrates that certain early monetary developments observed in the West since the Peloponnesian War about 400 B.C., but also in China can only e explained with the help of three economic theories called "Gresham's Law”, “Thiers' Law” and “The Monetary Approach to the Balance of Payments”.

By doing so it is shown that “economic laws” have not only been working for hundreds of years, but also that several observed phenomena can only be explained by applying them. Gresham's Law states that, given fixed exchange rates among two kinds of money, bad money will drive out good money.

By contrast, Thiers' Law (a name coined by me, in the literature it is also called the Anti-Gresham Law) states that with flexible exchange rates and sufficiently significant differences in the rates of inflation of two currencies good money will drive out the bad one. Because of this an undervaluation of the more inflating currency develops, its purchasing power is lower abroad than at home.

Finally the Monetary Approach to the Balance of Payments starts by looking at the balance of payments - and for Antiquity we should rather restrict this to the balance of trade - by taking into account that surpluses or deficits of the balance of payment have to be financed by extending credit or monetary flows, for otherwise they cannot occur.

Since international credits can be neglected in classical times, this means that deficits of the balance of trade have to be financed by an outflow of coins or sometimes gold, silver or copper. The empirical evidence for the working of these laws quoted stretches from antiquity to modern times.


RJPadavona said...

Thanks Ore 'Em, for that link. I was vaguely familiar with rocket stoves but I didn't understand the science behind what makes them so efficient until I watched some of those videos.

=========

All this talk about martial arts reminded me of something. It's good to be prepared for dangerous situations and sometimes you may not have a firearm to put you on more equal footing. Most people don't have the time to take any self-defense classes, so here's the next best thing:

Bas Rutten: Lethal Street Fighting


Wendy said...

Mikedv,

Looks like Ore em' has some hands on experience with that stove you were mentioning. I had a look, the technology is very simple but impressive

http://www.richsoil.com/rocket-stove-mass-heater.jsp


costata +1

ampmfix said...

BY, LOL, not a puma but a 6 year old neutered male that hunts extremely well, all kinds, rats, mice, birds. When he was still growing he brought home a dove bigger than him, he is awesome. And he is like a dog, follows me everywhere and cries when we go out...

Wendy said...

I don't get the fighting thing .... my son fights amateur MMA, he loves getting in a cage and kicking the shit out of someone. Yuck!! Fortunately I haven't had to suffer long, he finishes them off fast.

He can't fight again until he has shoulder sugery and it's making him crazy ... go figure

first round TKO video shot by MOM:

http://www.youtube.com/watch?feature=player_embedded&v=1FOXBDQRDDA#!

FOFOA said...

Happy New Year everyone!!

I'll have a new post for the New Year up at midnight Pacific time, in case you were wondering. ;D

Sincerely,
FOFOA

byiamBYoung said...

Happy 2013 all!

@Wendy,

I have a ferocious wrestler for a son, so I was interested in the video...but apparently I did not make the grade to be able to view it :/

Do you have an un-private link?

Cheers

Wendy said...

Happy new year FOFOA, looking forward to the new post

BBY, I'll have to have a look and see if I can fix that

Aaron said...

Happy New Year everyone!

Tyrone! Reveal thyself in a debrief!

And you too Victor.

costata said...

FOFOA,

Happy New Year

Placidus said...

@Aaron,
Thank you for helping to answer some of my questions…

In regard to my question below:

A second, and perhaps not unrelated issue, is the hyperinflation of the dollar (which has already happened). Yet …. who continues to provide this structural support for the dollar in 2012/13 and beyond? Why?



You answered:
"The Fed. To keep the system glued together as long as they can to milk whatever they can out of the system before the big blow up.
"

However, I thought it was foreign central banks that were mopping up the excess dollars and that they were doing this at some cost (providing the structural support costs them). As I understand it, European central banks did it before the Euro came into being in order to buy time to establish the Euro and keep the system going. Then it was China. There is some consensus that China is no longer providing the support it once did. So now it is …? I believe this is covered in several of FOFOA’s hyperinflation posts. Perhaps you are saying that it is now the FED who is stepping in and mopping up its own excess dollars overseas? Perhaps you can direct me to the post that clarifies who might now be stepping in and what process this involves. I am just saying that this may be a key indicator for recognizing the trigger for inevitable move toward Freegold (since the hyperinflation event is possibly coupled with forces that trigger Freegold).

