Three years ago today I wrote The Dukes of Wetton, and tonight you are in for a real treat. Dixie barber and storyteller extraordinaire
RJ Padavona reads this FOFOA classic for you and your kids.
Freegoldtube started this project a couple months ago, and he's asking a few of my readers to read their favorite post aloud and send him the MP3 file. Unbelievable, isn't it? I mean how many other blogs have anything like this? Soon I'll add an audio posts link to the sidebar, but for now you can enjoy Lisa reading The Debtors and the Savers here, right after you're finished with Boss Hogg and his damned HoggBucks…
563 comments:
«Oldest ‹Older 401 – 563 of 563When using houses as collateral to borrow, the loan is denominated in dollars not in bedrooms or square metres of construction.
But when borrowing with gold as collateral today, the loans are denominated in ounces not dollars.
Freegold is when the loans against gold is no longer denominated in ounces but only dollars.
Freegold:
In the current monetary system, almost all savings are "paper" (i.e. physical currency, currency denominated accounts like checking and savings accounts, Certificates of Deposit, stocks, bonds, etc). Today’s savers hope to exchange these "paper" claims in the future for real, physical assets. Over time, "paper" claims have grown to be magnitudes larger than the real assets which exist in our world. There are not enough real assets to satisfy all the "paper" claims which exist.
Imagine a balloon stretched to its limits. When it pops, all the air inside the balloon dissipates, leaving only torn and shredded rubber behind. This is our current monetary system. It is reaching its limit, and sometime soon, it will break. "Paper" promises will disappear, and those who counted their wealth in "paper" will see that wealth disappear - in an instant. Those who hold their wealth in real, physical assets, will carry their wealth through the transition.
After the system breaks, savers will seek a store of value which is real - something you can touch and possess. The world has already chosen physical gold as the primary wealth reserve. Those who live in the West have forgotten the historical use of gold as a store of value. But, while the old system still exists, we have the opportunity of a lifetime, to convert some of our "paper" to physical gold. This will allow us to carry our wealth, intact, to the new system.
No-one knows how much time is left - but it is better to be too early, than to be a day too late. Gold – get you some (h/t Ari).
tintin said:
"But when borrowing with gold as collateral today, the loans are denominated in ounces not dollars."
I don't understand that. Could you explain more? Why can't I go to a bank with X ounces of gold in my hand, leave them in the bank's custody as collateral, and get a loan denominated in dollars?
Ender
Your comments in the past have made me contemplate this question before. My thoughts are not on solid foundation but I enjoy the exercise. To answer your first question I would say if you have the power to create currency this privilege is much more valuable than Gold. I’m not sure I can answer your second question though. Maybe I would hold it to defend my currency? Or to ship it to where it needs to go to keep things stable? I’m just guessing though. Huge stores of Gov’t held gold still confuses me. It seems more natural for gold to be in private hands.
@2:47 I posted a link to "A personal message from FOFOA up today on the front page of JSMineset".
This piece, in fact, was not authored by FOFOA.
@Sam,
Thanks for sharing your thoughts on a subject I have wondered about. I still don't have an original answer to the question but it seems to me the last thing a "Giant" needs is more currency. His focus is on wealth preservation so it seems gold is the answer. The question is how much gold lying still is too much post transition.
From "The Gold Must Flow": "The bottom line is that private gold needs to flow as a fertile member of the balance of trade. There will be no advantage for the USG to confiscate or tax above-ground gold this time. Gold may be utterly "useless" to the present debt-based economy, but it will be absolutely vital in the Freegold economy."
This conversation may help.
Ha! I thought you sounded different, something was off, glad it wasn't me.
-v
Knotty Pine: "I still don't have an original answer to the question but it seems to me the last thing a "Giant" needs is more currency. His focus is on wealth preservation so it seems gold is the answer. The question is how much gold lying still is too much post transition."
Ender points me towards a different answer. Giants don't need more currency. Giants need a currency to function. To facilitate this need they have gold.
Hi Franco,
It's common practice in the gold mining industry to borrow money from a bank/bullion bank, but then tie up a hedging contract to support that loan. If we take this deal as a whole it is a loan denominated in ounces to the lender.
Freegold is the end of QE, WITHOUT Armageddon.
And yes, it WILL end before 2014.
It’s ‘against’ existing law to sell gold and ‘not’ report the taxes right now.
That’s true for some countries, for others not. Germany is taxing gold sales profits only up to 12 months after gold acqusition. Afterwards: Nobody cares.
Sales have to be reported by the buyer for the accounting department.
Acqusitions have not get personalized by the seller. They are anonymous up to 14’999 EUR per day and same person.
Freegold: Where your money is soft and your savings are hard.
Bjorn,
this is one dilemma I have: if the money is soft, somebody will lose purchasing power/wealth. Who will want to offer credit/invest AT ALL than ? As such credit will have built in some financial loss due to inflation/gold arbitrage ? I very much understand the obscenity of current "investments", but still, what is the limit ?
Yes Naughty, I would also like to have a hard money world. Problem is, it always ends in blood. And why do you think that noone will invest just because money is soft? It will not be softer than it´s been since -71.
Essence of Freegold?
Catch a whiff.
Aaron,
When I read that "excerpt" at Sinclair's site, supposedly from FOFOA, the first thought that crossed my mind was that it did NOT sound like him. In fact, in his own words,"To me it reads like someone trying to sound like me, saying what they wish I had said." I think that summed it up exactly, though it did not sound that much like FOFOA to me. There were no brilliant challenges to conventional thought there, no AH HAH, no lightbulb moments in it, In fact, rather dull.
Thank you for confirming that suspiscion.
So we can add a bit more to the idea that Sinclair cannot be trusted. His motives are unclear to me, unless we simply acceed that he has indeed gone "off the rails".
And before ART's last comment vanishes may I quote it here?
"Freegold = use gold to argue FOR fiat as money."
Was that another attempt at contention? If so it missed the mark. In fact my boy I think you've finally GOT IT!!
Here's mine:
Freegold is the realization that one should store its purchasing power (ie. save)
in a physical item that is useless (for all intents and purposes) in ones daily life yet at the same time, is naturally indestructible (for all intents and purposes) and therefore if one wish so, eternal. On all levels - personal, corporate, state, inter-state, planetary, interplanetary etc.
All paper vehicles for saving fail the criteria. All commodities (including silver) fail also.
Only physical gold fit the bill, hence -> Freegold.
Sugarlover,
A currency that functions in a freely traded global marketplace will always serve as a store of value, FOR A TIME ... why, just look at what we have today. Even the massively hyperinflated reserve currency stored value for a time, and still does to this day (for shorter and shorter periods) but that TIME is now ending.
No FIAT currency has as yet stood the test of TIME as an SoV, as gold has, because it has always been "linked to gold" for value in a way that, as WD says, the Euro is not.
FIAT can NEVER maintain an artificial fix to gold because the promises of men do not endure THROUGH TIME, as does GOLD.
Nothing in your quotes negates the A/FOA/FOFOA thesis (as clarified from the now burgeoning interpretations of "FREEGOLD") when considering the all important element of TIME.
"Freegold = use gold to argue FOR fiat as money."
"Freegold is not a monetary standard based on a durable commodity. It is a monetary standard based on pure, printable fiat."
Does everyone remember the moment when they realized 'we absolutely need currency'? I do and it meant that I no longer had to store little airplane bottles of liquor because that and silver are part of the barter larder.
Hilsenrath and Bernanke are merely channeling the intent of the BIS.
It is the BIS that will halt QE, when the new system is ready for launch.
FGT,
My humble offering for your significance of Freegold project:
A simple saver in todays world is forced to save in one or all financial markets, a gladiatorial arena of constantly shifting winners and losers. There is no choice but to join the fight, else be abused. Freegold will allow a saver to opt-out of the fight, to leave the arena. Let those so inclined, duel for the high-stakes and fortunes.
Good job, everyone.
Rgds
Wil Martindale said:
It is the BIS that will halt QE, when the new system is ready for launch.
I thought the new system was ready 12 years ago.
Wumpski Wumpski said:
A simple saver in todays world is forced to save in one or all financial markets
Not necessarily. A simple saver can save in physical gold, today.
milamber, et al
After seeing Jim attribute a FOFOA 'quote' that ain't a quote, I've turned. That is an inexcusable faux pas. Strange nonetheless.
Your criticism and suspicion look to be well founded. Weird.
@ Franco
But is not todays 'physical' gold price just another financial market, without Freegold?
@Naughty SlumDog,
"this is one dilemma I have: if the money is soft, somebody will lose purchasing power/wealth. Who will want to offer credit/invest AT ALL than ? As such credit will have built in some financial loss due to inflation/gold arbitrage ? I very much understand the obscenity of current "investments", but still, what is the limit ? "
Let me try to address the currency part:
I don't think that part is that different than today. How does lending get done today? We have expectations of future inflation and set the interest rate accordingly.
Also, don't forget that for banks, even thought they might not guess the inflation rate correctly, as long as they are nominally profitable they are not in trouble (in other words it's the bad quality of the loan, not the badly chosen interest rate that sinks a bank that holds on to the loan).
So if gold is at that point a stable savings medium, it too will have expectations of appreciation, just like anything else today - therefore an expected "safe/no-risk" interest rate (like the Treasuries used to be before QE flattened everything).
So banks can use a mix of that expected rate (along with other debt rates) plus the risk factor for the creditor to establish the interest rate. Will they be right? Sometimes yes, sometimes no, but if they have "skin" in the game by holding the loans instead of packaging and selling them to hungry savers/retirement plans then they will self-correct their mistakes very fast.
So I don't see much change in banking at that point except for a return to the bank caring A LOT more about credit risk since they own the loan.
Profits will be made in currency, just like today. Think about how many corporations look at real gains and not just nominal gains today? Very few, and certainly nowhere to be found on public financial statements. Maybe for their internal boards... I for one don't see that changing.
Aquilus
kobajashi said...
Do you know FOFOA IS IN CONTACT WITH SINCLAIRE thanks to the efforts of flore and belgium (2 Guys from belgium were i also live!)
We have a terrific forum www.goudstudieforum.com
Its in dutch but if you give it 10000 learning houres, you can all partitipate :-)))
Grtz koba
May 8, 2013 at 4:51 AM
James Sinclair was in the nineties and still is right now, just 'another' man .... :-)
Among friends in the nineties James Sinclair was just Another man ... :-)
prete
I take it you meant that (implication) as a joke? :)
TF
Maybe, maybe not ... ;-)
Franco:
A simple saver can save in physical gold, today.
Yes, in principle.
But de facto the simple saver, not reading any gold blogs (not to speak of FOFOA’s), has almost no chance. Most financial advisers, most banks, most newspapers, most magazines, most radio and TV media are sending him into the Circus Maximus. Exceptions prove the rule.
Franco,
Not necessarily. A simple saver can save in physical gold, today.
No, not really unless of course the simple saver in question is an evil gold hoarding, time misallocating, brainwashed, cult member jerk.
$IMFS gold is a sorry vehicle in which to save. What does a simple saver do when he has to draw upon savings that have dwindled by 20% in the matter of months? That kind of volatility excludes all saving time horizons but the very longest, and therefore limits the amount that can be saved. There should be no limitations to the amount one wants to save.
We cult members may see our gold purchases today as savings. The rest of the world disagrees and see us as speculators, in some cases reckless ones. They would be technically correct in the respect that we see a dramatic revaluation coming in our holdings that will greatly amplify our wealth. We seek to preserve our wealth like a saver, but quietly acknowledge that our wealth will grow. We are frontrunners. So I would have to agree that currently I have more in common with a derivative trader than a simple saver. My actions will only be seen akin to the simple saver from a post-Freegold world.
Until then I am just a jerk who likes to misallocate time.
If you look at things in isolation you’ll miss the big scheme. Everything is interconnected and so is gold. In the nineties some friends looked at the coming euro currency but missed some important details. They also looked at gold as a probable answer to a falling dollar but overlooked the importance of the interconnected trade and money flows. Still all gold advocates are looking at gold in isolation and therefore misjudge what we can expect.
