Sunday, May 19, 2013

Hold On (to those gold coins and bars)!



When the world ain't treatin' you good, you got to hold on…

When everybody's lookin' at you funny, you got to hold on…

You got to hold on…


"Hold On" by Alabama Shakes

Strong Hands

I want to discuss one more concept, the concept of strong hands going into Freegold.

[...]

Each time the price swings up and down like this the "gold" traders trade their way in and out of their favorite paper gold positions. But the physical side is slowly working its way into stronger and stronger hands with each swing. Strong hands buy the dips while weak hands are selling in a panic.

[...]

This could potentially be the final shakeout of weak physical hands, because there will be plenty of strong hands catching that physical even though physical buying won't stop the price from falling. Unfortunately for a few long-time gold bugs, the lack of a fundamental and foundational understanding of a much higher value could see them liquidating at the worst possible time in all of history. And that would truly be a shame. At least I have given fair warning. I'm not predicting that this is the way it will play out. Only that it could. And being aware of this possibility has value if it gives you strong hands at a key point in time.
[1]

That's an excerpt from an old post, about a year and a half ago, after gold had fallen about $250 during the preceding four months. Today it has fallen about $325 in four months. My perspective reveals that the "price" of gold may fall quite low just prior to a very quick revaluation upward. But that is just the temporary price that's falling, not the true value of physical gold.

All of my savings are in physical gold coins and bars, and yet I have been anticipating an eventual price plunge to some really low number at least since my post The Shoeshine Boy back in 2010. And now, ever since this past December, I have been discussing the possibility of a plunge in the price of gold this year, with more frequency than in previous years, and how it fits within my view. I even dubbed 2013 "The Year of the Window" on New Year's Day, referring to the possibility that this is the year it happens. So why would I keep all of my savings in physical gold at the same time as I expected an eventual collapse in the price of gold? Interesting question, isn't it? Here's how I illustrated my view in that 2010 post:



I'm not trying to scare anyone, quite the opposite actually. I want to help people have the same strong hands and peace of mind that I have, even if the price of gold continues downward. And those things come from understanding a well-reasoned scenario that looks a lot like what has been happening so far this year. I don't want anyone to take my advice. I only want you to understand the scenario and make up your own mind.

Another question you might be asking is why wouldn't I wait for the lowest price and buy my gold then? That's a great question, and yes, the answer is here in my blog somewhere. ;D You know, a funny thing has been happening lately. It's quite an unusual phenomenon if I do say so myself. While gold bugs far and wide are either panicking or throwing in the towel right now (some forums have even been closed), the "evil gold hoarders, jerks, time misallocators and brainwashed cult members" [2] here are all cheering as the price goes down. Isn't that weird?

Anyway, I was wondering why I haven't seen more curiosity about why these strange PGAs (physical gold advocates) would be cheering for a gold price decline. Perhaps no one has actually seen this phenomenon in action, so I thought that maybe if I put some of it here, front and center in a post, a few of the panicking gold bugs might take notice and ask WTF?

So here's just a sampling of what some of my followers on Twitter have been saying since the gold price really started tumbling on April 15th:





















There's something else that a few of my Twitter followers have been watching in addition to the declining price of gold. And that's the declining inventory in GLD. They even have a contest each day to guess how many tonnes will be leaving that day! GLD has lost 315 tonnes or 23% of its inventory since mid-December. I think this is symptomatic of the physical reserves of the LBMA leaving the system, either through allocation or delivery. You can read more about why I think that in this post.

Burning Fiat even wrote a "GLDpuker app" for his Twitter account which automatically detects and then tweets the daily decline (or increase) about 10 seconds after the SPDR spreadsheet updates on their website. Strangely, after he launched the app, organizations like Sprott Global and Fitch Rating agency followed him on Twitter. Here's how it looks:


ByiamBYoung sent me a donation last week, and somehow he fit quite a long message into the Paypal message box:

Hi FOFOA, A long time since I promised to contribute, but finally I can throw in a donation. I hope many in the hive are doing the same! Great new post. It seems that the winds of change are blowing more erratically every day lately. The hereafter may not be so far off... Maybe Mrs FOFOA could write a guest post, for all of those hand-wringing spouses out there? I know someone I would forward that link to ;) Cheers, byiamBYoung

I forwarded it to Mrs. FOFOA as I do with all donations, and here's what she came back with:

Ha - me write a guest post? It would be simple...

Dear Freegolders,

The time has finally come. Be at peace with the plummet because the pot is about to explode at the other end of the rainbow!!! Enjoy the ride - I know I am :)

Warmest regards,
Mrs. FOFOA

Now I must tell you that Mrs. FOFOA is just as bad at timing as me, so please take her pronouncement with more than just a grain of salt. You'll never hear me say this is it, it is now. All I can offer are possibilities and probabilities along with reasoned scenarios. You know where I have all of my savings, you know that I'm not worried about the price of gold, and if you follow this blog, you know why.

I don't care what the price of gold does tomorrow. It can go up, or it can go down. I don't know if this is it. I don't know if this year is the year. "Window" means opportunity, possibility and probability, and it is backed up with a well-articulated and well-reasoned theory. If you disagree, that's fine with me.

All I can tell you is what I think "it" will look like. And as I said, I've thought it would look a little like this since at least 2010. So in my mind that raises the probability at present. And that's why I don't like the idea of long-time gold bugs selling off their physical gold right now without at least considering this perspective for balance.

This post isn't meant to give you my full perspective, or even links to the appropriate posts, like The Two-Legged Dog, Legs or Checkmate. I only hope to catch your attention. And then, if you have questions about my view, I'm sure that a few of the regulars, maybe even some of the twits featured above, will be more than happy to either answer them in the comments or direct you to the appropriate posts or comments.

And be sure to check out the song below. It's a recommendation from JR that was meant to inspire a post. Indeed it worked! JR has a good track record with songs like Wake Up, Bankrupt on Selling and How It Ends, so I always pay attention to his music recommendations. I just hope this quick and dirty post lives up to his expectations. JR's email was titled "Alabama Shakes got 'Strong Hands'".

Sincerely,
FOFOA

[1] Excerpt from The Gold Must Flow
[2] "Evil gold hoarders, jerks, time misallocators and brainwashed cult members" is the affectionate title I came up with for my followers. It is based on just a few of the insulting names we have been called over the years. Scroll down to the very bottom of the blog if you'd like to join the cult. ;D

2013 Grammy nominated for Best New Artist & Best Rock Performance
"Hold On" by Alabama Shakes:


302 comments:

«Oldest   ‹Older   201 – 302 of 302
Edgar said...

@KnallGold

"Physical Gold can't be printed..."

Physical Gold cannot be forced to flow.

Victory said...

I've been hearing some talk about hedging coming back in fashion for the miners.

Question: is this really an option anymore or is it just speculative talk by those not in the know.

My understanding from reading FOFOA is that the hedging program needs a large 'physical gold' short leg opposite the long hedge purchase. This is done so BB who intermediate the process can themselves 'be hedged' and it is only possible with a large pool of 'gold for lease' available (other wise they would just be selling paper and further stressing their already thin physical reserve ratio). With CB's no longer leasing physical in size wouldn't this dead the idea that hedging is coming back?

Unless is it possible that those taking the long side of the hedge aren't BB but rather PGA's directly (physical gold advocates) like ME, China, Russia, ect. who want long exposure and would just buy the forward to get Gold without moving the price and wait patiently for it. Would that make any sense or would that just kill the flow for the 'third world nobodies' when those forwards mature?

tx,

-v

DP said...

When a mine sells production forward they are the short while the counterparty is the long, no?

All that is missing from the picture is the "insurance" fig leaf, to cover any concerns from the long side. Or do we run naked?

________________________________________________

Happy bank holiday weekend to all! ;-)

Edwardo said...

The noose tightens.

Attitude_Check said...