Happy New Year!

costata said...

Silver

TOTP,

Since my earlier response to you I have read APIIG's post and the comments. I also read the sycee post you linked. Lots of interesting snippets there. Many thanks.

I'd like to revisit the passage you quoted from sycee above and a couple of other passages (my emphasis). Then I'll comment on your exchange with APIIG separately.

Such a surge in silver's usage put upward pressure on its price. Domestic growth in supply could not keep pace with the demand, since during the Ming Dynasty, even with the addition of Yunnan's silver output, China’s annual production never exceeded 340,000 taels of silver.

Even late in the Ching Dynasty (1644-1911), production only increased to 460,000 taels per year, less than the peak production of the Sung Dynasty. This left tremendous room for great quantities of foreign silver to fill the void.


The highlighted statement rests on an assumption which seems to be a case of 20:20 hindsight. If there was rampant deflation throughout this period it would indicate a shortage, a "void". I can't find any evidence that this was the case.

In light of subsequent events it is clear that there was a high preference for silver currency in China during this period. But that is only half the story - demand. Another passage from sycee provides the crucial second piece of the puzzle - supply. (My emphasis)

Beginning in the late 16th century, immense amounts of silver produced by the Spanish colonial mines of Potosi, Peru, and Mexico began to be brought into China directly or indirectly by Spanish, Portuguese and Dutch galleons.

According to researchers, over 515,600,000 Spanish silver dollars had been imported into China between the latter part of 16th century and the outbreak of Opium War (#2).


Now for third piece of the puzzle - trade goods. One of the key points that I took from Peter Berholz research is that China had a tremendous amount of in-demand goods to offer those trading partners in exchange for that silver.

For the reasons described above (and below) I call BS on the claims about silver's "rightful place" or "historical claim" to a role in the monetary system.

The following sycee passage highlights a problem that crops up repeatedly throughout monetary history. It's not unique to silver. This applies to all currencies be they metals - gold and copper included - or paper/coin currencies.

Government currency issuers were either forced to, or desired to, impose an exchange ratio on the money they issued (my emphasis). Governments also sought to influence the exchange rate of their currency with those of their trading partners.

Silver's importance as currency increased significantly in the early Yuan Dynasty (Mongolian Empire: 1206-1271, Yuan Dynasty: 1271-1368).

The new Mongolian rulers brought with them the concept that silver should be one of the major currencies of the empire. They legislated the exchange rates among 3 major silver ingots of different fineness--白銀"Bai Yin" (White Silver), 花銀"Hua Yin" (Flowery Silver), and 課銀"Ke Yin" (Tax Silver)

-- and paper notes as 1 (tael): 1.95 (Guan, generally equal to 1000 cash), 1:2.00, and 1:2.05, respectively. Silver was treated as legal tender, and a connection between it and other currencies was developed.


None of this was occurring naturally except for one (1) evolutionary trend which was naturally emergent. To whit, a monetary system was increasingly demanded by humans which transcended nation-state boundaries.

Economic (monetary) calculation was developing as was double entry bookkeeping, banking and so on in parallel to the tendency of international trade to expand (when it was permitted to do so).

costata said...

Hi Placidus,

Aaron may be doing the New Years Eve thing so I'll respond in his absence. The chronology matters. First it was European governments/CBs, Japan and dollar bloc allies providing structural support for the $IMFS.

Then China circa 2001 began buying USG debt in size which helped to support the system. That topped out about two years ago. Some would argue that it was a policy decision to withdraw support for the $IMFS. (I argue it was a combination of diversification of their FX portfolio and capital flight.)

In recent times demand for USG debt has been coming from countries intervening in the FX market to try to force their currency's exchange rate down (such as Brazil and Japan) and from the Fed "printing" to buy it.

Japan may be about to escalate the currency wars by cranking up its "printing press" which would provide increased demand for the US dollar/debt and, de facto, for the whole $IMFS. The ME oil producers continue to support the $IMFS by accepting US dollars in payment for oil.