It’s very hard to get it all interconnected in an ever changing environment. I guess freegold has a chance in a powerful far east because gold already is free there. It’s only the gold price that isn’t free yet but this doesn’t guarantee skyrocking gold prices.
We just have to wait what the change from west to east will bring us.
Prete-
What important details were missed?
What is the big scheme?
How are all gold advocates misjudging what can be expected?
What is expected?
Why have you waited so long to come on board here and share?
prete:
Why don't you explain yourself? If you get the big picture, I'd love to hear it. Seriously.
Euro as the next world currency? Euro as the deliberator of gold? Wished it were true. One comment doubted the wisdom of "the Dukes" (the Europeans) because they are a bunch of bickering individuals, sorry. Fofoa reacted immediately by introducing a mr. Alexandre Lamfalussy--a man of reputation indeed. But now I find out both the comment and Fofoa's reply are gone. Is it true or am I mistaken? If true, why were the comment and Fofoa's reply removed?
Next, SugarLover refers us to Willem Duisenberg's (my country man!) position statement on the euro currency, to wit: "The euro is (also) a store of value". Martindale reacted by pointing out that a fiat currency is, indeed, a store of value but FOR A TIME ONLY. I agree, but that nuance of time is Martindale's--not Duisenberg. Be aware of confirmation bias (tendency to hear things that confirm you beliefs). Still waiting for a reply to SugarL.
Regards.
As long as the status quo is functioning, it will be supported by all who matter.
Of course the new system has been theoretically ready to launch for years now.
But it won't be "launched" until the status quo is shattered. Most think it will be a Lehman type event, but it will be a much larger debt default, probably tied to the derivatives casino.
When the current system freezes up, collapses, crashes and burns, however you choose to describe it ...
THEN the BIS will be ready to launch FreeGold.
Dr Bore,
How many times must you receive an answer?
FOA: Was gold a medium of exchange? Yes, but to their own degree, so were the bowls. Was gold a store of value? Yes, but to a degree, so were dinner plates. Was gold divisible into equal lesser parts to define lesser barter units? Yes, but to a degree one could make and trade smaller drinking cups and lesser vessels of oil.
FOFOA: Here's the thing, 'store of value' and 'medium of exchange' are relative terms. Anything real stores value (a painting, a computer, a jewel), and lots of things are media of exchange in various settings (dollars, other currency, cigarettes in jail, etc). And for stores of value, there is a continuum as to how long things store value. What we are talking about is degree. And this gets to the heart of a semantic issue about money being media of exchange and a store of value.
Menger: [I]t appears to me to be just as certain that the functions of being a "measure of value" and a "store of value" must not be attributed to money as such, since these functions are of a merely accidental nature and are not an essential part of the concept of money.
Mises: Money is a medium of exchange. It is the most marketable good which people acquire because they want to offer it in later acts of interpersonal exchange. Money is the thing which serves as the generally accepted and commonly used medium of exchange. This is its only function. All the other functions which people ascribe to money are merely particular aspects of its primary and sole function, that of a medium of exchange.
Both of the above quotes get at the idea that, because money is a medium of exchange, it is also, to some degree, a store of value. Even Zimbabwe dollars were a brief store of value, but being a store of value isn't what money is all about. Being a store of value is not its central function—it is derivative of its being a medium of exchange. Being a medium of exchange is money’s essence—what makes money money. This means that, by definition, money’s ability to serve as a measure of value and store of value is secondary.
(...)
As I mentioned above, in the same way that a medium of exchange is to one extent or another also a store of value, stores of value are also to one extent or another media of exchange. The question is one of degree, and this is how, through market forces, we end up with "two monies." Being the focal store of value does not make something the best medium of exchange, and vice versa.
prete: "I guess freegold has a chance in a powerful far east because gold already is free there. It’s only the gold price that isn’t free yet but this doesn’t guarantee skyrocking gold prices."
Skyrocking gold prices can only occur after a death defying nose dive.
You're right, the gold price isn't free, yet.
Does Freegold 'have a chance' in the West?
I think Jim mixed things up..he receives alot of mail..and made a mistake
What I am trying to tell you is that I really don’t know but I do have a clue. Satchidananda.
Thoughts are always good but Beliefs can be destructive. Another/s gold Thoughts were genius but could be destructive to followers who know they Believe but can’t comprehend what/s really going on right now.
Someone in the nineties had some Thoughts about the role of gold and those Thoughts were very different from mainstream Belief in gold those days. If you embrace those Thoughts don’t make it Believes because the world changes and time & timing is everything.
Dear 'jojo', I wished I knew how the big scheme would look like, but honestly I don’t think the big guys know that either. They simply go with the flow and profit every move the flow takes and try to manipulate it as much as they can.
Gold advocates who react on events in isolation simply misjudge. That’s a universal rule.
And yes 'indenture', if the dollar was to take a death defying nose dive, gold prices really would SKYROCKET. But realize that IF the dollar takes a nosedive it’ll have the same effect as Iran & Pakistan & China are firing nuclear missiles at the main cities in Europe and England and the United States. It’s all cause and effect.
If a world trading & reserve currency dies a sudden death without immediate replacement (either the Renminbi nor the Euro are convenient replacements) , there will occur Armageddon and Barter all over the place.
Flore, I hope you're right that it is just a mistake... Although a rather severe mistake I would say! Perhaps he should pay special attention to those emails he intends to publish such that he get trivia like the author correct!
Anyway, I'm still waiting for JS to correct this mistake (here approx. 24h after it was made). I'm sure someone (you perhaps?) has alerted him already, yes?
I guess freegold has a chance in a powerful far east because gold already is free there. It’s only the gold price that isn’t free yet …
As long the gold price isn’t free there is no free gold.
Since we are living in a interconnected globalised world it is not possible that gold is somewhere "this" and somewhere else "that". Either free all over or restricted all over.
As long gold (uuups, GLD) is chairbound to the Dollar it’s price is chairbounded globally. Because the Dollar is a global reserve currency, stil …
Att.: "… is a global currency!" Times where it was the global currency are already over …
Guess you misinterpreted me. Try to think out of the box.
With 'free' I meant 'free in peoples mind'. In the Far East we buy 24 karat gold jewellery unlike the 18 karat and less crap in the west. Main street Far East Gold is not a Central Bank issue unlike the Western Central Bank crap. Etc.
@prete:
Well, we also try to go with the flow. And just happen to find free(gold) flow the most probable of all flows. Go with the tide even if it seems to go backwards from time to time. No need to change the boat, one wrong move while switching and one might slip and fall overboard. Yes you might swim to the shore or climb onboard again but, why take the chance? History has proven our boat to be one the best if not the best, come hell or high water. ;-)
Hi Blondie, Sugarlover, Dr. Boer and asscoaited crew,
Wim Duisenberg said:
(1) a currency (money) has no value in and of itself, and only derives value from its use, from the confidence of the people using the currency in its ability to function as a MoE. As Wim said, money needs to "retain its value." Not store value, rather retain it, aka not depreciate too fast.
"Consider this simple fact: we engage in an exchange of goods and services everyday by using money as the means of exchange; and we offer our labour in exchange for money, which, in itself, has no value. We only do this because we believe that we will, in turn, be able to exchange that money for more goods or services. This fact tells us much about the confidence that we place in money itself. And it tells us much more about the confidence that we place in each other. Hence, money is, in essence, a social contract.
[...]
The architects of the Treaty also understood that a single currency can only fulfil its monetary functions and its role as an integrating force so long as it retains its value. Therefore, they drew up a solid monetary constitution to protect those functions and its stability."
http://www.ecb.int/press/key/date/2002/html/sp020509.en.html
(2) Wim also said the euro is not gold. The gold standard notion of trying to keep currency as good as gold is gone, that link is severed. No more will we try to keep money as an SoV. Rather, we will ensure the Euro retains its use value for those that use it as their primary medium of exchange.
The euro, probably more than any other currency, represents the mutual confidence at the heart of our community. It is the first currency that has not only severed its link to gold, but also its link to the nation-state. It is not backed by the durability of the metal or by the authority of the state. Indeed, what Sir Thomas More said of gold five hundred years ago – that it was made for men and that it had its value by them – applies very well to the euro.
http://www.ecb.int/press/key/date/2002/html/sp020509.en.html
As FOFOA has observed:
Why would he say it was the FIRST CURRENCY to sever its link to gold? Hadn't the dollar done that in 1971?? Perhaps he meant something deeper!
http://fofoa.blogspot.com/2009/11/freegold.html
Maybe the deeper idea Wim meant goes something like this:
"What is money? Economists know that money is defined by the functions it performs, as a means of exchange, a unit of account and a store of value. But, just as importantly, money is also defined by the community for whom it performs these functions. Because it is an economic instrument for each of its users, it is also a political and cultural bond between them. Consider this simple fact: we engage in an exchange of goods and services everyday by using money as the means of exchange; and we offer our labor in exchange for money, which, in itself, has no value. We only do this because we believe that we will, in turn, be able to exchange that money for more goods or services. This fact tells us much about the confidence that we place in money itself. And it tells us much more about the confidence that we place in each other. Hence, money is, in essence, a social contract.
"'The Duke', much more than the 'HoggBuck', represents the mutual confidence at the heart of our community. It is different from the HoggBuck in that it will never be linked to gold thereby suppressing the value of your gold savings on the free market, but it also will never be linked to the benefit or enrichment of any single member of our community above another. It is not backed by the durability (or weakness) of any other thing, nor by the authority of a single fat man. Indeed, what Sir Thomas More said of gold five hundred years ago – that it was made for men and that it had its value by them – applies very well to 'The Duke'."
http://fofoa.blogspot.com/2010/05/dukes-of-wetton.html
"Martindale reacted by pointing out that a fiat currency is, indeed, a store of value but FOR A TIME ONLY. I agree, but that nuance of time is Martindale's--not Duisenberg."
If you agree then we appear to share the same "confirmation bias" yet you still choose to point it out as such. I'm not sure where you stand or what your point is??
I think it is well known and accepted that monetary INFLATION is much more real than a nuance of someone's personal confirmation bias. Perhaps you've heard of it? It has been the hallmark of ALL fiat currencies throughout history.
And because W.D. did not specifically point this out in this particular speech, do you believe he then refutes the notion of inflation as having any possible impact on the Euro?
Because W.D. does not point this out, or qualify this "nuance" does not render it some imaginary personal bias.
Or did you instead somnehow hear W.D. call money a "permanent" store of value?
If that is YOUR confirmation bias, then I DO disagree with THAT.
Gold on the other hand?
JR,
You beat me to the point again. Only much more elegantly. I salute you!
I do have thoughts about physical gold …. … look at me ….
I simply don’t share western gold thoughts in general because gold can only be free when the bond with governments e.g. money e.g. world trading & reserve currencies is broken.
Timing is everything said the trader to the gambler. The gambler replied, "I know"
@prete
We all do share this thought. Freegold is one solution for the problem. Probably the easiest.
I am not following what you differ from what we say & read here. I agree with you that the Euro is not suitable to suceed the dollar.
Fantastic reply by Blondie on the "store of value" issue here.
(don't let JR push you off the trail and into the dark forest)
Victor
Victor,
Oh, so savers will now line up for some papers slips while (well-managed) Central Banks watch over the gold?
Are we supposed to believe this is now the real "trail"? Good luck pushing that... xD
Hi Victor,
I already explained why Blondie doesn't understand Wim Duisenburg above, but thanks for re-posting it.
==============
BTW VtC says (http://neuralnetwriter.cylo42.com/node/4014?page=5#comment-9466):
You don't need it in unrestricted amounts, and, even if you wanted it, you certainly wouldn't get it. People in Ireland, Portugal, Spain, Greece, Cyprus, know how that feels. It's a first glimpse of the new financial system.