I think this quote from the referenced HKMEx announcement is VERY important. The re-pricing of Gold contracts into renminbi-denominated. China getting ready for free-gold?


http://hkmerc.com/en/Media-Centre/Press-Releases/HKMEx-Voluntarily-Surrenders-Authorisati.html

While trading on the Exchange will discontinue, HKMEx as an organisation will continue to operate with its existing staff, and will focus on developing new products including renminbi-denominated precious and base metals contracts that will better meet customer needs. It also intends to re-apply at an appropriate time for an ATS authorization to launch these products with stronger and more effective market maker programs.“The favourable conditions under which HKMEx was founded have not changed. Global commodity demand continues to shift towards Asia as the region undergoes sustained growth, presenting great opportunities that we will continue to exploit,” said Barry Cheung, Chairman of HKMEx. “Our priorities now are to protect members’ interests by ensuring effective closing of open positions while strengthening our shareholding base and developing new products that play to our distinctive strengths.”

gull_mann said...

Anyone have a good youtube/other source video regarding the current gold situation or world economy? Need some material to share with family and friends as I doubt any of them have the patience to read through Another/FOA/FOFOA writings.

gull_mann said...

ABX buying out SLW?

- Barrick Gold Corp :

* Silver Wheaton shares halted, news pending

Anand Srivastava said...

Harvey Organ says that May is a non-active delivery month. And the delivery this month had been unprecedented. Also he says that June is the second highest delivery month.

If there is any truth behind this claim, June will be interesting.

http://harveyorgan.blogspot.in/

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

You can file the following data under the FWIW column, but anand's 10:02 comment has caused me to do some time based "research". Here's what I've found so far:

April '01 was the gold reaction low off the (now famous) spike high from the July '99 low. The time from low to low is a Fibonacci 21 months.

August '99 (closing low) to Oct '08 (closing low) is 110 months, or a Fibonacci 55(x)2 months.

The April 2001 low to the (still extant) April 2013 low is a Fibonacci 144 months.

Before I continue recording some more of these relationships, I'd just like to point out that, technically, gold presents a rather complex profile since the closing lows on a monthly basis are often not the same as the intraday lows.

Having said that, depending on which high one wants to use, either April or May of this year represent a Fibonacci 21 months from the '11 high.

The 2008 closing low to the 2011 closing high is a Fibonacci 34 months.

I don't know what the odds are that these Fibonacci relationships are random, but my bias is that the "odds" against them being random are pretty good.

As such, while there are a number of ways one can put the data together with respect to the timing of the theorized emergence of a physical only gold market (aka freegold), however way one chooses to do so, it would appear there is a decent case to be made that Fibonacci relationships, particularly monthly ones, will have something to say about the date that the long awaited visitor finally arrives.

steerpike said...

something is bugging me and I can't work it out myself.

It's about the price of oil post FG.

I understand that as the dollar implodes and loses its credibility it will be replaced by the euro for the purchase of oil on the international oil market.

The oil producing fractions have contented themselves up to now with the sale,on average,
of 15 barrils of oil in exchange for one ounce of gold.

Will this oil/gold ratio change post FG?

If it remains the same or similar (and why would the oil producers want to change it?) the price of oil will be multiplied by 20 or 30.

I suspect my reasoning is flawed but can't see where I go wrong.


If true however,can anybody imagine the vast impact this would have on the current cheap-oil addicted economy?





thank you.

gull_mann said...

@ Edwardo- can you describe more about these Fibonacci months you mentioned. I vaguely know/heard about Fibronacci numbers in passing but no expert by any means. Are you saying there is some relationship to when the eventual collapse of paper gold price takes place?

Franco said...

steerpike:

I'm not a freegold erudite. Having said that, some time back I asked on this blog what would replace the dollar as the world reserve currency, and one of the long-timers here answered "nothing". So there's that, which I'm still unclear about since FOA seemed to make it clear that he thought that the dollar would be replaced by a better currency (i.e. the Euro).

In regards to your other question, as gold is revalued against EVERYTHING, the gold/oil ratio would naturally change drastically. If I understand ANOTHER's narrative (which I mostly don't), the paper gold trading market was created in order for Saudi Arabia to get cheap gold in exchange for oil. With freegold, no more paper gold trading market, and no more gold-for-oil "deal".

JoyOfLearning said...

@Fofoa
Wooow! What an honor! A personal response from the man that started it all (for me). Wow!

"Devaluation is not the same thing as inflation."
If you mean a devaluation in relation to another currency then I understand, but in order to get rid of social obligations/socialist promises/entitlements one would have to devaluate in relation to real goods. Or do you mean the targeted devaluation only against gold? But in that case how does that help with the pension promises. If however by devaluation you mean against goods and services then it seems to me it's one and the same as inflation (and the wikipedia page mentions them in this sense historically).

So then I would have to understand that you mean that this will be for all intents and purposes a one time big inflation, except it will provde a legal loophole and not be called that, thereby not breaking the ECB mandate. Howeeeveeer, while this kind of legal trickery might work (and has worked with Greece defaulting AFAIK) will the people swallow it? I mean to them it will be exactly the same as a huge and sudden inflation if devaluation will be against goods. And even the ECB and the bureaucracy would have to measure it like that, wouldn't it? I mean don't they take a basket of goods and then see how much it costs in euro? After the devaluation (against goods) that would cost signifiantly more (which would be the whole point, to help with the entitlements and socialist promises, like inflation always has).

"It also wouldn't hurt the debtors or those saving in gold. "

I'm afraid here again I don't get it. I mean I do, but there's a big elephant in the room: let's say somebody is saving in gold, but tomorrow the devaluation cuts his salary 40% in real purchasing power of food & electricity: there's no way he's not going to feel that. The Cyprus solution does indeed offer a way to the governments to save themselves by large confiscations... but will they go as far as to do that in Germany and France and Holland?!?

Thank you so much for your kind reply and everything you've posted.

lola said...

@Edwardo

"You can file the following data under the FWIW column"

You sure showed Artie up. He comes by and leaves his usual bird droppings on the place and then you unload a barge of toxic waste.

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

gull_mann, here's a primer on Fibonacci. Suffice it to say that one can apply Fibonacci relationships in a multitude of ways that include both price and time. When used in conjunction with other technical approaches Fibonacci models can be quite revealing of the market's intentions. What I have presented is a vanilla application, however, my view is that seemingly non complex relationships are, by no means, to be dismissed.

I'd like to stress that while FOFOA's thesis is based on the deepest fundamental considerations one can imagine, that does not, in my view, mean that certain technical approaches are not capable of shedding light on the timing of what will be an event that will likely leave most TA grasping at air.

Time will tell.

P.S. A final Fibonacci tidbit.

The gold high of 1980 is a Fibonacci 34 years from 2014.

Sam said...

@ steerpike

I would say to you that the oil for gold deal has always been priced at around 1 ounce of gold per give or take 1000 barrels of oil. If you think about it, if they were getting 1 ounce of gold per 15 barrels, they would have all the gold by now. I always thought it was odd that the most valuable commodity in the world was so cheap until I found this site. Oil did bid for gold directly once, and the price went crazy very fast. This was no good for everyone and so a deal was made. Not an evil secret deal, a good deal, as the whole world benefitted. The deal kept the price of gold low, and the value of the dollar stable in gold and oil so that it would function, and ultimately so that gold would flow from people that saw it as a dead asset, to the people that found it very valuable. This was a good long term strategy for the oil nations, knowing all along that the gold they were slowly accumulating was worth much more than the market prices and would one day revalue. It was good for the US as well, as we have built a fantastic economic engine with this borrowed time that would not have otherwise been possible.

tintin said...

European Commission's intention to stop re-hypothecation of client assets might start the big unwind? what's long need to be sold, and what's short need to be bought back?

No more empty allocated gold accounts?

What about unallocated? still has reason to exist?

KindofBlue said...

Franco

Reserve currency means that the currency is accumulated and saved. Post freegold, gold will be saved.

In other news:

"Gold is for savings and currency is for transactions." -- Dan Norcini, Trader Dan, quoted at jsminset today. Sound familiar?

M said...