That's the sketch out of the support chronology. The erosion of support can also be traced along a similar timeline. Involving CB gold purchases, a declining share of US dollars in FX reserves, currency swaps and so on.

costata said...

Silver - GSR

TOTP,

Let's try to whittle down the points of debate to a manageable size. We should drop CBs out of the discussion about the GSR.

They are irrelevant to the GSR. Their decision to hold gold as a reserve asset, and not to hold silver, demonstrates that they don't see any role for silver in the monetary system in which they are a key component.

Many here argue that this has important implications for the price of gold but that is a separate issue to the GSR. The big numbers for gold, under a Freegold-RPG regime, discussed here can be examined without reference to silver.

The same can be said for these issues:
1. Government involvement (they don't own any silver either).

2. The BIS - as above.

3. Currencies - no one is moving toward either commodity money (except perhaps the GCC) or a silver exchange standard.

The GSR debate has a narrow range of issues to cover with very little overlap with the discussion of the Euro Freegold-RPG architecture.

Wendy said...

OK bBY, I think I fixed the settings, let me know

http://www.youtube.com/watch?feature=player_embedded&v=1FOXBDQRDDA#!

Tyrannyofthepresent said...

Costata,

Happy New Year!

I am very happy with your elimination of CBs, BIS and other sociological factors from the debate on the GSR.

Liked the Bernholz paper; here are my first responses to it:

1) His main contentions, e.g. Gresham's law played in antiquity, etc. is already part of my acquis, but yes I agree.
2) I liked the fact that he treats gold, silver, copper and would have treated cowrie as different monies and does not try to aggregate them as some have done, which makes a mess of the picture.
3) I also liked the fact that he moves towards treating them simply as commodities and analysing flows on a s/d basis. My own thinking has moved on from there however; they are all just different forms of limited commodity wealth, each with multiple s/d drivers. All else is temporary and/or requires coercion and gets circumvented.
4) He even hints at the natural endowments of geographical areas differing. My opinion is that this caused initial natural metal price ratios, similar to my 7:1 for Eastern Eurasia, 16:1 for Western Eurasia and [higher, still undefined] for the Americas. So the Potosi and Mexican cycles were arbing a natural discrepancy in China, not some kind of figment of the Khan's imagination.

With regard to the future, there are a couple of factors missing:

1) Gresham's law cannot play in the same way, because there is no longer an effective "abroad" or "out" to drive the good money to. It just sloshes around the world and disappears into hoards. This changes behaviour as regards money. But since I am more or less ignoring "moneyness", it doesn't affect my analysis very much.
2) Rather than arguing about the chicken and egg question of whether price and ratio changes are caused by the "money" or the "good", why not just cut through the Gordian knot and admit that it is delta (good 1) / delta (good 2) that determines the flow? Whether one of them is "money" or not. It is simpler and works better.
3) The regional geological GSRs are currently aggregating into a global GSR, and the last low-hanging fruit are being rapidly plucked and hoarded or consumed. Very fast. A new and possibly long-term equilibrium can therefore be expected to emerge relatively quickly.

Look forward to your thoughts.

Tyrannyofthepresent said...

Costata,

My favourite perspective: that of the Martian onlooker to whom money simply does not exist. Or possibly that of the hyper-intelligent squirrel.

First off, since I have mentioned Martians, I think Buffett's comment is complete nonsense. Pulling gold out of the ground where everyone knows its location and then hiding or guarding it seems perfectly rational to me. Squirrels do it all the time. That would not make them scratch their heads.

The Spaniards force the Peruvians to mine their abundant silver at gunpoint, steal it and take it to China where it is rare, get a lot of gold and silks in return, take them to Europe where they are rare and then get whatever they want. No head scratching required.

Since 1900 or so the Martians have required just a little more patience and a need to suspend disbelief between transactions, but in aggregate they should still be able to cope, assuming they are not stupid Martians.

The Arabs tap oil and ship it to China in return for nothing.
Plastic landfill items are produced in China and shipped to America and Europe in return for nothing.
Gold and silver are mined or otherwise sourced in America and Europe and transported to London in return for nothing.
Gold and silver are shipped from London to Arabia and China in return for nothing.