Victor
FYI FOFOA argues "unrestricted" and "unlimited" are not the same thing. I'm pretty sure you know this but just in case.
Victor
I think I agree with Blondie’s answer, post revaluation of course, as gold would go up and down in value based on local supply and demand. It won’t and shouldn’t be some sort of super SoV that has a really high value and just stays stable or goes up It seems to me that would cause perpetual savers and perpetual consumers like we have now. Instead Gold’s function would be more like an honest and real measurement of currency inflation/deflation.
In a real sense it would encourage or discourage production or consumption from various nations in order to achieve a median of balance.
Last I checked it was called the Gold Trail, not the Fiat Trail.
Folk's, don't let Victor's remark throw you. He and Blondie are blazing a trail of their own. Why do you think Blondie doesnt post here anymore?
Spot on JR!
NS,
Last I checked it was called the Gold Trail, not the Fiat Trail.
LOL!
Freefiat!
Friend of a Friend of Fiat. This is getting ridiculous.
Regarding Blondies comment on the "store of value" issue:
Well, I don't expect € to lose (completely) its SOV function. Yes, it probably will be devalued big time against physical gold but for daily purchases not so much. Consider this, if Eurosystem had ZERO (0) physical gold, how strong would its SOV function be? Or, on the other hand, if Eurosystem had no fiat currency at all and only physical gold, how strong would its SOV function be?
It's a balance. Ying and yang. Good money, bad money. I don't see what the big deal is.
Sam,
Perpetual savers? Really? Why would that be? Would there there be no need to liquidate savings because of retirement, infirmity, and death? Would we all live and produce forever? That is what perpetual means right? Would there be no incentive to grow wealth? I find that to be quite preposterous.
Are you talking about the value or the price of gold? A rising price of gold is different than a rising value of gold. With real growth potential available, as a young man I would choose to take on risk and turn to fiat and its derivatives in order to leverage my excess productivity. In middle age, with real growth potential, I would unwind leverage to some degree in order to ensure capital preservation while attaining positive growth. In old age, with real growth potential, I would reduce leverage to a minimum and be satisfied with a return that ensured that my capital would survive me, at least for a day.
What is the common denominator in my post Freegold life? Real growth potential. Without it, I am retreating to 100% capital preservation at the expense of growth. In reality, that is an extreme situation similar to what we are currently experiencing. More realistic is that I would increase my reserve level (savings), facilitated by a draw down of my investments. The risk/reward calculation tells me what my allocation should be.
Perpetual savings, nah, I don't see it.
NS,
I agree it is a sidetrack in the trail that VtC and Blondie are now traveling...
For newcomers to this topic it should be pointed out that the disagreement isn't so big up till the point of the transition. The advice from all discussants is to hold Gold through the transition...
It is more like: If you sell half your gold for Euros right after transition and wait ~10 years, which stack will now be most valuable measured in goods? The fiat stack or the gold stack? Main trailers would probably argue that the gold stack would win (mainly due to 2% fiat inflation target and a growing economy that would stimulate savers demand for gold as SoV), while team Victor/Blondie would argue that the Euro would have been rock steady in purchasing power in that the period, because the ECB will change its inflation target to 0%. Gold OTOH would fluctuate wildly (to signal price changes presumably)...
It's like a debate on the future preference of savers. Will they choose gold or Central bank base money for their savings?
At least that's how I see the outline of the debate from what I've been reading at NNW, Victors site and twitter...
/BF
Sam,
Instead Gold’s function would be more like an honest and real measurement of currency inflation/deflation.
No. It will be the Euro that is stable relative to goods and services. Gold will fluctuate in real terms. I.e. it will be the Euro that indicates the "inflation" and "deflation" of (the real price of) gold, i.e. when gold flows and its purchasing power changes in order to deliver price signals to the real economy and counteract imbalances.
Nickel,
Why do you think Blondie doesnt post here anymore?
Perhaps because dimwits like you vomited on his feet in November 2012 when costata, Blondie and myself were having one of the best and most productive discussions here in the comments section. Why should he waste his precious time to teach the mob?
If I ever need a loyal storm trooper who doesn't think, but rather just beats someone else up, I promise I will consider you for the job. But up to that occasion, please stay out of the discussion on the monetary system unless you have some content to contribute.
Dante_Eu,
[The Euro] probably will be devalued big time against physical gold.
ooops but you are immediately correcting yourself: but for daily purchases not so much.
This is exactly it. The Euro will be purchasing power stable whereas gold's real value will increase substantially when the $IMFS ends.
Victor
burning,
yes, I agree with your synopsis. I'd also add that there is a conceptual issue here: Once the exorbitant privilege (basically oil) of the dollar has disappeared, fiat currency will be able to fulfil all three roles of money: MoE, UoA and SoV. In particular, a well organized CB then has the option to keep their fiat purchasing power stable. Gold, in contrast, cannot be exactly purchasing power stable. Otherwise it would not be able to function and transmit price signals.
FOFOA explained this very nicely in his Once Upon A Time: During the reconstruction in Europe after WW1, Europe imported a lot of goods and services from the U.S. Under the international gold standard (rules of the game) this means a substantial flow of gold into the U.S.
At that time, gold was the medium of exchange, and so more gold inside the US meant a lower real price of gold, i.e. consumer price inflation. The Fed under the Harding administration in 1920 and 1921 enacted monetary policy (buying gold [fungible] and selling bonds and term deposits [non-fungible]) in order to fight this inflation. They were successful, but as a side effect neutralized gold's international function, preserving the competitive advantage of the US over Europe (the US was a currency manipulator) while at the same time pushing Europe into more and more serious deflation.
Summary: If you enact monetary policy in order to keep gold's real price stable, you neutralize its function, or, if you want gold to function, you need to let its real price fluctuate.
Victor
Victor,
How does your view differ from that of FOFOA when he says in Moneyness 2 that for short to medium-term expenses of known price, people will save in (now stable, post-Freegold) currency and for longer term expenses of unknown price or quantity people will save in gold?
-Andrew E.
To clarify with Matrix
When talking about perpetual savers I wasn’t talking about an individual but nations. Globally under our current system Gold isn’t functioning and I would say that we have imbalances that seem to unnaturally go on forever. ie US perpetually consumes and China perpetually saves, If China stacked stable gold bars instead of treasuries what would be different? Now if those same gold bars dropped in value after years of stacking China would eventually have more incentive to consume and less incentive to save. If the diminishing gold supplies in the US started rising in value the US would have more incentive to save and less to spend. Perhaps I’m way off base it’s just something I have been thinking about for the last few days
To clarify with Victor
I think we agree I just didn’t make myself clear. Gold going up and down in value regionally would show the increasing or decreasing value of said regional currency (at least in gold). That’s what I meant by inflation/deflation. Your thoughts on the Euro post transition are beyond anything I have spent time thinking about. I assume since they have been planning for this for a while their currency will infact perform well
Art thinks Victor is wrong about something....doesn't that mean 10 points for Victor?
Lighten up everyone. Name calling only discourages people to discuss or ask questions. I feel like a moron every time I post anything at all. The comment section can be very helpful. We are all learning
Everyone gets 10 points for enduring the Troll.
Does the sun revolve around the earth? It sure looks like it does from my perspective on earth. Am I looking at it wrongly?!?
In order for a thing to perform as a reference point for value, when market demand for that thing rises it must be met with the difficulty of the physical, not satiated with the ease of promises. This is the main reason currency makes a poor reference point for value. When demand for currency rises it is hoarded which slows the economy. Value is the output of the economy. It is the opposite of currency. When the demand for currency is collapsing, the demand for value is rising, and vice versa.
This is why Central Banks came into being in the first place; to make sure that rising currency demand does not hurt the economy. This is why the BOJ injected trillions of yen after the earthquake; to protect vital economic activity from the spiking demand for currency.
I know this is a difficult concept to swallow, but value and currency are polar opposites, which is why, if gold is the reference point for value—which it is—it cannot function properly and also be an economic currency—or tied at a fixed parity (price) to currency in any way! To view an economic currency built to function properly alongside the reference point gold, look no further than the architecture of the euro. [10] This is why the first ECB President stated clearly and publicly that the euro "is the first currency that has… severed its link to gold." [11]
Reference Point Revolution
=================
Some smart guy gets it - the euro is a backup trade currency to replace the dollar's international MoE function, the euro is not a store of value:
I think someone here (FOFOA?) said that one should read FOA's "the euro will become the reserve currency" as "the euro is the backup currency should the dollar fail" rather than "the euro is the new store of value".
Indeed, as the same smart guy pointed out:
no, there will be no eurobonds payable in gold. This would be precisely the opposite of what the euro zone wants. They want to separate gold as a store of value from the transactional currency.
Also wanna point out Blondie's View:
Another:
Gold! It is the only medium that currencies do not "move thru". It is the only Money that cannot be valued by currencies. It is gold that denominates currency. It is to say "gold moves thru paper currencies"
Blondie:
Gold functions as the ultimate store of value. Nice words, nice idea, but you are a shrimp. You’ve never had value in a quantity that needed storing. Sure you may have “savings”, but you’ve never personally experienced diminishing marginal utility to the degree that gold’s function becomes apparent, so it remains a theory.
For more on the Giant's perspective on diminshing marginal utility and a SoV, explore Think like a Giant
Andrew,
How does your view differ from that of FOFOA when he says in Moneyness 2 that for short to medium-term expenses of known price, people will save in (now stable, post-Freegold) currency and for longer term expenses of unknown price or quantity people will save in gold?
In this respect not that much. As an individual, your capacity to save in fiat is limited by the credit risk you are exposed to and finally by the remaining consumer price inflation in terms of fiat (ECB now 2%, but we have argued it may one day be closer to 0%).
Although the real gold price will not be constant in the short run, it will probably be rather stable in the very long run (just as it was before WW1). So for long term "saving" you wouldn't actually save, but rather acquire reserves (=gold) or, as Blondie likes to say, "equity", i.e. your share in the global productivity gain.
Victor
I for one would be most interested to hear our Trail guide express his views on the similarities and differences between his and VTC/Blondie's views on the MOE/SOV split in the post revaulation Euro.
TB
Victor,
Your comment about JR was equivalent to Nickelsaver's comment about you, and it came first. Your reaction was disproportionate.
What about the Giants' marginal utility of using currency as a SoV?
And might the Giants' preferred savings vehicle impact a currency issuer's "putative stability efforts?"
In case anyone is interested here is
Freegold by Blondie:
Version 1.0
Freegold 1: An Introduction
Freegold 2: The Basic Mechanism
Freegold 3: The Price of Gold is Arbitrary
Freegold 4: The Consolidation
Freegold 5: Gold Is Not Money
Freegold 6: Individual Sovereignty Analogy
Freegold 7: It's the Value, Stupid
Freegold 8: A Freegold Standard
Freegold 9: Gold as Pure Equity
Freegold 10: Paper, Pyramids & Paradigms
Freegold 11: De Gaulle's 1965 Statement on the Monetary System
>A steeper-than-expected rise in US shale oil reserves is about to change the global balance of power between new and existing producers, a report says.
>Over the next five years, the US will account for a third of new oil supplies, according to the International Energy Agency (IEA). The US will change from the world's leading importer of oil to a net exporter. Demand for oil from Middle-East oil producers is set to slow as a result.
>"North America has set off a supply shock that is sending ripples throughout the world," said IEA executive director Maria van der Hoeven.
>The surge in US production will reshape the whole industry, according to the IEA, which made the prediction in its closely-watched bi-annual report examining trends in oil supply and demand over the next five years.
>The IEA said it expected the US to overtake Russia as the world's biggest gas producer by 2015 and to become "all but self-sufficient" in its energy needs by about 2035. The rise in US production means the world's reliance on oil from traditional oil producing countries in the Middle East, which make up Opec (the Organization of the Petroleum Exporting Countries), would end soon, according to the report.
http://www.bbc.co.uk/news/business-22524597
Now that USA doesn't need Middle east, what will happen to those poor bastards?
