Monday, February 11, 2013

Think like a Giant 2



"Think that I a fool, because I trade gold for thousands US an oz.?
You will think much on this in the future."
-ANOTHER


"Something that Big Trader or Another said a long time ago about trading gold off market in the thousands. Trust me, it's there somewhere way back in the pre USAGOLD days. It seems that gold was then and is today traded between countries, CBs, special accounts,,,,,,, at not only contract prices but in the "perceived prices" that would exist in a non-dollar world. Hard to believe? Don't be so quick to laugh. We are talking about gold traded in large amounts on the "possibility" of a no dollar reserve world,,,,,, gold moved from "under the skin" to "under the skin" so to speak. […]

Today, gold is worth far more than its traded contract price,,,, and has been for some years. […]

Listen to this and listen closely: "the real value of gold today is based squarely on the probability of whether the US dollar can survive as a reserve currency"! No problem, you say? Well, you may think a little different in a few weeks or years. […]

In some cases more than a few people have "done the math" and come up with some startling probabilities and possibilities. In some perceptions, it's a political certainty!"
-FOA


In Legs there was a quote from Another that mentioned the "discount trade" in gold: "If gold rises above its commodity price it loses value in discount trade." In the comments under the post, Woland asked about it:

Woland said…

I have a question about the specific meaning of a phrase quoted in a paragraph by Another;

"[Central] banks do lend gold with a reason to control price. If gold rises above its commodity price, (me: cost of production) it loses value in discount trade".

My reading of this is that "discount trade" refers to oil sold BELOW the currency price OIL would otherwise demand, in return for gold being made available to OIL at a price far lower than would otherwise be possible, without the CB leasing/intervention. Is this the correct interpretation of the phrase?

(I am reminded of the old example by Another of $30 oil plus X amount of gold, then later the same $30 plus XX amount.)


January 18, 2013 at 11:08 AM

I responded to Woland with this comment:

Hello Woland,

My reading is that "discount trade" refers to the BIS deals in physical gold at a "discount" to the "future reset price", deals that kept the really big money wanting real gold from blowing up the paper markets and the "plan" to make it to the euro's birthday party. In the 90s, the "discount price" ranged (according to ANOTHER) from $1,000 per ounce up to $6,000 per ounce. This was a big discount on the "future reset price" of $10,000 and the real future dollar price of $30,000.

Of course he may have simply meant the low commodity price of gold when he wrote "discount trade." But I put the emphasis on the word value: "…it loses value in the discount trade." The value was the control it gave the CBs in managing the Giants. The wider the gap between gold's "price" and its obvious "value" the more room the BIS had to negotiate deals that would keep the Giants happy. Here, I'll try to make my case using ANOTHER's own words! ;D

First, let's look at the deal the Saudi's cut for themselves in the early 90s which you mentioned above. Here's how ANOTHER explained it:

Date: Sat Oct 18 1997 21:04
ANOTHER (THOUGHTS!) ID#60253:

The Deal:

We ( an oil state ) now value gold in trade far higher than currencies. We are willing to use gold as a partial payment for the future use of "all oil" and value it at $1,000 US. ( only a small amount of oil is in this deal ) And take a very small amount of gold out of circulation each month using its present commodity price.

If the world price can be maintained in the $300s it would be a small price for the west to pay for cheap oil and monetary stability.

The battle is now between CBs trying to keep gold in the $300s and the "others" buying it up. In effect the governments are selling gold in any form to "KEEP IT" being used as 'REAL MONEY" in oil deals! Some people know this, that is why they aren't trading it,, they are buying it.

Not all oil producers can take advantage of this deal as it is done "where noone can see". And, they know not what has happened for gold does not change in price! But I tell you, gold has been moved and its price has changed in terms of oil! For the monthly amount to be taken off the market has changed from $10 in gold ( valued at $1,000 ) /per barrel to the current $30 in gold /per barrel still valued at $1,000! Much of this gold was in the form of deals in London to launder its movement. Because of some Asians, these deals are no longer being rolled over as paper!

First of all, they said they valued gold at $1,000/oz. in this deal and took $10 worth of physical off the market per barrel for a "small amount of oil." This was in the early days of the deal (c.1991). $10 is 1/100th of $1,000 so they were taking 1/100th of an ounce per barrel. In the early 90s the Saudis were producing about 9 million barrels per day. ANOTHER said that starting in 1991 they were taking about 20 million ounces of gold per year off the market through this deal. 20M ounces X 100 = 2 billion barrels of oil per year. Divide that by 365 days and it looks like the "small amount of oil in this deal" was 5.5M barrels per day, or about 61% of their production.

20 million ounces at $360/ounce would have cost $7.2B. At $1,000/ounce it would have cost $20B. 3.3B bbls of oil sold at $30/bbl would have brought in $100B per year. So let's say that they came to the negotiating table in 1991 saying that 20% of their production was "net-production" or surplus for which they needed a real wealth reserve (gold) in return.

There were two options on the table. To use ANOTHER's first example, they could lower the dollar price of oil from $30 to $25, but also price oil in gold at 1/400th of an ounce per barrel. Here's how ANOTHER put it:

What if the oil states offered to buy gold with oil, OUTRIGHT? No currencies involved. " We will produce flat out, all the oil you want. And, we offer this oil as payment, per barrel, to buy ( say? ) 25US dollars or gold priced by us, at ( say? ) $10,000oz.!"

The answer is very simple, the world would sell them gold for oil. I tell you now, this almost happened!

If that had happened, as ANOTHER said, anyone with gold would have gotten oil really cheap. And the gold arb would have immediately taken gold to $10,000 per ounce. The Saudis could easily exchange gold to cover their overhead costs and save their 20% excess without a problem. The problem for the CBs would be that the world would be off a fiat standard and back on a gold standard a decade before the euro's birthday party.

The other option on the table was, let's not rock the boat just yet. At $30/bbl, you want to save about $20B in gold each year. At current prices that would be 50 million ounces or 1,555 tonnes per year. But you saw what happened in the late 70s. Obviously you can't just go to the market and get that much—in other words, obviously the price of gold today is bullshit. Obviously it's going to have to reset at a much higher level someday, we'd just prefer that day not be today.

So let's see if we can figure out a way for you to take, say, 20M ounces, or 622 tonnes per year off the market as long as we can keep the price of gold low so as not to rock the fiat currency boat. We'll even underwrite (guarantee) this deal with our own gold (and we have lots of it!). From what you, the Saudis, obviously understand, this is an excellent deal for both of us, especially if the gold you get comes from someone else and not from our vaults. But either way you're covered. Deal done!

I guess we will never know the exact deal, but ANOTHER sure spilled a lot of details in his early posts if you look closely!

Now let's see what ANOTHER said about the discount trade in gold:

"As long as there is an open market for gold, it will not be allowed to trade above its commodity price! It has far too much value for that to happen. You see, in much the same way that a zero coupon bond trades at a discount to face, gold is traded for its discount of "money value to commodity price! Think that I a fool, because I trade gold for thousands US an oz.? You will think much on this in the future.

[…]

With gold discounted to its production cost and below, those that have it can trade it for its monetary value. Make no mistake, the BIS knows gold in the many thousands. The future "reset value" of gold is the key. "support the dollar with oil and the currency system works" "fail the currencies and the dollar will come off the oil standard and the BIS will reset gold to $10,000+ with many conditions. That is why they continue to accept the dollar as a reserve. If Japan or any other COUNTRY sells US treasury debt it's all over!"

[…]

The selling of old dollar reserves, alone will reprice gold in US$ terms of at least $6,000/oz! Its present interbank reserve value.

[…]

The $6,000 valuation of gold can only be true if currency deflation destroys enough dollars to bring it down to that range. Without deflation, the dollar will be devalued much lower than this (higher gold price)! Once the Euro is created and begins to effect world trade (late 1999 perhaps), the gold market will begin a transition as never before! I think it will be interesting to follow the politics of this change, yes?

[…]

When the battle to keep gold from devaluing oil ( in direct gold for oil terms ) is lost, the dollar will find "no problem" with $30,000 gold, as it will be seen as a "benefit for all" and "why did noone see this sooner"?

[…]

The true value of gold, as a monetary currency, in today's current US$ values, is over $30,000. If all currencies were destroyed, and gold only was used, this value would be higher. However, currencies will be used in the future, as today, only their value in trade will change. They will no longer be held as reserves, without gold at their side!

Okay, so if you've got really big money and you want to protect a large portion of it in physical gold, you've got to pay what to us shrimps would be a big premium. But to the true Giant it is actually a discount.

Imagine, Woland, that you woke up one day and discovered that you owned an oil field that would produce millions of barrels a day for the rest of your life. Would you consider that a windfall? In fact, that's exactly what it is. And with that windfall you will be able to raise your standard of living up to the greatest standard available to mankind in 2013. You will even be able to accumulate wealth on top of your unlimited "maximum consumption" binge. What a rare treat!

But what you won't be able to do is get the full windfall profit from moving your excess into physical gold that we shrimps can get. You already got your windfall. You simply have too much money to do what we're doing. If you tried to go "all in", you alone would drive the price so high that you'd never get the windfall you were after. Go ahead, try. Approach your local Bullion Bank and see how far you get. I bet you'll eventually find yourself in a private room somewhere in London receiving an education and an offer. What seemed like a huge premium when you walked in will feel like a big discount by the time you leave.

When ANOTHER used terms like discount (and even premium) in this context, I think he was usually referring to gold, and I don't think he was talking about the 10% and 20% premiums and discounts we shrimps are used to. I think he was talking about Freegold-sized premiums and discounts. Remember this fellow from the post?

"A proposal was offered to borrow in broken lots, 3.5 and 5.5 million ozs for resale. It was turned down. The owner offered to sell only, no lease. What turned heads was that someone else stepped in and took it all, at a premium!"

I wonder what premium he got. That's the same 9,000,000 ounces I mentioned later in the post converting it to 280 tonnes. Remember ANOTHER saying:

"Think that I a fool, because I trade gold for thousands US an oz.? You will think much on this in the future."

Think now! I wonder if this guy got "thousands US an oz." when he was expecting $310/ounce. Let's see, that was a $2.8B sale offer at $310. At $1,000 it would have been $9B. Yeah, I guess that would turn some heads.

Woland, have you noticed that in ANOTHER (THOUGHTS!) there are many times when ANOTHER gives brief replies to various people yet we don't always know the question that was asked or the context in which it was asked? Well, I added the link to the old Kitco archives to my list of links in the sidebar. It's called Early Kitco Forum Archive.

It's pretty easy to click over and find the comments associated with ANOTHER's answers, and I think it adds a new dimension to (THOUGHTS!). For example, here's a discussion about that 9 million ounce deal, but you wouldn't have known that's what it was about from reading only ANOTHER's side of the conversation. I included a little more of the discussion for additional context (and also just because it was interesting), so enjoy!


Date: Fri Dec 12 1997 22:18
sweat (To Anybody) ID#23782:


Is there any way to find out if the 9,000,000 oz. deal really happened?

Where might the trade have taken place?

Is this whole gold trading business really that much "cloak and dagger"?


Date: Fri Dec 12 1997 22:31
ANOTHER (THOUGHTS!) ID#60253:

SW,
What is "cloak and dagger"?


Date: Fri Dec 12 1997 22:54
sweat (ANOTHER) ID#23782:


"Cloak and dagger" is an expression I would use for an action ( or trade ) done in great secracy.

My experience as a trader has taught me to value such things as
a ) time and sales - as reported on various exchanges
b ) open interest - as reported on various exchanges

The market always moves to size, you spoke of "making the turn". I would love to see documentation of a trade that size.

No offence intended, of course.


Date: Fri Dec 12 1997 23:08
ANOTHER (THOUGHTS!) ID#60253:

SWEAT:
You will not see 80% or more of gold deals. If it was done with all to see the discount value would be lost as the world price would explode. This is not the relm of any public “wall street”. At one time it belonged mostly to the Barron. Now it is large with the BIS and super rich. Wars will be fought over the lack of “visibility” of these dealings.


Date: Sat Jan 10 1998 21:50
sweat (ANOTHER) ID#23782:


What quantity of GOLD, paper or physical, has OIL traditionally purchased on an annual basis? How much paper GOLD is out there ready to be squeezed? Do you think OIL will be able to collect what is owed to them?

Why would OIL not want some ownership of GOLD EQUITIES?

Date: Sat Jan 10 1998 23:13
Cmax (COMEX is only but a refernence to the value of paper gold, NOT physical.) ID#344205:


It is interesting to watch all these various reasons for gold’s fall…..but most are missing the REAL issue.

The fact is, that when we talk about the purchase of gold, we are really talking about two divergent things:
a. that of the physical metal……… ( money )
b. that of a paper derivative, an I.O.U., kind of like a dollar bill…… ( currency )

What ( and who ) determines the price every day of the gold market?

Obviously, everyone looks first to COMEX as a reference before adjusting their prices.

What does COMEX use?

Supply and demand determined by it’s participants, who trade in gold contracts ( er ah, derivatives? ) , gold leases, and options and futures ( er ah, derivatives of derivatives ) .

One point must be plainly put forward:
Gold contracts, no matter what they are printed on or HOW they are worded, they are merely DEBTS, nothing more than a simple I.O.U. There is nowhere near enough gold on the planet to satisfy all these I.O.U.’s ( debts ) that are outstanding…….. and they are the very antithesis of what acumulators ( hoarders ) of wealth find in the spirit of holding real gold ( money ) .

I find it so wildly insane that holders of physical gold, ( money ) , would allow their wealth to be sold ( or valued ) at a price that is established by the supply of FIAT gold. If this scenario was written into a novel, no one would believe it……. or one would read it only as a comedy.

ANOTHER said it quite well, in his comment that “there is no end to the amount of paper gold that can be created.” All of this FIAT supply has overwhelmed the REAL demand for physical, and most people believe that they REALLY have purchased gold, when they buy these contracts. As long as the majority of gold purchasers believe that their paper is as “real” as physical, the COMEX paper gold value reference will continue to drop.

I for one, no longer accept established paper gold values for the real value of gold. Just try and buy a substantial quantity of the yellow……and what do you see? 6 months ago, you could buy at spot. Today, one ounce coins have a premium of $14 over spot….and rising every day. Oh, and don’t forget that even when paying the “premiums”, one has to really work at finding the coins for delivery. Easier said, there is now a phenominal demand, but very little supply of physical. And yet we allow paper to determine gold prices. Gold has never had the brute demand as what we have today……yet we are told that prices are down due to lack of interest.

COMEX should now be looked upon as the animal that it really is……
A REFERENCE TO THE VALUE OF PAPER GOLD. It has nothing to do with the price of physical beyond suckering in the few ignorant to sell there physical for the price of paper.


ANOTHER (THOUGHTS!) ID#60253:

CMAX: You are exactly correct! Follow your thoughts. good luck

SWEAT: What quantity of GOLD, paper or physical, has OIL traditionally purchased on an annual basis?
From 1991, appx. 20m/oz./yr., now it is more.

How much paper GOLD is out there ready to be squeezed?
Over 14,000 tons.

Do you think OIL will be able to collect what is owed to them?
It will come outright or thru the increase in value of metal owned after an oil for gold bid.


Date: Wed Feb 04 1998 20:09
kuston (followups) ID#273227:


Another - Did I misunderstand you posts last year? When you were promoting your gold theory last year - you stated silver and platinum would crash along with paper. I remember specifically asking this question just before I made a large physical purchase. Today, you are promoting world wealth will go into all physicals. I ask only for personal reasons. My physical collection has been going on for a long time, that's how I found Kitco many many months ago.

Date: Wed Feb 04 1998 20:04
sweat (ANOTHER) ID#23782:


Is it still possible that OIL will make a bid outside the BIS? If so, where might one look to follow this drama? How has the collection of physical progressed? Kitcoites have surmised RBA's 167 tonnes went to China or South Korea. ( Korean collection of 161 tonnes looks suspicious ) Any comments?


Date: Wed Feb 04 1998 23:23
ANOTHER (THOUGHTS!) ID#60254:

REPLYS:

Mr. Sweat,
If oil or the BIS bid for gold, you will know it ! In your terms,

" up front and personal"??

RBA's 167 tonnes ? No comment.