Or in continental Europe from 1935 to 1945:
All forms of wealth were taken by force, their owners killed, and transferred to a small number of people in Germany and Switzerland. Meanwhile a few of the owners exchanged all their wealth for tiny quantities of one particularly valuable item and fled with it.

Admittedly at certain times due to "bonds" and "stocks" there were long delays during which nothings remained uncancelled. But this appears to be resolving.

Or in modern-day China:
Workers spend their time laboriously converting crude oil into plastic landfill items in return for nothing.
They then go to supermarkets and jewellery shops where they receive food, gold and silver in return for nothing, and they hoard the gold and silver.

I liked our monetary historian friend because he adopted something close to this approach. I am suspicious of people who try to complicate the picture beyond this level, regardless of their pretext or justification.

Tyrannyofthepresent said...

PS Costata,

Clearly at some times these creatures tolerate a temporal offset between the two arms of their exchange. In some cases the second arm does not occur, which transforms the first arm into a kind of theft. In others the second arm is disproportionately large and represents a mixture of exchange and theft.

Various subsets of the creatures routinely take by force without ever offering anything in return. They have eventually accumulated most of the wealth.

Even after excluding apparent theft-components, both consumable and durable items are exchanged at variable ratios for various reasons. These ratios and reasons are based on multiple factors, the most important of which are availability and popularity.

Tyrannyofthepresent said...

Finally,

Individuals regularly allow themselves to be temporarily or permanently controlled by others in return for valuable items. Some of the robber-individuals have controlled others permanently by force or by stealth, allowing most or all the resulting wealth to accrue to themselves. This more patient approach proves more lucrative than simply killing them and taking their accumulated wealth.

byiamBYoung said...

@Wendy,


Wow! He's fierce!


Michael dV said...

Ore em'
Sepp Holzer ...is he some one to pay attention to or just a YouTube phenom?
Skip that, I just went back and read the last paragraph of your comment.
I watched several of the videos about Sepp and his work.
I found him as I was Shanghai-ed on YouTube...you know how that happens...you start out in your chair and 3 hours later you wake up in some foreign meme with little recollection of how you got there. As I recall it was Rocket stoves that first caught my eye and the next thing I remember I was watching some guy in central Europe digging turtle ponds and pig shelters. This is a problem for those of us with wide ranging interests and little discipline for staying on track.
Anyway I found his ideas fascinating. I almost ran away to South Central Utah and start my own farm.
Then I realized that I can't do shit right now because I am afraid to sell my gold and so I sit in Las Vegas waiting for freegold. If I'm not completely dead by when it arrives it is one of the things I plan to do with my hard earned and hard saved wealth.
It is really a shame that loans are not easier to come by. I'd be more willing to take risks if I did not have to part with large chunks of savings all at once.
I did buy a little Rocket stove though.

Aaron said...

Wendy, please remind me never to piss off your son.

Ore em. I'm a huge permaculture fanatic. I'm assuming you're well acquainted with Bill Mollison. I own Permaculture, a Designers
Manual
, along with Geoff Lawton's DVD, Establishing a Food Forest, Mike Reynold's Garbage Warrior on making Earthships.

Post Freegold a good chunk of my wealth will be going into developing these ideas in my own live lab.

anand srivastava said...

Too busy for the last few days. Will have to read the comments on this one later.

Anyway Wendy somethings about me.

I am a software engineer by trade. Love the development part but little else :-).

I am from the North of India (Gurgaon), but have stayed in the South of India (Bangalore) and also in Europe (Switzerland and Paris) for a few years. The years spend in different places gives you a very different perspective.

I hate the way our government is looting the country most of all, and I don't see how this thing will be worked out. The major problem being the whole country has become corrupt not just the people at the top, although the rot originated there.

I am new to economics and discovered the problems and the blog only late 2011. It didn't take much time for me to reach the Blog though.

I haven't had much of a life outside of the internet for a long time now. First it was researching Linux, then Nethack (a game), then learnt that General Relativity has outlived its usefulness (MOND). My interest in the last few years has been health. I have discovered that the way we look at health is totally and completely wrong. Its not as simple as eating and exercising, its much much more than that.

So there is so much more things that I can do on the internet for fun :-). Not too much in the real world though. I do take vacations though, visiting places.