PS; Oil is going to be cheap as fuck
@Diabolitio283
http://youtu.be/XuzUZX6EWBs
Vic,
your response to Nick was OTT. I don't read anything in his comment to warrant it. You have always seemed a civil chap to me and I respect your contributions.
Our host has given you a public forum to air your ideas. IMHO, you should do it respectfully.
best, E.
VtC,
Why do you think Blondie doesnt post here anymore?
Perhaps because dimwits like you vomited on his feet in November 2012 when costata, Blondie and myself were having one of the best and most productive discussions here in the comments section. Why should he waste his precious time to teach the mob?
If I ever need a loyal storm trooper who doesn't think, but rather just beats someone else up, I promise I will consider you for the job. But up to that occasion, please stay out of the discussion on the monetary system unless you have some content to contribute.
Us dimwits saw Blondie's BS for what it was and is. The fact that you buy into his BS hook line and sinker, and refuse to acknowledge cogent reasoning against it is the real head scratcher. Frankly, I thought YOU were smarter than that.
And as for loyalty. I'm thankful that my loyalty to FOFOA does not conflict with my loyalty to the truth. I can now say the same thing about you and Blondie, for nothing you two say resonates with me. And I "used to be" a big fan.
Diabolitio
perhaps the game plan was: Trade paper for oil while you are a net consumer of oil. Trade oil for gold once you are a net producer of oil.
Did Blondie take his blog down because it contradicted his recently adopted line of thinking that gold is not an SoV? What inspired such a 180 degree flip in his thought? Do inquiring minds want to know?!?
Blondie now:
Gold has an important function, to be sure, but I don't see it as the SoV Freegolders tout it to be as they "split the monetary functions between differing media", appealing idea though it may be in this age of "unsound fiat monies forced upon us by TPTB".
http://neuralnetwriter.cylo42.com/node/4014?page=5#comment-9512
Blondie on the blog he took down:
When the monetary system’s existence is threatened, those with value held as claims in the system (savings) naturally seek to preserve it by removing it from the system, exchanging their claims on value for assets of value. That a replacement system will emerge is guaranteed by the distaste for and the inability of most individuals to be self-sufficient. The path of least resistance to a replacement system would be to one that is essentially the same as the current one, except for one crucial difference: the stock of surplus value (savings) is never returned to be stored in the monetary system, but instead held outside the system in physical assets. Such assets can be sold as and when their owner desires in order to utilize the value they have stored. The storing of value inside the monetary system has always been the root of our problems.
The paradigm shift occurs as we collectively transfer our stock of value (savings) from the abstract claims of the monetary system into tangible assets, extinguishing the claims and their counter-party risk and receiving our payment in full.
Only one physical asset, gold, specializes in the storage of value (gold's only utility), with a potentially infinite time horizon and a stable stock. Any other asset will store value too, but for a limited time in a fluctuating stock, sooner or later being consumed as all other assets have other utilities too. Gold is simply the best asset in which to store value.
http://web.archive.org/web/20120808092813/http://forafistfulofdollars.blogspot.com/2011/08/freegold-10-paper-pyramids-paradigms.html
The shock news that made gold price soar
Shortly after 8pm on September 26 1999, Wim Duisenberg, then president of the European Central Bank, made an unexpected appearance at the International Monetary Fund press room and made a shock announcement about gold, writes Claire Jones.
[...]
Concerned, the World Gold Council, a producer-funded trade body, stepped up its efforts to remind central bankers of the motives for holding gold, notably as a long-term store of value.
Then at meetings on the fringes of the Bank for International Settlements in Basel, central bankers that remained attached to gold voiced fears that the behaviour of their peers was destabilising the market. Those intent on selling considered action necessary to stabilise the price. Cue Mr Duisenberg. In the days following his announcement, the gold price soared.
http://www.ft.com/cms/s/0/30f23ee8-8a42-11e2-bf79-00144feabdc0.html#ixzz2TK4MwYDL
RE Blondie now
Blondy lost his patients I think. Too many of us have our eyes on the gold market when they should be on the bond market.
I guess Blondy thinks that a bond bull market can be forced upon us by TPTB for another few decades.
@prete: - Good lines Sire.
Interest, Currency and Investment are but three of many terms nowadays that are uttered and written with nary a thought as to their basic meaning ...in a knock-down - drag-out extreme situation.
Don't be a Stranger.
FWIW: - I'm kinda in the Blondie "then" Camp.
burningfiat
that was a nice summary of the tiff...I have not followed it closely because it did not seem worth the effort. You have confirmed that...so...thanks
It seems to me that the true value of this blog is in the writing of fofoa. The comments were more helpful when I was new(er) and some of the ideas were not as flushed out. Recently it seems that some writers are just trying to nitpick, not to explore an Important nuance, but to establish themselves as significant contributors to freegold though.
If a newby asked me what to read with limited time I'd refer them to 15 or 20 of fofoa's best...and tell them to skip recent commentary.
Apologies to those with good insights but for all the chaff there is far more wheat in the original essays.
oba,
Yes, I loved the Blondie that "used to be" back then too. And I feel a sense of loss for myself and for the blog now that he is gone.
MdV,
I think I agree with you, especially considering my own emotional contributions. Although, it could be worse. The activity in the comments, good or bad, show that FOFOA and this blog are not only relevant, but the very epicenter of Freegold discussion.
My biased opinion.
@Bjorn,
I know, for Christ's sake, hard money is blood ...
The examples of hard money that came to my mind are the US Dollar, but there were gold rushes in California and Alaska to provide raw gold supply to mint enough money/currency/coins for a not so advanced economy. And as well there was during British empire, with the Boer War and wars in India to provide gold quantities to mint enough money/currency/coins for again a rather small economy ...
This is my concern, has the balance will end between soft money and hard money ... intuitively, yes, gold is the answer, but in flexible set up, otherwise we end up in monetary deadlocks that typically lead to conflicts ...
...in the mean time, we've seen the makings of a divergence with DX and $IRX as anticipated ...which MAY be related to This report which bobbed up on my Blog recently - Hat-tip Andy ;-)
This made me think the weekly T-bill Auction might be breaching 5 on the Bid-to-cover ...however all appears to be "more-of-the-same".
There is definitely "something" afoot ...as sure as eggs.
GLD holding has been stuck at 1051 tons for a few days. There was even an increase of 3 tons to 1054 but subsequently reversed the next day, last week I think.
I wonder if GLD is not defending the inventory level of 1000 tons.
Any thoughts my wise friends?
The fact that you buy into his BS hook line and sinker, and refuse to acknowledge cogent reasoning against it is the real head scratcher.
Can you point me to the arguments against CGV and VtC’s new direction?
Thx
Currency MOE and UOA only without the SOV function makes no sense.
If you hire someone to mow your lawn, the labor is put in trust to get something in return. When you pay the gardener with money, the value of that labor is stored in that money.
So trust becomes money and money becomes store of value!
If the gardener buys meat with this money, the store of value in that money changes from store of labor value into store of meat value. The butcher trusts that he can buy some new supplies with that money.
So money becomes trust and the SOV function changes from labor value into meat value!
How much the labor or meat is worth, is expressed in the UOA in that money. Together with the change of SOV the UOA changes!
Change of SOV implies change of UOA and vise versa.
Instead of barter (you could swap your labor day directly into meat) money fulfills the role of intermediary. This intermediary has a name because it bears the name of the issuer MOE and the issuer guarantees the Purchasing Power. Because the gardener and the butcher trust the issuer, they trust the money.
So what is money ?
Money is an ever changing SOV, an ever changing UOA and a MOE which are all bound by Trust. If you skip one of these components, the money will lose its function.
So who provides this (MOE) trust ?
The issuer (governments) do!
If you can’t trust governments anymore, you can’t trust their MOE. If you can’t do without money the best you can do is to choose the MOE that is almost everywhere. That provides you the trust that everybody who possesses that MOE has the same problem, gives you some relieve.
Therefore the dollar is called International Currency by default.
If the dollar really! defaults without a worldwide replacement, world trade stops for a while because there is not enough trust in other currencies. Mutiny everywhere around the globe, the value of basic necessities will go wild and besides barter gold will become money.
Will the CB stored gold regain our trust in money ?
I think not!
part.2
So can Gold be Money ?
No!
Gold can function as MEO (trust) as SOV (trust) but not as UOA because Gold has NO real objective face value. Therefore the Kruger Rand is the only true Gold Coin.
If Gold temporarily fulfils the role of Money you’ll never know what it’s worth because you have to assume it’s no counterfeit and it’s hard to return change for a Burger King paid with a Kruger Rand.
Therefore it’s hard to determine what the SOV role (labor-value, meat-value etc.) of this Kruger Rand will be at any time in any place.
And that questions the true objective SOV function of Gold, doesn’t it.
It also questions the role of Central Bank Gold, besides some imaginary trust, doesn’t it.
:-)
I posted over 600 articles at letthemfail.us beginning in 2008 but took the blog down in 2010 for reason's quite similar to Blondies.
In my case I had evolved from a "political activist" mindset to the FREEGOLD mindset, and while those writings were still relevant, they no longer represented my current position that you cannot change human nature, rather, human nature will change itself in due course.
One of the things that attracted me to FREEGOLD was the logic and tranquility that "raging against the rising sun every morning" cannot embue.
That said, it appears that the crux of Blondie's current view is not that divergent from the earlier view:
Gold I see as representative of equity in the system itself as opposed to the money which is a claim on the value the system exchanges. Gold establishes the relative values of different monies using that system, by virtue of the equity each has acquired, but gold's value is not stable, nor should it be, for this would defeat its very point.
Whether we classify gold as equity in the system or the ultimate store of value is really not a point of contention for me. It can be both, in my mind, just as fiat currency can function as a MoE, SoV and UoA (with certain limitations and conditions as systemically determined).
What does concern me is the fairly obvious flow of gold from West to East such that the East could have a much higher proportion of gold than the West, relative to the functioning of FREEGOLD.
There has always been an assumption that the USG/FED/IMF have maintained about 10K tons of gold for some decades now, and that the EU and sovereign members have about the same amount.
But as the current now visible exhaustion of COMEX and LBMA (JPM, HSBC) inventories continues unabated, a certain TRUE VALUE assumption of gold comes into question, which is its universal acceptance as "payment in full" in the retirement of debt.
It appears to me that the USG, though it could go down in flames as predicted, is betting its dollar and the debt system it represents AGAINST 6000 years of GOLD history by allowing it to flow disproportionately into the hands of the barbarian Mongol hoards where it will "be of no use" in trade with the almighty U.S.
While this may be a huge mistake, it nonetheless does seem the posiion of the USG and its banks.
We have scoffed at the Kirbys and Willies who assert that the gold is simply "no longer there" but "public be damned" if it still is, and at this rate, unless FREEGOLD asserts itself, or is thrust upon the world pretty soon, it may not be for long.
I am sure that JR has an opinion here, and I would welcome it.
I doubt this will be welcomed by many, but VtC's comment gave me the conviction to share rather than contemplate alone; I recognize that I am also projecting my own thoughts into the vacuum that Sinclair created with his amorphous and vague style of speaking (much like Another, but I will leave prete's speculation aside...). Maybe the world would benefit from a FOFOS, with the S as Sinclair.
What I read into Sinclair's comment in that he buys into Freegold, but not some of the political stuff of the new adherents is that he buys the structure of Free gold dissociating from paper, and physical gold serving as a reference point for currencies to settle against, but he rejects some of the things that I struggle with, such as that giants are and have been paying materially above 'paper' price for physical in volume, or that if you show up with currency, you can't get cleared for volume at the LBMA. He is in a position to know those things. And while, if true, they would be evidence of free gold, if absent, do not take away from the functionality of the FG system. I think Sinclair is putting himself in the latter camp.
My take, for what little it is worth.
Daedalus Mugged
A few questions prete....
Gold has NO real objective face value. Therefore the Kruger Rand is the only true Gold Coin.
