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458 comments:
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that's pretty cool! Yeah, I have sent peter emails about having FOFOA on the show. I don't know if FOFOA would want to go on, but I would like to see it happen.
Dr. Octagon,
so the US owns only the Fort Knox Gold, 4,578 metric tons, only some little more than Germany?
If this is so obvious - why the World Gold Council is telling the people that there are more than 8000 tons?
Why not just look at what the US Tresury says?
Department of the Treasury
Financial Management Service
STATUS REPORT OF U.S. TREASURY-OWNED GOLD
April 30, 2013
Summary Fine Troy Ounces Book Value
Gold Bullion 258,641,878.074 $10,920,429,098.79
Gold Coins, Blanks, Miscellaneous 2,857,048.173 $120,645,943.46
Total 261,498,926.247 $11,041,075,042.25
Mint-Held Gold - Deep Storage
Denver, CO 43,853,707.279 $1,851,599,995.81
Fort Knox, KY 147,341,858.382 $6,221,097,412.78
West Point, NY 54,067,331.379 $2,282,841,677.17
Subtotal - Deep Storage Gold 245,262,897.040 $10,355,539,085.76
Mint-Held Treasury Gold - Working Stock
All locations - Coins, blanks, miscellaneous 2,783,218.656 $117,513,614.74
Subtotal - Working Stock Gold 2,783,218.656 $117,513,614.74
Grand Total - Mint-Held Gold 248,046,115.696 $10,473,052,700.50
Federal Reserve Bank-Held Gold
Gold Bullion:
Federal Reserve Banks - NY Vault 13,376,987.715 $564,805,850.63
Federal Reserve Banks - display 1,993.319 $84,162.40
Subtotal - Gold Bullion 13,378,981.034 $564,890,013.03
Gold Coins:
Federal Reserve Banks - NY Vault 73,452.066 $3,116,391.91
Federal Reserve Banks - display 377.451 $15,936.81
Subtotal - Gold Coins 73,829.517 $3,132.328.72
Total - Federal Reserve Bank-Held Gold 13,452,810.551 $568,022,341.75
Total - Treasury-Owned Gold 261,498,926.247 $11,041,075,042.25
http://www.fms.treas.gov/gold/current.html
The NY Fed holds gold owned by various nations, including gold owned by the US Treasury.
US Treasury says the US has 261,498,926.247 fine troy ounces.
1 metric tonne = 32,150.7466 troy ounces
261,498,926.247 / 32,150.7466 = 8,133.526 metric tonnes
taylor rule...
comments?...
http://research.stlouisfed.org/conferences/homer/rule.html
The US treasury also has a lot of gold stored in West Point. The amount of gold doesn't matter though, since none of it is available for purchase. It may as well be zero.
Volcker ushered it ("inflation targeting," which is what the Taylor rule is about) in and now advocates its abandonment.
The seminal event is Volcker's efforts to "beat inflation" via monetary policy in late 1970s and early 1980s, which itself (in standard economic lore) was a consequence of the 1970s development whereby the US began running yearly fiscal deficits, which mean there was no possibility for countercyclical fiscal policy and those monetary policy was all that was left.
The Taylor rule basically says the Fed tighten/increase interest rates in times of high inflation or when employment is above the full employment target, and loosen/decrease interest rates in times of low unemployment. Its sorta based on the traditional Phillips curve formulation of the trade-off between inflation and unemployment in the short-run.
Volcker these days says please stop inflation targeting:
Paul Volcker, former chairman of the US' Federal Reserve, has called for a return to "more orthodox central bank policies" by the Fed, and expressed his opposition to targeting a specific level of inflation.
Volcker also described the Fed's "fashionable" dual mandate, targeting both price stability and low unemployment, as "both operationally confusing and ultimately illusory", implying as it does "a trade-off between economic growth and price stability, a concept that I thought had long ago been refuted not just by Nobel prize winners but by experience."
In a highly opinionated address to the Economic Club of New York, on the occasion of his receiving the club's award for leadership excellence, Volcker also urged the Fed's current leadership to display "backbone" in acting to pull back on quantitative easing before it is too late.
"The risks of encouraging speculative distortions and the inflationary potential of the current approach plainly deserve attention. In [the Fed's internal] debate, I trust sight is not lost of an ultimate return to more orthodox central bank approaches."
http://www.centralbanking.com/central-banking/news/2271700/volcker-calls-for-end-to-inflation-targets
Sexy:
Inflation target ‘neither necessary nor desirable'
Nevertheless, Volcker said: "I happen to believe it is neither necessary nor desirable to try to pin down the price stability objective by setting out a single highly specific target or target zone for a particular measure of prices. After all, some fluctuations in prices ... are part of a well-functioning market economy."
Price stability, however, should remain a central bank's key target - and credibility on that, once earned, "must not be frittered away by yielding to the notion that a ‘little inflation right now' is a good thing, to release animal spirits and to pep up investment."
main article to add...
great article of the failed gold major move...
amazing what is not known...
http://seekingalpha.com/article/1474..._article_title
http://research.stlouisfed.org/confe...omer/rule.html
ea
sorry I can't remember the exact www. but the treasury reports gold holdings and we have some in Ft.Knox, Denver, West Point and the FRBNY.
Fofoa probably has the exact reference but it is audited and hasn't changed much in years.
@M
"Yes, manufacturing is important. No disagreement there. But the free market would have found a better way to allocate the manufacturing. Under-developed areas would still be first in line to get the mfging work because they would have the lowest real wages. No need for Expriv for that."
Bold is my emphasis.
Wanna bet that, under Freegold, THAT will be what the ROW hates? Consider CapEx required to relocate a plant. Which is more? Hmmm... I think it is an interesting exercise to consider what is to hate about what comes next.
Consider, however, nearly ALL manufacturing will be done locally, in the not too distant future.
I would also like to add that, if you have kids or want to participate in what's coming next, that you look into 3D design/modeling (start with Google Sketchup and go from there). It will be a truly exciting time; for those so inclined.
Aside from Freegold, this is but one of the many reasons I am hopeful (and this is obviously independent of your location).
Thx to JR, Michael dV, Dr. Octagon.
See, when I am discussing Freegold with "non-Freegolders" I like to use the following argument:
The Euro has a better stand because of its Gold.
Just yesterday someone replied: "US has a lot of Gold too."
My answer: "Yes, US treasury has. But not the FED (Dollar)! And and the USG can’t give it to the FED because of legal reasons."
Dr. Octagon:
… since none of it is available for purchase …
This is true because of the same (bold) reason? So they are sitting on the stolen stuff, and because it is stolen, it is as if they have none at all?
Well, if the US ever put gold back on the table through another confiscation of its citizens' gold, the BIS would call in all of its outstanding claims in gold at the rate of $42 per ounce. And the BIS would not be alone. Other entities would have legal claims for gold at $20.67 per ounce, and others at $35 per ounce. How much gold was either confiscated or defaulted on without due process of law? Claims of perpetual entities never go away. If the US government ever exposed its own gold (or its citizens' gold through confiscation) to the light of day, it would expose itself to all kinds of claims and an international legal mess. Under international law, the US is still an OUTLAW when it comes to gold!
FOFOA, Confiscation Anatomy - A Different View
Is my understanding correct so far?
The Euro is better because they have severed the link between the ECB and governments. A currency for the people.
jeb,
"better" because of this link only?
Thx. It’s for my still growing understanding of the details …
In practice I am "all in" …
IMHO a good use of one's listening time. Discusses the USdollar worth being determined not by the the financial markets exclusively but by the military. Also discusses the managed takedowns by "Mr. Global".
http://www.youtube.com/watch?feature=player_embedded&v=hv8w1c2w80I#!
http://www.youtube.com/watch?feature=player_embedded&v=hv8w1c2w80I#!
this is getting interesting: Goldman going short on long bond:
http://www.cnbc.com/id/100779340
With yields on government bonds jumping in the past week, Goldman Sachs has warned that a widely predicted bond sell-off is finally happening, while a major U.S. asset manager has warned investors to move out of long-duration bonds to avoid heavy losses.
......
"The bond sell-off: It's for real," Goldman's fixed income analysts said in a research note released on Friday. "Our end-2013 forecast for 10-year U.S. Treasurys remains 2.5 percent, above the forwards, and we will be looking for other opportunities to trade the market from the short side."
@tintin
Isn't it the rule to normally fade GS on such announcements?
@ ein anderer - The US dollar is worth whatever amount the society that uses it gives it. The same is true of gold. Gold is worth whatever value the society that uses it gives it. The US dollar doesn't need to be backed by gold, and neither does the Euro - they work fine as they are today, without backing. By backing, I mean that there is no guarantee that 1 dollar or 1 euro will buy you some specific amount of gold, or anything else for that matter.
Since loans are denominated in currency, if we artificially pegged the currency to gold, then we artificially cap loans, preventing good projects from getting loans for no good reason. Also, without the freedom to increase and decrease the volume of currency available, the central bank is unable to properly respond to currency hoarding and inflation. We know this doesn't work - history gives us many examples.
There is no benefit to attempting to back a currency with gold - there are only downsides. Currency needs to be managed. Don't bother looking at which countries have gold, and how much. This information doesn't make any difference.
I stated that the dollar, the euro, and gold and even silver or bitcoins are only as valuable as the societies that use them, make them. Historical values don't matter. The actual material it's made of doesn't matter. Governments only play a minor role. What matters, is if I have one of these things that we roughly call money, what real-world items can I get with it? Which people, which societies, will take my chosen token, on the day I choose to turn it in? There is no certainty - you have to make an educated guess.
So look at these societies. Think about the people that save US Dollars, those that save gold, euros, silver, bitcoins, etc. Which group would you rather store your savings with? This is all that matters.
"Which people, which societies, will take my chosen token, on the day I choose to turn it in? There is no certainty - you have to make an educated guess."
Well put Doc! Let's hope our guess is little bit more worth then others. ;-)
Hi Dr. Octagon!
The US dollar doesn't need to be backed by gold, and neither does the Euro - they work fine as they are today.
Do you really feel like the USD is working fine today? If so, why billions monthly of QE to support it? or did you mean 'fine', only in the sense, without a Gold backing?
I stated that the dollar, the euro, and gold and even silver or bitcoins are only as valuable as the societies that use them, make them...
Until they aren't. We have multiple historical examples of paper currencies going to zero. In fact they all eventually go to zero one day. They have a 100% failure rate. The paper, essentially, goes bankrupt - slowly... then suddenly. I don't think it's a good idea to try to time when this will happen. We appear to be IN the 'slowly' phase. :)
Dr. Octagon,
thank you for your patience. There is left a bit?
Why ECB’s Mark-to-Market (of gold) is so important in the view of Freegold?
@ein anderer:
Because it makes gold a reference point. Benchmark if you so like.
Today, in $IMFS, US$ is the benchmark. This is US biggest advantage. But, also its Achilles heel.
You know that game paper, scissors, rock? Freegold is like that, just add in gold.
Scissors beat paper, paper beats rock and rock beats scissors. What about gold then? Well, gold beats everyone, so it's really easy to play. ;-)
Doc Oc wrote:
I stated that the dollar, the euro, and gold and even silver or bitcoins are only as valuable as the societies that use them, make them. Historical values don't matter.
I'm sorry, but I believe there is a fly in your ointment.
You are, on a fundamental level, comparing apples to bacon. "Societies" have only had one hundred years of the present incarnation of "the dollar" in which to assess its usefulness and value. Gold and silver have been found to be, at minimum, useful, and, at most, invaluable, for a far greater expanse of human history. This condition bears considerably on your thesis.
The actual material it's made of doesn't matter.
The following thoughts are of a much more speculative nature. I have, of late, pondered the importance of the aesthetics of gold and how it may impact its "historical" role as the wealth storage asset par excellence, and it is my view that its appearance has some real but unmeasurably positive impact on its longstanding place as the planet's premiere wealth storage asset. Consider that in this life, persons, even places, and, for the sake of this discussion, things tend to look the part. The operator of an ocean liner can't best perform his or her duties dressed like a lumberjack, and a partner in a prestigious law firm wouldn't present him or herself in the attire of a lobsterman. Some of this is simply a matter of functionality, but, I maintain that this, by no means, explains all of it. Perhaps a better way of putting it is that functionality is a more complex matter than it appears at first glance.
Appearances are, to my mind, a necessary but not sufficient condition facilitating humanity's task of, if you will, ordering the world and everything in it. In fact, I would argue that just as nature "dresses" us all in different garb for reasons that are dictated by evolutionary imperatives, we humans mimic nature's method when we choose our daily garb.
So, while we know that gold, for example, has some stellar attributes, portability, divisibility, indestructibility, etc. etc. that allow it to uniquely function as the premiere wealth reserve assert, I maintain that it very much looks the part as well-when fabricated in the right hands, it is, by many folk's aesthetic runes, stunningly beautiful- and that this state of affairs has something to say about its past and future prospects as the asset of choice in which to save one's purchasing power.
Well said Edwardo
How would the Dow/gold ratio behave under Freegold?