Wendy said...

thank you so much anand and everyone else that revealed a litte about who they are when they are not typing on the computer.

bYB,he has always been a little barracuda and into extremne EVERYTHING ..... snowboardsa, skateboards, dirt-biking, guns from the time he was little (pellet, paintball and hunting rifles) He's not so little anymore (6'0"/165lbs)and thanks to his MOM, he's in University and not fighting in a cage (at the moment)

But is is his dream to have his shoulder surgericaly mended (osteophytes removed) and give MMA his best shot. I support his subattical from university to persue anything he wants as long as he returns when he's done.

Sorry for the blah blah blah, this is my kid who had juvenille arthtiris..... it's a mom thing

J (not the old one) said...

DM - my simplistic understanding, for what it's worth:
- one day people will wake up, like in the Emperor's New Clothes story, to the fact that the value of a dollar is WAAAY below what we've been acting like it is
- they will then look for something against which the true value of a dollar can be assessed, and gold will fit that bill better than any other alternative
- the number of dollars required to buy an ounce of gold will skyrocket (conversely, the value of a dollar will be discovered to be very low in terms of micrograms of gold)

I have no idea which one it was, I'm afraid, but there IS an old post that I found very useful in understanding all of the comments about pushing string etc etc etc. Blondie was active in the comments and nominated one simple one for a 'Hall of Fame'.

This may not be useful at all, as I have found this all so easily confusing that I have tried have to simplify e.g. I skip over all comments that are concerned with oil and the Euro as to me it is confusing and doesn't seem central.

Just my 0.012mcg!

ein anderer said...

Hallo – and a healthy, wealthy and wise 2013 for all!
Here my profile:
I am 60 years old and as long in journalism as in Digital Publishing. Three grown up kids, divorced and again married, living in the south-west of Germany.
In the moment my old parents needed help in administration of their assets as late as 2011 I startet to get interested in questions around money, currency and precious metals.
That we are living in a huge debt bubble much greater than anything else we have seen in the last centuries was clear to me since 2008.
Very soon it became clear that the only way out of this struggle for individuals was physical silver or gold.
First I decided in all for silver. What a wheight!
Yet I was doubting: What if this metal will not be needed anymore by industries in such extend as today?
Then I discovered FOFOA, by chance: Don’t know what linked me to here. And although it is not so easy to follow such a highly specialized theme in a foreign country there was one experience with his blog which was very astonishing (compared with many other forums, Wikipedia and other places where people meet virtually): the politeness and the extraordinary background of knowledge which is shining through all posts and almost all comments.
I love those posts most which are describing vividly scenarios. More and more I realize that FG is something which is developing since decades: much longer than my 2008 perspective on money was able to grasp.
It’s like a huge tsunami wave which can be felt by some animals long before it hits the shore.
Therefore FG remembers me of the long told stories that there is a cultural wave rising in these days: the wave of consciousness.
I believe in consciousness as a highly creative, all pervading, universal field which is *reflected* by (human) nervous system instead of being individualy "produced" by it. I am a scholar of vedic wisdom as interpretated by Maharishi Mahesh Yogi.
In my journalist times in the ’80ies I wrote a lot about "signs of a betterment of the world". One of my most beloved stories was Fukuoka’s and Bill Mollison’s Permaculture, but I loved also Ken Wilber, Rupert Sheldrake and Ilya Prigogyne.
All these scholars--and FOFOA, FOA, ANOTHER and ARI belong to them--are writing from a much broader timeline perspective than the day to day "analysists" of today.
I strongly believe that it is possible to enliven the field of consciousness, this "field of all possibilities" (Maharishi) for the benefit of all. And I am admiring the astonishing endavours to concentrate many thousand young indian pundits at one place for producing "the effect" (http://www.panoramio.com/photo/83230531) very soon: first for India which is in such a need for a "Great Leap", then for the world.
Some months ago I thought the onset of FG as a function of enlivening the field of consciousness.
No it is not: It is one side of the coin of a huge historical tidal wave which will include still many more things, not only money, currency and wealth.
Yes it is: Without a great leap in the quality of consciousness FG would dissappear as soon it arrives, in favour of a Third World War. Because those who lose most when all the gold futures implode into nothingness--are they not mighty enough to stop it with a help of some other big turmoil?

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