@ JOL

Quote:"but tomorrow the devaluation cuts his salary 40% in real purchasing power of food & electricity: there's no way he's not going to feel that."

I'll take a crack at this one. From what I can see, nobody really knows what the nominal value of the various fiat currencies will be. Currently, eastern currencies are all undervalued and western ones are over valued. That has to correct itself either way.

As far as a 40% devaluation goes, just look at it like this. When other currencies are losing 100% of their value, a currency that retains 60% of its value will look fairly good in comparison.

M said...

@ Edwardo

What is the Fibonacci of the last US interest rate low ? (bond price high)

What is the fibonacci of the last JGB low ?

Thanks.

Edwardo said...

I'm not sure what you mean M? What one looks for is relationships to prior major turning points. September of '81 is the mother of all turns in bonds and, alas, there is no relationship of note that I can detect between that epic turn and the most recent high in the ten year made in July of '12.

I don't have anything on JGBs presently, but I'll see what I can come up with, if anything.

Now, if, by some chance, the ten year cranks out a new low in February of '14 that would be 377 months from the massive September '81 turn. Having said that, September of 2015 is 34 years from the '81 turn. And while I am loathe to even mention a certain "analyst" with the initials MA, that is precisely the turn date he has put forward for gold to commence launching to hitherto unseen heights.

I'll conclude this latest numberpalooza by noting that the second week of September of this year will be a Fibonacci 4181 weeks from the date of EO 6102, while July of '15 is 987 months from same. And the difference between those two dates is 22 months which is a Lucas 11+11.

byiamBYoung said...

@Edwardo,

My gut instructs me to think that Fibonacci talk is nonsense. Is there a source to a justification for the theories? I'm happy to be enlightened, but I am deeply skeptical that the Fibonacci kind of pattern mapping can inform our future experiences with any degree of accuracy.

As I have observed, the superorganism has no cadence and follows no patterns.

I'm happy to be proven wrong.

Cheers

Nickelsaver said...

Edwardo,

Why would a cycle theory such as fibonacci or k-wave be valid across game changing events such as "the closing of the gold window" or "the launch of the euro" or "the launch and or demise of a major market"?

KindofBlue said...

byiamBYoung

You might find this interesting as a place start. These numbers and relations are found in nature.

http://www.youtube.com/watch?feature=player_embedded&v=ahXIMUkSXX0

Peace

Phat Repat said...

Patterns are observable in nature and in the markets. Fib, k-wave, cup-n-handle, support/resistance, bull flag, bear flag, megaphone top, blah, blah, blah... Useful signs but never 100%. Isn't that what we are trying to discern here? When the FG event will be upon us? And how long the current market shenanigans can go on? But, does it really matter? The vast majority here now won't be during FG. The herd is restless, and thinning... Thus... ;-)

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

ByiamBYoung,

Thankfully I don't have to rely on my gut, I've seen work that is either based on Fibonacci or incorporates it meaningfully deliver fantastic results. It is by no means infallible, but then nothing is.

Nickel,

Fibonacci isn't cycle based though cycle based work often incorporates Fibonacci. The Fibonacci number series is nothing less than a recognition of the omnipresent and immutable fractal relationships found in all nature. I maintain that the physical gold market, however distorted, manipulated, and/or managed it may be, can not be so obscured that Fibonacci may not, at least theoretically, have something to say about gold's ultimate progress. I daresay that mathematical/Fibonacci relationships will likely have something to say about the ultimate price of gold post revaluation.

Consider, if you will, that the (nominal) all time closing high of gold at $1880 dollars in 2011 is very close to the squared price of the official US dollar denominated gold price of $42.20 dollars. Were we to take $42.20 to the third power we would arrive at $75,151. Sounds rather freegoldish doesn't it?

Sam said...

Edwardo

Can you see the walls in your home or are they covered in old random newspaper clippings where obscure patterns tell you the precise hour of the coming rapture?

Nickelsaver said...

Edwardo,

I do believe fibonacci is a form of cycle theory. It refers to intervals, one point in time versus another.

My practical experience dealing with intervals and cycles tells me that - if you change control variables, it induces change in the controlled output, ie more or less amplitude, shorter or longer cycle/interval.

So my question still stands. How does fibonacci account for the game changers, the change in variables.

I will submit that it cannot. And that any cycle theory you use to apply to gold price MUST reset with the euro launch (at the very least).

Edwardo said...

Nickel, if gou can demonstrate how the gold market, whatever fantastic evolution it experiences, exists outside nature, then you will convince me that math, broadly defined, can not have something meaningful and useful to say about gold upon revaluation. In short, it can't tell us why, as in "account for", but it may well tell us where, as in the ultimate destination expressed in a mathematical relationship to that which existed before a revaluation. Time will tell.

Nickelsaver said...

Edwardo,

I'm not saying that there aren't mathmatical relationships. Quite the contrary. I believe the entire universe can be represented in total or in part as a group of mathmatical relationships and or equations, I just don't believe any human is capable of identifying all of the variables, and then coming up with the correct formula to input them into.

I do believe in a God that can do that though.

;-)

Nickelsaver said...

Edwardo,

I'm not saying that there aren't mathmatical relationships. Quite the contrary. I believe the entire universe can be represented in total or in part as a group of mathmatical relationships and or equations, I just don't believe any human is capable of identifying all of the variables, and then coming up with the correct formula to input them into.

I do believe in a God that can do that though.

;-)

Nickelsaver said...

I will say this. It probably would not be too difficult to predict with relative accuracy the frequency and modulation of the postings of one particular troll. He is a prisoner of his own cyclical neuroses.

In other words, He can't not post...

Anand Srivastava said...

Art should probably get rid of Free Glutamate from his diet. It will probably help him get a grip.

michael3c2000 said...
This comment has been removed by the author.
michael3c2000 said...

From May 21, 2013. This is a good year.
Many things going on in the world and more surprises await. Demand is rising by multiples in important choke points, there are refiners and wholesaler delays and backlogs, Turkey is not for eating, accounts in Switzerland and elsewhere of vaulted, physical metal are being raided or made inaccesible for large withdrawals and much more.
On the Hong Kong Metals Exchange fatal trouble-
From South China Morning Post, a reader comment on story about lack of physical deliveries on yet another exchange, and it closing--
(Link: http://www.scmp.com/news/article/1240917/hong-kong-mercantile-exchange-closes-its-doors)
"John Manfred May 21st 2013
8:17pm
HKMEx turnover dropped dramatically, and that shows that people are realizing that derivatives are fraud. They are NOT real gold or silver. People have been moving into physical precious metals.
BUT, why are the clearing members of HKMEx (all but one is a clearing member of COMEX, incidentally) failing to deliver gold and silver bars? Remember, these clearing brokers took short positions. They OWE THE PHYSICAL GOLD to people who bought gold and silver futures, held them until maturity last Monday, and paid in full. Yet, they are DEFAULTING, refusing to deliver gold and insisting on cash settlement!!! This happens to include the mega-banks, Morgan Stanley and NewEdge (joint venture of venerable declarers of gold's alleged "bear market", Societe Generale & Credit Agricole).
This shows that they don't have the gold or silver and are so desperate that they are willing to ruin their reputations rather than deliver the metal! Wait to see the fireworks on COMEX once the big June delivery month arrives. Do they really have the amount of gold/silver listed in the COMEX warehouses? They'd better, because if more than 8.4% of the current long buyers on COMEX demand delivery, the casino-bankers will survive because of clever lawyers and corporate shells, but they will be out of the gold price manipulation business for good, and COMEX will be no more."

Bjorn said...

@anand srivastava

LOL yep. Bad stomach => bad brain.

Art said...

Freegolders say they are AGAINST gold as money but that they are FOR gold at the same time.

Who is AGAINST gold or honest money?

THE BANKERS.

Freegold=Freebullshit

michael3c2000 said...
This comment has been removed by the author.
michael3c2000 said...