@ Phat Expat
Quote: "Wanna bet that, under Freegold, THAT will be what the ROW hates? Consider CapEx required to relocate a plant. Which is more? Hmmm... "
You are always looking at one side of the market. There will always be some equilibrium. Do you really think that there will be parts of the world that are relatively stable and business friendly that will be starving simply because it costs too much to put in a plant ? The west, with all its taxes, unions and regulation have the most to lose in this case.
And yeah, I know about the 3D printer.
But I would rather invest in nuclear energy then anything else. That is where we are going.
Let's say after the transition the US debt burden is manageable to allow for higher rates. The nominal GDP would go from 15T to 45T due to currency debasement. Grandmama has ten oz gold worth 550K and there is no cap gain on gold. It's very tough mentally for Grandmama to catabolize savings. She's sees that US treasuries are yielding 12%. What's the calculus for Grandmama? Gold is somewhat steady but yields zero. What's to stop her from dumping 9 oz (495k) and putting it a debt instrument to get 60K/year income on that principal? She would keep 1 oz for just in case.
The nominal GDP would go from 15T to 45T due to currency debasement. Grandmama has ten oz gold worth 550K
AHNNNNNNN (Jeopardy buzzer sound)
@GrampsLampBeachBall
Hmmm... currency debases 1/3 so Gold must have been at, say, $18.3K for 10 ounces to get to 550K (you are measuring this in denominated dollars, no? - it 'inflates' as well). Already been through this, if Gold goes to 18K - the paper AU market is still functioning - not happening.
Since you are focusing in the 55K price FoFoA quoted in 2008 and you are anticipating major currency debasement - why wouldn't you think that would also effect the $ value of Gold? Your 550K figure is in USD, correct?
Let's use round figures and the 'value' in today's 2013 terms will be 100K FG (personally I think higher - anyway). So Grandma's 10 coins are worth 1 million in today's dollar value. With paper devastation globally, HI - whatever - you think Grandma can't live a great life living off her 10 ounces? without gambling on something with a yield? maybe your Grandma is different than mine. Heavy upkeep on the old gal? High maintenance?
You seem fixated on this current system boundaries when there will be a huge paradigm shift. HUGE! :)
My point is how would savers behave when real interest rates are positive?
Also, I thought under FG, gold would revalue much more than other commodities. So gold could go 30 fold higher, but the other cost inputs such as copper, lumber, grains, and energy would only go up a much lesser degree. Hence, the dollar would only HI against gold.
Grumps, I'm not seeing a scenario post-Freegold where anything better than junk bonds yield 10-12%. If granny has gambling in her blood she might sell some gold and roll the dice but I think most people would rather periodically sell a little gold to live. People are only fixated on "investing" now because they've been conditioned to do so to stay ahead of inflation.
So, Polly, are you saying highly rated debt would have a zero real rate or even negative? That would imply a bull market in bonds. If people considered bonds as gambling then the rates would have to rise to meet the bid. What would be the equilibrium ( market clearing) rate at which savers would be compensated for risk of default and devaluation?
All I can say is that based on historical data rates over 5% appear to be the exception to the norm.
But you miss the point. If savings are largely held in gold after the reset, what interest rate would bonds/cd's have to offer to coax that savings out of gold? Their will be an appetite for that capital. It will offer a positive real rate. If 3 month paper is 3% above CPI would you allocate some savings to that? 1 year paper @ 4% real rate? 5 year @ 6%?
This explains why gold is not a hedge against inflation and why it is not a wealth reserve on the shrimp scale.
Custodians ( UberGiants) don’t have all their wealth in gold for most of a credit cycle, it’s deployed into other assets such as CB’s, commercial banks, resource companies, technology companies, and utilities that extract wealth from shrimps. They do this not so much to grow wealth but to manage and control human livestock to remain at the apex of the food chain. Gold is used as a safe harbor for their value ( wealth ) in between human farming paradigms. Once a new system is rebooted they are happy to see the value in gold disperse to ownership of the new system. Their Wealth moves in a cycle between gold and financial assets.
If savings are largely held in gold after the reset
I think savings will largely be held in Gold by people who already hold them in Gold today. Not JoePublic - who will continue to be steered into whatever financial instrument is most desired by those with the power to... herd them. It probably won't be much different than today... but 'so what'? Is this some wide-angle point to endorse mining shares again, Lumps?
Grumps,
Still stuck in a debt based paradigm? After freegold, others won't be. Suggest you read Metamorphosis and consider an equity based system.
FOFOA: In an equity-based system, any entity can still issue unlimited paper notes if it wants. Just like the US government does in its crazy debt-financed world. The difference is that the marketplace will price that paper against the real underlying property as it is issued. If a company doubles its issue of stock certificates to raise cash, then the price of each outstanding share will be cut in half. If a sovereign money-printer doubles his currency base to pay his cronies, then the value of each currency unit will be cut in half. But in today's debt world, a company can keep issuing more and more bonds until it ultimately collapses under the weight of its debt service. The same goes for countries.
Does anyone know when is the next Mark-to-market party? ECB's homepage is not so user friendly. I bet it was some Germans who did it. :-)
Off topic: Once upon a time I was applying (or trying to apply) for a job at Siemens (German company). First obstacle is to register your application on the Internet. No problem, done it 100 times before. Oh boy, oh boy was I wrong. When filling your personal data you had to choose the password that meets 15 different criterias. There was also some hieroglyphics that needed to be typed back, for security reasons. Then, you needed to confirm "data integrity agreement". Only 100 pages long. If you live in Mozambique then this, if you live in Sudan then that (I live in EU btw). Apparently the server is located in Germany and all applicants must go throug the same procedure. When I was finaly done, the bloody thing didn't work and I had to repeat everything. After 5 tries I gave up. So, I never get past the first obstacle. I guess it was some type of IQ and endurance test. :-)
But hey, at least they make some great cars! ;-)
The most ductile non-poisonous star-stuff, that's why gold was chosen way back.
Spelled out for the unimaginative:
most ductile: obvious, can be easily transformed with simple tools.
non-poisonous: inert, doesn't corrode or react with almost anything so it doesn't alter its appearance easily, it is a symbol of perennial qualities.
star-stuff: dense and yellow, the colour of our star and the presence and entity of something important and durable.
No other material on earth has those qualities.
So simple...
Hi Grumps,
I don't know much about your Gramama but I think my Nana would have done this!
Jeff,
There is no way the Custodians will allow such a system FOFOA lays out in Metamorphosis. The banking structure as it stands is how they can foreclose at the end of a cycle. They don't want sustainability. They want volatility--expansion and collapse. Look at the BIS network of CB's. That's our Venetian World Government. What they will probably do is bring gold back into the system to serve as Tier one reserves at a value to recap the system. But the debt paradigm will still be in place--that's how they control human tax farming districts ( governments) and lower level financial institutions. After nearly a thousand years of working to this goal of world empire they won't give up control.
Jeff,
You should check out Twoshortplanksunplugged
http://twoshortplanksunplugged.blogspot.com/2013/05/gold-nwo-elitesthe-gamethe-ambush.html
Neither Grumps nor you Freegolders understand the changes we are going through.
It's ALL going down. What part of that is hard to understand?
I agree more with the Freegolders, but we don't get there without a collapse of global industrial civilization.
The Gordon Long video that Leopard points out between Long, Fitts and Ty (somebody) is about the most sensible thing I've heard lately.
Right now we are seeing the main generational banking dynasties (Mr. Global?) engineer a takedown in paper gold to facilitate a move into equities.
It is the same old moving target scheme from bubble to bubble, and yes, in the final analysis a functioning business that generates real revenues is by far a better investment than any papr proxy, or commodity, or energy source, as long as the current status quo is still in play.
And the absolute pinnacle of a successful business is the very system they own and operate through the BIS, its central banks and their primary dealers. The business of FIAT currency management.
We here call that business the "IMFS" and it is a wealth production machine for the 1% (at the expense of the 99) that has ALWAYS been the number one equity for the top 1% to invest in, with all the power they bring to bear.
It is obviously not "owned or traded" as in some "public Wall St.". It in fact does not even appear evident to one man in a hundred as to how and why it exists, or even that is does.
But that system is what these Giants are totally invested in, and certainly not through equity shares in the sense that shrimp comprehend them.
More and more, the Matrix comes to mind, in that we can never truly understand this world we are experiencing, unless we take the red pill.
And I do believe that 99% of the 99% will choose the blue. They'd rather taste that sizzling sirloin steak, even if it isn't real, then face the truth that, "there is no steak".
In the end, reality will re-assert itself in a very ugly and unfashionable way, but I do know when, and in the meantime the Matrix offers steak in a wasteland.
We humans are odd indeed.
Meant to say I do NOT know when. But it doesn't look to me right ow like any time soon ....
About the time I can compose a single complete comment on this blog without a frickin' typo??
@gary – yes, I think the US dollar is working fine today. I personally get paid in dollars, and can pay for my day-to-day purchases in dollars. As long as that continues, then I would say that the dollar is “working fine”. QE may be necessary to offset the hoarding of dollars, and I'm ok with that too. If someday the value of a dollar goes to zero, then it's obviously not working anymore.
@ein anderer asked “Why ECB’s Mark-to-Market (of gold) is so important in the view of Freegold?“
Because the ECB can buy or sell gold in exchange for Euros, to directly influence the value of the Euro relative to gold. Freegold assumes that gold is more highly valued than it is today, and this gold value can be used by the ECB to directly manipulate the value of the Euro. If confidence is lost in the US dollar, then there is little the US Federal Reserve can do about it, but the ECB can use gold sales and purchases to support (or weaken) the Euro, if needed. FOFOA explains this much better than I can.
@Edwardo – I'm sure that there are physical attributes that have given gold its value in the past. There is obviously some reason why this otherwise useless metal was highly valued in the past, and those attributes may continue to influence us in the future, All I meant to say, is that I personally don't consider past values to be a guarantee of future values, and that future valuations need to stand on their own, in their own time, independent of the past. Aluminum used to be very highly valued. Today, not so much, although aluminum today has the same characteristics as it did when Napoleon was around. Freegold assumes that gold will have a similar value transformation, but in the opposite direction. As it says at the top of the page "Everyone knows where we have been. Let's see where we are going!".
Hi Doc Oc,
QE may be necessary to offset the hoarding of dollars and I'm ok with that too.
Ahhh... okay - so know I understand you. You feel QE is 'necessary' because of 'hoarding of dollars' and when that ceases - they will stop QE, right? or are you okay with it continueing? or you don't care as long as you can get 'paid in dollars, and can pay for my day-to-day purchases in dollars' ?
If someday the value of a dollar goes to zero, then it's obviously not working anymore
I'm curious - what do you do simply go on day-to-day until that time comes? What I am asking is, are you preparing for this event? and how? or you don't feel it is a possibility? or d) Don't care either way.
Lastly, being a Doctor - do you believe in the field of psycho-analysis?
Here is a cool 7-minute video on Peak Gold
Historical context etc.
Cheers,
There is obviously some reason why this otherwise useless metal was highly valued in the past, and those attributes may continue to influence us in the future
For monetary stability, humans require a reference point of value - a physical asset, ideally one without conflicts. There is really nothing special about Gold... except that as an element it has the most suitable characteristics we require to be that reference point. Aside from the obvious that it is durable, portable, divisible etc. you used the term 'otherwise useless metal' with a negative connotation - where it is actually an essential positive. Being 'useless' means it can't conflict within the marketplace for its purpose as a wealth asset unlike, say, salt or petroleum. That also means it won't be used up. Petroleum's divisibility is inconvenient and it's not ever lasting (it can be used up!). Opposingly, these are the reasons that Gold has been a representation of wealth for over 5,000 years. The number of gold atoms on Earth is fixed. History maintains that it is the perfect asset choice as that reference point of value.
When this fractionalized asset, created for convenience, leverage or slight-of-hand in the marketplace, becomes transparent - value always reverts back to this historically viable precedent. This is a lock-bet Doc despite that you state All I meant to say, is that I personally don't consider past values to be a guarantee of future values, and that future valuations need to stand on their own, in their own time, independent of the past.
If you have another option (a future one) we'd love to hear about it. Perhaps your answer can influence Central Banks to stop accumulating Gold and instead buy _______ ????
Cheers,
@M
"You are always looking at one side of the market. There will always be some equilibrium. Do you really think that there will be parts of the world that are relatively stable and business friendly that will be starving simply because it costs too much to put in a plant ?"
It will be significantly different from what we currently have and on a smaller scale (country dependent of course). I am not against other countries having a higher quality of life. I am not, however, willing to lower the quality of life for my countrymen to achieve that.
"The west, with all its taxes, unions and regulation have the most to lose in this case."
Fine by me. Oh, and the East is catching on to the Tax and Regulation thing; and it will only grow from there. But not all Tax and Regs are bad, as long as it's not misappropriated. And PJ pretty much nailed it with the degradation of our society as a result of this abuse. No greater harm to a man's soul...
"And yeah, I know about the 3D printer."
Well, that is part of what I was alluding to. And good for you, it is an incredibly transitive tech.
"But I would rather invest in nuclear energy then anything else. That is where we are going."
Sure, that and so much more. I remain hopeful.