Face value on other Gold coins is superfluous now, isn't it? It's value is not the government currency amount. What about 1oz Gold bars with no currency value on them?
...you’ll never know what it’s worth because you have to assume it’s no counterfeit
? Don't you also have to assume a $100 bill is not counterfeit? You seem to be referring to MoE not SoV - The medium of exchange function requires durability when used in trade and to minimize fraud opportunities...
it’s hard to return change for a Burger King paid with a Kruger Rand.
Why would you pay Burger King with a Krugerrand? or a T-Bill? or a pink slip for a car?
You are referring to MoE here too, not SoV. To act as a store of value it must be able to be saved and retrieved at a later time (as you can do with Gold - the world over). MoE (paper) would be used for trade not SoV.
FOFOA's dilemma: When a single medium is used as both store of value and medium of exchange it leads to a conflict between debtors and savers.
gary said...
FOFOA's dilemma: When a single medium is used as both store of value and medium of exchange it leads to a conflict between debtors and savers.
===========================
This dilemma is called TIME.
If the gardener mows the butchers lawn and he pays his meet with labor, there is no problem.
To bridge that time leap we use money.
And yes, Time conflicts Debtors and Savers because you always have to trust that a debtor will pay his debt by labor or trade.
If you don’t accept this double bind, you’ll have to abolish money.
During this time leap the guy who hired the gardener is actually in labor debt with the gardener and this debt is guaranteed by government money. When you skip direct barter, you create direct obligation via money which is actually debt!
Problem with debt:
By creating debt that doesn’t serve the economy (creating worthless debt), governments create a problem because no (future) service or commodity is backing that debt. That is what politicians always do, that is why currencies always devalue, hyper inflate or sometimes even die.
If you read Martin Armstrong dollar article, which defines this 2 separate dollars, you’ll understand.
One dollar is temporarily debt that generally will be paid. The second dollar is sometimes worthless government debt, a simple IOU that won’t be paid unless you’ll pay for it. If you can't, govenment trust will be in trouble and so is your currency and so are you again and again.
;-)
Hi prete,
If you haven't checked it out recently, you may enjoy some of the discussion about time and gold as a long term UoA in Gold is Money - Part 3
"Breaking the Triangle
In part 1 of this series I used a diagram I created called The Modern Money Triangle. The three corners of the triangle represented the three primary functions of our modern understanding of money.
Modern Money Triangle
But as we pass through the coming phase transition in which the parity between paper gold and physical gold will be broken, cracks will start to form in certain parts of the triangle.
fractures
The fractures you see in this diagram are time related. On a short timeline [length of time is the key variable: "t"] fiat currencies will perform our necessary monetary functions, medium of exchange and unit of account. But at some point on the x-axis, 'length of time', we will switch to a different medium, gold.
On a long timeline, gold will perform our necessary monetary functions perfectly, store of value and long term unit of account. By the way, there is no upper limit on the x-axis of 'length of time' when it comes to gold. If plotted out it runs to infinity!
The outcome will be my new Freegold Quadrangle!
Freegold Quadrangle
The "x-axis" represents the amount of time you are willing to hang onto the fiat currency you either earn or receive in payment. If the monetary authority is printing money, "t" will be shorter and shorter. In a hyperinflationary situation "t" will slide all the way to the left with a value close to zero. [1]
"t" shifting
As the new Freegold system of natural, pristine balance emerges, the fiat monetary authority will find its wisest move is to keep the money supply under control. And with a "wise" CB, gradually the "t" value will shift back to the right, little by little."
Hi Daedalus,
he rejects some of the things that I struggle with, such as that giants are and have been paying materially above 'paper' price for physical in volume, or that if you show up with currency, you can't get cleared for volume at the LBMA.
The import of these statements is gold is not available in size at today's prices. It's a core idea - you either believe there is a paper market that suppresses gold's price (and thus gold in mass is not available at these prices), or you don't. But you can't really be logically consistent if you believe the FG thesis but also reject these things.
he paper market for commodities is just as likely to have a levitating effect as a suppressing one because it allows for financial participation by those who have no need or ability to hold the actual commodity. Gold is the only one that is unequivocally suppressed by the existence of a paper market.
No conspiracy. The mere existence of a commodity-like paper market for gold suppresses the price naturally, systemically. Long term systemic suppression of gold is something totally separate and different from short term price manipulation or distortion which can occur in any commodity or paper market.
Here's ANOTHER explaining that the BIS (primarily European central banks at the time) not only anticipated that a paper gold market would lower the price of gold, but that in the 1980s they supported the creation and expansion of this market for that very purpose
http://fofoa.blogspot.com/2012/07/fallacies-1-paper-gold-is-just-like.html
HI Will,
One quick idea is the BIS/ECB paper gold plan had to do with re-directing the flow of new mine supply. A/FOA is basically new mine supply got directed east until Big Trader found out and the deal broke apart. Then we get the Washington Agreement on Gold whereby the big Euro cbs cap gold leases and sales.
So yeah, new mine and then more scrap flow went from from west to east, plus whatever flow GLD re-directs, but the essence of it is that most gold is not available at these suppressed prices. CBs only leased their name, not gold, and the big gold holdings are "off the market." Most gold is not flowing because the paper market has messed with the price, and that is the crux of the issue.
===
CBS leased their name by and large, not paper:
Another: [Central] Banks do lend gold with a reason to control price. If gold rises above its commodity price it loses value in discount trade. They admit now to lending much where they would admit nothing before! They do this now because of the trouble ahead. Does a CB have collateral to lend its gold? Understand, they only lend their good name on paper, not the gold itself. The gold that is put on the market in these deals belongs to someone else! The question is not "Are the CBs worried for the return of gold?" but, "Has our paper been lent to the wrong people?".
http://fofoa.blogspot.com/2013/01/legs.html
========
The price of gold today is unstable. Anyone with eyes can see that. Worse, it's rising. Which means the flow of physical gold in the quantities needed (at today's gold price) to lubricate global trade is drying up.
"Gold has always been funny in that way. So many people worldwide think of it as money, it tends to dry up as the price rises."
But the flow of physical gold WILL be reestablished. The world demands it. It doesn't care how high the price goes, only that the flow is guaranteed. Only the $IMFS seems to care about how high the price goes. And, apparently, that is because the $IMFS is the main printer of paper gold. Flow WILL be credibly and sustainably reestablished, which means paper gold WILL be discredited. Flow is sustainably and infinitely guaranteed at a floating, physical-only price. What that price is in today's world is anyone's guess because we haven't had such a market in centuries.
http://fofoa.blogspot.com/2010/10/its-flow-stupid.html
========
But the thing about physical gold is that it very rarely moves. Let's switch to thinking only about all of the above-ground gold in the world. Perhaps 95% of it lies very still for very long periods of time, often spanning generations. Some may wonder how this is possible. It is possible in the same way that any piece of physical property, be it real estate or an old piece of jewelry, can stay in the possession of a wealthy family for generations, even centuries in some cases.
[...]
So we have (very roughly) 95% of the world's physical gold lying very still, but what about the other 5%? Perhaps half of that is recycling plus new supply coming out of the mines that "moves" (i.e., changes ownership and/or changes physical location) on its way to its final (long-term) resting place, and the other half, perhaps, is us shrimps trading coins and jewelry along with a few "big" changes of ownership. Like chips on the poker table, 95% is sitting very still in the big stacks while maybe 2.5% new chips are added each year and, perhaps, another 2.5% are moved around (churned) "in play" each year.
Again, I'm only talking about physical here, and I'm only guesstimating the numbers while allowing for a large margin of error. The gold market is so opaque that it's the best I can do in order to explain the big picture.
http://fofoa.blogspot.com/2013/02/checkmate.html
Dear JR,
I’ve read the article long time ago. In my opinion you can’t look at the (financial/monetary/gold) World in isolation.
Everybody and everything is interconnected. Gold is part of the system and can gain weight as one of the LONG TERM SOV/s. Trading Money is (as I explained above) also SOV, but short time. Can be hours or sometimes months. If you kill the SOV function in money, you kill money as Medium of Exchange in itself. In every transaction money NOT ONLY is UOA but also bears an Obligation e.g. Debt e.g. Value! I miss that role in the triangle.
In the past I also had discussions with ‘blondie’ about this subject but he could not comprehend what I was trying to explain and figured out that discussion with me was a waste of his time. So be it.
Thanks anyway for your effort to explain your point of view.
@alan2102
:)
Thought somebody might be interested:
http://www.youtube.com/watch?v=gl-GZADJNao
A smart woman it seems to me and with a view that's feels to me just steps away from FG. She seems to have quite an experience with TPTB and from that comes some statements which are delightfully unexpected.
Paper gold just plunged through $1400..
JR, I disagree with:
"But you can't really be logically consistent if you believe the FG thesis but also reject these things."
I think the closest to my belief if that I believe FG will be true, but am not convinced it has been or currently is true (gold not available at todays/paper prices). I don't think those are logically inconsistent. It is not necessary to believe the oil for alternatively priced gold history of Another in order to believe gold will serve as the key reference point in the future. I think that may be the difference Sinclair was alluding to between the theory he agrees with and the rest he does not subscribe to.
Daedalus Mugged
prete said: "In the past I also had discussions with ‘blondie’ about this subject but he could not comprehend what I was trying to explain and figured out that discussion with me was a waste of his time. So be it."
I suspect Blondie came to that "waste of time" conclusion rather quickly.
Hi Daedulus,
It is not necessary to believe the oil for alternatively priced gold history of Another in order to believe gold will serve as the key reference point in the future.
I agree.
All we are talking about is the paper market and its effect of supress the price and thus avaiablity of phsycial gold.
You can't "believe" freegold, which is in essen phsyical gold set free from paper gold aka bullion banking aka priced on a phsycial gold supply/demand dynamic, if you don't beelive there is a paper market that supress the price fo gold.
Freegold realized entials higher gold prices in real terms because of the end of the paper market.
So if you aren't sure if "gold [is] not available at todays/paper prices)", I urge you to explore some of FOFOA's pieces on paper gold, like:
http://fofoa.blogspot.com/2012/07/fallacies-1-paper-gold-is-just-like.html
http://fofoa.blogspot.com/2013/01/legs.html
I'd also urge you to consider the import of the Washington Agreement on gold.
==============
The shock news that made gold price soar:
Shortly after 8pm on September 26 1999, Wim Duisenberg, then president of the European Central Bank, made an unexpected appearance at the International Monetary Fund press room and made a shock announcement about gold, writes Claire Jones.
[...]
Concerned, the World Gold Council, a producer-funded trade body, stepped up its efforts to remind central bankers of the motives for holding gold, notably as a long-term store of value.
Then at meetings on the fringes of the Bank for International Settlements in Basel, central bankers that remained attached to gold voiced fears that the behaviour of their peers was destabilising the market. Those intent on selling considered action necessary to stabilise the price. Cue Mr Duisenberg. In the days following his announcement, the gold price soared.
http://www.ft.com/cms/s/0/30f23ee8-8a42-11e2-bf79-00144feabdc0.html#ixzz2TK4MwYDL
Let's get RANDY!
Randy (@ The Tower) (04/17/01; 13:37:02MT - usagold.com msg#: 52046)
Mr Gresham, nice question (msg#: 52041) ---
"Was the Washington Agreement the most significant event in gold since you were last posting in 1998?"---
If I may be so bold, let me anticipate ANOTHER's answer with an answer of my own.
The most significant event in gold since the dollar's gold default in 1971 has been the successful launch in 1999 of a long-awaited new currency system built upon neutral (meaning, multi-national) management and, more importantly, a floating gold reserve structure that finally abandoned the now obsolete "fixed" gold legacy of the failed Bretton Woods structure.
With this new reserve structure, the prevailing institutional incentive -- from '71 to the end of the millennium -- need no longer be one of "price suppression" for the perceived market value of gold.