@Gull_Man
There are some good audio interviews out today.
And this Graham Summers, Phoenix Capital Research overview commenting on Japan and the US's potential Splashdown Sequel, written in a simple way. Would appear easy for relatives to grasp some implications from any point of view. Ultimately , where safety is the goal, little need be said anyway.

http://www.zerohedge.com/contributed/2013-05-24/feds-hands-are-tied-right-financial-system-begins-crack

michael3c2000 said...

@Gull_Man
Last week Greg Hunter did some short videos that might appeal to a wide audience:
http://www.youtube.com/user/usawatchdog

ampmfix said...

Edwardo,

I would rather keep taking the square not the 3rd power: 55,000 is the square of 235, price reached in 1978 for the first time (and also around more or less the price in Another's time!).

Last time (and first time) gold was at 42.2 was maybe 1971, so 42 years ago. Hopefully FG might come in 1978 + 42 = 2020 or 7 years from now...

This is like the story about a recurring number that you see all the time. In my case it is number 13. But, there is nothing special about it, it is just that one remembers the occurrence because of the fix in one's mind.

Similarly, one can make the numbers fit any story. If there is any truth to this cabalistic stuff it is surely beyond our potential, otherwise I would be able to hit the lotto jackpot, given enough study time (which I try!).

Good long weekend!

ampmfix said...

Geez, it is 2011-1971 = 40, 1978 + 40 = 2018, for the square of 235$ to appear.

You see, you can make the numbers say anything since all the assumptions are flawed and a small deviation in them, makes a big divergence in the result.

We can still dream though:

"¿Qué es la vida? Un frenesí.
¿Qué es la vida? Una ilusión,
una sombra, una ficción,
y el mayor bien es pequeño.
¡Que toda la vida es sueño,
y los sueños, sueños son!"

Calderon de la Barca.

Unknown said...

Would very much appreciate the opinion of FOFOA and other forum members on Goldmoney.com and Bullionvault.com.

They are mean to provide audited, segregated, allocated gold and silver to the retail public, in Viamat and Brinks vaults separate from the banking system.

Is the chain of ownership likely to be disrupted, and cash settlements made at a paper price around the time of the reset? Have holdings in both, so highly value your opinions

ampmfix said...

Hello John,

I am by no means the best person to explain things here, but since my time zone permits, and it is a bright and beautiful Saturday, here it goes:

I looked at both those companies. They as serious as can be, but what you need to look at in detail is the prospectus (not an easy task unless you are a lawyer), does it state under which circumstances you will be settled in the last cash price known? Do you trust the lawful enforcement of that prospectus? who are the market makers, who are the custodians? bullion banks involved, governments involved, etc...

Viamat is one of the most renowned vaulting companies and Switzerland is probably the best country to have the vault in. Personally I do not like UK law and the channel islands, nor the US based one either.

Also, think about a sudden large revaluation, how difficult would it be for the custodians to pick up the metal and flee (sure they would become outlaws, but immensely rich, money can help disappearing, no?).

Another thing I looked at is the insurance terms most of the custodians have, they all exclude acts of "terrorism" (can fake a commando???!?!?!) and "nuclear war", and they are located near or within the airports, how convenient!

FOFOA has explained many times that when the bank holiday comes, people might be settled in cash at the last official price in the exchanges, which obviously won't be the FG final inverted waterfall top.

So when people here say "the most dangerous time is during reset", means that you need to hold it yourself till after things settle down, then after that, you will be able to put it in safe custody in a bank or similar institution.

That is my view, unfortunately I do NOT trust any known such institution as the ones you mention, keeping my gold.

Another option is to pick the safest bank you know in the safest jurisdiction you know and putting some in different safes (pick up the most difficult to access (high up in the room) so in case of a robbery you are spared). I know people holding gold coins in such safes through WWII and they didn't loose one coin. Is the future system crash going to be worse than WWII? good question...

Even if a bank closes for a few days, for the bank opening the safes and robbing you is equivalent to the end of the world, the final rape, mad max, etc... (in the safest jurisdiction mentioned above) if you believe that can come, do not use bank safes. The government could also order raping those boxes (again depends on the country...).

Good luck, please let us know if you find a safer option.

Cheers.

Anonymous said...

Joy,

I agree with your reasoning. It makes absolutely no sense for the ECB to create a one-time flash inflation of 20%-50% or whatever figure people have been discussing. Quite the contrary, they have any incentive to stick with their mandate and keep the Euro purchasing power stable.

Everything else follows from this, and you can conclude that they will (have to) purchase a lot of debt, including bad debt, in order to prevent consumer price deflation, but at the same time that they will not prevent the deleveraging of the financial sector beyond that, i.e. a good part of the bad loans will be defaulted on.

I don't think FOFOA's response to you can explain the recent policy shifts in Europe:
1) bank deposits in Cyprus beyond E100k are defaulted on (senior bank debt, too)
2) haircut on subordinate debt of some Spanish banks, even if this paper was sold to little people as "savings"
3) proposal that the EFSF will support banks only after equity, subordinate debt, senior debt, OTC liabilities and deposits beyond E100k have taken a haircut
4) lowering of CB reserve interest rates and even talk of negative rates, threatening the viability of money market funds
5) talk of imposing restrictions on collateral use by commercial banks

Is this how you create a one-time flash inflation of the Euro relative to goods and services, or is this how you deleverage the financial sector without compromising the real value of your currency?

You also asked about the gold reserve after revaluation. The gold of the Eurosystem is an exchange reserve of the CBs, but not a government slush fund. Eventually, the majority of this gold should flow to the private sector where it belongs AG (=after gold has become the primary reserve). I see two ways in which gold will have to flow:
1) AG, the Eurosystem can sell some revalued gold in order to cancel the excessive amount of base money from their debt purchases when they fought deflation
2) AG, the Eurosystem can settle the remaining balance of payments (TARGET2) in revalued gold. This is how gold ought to function inside their currency area AG anyway.

I don't think the governments will be allowed to have their CBs sell gold on gov't account in order to pay back their debt. That would be using monetary policy in order to fix poor fiscal policy, and I don't think they want to go that route. But if some bad government debt ends up on the Eurosystem balance sheet in the process of monetary policy (fighting deflation), it is well possible that this position will be cancelled in a sale of revalued gold.

Here is an example. When the Eurosystem purchased Greek government debt in 2011 (SMP), this transaction left two traces: a) government debt on the ECB balance sheet; b) TARGET2 claims of Germany and northern countries against southern Euro CBs (because northern holders of Greek bonds were paid off with CB reserves).

...

Anonymous said...


AG, I can imagine the CBs of the southern countries paying off their TARGET2 liabilities in gold, i.e. the Bundesbank would purchase revalued gold from the southern CBs in order to offset TARGET2, i.e. settling their balance of payments in gold as it ought to be.

Secondly, if Greece defaults on their debt once more, the Eurosystem would have a capital shortfall because of the defaulted Greek bonds. They can offset this position by selling revalued gold and cancelling the base money they receive. This suggests to me that the final sovereign defaults in the Euro zone should occur very close to revaluation.

Finally, depending on what happens to the dollar at the same time, the Euro zone may even experience a huge inflow of money, and so at first they may actually have to purchase gold in order to sterilize that huge inflow (unless the investors buy debt that will later be defaulted on - never miss that opportunity ;)
John,

one risk with Bullionvault or Goldmoney is that (even though they most likely do have all the gold), you don't own specific bars. So your main risk besides outright fraud is that these businesses close at precisely the wrong time.

If you have a safe deposit box in some ViaMat vault and ViaMat closes for business, you can still take your box home. But what do you do if GoldMoney closes for business, say, because a few days ago, the London fixing was skipped and now all major countries have enacted capital controls, and GoldMoney can neither buy nor sell nor ship their small customers retail sized bars because that, cross-border, has suddenly become illegal.

Victor

Edwardo said...

ampmfix wrote:

Similarly, one can make the numbers fit any story.