Dante_Eu,
The ECB's website is a challenge! Thankfully, the info from FOFOA's 2011 post Reference Point: Gold - Update #1 is still on helpful.
Go check out the ECB weekly financial statement info here:
http://www.ecb.int/press/pr/wfs/2013/html/index.en.html
It lists the normal publication dates and points out how that changes when they do the quarterly revaluation, aka when they mark the assets to market (MTM):
Weekly financial statements
Publication dates 2013
As a general rule, the consolidated weekly financial statements of the Eurosystem are published on a Tuesday, and they relate to the preceding Friday. There are two exceptions to this general rule.
Firstly, the publication day for the first financial statement of each quarter will normally be a Wednesday (instead of Tuesday) in order to allow more time to complete the quarterly revaluation of assets and liabilities, which is reflected in these statements.
The next quarterly financial statement (QFS) is reported on June 28 and published on July 3rd.
QFS Week 26 28 June 2013 03 July 2013 Wednesday First financial statement of the quarter
This is the MTM of Eurosystem assets, not just the ECB:
Eurosystem: The central banking system of the euro area. It comprises the ECB and the national central banks of those EU Member States whose currency is the euro.
http://www.ecb.int/home/glossary/html/glosse.en.html#206
Dr Octogon,
sorry for late answer. If my reading of statistics is correct, US trade deficit is approx 1% of Worlds' GDP (for 2011 WGDP was approx 70 tril$, as per WB's estimates and US TD was 780 bil$ or so). And is a recurrent trade deficit since the last decade ! Now if my reading is correct and the my accounting bias is right, the 1% is very big, as a standard net profit from a good plc is 5% max. And intuitively I do not believe full nations dependent on foreign receipts. We have heard of "banking nations" and look where they are !
Thanks JR, that was what I was looking for! I'm going to reread RPG - Update #1 as well.
We seem to be at the same level as of Jan. 5, 2011: Gold: EUR 1055.418 per fine oz.
Today: Gold: EUR 1067.01 per fine oz.
It will be interesting to see if some other asset has gone up now that gold is down.
May divergence Update
DX is now plumbing the depths of the mid-82's (with concurrent $PoG uptix) ...which begs the question "WHY"!
The thing (DX) looked for all money to be heading toward exponential giddy-up only last week and I'm thinking this current knockdown is probably the last tool they have left in the management arsenal.
This is a most unusual form of monetising the debt and could very well backfire FWIW.
DO NOT be short the USDollar here IMHO.
OBA,
I'm not only short the USDollar, I'm short the entire USDollar financial and monetary system! FGFTMFW!
;D
Yes Edwardo, very well said, and I would add the following.
Why gold has intrinsic value in and of itself.
There is a deep and basic reason why gold was first noticed, and then appreciated by so-called primitive man.
Of all the 92 naturally occurring elements, it is the only metallic element that commonly occurs in its elemental form. This is because of its unique non-reactivity with other elements to form complex compounds. Usually every other element must be smelted in some form to obtain its elemental form.
Sure, you can occasionally find pure crystals of silver or copper, but the vast majority must be refined by a smelting process to obtain their elemental form, a technology that was not available until well into the city-state era. Gold, in many areas, can be picked up in its basic, unalloyed, pure form.
Thus, in earlier days, no other element could be obtained, in its original, elemental form. Why was this important? Because gold in its elemental form could be easily worked and shaped into objects of utility and decoration, unlike all other complex mixtures of metallic elements we call rocks.
It would thus be an absolutely unique substance in the primitive world, and would have attracted attention, and gradually come to be accumulated, valued, and used as a store of value and trading vehicle.
Thanks, oldinvestor. I'm glad you found value in my perspective. Your comments were a revelation to me.
Wow, Jim is referencing that Bo Polny character again, incredible.
When you read the many interesting interpretations of our current socio-political international monetary and finacial system, it is amazing how many arrive at freegold without seeming to actually realize it, or articulate it.
It is as though all roads lead to Freegold, and yet the twists and turns along the many paths to this inevitable destination vary with the terrain.
One common thread is the idea that we "cannot print our way to prosperity forever" and yet I would argue that prosperity has NEVER been printed to begin with. THAT has always been a carefully disguised illusion.
The "trades" or working class have never been poorer, and the information we are led to believe regarding unemployment, growth and prosperity are merely a panacea to calm the heard.
What we can deduce, through a careful examination of reality, is one solid fact regarding the onset of FREEGOLD.
For many years we have continued to see the wealth of Giants preserved in this present system, and even grow in nominal terms. But there comes a time when the huge mass of working class producers can be squeezed beyond the point of no return.
In that time the present system will no longer grow or preserve the wealth of giants. Some would say that this time is already upon us, or at least very near. This would be a call for Giants to make, and I believe it is under discussion among them as I write this.
That is the sign to look for.
When the present system becomes inimical to the interest and wealth preservation of Giants, the new system will unfold.
This we learn from the flower of understanding.
What's with "the flower of understanding"??? Is it an inside joke?
Some saying that Wil came up with -- but I don't think the joke is inside. ;D
Edwardo & oldinvestor - I fully disagree. I don't mean to offend - but are you projecting your own feelings onto others? Not everyone is so enamored with gold. You are suggesting that gold is special, outside of its monetary qualities.
It's true that India and other cultures are fans of gold, but I believe that is for cultural reasons, not some inherent human desire to own it. Why do so few westerners own gold? Those westerners that do own it, usually own GLD or some other paper form, which has none of the physical qualities of the metal. Even gold wedding rings have fallen out of favor, at least in my area, with platinum, white gold, or similar metals dominating. A "gold card" is a step below the platinum card. Times change.
I don't disagree that gold held a special place in the past. But that's not a good guide for the future. Don't get me wrong - I see a bright future for gold as you do, but I think that the physical and historical qualities of gold are not responsible for that future, and that focusing on them is a distraction.
http://www.bis.org/publ/qtrpdf/r_qt1306e.pdf
"A more effective approach to
maintaining the confidence of insured depositors in a creditor-funded
recapitalisation plan is also a much simpler one: require deposit insurance schemes
to bear losses directly, leaving insured deposits intact.
This approach works as follows. Rather than writing off some amount of
insured deposits as part of the process of creating equity, the required equity would
be obtained instead with a direct payment from the deposit insurance scheme to
the bank (thereby increasing the bank’s assets). The deposit insurance scheme
would then have a claim on the holding company under step 3 of the basic
illustration, along with the written-down uninsured creditors."
Franco,
Careful! One must never taunt the flower of understanding :D
Cheers
Dr. Octagon,
For the record, white gold is still gold. It's not like white chocolate which is not chocolate at all ;-). White gold is simply alloyed with other white metals rather than copper so the color isn't yellow.
People in the west aren't as enamored with gold as easterners mostly because the investment/financial community has made an active campaign for the last twenty five years of disparaging gold ownership.
Octogon: You said "I fully disagree. I don't mean to offend - but are you projecting your own feelings onto others?” and then you link to '
The Rules of Goldbuggery
1. Gold is a Currency: This is rule number 1. It is not a decorative or industrial metal, it is a permanent store of value, as dictated by Greeks in Lydia around 700 B.C. And, it shall be ever thus.' which states the number one fallacy of goldbugs is the thought that gold has value.
Have you read:
Life in the Ant Farm
Superorganism Open Forum
Focal Point: Gold
My question who be 'who places value within gold'?
This point of view is not purely dollar-centric. The problems of an emerging market middle class sustaining the wealth of Giants comes into view from Forbes:
This is what the hard landing crowd has been waiting for. Financial risks are already on the rise in China, reflected in “excessive borrowing” by heavy industries and local governments. The rapid growth of the shadow banking sector also suggests that further delaying financial reform is no longer an option. International experience also suggests that liberalization of currency be accompanied by significant increases in financial instability. It remains an open question if China’s banks and its financial system more generally could withstand the shocks likely brought about by financial liberalization and opening.
“In our view, the government’s ability to control and alleviate risks in these three areas –environmental damage, the SOEs and financial shocks – will determine China’s chance of maintaining its growth sustainability,” says Yiping. “If the above risks explode, China’s growth could collapse, at least in the short term, with devastating implications for the rest of the world.”
Octogon: When 'oldinvestor' said, "Of all the 92 naturally occurring elements, it is the only metallic element that commonly occurs in its elemental form he proved gold was special outside it's monetary qualities.
@ Dr Octagon
Quote " A "gold card" is a step below the platinum card. Times change."
The stock to flow ratio for platinum is still 6000 years behind gold. Some will find this out the hard way.
Im checking the platinum holdings of central banks and seeing a lot of zeros....
Croatia gets green light to become 28th country in the EU. Croatia will be the bloc's first new member since 2007 and joins July 1.
The Eurozone has to play its hand one of these days. The print zone is getting all the good headlines again and if the ECB doesn't do something, there is going to be some serious riots. Its time for the EU to pull the plug.
Here is the most popular comments on Mail.Online regarding the Croatia entry to the EU.
"If the people of Croatia vote to join the Euro after what has happened in Cyprus then they want their heads examining. I wouldn't touch the EU with a barge pole, it resembles the Black Death."
-442 up votes
"How could any country want to join the EU?"
-356 up votes
Lets hope Croatia is the 27th (not 28th) member - Filling the void made by the exiting UK---- :) UKIP and Freedom.
-323 up votes
"Are these Countries Crazy or they just trying to get rid of their citizens!"
-245 up votes
M,
I wouldn't cite the Daily Mail as a representative source for the whole of the UK! It has a rather nasty reputation.
On the other hand, it is one of the most widely read foreign sites in the US I beleive - supposedly for the "quality" of the showbiz news.
TB
@M:
However bad EU seems to be, it's 1.000 times better than being outside EU. If you are on european continent. Switzerland and Norway are exemptions, because of the banksters and the oil.
Same rule apply to € also.
Is it me, or does history seem to be slowing down? Or is that just an illusion?
The Euro was launched as an accounting currency on 1 January 1999. Euro notes and coins entered circulation on 1 January 2002. A little more than five years later the global financial crisis started, though things did not get exciting until the following year -- around the time FOFOA launched this blog in August 2008. Since that time almost another five years have passed.
I do not think that five years is a long time, but in percentage terms this blog has now been around for almost half the life of the circulating Euro. And in percentage terms the world economy has been in the doldrums for a big chunk of the life of the circulating Euro. And now Japan is getting a whole lot more restless and exerimental. How long before that becomes contagious?
What about the Swedes?
They of their treasured Nobel laureate
Harry Martinson, whose epic poem Aniara, about a tragic space journey gone awry, speaks of not just existential bleakness and the place of art in the human condition, but on a deeper level speaks to stewardship of humanity, of the need to care of our plight and accept responsibility and guilt for our collective human sins born out of WWII and the news of the hydrogen bomb in 1953. "The cruelty of space does not surpass that of man." He calls man "the king of ashes".
Harry Martinson later killed himself after suffering for years the taunt of critics, who claimed his Swedish heritage and closeness with the academy meant he unfairly stole the award from more deserving others, like, Saul Bellow. I don't know, because its poetry and unless you speak Swedish, you really can't judge his craft. But I do know Saul Bellow went on to publish one of my favorite books, Humbolt's Gift , the year after Martinson won the 1974 Nobel prizethat many argued Bellow should have won, so perhaps it all was for the best. Saul got his Nobel in 1976.
Anyway, Harry is treasured in Sweden, from the country wide celebration of the 100th anniversary of Martinson's birth in 2004, to the songs of Sweden’s most famous artists, like the charismatic Tallest Man on Earth, whose 1904 offers an tribute not just to the earthquake that shoke sweden in 1904, but the man who forever changed it.
So yeah, Sweden has a cultural appreciation for the underpinnings of the Euro's formation - the need to unite Europe.
So why do they still have an effective opt out on joining the Euro , and why do most signs point to the Swedes having no current interest in adopting the Euro?
ein anderer said...
“Under international law, the US is still an OUTLAW when it comes to gold!”
Wrong
Here is what ‘will’ happen post Petro-Dollar, the US dollar will hyper-inflate taking all foreign claims on the US to near zero. A new dollar will be issued that ‘can’ be exchange for UST gold at a ‘floating’ exchange rate or at a 10,000/1 conversion ratio from the old dollar.
This new Freegold dollar will then effectively isolate the US from the job stealing currency manipulation practices of the ROW.
We will consider all the above as payment in full for being pretty much the lone defender of the modern era world since WW1. Have a nice day.
Are you Swedish Bjorn?
Do you have any insight here?
spaul67 ,
So the US has to issue a new dollar because...
That's ein anderer point, because the current dollar system is a golden outlaw. So yeah, the post FG dollar will be at a floating, not a fixed gold exchange rate.
spaul67
I would think AG, US will introduce a new currency, but will not defend it with gold, rather it will fix the exchange rate against Euro, and then defend it with its gold. It will not be fixing the price of gold in the new currency but the price of Euro in the new currency.
@ Daute Eu
"However bad EU seems to be, it's 1.000 times better than being outside EU. If you are on european continent. "
Why ? The Eurozone seems to think it can have a capitalist style crash and recovery while keeping the US dollar regime happy at the same time. Hence why they lowered rates yet they wont print anything to buy Greek govt bonds.