Mr. Kuston,
Please understand, that wealth will move into all forms of real assets as the destruction of our debt/ digitial currency system continues. When the currencies move to a final resolution, it will be the "marketplace for precious metals" that will die first! It is well known that gold will hold it's value above everything. All other metals could lose much of the value they gained prior to this meltdown! Remember, "when the currencies go to nuclear war, all paper and paper markets will burn"! Many hard assets will lose in the public mind as confusion will rule. In the thoughts of many, gold will perform!
______________________________________________________


The discussion above sparked an email exchange with a reader, the conclusion of which I wanted to share with you:


Hello XXXX,

Okay, now I think I see where you were going with this "top level approach". Here's what I think. At the highest level of wealth, I think the giants that understand gold have a lot less than 50% of their wealth in gold at today's price. At a Freegold price it may be closer to 50%, but I doubt they would book their gold at Freegold prices now, or even at the much higher off-market price they paid.

At that level, gold is merely insurance of sorts, even if they understand Freegold, and especially if they understand Freegold. The reason it is transacted at a higher-than-market price is so that the seller of the gold gets the future Freegold windfall now at the time of the sale, and the buyer simply preserves his current purchasing power through the transition. I'm only speaking very roughly, of course, since the higher prices mentioned by Another were not the full revaluation figure, but some number in between. So essentially the "Freegold windfall profit" is being split between the buyer and seller at the highest levels.

If you have, say, $20B that you want to put into gold, you can only do so in paper unallocated through the BBs. When the revaluation happens, as Another said, you will get your $20B in real gold at the new Freegold price. In other words, you buy $20B in unallocated paper gold today and then after Freegold you will have about 11 tonnes of real physical. Alternatively, if you want to take possession of your physical now, or have it allocated now, you are taken into a private room and given a very private education on the realities and constraints of today's gold market.

Here's my guess. Perhaps you are given two choices. $20B in paper gold as above and you suffer the same fate as everyone else in paper gold but you're at least guaranteed that physical at the revaluation price (11t), or you can take 22t now for your $20B. Let's see, that 22t option would be at a present price of $28K per ounce. So you're still likely to double your wealth if you take the latter deal and believe the story. But there's no way you are going to get the 370 tonnes that today's price says you should be able to buy.

But more likely than that is they simply say, look, you can't get more than 5 tonnes if you want physical. If you want paper gold, we'll take your $20B and give you the paper gold credits, but you can't have it allocated because there's simply not enough physical to go around. So let's say this guy gives them his $20B and also gets the 5t allocated. Come Freegold his paper gold will bring him 9.9t plus he'll have his 5t allocated for a total of 14.9 tonnes. See how that outcome is right in between the two choices above? And the best part is that this way they didn't have to explain Freegold to him, they simply had to explain the realities and constraints of today's gold market.

So now let's look at this guy's net worth. Let's say in Freegold his gold is roughly half of his net worth. 14.9 tonnes in Freegold would be about $26B, so let's say this guy is worth around $50B in Freegold. Maybe he's worth $40B today (pre-Freegold) because he's going to make a little bit of a gain (~25% gain overall) through the transition because of his choice to go after some physical gold. Today he only has 5 tonnes in actual physical, but in reality he has the equivalent of 14.9t because he put half of his net worth into a combination of paper and physical gold.

So, at $1,680, 14.9 tonnes is $805M, which represents only 2% of his current net worth. This is what I mean by insurance. The really big money cannot go deep enough into physical to get a windfall anywhere near what we shrimps can. It can only use gold as insurance to preserve what it already has, and with a little foresight, make a relatively modest gain.

Now, if we apply this across the board to those elites with $35T in net worth, 2% in real physical would be $700B or about 13,000 tonnes of physical, which sounds reasonable. But perhaps some of them have much more, like, for example, the Saudis. They could easily have 6,000+ tonnes alone (according to Another's figures), but even that is small potatoes compared to what they could have bought at market prices over the years.

Here is what the USG worried about back in 1973. It's from Foreign Relations of the United States, 1969-1976, V. XXXVI, The Energy Crisis, 1969-1974:

Saudi Arabia, Abu Dhabi, and Kuwait, limited by small populations, inadequate numbers of technically capable people and a dearth of non-oil resources, will not be able to increase spending on imports as fast as oil revenues mount. Nor could their gifts to other Middle Eastern nations even on a generous scale, greatly reduce this surplus of receipts over current expenditures.

Thus the foreign assets of the Middle East countries could amount to between $50–$80 billion by 1980 in constant 1973 dollars. At the upper limit these assets would be equal to about 60% of the world’s gold and foreign exchange reserves in 1972. The trends already in motion, if continued through 1985, would result in the Middle East oil producing states accumulating foreign assets that would be truly astronomical. Their assets would range from a low of $100 billion to as much as $180 billion by 1985, comparable to total gross U.S. foreign assets and to more than double net U.S. foreign assets.

Foreign assets of such enormous magnitude would inevitably be held in relatively liquid forms, such as securities and short-term instruments. The Middle East countries lack the industries and managers to make direct investments abroad on a really massive scale. Moreover, their buying up existing foreign companies would cause strong policy reactions.

In any case the Middle East oil producers would have unprecedented financial power. Discretionary use of such vast assets obviously has enormous potential for disruption of financial markets. Attempts to neutralize these assets through capital controls in producing countries might induce the producers to curtail output.

Footnote:
In an April 17 briefing memorandum, Saunders and Quandt reminded Kissinger of Yamani’s proposal for a special relationship with the United States (see Document 140), the “real purpose” of which was to develop closer strategic ties by binding the United States to Saudi oil, offsetting a short-term U.S. balance-of-payments problem by investing in the United States, and thus guaranteeing that the Saudis would not cut off the flow of oil.

The point here is that they knew, even back in 1973, that the Saudis essentially had gold cornered. The Saudis could, theoretically, have had 60% of the world's gold by the early 80s and probably all of it by the late 80s (and it's a good thing for them that didn't happen). But instead, someone worked out a deal and, by 1999, let's say the Saudis had 6,000 tonnes of physical amounting to maybe 4% or 5% of the world's gold at that time, rather than all of it or even 60% of it.

You see, the Saudi's windfall came in the 1940s when they woke up and found themselves sitting on top of the world's richest resource. Freegold will not be their windfall, they already got that long ago. Freegold will simply preserve it for them long into the future, perhaps even well past the end of fossil fuels. And that's kind of the way it is for any Giant at that level. If you're worth $40B today, you already got your "windfall" and Freegold is simply a way to lock it in and preserve it far into the future, it is not a way to multiply it many times over. The realities and constraints of today's gold market make that impossible.

There's plenty more that wealth at that level can do other than just hoard gold:









The point is that they don't hoard gold for profit. They do it to lock in the profit that they already made above and beyond their ability to spend it in their lifetime. And that's the way the gold market has been managed at this level. Sure, they will get some gain, some profit from the Freegold revaluation, because not everyone at that level is in gold.

So, yes, those higher prices are already here for the super-wealthy Giants, and always have been. That's what Another was trying to tell us. And this is my version of a "top level approach"! ;D

Sincerely,
FOFOA

Hello Fofoa:

Wow! Thanks for a really comprehensive answer. The "back room" explanation was vaguely familiar, so I'm sure you're dealing with questions already asked and answered. Your email read like a personal post, and I'm going to go back and re-read it several times until I get it all. This bit...


"freegold windfall profit" is being split between the buyer and seller at the highest levels...

is a great explanation, of a more scrambled thought I had, but this...

they don't hold gold for profit

is a Goliath idea: nothin' like that ever entered my head before! Both concepts would be very bloggable, by the way. Thanks again, and all the best!

XXXX



762 comments:

1 – 200 of 762   Newer›   Newest»
Tyrone said...

Bring on the Giants... errr... I mean FreeGold.
Cheers!

Wil Martindale said...

I think a lot more light bulbs will go off with this one. :)

Wendy said...

Tyrone, reveal thy self!!
;)

Wendy said...

FOFOA,
I really like this post, it brought in elements of several past posts in a new way.

Nickelsaver said...

I wonder how of those that indicated doubt in the credibility of A/FOA ever read A/FOA. And if so, put themselves in the mindset of that timeframe.

They called the bull-market. They called the Euro's roll in that. If someone came out today with this message, we might be inclined to call it hindsight.

But they called it because they were in the know. And they were in the know because they either knew Giants, or were Giants themselves.

We walk in their footsteps...

Victory said...

Marvelous....simply Marvelous!

-v

anand srivastava said...

That explanation of the splitting of the freegold profit was really great. It makes complete sense.

Rien said...

One of your (many!) best posts!

Wil Martindale said...

One game for giants, another game for shrimp.

Now fast forward to 2013 where dollar commitments have already breached the 2008 "almost end-time" and exponentiating from there.

What premium now?

TIME is what is bought. TIME to move mountains of gold AT A TRICKLE using the public game of shrimp.

As for currncy wars, from the G7:
We are agreed that excessive volatility and disorderly movements in exchange rates can have adverse implications for economic and financial stability. We will continue to consult closely on exchange markets and cooperate as appropriate."

Translation: We will carefully rotate relative exchange rate fluctuations in a moderate and orderly fashion so as to maintain CONfidence in our ability to sustain the current system.

CONfidence to sustain, CONfidence to buy more TIME.

Gold is not the only asset to be bought for pennies on today's immensly overvalued dollar.

Some G(7)iants do have enough already ... ;0)

SugarLover said...

I for one eagerly await 'Think Like a Giant 7', following 3,4,5 & 6, and due in 2016.

The effort and time required to throw together A/FOA posts, one's old posts/comments, and a speculative email is truly mind-boggling, and I feel it merits further hefty donations to keep the business...oh sorry, series going.

Wil Martindale said...

"Troll Finger" as sung to the tune of "Goldfinger", and only 24 hours to pen the words.
Now there's a challenge ...

gary said...

I remain 'less' unconvinced. :)

Wil Martindale said...

Troll Finger,
I'm sure he thought of it long and hard, but there does come a time to act, or are you saying that single large purchases simply never happen. Is that the picture YOU are trying to paint?

There is a usefulness to the role of Devil's advocate, up to a point ...

And you are quite correct in that gold is not the only asset to be bought for pennies on today's immensly overvalued dollar.

And also correct that a massive movement of say, wheat or pork bellies can be self-defeating for the buyer.

But what is the point here? That only gold is in such demand as to test those limitations ?

If so, point well taken.

Jeff said...

AD,

The title is Think Like a Giant. You ignore the concept of diminishing marginal utility; you never had a need for a real, long term SoV. You have stated before that you will just close your business if you can't save your value. What would happen if super producers took your selfish antlike view?

FOFOA: "Gold’s value really comes from intergenerational Giants who have no need to ever sell it. They really just net-produce and net-produce and they do it willingly for more and more gold, and then just sit on that gold until they die and pass it on to the next generation. And they will keep doing this no matter what the $PoG does. They're not buying it for its weight, but for proven long run currency exchange value! But if there’s no flow for them to get some, then they have to buy things like extra castles and cars and stuff that drives up prices and drives down everyone else’s purchasing power."

AdvocatusDiaboli said...

Jeff,

"What would happen if super producers took your selfish antlike view?"
Pretty easy: They will be seized and/or killed.
Or do you buy into that crap of weapons of mass descruction, "war on ...." and all that other BS?
Greets, AD

Jeff said...

So it isn't in their interest to crash the paper gold market, stop producing, or buy other goods driving up the price for other people, as they will be 'seized or killed'?

Maybe that's why they don't do it, then.

Robert said...

Making a distinction between giants and shrimps is a good pedagogical tool, but does the world neatly divide into giants and shrimps? We have stretched it a bit to acknowledge that there are "small giants" as well as "jumbo shrimps." Is there anything in between? It's an important question because we are talking about one of the greatest arbitrage opportunities of all time. Giants might not care if and when the paper markets freeze up, but there are plenty of big players who would attack the two tier price structure in a heartbeat if it were as fragile as we think. Why haven't they done so? Are they still afraid of the CBs?

Indenture said...

SugarLover said, "The effort and time required to throw together A/FOA posts, one's old posts/comments, and a speculative email is truly mind-boggling, and I feel it merits further hefty donations"

Sir, I couldn't agree more! It is incredible that FOFOA can scour the archives and pull out the relevant posts to weave the tapestry of his dialog. I have donated in the past but have neglected to contribute recently so thank you for reminding me just how valuable this service is to my families future security. Thanks Sugar and Thank You FOFOA.

Alex in Montana said...

FOFOA,

1) If gold is more valuable than foreign currency and other paper reserves.....
2) and if Russia, South Korea, China et. al. are buying it, trading our Treasuries and other foreign currency reserves for physical metal....
3)then why doesn't our FED buy some also? They can print worthless confetti with the click of a mouse, so why not buy gold quietly.

Everyone realizes that China has bought up to a few thousand tons since they last reported having 1,054 tons some 4 years ago and they now have maybe 3,000 tons as suggested here:

http://www.moneymorning.com.au/20130211/how-much-gold-does-china-really-have.html

Are Bernanke and Obama stupid?





Jeff said...

Why should that ever change?

The only permanent solution is to fully value gold. Deals that undervalue gold inevitably fail because gold doesn't flow freely.

ANOTHER: It was once said that "gold and oil can never flow in the same direction". If the current price of oil doesn't change soon we will no doubt run out of gold.

Beer Holiday said...

@SugarLover

I'm Donating to FOFOA to offset the bad karma that you spew forth upon the comment section. Bad karma needs to be counterbalanced, and you have more bad karma than anyone I know.

Polly Metallic said...

A very good Thought provoking post, as always. In a prior post, the concept had been discussed that Giants would not liquidate their gold after a revaluation since their main object is wealth preservation, and nothing does this better than gold.

This post covered that important theme again as well as highlighting the concept that pre-Freegold transactions of gold “in size” benefit both the buyer and the seller. Having an example to see how that worked for both parties was an Ah-ha moment for me.

Wil Martindale said...

Alex,
I believe China has FAR MORE than 3000 tons. As for the Fed, their prime objective is to keep their primary dealers solvent, therefore they are a key proponent of the dollar faction, but I do understand where you are coming from.

At what point does the Fed show it's true colors? It is strange indeed to be linked so intrinsically to both the US Treasury AND the BIS.

Politics does breed strange bedfellows.

AD,
I think the point is that there are TWO MARKETS, one of size and one of shrimp. It doesn't matter who buys 20B in paper gold, or whether it moves the price of paper, that is irrelevant to the PGA. But a lucky Lotto winner could get an education pretty quickly if he wanted to gun the physical market.

I don't have 20B (or a sea of oil under my basement) to test the backroom theory with, but there are Giants who hold US paper (and not just dollars) which they could also just "sell all at once" as part of this market. A good move do you think?

The wheels of change move slowly, and the forces of status quo do work together to keep it that way. it's not a conspiracy, just common sense and self preservation.

Alex in Montana said...

Fingerprints and mug shots are now required to sell gold in Houston,TX per Houston City Council

http://abclocal.go.com/ktrk/story?section=news/local&id=8982844

Obama could do the same thing in 5 seconds with an Executive order on a national scale. The government will not die a quiet death when faced with bankruptcy and that goes for Japan, France and the UK as well. It's just a matter of time.

Polly Metallic said...

Alex:
Many similar laws have been in place throughout the US at pawn shops and other Cash4Gold type venues. Typically these laws have been passed in larger cities where theft is all too prevalent.I don't disagree that future laws could be passed that track sellers, but my point is that currently the paperwork is filed in case the police need to track someone's stolen jewelry. The paperwork isn't turned over to government agencies so they can monitor who does or does not own gold.

duggo said...

@FOFOA

How does a government buy Gold?

The UK has supposedly only 300 tonnes. So if the UK wants to buy more Gold what do they pay with and where do they get it?

If governments can buy Gold with "fiat" why wouldn't the UK with the Bank of England secretely print-up a few £billion and buy Gold?

Motley Fool said...

Hmm

How does the control of revenue work in Saudi Arabia? Did the king control all 9 million bpd in 1991, or did he only control 5.5 million bpd? Is that why the deal was only made for some of the oil? 61% does not seem like a small part to me regardless.

TF

athrone said...

FOFOA,

1. If Another was a whistle-blower, why did he use convoluted prose instead of simply providing a transcript with gold transactions?

2. What other interpretations are there to Another's story of Gold, aside from the desire to turn a bunch of forum posters into millionaires?

3. Central Bank Gold is ~30,000 tonnes. Private Gold is ~140,000 tonnes. If we believe Another, some subset of the former trades at a 300%+ premium, whereas the latter apparently trades at spot. This works out to an average premium of < 50%. Is a 50% higher price in Gold really that far farfetched that we need some 20 year conspiracy to make it work?