One can torture numbers just as one can torture data, but clearly that's a rubbish and says nothing about the validity of this particular brand of (dare I say it) TA as applied to markets. As for Fibonacci analysis being cabalistic in nature, well, clearly it's not. It may be a tad esoteric, but it's hardly mystical, and it is not, at least in this case, numerology in support of any doctrine, belief system, or secret society. It's just a basic, quite frankly, vanilla application of a fractal number series to a longstanding, (but by no means divorced from nature) human construct. In this case, markets.

Joe Yasinski said...

Not that I want to be a pitchman, but look at GBI. We offer allocated bullion down to the specific coin or bar you purchase, and delivery is always available anytime, anywhere. No fractional ownership with us.

Victory said...

DP,

From 'Legs':

There's also another way to think about these two-legged deals. It could also be said that the miner was simply forward selling his future gold production for a cash flow of dollars in the present, locking in a good sales price in the process. The counterparty to this deal, the bullion bank, would then be long future gold and, to offset this long position, would short sell spot gold, borrowing it from the CB and selling it to the market. Here's what another WGC research paper, this one from 2001, said about it:

"Transactions in the derivatives market, whether they are motivated by the need to hedge future production, or to hedge the risk of holding gold in inventory, or simply by speculation, tend to be seller initiated. The other party to the transaction – typically a commercial bank or some other intermediary – will seek to hedge its exposure to the gold price by selling in the spot market (normally borrowed gold). The sale of gold in the forward market therefore generally leads to a sale in the spot market.

When the derivative contract matures, the spot market hedge is removed, and the bank buys back the gold. Thus the effect of hedging by producers and fabricators is to bring forward or accelerate sales in the spot market. The volume of sales brought forward is equal to the net short position of hedgers and speculators.

So long as the net short position is stable, with the initiation of new contracts being offset by the maturing of old contracts, the effect on the spot market is neutral. But over the decade of the 1990s the amount of hedging increased rapidly, with much of the increase occurring in the second half of the period. The net short position increased by a total of some 4,000 tonnes, or around 400 tonnes/ year on average. To put the point another way, to meet the demands of the derivative markets, holders of gold increased their lending of gold to the market by some 4,000 tonnes." [2]

-v

JR said...

Ze GERMANS are coming!!!

The Champions League Final, the most watched annual sporting event in the world, kicks off in a little more than an hour. Live from new Wembley in London. Its on FOX in the USA unless your local FOX is stupid and opts out.

http://www.sbnation.com/soccer/2013/5/25/4362294/bayern-munchen-vs-borussia-dortmund-2013-uefa-champions-league-final

http://goal.blogs.nytimes.com/2013/05/25/live-analysis-champions-league-final-bayern-munich-vs-dortmund/

And surprise, the Germans aren't just good at being the economic powerhouse of Europe - the kick the ball good too as we have an all Germans club final - Bayern Munich v. Borussia Dortmand.

I don't have anything FOFOArific to say, I'm off to go enjoy some pints and the game. But the all German final does make me think about how much we have heard here the Dutch (W. Duisenberg, J. Zijlstra) and the French (D. Gaulle, J. Rueff, V. d'Estaing, C.Noyer), even Hungarians like A. Lamfalussy, but not so much about the Germans?

Maybe Woland will come tell us a story about the Germans?

Like maybe about Helmut Kohl, who knocked down the Berlin Wall and then pushed the Euro through sans a referendum because he knew it would fail a popular vote and the euro was essential for peace:

"Nations with a common currency never went to war against each other. A common currency is more than the money you pay with," he said.

He recalled French President Francois Mitterand - and other European leaders of the time - repeatedly urged him to push through the common currency idea, which was not very popular in Germany.

"They thought - and were right about it - that if Germany doesn't adopt the euro, nobody will. And about the German situation they said: if Helmut Kohl doesn't push it through, nobody else will. Decisions emerged out of this core attitude," Kohl said.

[...]

In addition, the freshly reunified East Germans, happy to finally have their Deutsche Mark back, would never have voted in favour of abandoning it again for a new European currency.

"In the end, representative democracy can only be successful if someone stands up and says: this is how it is. I link my existence to this political project. Then you get a whole bunch of people in your own party who say: If he falls, I fall too. And then it is not about the euro - it is a life philosophy."

"I wanted to bring the euro because to me it meant the irreversibility of European development... for me the euro was a synonym for Europe going further," Kohl said.

But he admitted that in bringing this idea to life he "was like a dictator."

Asked if he had to accept the euro in return for French support for German reunification, Kohl replied:

"No more war - that was the first message. That was the point for men like Mitterand and Kohl, who in 1984 held hands on the Verdun battlefield. It wasn't about German reunification first and foremost."


http://euobserver.com/political/119735




Ze Germans are coming!!!

http://www.zonalmarking.net/2013/05/25/borussia-dortmund-v-bayern-munich-european-cup-final-tactical-preview/

M said...

@ Victor

Quote:"It makes absolutely no sense for the ECB to create a one-time flash inflation of 20%-50% or whatever figure people have been discussing. Quite the contrary, they have any incentive to stick with their mandate and keep the Euro purchasing power stable. "

You are assuming that the ECB is daft enough to think that they can hold that much control of the situation when the real crisis hits ? I think they will try but they know damn well that when Japan or the US blows up, they will just let the chips fall.

FOFOA says that gold will revalue to 50k or so in todays terms but I don't recall him claiming to know what the cost of goods and services will be in Euro terms.

Basically the USD will hyperinflate and the Euro will not.

With the sudden demand destruction that will come with the real crisis, who knows what the price of things will be. If oil did what it did in 2008 ($30 per barrel) then maybe the price of things outside the print zone will be more stable then people think. There is no way of knowing.

Anand Srivastava said...

VTC:

I would think those rules are designed to do something when the financial system melts down. Many banks will go bankrupt and then the options would be to either print and recapitalize or take the money from the creditors.

But I don't see how this relates to inflation.

Inflation can happen two ways, either there is too much money in the market or there are too few things in the market.

The reason why Inflation will happen is to bring Europe in parity with the developing world. This disparity will not work After Gold. Currently things are too cheap in Europe or USA. I think there is around 3x difference at present, when you compare earnings to cost of everyday stuff.

Dante_Eu said...

@JR:

Football is a simple game; 22 men chase a ball for 90 minutes and at the end, the Germans win.
- Gary Lineker
(after losing the 1990 World Cup semifinal to Germany by penalty shootout.)

"Nations with a common currency never went to war against each other. A common currency is more than the money you pay with," he said.

Not true. Yugoslavia had a common currency. Austria-Hungary had a common currency. Both ended in bloody war.

Let's hope EU does better.

ampmfix said...

Edwardo,

Didn't you like my squares story? I found it so similar to yours!

Rubbish is a bit out of place, I am sure you realize it by now.

Relax.

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

I wasn't saying your particular foray with squaring was rubbish just that plugging in any old figures one chose until one achieved the desired result was.

In the meantime, I'm relaxed, especially when I consider that while the Germans have The Champions League por que cuando se trata de fútbol, los latinos dueño de la tienda.

burningfiat said...

Oh, Munich scored!

To round off this excellent, excellent European sports night, might I suggest some world class boxing after the CL match.
The main event is Carl Froch (UK) against Mikkel Kessler (DK).
This seems to be working right now (h/t RJP)!

Cheers!

Jeff said...

Indians, control yourselves.

http://www.indianexpress.com/news/contain-uncontrolled-passion-for-gold--chidambaram-to-countrymen/1120501/0

JoyOfLearning said...

@victorthecleaner:
So, if you too believe that if the ECB is to have a good chance of surviving transatition with credibility it must keep to it's single mandate of low inflation, then my question remains: what happens to all the debt promises, the pensions, the socialistic initiatives, the promised subsidies and other government activities? As far as I know these kinds of things, especially with aging populations and rising state promises are signfiantly bigger than even the huge government debts. I'm asking because if I find it hard for the ECB to maintain credibility after a 40% inflation on the transition, then politicially it might be even harder to swallow huge reductions in pensions, huge cutbacks in the nanny state and a lot of subsidies for the friends of the governments.