When you look at the unemployment rates in the EU, you have to wonder when there will be some serious civil unrest over there. That would be the only thing that will cause the EU to use the nuclear option. But even then, maybe the EU would rather let the continent burn before they dare not support the US dollar.
JR, maybe I misunderstood FOFOA?
It sounds like from that quote that post the petro-dollar collapse the US would just send all its gold to Europe at 20-40 old $/oz for fear of being label an ‘outlaw’ (que crowd shock horror noises) by the Euro dominated BIS no less?
The same Euro zone the US saved from itself three times in less than a century with our blood and treasure.
I’m pretty sure about 99.999999% of Americans would go tell the BIS and the ROW to pound sand. Just a rough estimate mind you +/- 0000001% or so.
I’m pretty sure if the ROW doesn’t want to starve, they’ll be back. That and nations that still want to buy weapons instead of targets.
In short the US won’t fall on the very sword we used to defend them with.
Spaul67
Yes, you misunderstand FOFOA
I think the reason why West stopped loving gold was the price reduction of gold over 20 years from a high of 834$ to 256$. Anybody would lose faith in gold if something like this happened.
After Gold gold must be stable in long terms to do what it needs to do to store value. Since there will be no manipulations in gold prices so the price will go up slightly over time. There may only be small variations in the short term.
Gold is only unique because of its physical properties.
Ease of extraction and Lack of destructive industrial applications resulted in a huge stock over time. This gives it the formidable stock to flow ratio unequaled by any other metal.
The ease of recognition, and difficulty in faking made it universally acceptable as a store of wealth. To recognize you just need to know the real color and be willing to bite at it. There is no other metal that is as easily recognizable.
There is nothing quite like gold.
anand srivastava said...
“I would think AG, US will introduce a new currency, but will not defend it with gold, rather it will fix the exchange rate against Euro, and then defend it with its gold. It will not be fixing the price of gold in the new currency but the price of Euro in the new currency.”
All fixes will fail because they disrupt the pricing information system which is absolutely critical to maintain in order to prevent large imbalances in all things from forming. In short you can’t have Free markets ‘without’ Freegold.
The best way to manage ‘mutually’ beneficial global trade in a neutral way is allow gold to once again do what it is uniquely best at. By using the physical transaction price of gold in each nation’s local currency the flow of gold between zones is what is managed via its exchange price. In fact very little gold will flow between currency zones if its price relative to the local fiat is right.
The level of real prosperity and efficiency achievable by all nations committed to Freegold will easily eclipse the vision for humanity the central planning self-serving corrupt fools have in store for us all via their various paper ponzi schemes, that much I’m sure of.
It’s the fact that gold is now the nexus of global trade balancing act that will open up the opportunity for savers in all nations to finally reside outside the ability of the paper ponzi pusher to steal from.
Why do you think Nixon chose to default on the gold standard instead of just revaluing gold. If you understand the answer to question 1, then you know why the US won't revalue gold now, to defend the "current" dollar.
Sam said...
Spaul67
Yes, you misunderstand FOFOA
I’m not sure that I do? His whole write-up on this subject seemed to indicate that ‘only’ the Euro is set up to mark to market. That because of the Euro’s superior design and lack of nation state it will fill the void left by the collapse of the petro-dollar system? That the US dollar could ‘never’ pull a Euro because then all these BIS claims would drain the US of gold? I don’t recall him ever using the term “Freegold dollar”?
Frankly having any fiat trusted as a SoV proxy to gold doesn’t make any sense especially among the very same generation that will experience the burn pile of ponzi fiat paper likely in front of us.
Now I could easily see future generations once again falling into the trap we find ourselves in right now but this another currency cycle away, and anyone with direct knowledge will be long gone by then.
Spaul67
Fixing the exchange rate with Euro is easy provided that your deficit is in control. And you are willing to raise interest rates.
Remember 1980. Volcker tamed gold through interest rates.
This is not possible now, because of the huge debt, but AG, the HI will have washed away all the debt. It would have also washed away the Govt expenditure. Then the deficit will be manageable with the Treasury gold. And the exchange rate fix will be manageable through interest rates.
I believe there is no other way to come out of the HI, and that is what the US will do. The high price of gold and the big store with treasury will help US to come up faster.
JR. I hesitate to give an answer because I don´t fully understand it... I will say that we had a referendum about the Euro in 2003, and the no side won by a small margin. The entire political establishment was on the yes side, apart from a few people, most notably the former minister of commerce, Leif Pagrosky. I myself voted no, because the yes sides only argument at the time seemed to be that we wouldn´t have to exchange currency to shop abroad, and the no side had some more macroeconomicaly substantial arguments. I was also (and still am) very much against the centralization and bureocratization of legislative power that is the EU and saw (and I think most of those who voted no saw it that way) the Euro as just another power grab. Of course had the referendum been today I would have voted yes, but an even larger majority of the Swedes would vote no today. Probably because they believe the constant barrage of anti euro propaganda.
The consequence today is that the parliament cannot go against the referendum. The only chance is to have another referendum, but the way things are now it would be a guaranteed no today.
Its more like the dollar is what it is because it used to be defined as a fixed exchnage with gold, and then nixon said no, lets not do that anymore and in effect 'defualted" on the US's international obligations to convert dollars to gold under Bretton Woods.
So if the US ever tries to fix its dollar to gold, they would face a tsunami of claims from the BIS and other nation's CBs at the bretton Woods gold price of $42/oz.
The US will revalue their gold: FOFOA says
The legal problems the US faces with regard to past gold history have only to do with controlling gold to avoid real meritocracy moving forward. This is why another confiscation or a new fixed dollar-gold standard are simply not in the cards. Both are attempts to control gold and end-run meritocracy. The world will not tolerate that again. Fool me once, shame on you; fool me twice shame on me.
We can't turn back the clock. But we can move forward. The world would not resist the US revaluing its gold. There is no reason to. FOA said the US would eventually mobilize its gold at a much higher price. That means revalued, at the floating Freegold price. The US will ultimately have to make a market for its own dollars by buying them up with physical Freegold from Fort Knox.
When the trade deficit is no longer possible, the US will have to import all that inflation it has been exporting if it wants to keep oil flowing in. Real goods going out (gold) and less real goods plus some inflation coming back in. That's the reverse of today's trade deficit.
Check out Reference Point: Gold - Update #2 , it explores the idea of the US Treasury revaluing its gold and marking it to market.
Interesting discussion. I am not so sure though that it is truly "meritocracy" that is moving forward as much as "asset based wealth" - perhaps just a finer point.
I also rather believe that post "dollar debt as global wealth reserve" we will have a supranational currency linked to gold for trade balance, and national currencies (like what the dollar will be) will go about their business as usual.
Of course debt (dollars) will be devalued severely against the new asset based global reserve currency, but that will be for Giants to deal with. Why do you think all these FED dollars are merely accumulating on global bank and corporation balance sheets?
Whether that new global reserve currency is the Euro or not is a question for mice and men, and really doesn't matter to "Wil the shrimp" because Wil's debt is denominated in dollars (completly self-evident) and if his debt (dollars) is/are controverted to negate the advantage of his stack then that will be the end of Wil's agreement with "the law".
Yes, many international dollars will be repatriated, but interstate / intranational commerce will still use them for wages and services.
Global businesses will deal with the new currency exchange rates, and this is where Giants will further their "continuation holdings".
The house always makes the rules of the game to win. But the least disruption to the players is always the objective. What is obvious and necessary is that debt based wealth has a finite timeline and the absence of desired collateral is beginning to define this endpoint.
It was always known when debt was imparted with its gravity-defying act of "wealth preservation" that it would eventually fall to earth.
But it certainly was an interesting run, was it not?
Even the most magnificent of flowers blooms for only so long before it becomes nothing more than the compost of a new garden.
Folks, it just keeps getting better and better. Just saw this at Jesse's Cafe Americaine. Apparently, the CME has just given itself permission to make numbers up about how much available gold there is, etc. You just can't make this stuff up anymore:
Jesse:
"Sharp-eyed Dave from Denver and His Band of Merry Pranksters spotted this little addition at the bottom of the page.
This is from the report that shows the amount of gold and silver said to be available at the Comex.
"The information in this report is taken from sources believed to be reliable; however, the Commodity Exchange, Inc. disclaims all liability whatsoever with regard to its accuracy or completeness. This report is produced for information purposes only."
So much for even any pretext of audits and inventory controls. Just numbers on a piece of paper when push comes to shove."
http://jessescrossroadscafe.blogspot.com/2013/06/caveat-emptor-another-level-of-risk.html
Sam said...
“Why do you think Nixon chose to default on the gold standard instead of just revaluing gold. If you understand the answer to question 1, then you know why the US won't revalue gold now, to defend the "current" dollar.”
Yes, I understand the benefit of the petro-dollar system to the US, at least in terms of getting stuff shipped to us for paper, and also how paper gold is key in maintaining a two tier system that delivers the physical gold flow that keeps the petro-dollar in place.
But FOFOA seems to indicate that the US couldn’t put forward its own gold exchange dollar (post petro-dollar obviously by definition) just like the Euro for some reason? That is what doesn’t compute.
Sir Tagio,
I saw that disclaimer as well. I think it drives home the point that a disclaimer of that type can be applied to nearly anything related to gold (or anything systemically related to gold).
... including the official amount of gold held by the US Treasury ... that disclaimer could could apply to the WGC "official gold holdings" reports.
Many surprises await when the musical chair charade stops.
spaul67,
FOFOA may have another answer as to why so many dollar debt derivatives cannot put forth a credible gold exchange dollar (replacement?).
But I would say that the "keepers of the system" are planning to defeat the US Empire's bid to "control the money".
The dollar empire is NOT at the top of the GIANT food chain. It was a contender at one time, but that time has passed.
@spaul67 asked "But FOFOA seems to indicate that the US couldn’t put forward its own gold exchange dollar (post petro-dollar obviously by definition) just like the Euro for some reason? That is what doesn’t compute."
Here is my understanding of it.
Don't think of the Euro as a having a gold-exchange. A better way to think of it is that the ECB holds gold, and through market operations can buy or sell gold to influence the real-value of the Euro. The ECB gold is owned by the ECB, so they can sell it, and they can print Euros, to buy gold on the open market just as easily.
The gold held by the US Treasury is not owned by the United States Government. Yes, it's in a government vault, but technically, a US dollar is still a claim ticket for that gold, at the $42.22 per ounce rate (for non-US citizens). The "gold window" is closed, so you can't redeem your dollars at that rate - the gold just sits there. The US government can not sell the gold as the ECB can, because the moment it's put up for sale, then that's a re-opening of the gold window, and everyone will try to turn in their claim-tickets. The price could be changed to some higher value, but no matter the value chosen, this is an immediate path to (hyper)inflation.
So there can be no gold-exchange dollar.
I just want to give my 2 cents on the aesthetics of gold.
I must side with Edwardo and Oldinvestor and disagree with Dr. Octagon (on this issue)!
There are some (old) cultural and human reasons for choosing gold as the medium to accumulate, outside the (perfectly) rational calculations on the future stuff/gold ratio (literal store of valueness)... Despite the current $IMFS and the suppressed price these gold sensitivities still exists within us and they also will in the future IMHO!
This is part of the reason why we can also in the future rely on gold to be the store of value FOCAL POINT!
I think the appreciation of gold lies deeper inside us than some might expect. Don't discount the human element (feeling and action) in the economic equation.
-----
Know this: "gold transcends human valuations thru time and life". . Take your time on this one! --Another
Good Stff Dr. O,
The US government can not sell the gold as the ECB can, because the moment it's put up for sale, then that's a re-opening of the gold window, and everyone will try to turn in their claim-tickets.
Its more the US can't back try to the dollar with gold again.
But the Treasury can sure sell its gold:
In the future, that gold can be mobilized, if necessary, in defense of the U.S. dollar. But only with the approval of Congress. The physical gold remains the property of the United States.
http://fofoa.blogspot.com/2011/04/reference-point-gold-update-2.html
One more Dr. O
The gold held by the US Treasury is not owned by the United States Government.
It is more like the gold is not owned by the FED.
The Gold is owned by the USG, and the Treasury is part of the USG.
The Fed is technically separate and not a part of the USG. The Fed has gold certificates isused to it by the Tresury that give it claims to USG gold held by the Treasury:
The salient point here (circled) is what Randy Strauss expounded on in his previously linked piece:
"Meanwhile, due to the woefully outdated paradigm established by the U.S. Congress for gold held by the Treasury Department, the gold reserves of the United States are effectively anemic and bedridden upon the books of The Federal Reserve System, where they exist only in certificate form — valued at a static $42.22/oz., forming a paltry $11 billion stake."
That's right! The Fed doesn't even have actual gold on its balance sheet that can be used as a reference point. It has "gold certificates" issued to it by the U.S. Treasury from the past monetization of U.S. Treasury gold at $42.22/oz.
http://fofoa.blogspot.com/2011/01/reference-point-gold-update-1.html
Dr Octagon said: " The US government can not sell the gold as the ECB can, because the moment it's put up for sale, then that's a re-opening of the gold window, and everyone will try to turn in their claim-tickets."