4. Is Gold still traded at a 300% premium? By whom? How did they keep it a secret for 20+ years? What the the personal holdings of the people who are likely involved? Is it possible to prove they own Gold themselves? Anyone secretly trading Central Bank Gold at a 300% premium would surely be investing in the same thing with their own money...

5. You said "so if you've got really big money and you want to protect a large portion of it in physical gold, you've got to pay what to us shrimps would be a big premium" What Giants exactly are you talking about? Warren Buffet seems to do just fine with his wealth, without investing in Gold. If what you imply with your quote is true, not only Central Banks, but also private billionaires are in on the conspiracy.

6. Saudi Arabia produces 11M bbl per day. At $100/bbl that is 1.1 Billion a day or 400 billion a year assuming 100% profit. Sounds like a lot until you remember that Oil is 90% of their GDP aka they have nothing else going for them. At 8 million people that works out to less than 20k per person. Why do we need a 20 year Gold conspiracy to explain the wealth of a country that is less than 20k per capita? 20k per person is not a "Giant" so again, who is a "Giant" if not Saudi Arabia and Warren Buffet?

Jeff said...

duggo,

5/5/98 ANOTHER (THOUGHTS!)

A: The BIS is the gold broker for all interbank sales/purchases. Bullion Banks are for sales to other entities. I think, at first, China was leverage against the oil producers. Then Arabia was allowed into BIS for Euro.

Q: **One other item you might clarify for me is "Who is really behind BIS?**

A: Perhaps, "who control them"?

Q: **The Swiss?

A: Yes.

Q: **The eurocentral banks?

A: Yes.

Q: **Who does BIS really represent?

A: "old world, gold economy, as viewed thru modern eyes" or " way to move from US$ without war".

Q: **Why was Saudi Arabia just included in BIS?

A: answered.

Q: **Has Saudi Arabia gone with Europe?

A: Yes.

Motley Fool said...

"For the monthly amount to be taken off the market has changed from $10 in gold ( valued at $1,000 ) /per barrel to the current $30 in gold /per barrel still valued at $1,000!"

This part also still bugs me. It says the price changed from the start of the deal at 1/100th ounce per barrel to 3/100ths ounce per barrel by 1997.

So if they were taking off 20 million ounces per year in 1991, were they taking off 60 million ounces by 1997? That seems incredible.

TF

jojo said...

Hi Sugarlover...I mean Gary.

Gary you are even more of a doucher.
Gary also spams with these names too:

SugarLover
60253 (FakeAnother)
90days
Brian
Steven Feldman
poodlejim
MadeItUpCentury

Why do you still come here GaryBrianMadeItUpCenturypoodlejim90daysStevefeldmanFakeanotherSugarlover?

Jeff said...

FOFOA: ...according to Another's perspective at the time, it went something like this...

From 1983ish to 1993ish the gold market was maintained in a certain range ($300 to $500) using other people gold (not CB gold), and gold in the ground through the forward sales game. Remember, Barrick was created in 1983.

In 1993, (right after the Gulf War as Another says), we have the Larry Summers Gibson plan kick in on Aug. 5, 1993.

So we have a relatively wide trading range of $300 to $500 in the 1980's, which settles down to its median around $400 after Summers comes in.

Then in 1996 something happens. According to Another this is when additional pressure is put on "the deal" as some non-oil-producers get in on the action, but only on the dips. This causes renewed volatility and the gold managers take the price down just like they did last night, to show these "bulls" that they are buying a losing asset.

Big trader (one of the non-oil-producing giants) warns that if they take it below a certain level that they are going to have to greatly increase the paper volume just to maintain the facade of the paper market.

This happens.

Another then warns that this paper volume explosion is going to have to be followed by a commensurate physical volume. In other words, either the CB's will have to become primary suppliers or the whole charade will blow up.

18 months later Gordon Brown announces the BOE sale. But the actual movement of gold is spread out.

4 months later the POG is rising again and the GOFO is approaching backwardation. There is an incident about which Edward A. J. George, Governor of the Bank of England and a director of the BIS later wrote:

"We looked into the abyss if the gold price rose further. A further rise would have taken down one or several trading houses, which might have taken down all the rest in their wake. Therefore at any price, at any cost, the central banks had to quell the gold price, manage it. It was very difficult to get the gold price under control but we have now succeeded. The U.S. Fed was very active in getting the gold price down. So was the U.K."

This "event" was the only known case of backwardation in the gold market in a generation. It can be seen in this graph, about which Lance Lewis wrote:

"Some entity with physical gold bullion was willingly taking losses to induce bullion borrowing, even as prices rose."

This massive intervention (by the BOE?) in Sept. 1999 somehow managed to keep the trend under wraps for two more years, at which point gold resumed its rise to its current level.

Frank Veneroso's independent research of the CB gold actions during the mid-90's corroborates Another's story.

jojo said...


athrone said...
FOFOA,

1. If Another was a whistle-blower, why did he use convoluted prose instead of simply providing a transcript with gold transactions?

So, you are the writing police? Fudge you.

2. What other interpretations are there to Another's story of Gold, aside from the desire to turn a bunch of forum posters into millionaires?

No other interpretations, you nailed it on the head. This was the first get rich quick scheme and now you have spoilt it.Doucher.

3. Central Bank Gold is ~30,000 tonnes. Private Gold is ~140,000 tonnes. If we believe Another, some subset of the former trades at a 300%+ premium, whereas the latter apparently trades at spot. This works out to an average premium of < 50%. Is a 50% higher price in Gold really that far farfetched that we need some 20 year conspiracy to make it work?

Again, yes. Get rich quick schemes definitley require conspiracy to work fluidly. Are you also the SEC?

4. Is Gold still traded at a 300% premium? By whom? How did they keep it a secret for 20+ years? What the the personal holdings of the people who are likely involved? Is it possible to prove they own Gold themselves? Anyone secretly trading Central Bank Gold at a 300% premium would surely be investing in the same thing with their own money...

Whoa, you are past your limit of questions per number. WTF you think you are? Oh, you are the writing police, excuse me, I must answer you then.
Jon, Sayid, Achmed, Fiona, Heinrich and many others but those were the most recent and no you won't get their last names.
Shhhhhh....be very very quiet. We are hunting wabbits and keeping secrets...shhhh.....
Man, you are rude. Personal holdings are many and again, above your security clearance.
See last answer.
Surely?!?!? Now you call me Shirley?? Surely you, a trader and a shrimp, would be "investing" with your IOU's but you obviosuly have no clue about gold or wealth.



5. You said "so if you've got really big money and you want to protect a large portion of it in physical gold, you've got to pay what to us shrimps would be a big premium" What Giants exactly are you talking about? Warren Buffet seems to do just fine with his wealth, without investing in Gold. If what you imply with your quote is true, not only Central Banks, but also private billionaires are in on the conspiracy.

Damn athrone, you are nosey and presumptuous...are you American?? Must be. Or maybe you are overall world police??? Team Amerika, Fuck yea??
Not billionaires, Giants. GTFO you poser.


6. Saudi Arabia produces 11M bbl per day. At $100/bbl that is 1.1 Billion a day or 400 billion a year assuming 100% profit. Sounds like a lot until you remember that Oil is 90% of their GDP aka they have nothing else going for them. At 8 million people that works out to less than 20k per person. Why do we need a 20 year Gold conspiracy to explain the wealth of a country that is less than 20k per capita? 20k per person is not a "Giant" so again, who is a "Giant" if not Saudi Arabia and Warren Buffet?

Athrone.As a trader, you are hopelessly lost on this new way of thinking. You need to leave and don't come back. Now, y'hear?
If you do, please RTFB beforehand m'kay?

PaulB said...

Nice post FOFOA. You do us shrimp a real service with your writings. A / FOA predicted the bull market in gold unfolding; however, looking back at their writings it appeared that they thought the revaluation was closer in time than reality has proven out. I've personally wondered how the end game has been put off for so many years. In your mind what will be the trigger for a full revaluation? When do TPTB need to give up and allow it to happen?

Polly Metallic said...

Thanks, Jeff. I found that timeline recap very helpful.

Victory said...

MF,

'Is that why the deal was only made for some of the oil?'

My take was that the deal was only made for some of the oil because the remaining dollars were spent on the Saudis' standard of living, their 'maximum consumption binge?'

'This part also still bugs me. It says the price changed from the start of the deal at 1/100th ounce per barrel to 3/100ths ounce per barrel by 1997.'

Yea that bugs me too. It reads like oil got more expensive in terms of gold. If that is the correct interpretation then why?

-v

Edwardo said...

Yes, Alex, Obama and his fellow travelers in government could do what you suggest. As per Winston Churchill's observation that "You can always count Americans to do the right thing, after they've tried everything else" it is probably likely that A.) they will, B.) that they will fail miserably, and, finally, C.) that they will be disgraced and their persons and policies repudiated and replaced.

P.S. This could take a bit of time.

AD,

I want to congratulate you on your remarkable consistency, which strikes me as not dissimilar to that of a McDonald's Hamburger. Like the bloodless and rubbery patties offered up at The Golden Arches, your verbal servings are, regardless of time and/or place, always exactly the same, never wavering in their perfectly anodyne flavor, lack of nutritive heft, and aesthetic nullity.

I submit the following bit of gristle as evidence,

"But that applies to any commodity...


I can see it now, some giant, with a less than giant brain, will corner the market on, hmm, let's see, pork bellies, and a year's supply of them at that! Of course we'll need far more space than we would for the equivalent year's supply of gold, and, because pork bellies go off, we'll have to refrigerate them (and, sans installing a massive and very expensive backup generator system, pray that there is no power supply interruption of more than a few hours.) And that's just the start of the headaches with a foodstuff.

If only you had fries on your menu.

Polly Metallic said...

Could it be that as peak oil concerns faced Oil they would require a greater % of gold in exchange for a diminishing asset?

Michael dV said...

PaulB
the topic of timing has been discussed here at length. The quick answer is that China became a supplier of funds to the $IMF. They became important (allowed into world trade on equal footing) in 2002. Since they stopped buying treasuries in 2011, we now expect the clock to start ticking as it was at the time of Another's departure.
Hopefully others can give you specific references for Fofoa's writing on the topic.

jojo said...

Peak oil? I thought there was plenty in the ground and on purpose.

Michael dV said...

I simply do not understand why any troll would bother trolling here. We do not advocate any action (though it appears that holding physical gold is a conclusion many come to after reading here.)
Fofoa does not send his blog out for publication on a wider basis.
We do not get actionable investing advice. We are kinda boring.
Yet some people devote a lot of time trying to make a point....though it is usually unclear what that point is exactly. Those who object strenuously almost never tell us what they object to and those who do tell us are usually wrong about what was actually stated.
Maybe it is because they are jealous that we here will all be rich rich rich!!! but then we'd have to be right for that to happen.
I guess i just do not understand the troll psyche. Maybe I should start my own blog about that?

Pete T said...

Exceptional.... as usual....

Nickelsaver said...

Edwardo,

Valiant effort towards our recurring mantra AD. Of course, he has the answer to your pork belly dilemma, "Canned Beef".

---------

On Jumbo Shrimp -vs- Little Giants.

My perspective, shrimp are western thinkers, giants are not. Shrimp are new money, giants are old. Shrimp invest in finacial instruments, stocks, bonds, etc. Giants save in gold from generation to generation.

A jumbo shrimp may very well have paper worth on a scale equal or greater than the little Giant. The difference is in how they view savings. Habits are hard to break and to establish. Good ones even more so.

---------

Sugarlover meet Tranny, Tranny meet Sugarlover.

Now go get a room. Better yet, Tranny has a nice empty spot.

LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL

burningfiat said...

FOFOA,

Really nice post!

It made me think about huge wealth.
(For me) an important lesson of Freegold is: You can get really lucky and get a massive windfall one way or the other (through business, oil, lottery or whatever), but no matter your size the universe has a limit! No one is ever going to "own the whole world" (and if you could, you wouldn't want to!). It's almost as if anyone's portion of world wealth is always logarithmic-proportionally limited. That is to say, for every x-fold increase of your surplus, your portion of world total wealth only increases by an ever decreasing amount K*ln(x). To break the asymptotic limit is somehow not possible (or desirable). Interesting, but why one might ask?

/Burning

PS. I'll be pissed if the above observation turns out to be true, as it will screw with my world domination plans!
PPS. As FOFOA says the big Freegold windfall is only open to those that haven't experienced the other mega-wealth-multiplications yet. Kinda neat for us shrimps...

farmersteveg said...

I am a somewhat casual reader of this blog. I glean stuff from FOFOA's blogs and chew on it for a while and reread sometimes and probably pick up 25% of what is offered. Occassionally I read the comment section. I sense there have been some subtle changes happening above the surface pertaining to paper price of gold, trade deficit, currency allignments, etc. I read Turd Ferguson about trade deficit and nonmonetary gold being exported, I listen to Jim Willie talk re: net trade between nations being settled in gold, etc.

Someone on this blog recently commented on 3 phases of transistion to Freegold. My question is what are the 3 phases, and how long should it take for each to play out before Freegold arrives??

Robert Mix said...

Excellent post, FOFOA. More perspective that fills gaps in my understanding, thanks.

Recently I have had "a feeling", an emotional reaction really, that physical gold is ALREADY worth far more than the +/- $1650 we see now, even in the shrimp-like quantities we deal with. It "seems to be worth far more", I cannot put my finger on it (now...). ("TCIG,TDIG"..., No!)

Edwardo nicely rebutted AD with his pork belly comments. Pork bellies do not have a positive marginal utility in ever larger quantities either.

Oh, to be a fly-on-the-wall during one of those LARGE physical purchases, to get that "education", LOL. Yet, I can see that anyone who would want to buy a HUGE amount of the available gold could encounter (at least some of) the same kinds of problems as any would-be buyers of a LARGE amount of any product out there. As the supply of almost anything gets smaller in the face of increased demand, the price will go up.

***

FOFOA! Another and FOA always seemed to write in such parables that it is hard for me at times to understand them... THIS note of yours is where the value of your blog comes in, you expand on their thoughts and write clearly.

Michael dV said...

I doubt that the giants of the world have always saved in gold. There have certainly been times in history when 'all in' on some industry was probably appropriate.
At this time in history however we are seeing the end of a long degradation of currency. Anyone with wealth will know the story of currency and the history of those who control it. Now gold makes sense. Now preservation of wealth is key. Now we, the small fry, can do what they do and take advantage of wealth preservation but also of a reset in the gold price that we see coming.
I do not believe that gold is the only way to preserve wealth. At this particular time however it looks to be by far the best. While diversification is usually wise, in this instance I think otherwise.

athrone said...

What is the point of this comments forum, if not to engage the topic of the post with critical thought and respond with some form of peer view -- in order to either strengthen the argument presented, or if necessary, refute or refine it?

If the only thing allowed is mindless affirmation (circle jerking), what's the point?

Either way, that is why I addressed FOFOA, not one of the dime a dozen posters whose extent of intellectual contribution is a string of curse words.

DiverCity said...

Agreed, Michael dV, on your thoughts about trolling. While I rarely post here, I've been reading FOFOA since shortly after his first post. And even though I'm a skeptic by nature, I always look forward to a new article -- FOFOA is very insightful concerning our present financial system, regardless of whether or not Freegold comes to fruition.

Pat said...

Athrone, yet one more indignant poster, " I addressed FOFOA, and I by god want an answer only from him. In fact I demand it. And while you are at it, I demand a notarized accounting of all your gold."
If you want peer review, I'm afraid you have to look elsewhere. Now where can we find you a peer...

Nickelsaver said...

athrone, I just now understand your name, a-throne (as in, high upon it)

lol

Sam said...

ANTHRONE

“If one only sees value in currency then one cannot see value at all.”

In regard to number (6) I’d like to make a comment. I think the premise for Another’s postings was to make us aware that Saudi Arabia is in fact not trading their oil for $400 billion a year. They get $400 billion plus some gold. You are correct to say that is not a lot of “money” for the most important commodity in the world. Saudi Arabia is a Giant because they produce something the rest of world needs far in excess of what they need personally. They simply want X amount of gold for XXX amount of oil and couldn’t care less as to what the price of either is. It is the rest of the world that must concern themselves with the price of oil, and as such must concern themselves with the price of gold.