Do you think there will be enough political willpower to do such huge and painful cuts? I listen to the German radio every day and I hear such a HUUUGE socialistic statistic bias that I'm really curious how something like that could happen. What could provide a strong enough incentive for people to accept those huge cuts in the state without a socialistic revolution of the workers?

In fact feeling the constant atmosphere of greed and entitlements I hear on german radio I'm quite scared of how all the news media would scream for politic intervention for those pigs that dared to hold gold and get rich, painting them as already rich and greedy. I hear every single day, usually on many stations the propaganda for "closing tax loopholes" and extending the tax net, so I'm really wondering how these journalists and reporters will deal with the fact that some small group of the population (which will be easy to cast as already filthy rich) has suddenly become 10-20 times richer. I can totally imagine them screeming for a way to take this gold. Which leads me to a very practical question:

Let's take saver Frank. He's a newbie saver and he just got his first ounce of gold, for say 1100 euro. Now FG comes and it's revaluated, in $ from 1700 to say 50k in purchasing power . thats a factor of almost 30x revalutation. So, our hypothetical saver frank now is in a situation of selling his one ounce for 33 000 euro. How does he do that? Does that mean he's suddenly no longer able to do it anonnymously? As far as I know in EU you are not allowed to do transactions with sums above 1-3k in cash without reporting, or such things, direction decreasing every year. This puts a huge problem. Does that mean that every coin dealer will now have to have hundreds of thousands in cash euros? Or he gives everybody checks, which then makes all the until now safe savers in europe into declared gold holders and the government can suddenly make a list of all of them? I can't imagine any practical solution to this.

The only thing that would work, is a solution to the previous problem too (the pensions and government promises), and that would be if they found a way to stretch this over decades, for pensions inflation would slowly eat away at the promises, and for gold maybe people would find a way to deal with the bigger numbers... but other than that, what does a holder even just a couple of ounces do. Does FG mean that he's now forced to declare everything to others/govts? Do you expect it will be common for people to at home try to rip pieces of Krugerands just to not have to be listed at some bank/govt/get hunted by a media witch hunt because he was a saver before the transition? I just can't imagine any plausible scenarios that would solve this very practical problem. I can't imagine all the 1oz Krugerand coins in the world suddenly dissapearing, neither can I imagine payouts by coin dealers of >30.000 euros in cash for a single coin... and if everybody is forced to come into the open via bank statements about their savings for rainy days... well, that puts a criminally dangerous ammount of trust in their governments which historically has always been punished.

Thank you very much for your thoughts!

RevolutionOfNations said...

It must be hard keeping a blog going on a topic that has now been explained more than 400 times... (on this same blog)

FOFOA could, if he dared, venture outside the realms of Another or FOA and delve into the dynamics of empire sustainability and gold. Or the real reason for wars. There is a lot of insight to gain from the mountain view that Another and FOA provided us with.

When I hike the trail and reach a good viewpoint I sometimes like to use my binoculars..

Woland said...

Hi JR; I've only 2 German heroes: T. Mann and H. Hesse. but, if I were
to have a modern "political" hero? Yes, Kohl would top that list. Keep it
up! Greetz.

ampmfix said...

My square story was not ironic, I do believe in that, and I always was a square man (not a cube one! that was the disagreeing point more than any other), anyway...

ampmfix said...

Hans Castorp and Mme. Chauchat, lying side-by side on a longchair facing the Alps, waiting for freegold to arrive...

And Y said...

Hi, Joy of Learning....

Let's take saver Frank...I can't imagine any practical solution to this....I just can't imagine any plausible scenarios...I can't imagine all the 1oz Krugerand coins in the world...neither can I imagine...

I suggest some imagination work. Close your eyes, put on a soundtrack of your choosing, and think....

Saver Frank goes to dealer with 1 oz krug and walks away with a 1/2 oz maple, 1/4 oz eagle, 5g pamp suisse, and some cash. Or...

Frank contacts a private mint, to have his few oz coins melted into 1 and 5 gram bars, for a small fee. Or...

Any other number of solutions that will flood into the market post-RPG.

Not that hard to imagine.

Totara said...

@ JoyOfLearning,

Maybe saver Frank has his 1-oz in the form a Philharmonic with a face value of 100 Euros. Maybe Frank will find himself a friendly coin dealer who will buy his '100 Euros' coin for some combination of fractional Philharmonics like the 1/4-oz or 1/10-oz coins that have 25 Euro and 10 Euro respective face values, plus just enough fiat that the transaction doesn't trigger any limits. And maybe Frank can repeat this trickle-selling process, however many times he needs to, until his cash requirements are met.

Of course if saver Frank had known about Freegold in advance of the transition, he might have decided that buying a goodly supply of fractional Philharmonics could be a prudent part of his overall preparations.

Grinners said...

If a falling gold price makes us happy, then we must have been tearing our hair out for the past 12 years...!

Michael dV said...

Jonas
If you poke around you'll find a fofoa response to "Fiat is the Cause of Endless Wars" or something close to that. About a year to a year and a half ago....oops...found it:
http://fofoa.blogspot.com/2011/07/does-fiat-produce-endless-sea-of-wars.html

Attitude_Check said...

Look what I found posted at Zero-hedge. Looks like "some-one" cut and pasted the wrong message to the wrong blog. I would call this a smoking gun proof of a paid troll.

"...Freegolders say they are AGAINST gold as money but that they are FOR gold at the same time.

Who is AGAINST gold or honest money?

THE BANKERS.

Fregolders say that gold is neither commodity nor money. What kind of bullshit is that?

Freegold=Freebullshit " - post number : 3598973 Maestro

compare this post with

"Art said...

Freegolders say they are AGAINST gold as money but that they are FOR gold at the same time.

Who is AGAINST gold or honest money?

THE BANKERS.

Freegold=Freebullshit
May 25, 2013 at 1:50 AM "

Robert Mix said...

@ And Y and @ Totara,

Both of you raise a subject that has been of recent interest to me: fractional weight gold coins! Yes, it is true that the premiums are higher for fractionals (1/10 and 1/4 oz especially), but both of you point out one situation where the small extra premium would cost very little as opposed to the utility gained from owning small pieces.

The larger (1 oz) coins would best be used for BIG purchases like capital goods or companies competing against you...

:)

Luke said...

Better than fractional rounds are the Valcambi bars. 50g bar where you can break off 1g pieces at a time.

@Attitude

Very interesting.

JR said...

HMMMMM

It makes absolutely no sense for the ECB to create a one-time flash inflation of 20%-50% or whatever figure people have been discussing. Quite the contrary, they have any incentive to stick with their mandate and keep the Euro purchasing power stable.

Yup, because the euro debts are all good and will (should) be paid in real terms.

Hmmm, oh wait...

JR said...

Hi Dante_eu,

I agree neither A-H empire or Yugoslavia fits.

KnallGold said...

...and then there is the $ system derived debt of the European countries, I think FOFOA termed it first in "Greece is the word".

On that worry not being able to sell 1oz. coins, those solutions proposed somehow don't convince me. It must be practical and liquid, that Gold which must flow. And if large sums of money can't flow anymore, what would that do to the economy?

No, FreeGold somehow must be guaranteed. There must be also something for the savers! Remember the hybrid nature of the new system?

Oh, and a good description on what is so precarious right now, since end of last year, there is no true savings vehicle left! Ask yourself, can this last? And, how long?

Dante_Eu said...

@JR:

Those examples are from Balkan so they don't count. Barbarians you know. :-)

Actually there is a saying in Balkans:
"If you want to turn your friend into an enemy, lend him\her money."

Today, I see that as a primitive form of FOFOA's dilemma. Common currency or not, if the same medium is used as both store of value and medium of exchange, sooner or later, it will lead to conflict between debtors and savers. Holds true for both fiat and gold. Solution being Freegold which accidently also resolve Triffins dilemma.

It really is that simple. So simple that it took some random dude from South Africa to put it so eloquently. :-)

Balkans is Land of Confusion to some. To me, the West is becoming more and more Balkanized:


[...]