From: http://fofoa.blogspot.com/2011/06/open-letter-to-ron-paul.html#comment-form:
"Rather than selling the gold, why don't you just value it like the rest of the world? Why not just mark it to the market price of gold on the Treasury books? If you, Congress, are going to insist on an honest accounting of America's liabilities, why not properly account for her ASSETS as well?
And then… the US Treasury, under the daft guidance of [Geithner], can issue new gold certificates to the Federal Reserve. As anyone with even a rudimentary understanding of double-entry bookkeeping knows, the balance sheet must balance. For every asset there is a liability, and vice versa. This is basic stuff. You don't need to be a banking "expert". And so far the Fed only carries $11 billion of the Treasury's gold on the asset side under the gold heading. Today we have room to add $370 billion more, and that means fresh Fed liabilities—also known as US dollars—accruing as fully paid-up credits to the Treasury account for the government to use however it deems appropriate.
Again, I realize this doesn't solve any of the big problems, but it does buy some time. And furthermore, it is not a bad or reckless thing to do. It is the right thing to do! America has an untapped asset. You can use it without selling it for gosh sake! And just like the old gold certificates, the new ones will NOT be redeemable by the Fed or any other banks in physical gold. They will simply be an accounting entry on the Fed balance sheet. In the future, that gold can be mobilized, if necessary, in defense of the US dollar. But only with the approval of Congress. The physical gold remains the property of the United States. It will simply be monetized by properly revaluing it as the monetary reserve asset that it is, and placing it—at its proper valuation, updated quarterly—on the asset side of the central bank's balance sheet, just like the ECB."
Dr. Octagon said...
“The US government cannot sell the gold as the ECB can, because the moment it's put up for sale, then that's a re-opening of the gold window, and everyone will try to turn in their claim-tickets.”
At which point the US will tell them to go pound sand, ……your point?
How is it that a bunch of Eurocrats are going to ‘force’ the US ship gold to them at $44/oz exactly? Now if they want to pay a market based floating Freegold price then fine, here you go but $44/oz because their little claim check says so?.... sorry Charlie, not going to happen.
As I said chalk it up to all the blood and treasure we have expended on them over the last century.
Obviously a confusing topic with the FED, USG, treasury, and the gold reserves. I am certain though that those at the top levels are very aware of gold and the various options/scenarios. In other words, their actions and more importantly their inactions are deliberate
spaul67 asked: "At which point the US will tell them to go pound sand, ……your point?"
Did you read the sentence following that one? "The price could be changed to some higher value, but no matter the value chosen, this is an immediate path to (hyper)inflation."
That's my point. The moment any of the US gold, in treasury vaults, becomes available for sale, there will be a flood of US dollars coming in for redemption for whatever the price. Do you disagree?
@Knotty Pine - thank you for the pointer. While I agree with FOFOA that congress could revalue the gold to make US finances look better, all it does is move book entries around. It may help if the debt limit becomes an issue again. I personally don't think that it would have any impact in the real world.
Hello Dr. Octagon-
I can see you’re making some progress so I thought I might toss in a few comments.
Did you read the sentence following that one? "The price could be changed to some higher value, but no matter the value chosen, this is an immediate path to (hyper)inflation."
A higher gold price is not a path to hyperinflation. A collapsing gold market might be, but ultimately the path to hyperinflation is paved with a loss in confidence in the dollar as a store of value.
@Knotty Pine - thank you for the pointer. While I agree with FOFOA that congress could revalue the gold to make US finances look better, all it does is move book entries around. It may help if the debt limit becomes an issue again. I personally don't think that it would have any impact in the real world.
This isn’t correct at all. I think I understand why you view gold revaluation as simply moving “book entries”, but framed this way you aren’t considering a primary, in fact the most requisite aspect of a sustainable international trading system as it exists in the physical world. Forget currencies for a moment. Burn all currencies. They no longer exist. Now imagine nations trading goods and services in the physical world. It has to balance. If China keeps shipping us computers and plastics and all we give them back are promises over the phone, that arrangement gets old pretty quick.
Bring currencies back into the equation. As we know from FOFOA -- currencies are for lubricating trade and each nation or currency block is allowed to create currency in sufficient quantities as it sees fit.
Using this background, let’s create an example for discussion.
Let’s say Europe creates X number of goods and services and the USA creates an equal X number of goods and services. Now let’s imagine Europe prints Y amount of currency and the US prints Y * 10000000 amount of currency. Keep in mind these numbers are completely inaccurate; I’m taking the numbers to an extreme to make a point. Let us also imagine gold is one of the goods and services that needs to balance trade within our physical goods and services exchange and serves as our focal point in this new international monetary system, a focal point which floats against each currency.
How should I value the same amount of produced goods and services from each country when the USA has printed millions of times more in currency than Europe?
Why with a higher price of gold in US dollars of course.
After I've purchased whatever goods and services I need from the USA and any/all countries which consider the US dollar legal tender, what should I do with my extra dollars? Save them in a bank? Buy gold perhaps?
In Freegold post gold valuation gold moves and trade balances, but this isn’t simply an exercise in moving book entries as you believe. In the process of balancing trade FX price signals expose the dollar (or whoever currency) as a horrible store of value in Reference Point Gold environment -- and Gresham’s Law tells us that people will avoid holding said currency for any length of time – possible even for short-term trade. Remember -- currencies lubricate trade -- and with all lubricants viscosity is important. A currency with no viscosity will allow the economy to run pretty freaking hot to the point where something important cracks just like the engine in your minivan. There must be some resistance in the system and Freegold offers the first ever superorganism controlled brake.
@Aaron - I lean very little these days in the comments. Mostly I get annoyed by them. Either I'm very bad at getting my point across, or I'm coming at these topics from such a different angle that most commenters simply miss my point. I'm not yet sure which.
You asked: "After I've putchased whatever goods and services I need from the country/counties which consider a given currency legal tender, what should I do with my extra currency?"
This is not a valid question. You're projecting your shrimp view onto countries. It does not work that way.
Hello Dr. Octagon-
I can see you’re making some progress so I thought I might toss in a few comments.
Did you read the sentence following that one? "The price could be changed to some higher value, but no matter the value chosen, this is an immediate path to (hyper)inflation."
A higher gold price is not a path to hyperinflation. A collapsing gold market might be, but ultimately the path to hyperinflation is paved with a loss in confidence in the dollar as a store of value.
@Knotty Pine - thank you for the pointer. While I agree with FOFOA that congress could revalue the gold to make US finances look better, all it does is move book entries around. It may help if the debt limit becomes an issue again. I personally don't think that it would have any impact in the real world.
This isn’t correct at all. I think I understand why you view gold revaluation as simply moving “book entries”, but framed this way you aren’t considering a primary, in fact the most requisite aspect of a sustainable international trading system as it exists in the physical world. Forget currencies for a moment. Burn all currencies. They no longer exist. Now imagine nations trading goods and services in the physical world. It has to balance. If China keeps shipping us computers and plastics and all we give them back are promises over the phone, that arrangement gets old pretty quick.
Bring currencies back into the equation. As we know from FOFOA -- currencies are for lubricating trade and each nation or currency block is allowed to create currency in sufficient quantities as it sees fit.
Using this background, let’s create an example for discussion.
Let’s say Europe creates X number of goods and services and the USA creates an equal X number of goods and services. Now let’s imagine Europe prints Y amount of currency and the US prints Y * 10000000 amount of currency. Keep in mind these numbers are completely inaccurate; I’m taking the numbers to an extreme to make a point. Let us also imagine gold is one of the goods and services that needs to balance trade within our physical goods and services exchange and serves as our focal point in this new international monetary system, a focal point which floats against each currency.
How should I value the same amount of produced goods and services from each country when the USA has printed millions of times more in currency than Europe?
Why with a higher price of gold in US dollars of course.
After I've purchased whatever goods and services I need from the USA and any/all countries which consider the US dollar legal tender, what should I do with my extra dollars? Save them in a bank? Buy gold perhaps?
In Freegold post gold valuation gold moves and trade balances, but this isn’t simply an exercise in moving book entries as you believe. In the process of balancing trade FX price signals expose the dollar (or whoever currency) as a horrible store of value in Reference Point Gold environment -- and Gresham’s Law tells us that people will avoid holding said currency for any length of time – possible even for short-term trade. Remember -- currencies lubricate trade -- and with all lubricants viscosity is important. A currency with no viscosity will allow the economy to run pretty freaking hot to the point where something important cracks just like the engine in your minivan. There must be some resistance in the system and Freegold offers the first ever superorganism controlled brake.
You asked: "After I've putchased whatever goods and services I need from the country/counties which consider a given currency legal tender, what should I do with my extra currency?"
This is not a valid question. You're projecting your shrimp view onto countries. It does not work that way.
My question is quite valid. Currently nations that run a surplus store their excess in Treasuries. They do have another option and that other option is not simply "book entries".
It does not work that way.
How does it work?
Dr. Octagon said...
“That's my point. The moment any of the US gold, in treasury vaults, becomes available for sale, there will be a flood of US dollars coming in for redemption for whatever the price. Do you disagree?”
Yes, how about $1 million old dollars/oz? The world will run out of old dollars long before the US runs out of physical gold at that price.
At the correct physical price for gold very little gold will actually flow between currency zones or even into or out off CB vaults and Joe Public.
As long as gold is allowed to flow at a free market prices the world will finally have a foundational basis for trade that can’t be mucked with by anyone.
Dr. Octagon said...
“The price could be changed to some higher value, but no matter the value chosen, this is an immediate path to (hyper) inflation.”
If the price of gold ‘absorbs’ the excess currency there will be no hyper-inflation. That is the best part of gold due to its limited uses and high stock to flow. No other substance on the Earth can you do this too (ie hyper-inflate) without causing serious social problems, none.
The danger is that excess dollars will attempt to bid up stuff people actually need. So on that note their may be an upper limit to what the US can get away with in terms of exchanging gold for old dollars before those with excess dollars look elsewhere for conversion of currency into lesser SoV. Hey, does Silver ring a bell.
What spaul67 said. Good summary! ;D
Spaul, reminds of this fofoa quote:
"Lastly, understand that currency flows through assets, not into them. In fact, a limited amount of dollars can flow through the same gold many times, over and over, driving it higher and higher with each pass, as long as new gold stock is not coaxed out of hiding. And the interesting thing in this process is that, as I said above, it actually causes the opposite of the expected supply/demand reaction. With each pass-through of the dollar more "flow gold" is moved into "stock gold", not the other way around like commodities and paper."
http://fofoa.blogspot.ca/2010/06/how-can-we-possibly-calculate-future.html
@ Knotty pine
"And so far the Fed only carries $11 billion of the Treasury's gold on the asset side under the gold heading. Today we have room to add $370 billion more, and that means fresh Fed liabilities—also known as US dollars"
If the world will line up to buy freshly printed bonds and the detriment to their own economy from a bankrupt entity then what incentive does the US have to revalue its gold ?
Want 370 billion ? Here $370,000,000,000.
Done.
spaul
"Yes, how about $1 million old dollars/oz? The world will run out of old dollars long before the US runs out of physical gold at that price."
It's not that simple. If a price too high is picked then that in itself destroys confidence in the dollar which initiates a currency meltdown.
It really is quite simple. While the current dollar exists it will be technically difficult for the US to use MTM gold as reserve, due to old debts. Once the USD has collapsed and those debts have been repayed in worthless currency, the US is free to MTM its' gold.
TF
When I read The latest BIS plan on how to handle insured deposits by having the FDIC become a senior creditor of the new holding company my mind repelled at what that implied.
Now I see what JS has wrote, " The size of the loss might well be the final resolve process of the setting up a "Resolution Bad Derivative Trust" for the bankruptcy of the huge amount of legacy OTC derivatives still floating like a mine field financially in cyberspace."
USTBond: Return To Sender
Jim Willie CB - June 4, 2013
http://news.goldseek.com/GoldenJackass/1370376300.php
Jim Willie CB
Golden Paradigm Shift - Exclusive
http://pacificrimcoins.com/content/jim-willie-golden-paradigm-shift
http://www.economicpolicyjournal.com/2013/06/major-insider-time-to-buy-gold-chinese.html
Major Insider: Time to Buy Gold; The Chinese Want to Make the Yuan Gold Backed
"I have mentioned Philippa Malmgren before
Philippa Malmgren is an insider's insider. She was Special Assistant to the President for Economic Policy on the National Economic Council. She was also a member of the President's Working Group on Financial Markets, aka, the Plunge Protection Team. Her client list includes every elite corporate firm in the world (Take a minute to look at the list, its mind boggling, the list is here.). You don't get much more insider than this.
She is out with a new comment on gold. In it she seems to hint that there might have been a conspiracy to push gold down (Remember this is coming from a major insider, who travels in the circles she is talking about)..."
When Giants conduct a "stress test" what does it tell you? The true stress test of the derivative/debt system was Lehman.
Remember how certain counterparties took a big haircut, while others got 100 cents on the dollar?
Rules are for peasants to follow and they are decreed by Kings to meet the changing needs of the Giants they serve.