Various gold suppression schemes have worked fantastically and given us decades of debt based economic advancement as a planet. Debtors like Warren Buffett would like to keep things going as long as he can. In fact so should most of us really (at least Americans). Unfortunately human nature leads to an end to credit based growth and financial resets happen over and over again throughout history for the exact same reasons. Large transfers of wealth happen during these resets and Another was just giving those of us in the West a fighting chance to follow in the footsteps of the Giants who have already properly prepared themselves for this event.

athrone said...

If I recall correctly, the words of FOFOA himself were something along these lines: "I came across these revolutionary ideas, and there was no place to discuss these ideas online so I started this blog" Well even today, this is really the only place to discuss this subject. Interestingly enough, many posters here (again, the ones who do not really contribute) seem to think the point is now "beyond discussion" and that all there is left to do is nod our heads after each post. That, or tell other people to RTFB or insult them, make fun of their names, or call them trolls.

You are free to have the opinion that Freegold is already "resolved, and inevitable" but many others who have spent hundreds (thousands?) of hours are also interested in convening here to discuss this topic. Discuss... as in think about thinks from different perspectives and flesh out whether these ideas are valid or not. As well as evaluating new data or events (such as the recent actions of Germany) in the context of the Freegold hypothesis.

Of course, if FOFOA does not wish to discuss Freegold (as in, from both sides: for or against) then he is free to delete the comments of "trolls" as they (skeptics) are called.

athrone said...

By the way, my namesake athrone (a throne) is an anagram, for those unable to perceive things outside their own perspective, ironically, on a blog about Another!

Wil Martindale said...

If governments can buy Gold with "fiat" why wouldn't the UK with the Bank of England secretely print-up a few £billion and buy Gold?

They could, and would do so in the "backroom" with 6 other high ministers "coordinating".

Now do we see why there is a game for giants and a game for shrimp?

Governments are GIANTS !

Wil Martindale said...

One Rath ??
Near Hot ??
Heart On ?? (alliterative pun intended)

poopyjim said...

LOL why bother addressing your points, athrone? Remember last time when you were completely, 100% refuted by myself, JR, & others? What did you do? You and your crappy sidekicks at the time proceeded to claim victory and congratulate yourselves on the great points you made. So who's really circle-jerking here?

But hey, why not give it another go-round. I'm sure you'll just claim victory again.

Your points #1 and #2 are ad hominem, essentially attacking Another's motivations and credibility. Feel free to malign the credibility of A/FOA if it helps you sleep better at night with all your paper "wealth."

Point #3, dear Lord man, I went over this with you before!

3. Central Bank Gold is ~30,000 tonnes. Private Gold is ~140,000 tonnes. If we believe Another, some subset of the former trades at a 300%+ premium,

OK...

whereas the latter apparently trades at spot.

Yeah, you can go out tomorrow and buy up ALL 140,000 tons at SPOT PRICE. Are you serious?!

This works out to an average premium of < 50%. Is a 50% higher price in Gold really that far farfetched that we need some 20 year conspiracy to make it work?

And now you're apparently calculating some kind of valuation of ALL gold based on the "discount to future reset" premiums paid by buyers of size averaged across the total supply of above-ground gold? LOL are you serious? This makes no absolutely NO sense. How is this possibly relevant?

4. Is Gold still traded at a 300% premium?

Who knows the exact premium, but yes.

By whom? How did they keep it a secret for 20+ years?

They didn't, as we are talking about it right here, amirite?

What the the personal holdings of the people who are likely involved? Is it possible to prove they own Gold themselves? Anyone secretly trading Central Bank Gold at a 300% premium would surely be investing in the same thing with their own money...

Let me consult my magic 8-ball and get back to you!

20k per person is not a "Giant" so again, who is a "Giant" if not Saudi Arabia and Warren Buffet?

There is a difference between paper wealth and real wealth, paper giants & real giants. You desperately want to see wealth only in easily quantifiable dollar-denominated terms, but it just doesn't work that way.

Sam beat me to it, but as Another said, "if one can only see value in paper currency terms then one cannot see value at all" You are suffering from this. I hope you get better.

Just kidding, I don't.

athrone said...

If you aren't going to put forth any brainpower in forming a response, why even bother typing something out? Just ignore it and let someone who is interested in real discussion reply.

MatrixSentry said...

I miss the good old days when douchers (perfect Wendy!) like AD, Gary (or whatever handle he is now using), etc, were busy being douches on somebody else's blog. Suppose it comes with success, you know, the attraction of psychopathic trollers to elevated and enlightened discussion.

FOFOA has the patience of a saint it seems. I propose FOFOA posts a poll with a simple question: Does AD get the hook, permanently? Yes or No? Let us as a group decide whether his douche-baggery is something we wish to tolerate.

I am for one getting fucking tired of the psychopaths.

Knotty Pine said...

farmersteveg,

I think you will find your answers here:

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

athrone said...

This post is titled "Think like a Giant" but maybe someone can point me to the post titled "Proof Giants exist"

Saudi Arabia is the most cited example, but they only produce $400 billion a year. Saudi Arabia is not a giant, but 8 million shrimps earning 20k/year each. After food, iPhones, and rent there is nothing left to "save" in Gold at that salary so what excess production are we really talking about?

Unless you think $100/bbl oil is under-priced? Ok let's make it $500/bbl oil and you are still only talking 2 Trillion/year ($100k/year per capita). Is it really the most likely explanation that a nation of 8M people experience "decreased marginal utility" at $20k or $100k per year? Or to such an extent that it requires a shadow Gold market just for them?

Yeah you use statements like the "most important commodity in the world" and it sounds plausible when you just skim over the words without thinking. Then you pause to think for a minute and look at the numbers and it makes no sense.

Robert Mix said...

Hey! Wait, wait! I want to join the douchebaggery! (anagram that)

Since NO ONE can know the future, buying some silver and platinum is OK (for diversification).

But, Au is, by far, the largest of my PM holdings, for reasons laid out by our congenial host over these past few years. 5000 years (more?) can't be wrong about preservation of wealth.

To a point, I don't mind the trolls, I have even challenged (via email) mighty FOFOA himself on a point or two, and he kindly straightened me out! So, you see? Even trolls can be helpful as they challenge ideas and force better explanations.

athrone said...

Interesting that only those attempting to refute are trolls, while those affirming are not. Even though in many cases those who are challenging the ideas are extremely polite (e.g. TotP) and those who are defending them are extremely inflammatory or antagonistic.

If your goal is to protect your wealth or ensure a financial future, shouldn't you be searching for the truth as opposed to married to a hypothesis?

That is, unless your wealth or financial future depends on that hypothesis. But for all of us aside from maybe FOFOA, that shouldn't be true, should it? So I really cannot comprehend the aggression towards dissent....dissent is how knowledge advances.

MatrixSentry said...

Sorry Robert, I have to disagree with your premise that trolls force anything constructive to happen, here or anywhere else. They are a form of pollution and exist to tear down, not to build. They love to be given credibility, and you you just gave them some.

Ask yourself this question: why is AD on this blog? What about Athrone? How about Tranny? Do they appear interested in embracing the Freegold concept? What about Art before them? Gary?

Robert Mix said...

MatrixS, it's more-or-less a public forum. Sometimes dissenting opinions are good! For now, I will not name the Good vs. the Bad vs. the Ugly...

Wil Martindale said...

A Hornet says:
"Saudi Arabia is the most cited example, but they only produce $400 billion a year."

What on earth are you talking about? Oil in dollar terms ???

What they are producing is a PRICELESS flow of oil in return for a PRICELESS flow of gold. Without gunning the gold or oil market so that gold is 30-55K per ounce and oil is $1500 bbl.

Or would you prefer that now? I know I would, just to get it over with, but mnany won't, and at least we can understand that.

Slow down, take a deep bereath, try not to over-react or say something stupid again right away, and think about what everyone here is telling you.

IF YOU CAN ONLY
S E E
V A L U E
in currency terms
$$$400$Billion$$$$$$400$Billion$$$$$$400$BILLION$$$
THEN YOU CANNOT
S E E
V A L U E
at all ....

Sorry if that seems like a put down, but really, it's more an attempt to get you to start reading and stop posting.

athrone said...

Why am I on this blog? Because when I came across Another my Gold allocation was 0% (I'm probably not the only person who panicked a bit after reading Thoughts!) I was already bearish on the US/USD before reading it, but after a year of research here and elsewhere I decided that the only way to invest in this market environment is by having a Gold allocation.

Mine eventually got as high as 65%, after which I had no need for more (decreased marginal utility, if you will). At that point I felt comfortable, Freegold or not, so I started looking for alternative explanations / ways to refute the theory to see if there was something I had missed.

Long term I will probably target an allocation of about 50% as the global economies look better. At this point, I would prefer a 19% annual return in Gold to a sudden 20x revaluation and the (IMHO) resulting war and economic instability that could result.

Freegold is plausible, but the time-frames and events that could prevent it are many and thus it's probability is low in my opinion. There are also many things that I think are misunderstood about Another's writings, and trying to extrapolate them far into the future without sufficiently taking new events into context is also another source of error.

How this makes me a troll, or unable or unwilling to embrace Freegold, well maybe you guys can explain that one to me?

Wil Martindale said...

Sorry MS I had to take one more stab at it, but you're right of course.

And now, off to less fertile fields of discussion elsewhere ....

Edwardo said...

FWIW, Jim Sinclair seems to have targeted sometime in the next few weeks for a (meaningful?) low in "gold." His utterance below, and others just like it, have, over the last little while, emerged with some regularity. I'm used to his steadfast refrain that "gold is going to and through $3500", but, to date, save for his longstanding call of $1650 by January 2011, which he missed by the relatively short span of six months, I've not heard him get into the timing business. I can only guess what it might be that has emboldened him in this way.

"This gold and silver reaction is coming to an end. In a few weeks it will be ancient history."

MatrixSentry said...

athrone,

Excellent, you have stated your case and your beliefs. You believe Freegold is unlikely, as in low probability. So what else is there for you at this blog? I would think you would move on in an attempt to nail down a high probability future outcome. What is your motivation at this point? Do you wish to sway us over to your way of reckoning?

athrone said...

Wil,

Yes I realize what Another said about Gold discounting the price of Oil. However, go look at the post, Oil is only being discounted from $30 to $25/bbl -- 15%. So adjust $400 billion figure to $460 billion, heck quadruple it to $2000 billion as I did in my example. It's still not that much money on a global scale.

This is what I mean by Another's words being misconstrued.

When he was talking about Giants, was he really talking about a mysterious race of super-producers who had more money than they know what to do with, and thus have to buy Gold in the shadows, or was he using allegory to describe some very specific deals between Central Banks that were made at the time which show Gold was undervalued?

Doesn't it just mean that Oil countries didn't want paper because they knew it was overvalued, and we didn't want to give them all our gold because we knew it was undervalued?

athrone said...

MatrixSentry,

I come here because I'm interested in seeing thoughtful discussion on recent events through the lens of the Freegold hypothesis. IMHO there is no better perspective for Gold than the one offered by Another and discussed here. However, just because it is the best perspective on Gold does not mean it is necessarily the best perspective on global/macroeconomic events or wealth strategy. For this reason, I feel it is prudent to remain critical and open minded.

What I am not interested in is reading a bunch of intellectual infantiles mock and bully others, as you can find that just about anywhere.

MatrixSentry said...

MatrixSentry said...

So you think Freegold is not going to happen, yet find it useful to view the world through a Freegold lens? Wow.

poopyjim said...

Alright athrone, let's focus specifically on your point #3 from above then, shall we? You want to discuss this, right?

Here is my view of your "analysis," please tell me if this is correct:

A: Some portion of 30,000 tons of gold trades at around a 300% premium in a closed market.

B: There are 140,000 tons of privately held gold.

You think that if not for 'A' i.e. if there were no such market, that the 300% premium for the 30,000 tons, would be distributed across the additional 140,000 tons (a total of 170,000 tons).

So that's about a 5.5x increase in supply. Divide 300% by 5.5 and you get *gasp* around 54% - around what you came up with!

Is this not your reasoning?

Because if it is I would suggest your comprehension of the material on this site is pretty lackluster, and that's me being kind. Might I also suggest, if this is indeed your reasoning, that maybe you shouldn't go around accusing others of being intellectual infants. It doesn't look too good on ya, given your rather poor track record.

I know it's easier to dismiss people and act like you're "above" them, and I know you don't like to respond when someone calls you out on your poor analysis (see e.g. here), but don't try to pretend I'm not addressing you on the merits.

athrone said...

MatrixSentry,

I guess the difference is you probably don't hold a 65% allocation to Silver? If I hold an allocation to Gold, and this is the best place to discuss the Gold market, then it seems logical that I would be interested in following the blog.

However, this, like any other reading is something you have to apply critical thought to. I don't agree with 100% of what is said here, but why should I have to in order to get something from the discussion? A lot of posters seem to think it is hearsay (or borderline idiotic) to even disagree slightly with what is said.

I think a lot of the general direction described by Another/FOFOA is valid, or else I wouldn't be here. When I say low probability I do not mean the direction of currency/Gold but more the exact mechanisms/reasons/logistics that are described here. Will it be an overnight re-evaluation to $50k/oz because a bunch of shadowy giants have so much money they can't put it anywhere else? Probably not..

So, no I don't believe the hypothesis here is 100% accurate or complete. Was it complete 2 years ago? 3 years ago? At what point did it's ability to model reality become perfect? Remember that a hypothesis is nothing until it is tested and validated. So far it has been under test for about 15 years.

If you think about some of the posters who devote a lot of time to this subject, and tend to post their own thoughts or ideas, you will find that many of them are not 100% aligned to the exact flavor of Freegold presented in the comments/posts.

athrone said...

poopyjim,

It seems you believe my reasoning is incorrect, but you don't seem to be detailing how. Care to explain?

Biju said...

Eric Janszen of iTulip commented yesterday behind paywall about interacting with ANOTHER in kitco forums around 1998. He is the "EJ" in the ANOTHER THOUGHTS.

Date: Sun Apr 05 1998 00:14
ANOTHER (THOUGHTS!) ID#60253:
REPLY,
Date: Sun Apr 05 1998 00:01
EJ ( ANOTHER: what do you expect as the timetable for the shift?

EJ,
With or without the Euro, we will change in the next few years or less!

"Money does never change, as do dreams of wealth

So we search for our future, but find out true worth from the past"

I will be gone for a time.

Thank you


He thinks that ANOTHER was not a saudi oil man or gold trader but rather masquerading as one.
He also said that ANOTHER writings were undecipherable and always ended with astronomical price of Gold.

He mentioned that one of ANOTHER wrong prediction gone wrong was about GOld exploding when CB's start buying Gold, and it has not happened since 2009.

He did pay tribute to ANOTHER, that he did influence him to move buy Gold three years later in 2001, especially with the timing.

He mentions he had several dialogues with ANOTHER but only one snippet(Q/A) is in the USAGOLD archives.


athrone said...

My logic is this:

If the reasoning for a 300% premium on 30k tonnes is because that same demand would blow out the price on the remaining 140,000 tonnes which have 0% premium, then that does not make sense because the net affect is only a 50% increase in price. This is true because there are no demand problems in the 140,000 tonne market because that is presumably, not behind closed doors...that is, supply is already matching demand (as far as they know)

Now, if an Oil producer can be convinced Gold will be 300% higher in 5 years, well then that really isn't a premium is it? It's more of the Gold market existing in two different time planes. Now if the reason for them not wanting to rush up the price of Gold is because the world is not ready for a higher Gold price for some reason. Okay that is believable. That seems to be the story Another told.

On the other hand, if we believe in the existence of private Giants, or maybe even Giants at all, does the explanation of "too much money" make sense? The same argument from that perspective holds a lot less weight, in my mind.

Victory said...

Biju,

interesting

...however I don't recall any statement that Another made insinuating that he was a saudi oil man or gold trader...does anyone?

i always thought he was someone way more intriguing;-)


-v

Michael dV said...

athrone
I just figured out why you are a troll....for every 1 word that constitutes a legit question or comment, there are 10 words about how butt hurt you are about some gripe.
After reading just what you produced today I can see that a 'rile and rise ' is what you are really after. I vote you stop wasting electrons and go away. You are not challenging anyone, any thing or concept. You have no ideas that make sense. You do not show that you have read much here at all. Those new comers who ask nice get treated nice and pointed to a useful reference. Your questions are just cruel taunts....like that French guy in Monte Python...you fart in our general direction...how painful, hurtful and cruel (not really....it is just stupid.)