Now, did you read the news today?
They say the danger has gone away
But I can see the fire's still alight
They're burning into the night

There's too many men, too many people
Making too many problems
And there's not much love to go around
Can't you see this is a land of confusion?

This is the world we live in
And these are the hands we're given
Use them and let's start trying
To make it a place worth living in

Oh, superman, where are you now?
When everything's gone wrong somehow?
The men of steel, these men of power
Are losing control by the hour

[...]

ein anderer said...
This comment has been removed by the author.
ampmfix said...

Do you detect a contradiction here or is it just my simplistic mind?

http://armstrongeconomics.com/armstrong_economics_blog/

In the "Gold the real conspiracy" MA states that the real ultimate goal of governments is to tax all that is possible and more ("The real secret strategy of central banks is to shut down the black markets"), but at the same time he states that governments will let the economic system fail (deflation), "They will destroy the world economy before that ever takes place" (hyperinflation).

For government and society not to breakdown (and thus be able to tax the citizens to death and preserve the nice politicians status quo) the future looks like governments will print. Looks like a contradiction to me.

Worthy of mention also is the comparison of today's governments to the absolutist kings of the past ("At the time of the American Revolution there were 240 felonies all carrying death so the king took all your assets and through your family out on the street").

ein anderer said...

Joy,
my 1¹/₂ cents to …

Media
Those *very few* people who are owning some little gold here and there ("shrimps") will not become a long standing relevant theme anywhere. Who will care about some anonymous new millionaires? Nobody at all. Because these few little millionaires will stand in a huge, huge shadow of the central banks: THEY will become enormously "rich". ECB: from 433 bn to 2 tr!
THIS is the shocking figure which will dominate the discussions. For very long.

Selling
Who cares if you take some old furniture or some small Picasso pieces to an auctionary? No tax. Nothing. At least if you are not doing this as a business.

Coin Dealers
In my town there is a coin dealer who is planning already now a new service, completely independently from Freegold: He will bring sellers and buyers together, with a small premium for him. So instead of buying some coins and giving out cash and waiting until a new buyer is coming giving him cash back, this service is almost cash free for him. Only buyer and seller are in cash. In the same manner as FOFOA is predicting some new bank services in this very post there will arise new service outside the banking system too.
And why should there not be dealers handling 50K-transactions? With this argument there could never be sold a Daimler-S (80K and more). 50K is absolutely no unusual cash transaction today. The only ones for whom this is unusual are we shrimps owning only some few K, because we are not (yet) accustomed to it :D
But we will, very soon. And be sure: There will be some who will lose their gain quickly because they are not educated to save.
And don’t forget ebay. There are quite a lot 5 figure auctions!

Government debts
As far as I know there has to be attained an Aktiva and Passiva ratio of CB assets. That means (@all: please correct me if I am wrong):
If the Aktiva are skyrocking because of revaluation most of the overhang has to be paid over to the government. May be they change the ratio a bit to make the CB still more safe. But the main amount of the gain will go directly to the Ministry of Finance.
Therefore: Since those governments are not dumb at all it will be in their strongest interest to support any Freegold developments as soon they arise on the horizon. Governments (owning gold via their CB) are the first profiting from FG.
Here it comes, the new situation for The Debtors and the Savers!

Brady said...

JR,

good match to watch, chances both ways including an number by Robben's who was making things happen all game. Goalkeeping was splendid. Dortmund was a little too lax on the defensive end in the last 10-15 min but then again, a lot of things went right on Robben's late goal.

On another note, watched Hangover 3 yesterday. Another movie with a reference to gold, in this case, criminal (John Goodman) steals Las Vegas visitor Saudi sheikh's 400 oz gold bars (we're only told its worth $42M), Chau steals 1/2 and Goodman forces the wolfpack to attempt to retrieve the $21m in gold bars stolen by Chau. The shiny yellow is central to the storyline.

Woland said...

When one understands that Chidambaram was speaking at the "platinum
anniversary" celebrations of state run Dena Bank, it all makes sense. ;-)

ein anderer said...

Joy,
calculation on a lazy sunday afternoon …
Worth of ECB’s gold assets after revaluation would grow from 433 bn (german: Milliarden) to about 20 tr (german: Billionen).
What figure! Until now we are accustomed to those figures more in the context of debts …
And that’s the ECB only. Look at those enormous gold assets in the states of Europe in respect to Freegold!

Edwardo said...

ampmfix,

It seems we are destined to converse right about now. You've discovered a key feature, perhaps the key feature, of Mr. Armstrong's discourse, which is that it's riddled with contradictions of just the sort you've pin pointed.

Once one realizes that Mr. Armstrong's world view, shaped (make that warped) as it is by his lamentable experience with the U.S. Judicial System, rests on the singular idea that world governments are singularly hell bent on destroying all semblance of healthy financial and economic functioning in order to maintain their position, one has captured the essence of Martin Armstrong's offerings.

Unyieldingly armed with the aforesaid view, any and all other explanations (such as those found on this blog) that could conceivably explain all the disparate phenomena emanating from officialdom are inadmissible. Mr. Armstrong shoehorns all data into his peculiarly personal vortex of perception where government, government being broadly defined to include any institution that even faintly interacts with elected officialdom, is a purely malevolent and thoroughly destructive force that, were it drawn on a piece of paper by a child, might look like The Borg crossed with Count Dracula having fearsome appendages that would put an octopus, or perhaps your least favorite insect, to shame. In the main, I, too, detest government, but Martin Armstrong's view, despite his seeming patina of erudition on matters pertaining to history, money, and the history of money, is so unmeasured and unsubtle in his approach that he invariably must contradict himself, because, well, that's what happens when you run like a screaming banshee from anything that admits a tad more complexity than your rigid world view will allow.

JR said...

Hi Dante_Eu,

Not true. Yugoslavia had a common currency. Austria-Hungary had a common currency. Both ended in bloody war.

Yeah because in civil war and or rebellion against an occupying government, it is a nation(s), not nations. That's a starting point for exploring why your examples don't really bear on Helmut Kolh's point.

AKA war happens, and pointing out people on different sides have used the same money before misses the key point he is talking about, which requires nations and the collective decision to use a share a currency. Tyranny and rebellion is not what he is talking about.

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

BTW, great point here:

Actually there is a saying in Balkans:
"If you want to turn your friend into an enemy, lend him\her money."

Today, I see that as a primitive form of FOFOA's dilemma. Common currency or not, if the same medium is used as both store of value and medium of exchange, sooner or later, it will lead to conflict between debtors and savers.


Its the lending that isn't the problem, its the lending of something that tries to be an SoV too that causes the problem, in large part because of the oppressive burden in places on the borrower. You don't want to lend something and try to fix its value, you want to lend something whose value can change. Which is why you lend in currency and let gold float, settling outside of the debt system and thereby letting prices fluctuate so debtors can repay.

The lesson from the monetary changes made in the post-war 20s is that if you want the debtors to ever be able to repay their debts in real terms, you do not sterilize the vital spur and brake function of gold by locking its purchasing power. It is the price mechanism—price changes in goods and services—that transmits the arbitrage signal that causes gold to physically flow to where it has the greatest purchasing power. For a struggling economy to grow and expand to a point at which it can repay its debts, the gold not only needs to flow, but it must be a fertile member of the economic ecosystem so that it can perform its vital function.

cont.

JR said...

cont.

[...]

Now imagine you have one country with debts denominated in goods and services. Let's call it Greece. Greece owes Germany X goods and services. Meanwhile Germany is still exporting goods and services while Greece is still importing. This leaves Germany with a structural surplus in its Balance of Payments and Greece with a deficit. But gold can reverse this flow in an instant on the BOP at a high enough price. And once it does, it will begin to exert the brake and spur forces on the two countries until the flow of actual goods and services finally corrects and reverses. Once that flow corrects, the gold flow (which is opposite the flow of goods and services) will reverse and subsequently the brake and spur forces will also reverse.