In 2008 governments were basically castrated, though they had been impotent for quite some while. This United States of America did pose a challange at one time, as they did think they could issue sovereign money.
But a new bank of Giants, the Federal Reserve, ended all that.
Now ALL paper is debt, and all debt is a derivative of "asset", a future promise of asset recovery. Gold is not denominated in paper, paper is denominated in gold.
But that denomination is not for the "little people" to see or understand. They are paid in debt, and their lives COMPLETELY depend on it.
The dollar denominated derivative positions are untenable; this is why the currencies are being hyperinflated to revalue the debt to its true asset recovery position: ZERO
This we learn from the flower of understanding.
Do you REALLY think the US Government commands the US military? Do you think it issues orders to Fatherland (oops, I mean "Homeland") Security?
Think again.
Motley Fool said...
“It's not that simple. If a price too high is picked then that in itself destroys confidence in the dollar which initiates a currency meltdown.
It really is quite simple. While the current dollar exists it will be technically difficult for the US to use MTM gold as reserve, due to old debts. Once the USD has collapsed and those debts have been repayed in worthless currency, the US is free to MTM its' gold.”
All the common man cares about is the price of food, fuel and flow of government benefits and/or employment, not gold. I suspect that the collapse of the fiat ponzi system and the rise of gold will be parallel and not serial events as you suggest.
Think about it, how on Earth could the price of gold stay fixed in flurry of paper? I suggest that the government will use the natural attractor of paper to gold in order to reduce the social effects of hyper-inflation. As I wrote earlier though there is likely and upper limit of $/oz that gold can effectively absorb though before more social disruptive lesser SoV than gold also go up in price. This is likely why the GSR compresses as the PoG goes up.
Thus, leading to what
Grumps LaBastard said...
“When I read The latest BIS plan on how to handle insured deposits by having the FDIC become a senior creditor of the new holding company my mind repelled at what that implied.”
Bingo, the price of physical gold is not the only tool in the shed for TPTB. They can just up and steal some of this excess currency thus limiting the amount that remains needing to be absorbed by gold (ie Cyprus). Once the danger of social disruption via hyper-inflation has passed the price of gold will crash, and TPTB can restart the fiat ponzi wealth extraction system anew.
Meanwhile the common man goes about his business none the wiser of the wide scale theft that just occurred in the land of the giants.
This is why this gold holder plans to diversify into lesser SoV post Freegold. Per chance to dream I’ll be able to acquire 1,000 oz of silver for 1 oz of gold. My guess is that decades after Freegold silver will be the superior proxy for energy precisely because it ‘is’ consumed unlike gold and yet will require ever increasing amounts of ever lower (Energy Return on Investment) energy to produce. A double whammy if you will.
Likewise while I hope the transition to Freegold is quick I suspect that I’ll need some way of getting my hands on some of that flurry of paper in order to maintain fiat debts and procure stuff you just can’t stock or produce short of disconnecting from modern civilization and independently living off the land by the sweat of your own brow. So having some silver in front of Freegold in order to protect your gold is also prudent IMHO.
I can’t think of worst time to be forced to sell gold for paper than just a few months in front of Freegold, can you? Nor do I want to stock a lot of the very same paper that will burning all around us. Silver fills the job requirements perfectly both pre and post Freegold.
If your "good name on paper" allows, why not buy more gold with paper as the paper price collapses?
I can write myself 0% interest checks (notwithstanding the advance fees) up to around 15K on the Bank of America, based solely on my past limit to provide a good credit risk of 18K paid in full several times in the past. On that single debt, I mean cedit line.
What is the difference between writing that advance check to myself and converting it to the familiar green Fed Reserve notes that my coin dealer prefers, vs. using my reserve "reserve" paper in the cookie jar?
It's ALL DEBT. Use it while it's still usable. Trading debt for gold is the biggest play of your lifetime right now.
Hi spaul67,
I think you misunderstood the implications of the BIS plan.
"Rather than writing off some amount of
insured deposits as part of the process of creating equity, the required equity would
be obtained instead with a direct payment from the deposit insurance scheme to
the bank (thereby increasing the bank’s assets)."
Since the OTC derivative problem exceeds the 10T FDIC liability, all 10T would be printed by the FDIC in exchange for senior creditor status in the new holding company. Just the uninsured deposits would be stolen. The FDIC would be reimbursed by sales of the new bank.
spaul
why do you think the common man is a causal factor in hyperinflation...especially today's common man in this case- j6p with debt coming out the yazoo?
anyhow, whatever.
Yo ho silver...and a bottle of rum.
Grumps LaBastard said...
“Since the OTC derivative problem exceeds the 10T FDIC liability, all 10T would be printed by the FDIC in exchange for senior creditor status in the new holding company. Just the uninsured deposits would be stolen. The FDIC would be reimbursed by sales of the new bank.”
But unleashing that flood of currency into the real economy will lead directly to hyper-inflation via the double whammy of money volume and velocity (ie hyper-inflation = social unrest). The dynamics of a progressive dam failure comes to mind. The politics will fight against this level of liquidity because it will not only driving social imbalances but this imbalances will in turn be amplified via the feedback loop inheirent in social welfare systems along with a progressive shutdown of what remains of the net producing economy that actually makes the whole cycle of theft work in the first place.
The better option for the crooks running the show is to as you say make large depositors new owners in bank that is just going to collapse anyway thereby covering their tracks to the theft that has ‘already’ occurred. I also think there will be a progressive hair cut for even the insured shrimp depositors. Sure if you have $100 to your name you get $100 but if you have $100,000 you may get $25,000. At these low interest rates it’s better to just hold physical cash for the brief post bank holiday but pre-hyper-inflationary window, likely measured in weeks. Put the rest in precious metals and other even more basic assets you can directly hold/defend.
Then there will be gold/silver holders also soaking up excess currency to pay off fiat debt which is also deflationary as hyper-inflation begins to kick in. Ironically in hyper-inflation, cash is everywhere but almost know body seems to have enough to purchase what they need let alone pay off debts. Hence why it’s a good idea to hold a liquid asset that paper will bid for in order to help keep your head above water and retire your fiat debts held against real assets like houses and land. Gold will obviously do the trick but I just can’t think of parting with my gold when I know that a Freegold price is just down the road.
I think getting a sense of all the interlaced elements, moves and counter moves on the behalf of all parties involved in this global monetary phase shift is critical to understanding how best to prepare. Easier said than done but such is life.
So in short the 0.1% insiders/crooks will be fine and the 50.1% that keep them in power will still keep getting their bread crumb cut of that which is stolen from the net producers, but the 49.99% (ie net producers) will get messed up.
Sorry make that 49.98%, I forgot about us 0.01% shrimp gold holders, we should do okay as well.
Thinking like a giant means knowing where they are and are not going to step. A bunch of ones and zeros on a bank screen is most definitely a place they will step on before this is all over.
And now a little something for all you Die Hards that think stores of values are all about that rock-steady future steak-gold ratio (or steak-Euro ratio ;D):
http://business.time.com/2013/06/05/buying-your-way-to-eternity/
My take-away: We humans are not rational. Not when it comes to money and not when it comes to stores of value... There's more to the game than cold calculus.
Please update your economic models to take it a little easier regarding the systemic mechanisms and account a bit more for deep-lying human emotions! I'm sure you're then one step closer to predicting the super-organism...
/Burning
Wil (from another account) said:
"I can write myself 0% interest checks (notwithstanding the advance fees) up to around 15K on the Bank of America, based solely on my past limit to provide a good credit risk of 18K paid in full several times in the past."
Am I to understand you're advocating the use of the system against the system itself? Does anyone else engage in this practice?
I've thought about it several times, and just recently dipped my toe in buying an oz using a credit card. It cost a little extra (APMEX it was about $40 over the premium), but you've got it in your possession a week later and haven't paid anything.
Have consumer debts been discussed on the blog? Someone has $15k in credit card debt from buying gold. What happens to those debts if the dollar hyperinflates? The consumer is still responsible for the nominal amount of $15k, regardless of what a dollar is actually worth at that particular moment, right? Can the creditor demand payment on credit card balances, despite a no interest, no payments until Dec 2014 clause?
I don't necessarily agree with that form of accumulation, but if things were to start spiraling out of control, I might be motivated to use that practice to give myself a little more "comfort."
- Sherlock
@burningfiat
Rumor has it that these people just finished counting a wad of cash.
What will the world look like when the front lawn dump happens? Have your video cameras ready. :.)
Knotty, the more zeroes the longer you'll fly... ahem... live :D
@Sherlock
It is attempting timing... and, despite being enticing I'm not a fan. Follow FoA's advice:
"Take the most able years of your broad middle-age to expand your skills and knowledge and to produce something the world wants or needs. Sell your time, energy, and capability to the highest acceptable bidder. Throughout your life strive to improve your special talents or capabilities, and strive to make your field of passion also your field of employment. Your only obligation is to prepare yourself for your feeble years by producing an excess during your productive years, and living with discipline so that you will have adequate savings to draw upon until the day that your spirit flees your body for a more suitable residence.
Part of the discipline that assists you with your obligation to yourself is the wisdom not to be duped into selling your productivity for less than what it's worth or for false promises, and don't squander your meaningful and important savings by chasing uncertain rewards for undue risk.
Truly, what is a dollar but an empty promise? A promise that springs into existence as easily as a loan contract. A promise that the borrower will one day give that dollar back, and a promise that the issuer will at any given time exchange such a dollar for nothing more than another dollar. If you are willing to sell your valuable productivity for payment in dollars (or any other fiat currency,) the quality of your discipline must either be called into question, or else you have satisfactorily called the currency into question and found it to be one in which borrowers cannot ever be allowed to default and, more importantly, the supply can't be issued (expanded) to such high levels and at a rate such that the purchasing power is eroded, or be capable of contracting such that businesses and the economy fall into a recession or depression. A careful review of fiat currencies and fractional-reserve lending practices will reveal that no fiat currency can suitably pass muster.
So there you have it. When you strive to master the all-important art of timing your investments, the most crucial time is every payday in which you are, in truth, selling yourself--selling your own time, labor, and productivity. Are you being paid-in-full on each payday, or are you accepting an empty paper promise of payment built upon the strength of and the continuation of the confidence of everyone in society. Are you worth payment-in-full? Have you ever received an ounce of honest money for a day in your life? You can perfect your investment timing by being paid in Gold--you would be paid-in-full at the very moment that you sold your productivity. But in an acknowledgement of the currency structure of the present realm, for your own convenience, take your dollar paycheck and first use it to pay your various bills to all of the others who have been duped into accepting dollars for the sale of their own products and services. Anything left over represents your excess production, and is almost suitable for saving. Since your employer probably paid you originally in dollars, it is up to your own discipline to convert this excess into Gold to effect your own immediate payment-in-full.
Held as Gold, your excess production has now become suitable for saving until the day arrives that your feeble old age forces you to become a net spender instead of a net saver. The timing couldn't be any easier or more evident!
we often talk here about GLD's falling supply. What about comex? I saw this on zerohedge today. comments? http://www.zerohedge.com/news/2013-06-05/jpmorgan-parts-another-21000-ounces-gold-holdings-drop-new-record-low
Sherlock,
Having once done my time on the debt treadmill, and witnessing first hand the way the banksters cynically pillage the most desperate among us, I have no problem with somebody using UNSECURED bankster debt as a funding source for accumulating gold during these most extraordinary times.
These are not honorable institutions, IMO. They knowingly rape the poor without hesitation using all forms of predatory lending. The rules of the game are written on their terms and in a language that defies understanding without the help of a $300.00 per hour lawyer.
A common piece of business advice is to try to always use someone else's money.
Is this race to safeguard the future not in many ways a business? Isn't using other people's money (and money of some pretty ugly people, at that) a smart strategy?
I wouldn't use my neighbor's money, or SECURED money. But bankster money?
Oh yeah.
Cheers
FOA said
"you have satisfactorily called the currency into question and found it to be one in which borrowers cannot ever be allowed to default and, more importantly, the supply can't be issued (expanded) to such high levels and at a rate such that the purchasing power is eroded, or be capable of contracting such that businesses and the economy fall into a recession or depression."
So that is how AG will look like??
It'll be interesting to see if GLD inventory falls below 1000. If the Comex can now make up whatever data it wants, why not the GLD?
@Grumpy
We do seem to be hovering in place (GLD). What is up with these no change days?
Anyone?
There have been periods in the past when inventory did not change for 19 days. It is not a sure sign of anything. I too wonder about the magic '1000' number though.
Sherlock
I too have thought of this, as I am sure most have. Assuming we have the next leg down in gold in a similar fashion to the last, I will certainly try to get a 0% APR credit card and using it to buy as much gold as I can. I don't know if the system could take another shock lower for very long, so one would have to act fast.
@ grumpy
It will be interesting to see if the draining in GLD is not really a draining but rather a case of "dark bullion".
@ Wil
"The true stress test of the derivative/debt system was Lehman."
Yes it was. If they managed to survive that then they will survive anything.
That is why I am not convinced that it is over for paper gold. I am doubling down on some of my gold stock positions. The rest of the world will do anything to save the US from price inflation so I think a mining stock bull run is in order.