Wil Martindale said...

V and B,
I was never under the impression that Another was a Saudi or gold trader. My impression was that he was a member of the board of the BIS, or a high ranking Tresury minister, Trilateral, generational wealth giant (or some combination thereof).
Or he was an excellent and most clever imposter of such.
He would say things like "we stop OUR CBs from leasing gold" and was often a defender of CBs, with talk of their "bright minds" and how the world had "simply run away from them."

He knew of the thought processes behind the current dollar reserve system intimately enough in his explanations that I believe he could have been a part of those ideas in the mid 1940's, and I believe he was likely in a position to view the intent go awry from a very high view, perhaps in Basel.

The Freegold WIKI once erroneously cited Ferdie Lips to have been Another, but some (myself included) disagreed, as Lips was far too much a traditional gold standard advocate (though his, and Claudio Grass' work is good background info).

I believe he felt personally responsible to tell the world how the intent of the dollar reserve system and the oil for gold deal were "good business" but that there would be a price to pay for this idea of a world rebuilding from the ashes of war on the back of one country's debt.

When we talked of credibility, I put all these things together and I feel that Another had to be an important figure in the transition of this system he helped influence, into a better one, which he also "backed".

Or else he contructed one Hell of a convoluted tale that makes perfect sense all in the hopes to spike his personal stash of bars?? I think not, but I don't know.

I was never given to the impression that he was a Saudi, as a Suadi would not be a CB apologist. And he seemed to despise traders, the whole idea was antithetical to his core value system.

poopyjim said...

Athrone,

If the reasoning for a 300% premium on 30k tonnes is because that same demand would blow out the price on the remaining 140,000 tonnes which have 0% premium, then that does not make sense because the net affect is only a 50% increase in price.

It's like my comment to you before - the majority of that 140,000 tons will not move - it can't be coaxed out no matter how much currency is offered. It is lying still. This isn't like pouring water from one beaker into another. You're talking about massive demand for physical gold, by entities who can buy tons of gold at a marked up price, who are now sucking reserves out of the BB's at the shrimp price. The effect would not be a clean 50% increase in price, the effect would be breaking the paper gold market and freegold.

This is true because there are no demand problems in the 140,000 tonne market because that is presumably, not behind closed doors...that is, supply is already matching demand (as far as they know)

What is behind closed doors is much of the BB's activities, especially e.g. how much reserves they have. We can only speculate. Though the situation you're talking about would probably bring that information to light rather quickly.

Wil Martindale said...

(cont)
But whoever he was, his thinking was far in advance of many a shrimp, prawn or even a whale, he seemed to me to be able to think and act like a Giant without proclaiming it.

And that is a big difference between "old money and "new money". Old money knows its place and has little need for pretense or pomp and circumstance.

I doubt that he lives today, as I suspect he was in his 70's or 80's in the late 90's.

GS said...

athrone does make some interesting points.

Although I am intrigued by the Freegold theory, until we see it in practice, it remains a theory.

Let's face it...we are in trying times and everybody has their beliefs about what is going to happen going forward. Freegold being one of them.

It is worth noting that alot of people who are quite aware of the world's geopolitical situation vis-a-vis energy are not too enamored with gold. I am not talking about MSM cheerleaders here, I am talking about thoughtful analysts, such as Ilargi/Stoneleigh of Automatic Earth fame. Who I don't agree with but find interesting.

The single best missive against gold I've seen comes from Steve from Virginia's "March of the Metal Men" post dated 7/10/11 which I highly recommend to everybody here to mull over:

http://www.economic-undertow.com/2011/07/10/march-of-the-metal-men/

Steve mentions FOFOA, so FOFOA might know about this.

For the time being, Another is like Jesus and FOA/FOFOA are like Peter and Paul. Time will tell what comes of this.

Wil Martindale said...

It occurs to me that people who are apt to disparage gold are not in much of a position to influence its historical role and universal acceptance as a store of value through times of fiat currency system change.

It is the giants who insure this psychology: CBs and their repsective sovereigns, Russia, the ME, China, the Eurosystem and the generational wealth dynasties who have vast gold and vast influence upon this world. All these holders of gold in size have more influence on the markets, IMHO than any coalition of anti-gold forces which comne to mind, including the fiat religion, the food hoarders, the gun stackers, the silver bugs, the platinum bugs, and all the paper traders combined.
There is no entity as powerful and influential in my mind as the historic, and growing (emerging) coalition of global PGAs. It's only challenger has ever been paper and this dollar is the widest deepest challenger to ever come along.

It seems to me that the fate of the dollar, gold's most powerful contender to date, is a foregone conclusion.

And yet people dwell on lesser challenger's as the straw dog of sorts.

I can hardly go anywhere these days where gold is not talked about in terms of dollar price, it is so ingrained in the mind, as to have challenged the common sense of gold and left us with a world awash in the delerium of paper.

"The gold price will rebound", "this will signal the next leg up in gold", always and over and ever again the drama over a tiny dip in price, then the cheerleading of the even tinier blip upwards, "A SURGE".

And all this paper drama is but an illusion that people cannot get out of their heads. The psychology of the original paper derivative, the expanding debt-dollar is the ONLY challenge worthy of gold.

As they say, the bigger they are, the harder they fall.

Nickelsaver said...

Wil,

Your last comment reminded me of this:

http://fofoa.blogspot.com/2012/04/open-forum.html

P.S. Give my regards to Uncle Wink.

Motley Fool said...

The word 'troll' is bandied about here quite often and rather casually. In my mind we have not had that many trolls here, though we have had rather a large number of misguided individuals.

Stupidity is not trolling, nor is lack of understanding, or simple disagreement.

@athrone

I agree that this board and the Thoughts should remain open to challenge, a thing which does become rather difficult as the number of supporters grow.

Two other quick things then as regards the arguments you have made.

The first, your 300% premium...how did you come up with that number? I would be curious as to your source for saying the current number used for The Deal is $6600 per ounce ( $1650 + 300%). Quite obviously it cannot be $1000 anymore, and given the rate of change mentioned by Another, it would seem this number is renegotiated quite often; yet given how opaque these transactions are, your certainty as to what the current price is, is frankly just odd.

The other thing, the only reason that SA are only getting $400 billion per year is because of The Deal (accept this as premise for discussion if you are not convinced, and feel free to discount or challenge it); if there was no deal they would be getting more. And. While it may be a small population backwater, Oil is not the only thing they do, just as valuable exports to other countries is not the only thing that determines value created for other countries, there is also internal trade and other forms of international value offered (such as advising others on how to do oil drilling for example).

Your criticism of others for not thinking seems rather hollow when it seems you do little of the same yourself about the arguments you advance.

A final bit of advice...which you can feel free to ignore.

It is best I feel to just leave such criticism aside and focus upon one's arguments and let them stand or fall on their own value. Let each then judge to their own ability, do not try to prescribe what such judgments may be.

TF

costata said...

FOFOA,

Vintage post, up with your best. I second Polly Metallic's observation at February 12, 2013 at 7:13 AM. A clear explanation of the rationale that could prompt a "Giant" to make a deal like the one you described. Bravo!

Wil Martindale,

Trollfinger

Trollfinger
He's the man, the man with the urge to troll
A douchebag life
Such an old fingerer
Beckons you to enter his web of spin
But don't go in


Endless words he will blow up your rear
But his lies can't disguise what he smears
For a freegolder knows after he's dissed-ya
He's stolen your time ...

From Mister Trollfinger
Pretty girl beware of his tale of gold
His tale is old

Endless words he will blow up your rear
But his lies can't disguise what he smears
For a freegolder knows after he's dissed-ya
He's stolen your time ...

From Mister Trollfinger
Pretty girl beware of his tale of gold.
His tale is old

From Mister Trollfinger
Pretty girl beware of his tale of gold.
His tale is old
He reads his words
Not yours
His alone
He reads only his
Only his
His alone

JoyOfLearning said...

I'm saddened to see the whole "troll" discussion is back and I do see some ammount of bullying instead of discussion, so I felt it was my duty to come out of the shadows to say that I am thankful for the so called trolls here. I am thankful for people who give counter opinions as they sometimes lead to more information and perspective. I however have diminishing respect for those who keep hitting them with the "troll" word, telling them to go away to their own blog or personal attacks. It is a waste of valuable text/time that could be spent giving arguments and rational reasons, contemporary facts. Even pointing back to the archives or a copy paste has it's limitations: for example I have been reading in the background for quite some times now, and I've read all the archives, all the comments, and a lot of Another's old stuff, also I've read many books on the subjects and other blogs, and am still unclear about some stuff, so I respect the brave souls who dare ask things even when they are in the minority, in the hopes that new angles on things will come out.

Now of course I do absolutely respect private property and if Fofoa decides to kick people out that is of course his right... but I see reality in layers, apparently contradictory, but coexisting, so in this case it is absolutely his right, however it would also in my mind hurt the whole FG theory as it would mean that it is afraid of new facts attacking it, new information or different perspectives.

Of course I do see constantly new people coming into the community, and some conversations do repeat but instead of "troll" naming and shu-ing away I think this could be handled (as it was sometimes to the credit of those elders!) with a polite point to an older point, or even ignoring (*without* saying it! that's NOT ignoring, it's poluting the fine conversations, IMHO). Though to be honest I never get tired of re-answers of old questions, especially if they are with new words, because some of the old ones I've read way too many times, some as many as 10 times and not only is that boring but also it hasn't destroyed that little goblin at the back of my head saying that some of the answers are a bit of circular reasoning, or occasionally a layer of reality that is true, but also other things are true too.

One example that comes to mind is the old quote that keeps being repeated about gold pricing money and not fiat pricing gold... true, how very true. On so many layers of reality and with historical perspectives... however there's other things about which one might be able to say the same thing.. let's pick for example rice, or wood: rice is a food, we need it, thus it's more fundamental than fiat, and of course it's not how much money is given for the rice, but how much rice that is given for some bits of paper...

Anyway, I'm getting sidetracked. There are so many amazing posts, and so many amazing people here, I'm thankful to all of you, just felt it was my moral duty to mention the degradation of the discussions whenever the troll-attacks come back (and no, i don't mean the attacks of the trolls but the long and prolongued discussions about the trolls). So, thank you again everybody. By the way, I would very much appreciate if you could recommend me any good audiobooks on the topics of interest here (monetary history, history, economics, the coming crash/revaluation...). I've recently finished listening to "This time is different" which is just one of the books I picked up because of people talking here, so I wanted to thank you guys! For all the good books you mention during your discussions. I always pick them up and more often than not they become prized jewels in my knowledge chest.

Thank you!

duggo said...

Dear FOFOA I still don't get it.

If a government with it's central bank can buy Gold with its unlimited printed "fiat" why don't they do it? Even at the biggest premium it would be sensible. If you can buy Gold for nothing (home printed fiat) why wouldn't you? After all your accounts would balance. Fiat out: Gold in.

On the other hand who would except "fiat" for Gold?

How do Giants buy Gold? (forgetting oil). If only Giants are allowed into the Giant's playroom who is the Giant that accepts "fiat"?

Jeff said...

Duggo,

The ability to print fiat is worth more than gold. Read the ender/FOFOA comments to the post Freegold 9/32/2008. It doesn't matter how much gold a nation has if its currency doesn't function.

FOA: The currency equivalents remain as a trading medium, even as real things are held in the background for value proof."

FOFOA: You see, a functioning printing press is infinitely more valuable than gold. Gold, as FOA said, is simply "held in the background for value proof."

farmersteveg said...

Thanks for your help Knotty Pine

Polly Metallic said...

JoyOfLearning,

The rice example really is not similar. Rice would never be a suitable store of value and is only a useful commodity therefore it is just another item for which we make comparative value associations in our minds. Gold is the store of value that money does not "move through." It is the final SoV and the destination rather than part of the trip.

Beer Holiday said...

I think Enders comment that a printing press is much more valuble to Governments than gold deserves long contemplation.

Duggo, why did our Gov sell most of our gold in the 90's. Why does the RBA do nothing when they have

- too strong a dollar
- very low gold reserves
- to send most mine production ~200t/yr mostly to Asia

We are not printing AUD for gold as simple logic suggests.

The truth is, our standard of living as a tiny population on an unexploited continent dictates that we'd better hand over the gold or we have a problem IMHO.

Jeff said...

FOFOA: Think about the bare necessities of life: Food, water, shelter and air to breathe. If you didn't have one of these things, you would pay any price to obtain your first unit of it. But once you have what you need to survive, the marginal utility of additional units drops off a cliff. So the bare necessities of life actually have very low marginal utility, or very high diminishing marginal utility.

There is more to this story, but before we proceed, let's take a quick look at the marginal utility of gold as a store of value. Take the man above with $1.5 million in disposable cash. Say he buys himself one $50,000 BMW and one $55,000 gold eagle coin. He has just obtained the full utility of a fine automobile as well as the value preservation of that same purchasing power, for up to thousands of years if he should so choose.

Now say he buys one more $55,000 gold eagle coin, and then another, and another, and so on until all his cash is gone. In the end he will have 26 gold coins. And here's the question: Will that 26th gold coin purchase provide the same utility or diminished (less) utility than the first? Remember, the only utility of gold coins is that they retain their value for thousands of years. That's all they do. And hoarding them doesn't interfere with any other economic activity, at least not when they are not "official money."

The answer is "the same utility," because unlike ANYTHING else, (yes, even silver), gold has INFINITE marginal utility in this particular role.

Jeff said...

So you see, AD, athrone, and Joyoflearning, and anyone who thinks that gold is just like any other commodity, it isn't. You should hink long and hard on that.

FOFOA: In applications of marginal utility, it is often assumed that commodities are continuously divisible. And as you divide a commodity (which you might do as the price rises) you reduce its consumption and increase the likelihood of substitution. For example, a consumer who previously enjoyed 1 lb. steaks may face a substitution dilemma if the price of steak doubles. He may have to choose between a ½ lb. steak and 2 lbs. of ground beef. Steak is divisible but dividing that steak reduces its utility.

This is true for all commodities on Earth in their "real world" uses… except gold!

Say gold doubles in price just like the steak. It is also divisible, just like the steak. Prior to doubling you could have gotten an ounce of gold for $25,000. After the doubling, you can only get ½ ounce for $25,000. Like the steak, you are only getting half as much. Or are you?

Unlike the steak, the utility of the ½ ounce of gold has not diminished. If anything, it actually INCREASED! How? Well, this ½ ounce will protect your present purchasing power of $25,000 for thousands of years just as well as a full ounce, but it will only require half the storage space and expense! (Keep in mind that the utility of gold is protecting your purchasing power, not increasing it. The fact that the price and value of gold have an extremely wide disparity right now is a separate issue.)

As any other commodity used in industry or consumption rises in price, the necessary division reduces its utility and encourages substitution. So all other commodities have this value-limiting characteristic. But not gold. Gold becomes MORE useful at higher prices while industrial commodities become less useful and subsequently get swapped out.


Wil Martindale said...

Duggo,
I think you answered your own question (as I have in my own mind before).

The printer can print to infinity to buy gold, but to buy it in size he must buy from giants, and these giants do understand the true premium of the giant game.

Perhaps if a giant perceives that the printer is going on a bid unlimited buying spree amongst like giants he will fear that he cannot convert the fiat to other things (assuming he needs or wants them) fast enough to absorb the inflation of the currency.

Most giants have a good memory of recent currency hyerinflations, there have been many worldwide since the 60's.

So then, the printer could hope to absorb the gold through shrimp-like means at shrimp-like prices, from many, many dealers who have those connections to those unlimted demand buyers at a "great premium" (in their shrimp minds) but how long will it take to accumulate the amount needed in size at that trickle??

So every which way the printer turns there are mechanisms to prevent accunulation in size via the printing press.

In the giant game there is the rationale that fiat is relatively worthless in future terms as it expands so the premium could be high enough to end up in "sorry, no deal, not for any amount of paper".

In the shrimp game it is all a matter of TIME. And these are where the discussions of scrap supply come in.

So you see how all the strands of this web do all connect into one cohesive organic system which "you cannot beat" with FIAT.

Thus you have the battle of an organic system vs, a virtual (fantasy value) system which maddens the printer against gold, leaving him with his paper game and its limitations.

And this then affirms the inevitability of freegold, as organic systems will always prevail over kick the can fantasies of "something for nothing".