Gold flows in the opposite direction of goods and services. Remember when ANOTHER said, "gold and oil can never flow in the same direction"? Well it's the same thing with other goods and services. Germany and Greece may both be exporting and importing, but Germany is exporting more, which shows up on the BOP as a Trade Surplus and a Capital Account Deficit. At a high enough price, a small amount of gold can (and will) flow in the other direction, from Greece into Germany, and if its value exceeds the (net) trade difference between Germany and Greece, it will turn Germany's Trade Surplus into a Trade Deficit and a Capital Account Surplus.

Now jump back to post-WWI. Europe was the debtor with debts denominated in goods and services owed to America. But Europe's economy was struggling to get back on its feet, making it difficult to pay its debt in actual economic goods and services. So the proxy—gold—flowed from Europe to America in unprecedented amounts. This flow should have acted as an incremental brake on the American economy and a spur on the struggling European economy. But instead, the US sterilized the effects of this gold flow in 1920 and '21 while implementing "intelligent and courageous deflation" (President Harding's words), and then in 1922, the Genoa Conference sterilized gold's natural mechanism globally.

Once sterilized, gold flowed uncontrolled into the US right up until the whole system collapsed and beyond. This would be similar to Greece selling gold at today’s prices to pay off its debt. The gold would quickly be gone and then the economy would collapse. The sterilization of gold may be at least partly responsible for the roaring 20s, the Great Depression, the rise of Hitler and the Second World War.

You can't squeeze blood from a turnip. That's an old saying. It means that you cannot get something from someone that they don't have. In order to pay its debt in real terms, Greece needs to ultimately get back to producing more than it consumes. And as counterintuitive as this may sound, they will first need to run a BOP surplus in order to get there. You do that by exporting more value than you import.


http://fofoa.blogspot.com/2011/09/once-upon-time.html

JR said...



So what is settlement? Well, it's not lending. It's not investment. It's not speculating in commodities (i.e., betting on future price signals). It's not consumption. And it's not necessarily buying gold. It is simply spending your excess income on durable goods that are not consumable and are not economically important. And, for savers, this means goods that tend to have resale value because of the focal point and network effect principles. This includes all of the usual goods I list as collectibles, but without a real focal point, none of them suffices enough to do the job properly and get the savers, as a group, out of the way. The best durable assets currently are out of reach to most savers, and the ones in reach suck. So the savers turn to investments and speculation which messes with the price signal transmission system built into the human superorganism.

[...]

You see, it's not the fluctuating gold price that is needed for price signal transmission… it is the exact opposite! It is the price of everything else that fluctuates, transmitting signals, and it is gold that remains stable enough to sequester the savers as a group and get them out of the way of the Superorganism so it can do its job! Gold does not need to beat investment returns. Born investors will not be drawn to gold, and we don't want them to be, because they are a fickle bunch which makes them an important component in the Superoganism's price signal transmission system. The savers just need to let them be, which is why I ended that post with "Let It Be" by the Beatles.


http://fofoa.blogspot.com/2013/05/glimpsing-hereafter-2.html

ein anderer said...

Joy,
Victor was questioning if the benefit of the ECB and the national CBs get into the household of the governments. If he is right Wikipedia would be wrong: see it’s Bundesbank and EZB articles.

JR said...

Yeah Brady,

Fun game. The Bayern fans were organized and coordinated, Hans Gruber was animated in his return to the international limelight (KLOPP!), Roman Weidenfeller tried really hard not to lose, Dante is really good at kneeing you in the chest while hitting you in the balls and Franck Ribery is still surly.

Hope the movie was okay!

ampmfix said...

Well put Edwardo, thanks for confirming my suspicion and the additional explanation.

gull_mann said...

If gold goes to $35k, $40k, $55k or whatever, what will stop TPTB from taxing the common person 70-80% of the amount when to go to sell the gold for some fiat to buy a new car or for a nice vacation trip?

Dante_Eu said...

JR,

Yes I agree, examples are not what Helmut Kohl meant. Although, one could see Austria-Hungary as a predecessor to the EU.

Yea I agree, lending in it self is not the problem. But the fact that, if your friend no longer can pay his debt back, you two will become hostile to each other. And hard currency ensures it. It's not called hard for nothing. :-)

How about that Dante, that's some Bruce Lee style! :-)

Dante_Eu said...

@gull_mann:

Not all live in Denmark or need to sell the shiny over there. ;-)

You guys get slaughtered on car taxes also. :-)

Anonymous said...

Attitude Check,

Good eye. I think it's obvious something is up with these characters. He's either paid to act retarded/manufacture brainless spam to disrupt, or he's simply psychotic... and really fucking dumb! Poor bastard.

There is then the "higher grade" troll like gary/sugarlover/etc... he appears to be maybe a little more intelligent than the art/maestro/etc version... Paid in nootropic brain supplements perhaps?.. This version is also disruptive, though their target is the more advanced, learned reader.

After that point they have no ammo left. Limp and useless. They're dishonest and don't really provide anything to the discussion, and it's obvious... which is why their comments get deleted. The whole thing is pretty damn sad. You couldn't pay me a million dollars to do what they do, and I'd probably do the world a favor and shoot myself if I was doing it for "fun".


They are dancing in quicksand while we continue to ignore them.




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

gull_man,

The physical must flow, which is why those who have it in their possession will not be exorbitantly taxed, for if they are, physical will lie too still, if you catch my drift. Read some more of the blog and you will find that questions such as this and many, many more are answered.

Reality Show said...

Hi John Law,

I think it depends on the reasons why you are holding gold, to make money or to actually preserve wealth?

Through the teachings of Fofoa I have grown to understand that wealth is something you must physically possess, it cannot be represented by a promise of something that is owed to you. You own the gold at, say, BullionVault, but is it really your wealth when it is in their custody?

Are you comfortable keeping other men's actions between you and your wealth in these unprecedented times?

M said...

Art

You are a clueless ffing moron.

If nobody saves in the medium of exchange (paper/digital) then printing money creates instant inflation like it does in bannana republics or anywhere that isn't part if the dollar sham.

Why doesn't the Central bank of Russia just print money and hire govt workers and scam the system like the US does ?

BTW you should check the comments on your own blog once and awhile haha..

Knotty Pine said...

@gull mann

Try reading this.

Whatever you do just stay away from these businesses!

Victory said...

JR,

One thing I'm struggling with, I get the spur/brake function with gold flowing opposite goods and services in your example above using the US and Europe but it makes less sense to me when it's between countries within the same currency zone.

If Greece is running a trade deficit with Germany why would Germany necessarily import gold from Greece in return when they could buy Gold within Germany or any other member of the Eurozone using the Euros they received from their trade surplus with Greece?

tx,

V


JoyOfLearning said...

@ And Y,Totara
Thank you so much for your answers. It was indeed a failure of imagination of my part. I hope you are right and local gold dealers will be as friendly/be allowed by regulations to be as friendly and anonymous as that.

@ ein anderer
What a great idea & service that coin dealer in your town does! Hope there'll be movements like that in the Baden-Württemberg area too. I'm hoping also this kind of a service will be doable in anonymity, without needs to identiffy and maybe get written down on lists.
Also thank you very much for your pointing exaclty the answer I needed for my fears of socialist media reacting: I now see that indeed the governments would be the biggest profitors of the revaluation and thus will probably pull propaganda strings in newspapers & radio so it may get softened down/put in a positive light, nad if they can't they'll still be in the spotlights for the huge sums. In fact this might give a new distraction for the press, as all the socialist media will look to the now rich governments and start to lobby for new handouts and social programs funded out of the revalued gold.

Thank you also for the wikipedia links in relation to Victortheclener's post. Just to check that I got it right, it's about the fact that the ECB is passing down prophits the German government and thus would have an incentive/channel to do that? Or did I get it wrong?

Thank you! Also thank you for your blog. If you know of other german language/origins writings I would be very interested in other posts about FG as it relates to the speciffic problemsn in the German area, both in terms of public/social mentality and private reactions.

Thank you everybody for again opening my mind to a new level!

Michael H said...

Oh my, a bot with a sense of irony. Skynet is near.

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