GLD is small potatoes in the grand scheme. It would be easier to funnel catacomb or golden lily gold to HSBC or JPM vaults directly than go thru the machinations of GLD. I think they would just lie and let the PA's drain it.
The game's afoot Sherlock, though each person will manage debt according to their own strategies, I do enjoy that the irony is bittersweet.
Yes, invest first in yourself, as FOA's advice is good and honorable, even in these times where honor is as rare as gold.
I would add, always diversify, i.e. "hedge" your income streams. But for me when paper debt pulls physical down to a certain price, I will not allow my usual conservative nature to blind me.
When you buy gold with dollars "earned" you are still buying gold with debt. Have we not learned that dollars earned are dollars borrowed either way? If not now, we soon shall.
M,
Lehman was worth the risk to prove that not only can he debt be massively socialized with nary a peep from the Kabuki audience, it can be "saved" selectively and in accordance with no rule of law other than systemic "might makes right".
But credit default swaps and fraudulaent securitized debt baliouts (CDO's etc...) are NO MATCH for what is coming when the interest rate derivative complex fails.
This is where you will see the interdependence between gold, interest rates and bonds unfold, and sleepy Summers sipping his "Gibson" will choke on his olive.
It will ultimately be physical gold that brings this house of cards down. The run on physical gold conitnues unabated, and is accelerating, but we do not "see it" in the GLD inventory ... but what in this world do we see that is truly real?
What rules (I cite Comex' much tauted recent "disclaimer") apply? What information can be trusted?
All we do is "read between the lines" in order to try and seperate what is real from what is false.
Isn't that exactly what we are doing here after all? Always and forever seeking the truth in a word of lies?
Gold is TRUE. It will bring TRUTH to the system.
Sherlock,
I would only employ your method of buying gold with credit if I had the fiat to pay it off when desired, or liquid assets that I could sell to pay it off. That way you preserve your cash for other immediate uses and you're not trapped with credit card debt and no way to pay it off if your timing for Freegold is wrong.
Thanks for the great discussion everyone!
we will survive the transition
PS Always thought it was "dollars breaking everywhere" not "dawn" - misheard lyrics :-)
@ JR: The US also holds about 25% of its gold reserves at the US Mint West Point. Valued at ~$80 billion.
http://www.midhudsonnews.com/News/2013/June/06/WPMint_75th-06Jun13.html
They hold 147,341,858.382 at Fort Knox of the total Total - Treasury-Owned Gold of 261,498,926.247 according to the treasury link I posted above, so it looks like more than half:
http://www.fms.treas.gov/gold/current.html
[...]
Mint-Held Gold - Deep Storage
Denver, CO 43,853,707.279 $1,851,599,995.81
Fort Knox, KY 147,341,858.382 $6,221,097,412.78
West Point, NY 54,067,331.379 $2,282,841,677.17
Subtotal - Deep Storage Gold 245,262,897.040 $10,355,539,085.76
Mint-Held Treasury Gold - Working Stock
All locations - Coins, blanks, miscellaneous 2,783,218.656 $117,513,614.74
Subtotal - Working Stock Gold 2,783,218.656 $117,513,614.74
Grand Total - Mint-Held Gold 248,046,115.696
Grumps
Yes the GLD is small potatoes but it is the small potatoes that make up a big portion of the flow and it is the flow that establishes the price. I feel the GLD redemptions are quite important.
Not positive, but I believe the gold at West Point is the working stock to produce Eagles, Buffalos and commemoratives. So, that hold is being used, and hopefully replenished, no?
Perhaps someone can answer this, I've heard this comment repeated often from knowledgeable posters including FOFOA and Bron:
"Any commodity with around 60 years of annual new supply above ground would have a price close to zero."
This to me doesn't make sense. How is Gold conceptually different in available supply than Copper, for example? With copper there is X tonnes of available supply and, for example, X tonnes of demand for copper plumbing in houses across the country. With Gold there is 170,000 tonnes of above ground supply... and 170,000 tonnes of investment demand (at the present price).
Like Gold, if Copper would to rise 30x in value "the Copper must flow" and people will be ripping out their plumbing and exchanging it with something else. How is this different from people exchanging their Gold for something else; and they must, or else the Gold will not "flow."
Why is the above ground stock of Gold given the special term "strong hands" where the copper plumbing in housing is not?
Hi Athrone-
How about I answer your question with a comment you made two months ago in a previous post:
Athone said...
"the more time I spend in the comments the more light is shone on issues which are not self-consistent, and the more of a mirage Free-gold becomes."
So, to your question, "Why is the above ground stock of Gold given the special term "strong hands" where the copper plumbing in housing is not?"
It's all a mirage. Why are you still asking questions?
The view is getting clearer by the day.
@athrone
How is Gold different than copper? and Silver and Oil?
It is useless. It doesn't conflict in the marketplace to alter its balance as a wealth asset. Unlike Silver, Gold is not un-mined. The velocity of commodities in the marketplace is irrelevant for Gold because it doesn't have a conflict - making it always a representation of wealth - not because of how many houses are being built or not being built, or solar panels constructed or cars purchased - or being 'used up' - fluctuating value. Gold is 'above' all that, if you will... :)
And it looks shiny and nice.
Aaron, "Why are you still asking questions?"
One reason is I have a 50% position in Gold, and Gold is down 25%.
gary, "It [Gold] is useless"
I understand that Gold is unlike Copper, Silver and Oil in it's end use. But Gold is also like Copper, Silver, and Oil in that it's properties result in a demand to utilize it [as a store of value, vs. as a material for plumbing].
My point is, Gold held by strong hands in vaults underground is not unlike copper plumbing in housing (in my view). Neither are going anywhere at present prices, but both could and would be mobilized after a 30x price increase, would they not? After all, The Gold Must Flow.
So, why is the "above ground supply" of Copper discounted, whereas that of Gold is not? Isn't this a fallacious argument?
I realize it is such a often repeated, even central statement about Gold that is not likely to be easily dismissed...
athrone,
My point is, Gold held by strong hands in vaults underground is not unlike copper plumbing in housing (in my view). Neither are going anywhere at present prices, but both could and would be mobilized after a 30x price increase, would they not? After all, The Gold Must Flow.
What is gold's current function?
Let's say gold is revalued 30x. What would its function be then?
What is (are) copper's current function(s)?
What scenario might lead to copper being revalued 30x? What would copper's function(s) be under this revaluation scenario?
Michael H,
It's not about function it's about demand. It doesn't matter why someone demands something, just that the demand exists.
Today, people demand copper for plumbing and people demand Gold for a store of value. So why is Gold special because it is held in a vault, vs. pipes in a house?
It's a false argument because as there are alternatives to copper for plumbing, there are alternatives to Gold for a store of value.
If Gold price increases 30x, does my present level of consumption change? If Copper price rises 30x, does my present level of plumbing needs change? The answer to both is no.
So why is one given a special supply status and the other is not?
""Any commodity with around 60 years of annual new supply above ground would have a price close to zero."
This to me doesn't make sense. "
Go round up 60 years of corn, put it in your silo(s) (imagine that) and see how well you do with that.
To you, gold is no different than corn, copper, or pork bellies. In your world, you meet people who store monetary value in these other commodities I guess.
You should think about what's written in this post: http://fofoa.blogspot.com/2010/12/value-of-gold.html
And what is the utility of gold? Well, it used to be a medium of exchange and a unit of account. But today it is neither of those things. And yes, it does have a few industrial uses, but not many, and certainly not very many when compared to other industrial commodities. So what is gold's utility?
Gold's utility is that for thousands of years it has held its value relatively well. And because it is not used for many things other than mere hoarding, the act of hoarding gold is not an infringement on the natural rights of others to enjoy the utility value of "real world" things like BMW's and oil and wheat and pork bellies. If one were to corner, say, the copper market or the chocolate market, there would likely be repercussions as those industries fought back through the power of the collective that likes to consume chocolate and copper. But with gold there is no such worry."
In 1918, Silvio Gesell, a "free money" (easy money) economist with many radical ideas, wrote:
"And it is clear that money cannot be simultaneously the medium of exchange and the medium of saving - simultaneously spur and brake."
"I therefore propose a complete separation of the medium of exchange from the medium of saving. All the commodities of the world are at the disposal of those who wish to save, so why should they make their savings in the form of money? Money was not made to be saved!"
Silvio Gesell
While Gesell's "free money, free land, social equality for all, full employment, shorter work weeks for all and economic growth on demand" ideas appear quite impossible and dangerously utopian to this blogger, he was certainly on to SOMETHING of value in the above quotes. But while those selected quotes sound an awful lot like Freegold, can you spot the one problem in them?
That's right, he suggested that "all commodities of the world" could serve relatively equally as stores of value outside the monetary plane. This suggestion ignores the difference in marginal utility between the one commodity used ONLY as a store of value and all the rest that rely on their other uses for value.
Substitution, indifference and preference do not apply only to consumer products and food. They also apply to industrial commodities.
In applications of marginal utility, it is often assumed that commodities are continuously divisible. And as you divide a commodity (which you might do as the price rises) you reduce its consumption and increase the likelihood of substitution. For example, a consumer who previously enjoyed 1 lb. steaks may face a substitution dilemma if the price of steak doubles. He may have to choose between a ½ lb. steak and 2 lbs. of ground beef. Steak is divisible but dividing that steak reduces its utility.
This is true for all commodities on Earth in their "real world" uses… except gold!
athrone,
It's not about function it's about demand. It doesn't matter why someone demands something, just that the demand exists.
So how does a 30x revaluation, of either gold or copper, come about? Change in demand? What would drive a change in demand, of gold, and of copper?
Today, people demand copper for plumbing and people demand Gold for a store of value. So why is Gold special because it is held in a vault, vs. pipes in a house?
It's a false argument because as there are alternatives to copper for plumbing, there are alternatives to Gold for a store of value.
What are the current alternatives to gold as a store of value? Do you expect these alternatives to gold-as-SoV to continue functioning as stores of value for the near future? Into the far future?
If Gold price increases 30x, does my present level of consumption change? If Copper price rises 30x, does my present level of plumbing needs change? The answer to both is no.
If copper rose 30x, would you remove the copper pipes from your house and go without plumbing?
If gold rose 30x, would you no longer have any need to store that value, and thus dishoard all your gold?
@athrone
Your verbiage is incorrect.
You don't 'use' gold as an SoV - it is so because 5,000 years of history have proven it to be the best SoV. Perhaps you can reverse that (channeling Dr. Paul to Dr. Bernake)
Copper can be used up. Gold cannot. Why? IT'S USELESS! Period.
It is a free world, if you expect a 30x price increase in copper and then have it challenge Gold's as the single objective reference point from which the relative value of all else can be ascertained (Blondie) - you are welcome to do that. Best of luck with that. Sounds like an strange gamble. I'll stick with Gold. I think the odds are greatly in my favor. To each his own.
Paper, Copper, Oil, Silver, Platinum - they all revolve around Gold - which doesn't change value. I think you can forget that is has a stable production in relation to population growth or divisible, fungible, durable - it doesn't get used up because it is useless! Hooray!
One reason is I have a 50% position in Gold, and Gold is down 25%.
Why were you thinking of selling it? for USD? LOL. You are gauging your wealth in USD - you realize that particular paradigm is ending, right?
Giants don't hold Gold to sell it at a profitable time to obtain USD. They hold it for their legacy and to protect them FROM USD. Gold is the base - they know this. My advice would be accept it, too. You'll be much more content and, eventually, wealthier.
"My point is, Gold held by strong hands in vaults underground is not unlike copper plumbing in housing (in my view)."
Huh??? That makes no sense.
"I understand that Gold is unlike Copper, Silver and Oil in it's end use. But Gold is also like Copper, Silver, and Oil in that it's properties result in a demand to utilize it [as a store of value, vs. as a material for plumbing].
Aren't you answering your own questions right there?? All you said there is true but that one huge difference is all it takes. Only gold has that usage demand by humans.
"It's a false argument because as there are alternatives to copper for plumbing, there are alternatives to Gold for a store of value."
Sure, the money in your pocket is an alternative but how safe(well) does that store your value. What do you consider the BEST store of value?
"If Gold price increases 30x, does my present level of consumption change? If Copper price rises 30x, does my present level of plumbing needs change? The answer to both is no."
So you have no plumbing projects in your immediate future...so what.When you do, you'll likely use a copper alternative.
Athrone-
Of all you said, this is the scariest:
"One reason is I have a 50% position in Gold, and Gold is down 25%."
You really have missed a lot of the point of this blog and you have been here a while now.
(which is why I always assumed you for troll) Best of luck with your copper.
For some, it is easier to understand this way. When the sovereigns "bailed out the banks" with untenable promises, and the question was raised, "who will now bail out the sovereigns?" all many of confusion was provided, including "little green men from planet X".
But surely, even someone who sees gold as nothing more than a commodity can understand why central banks and sovereigns are loading up on gold.
Even if you say that, "they really aren't" and all these reports of China, Russia, India, CBs and unprecedented numbers of private buyers (even in the anti-gold West) lining up to buy gold at a premium are ALL a mirage, a misdirection from the propaganda pulpit, to get you to buy this curious commodity for some clandestine ulterior reason ....