Although the paper is still good for something, like maybe wrapping fish, or wiping ass??

DP said...

If a government with it's central bank can buy Gold with its unlimited printed "fiat" why don't they do it?

Ever found yourself looking in all the wrong places? #FacepalmMoments

Polly Metallic said...

AD,
What is the utility of gold in the first place? If you really see it as only jewelry and electronic components then you are ignoring thousands of years of history. There have been brief periods when fiat money experiments have distorted.our views of gold but every fiat money experiment has ended badly as you probably know.

Motley Fool said...

AD

"What is the utility of gold in the first place?"

The primary utility is that it stores value...because something has to have that function...we require the function existing as mortal human beings.

The other utilities you mentioned are circumstantial and irrelevant in the bigger picture.

TF

ampmfix said...

If a giant wants to buy 20B$ worth of gold at spot, he can just hire 1 guy that hires 100 guys that hire 100 guys each, and each of the total 10,000 guys buy 37 kilos each? at spot of course, 37 kilos is no big deal. So...?

What's wrong with this idea?

Wil Martindale said...

AD,
If one perceives the marginal utility of gold as essentially zero, then the printer has done an excellent job of converting you to his "way of life" which is the way of "fiat has value and gold is a commodity."

As I commented earlier, it is this psychology of the dollar that truly challenges gold as it's top contender through the ages.

This battle of wills plays out on the world stage just as here. Some people do become incensed because they feel that FIAT and all it's nightmarish hyperinflationary consequences will be assured by those who trust in FIAT, whereas those who trust in gold can prevail for a better world.

As you say, there is no point in rehashing it. Some will get it, and others won't and those who get it could be wrong, although history is on their side.

On the other hand, there are those who do "get it" and for some perverse reason pretend not to so as to cause contention and invoke the consternation of those who tire of explaining it over and over, and I think here is where the term TROLL, if not 100% semantically accurate, comes into play.

It does upset people who try to explain a simple concept over and over, in earnest, only to be met with "I don't get it, explain me some more" when in fact the instigator does "get it" and simply wishes to monopolize the attention of others.

Not saying this is the case in recent citings of comment trollery here, but it is a distinct possibility.

In the final analysis, it is belief, confidence and a certaim gullibility that fuels FIAT and those willing slaves to it, and their printing masters. This can be summed up as CONfidence.

So really freegold is a battle of CONfidence between paper and gold. AS long as there is confidence in the paper, the paper will continue to work (have utility) thus instilling further confidence in a vicious cycle.

But confidence in a fantasy can only be stretched so far, as time proves, time and again.

When CONfidence in the paper fails, the paper does fail and the vicious cycle is reversed.

As gold is an inverse reflection of fiat the same holds true inversely, confidence rises in gold, as does its utility. It replaces fiat as a store of value.

Thank you for your thoughts.

Jeff said...

ampfmfix,

Kind of sounds like smurfing, aka when a coinshop Giant like AD goes from store to store buying up inventory he doesn't really want.

http://somechicksblog.com/meth-awareness/meth-smurfing

Does that make AD a methcook or just a user? :)

Motley Fool said...

AD

Sorry, I do not understand how those two differ in meaning, would you please clarify?

Also. No it does not store a constant amount of value...or reserve a constant amount of wealth if that parlance is preferable.

TF

DP said...

The nightmarish consequences ahead are to be suffered because of the debt, not really "OMG TEH FIAT!!!" per-se. (Although, clearly, the nature of fiat currency facilitates the over-expansion of debt.)

The fiat currencies themselves have not (yet) been hyperinflated. But that is, IMO, baked-in now. Because the existing mountainous debts dictate it must be so — the only alternative is the mother of all deflations. Which we know will not be allowed to simply play out "as it should", because:

1) Bernanke was hired to ensure "it" won't happen here.
2) In the deflationary collapse of 2008-> we have seen "them" inflate the fiat base to counteract "it" as best they can.
3) Take another look at the chart I posted in my last comment, a few minutes ago.

Debt is always the problem. It's never been a bigger problem than today.

Polly Metallic said...

AD,
It is what it is indeed. That is why we are here discussing this complex topic, because "what it is" is not a uniformly held idea.

I have no problem with the concept that paper gold derivaties were used to expand the apparent supply of gold, thereby giving the $IMFS time to evolve and avoid a systemic global collapse.

I also don't find it hard to believe that countries, or individuals who held generational wealth, would not only work to protect their own wealth but to construct a means to protect the financial system that we all must to some degree operate within.

There have been explanations/theories of why the $IMFS has enjoyed an extended timeline, (China). The fact that matters didn't come to a head 15 years ago doesn't indicate that A/FOA were wrong about what was taking place at that time or what those events meant for the global monetary system.

I am not sure if you think that the dollar and fiat money in general is nearing the end of it's expansionary timeline and a new system must replace it. That concept seems unavoidable to most of us here, and is becoming a commonly held idea even by the general public, based on hundreds of "man on the street" sort of people I have talked to on this subject in the last few years.

If you do hold the view that the current financial system is broken beyond repair,it's a worthwhile mental exercise to devise a solution that would make sense in a historical and cultural perspective. A solution that would satisfy the global market, many of whom have never stopped viewing gold as the only real money/wealth holding. Gold at present day values would not repair the damage of the global fiat money expansion that has been going on since the 70s when gold was demonitized. Only a much, much higher gold price would compensate.

ampmfix said...

Jeff,

I don't understand your comment, I am really talking seriously, I mean if I was Carlos Slim, I would do that rather than pay 15-20-30 times spot. Wouldn't everybody? I am not really buying all that "secret London education", surely there are ways to bypass that London meeting and buy lots of tons anyway.
Do we know who is behind the thousands of cash for gold shops ww? how much they got in the last 2 years? do you know they pay 60% spot, so it's even cheaper than spot to get hundreds of tons! (provided you also own the refinery and absorb the cost at 0 value in your own books)...

So?

gary said...

I suppose there must be another 'Gary' here that your venom is directed at. I've only posted maybe 2 or 3 times in the past 1.5 years - so I doubt it is me and I have only posted under 'Gary'.
I was directed to this Blog 3 years ago by a friend who thinks like I do - which, by itself, separates he and I from almost every other friend I have.
Like most of you - I am a physical Gold advocate. I 'awoke' over 3 years ago and am 100% in PMs (collapsed my RSP - I'm in Canada) and I buy monthly. BUT unlike my friend I own NO mining shares - following the advice of two Gold analysts (you are aware of both of their names) who I now count as friends. One lives close by and we have lunch about once a month. Both have been encouraging to get out of mining shares, since around 2008 - and, so I did.... thankfully. Reading the 1600 PDF F.O.A. posts - I see he, as well, stated keeping clear of mining shares (of course he was doing that as far back as 1998!).
This is a big dividing point for me and I separate my two friends and F.O.A. as being very 'correct' about this. There are so many in the PM community telling people to buy mining shares - it is rare to find the few who have avoided that trap and they certainly have been accurate so far.
I like the quote 'listen to all - follow none' and I have had a fairly open mind although have become much more discerning in the past 6 months. I don't discount a Freegold concept and inch closer all the time. I just don't have the inclination to read as extensively as I need to - nor the time (I feel I have a limited attention span) nor ALL the posts here - but do read some. I appreciate the Oil aspect but not the Euro... yet. Maybe one day. But...
I do have some Ag. I know this is contrary to some of your thinking - but I don't believe it is an especially big speculation/gamble. One of the 'Debriefing' chaps said he converted his Ag to Au at 65:1... which 'hurt' (his words). It is 53:1 today and I hope the ratio shrinks as it IS my *intention* of convert the Silver I have to Gold... then eventually (way after a revaluation or past TSHTF) to some land/property.
I think it is very cool that you guys have developed such a consistent niche, have 'found each other, go on trips etc. but I would warn you not to get too cliche -y (is that a word?) It tends to narrow the focus and leads to arrogance and intolerance.
I am currently reading Ferdinand Lips book 'Gold Wars' although I know his advocacy of a Gold Standard is contrary to FreeGold. That's okay - there is a lot here to understand and educate me.
Regards,

Pat said...

Perhaps the comments section of this post should have it own title, " Think like a Troll".

Polly Metallic said...

AD,

"I agree that a much higher gold price could maybe fix it again, until it is broken again."

This is the elegance of the Freegold system. If we were to go back to an actual Gold Standard, you are absolutely correct, the system would be broken again before long. That's why a gold standard doesn't work, as it is not elastic and does not allow for the inevitable credit expansion. In a Freegold system, there is nothing that will need "fixing" since gold is on the other end of the teeter-totter, compensating for monetary debasement.

Your comment indicates that you really don't understand how Freegold works and are still thinking in terms of an old gold standard. Have you really read enough of this blog to understand the mechanics of Freegold? I believe you said you have read extensively, but it sounds like you are dismissing the system when you really don't grasp how it works.

Beer Holiday said...

Hi lowercase gary. You are correct this other uppercase "Gary" was a troll.

Good choice of reading - how cool is it to start a book with the charecter Ra, the god of the sun! . I think F. Lips is underrated FWIW.

DP said...

Hi gary,

Yes, there is another Gary, so please don't take any references you've seen made to "Gary" as being personal to yourself. They are not.

I hope the ratio shrinks as it IS my *intention* of convert the Silver I have to Gold

You are very much not alone in this cunning plan. Here in your own comment is a good part of why some here caution against silver. Seem like every silver advocate is looking to "play the ratio", or to "use the silver as money when fiat breaks down, because gold will be too valuable"? :-\

Good luck! And don't ignore the discussion of the euro while walking this trail.

Sincerely,

DP :-)

duggo said...

Well as FOFOA is not interested in answering my question (even in "other words") and as the the comments I've seen don't make sense to me (my limited grasp probably). I will try to answer the question myself.

Presumably A country can't buy Gold with a printing press so the only way is to run up a positive balance of payments by trade with a country that has Gold and only except Gold. If the country with Gold refuses to part with the Gold the only way then is to get the US/UK (or their proxies) to invade the country such as Iraq, Libya, Afghanistan and Syria and steal the stuff.

Polly Metallic said...


"Do we know who is behind the thousands of cash for gold shops ww? how much they got in the last 2 years? do you know they pay 60% spot, so it's even cheaper than spot to get hundreds of tons! (provided you also own the refinery and absorb the cost at 0 value in your own books)..."

This was a very handy way to accumulate gold on the cheap, but it's definitely coming to an end. Some of the gold was definitely going out the country prior to being refined,shipped directly overseas as scrap jewelry, and some of it was probably being sold outside the US later in the form of LGD bars.

There certainly is no one entity behind these shops, and they all pay at very different rates. Some pay 50-60%, but I have run across others that paid so close to the full gold value that when their operating costs were taken into account they were actually losing money. Why would they do that? In some cases it is a form of money laundering. In some cases it was simply a way to get out of dollars. They were apparently more interested in getting the gold than getting gold at a good price.

jojo said...

Don't be butt hurt Duggo :(

Nickelsaver said...

ampm,

Those 10000+ ppl sent out to purchase gold at shrimp prices, are they working Pro bono?

Michael H said...

RE: “The Metal Men”

”What is US debt really worth today? $14 trillion? Gimme a break. It’s not worth anything outside of its ‘ad value’: we acknowledge the debt’s existence so we can ‘borrow’ more crude oil from mindbogglingly stupid- idiot producers who cannot think of any use for it besides trade it to equally stupid Americans to burn up for nothing!”

I think the FO/FO/A explanation of the relation between oil producers and currencies is much more plausible than “oil producers are stupid”.

”FOFOA clearly believes in the ability of language to influence anything other than the electrons which would otherwise flow in the direction of Lady Gaga. Don’t misinterpret: I like FOFOA, unlike a lot of Gold People, he talks about energy, even if I don’t always agree.”

I found the ‘metal men’ article to be long-winded and rambling, so to each his own. Also, since FOFOA is not an activist I don’t know what he is trying to ‘influence’ with the Engilsh language.

”All the ideas about gold and gold/money exist outside of any science or reason but thrive within art.”

So all is either science or art? I think social science doesn’t fit into either of those categories, although hopefully it does include reason. Recall that economics is a social science.

”Without cheap and limitless energy there is no modernity. There is no modernity- centric economics, there is no ‘theory’ no Keynes, no production, no GDP, no credit, no ‘stimulus’, no value to gold or silver no goddamned thing that a 21st century American might take comfort in.”

Mostly agree, except for the gold part but only because those that produce the cheap energy value gold, and so if one has gold one should be able to have access to cheap energy and all (physical) derivatives thereof.

Link above from GS:

http://www.economic-undertow.com/2011/07/10/march-of-the-metal-men/

DP said...

Yes, jojo.

Presumably A country can't buy Gold with a printing press

Not when its currency is already weak in real goods (inflation).

You'd want increased supply of your currency in circulation when the currency is too strong — when it is in high demand.

Michael H said...

JoyOfLearning,

"One example that comes to mind is the old quote that keeps being repeated about gold pricing money and not fiat pricing gold... true, how very true. On so many layers of reality and with historical perspectives... however there's other things about which one might be able to say the same thing.. let's pick for example rice, or wood: rice is a food, we need it, thus it's more fundamental than fiat, and of course it's not how much money is given for the rice, but how much rice that is given for some bits of paper... "

Try this comment:

January 20, 2013 at 4:19 PM

By Dr. Octagon.

Polly Metallic said...

AD,

There are brighter minds here by far than mine who can critique your definition of Freegold, but I see a problem with the rest of your commentary. If your understanding is that Freegold is designed to erradicate fiscal mismanagement, you have missed some essential reading here. We will continue to have fiat currencies that exist alongside the freely floating gold value and those fiat currencies will continue to be managed wisely or poorly. I agree with you that the propensity will always favor "poorly."

Polly Metallic said...

AD,

What changes for the better, is that those who hold gold, whether a private individual like you and I, or a government or other "Giant" has a defense against this fiscal mismanagement. The more a currency is mismanaged and debased, the higher the price of gold goes in that currency.

Michael H said...

duggo,

The decision of whether to print currency to buy gold is different depending on whether the country in question prints the world reserve currency or not. The situation would also be different in a post-USD world.

If you are the US, you definitely do not print to buy gold, because

a) you already own the world's single biggest gold hoard and

b) your currency allows you to run huge deficits and get free stuff from the rest of the world, seemingly without limit.

Of course, once the limit is reached, your gold already assures you a nice cushion before being forced to make real adjustments.

If the country does not print the world reserve currency, then there are other considerations:

1. Believe it or not, I think one has to 'play nice' on the world stage. If the country in question printed currency to buy gold, and that action brought about the end of the USD as a reserve currency, then some injured parties might hold a grudge for a few generations.

2. In printing currency to buy gold, the next question is 'how much gold would we be able to buy before the price runs away from us'? Meaning -- inflation.

3. A further question for our hypothetical CB: what would be gained by buying gold with printed currency? "The CB would be rich!" yeah so what. They generally operate as publicly-chartered institutions and so would not really be able to benefit from a windfall. Best case, a large gold hoard would then allow the government to run deficits for some years as the hoard is spent, but I think a CB would generally frown upon such short-term-thinking.

Now, post-USD-as-reserve-currency, when imbalances between CBs are settled in gold, then yes there may be situations when a CB decides to print currency to buy gold. It would be just like when a CB prints currency to buy government bonds today: a currency management tool.

Pat said...

Geez AD, how can Obummer ( USG ) get away with spending money they don't have? Exhorbitant privilege, which will not last forever, and is in fact in a rapidly increasing downward spiral. Once the ROW no longer accepts our debt in payment,completely, we will be forced to balance our ROW trade or pay the delta in gold. So Freegold will indeed prevent USG from getting away with what they can now do.

Indenture said...

Will said, "It occurs to me that people who are apt to disparage gold are not in much of a position to influence its historical role and universal acceptance as a store of value through times of fiat currency system change." This answers the question of 'Who are the Giants'. Answer, not us. But they exist, and they must store value.

I'm sure it has been discussed but what is the event horizon number of ounces between Giants, those who exchange gold at the 'true' price and those who exchange gold for fiat at the 'paper' price?

Jeff said...

ampmfix,

Smurfing seems like a lot of time and work. Cash4gold probably works better; let the little people bring their gold in, have it melted, buy in tonnes, 'the small purchase size'. As long as there is someone willing to sell, yes?