In this light, the most significant element of the Washington Agreement is seen to be NOT the amount of pre-announced gold sales, but rather, the self-imposed curb on gold lending operations by these European central banks. And if you think about it, this action with the Washington Agreement was nearly just a predictable inevitability from the moment the eurosystem committed to provide for freely floating gold reserves. The "tools" of the prior suppression are on the outs. Believe it. The WA simply announced the foregone conclusion in a package suitable for newspaper headlines.
Just as the value of the post-'71 paper dollar has long been propped by the international yet artificial "mandate" to hold these dollars almost exclusively as reserves (acting in tandem with the dollar settlement for oil and the overhanging debts of the "Third World"), through this new currency structure gold (and its price/value!) has now been "officially" set free to replace these dollar reserves (savings).
The reason this full transition has not already occurred is that institutional interest still exists to foster the smoothest practicable transition until that unknowable moment where the final remaining *SNAP* in the adjustment occurs.
Speaking for The Tower and personally, I continue to buy gold with excess funds because I prefer the real wealth of gold over managed paper (and digital) contract currency. As a bonus, the real wealth value of same gold will provide a pleasant benefit upon full completion of the transition in world currencies' reserve structures. (An understatement, to be sure.)
http://www.usagold.com/goldtrail/archives/goldtrailfour.html
JR,
You have reached the crux of the matter, though the fishbowl is a bit murky from the outside looking in. I suspect brother Young has been keeping tabs on how much gold GLD has been re-directing since 2008? Perhaps not enough to matter, but someone needs to change the water in that bowl for me to see clearer what's going on in that little coral castle the big fish swims through.
Yes, Dieuwer, the paper did just breach 1400 USD/oz in the 8am "New York slide". We will see wash, rinse, and repeat until the credibility simply snaps.
Dr. Octagon said...
I suspect Blondie came to that "waste of time" conclusion rather quickly.
-----------
Yup, like for a crowd of Belgian people Freegold became a Belief for him, instead of a possible or maybe probable Thought.
Like Labor is added Value, but Labor transferred through money doesn't make that money a bearer of transitional wealth e.g. SOV.
Stupid!
Has Paul now become prete ?
If Comex burns and all other gold future maketplaces burn and the dollar burns and all other currencies burn, so all paper burns and physical goldprices will go up to lets say $ 50.000 / troy ounce.
O.K. with me, it's just a Thought, but certainly NOT a Believe for me !
Is it possible to transfer your gold into currency. NO
Is it possible to transfer your money into gold.NO
NO store or bank will sell you gold and you won't sell it either, because money is no SOV anymore. The gold transitional Value in money is gone. NO store or bank can stand in for replacement of the gold they sell because the future market is gone and they simply don't know how much they have to pay for replacement.
At this time physical FreeGold will be the ultimate currency ..... by DEFAULT !
No, I don't know who Paul is.
Can you please tell me what he had in mind ?
prete,
You ramble and make no more sense than any other troll. What's your game?
Just come out with it so you can then move on.
These stupid little quips you put out there, probably meant to look thoughtful or thought inspiring, are just lame.
So please skip ahead to the point of your trolling and then we can all wave bu-bye to you, ok?
Later this afternoon, London-based Chelsea take on Lisbon-based Portuguese side Benfica in the 2013 Europa League final in the capital of the Netherlands, at the AMSTERDAM ArenA. The Europa league is one of two club tournaments amongst European football clubs sponsored by UEFA, the Union of European Football Associations. German sides Borussia Dortmund and Bayern Munich meet in the final of UEFA's showcase tournament, the Champions League, on May 25 at new Wembley in London. The Champions League final is the most watched annual sporting event in the world, with the majority of the world's top footballers concentrated in Europe's top club divisions.
Anyway, one of the ideas advanced by UEFA is the notion that football can bring nations and cultures together, using a common sport to build cultural bridges. UEFA's club copmpetitions pit the best teams from various leagues against one another, bringing together cultures and nations through sport. Not that it always works as holliganism and racism/xenophobia still haunt, but its a process. And that thought of disparte European nations and cultures coming togther, combined with the location of today's final in the Netherlands, brought to mind one man.
Wim Duisenberg from Heerenveen, Netherlands, is the Dutch central banker who oversaw the introduction of the euro as the first president of the European Central Bank.
Born in 1935, Mr Duisenberg obtained his PhD in 1965 when his thesis was "The Economic Consequences of the Disarmament." He worked for the International Monetary Fund in DC before serving as his country's finance minister from 1973 and 1977.
After serving in Parliament and working with a private bank in Holland, he succeeded Jelle Zijlstra as President of the Central bank of the Netherlands, holding the position from January 1, 1982 until July 1, 1997. Lots could be said about his role in the political play of the ECB/BIS setting up the paper market as described in post like Checkmate or Happy New Year!:
For example, Wim Duisenberg, who followed Jelle Zijlstra as the head of the Dutch CB and later became the first President of the ECB, oversaw the sale of Dutch gold in two significant tranches of 400t (announced January 1993) and 300t (announced January 1997), and by decade's end had allowed for the lending of up to 15% (150t) of CB gold reserves.
Indeed, as FOA wrote:
FOA (08/22/01; 09:25:51MT - usagold.com msg#99)
[...]
As this reserve currency transition, or perhaps war is a better term, moves on; the ECB must shift it's thrust with a leadership statement. Wim Duisenberg provided an excellent political cover for selling into the American paper gold market; as it exists around the world today.
After his 15 year term at the helm of the Dutch Central Bank, he Then took over the head of the European Monetray Institute, the predecessor of the ECB, before serving as the First President of the ECB from 1998 until stepping down in 2003. FOFOA readers may also recognize the name of his Vice-president at the ECB from 1998-2002, Christian Noyer.
Anyway, the snowy-haired Dutch central banker is perhaps most famous as human face of a new EURO currency as he presided over an epic money transfer on Jan. 1, 2002, when 305 million Europeans turned in their francs, marks, lira and other currencies for euros. Point being, Wim Duisenburg is a heavy weight in terms of understanding the Euro, from its very early formations through its introduction, to its goals and purposes.
cont.
cont.
So with that out of the way, here are some excerpts from a few of Mr. Duisenburg's public speeches and articles that I thought were worth exploring, if for no other reason that they offer a unique insight into the drive behind the Euro project:
December 31, 2001 speech: A new future for Europe - Welcoming the euro banknotes and coins
A single currency is a dream which Europeans have had for decades. But why did Europeans have that dream? And why did Europe pursue that dream when no one had ever attempted before to replace a dozen currencies simultaneously with a single currency? Perhaps I can best explain that to you if I begin by revealing something which you may have trouble believing.
It is this: I, too, was once a child.
And the Europe into which I was born was a very different place from the Europe of today. It was part of a world suffering from a terrible economic depression. It was a continent whose nations were about to learn the terrible lessons of war for a second time in less than half a century. Out of the folly of dictatorship and the errors of protectionism was born a new determination among Europeans to work with, instead of against, each other, and to respect each other's differences and to learn from them.
In the 20th century, Europe's nations learned that they could only secure their rightful place in a world made smaller by telecommunications and modern transport by working together and by developing their economies in a spirit of co-operation.
So the concept of a European community leading to a single currency goes back quite a way.
[...]
While I pay tribute to the skills you young people demonstrated to learn about the euro and earn the right to be here today, I must say that the three-year old euro is quite a precocious child. In those three years, the euro has clearly demonstrated it can achieve its main objectives. These include ensuring price stability, enhancing market transparency across national borders, and facilitating commerce both inside and outside Europe.
You might even say that it is already achieving what its design symbolises. You know that one side of the banknotes depicts the windows of a society open to the world. And the other side of the banknotes shows the bridges of a community of people working together with their neighbours, both inside and outside Europe.
[...]
On this very special day for Europe and our new money, I want to conclude with a tribute to others who have made this moment possible. It is a tribute to Europe's leaders over the past decades.
They are true leaders because they had the foresight to take bold actions that would make Europe a place where people, ideas, and commerce would intermingle. They had the vision to see that a common currency would be an essential part of that, and would represent a formidable leap in the European integration process. We are marking, and making, that leap today.
cont.
cont.
October 22, 2003 speech: Maastricht and the future of Europe
The euro marks the achievement of full integration in the monetary field. In purely functional terms, it is therefore an end point, rather than an intermediate step. However, with the euro, we now form a "Schicksalsgemeinschaft", a community with a shared future. Our economies are linked, and so our policy decisions have become a matter of concern for all. We have a legitimate interest in developments and political actions in other euro area countries, since we are affected by them - for better or for worse. If I may use a "domestic" metaphor, the marriage in which the euro has joined our countries is about more than just living under the same roof, it is about sharing a common vision and about managing life together.
========
August 1, 2005 article Europe, An Engine of Peace
In other words, it is not true that the European Union does not constitute a political union. European economic integration – in all its aspects – reflects the desire to integrate Europe politically, which, at least in my view, implies that European economic and monetary integration is irreversible.
This has been true from the outset of the European integration process in 1952, when six countries established the European Coal and Steel Community (ECSC). The aim of the ECSC was explicitly political: to remove control of the two most important raw materials for the production of heavy weaponry from states that had just fought the bloodiest war in history.
drive for peace remained, quietly, the key motivation behind further steps toward Europe’s economic integration, which was regarded as the vehicle for achieving political integration.
In 1951, French Prime Minister Rene Pléven proposed establishing a European Defense Community (EDC) alongside the ECSC. He failed, but the idea did not vanish. Later that year, Robert Schumann – the French foreign minister at the time and a founding father of European integration – explicitly identified the ECSC with the drive for peace. He described it as a means for creating a “fusion of interests…that will be the leavening from which may grow a wider and deeper community between countries long opposed to one another by bloody conflicts.”
These words were echoed on the eve of the introduction of the single currency. In particular, Germany under Chancellor Helmut Kohl often linked monetary integration with the objective of political union. Kohl once referred to the single currency’s success as a matter of “war and peace.”
[...]
Of course, there are other motives behind support for economic integration. The EU’s leaders are convinced that achieving the so-called four freedoms – i.e., freedom of movement of goods, services, capital, and people – will optimize the well-being of Europe’s population. They also aspire to increase the Continent’s strategic power.
But peace was the principal driving force in the minds of people like Schumann and Jean Monnet at the beginning of the European integration process, as it was for Helmut Schmidt and Valéry Giscard d’Estaing when they laid the foundations of the single currency and today’s European Central Bank. For half a century, the process of European integration proceeded – sometimes with setbacks, sometimes with giant steps forward – joining formerly separate markets by creating very close trade relations.
Over time, this stimulated ever-greater economic convergence. Of course, Europe’s economies have not become “look-alikes,” nor has GDP per capita been fully equalized. But the differences between Europe’s economies were never so dramatic as to form an insurmountable barrier to embarking upon the most ambitious project of all: adopting a common currency.
Isn't it funny how once dearly held thoughts change the closer we get to physical plane C-H-A-N-G-E ?
The Paper Gold price does indeed reveal the true purchasing power utility of gold in USD at any given TIME, despite the many claims of "price suppression".
But what is this dollar? It is always and forever changing before your very eyes. Gold is not. The only way gold's promise fails is if a large enough faction (ring any bells?) truly sees no value in it, wants nothing to do with it and rejects it's historical reference point in a purely nationalist closed economy (FDR attempted this by closing the window on in-border ownership).
In that TIME, gold will fail to deliver on its value promise (either by function or by decree)WITHIN that faction only, with the caveat that if that faction can spread its belief to all, then gold will fail to deliver on its promise to all. Can this be successful? Was it successful? Will it be. Hmmmm, we shall see.
So we can can view this process in the faction denominated price. As confidence in the faction's belief system slowly dwindles it's denomination slowly rises.
Then as we see the faction's belief system crumble, we view a much more rapid descent of the denominator, and some (especially a whiff of stinky air, soon to vanish) will view this as a victory of sorts, even as all evidence suggest that it is in fact the death throes of the faction we are witnessing, for where the new power structure is growing, that belief system is losing support, and the histrorical reference point is re-asserting.