Those giants probably have been sitting on a pile for a long time now, and probably have better things to do (being superproducers) than chase kilo bars. So they take what they can get, and they wait. Who needs to bring a lot of attention to themselves? They aren't in it for the revaluation, right?

Indenture said...

Something like if you withdraw $10,000 from the bank in the US a form must be filled out so people withdraw $9,000 without paperwork. Is there a number of ounces that is the over under or is it the player or both?

Polly Metallic said...

AD,

I agree with Pat that post Freegold we will need to exercise more fiscal restraint or we will indeed become a banana republic. Without the luxury of being the world reserve currency, there will be a lot of things we can no longer get away with.

There is no religion, no monetary policy, no economic philosophy that will make the US or the rest of the world any where near a social utopia. If you are looking for a system that can accomplish that, you look in vain.

jojo said...

Milamber-

Have you read this one:End of Currency

Your words kept coming to mind as I was just reading it.In this image, as all that cash flows down and into, say, stocks, would you think it's solely Apple's products/business that is pricing it's stock?

Pat said...

"Once the ROW no longer accepts our debt in payment"
...which will never ever happen. Who ever would, why? Come on, be serious to yourself?
TPTB would prefer to rather race together to the bottom.
But anyway, if it does, we talk again ;)

You can't be this misinformed, not to know the world is rapidly fleeing the dollar. China not buying treasuries and diversifying out of much of what they have purchased in the past; bilateral swaps cutting out the dollar middleman between many/all of the BRICS; etc.

Pat said...

What do you think QE is? It is the USG ( via the Fed/Treasuty mechanism ) buying up the excess debt it used to sell to China, et al.

GrumpsLabastard said...

Hey guys check out Bernanke's 2002 speech, Deflation: Making Sure "It" Doesn't Happen Here .

http://www.federalreserve.gov/boardd...21/default.htm

He spells it out what he is going to do.
1. Buy US debt and Agency debt ( Fannie mae/Freddie mac) check

2. Operation Twist check

3. Corporate Debt (not yet, but wait til high grade and junk debt starts slipping)

4. Swaps with commercial banks...cash for commercial paper, car loans, mortgages, helocs, perhaps student loans maybe??? (yet to come)

5. Foreign debt ( we are kind of doing this now by proxy with currency swaps and some of the QE money in that a US branch of DeutscheBank is unloading MBS paper unto the Fed and using that money to buy Eurobonds)

6.Affect the exchange value of the dollar ( Gold operations, he references FDR's revaluation of gold) " A striking example from U.S. history is Franklin Roosevelt's 40 percent devaluation of the dollar against gold in 1933-34, enforced by a program of gold purchases and domestic money creation. The devaluation and the rapid increase in money supply it permitted ended the U.S. deflation remarkably quickly. Indeed, consumer price inflation in the United States, year on year, went from -10.3 percent in 1932 to -5.1 percent in 1933 to 3.4 percent in 1934.17 The economy grew strongly, and by the way, 1934 was one of the best years of the century for the stock market. If nothing else, the episode illustrates that monetary actions can have powerful effects on the economy, even when the nominal interest rate is at or near zero, as was the case at the time of Roosevelt's devaluation. "

Oh but wait, here's the best part in the two paragraphs for Fiscal Policy:
" Fiscal Policy
Each of the policy options I have discussed so far involves the Fed's acting on its own. In practice, the effectiveness of anti-deflation policy could be significantly enhanced by cooperation between the monetary and fiscal authorities. A broad-based tax cut, for example, accommodated by a program of open-market purchases to alleviate any tendency for interest rates to increase, would almost certainly be an effective stimulant to consumption and hence to prices. Even if households decided not to increase consumption but instead re-balanced their portfolios by using their extra cash to acquire real and financial assets, the resulting increase in asset values would lower the cost of capital and improve the balance sheet positions of potential borrowers. A money-financed tax cut is essentially equivalent to Milton Friedman's famous "helicopter drop" of money.18

Of course, in lieu of tax cuts or increases in transfers the government could increase spending on current goods and services or even acquire existing real or financial assets. If the Treasury issued debt to purchase private assets and the Fed then purchased an equal amount of Treasury debt with newly created money, the whole operation would be the economic equivalent of direct open-market operations in private assets. "

Did you catch that? Even if the public uses the cash from tax cuts or transfer payments and buys real assets (gold) this will improve their balance sheet. Even if the public doesn't, the Fed will enable the Treasury to do it and conduct gold operations. The Bernank is telling you what to do.

athrone said...

Motley Fool,

Another said "you think I am a fool for trading Gold in the thousands" when Gold was $300. So I am assuming 1-2,000/oz based on those words. That is where I got my 300%+ premium number.

Do you agree it is quite a statement to claim that Oil is worth much more than $100/bbl. Where is the proof that this is true?

How does this mesh with Another's words above in FOFOA's post about only discounting oil by $10/bbl? Yes Gold is undervalued, but a 300-600% discount seems enough if it is only 10% of the trade, is it not?

But even still, what is the argument that Saudi Arabia only has a per capita of $20,000. How can you call this a Giant? Multiply it by a 10x and you are still at $200,000. Is that a Giant (someone with so much money they experience decreased marginal utility)? I say no.

It's hard to counter-argue when there are no numbers provided on the other side. You say The Deal means the $400 billion is actually much higher. Well how much higher? Where is the proof either via the economic statistics or gold transactions or something?

Indenture said...

""What is the utility of gold in the first place?"
The primary utility is that it stores value...because something has to have that function...we require the function existing as mortal human beings." We require that function is a beautifully simple law of man. I can't think of any lower position of the pyramid than we, the moment we wanted to store the 'idea' of the winter nut instead of the actual item a proxy had to be found. Humanity chose gold, or gold is here for us to use but either way "we require the function". MF, very nice.

gary: When I thick about the Euro I ask myself why in the world would a bunch of countries/cultures who attack or defend each other every couple of decades have any possible reason to form a monetary union? For me

duggo: I realized a long time ago that if FOFOA answers a question I felt privileged. Why? Because there are plenty of people here to answer questions so there is no need to 'directly' ask FOFOA for anything. It is his time to give.

AD: ""Once the ROW no longer accepts our debt in payment"
...which will never ever happen. Who ever would, why?
"

I think we have come to one of the blocks in the pipe. AD seems to think the US can force Dollars on the world forever and nothing will happen.

athrone said...

Here's my perspective. Another said he was trading gold in the thousands behind closed doors in the 90s at a time when Gold was $300. A decade later (short time scale for Nations) gold is trading in the thousands. So he was correct about this.

That was one prediction he made.

The other prediction he made was the imminent collapse of the dollar/Gold market. Well it's been 15 years and that prediction has not yet come true. He may have thought this was true because he was secretly trading Gold at such a higher price, or because he thought the stress on the dollar was too great to bear, or because of his knowledge about the Euro and the Gold/Oil connection. Certainly a reasonable assumption based on his view, isn't it?

However, what man has ever had a perfect view of the future?

We already have proof on the first claim, so he has established some credibility based on that as well as the novel ideas about Oil, Gold, and the Euro. The second claim is much harder to prove, and even if you did prove that it is a possible direction, there are so many variables that it cannot be guaranteed.

So the debate is far from settled, IMHO.

Indenture said...

Uhm, AD, do you really need proof the rest of the world is no longer purchasing US debt in sufficient quantities?

Pat said...

Indenture, I'm through with him, he is most certainly a troll with no access to Google.

ampmfix said...

PM,

I am still not so sure who could be behind the cash for gold. In my area they pay 25€/gram max.

Nickel,

Those salaries wouldn't cost even 1B more (5% of 20B), Carlos slim has 220,000 employees, take the most trusted 5% and give them a bonus of 1000$ by Xmas, they'll do the job or else... that is 10M or 0.05% of 20B.
One thing that I don't hear much around here is about the Giants themselves, super producers yeah, but Godfather types also... They are all vultures anyway or wouldn't be there...

Jeff,

I think that many people are still waiting for higher prices to dishoard so this might not be over yet. Good point about Giants not waiting for the revaluation, that does convince me.

Thanks all for your opinions.

jojo said...

"That was one prediction he made. "

You so badly need to RRTFB.

jojo said...

err...I meant RTFB.

jojo said...

"Indenture, I'm through with him, he is most certainly a troll with no access to Google, newspapers,magazines,brain,or sense."

FYP?

athrone said...

jojo,

Are you suggesting he made more than one prediction, or that wasn't the prediction he made, or... what? Maybe you can explain a little more so I don't have to spent another year re-reading everything.

jojo said...

It's been bandied about that the US Gov is behind one of the biggest C4G shops....fwiw.

"Those salaries wouldn't cost even 1B more (5% of 20B), Carlos slim has 220,000 employees, take the most trusted 5% and give them a bonus of 1000$ by Xmas, they'll do the job or else... that is 10M or 0.05% of 20B."

Does this not have clusterfuck written all over it???
Just to entertain this idea seems silly and unworkable. Talk about having a conspiracy to keep quiet...and all for only $1000. No disrespect ampm, but this idea just seems redick.

jojo said...

Athrone, I'm suggesting you haven't comprehended this blog you attend.
That was no prediction, that was a statement.

Pat said...

We are sorry, but at this time Jojo cannot help you, no matter what he says. You must spend another year re-reading everything. No posting until you are finished.
Plus say 4 Our Fathers and 10 Hail Marys.

Edwardo said...

I move that when addressing the poster with the initials AD, that the letter D (which could stand for a variety of uncomplimentary epithets such as disgraceful, dipshit, dumb, disgusting,
doofus, derriere, diarrhea, deranged, but in this case simply refers to the word, disorder) be formally added to the handle of the poster with the initials AD, so that, henceforth, his acronym reads ADD. This could serve as a kind of warning to all unsuspecting interlocutors as to the quality of response they are likely to receive. After all, it seems reasonably clear that this condition may be part, but only part, of the problem we are dealing with vis a vis AD(D). The other part is informed, at least from where I sit, by the DSM.

jojo said...

athrone said:
"Do you agree it is quite a statement to claim that Oil is worth much more than $100/bbl. Where is the proof that this is true? "

Well, imagine you yourself sits on an oil well and you sell your oil out of the ground and that oil goes to fertilizer, food, cars, internet, computers, your favorite porn site, everything that we associate with "modern living" is a result of that little oil well. The "modern" world exists BECAUSE of you and your oil well.

Would you willingly give away this precious for a measly piece of paper with the number 100 on it?

You would year after year just keep stacking all that paper- even after you spent billions of it on your palace and harem and any thing else you can think of??
You've bought all you can buy yet that paper keeps piling up while your black gold keeps going out to the rest of the world.
The rest of the world has their gold, and they hand you pieces of paper promises for your black gold. You are really "rich" right now cause you can buy anything you want and have done so. Those paper IOU's keep piling up though.
So what happens when you empty your oil well. What did you trade that all that physical good for?

You received a generation of "wealth" (not real wealth) and a bunch of paper promises. Woohoo.


All this would never bring about a moment for you where you thought "gee, my oil is very valuable to the rest of the world"???

You require some kind of "proof" of this????

athrone said...

jojo,

Another's words were exactly:

"Think that I a fool, because I trade gold for thousands US an oz.? You will think much on this in the future."

Is this a statement or a prediction?

There are two sides to every trade, why would Oil go along with this huge premium? It's not stated directly, only implied so let me expand on it for you: Unless the Oil producers on the other side of the trade are predicting a higher Gold price why would they go into the trade? If Another was on the other side of the trade, then he too was predicting a higher Gold price in the future, or was using deception to trick the Oil producers into thinking this would be true.

Given that he was also implying to the reader he felt this way, unless he was taking advantage of not only the Oil producers, but the readers as well, how is this also not his prediction?

He says it right there, do you think he is a fool for trading Gold at thousands/oz in the 90s? He didn't think he is a fool precisely because he was predicting a higher Gold price.

So I don't really understand why you are suggesting I cannot comprehend simple reading material. I am just applying driving his words to their (perhaps, not directly implied) conclusion.

ampmfix said...

Fine jojo, to each his own. No harm done :0)

I have the growing belief that all super rich are mafia types.

athrone said...

jojo,

You don't think I can comprehend that oil is valuable or drives the modern world? Especially after spending a year on this blog and reading Another?

Well guess what, not only does oil drive the modern world but the modern world drives the price of oil.

Tell me how much Oil is worth without cars to burn it? Saudi Arabia realizes this which is why they have to balance the high price which gets them a fair value for their resources vs. the low price which allows the world to keep running (and thus value that Oil).

Guess where that balance currently is? $100/bbl. So tell me how you can just throw the system out of balance by assuming a much higher price of oil?

Yes they don't want worthless paper which is why they try to obtain real assets like Gold. It's also why there is all the real estate development shown in the post above. However, you can't just assume Oil is not some magic thing with infinite value. It has zero value if there is no modern world to utilize it.

jojo said...

"I have the growing belief that all super rich are mafia types."

Haha...lol...I used to think along those lines too. I think it's easy to so so. I think it's easy because we are shrimps.

jojo said...

"Guess where that balance currently is? $100/bbl. So tell me how you can just throw the system out of balance by assuming a much higher price of oil?"
See, now you switched to price.

I am talking value.

athrone said...

Let me flip the question around to you, so you can really understand the perspective of the meetings with Oil producers described by Another.

Imagine you are sitting on a pile of wealth that is extremely un-diversified. It is all held in a single asset, and while it is currently very valuable, if the world leaves it's current stable state it's value could drop to near zero.

Given that you have almost zero diversification, or other means to support yourself, what do you do?

Do you pursue maximum greed by demanding a high price for your asset, thus crashing the world economy (and with it, the value of all your wealth)? Or do you try to temper your greed so you can keep the good times going?

jojo said...

Athrone-

So you think we are close to losing automobiles?
Or maybe even grander, you think the modern world is about to end??

jojo said...

"Imagine you are sitting on a pile of wealth that is extremely un-diversified. It is all held in a single asset, and while it is currently very valuable, if the world leaves it's current stable state it's value could drop to near zero."

Well hells bells, the frickin aliens could land and eat us too???
Why worry about such extremities??

Indenture said...

Ampmfix: Be careful using absolutes like "all super rich are mafia types". Absolutes cloud critical thinking. But you think these guys are playing 'Highlander'?

Nickelsaver said...

ampm,

If it were merely a matter of paying $x to individuals, maybe your'e right. But then there is issue of security risk. What percentage of that network fails to perform because they either bought fake bars, had them stolen, or made off with the stash. Then multiply that by having to do it time and time again. Seems to me a rather pedestrian approach for a giant.

Wouldn't a giant do much better to simply own the dealership?

The other problem I see is the gold not being in the form of 400 oz bars.

Lastly, anyone trying to do that, would inevitably run up the price, as it would not go unnoticed by the market.

athrone said...

It is the price of Oil which determines it's value to the world...

If you can't see that, then answer the question: How valuable is Oil if it costs you 1 day of work to drive your car 1 mile?

jojo said...

Athrone...
this is my last one. I am no where near as good as so many others here at explaining this stuff. And all your questions have been asked in various ways and answered several times.
I seriously doubt I could rise to the level of others and pierce your baggage.
What sticks out to me is you are stuck in a trader mentality. I don't know how else to say it.

You are a trader of some sort aren't you?

I've only guessed that but man, you've got to be.

jojo said...

$ price of oil = value??????

Indenture said...

athrone said, "It is the price of Oil which determines it's value to the world..."

Really? The most important 'destroyed in it's use' commodity in the world and you think it's value is determined by how much it costs to purchase?

Motley Fool said...

@ampmfix

You lost me at 37 kilo's of gold is not a lot. I'm a shrimp. My brain stopped functioning at that point. :P

@indenture

Sure. :)

@athrone

You think gold trades for 1-2k per oz today assuming 'The Deal' exists? Are you insane? :P

Have you looked at the per capita incomes worldwide. The united arab emirates are not poorly. Shit man, they build ski slopes in the desert for fun.

And what gives you the ridiculous notion that each individual has a share in the say about what to do with his part of oil income due to idk right of birth? Are you suggesting they vote on it? Or is there perhaps someone who has control of those incomes? Go look at some lists of world income...then give some consideration to population sizes. In relative terms they are rich as fuck already...but I am sure poor people exist there too.