While on the surface the plunging USD price of paper gold would be a bullish signal for the USD, beneath the surface it tells us only that the USD is presently bullish against PAPER gold, and bullish for shrimp with strong hands and paper dollars to spare.
How much longer until the physical world is buillish against the USD and all debt derivatives denominated in it?
Be my Lehman, Paper Bitch !!!
"At first, gold and the dollar rise together ... (you know the rest)"
Now comes the time that this shrimp must visit the local coin shop to see the latest premium on real gold / paper gold.
FOFOA has dubbed 2013 the "Year of the Window," in no small part because "2013 might be the new "window" being targeted by the central bankers for transition to the new "world financial architecture"
http://fofoa.blogspot.com/2013/01/happy-new-year.html
Perhaps unintentionally, but we know the introduction of the Euro is a huge part of the unfolding of Freegold, and its perhaps symbloic that one side of the [Euro] banknotes depicts the windows of a society open to the world.
To the extent the windows symbolise the spirit of openness and cooperation amongst Europeans, its fitting, because the idea of central bankers seeking to transition to a new world financial architecture is certainly an enourmous task that requires great cooperation and openness.
jojo said...
prete,
You ramble and make no more sense than any other troll. What's your game?
Just come out with it so you can then move on.
These stupid little quips you put out there, probably meant to look thoughtful or thought inspiring, are just lame.
So please skip ahead to the point of your trolling and then we can all wave bu-bye to you, ok?
-------------------------
Dear jojo,
I simply tried to find some anwers because I'd like gold to be free from the system too.
But O.K. I know by now that there is only one way trafic here and people rather 'quote' than argue out of free mind and that's fine with me.
I myself am from the east and understand that westerners have a long way to go to understand gold and money and the interconnectedness.
prete
JR,
before I put on the TV now I want to thank you. I will read and read again your wise post. The level of discussions rose markebly since you came back. Keep it coming. And thanks to FOFOA hosting this great, great blog and making it possible to read such fine remarks.
ein anderer,
I echo these thoughts.
prete,
I find your comments insightful, perhaps a little intrigueing. Do not be discouraged.
I actually had someone track down my email address and write me a long love letter about how I "dominated the discussion without adding anything of value".
So I don't reference my usual tagline, "this we learn from the flower of understanding" much any more, as I sense it disturbs some who feel it is inappropriate.
I am sure there are those who feel that "Wil's" comments are not worth reading and it takes little effort to skip over them and read the others "worth reading".
Frankly, I do that all the time here, without feeling the urge to lash out and "scream at trolls" too often.
When one considers the level of intellect here compared to the many other forums and blogs out there, I for one am appreciative of it, and though I am horribly cash-poor at the moment, and sliding further and further into debt (on my "good name" alone) after the revaluation, FOFOA will receive a goodly token of that appreciation.
JR,
A hypothetical:
Say you were a big dog in the gold and mining world, and you knew with a high degree of confidence that for the last two decades if you wired 1 billion dollars into a bullion bank, and asked to be a buyer at the next fix, and you were cleared into an allocated account, and you sent Brinks the next day to pick up the gold and ship it to your personal vault, you would get physical bars at the LBMA fix price. Say you knew that for a fact. Does that mean you cannot believe in reference price gold Freegold?
Also assume your initials are JS.
The fact that gold may be manipulated through various means does not mean you have to believe the paper/physical disconnect has already happened. It is possible to be confident it is currently or will happen without believing it has been happening for a decade and a half.
DM
Bitcoin enthusiasts,
Looks like MtGox has vaporized.
Hi Daedalus,
Good thoughts. Here is my take:
Does that mean you cannot believe in reference price gold Freegold?
It means you believe there is no paper gold market that supresses gold's price and keeps much of the world's phsycial off the market, thereby tightening the flow of physical.
So yeah, if you think you can buy gold in size today without resorting to off-market, backdoor transactions facilitated through the BISn for special purchasers, then your view of the current gold market is at odds with the view of the currenct gold market as espoused by Freegold theory.
=================
The fact that gold may be manipulated through various means does not mean you have to believe the paper/physical disconnect has already happened.
Putting manipulatation theories side, the essence of what we are talking about is long term price supression that results from having a paper market in a good whose stock is not consumed. The idea is paper gold augments the available supply to make it appear there is much more gold than isactually available at these currenct prices.
http://fofoa.blogspot.com/2012/07/fallacies-1-paper-gold-is-just-like.html
Which gets to the crux of the issue:
Another: This convertible gold market is old from the mid 70s but is new from the early 90s. It is old by the 70s because it is "freely convertible", but it is new by the 90s as it "is not" "freely tradable"! The US$ price of physical gold is no longer "fixed" from supply and demand, rather it is "created" through the market action of "paper gold". Truly, it is the US$ has become the "item traded" in the "paper gold" market, not physical gold. Participants have yet to realize that the gold futures, gold options and gold forward markets, worldwide, have become little more than currency trading arenas. The percentage of gold delivered against these markets has grown so small as to be nonexistence when compared to actual metal settled at closing. Physical gold does still move, and in size, but this is little or nothing compared to the "paper gold" traded.
http://fofoa.blogspot.com/2013/01/legs.html
This time around ($PoG rout) it again seems more of a currency realignment thing ...rather than a wilful abandonment of PaperGold per se.
The "set-up" for transition to PG WON'T look like THIS! (when it updates)...IMHO!
@M:
I'm with you on that one. Blondie is a very smart dude, no doubt. But I think his timeline was breached. That's ok, it happens even the best. I'm pretty sure we all been there or will be there.
Superorganism has his own timeline. When and if it decides to execute, we will not read about it. We will know it. No need to split hairs because of that.
Just my 2c.
PS On another note, You know that saying you must see this? Well, you must: Columbia Economist Dr. Jeffrey Sachs speaks candidly on monetary reform [Full version speech]
The level of fraud is order of magnitude bigger than anything I read or have seen in other countries. Truly unbelievable and in mine opinion disgusting. That is the state of $IMFS Anno 2013.
The blue half of the Amsterdam ArenA is going nuts. Chelsea delight, Benfica devastated.
Congrats to Chelsea, who won a thrilling Europa legaue final 2-1 on a stoppage time header from the captian of the Serbian National team, Branislav Ivanovic.
Nee Flore
Ik vind de discussie hier al heel lang de moeite niet meer waard.
Hooray!!! The price of gold is falling!!
This is exactly what Freegold predicts.
Wil-
Perhaps I was too quick to judge prete. Maybe. Ive sniffed out many of the aholes before and he fits a pattern. I'LL be the first to apologize if Im wrong.
what exactly has he tossed out the that intrigues you?? My mom idey senses are going nuts saying he is like Duggo.
Frick8n phone keyboards...no mom...spidey
SPDR GLD lost anothe 4.48 tonnes today. Keep draining boys :) I love the smell of less gold in the fund!
@prete: - With all due respects Sire, I'm not too enthused by the thought of Gold "as a part of" the Currency mix.
Gold (24K) trancends Currencies ...and, whilst it has NEVER been acknowledged as such in all of history, the Euro / FreeGold concept is IMHO a definite move in that direction.
Gold (24k) is Timeless ie: it's unique suite of Properties allows it to span the ages unaltered.
It would appear the Euro architects, forseeing an end to (lets call it) the $IMFS "timeline" in c 2001, stood ready to implement a transition to Freegold before said $IMFS devolved into farce.
Clearly, the encumbent had other plans, the Euro is displaying the warts 'n all of a subservient currency "within" the current system ...and here we are today - farce-ville.
Whether or not the current regime will devolve further into a Barter-esque nightmare ...or a new Global currency / FreeGold alternative will emerge ...who knows!
by: - Re Bitcoin - Mt Gox appears to be chugging away ...although I did read somewhere (unconfirmed) your Homeland Security took down one of the US-based transfer sites (dwolla??)
JR,
Re-read the Another quote you posted, I don't think it says what you think it does. Another does not say there is an alternate physical price seperate from the paper price. What he says is that a fundamentally 'paper' market where banks trade promises to each other is setting the price of gold. He says very little of it settles physically; that is empirically true, something like 98 or 99% of COMEX open interest ultimately rolls forward rather than stands for delivery; it never intersects with actual atoms of physical gold. That does not mean that those who do stand for physical at the 'paper' price don't get it, including in bulk, at the paper price.
I don't think the potential lack of this alternate price for real physical means that paper prices do not suppress prices. There are lots of people who think they own millions if not hundreds of millions of ounces of gold, thousands of tons, who do not. They own promises. Promises that can be broken. And by steering all of those buyers from real physical into paper promises, they have reduced the price for real gold. When those people have a preference cascade, and no longer accept the promises, but want the real thing, the 'paper' price will disconnect from the physical, as there is not enough physical to give to all of the people who hold the promise. Say hello to transition.
After that free gold, and with no pre-transition conspiracy theory of a difference between physical and paper prices.
(I am using conspiracy theory in the non-derogatory sense...it is a conspiracy, and it there is no proof of it. Maybe it is true, maybe it was and it stopped, maybe it never was. In my mind it is unproven speculation.
It is not necessary for FG. If it is true, it would be evidence for FG, but if it is not true, it is not evidence against the viability of FG.)
DM
JR:
Are you European or do you live in Europe?
Jojo,
Where Prete talks about TIME and the butcher/gardner for reference ... these thoughts reveal a somewhat kindred yet original/creative understanding of time/debt and gold which appears to escape the more Western leaning "mentally blocked". It intrigues me.
But I come to you with another thought: What does it take to have a voice in the BIS? I did see Another speak of China being "let in", and JR, the addendum to recognize "Sh'aria Compliant" in Basel III did not escape me (to some degree coinciding with, if not confirming Patrick Wood's work at the August Review).
What does it take to have a voice in this "free market" valuation of the many forms of dollar reserves held by those trading partners who are flush with them?
I can see Blondie's point, and perhaps how Ender would go that way, or already has. Gold has a function, but Sovereign level Giants may be more concerned with settlement that is "unclear" than settlement that is "crystal clear".
These derivatives. They do bother me. Especially when the BIS themselves plead ignorance (I do not have the link but I do retain what I read).
But I think they bother sovereigns MUCH more. They certainly bothered Greece. Gold as a measuring stick to weigh derivatives relative to ....???
I know that JR has this one before I even post it. I am slow and old. JR is a freekin' walkin' talkin' organic FOFOA encyclopedia.
DM,
The flower tells me that perhaps the paper price and physical diverged at incept of this "new from the 90's" paper gold market ... and has been widening ever since.
Like so many things we are "waiting for" as in hyperinflation, they have "already happened" and as this massive Titanic of a system "turns" we wait decades for the "knock off effect" of dollar price inflation for example, in reaction to the hyperinflated reserve.
So in this:
When those people have a preference cascade, and no longer accept the promises, but want the real thing, the 'paper' price will disconnect from the physical ...
I will tell you that it has already done this, many years ago, you see, but the "paper price does not tell us this".
"Think I a fool for paying many thousands USD per ounce for gold? You will think long and hard on this in the future".
Hi Daedalus Mugged,
I must apologize, I am in error. I didn't realize you were soliciting attendees for your lecture on freegold.
If I had known this was the case, I wouldn't have so selfishly taken a seat when it would have been more gracious to offer it to others. I'm kinda antsy and get ill-tempered when I'm asked to sit still for a while, so Great Depression era lectures at School of Political Sciences in Paris aside, I'm not real into pedantic discourse.
That said, I did peruse your sermon and am happy to report it did inspire a rare spark of creative thought.
If I may be so bold, I humbly offer you a theme song for your sermon. It is by my third favorite "Beatle," the crazy cokehead one who was convicted of insurance fraud for burning down his own house and later for sexually assaulting a 16 year old boy. But man, could he play.
I'm off to atone for my wayward ways with a little solitary scolding, enjoy the music!
When we the Shrimple "see" the true price, the true divergence, why Freegold will be upon us, and we will suddenly see what Giants have gradually watched and we have only glimpsed since a single giant "spoke the truth" in the '90's.
That one single Giant, speaking the truth publicly on the Internet, created no less than a cult following of 14 years, and is now capturing the attention of diehard paper-goldbugs like Sinclair.
ONE GIANT speaking the truth 14 years ago.
What more would one want for proof that Giants see a much different world than shrimp, that the paper price we are waiting to see is much different than the real price giants already see and have watched for decades as we chase a paper proxy?
Think of the price of gold as a thermostat for the financial system and the value of gold as a transverse dimension to this system like the imaginary axis in mathematics.
During most of the life cycle of the system a real positive interest rate is possible, the POG is stable or even dropping and the value of gold is stable or dropping. Much of the savings/capital is in real financial space.
As the system reaches debt saturation, that is a real positive interest rate cannot be tolerated, the thermostat function of gold reflects this state. The SoV function of gold is activated as savings/capital flee real space to imaginary space. System implodes.
A new system is put in place with a new thermostat(higher POG). Savings can re-enter real financial space again as a real positive interest rate can exist.
I think this is what Blondie stumbled upon. The function of SoV flows with time. The Flow of Value.
(cont.) more like 16 years now ...
And all this time the BIS is valuing an ounce of gold by the number of paper claims upon it, denominated in the paper of the claimant ... and we Shrimp, with our Kitco charts and computer screens see only "$1390 and falling"?
Do these not represent two wildly different "paper prices"? Has not the Giant paper price aleady diverged from the shrimp paper price ?
Take this outlook to the argument of golds "price in size to a Giant" and that price in size is still denominated in a currency, one for shrimp, one for Giant.
The physical has already divorced the paper. We do not see it. Giants do.
Grumps...now you have bastardized fofoa and blondie. You are on a roll.
So a new system is just put in place...walla...poof. You didn't mention credibility. Does that just poof in as well?
How does all that happen? Is it like this?
INDIA : Coming in June, inflation-linked bonds
http://www.thehindu.com/business/Economy/coming-in-june-inflationlinked-bonds/article4717814.ece?homepage=true
THis looks like US TIPS Inflation indexed bonds to me.
The bonds are being launched to discourage investments in gold as whopping imports of the yellow metal have been adversely impacting Current Account Deficit
There’s now an alternative avenue for those who in recent times were going in for investment in gold as a hedge against inflation. As promised by Finance Minister P. Chidambaram in the Union budget for 2013-14, the government on Wednesday decided to launch Inflation Indexed Bonds (IIBs) to wean away investors from the yellow metal to paper-based savings instruments.
The Finance Ministry in a statement said: “…the Government of India, in consultation with the Reserve Bank of India, has decided to launch IIBs, as instruments that will protect savings of poor and middle classes from inflation and incentivise the household sector to save in financial instruments rather than buy gold.”
Starting June 4, the RBI will launch IIBs each month with a maturity period of 10 years with the primary objective of weaning away household savings from gold to these hedged bonds up to Rs.15,000 crore this fiscal.
According to the apex bank, the first tranche of IIBs-2013-14 for Rs. 1,000-Rs. 2,000 crore will be issued on the first Tuesday of June, after which the bonds will be issued on the last Tuesday of each month for a total issue size of Rs. 12,000 crore-Rs. 15,000 crore for 2013-14.
Open to all
The first series of IIBs will be open to all classes of investors, including institutions, pension funds and insurance, while the second series, starting October this year, will be reserved for retail investors.
This is being done for appropriate price discovery and market development. That is why “it is necessary to issue comparable instruments through auctions to institutional investors such as pension funds, insurance, and mutual funds as it will create demand for IIBs and help in making them tradable in the secondary market.
“It is therefore proposed to issue an initial series for institutional investors (including 20% to retail investors) and later, another series, exclusively for retail investors. The first series of IIBs would be issued in H1 of the current FY. With a view to targeting greater retail participation in this series also, it has been decided to enhance the non-competitive segment for retail investors to 20%, from the present level of 5%,” the statement said.
Terms of issuance of IIBs for retail investors will be announced in due course.
Clearly, the bonds are being launched to discourage investments in gold as whopping imports of the yellow metal has been adversely impacting the country’s current account deficit (CAD), which had widened to a historic high of 6.7 per cent in the third quarter of 2012-13. Last month, imports of gold and silver zoomed by 138 per cent on an annual basis to $ 7.5 billion.
While both the government and the RBI have been taking steps to check the runaway increase in gold imports on account of largely speculative investment, hedge against inflation and general demand for jewellery, the demand does not appear to be falling to the extent desired. That is one of the reasons that the apex bank imposed restrictions on banks importing gold. However, the fact remains that while the IIBs are expected to attract those savings which were finding their way to gold investment, analysts feel that speculative investment may not get adequately curbed.
cont.....
This is for the simple reason that while the bonds will insulate the savings from the draconian tax of inflation, they would not provide any returns by way of additional profits as gold has provided during the last decade.
How does the government propose to insulate investors through the indexed bonds? The government has stated that that the Capital Indexed Bonds (CIBs) have a fixed real coupon rate and a nominal principal value that is adjusted against inflation. Periodic coupon payments are paid on adjusted principal.
“Thus, CIBs provide inflation protection to both principal and coupon payment. At maturity, the adjusted principal or the face value, whichever is higher, will be paid.”
Index ratio
The IR (index ratio) will be computed by dividing reference index for the settlement date by reference index for the issue date, and the final inflation data based on the Wholesale Price Index (WPI) will be used for providing inflation protection. Besides, in case of revision in the base year for WPI series, base splicing method would be used to construct a consistent series for indexation.
As for the indexation lag by way of availability of the final numbers, the final WPI with four months lag will be used, that is, September 2012 and October 2012 final WPI will be used as reference WPI for February 1, 2013 and March 1, 2013, respectively.
The reference WPI for dates between February 1 and March 1, 2013 will be computed through interpolation.
The BRICS Developmental Bank.
Bennie's 2002 speech.
It's been done over and over.
You know what's missing from the FG model, it's how interest rates are handled. Ask yourself why hold gold if a saver can get a real positive rate on currency? The goldbugs often trot out the chart showing the debasement of the dollar but that chart doesn't include the accumulated gains from a yield. What would the chart look like if accounting for a yield on 5 year or 10 year money?
if anyone wants to read the effect of India Govt regulation on Speculative imports. sounds correct to me.
http://www.moneycontrol.com/news/business/rbi-measure-will-curb-speculative-gold-demand-pc-jeweller_871822.html
I'm overweight gold and miners BTW.
All this fuss can be settled with this take-home message: IF RATES ARE NEGATIVE OVERWEIGHT GOLD INVESTMENTS, BULLION AND UNHEDGED MINERS. THE TIME TO COME OUT IS WHEN THE DEBT HAS BEEN PURGED AND RATES ARE +.
Miners, eh Grumps? Sorry to hear. I wonder if you'd have changed that decision if you'd have read FoA (or, maybe, if you had believed?...)
"You see, there is a world of difference between saving real money as a "wealth of ages" and trying to trade this world's "paper derivatives". The lasting wealth of physical gold does not have to be "converted" into real things prior to a currencies destruction. It already represents the new holding everyone will want. The coming "Western" economic dislocation will devastate all forms of assets that are held in "contract ownership". Be they stocks (most gold stocks included), bonds, businesses or savings accounts, etc.; the loss of a major currency will consume most of the equity these paper items represent. It has happened with every currency ever created and will happen again with our dollars.”
I'm sure though - that you have chosen the 'correct ones' to navigate this storm...
When FOA was writing miners were hedging. That's to what he was referring.
This 'hedging' too?
FoA: "The most important aspect of gold as financial disaster insurance is that it is immune from default. The second point, particularly important for the gold mining investor, is that in financial crisis, desperate governments are prone to disregard the property rights of large holders of industrial assets. The most captive form of industrial asset are the mines and the oil wells. The most attractive asset for taxation and expropriation in time of crisis is a gold mine. Very large hoards of precious metals may prove attractive to a government seeking survival..."
But, we have been here, I'm sure you, Sinclair or the Hedge Fund manager you have chosen will navigate these waters effectively... best of luck - please let us know how that works out!
The threat of nationalization is to scare owners into dumping shares in a panic to be scooped by insiders. Disregarding property rights is a slippery slope. At the brink the threat is rarely followed through on.
Jim Willie, in his own amusing acerbic way, gave miner advice too... many moons ago.
"Clinging to precious metals mining stocks is not part of my forecasts, a decision made back in early 2008. They are bound in paper wealth, subject to inflation in share dilution just like the USDollar, vulnerable to jurisdictional confiscations, and at the mercy of labor unions whose production is increasingly halted. Unfortunately, too many fine people within the gold community, including GATA, hold firm on hope, regulators, and mining stocks. Not here! The major financial networks rely upon advertisement revenue from Wall Street, fund managers, an market exchanges. GATA has a business model that has one key vulnerability, with strong links to the mining firms. It has tainted their viewpoint sadly.
.... not align with the expectation of mining stock rise. The stocks are paper wealth in a new era of paper wealth implosion, during which inflation of shares through dilution is rampant. My full expectation is for mining stocks to continue to fall in value from dilution and reduced metal output. The leverage is a mirage when large deposits are seized by desperate foreign governments in need of income. What on earth is complicated about understanding this point?? The leverage is a mirage when workers are the focal breakdown point for a higher cost of living. If workers cannot afford to feed their families and survive, mine output will suffer. What on earth is complicated about understanding this point?? The leverage is a mirage when rising mine operation costs must be handled, by the simple practice of share dilution. Combine with regular executive stock options, and the dilution on stock shares is huge. What on earth is complicated about understanding this point??"
Different take... same result.
GrumpyLumpy said…
The threat of nationalization is to scare owners into dumping shares in a panic to be scooped by insiders. Disregarding property rights is a slippery slope. At the brink the threat is rarely followed through on.
FOFOA said…
When that happens the mines will be treated in one of three ways: 1. They will be nationalized as gold in the ground will suddenly be viewed as national reserves (unlikely). 2. They will be forced to sell all production to the government at a low "commoditized" price (less likely). 3. They will be able to sell to the public at market prices but will have to pay a windfall profits tax and deal with many restrictions (most likely). In other words, the windfall profit of a 30x revaluation will not be passed on to those holding a government license to dig up gold that is still in the ground, a profit that can thereby be claimed by the hungry collective.
JR,
That is pretty rude. You insisted pre-existing disconnect between paper and physical was essential to FG, so I laid a scenario that gets to FG without the disconnect until the transition point.
You obviously think that the LBMA fix is and has been a complete fraud for over a decade, and that believing that is both essential to and a prerequisite to FreeGold. I would say I have little evidence as to whether that is actually true or not, but FreeGold stands without it.
How does the rest of the commentariat view this? Is believing that bulk gold could not be had at LBMA clearing price from 1997 to 2012:
A) Essential to FreeGold
B) Would be evidence of FG, but not vital to FG
DM
Confiscation via tax or expropiation tends to affect not just the targeted industry.
ae,
FOFOA: The way the gold market works today is a little different. It is kind of a flow within a flow. On the surface, anyone can very easily buy exposure to the price of gold. In fact, this "exposure" is all that most Westerners want, including traders, speculators, goldbugs, hedgefunds, anykindafunds, banks, you name it. And most of this group is firmly in the debtors (easy money) camp. But underneath this superficial flow is the physical flow from the miners and physical gold pukers in the West to the true savers like the Giants in the oil-rich Middle East and net-producing Asia.
The key to keeping this gold market humming along, however, is that anyone who asks for physical in any size has to get it. But those who can afford real size also know that hogging the flow and stressing the system is not the best way to get what they want.
(...)
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.
Claims Pages - The Claims Pages is the largest circulated reference
source for insurance claims pages adjusters.
Post a Comment
Comments are set on moderate, so they may or may not get through.