You want numbers? Why am I having to do this for you. Are you incapable of doing what you accuse others of? :P

Ok thumbsucking.... 400$ billion + 650(tonnes)x31500(est ounces per tonne)x55000$(freegold price) = a cool 1.5 trillion a year for their 10 million bpd. Though ofc if you read the blog you would know they are being overpaid something fierce by this deal, which is why they are happy with it.

TF

Indenture said...

Really? The most important 'destroyed in it's use' commodity in the world and you think it's value is determined by how much it costs to purchase?

Let me rephrase because the word 'cost' is improper. Let's try: 'Really? The most important 'destroyed in it's use' commodity in the world and you think it's value is determined by how many dollars it costs to purchase? So Oil Producers are selling a diminishing commodity for dollars that increase in supply and yet the prise of oil hasn't risen in conjunction with the inflation of dollars.

Jeff said...

Athrone, read this.

http://fofoa.blogspot.com/2010/04/gold-money-more-than-meets-eye.html

milamber said...

@JoJo

That’s a good question.

AIUI, theoretically all stocks traded on an exchange have the same relationship to cash*. So as cash flows up/down Exter’s pyramid, relatively speaking, the premise of your question would apply to all stocks, would it not?

I think what differentiates them is twofold:

- What does the company do.
- How many of their shares are available for purchase.

Armed with that information, an investor, in theory, can bid (or not bid) based on his judgment as to whether or not the current price is a good measure of the *value* of the company.

Where am I going wrong?

And yes, I have read the FOFOA piece that you referenced. I found the various discourses concerning Charlie Munger and OG Warren to be more relevant to the price/value question. As well as the comments between Blondie and others concerning the nature of value.

I think that generally, most people play fast and loose with terms. But FOFOA doesn’t. That’s why FOFOA’s comment about MSFT value going to ZERO if no one bids on it has always struck me as odd. But I think that I am seeing where he is coming from keeping his recent answer to me in mind as I reread previous posts.

It is a long road for me to see value expressed outside of a currency price for a stock (again as it ONLY relates to a marketplace where stocks are traded):)

Milamber

* This is all pre derivatives, HFT algo trading ,etc. Now, I think that in practice "value" investing is close to irrelevant.

athrone said...

Motley Fool,

You said "You think gold trades for 1-2k per oz today assuming 'The Deal' exists? Are you insane?"

As far as I know, Another doesn't post anymore so we have zero proof whether The Deal is still in existence. The last data-point we have on that is 15 years old. At the time, Gold was $300 and at the time, Another was trading gold for 1-2k per Oz. Again, there is where I got my 300%+ premium number.

Polly Metallic said...

ampmfix:

"I am still not so sure who could be behind the cash for gold. In my area they pay 25€/gram max."

If it is like the U.S. every entrepeneur who saw the "gold rush" coming like in the 1980s and decided to make some extra money eventually jumped on the band wagon. In our area, everyone from coin dealers, jewlery shops, pawn brokers, antique dealers, and Joe Homeowner with a set of gold test acids is setting up shop, or traveling around the country setting up at local hotels with big ads in the paper, trying to buy gold. Some are reputable and pay a reasonable price, some try to buy for as little as they can get away with. My husband and I started a business in 2008 where we set up in people's homes and bought from people who attended a party thrown by one of their friends. They brought us coins, old out of style jewelry, silverware sets etc. We started the business because so many traveling buyers were coming to town setting up in hotels and paying people very poorly. Back in 2008, the jewelry stores weren't buying much and the Cash4Gold mall kiosks and hole in the wall shops didn't yet exist. People didn't have a lot of options. Now there are "we buy gold" shops everywhere. Prices, on the whole,have become more competitive.

Most of the people who have anything to sell have already sold it. I don't think somewhat lower prices has much impact on what's coming to market currently.We are only doing the occassional home party or fund raiser these days because it's nearly impossible to get a group together who haven't already sold their items.

jojo:


"It's been bandied about that the US Gov is behind one of the biggest C4G shops....fwiw."

That may be true of one of the big mail-your-gold-to-us companies, although I rather doubt it. I think it is most likely just run by people who saw this business model as a lucrative way to make money, especially during a recession.

Motley Fool said...

athrone

Ok seriously wtf?

"In the 90s, the "discount price" ranged (according to ANOTHER) from $1,000 per ounce up to $6,000 per ounce."

From this bloody post. And another posted into the naugties, and updated that number again from my vague recollection.

TF

athrone said...

Motley Fool,

You think Oil from one country is worth 10% of the US GDP, which is in turn about 30% of the world economy?

These are incredible statements, where is the proof to support such claims? If you remember, Another had at least some kind of evidence (his credibility as an insider). Where is the proof that today, 2013, anyone is trading gold at $55,000 an oz behind closed doors?

Again, this is what I mean when I say leap of faith or extrapolation error. One guy says there is a Gold for Oil deal 10 years ago, and today we are to assume the "value" (price) of oil is not $100/bbl but actually $400/bbl?

These are incredible conspiracy-level statements, that the greatest commodity in the world is being traded in secret at 400% it's present market value.

Motley Fool said...

athrone

"You think Oil from one country is worth 10% of the US GDP, which is in turn about 30% of the world economy?"

No. The word you missed in my reply was 'overpaid'. In fact I said 'overpaid something fierce'.

TF

jojo said...

Polly-
Yea, I just mentioned it because I think I read it here a few times. A former me would have pounced on the idea due to the conspiracy angle.
Now, I figure, so what if they are?

My only feelings on that are if it IS run by our gov, then that is a shame because all that private gold left our zone. If true, our gov just pimped us out of our true savings and everyone that went and sold will realize that one day.

Regardless, someone got all that gold from the folks who needed it most.

Motley Fool said...

athrone

Are you fucking with me?

I am starting to think the others here are right and that you are simply trolling.

The only other alternative explanation for your serious oversights is that you must be mindnumbingly stupid.

Idk.

TF

athrone said...

Saudi Arabia Produces 12% of the world's Oil. If their secret share is $1.5 Trillion (as you stated in your example). That implies the world value of oil is $12.5 Trillion per year.

Are you telling me that oil consumption is equal to 17% of the world's GDP?

athrone said...

Above post is in reference this statement:

Motley Fool said: You want numbers? Why am I having to do this for you. Are you incapable of doing what you accuse others of? :P

Ok thumbsucking.... 400$ billion + 650(tonnes)x31500(est ounces per tonne)x55000$(freegold price) = a cool 1.5 trillion a year for their 10 million bpd.

Motley Fool said...

arrrrrrgh

No. From this and your other replies it seems to me that you do not even bother to try and think.

You want others to do all the thinking for you.

If this is correct you are beyond help. One cannot help a person that does not want to help themselves.

Honestly, I am not going to push my blood pressure up anymore. Either start thinking for yourself, or believe what you like. I am done wasting my words on someone who is not even trying to understand. One who only tries to find fault and validate their already held beliefs and feelings.

Ugh.

TF

athrone said...

I'm not saying anything inflammatory, and I am not attacking others arguments via ad hominem. If my posts are so stupid, why don't you quickly and easily dismantle them with a few sentences of evidence/logic.

Polly Metallic said...

jojo,

I am sometimes conflicted by the idea of people selling gold which we believe will some day be worth more, even if Freegold never happens. But, truly, the government, or whomever, did not twist people's arms to sell. The common man does not have an investor mentality, and often is better off taking the money and paying a bill with it now, or doing something productive with the money. Financial "experts" like Dave Ramsey tell their clients to sell items like gold jewlery and start an emergency fund or pay off some of their debt. For people who do not have surplus income, I guess that makes sense. We don't know how many months or years it will be until gold is revalued, and many people need extra money NOW. It's one of the few sources of potential income they have.

It has been a type of economic stimulus plan that the government didn't fund, and I sometimes wonder how the lack of this extra economic stimulus will affect the economy now that it's about over.

Another thing I think about is how much unrecoverable gold is out there in the garbage dumps of the world. I can't tell you how many people have said they had broken/damaged jewlery and simply threw it out because it never ocurred to them that the pieces had any value.

athrone said...

You said Saudi Arabia is paid $400 billion in dollars and $1.1 Trillion in Gold. There is nothing to think about, those are your direct words, unless I am misunderstanding somehow.

$1.5 Trillion in Oil Value on 12% market share means $12.5 Trillion in Oil Value worldwide. Global GDP at $70 Trillion, what is the problem here?

These are the conclusions of Your statements, I am just checking how they fit with reality.

jojo said...

Milamber-

I'm not sure where you are going wrong. I'm just trying to offer up things that might make a puzzle piece slide into place and give you an aha moment.


If I could muster the details and words I'd get that chart I've seen that shows how the stock market has kept pace with money printing- implying our Gov has been pushing it up- that our printing press is really responsible for setting the prices you see.

Motley Fool said...

athrone

Are you actually reading my replies?

If you are, are you having trouble with comprehension?

Do I need to simplify my replies?

You : "The last data-point we have on that is 15 years old. At the time, Gold was $300 and at the time, Another was trading gold for 1-2k per Oz."

Me : ERR NO. From This Post, which we are commenting on we have other data points: "In the 90s, the "discount price" ranged (according to ANOTHER) from $1,000 per ounce up to $6,000 per ounce."

Giving not only a higher price, but showing that the price was changing rapidly.

You : "You think Oil from one country is worth 10% of the US GDP, which is in turn about 30% of the world economy?"

Me : ERR NO. "Though ofc if you read the blog you would know they are being overpaid something fierce by this deal, which is why they are happy with it."

They are being overpaid. Simultaneously other countries are being shafted.

I did not say that they were getting a fair price, and that all oil should be valued at this price. I said they were being overpaid, and it was a good deal for them.

Right..so there already is two stupendous things which you overlooked, I corrected, and you have now subsequently ignored, or not read, or not understood.

Is it any wonder I ask if you are fucking with me?

TF

Jonas said...

Article posted Feb 11, it's now Feb 13 and 188 reactions to this article.. Wow! FOFOA is being followed and read. Scary development.. To me seeing this development is like watching
a "the end is nigh"-index going parabolic.

athrone said...

If the hypothesis of this Forum is that Gold trades behind closed doors at $1000-6000/oz in 1999 or $55,000/oz in 2013...then that is the price of Gold is it not! The rest of the market can then be seen to only be "waiting" to discover the real price.

If Gold is added to Oil deals at the price, then the value of Oil is not $100/bbl (dollars only) but rather $400/bbl (dollars + gold). According to this theory, that is the real price of Oil not the price we pay at the pump.

So for 15 years then, on the supply side we have people (allegedly) selling something like $400/bbl oil and on the demand side we have people paying $100/bbl oil at the pump (fact).

That is one hell of an 15 year long arbitrage if I ever saw one. Maybe you want to refine your numbers a bit?

athrone said...

TF,

Are you saying that Saudi Arabia and only Saudi Arabi is being paid effective $400/bbl (12% market share) vs. $100/bbl (the other 88%)?

Motley Fool said...

athrone

Ok, so your reply is YES, I am fucking with you.

Well congrats, you annoyed me for a bit. Enough already.

@rest of the board

Excuse my language. I got a bit worked up.

TF

athrone said...

If you stop assuming I am an idiot, it would be easier to follow my arguments. You're reading comprehension is not perfect either (it's not easy to convey complex arguments in short paragraphs) but I'm not repeatedly pointing it out.

jojo said...

Polly,
I agree with all you said. I would be one of those people if only I hadn't read so much.

I guess the bigger shame is we the people are not really ever taught how the economy and money,wealth, and savings work.

You are correct, and I don't blame anyone for dumping their gold for cash that they need right now. It's just too bad we all didn't know better (more).

I also think of the dumps. I also have saved every piece of tech gear I've ever had in my possession (at first just cause i save stuff- just ask my wife who sometimes labels me hoarder ;) )with the intention (now) of retrieving that gold once it's REALLY worth it to do so.
I found a site a year or so ago that describes with nice pictures and instructions how to get and use the chemicals to dump on this stuff after you smash it with a sledge and put into a bucket.

Motley Fool said...

athrone

It is only in the last 30 minutes that I have decided you might be an idiot. Though I am giving an higher probability to your simply being a troll. The third alternative is that you have serious ego problems, and are unable/unwilling to have a conversation with others with the ability of listening to comprehend, as opposed to listening to reply, and refuse or are unable to think, and simply want to validate your already held notions.

The answer to your last is yes.

I am bowing out, I do not want to converse with you anymore in any of those scenarios.

TF

Nickelsaver said...

Athorn

$55K is the post transition freegold valuation, not the price giants are paying above market price to buy in size.

For both the seller and buy to be happy, the price would need to be much lower thab that.

Please try to understand the arguement before you erect you strawmen.

Thanks

Jonas said...

FOFOA, how about doing an article on the integrity of a state and its ability as an entity to possess or pay anything? Someone who gives his gold to someone and provides his "protection", could just as easily remove that "protection" and relieve him of his gold at the time of his choosing. Who do these oil for gold entities rely on for their "protection"? Can they trust their "protector" to act in their interest or not?

Jonas said...

FOFOA. BTW, by a "state" what do I mean? Surely in the case of Saudi Arabia, we're not talking about the "people" of that state.. Are we? Then "who" are we talking about? This eventually comes down to a handful of individuals, "who" can easily be "taken care of" if the necessity arises.. No?

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

Jonas

Wouldn't killing the handful of most powerful royals and others from the house of saud have some (ever so slight I am sure :P ) ripple effect though? You know... eyebrows might be raised if that were to happen. xD

TF

Jonas said...

Motley, "regime change" seems to be in vogue in that part of the world.. Who's to say popular uprising and demand for democracy topples the current "leaders"? After all, who do you think the "west" will support? The "democratic" movement, or the "dictators" of the past?

duggo said...

@ Indenture
"duggo: I realized a long time ago that if FOFOA answers a question I felt privileged." Really?

It's his blog. Why should I have to rely on other people's answers? Why do you feel privileged? What's so special about FOFOA? Other blogs answer peoples questions. He's not a God or some high priest.. is he?

What's the point of having a comments section if the person writing a blog hides away or only condescendingly deigns to leave Mount Olympus to dispense pearls before his little people now and then.

I'm only passing through. I'm only here as long as the person writing the blog holds my attention.

I find other people answering my questions maybe well meaning but I never asked them in the first place. As for the ones that quote previous articles by FOFOA or A/FOA I find them resembling the hilarious followers of some sect that have a holy bible that they quote passages from.

As I've said before I come to this blog because I find the FOFOA articles are interesting and make sense. I didn't come here to join some sort of debating society or cult following.

FOFOA writes a blog about what he understands from the discussions of A/FOA. He has a comment section. I comment mainly because most of the time I'm confused. If FOFOA doesn't answer then that's his privilege. Eventually if I find I'm ignored then I'll go away. Maybe that's what he wants with people like myself. Maybe he only wants worshippers.

DP said...

jojo,

that chart I've seen that shows how the stock market has [not?] kept pace with money printing

I doubt its what you've seen before, but how about this 'chart of the millenium'? #StocksFTW!

Extra bonus super-fun edition. #EuroFTL??? (Depends… everything is relative.)

jojo said...

Duggo, first you need to ask an original question.
You ask the ones already asked and answered a hundred times because you refuse to read. Then you go on other sites talking shit about this one and the people here.

If they really made sense, why do you have questions?

The quotes are for you to read and understand. Your answer is in those quotes but it's up to you to use your head and comprehend what is being presented and why.

Oh, wait, now you say you write commetns because you ARE confused.
I'll say.
You should instead write questions if you get confused.
Save your commenting.It gets in the way of our worshipping.

You are a doucher.

Please pass right on through.

athrone said...

Nickelsaver,

MF explicitly said in his example that they are being paid $55k/oz here and now, in the present, not in some future time. Are you reading the comments?

Motley Fool said...

I did? That's news to me.

athrone said...

Motley Fool said at February 13, 2013 at 11:03 AM:

"You want numbers? Why am I having to do this for you. Are you incapable of doing what you accuse others of? :P

Ok thumbsucking.... 400$ billion + 650(tonnes)x31500(est ounces per tonne)x55000$(freegold price) = a cool 1.5 trillion a year for their 10 million bpd. Though ofc if you read the blog you would know they are being overpaid something fierce by this deal, which is why they are happy with it."

What is that then?

Motley Fool said...

My using an estimated future reset value of gold under the FG system, to determine the current day value of what they are receiving in return for their oil.

If you read carefully, FOFOA actually gave an estimate (read : guess/thumbsuck) for the current interbank trade value at about 30k, in his examples in this post.

TF

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