You still have the truth of history to draw from, and I don't think we've lived on a planet of continuous propaganda for 5000 years.
Gold has always been the chosen asset to extinguish debt. Gold is the promise that cannot be broken, though the oracles FIAT have cetainly TRIED to extinguish its promise.
But these are the same "promisers" who continually fail, as debt expands. Yes, they promised to make bank's fraudulent debt whole. Does that strike you as a promise which utimately can be kept?
After all the fraud, theft and trickery FAILS to deliver, only GOLD bails out the debt. It is only a matter of what amount debt will be honored as to how high gold is "priced" in debt.
You may settle your personal debts perhaps in corn, diamonds or platinum if your counterparty agrees to ACCEPT it, but is it not clear that international trade prefers to accept debt reitirement only in GOLD?
If not, China would be accumulating copper in much more vast amounts than gold, despite the fact that it's value is commodity based, and monetary.
Perhaps I am not spending enough time getting the point across (it is very clear in my mind) as for others it seems to be flying about 10 feet over heads.
Copper was just an example, clearly I cannot explain why copper would rise 30x in value -- why should I? What does talking about Corn have to do with this?
If it helps, think about housing instead.
1. Like Gold, only some small subset of houses are on the market at any given time.
2. Like Gold, all houses have an owner. Ownership implies demand.
3. In housing, only new and vacant houses are considered supply, correct? For every person happily living in a house, that 1 demand = 1 supply and the two cancel.
4. In Gold, only new mining and recycling is considered "supply" (commodity view)
5. In Gold (monetary view) people often say "there is 60 years supply overhang" yet each of those owners is canceled their 1 oz demand with 1oz supply are they not?
It doesn't matter if you replace Gold with corn or houses with copper, or talk about Freegold or 30x re-evaluation -- none of that matters -- what matters is these are different yet similar objects that are connected by fundamental concepts. Those concepts should apply equally should they not?
So can someone please explain why in housing, the existing demand and supply is canceled (no supply overhang) but in Gold the existing demand and supply is not canceled (60 year supply overhang).
The common counter-argument to the above I would imagine is this: "but everyone needs a house"
To that I would reply "but everyone needs a store of value."
People can move into and out of Gold and other assets as a store of value in the same way they can move into and out of housing from one town, state, or country to another. The two are different yet similar objects connected by shared concepts....
athrone
Sure, the demand rate for copper is unlikely to change in the near future(and even if it did, the question is whether it is economically viable to remove and recycle old copper pipes).
Is the demand rate for gold likely to change?
TF
@ Wil
Fantastic
@athrone
Those concepts should apply equally should they not?
So can someone please explain why in housing, the existing demand and supply is canceled (no supply overhang) but in Gold the existing demand and supply is not canceled (60 year supply overhang).
Because there is no faux paper-market in housing at a ratio of up to 1000:1 for the real product. Why not? Because housing is not the base of monetary stability, so no one created one over the past 2.5 decades, but as the result of expanded paper-market in the base - everything else is distorted and irrational. I wouldn't worry about the housing market or the copper market if I were you. I wouldn't worry about which gamble to make to obtain more USD. Measure your wealth in ounces and sleep like a baby.
@athrone
think like a Giant and the answer to your question will come to you
"what matters is these are different yet similar objects that are connected by fundamental concepts. Those concepts should apply equally should they not?"
Why?
"People can move into and out of Gold and other assets as a store of value in the same way they can move into and out of housing from one town, state, or country to another."
So, you are telling us one can liquidate their house as easily as their gold?
forgot to add, I have a house I need you to buy. Email me.
Gary,
Thank you for FOA's words. I live a modest life, and manage my finances in a way that I can buy whatever I need/desire outright without the use of credit. I only use debt (no interest) in instances when I am making a very large purchase or trying to rack up airline miles for some free flights! I stay disciplined in my spending habits, and typically forego nights out or extravagant expenditures like vacations, or new iGadgets.
byiamBYoung,
I couldn't agree more, which is why I don't feel uncomfortable using that method. For as much financial destruction that's left in the wake of those institutions, what's a few grand in the ultimate extinguisher of debt? But as Polly Metallic mentioned, it's best to be positioned so the debt doesn't become a burden and force liquidation at an inopportune time.
Edwardo,
Could you post some of the highlights from the Forex article you linked, it's a "premium report" and requires a subscription. Thanks!
- Sherlock
Everyone doesn't need a store of value. You have never experienced diminishing marginal utility. You aren't thinking like a Giant.
Athrone-
From http://fofoa.blogspot.com/2012/07/fallacies-1-paper-gold-is-just-like.html
"In commodities the paper market regulates the flow between the producers and consumers, acting as a kind of a shock absorber against unexpected supply and demand shocks. But gold is different because it just accumulates. There are two main differences between gold and everything else. The first is that gold just accumulates rather than getting consumed, so there is no reason for there to ever be a supply side shock, even if all the mines suddenly stopped producing. In fact, today we have a 60 year "supply overhang" in gold. Nothing else comes close.
The second difference is that the vast majority of demand for gold is in currency terms, not weight terms. This is not true for commodities. If you need a ton of copper for a construction site, you need a ton of copper. That's weight-denominated demand. But gold demand is overwhelmingly in currency terms. If you need a tonne of gold, what you really need is $50,000,000 worth of gold. It doesn't matter how much it weighs because you're just going to stick it in a vault.
Folks,
India prohibit sales of gold coins to the public
http://www.zerohedge.com/news/2013-06-06/india-central-bank-prohibits-sales-gold-coins#
TB
athrone,
It doesn't matter if you replace Gold with corn or houses with copper, or talk about Freegold or 30x re-evaluation -- none of that matters -- what matters is these are different yet similar objects that are connected by fundamental concepts. Those concepts should apply equally should they not?
If you do care about 'these different yet similar objects', then pick an object, and tell me, what are the differences, and what are the similarities?
If you only care about 'these concepts', then what are the concepts?
You have given examples but if you do not want commentary on the particulars of your examples then you'll have to name the concepts, apply them to gold only, and do without the examples that apply to other objects.
People can move into and out of Gold and other assets as a store of value in the same way they can move into and out of one house from one town, state, or country to another house. The two are different yet similar objects connected by shared concepts....
See how the differences between housing and gold matters? Housing fills a need that can only be filled by housing. It can be in one town or another, as a renter or owner, single- or multi-family, etc. etc., but housing itself is the need.
It is a deficiency in logic to fail to evaluate the relationship between two similar objects because they are not identical, is it not? No two items are identical those all logic is formed on these grounds...
Yes houses are not liquid like gold, nor used for functions like copper, nor does the gold futures market operate exactly like the mortgage market, etc.
These notions do not stop the ability to reason...
Think like a Giant? The worldwide real estate market is far greater than that of Gold.
I'm sorry but these are not strong rebuttals IMHO.
"gold is different because it just accumulates. There are two main differences between gold and everything else. The first is that gold just accumulates rather than getting consumed"
This is the notion I am refuting, so using it as proof against that counter does not make sense. Tell me, does the copper plumbing not accumulate in houses?
How can you call one accumulation but the other not?
How is demand for copper or housing "demand" in the sense it cancels supply, but demand for Gold does not can't supply (thus creating an overhang). It has nothing to do with reason and everything to do with what it means to own or possess(demand) something.
Owning gold is "consumption" of a store of value is it not?
"Housing fills a need that can only be filled by housing [shelter]. It can be in one town or another, as a renter or owner, single- or multi-family, etc. etc., but housing [shelter] itself is the need."
Adding a clarification [shelter] to correct the above, and then showing the same in Gold:
"Gold fills a need [for a store of value] that can only be filled by a store of value. It can be in one currency, asset, investment, tangible good or another, but storing excess production is the need"
The argument is exactly the same between the two. (Same in kind, not exactitude...)
shelter --> housing
store of value --> currency, asset, investment, tangible good or another
Michael H,
You already said it above:
shelter --> renting, single family home, apartment, house in another state, house in another country, cabin in the woods, etc. etc.
Just as Gold is not the only store of value, the house at a single mailing address is not the only shelter available...
Michael H,
Why argue the trivial details about the example, can you not grasp the broad notion I am driving at? If not housing call it plumbing, then it doesn't matter the material and it's the same argument as Gold.
I really don't understand why everything has to be identical for people to reason...
Athrone,
I get what you are saying about the 60 year supply overhang, I think, but I see it differently.
As I understand the intent of that comment, commodities like copper enter the market and are deployed as pipes, wires, whatever. Once that deployment happens, that commodity is effectively consumed and will not re-enter the marketplace. Yes, there is the fuzzy edge where recycling captures some amounts of stuff like copper, but for practical purposes, the deployed copper is withdrawn from the marketplace.
VIrtually all of the gold ever mined, on the other hand, is still lying in safe storage, still completely capable of re-entering the marketplace where it will be quite liquid. It is lying still, but there are no barriers to its re-entry. It is supply, given the right set of circumstances.
Your best analogy was your mention of houses, or real estate. I agree, it does serve as a store of value in a lot of ways that are similar to gold. It has proven to be a flawed store of value in a number of ways, though. Gold is better at it. A lot better.
Cheers
The Roman Cult holds gold for another reason besides a SoV. See Frank O'Collins.
It's why you don't have to worry about dark bullion coming onto market.
byiamBYoung,
The problem I had when making the case for Gold is I never felt intellectually honest when telling others "Gold has a supply overhang of 60 years annual production." Mainly it was the comparison to houses that made me feel that way.
I will say though, you don't need a comparison to arrive at the perspective that ownership of Gold is "demand" such that it "consumes" the function of a store of value until it is released back into the market at a later date as "supply". If you think of it this way, the above ground supply is exactly matched with the above ground demand (every Oz has an owner, and all are content to hold at present prices). To call the above ground Gold a supply overhang would be to ignore the demand which ownership implies.
Thinking about it in terms of other markets such as housing helps (at least for me) but it self evident within Gold alone, IMHO.
Exhibit A of why even freegolders should hold ‘some’ silver.
http://www.zerohedge.com/news/2013-06-06/india-central-bank-prohibits-sales-gold-coins
Governments can be stupid longer than most can be solvent.
Besides, the only thing worse than needing to selling gold prior to Freegold in order to buy necessities is becoming a criminal of the state in the process. Missing the 50K pop and being in jail? oh the joy.
Can anyone find a time and place in history where the sale, purchase or possession of silver was deemed a criminal act by the state? I can think of plenty of historic cases for gold but not for silver.
Gold is always and everywhere a creature of the central bank and thus the state the world over; gold’s greatest asset and liability simultaneously.
Got Silver?
Here is another simple way to look at it:
When you are selling 1oz: demand = 0, supply = 1
When you are buying 1oz: demand = 1, supply = 0
When you are holding 1oz: demand = 1, supply = 1
So I do not think you can call this a "supply overhang" anymore than you can call it a "demand overhang" can you? I've at least never heard anyone claim Gold has "a demand overhang equal to 60 years annual production?" =)
It is true that when you buy gold it does not disappear like eating a cheeseburger. But it is not the only hard asset where this is true (real estate and copper plumbing were my examples).
Athrone,
I get that, too, and in that strict and narrow line of reasoning, you may be correct. I do believe, though, that at the end of the day it is a tiny wisp of a point, and the overriding message in the supply overhang statement is starkly valid.
I certainly do not see it as a stumbling block in presenting the case for gold as the supreme SOV.
Cheers
Indian Government Desperately Tries To Discourage Gold Demand
I think India has a Rupee problem ... or at least it thinks it does ;0)
Sherlock,
I don't have a sub either, but the headline is just one more data point indicating that we are getting rather near the event horizon of a black hole with which the present $IMFs has a date with destiny.
byiamBYoung,
"I do believe, though, that at the end of the day it is a tiny wisp of a point, and the overriding message in the supply overhang statement is starkly valid."
This is probably the most accurate response. It was never my intention to dismantle the argument for Gold, I was merely pointing out that if one is making the case of Gold to others, the story of the supply overhang is probably in the top 5 points you would first mention.
Yet as shown above, it's not really accurate.
But what does that mean? Well for one, if you remove a weak argument from an overall message then that message actually becomes stronger, so that would be a positive for Gold.
On the other hand, I think where I am going with this is that while it is a mere wisp of a point with respect to the Freegold thesis, I think it does say something about the mentality and perspective held by those "reasoning" through the thesis for Gold.
If such the basic logic error in such a central point has gone unnoticed, and is sharply attacked when merely raised (see the posters above who disagreed almost on reflex, telling me to sell my Gold, etc.) -- well what other things might someone with that mindset have missed?
Just some observations based on my own thoughts...
From the article on India:
"The government also worries that large amounts of savings locked up in gold curtail liquidity and therefore investment in infrastructure and other drivers of the economy.”
So when someone buys gold the cash that goes to the seller is burned in a giant fire correct? No longer available for "investment"
WRONG. The exact same amount of credit or currency can and should be available for investment for good projects. You don't need savings to have credit based investment. All you need is good investments. Currently people's savings flow into mal-investment chasing a yield in a broken system.
Athrone,
Aw snap. We were so close to an understanding. We have a bit more work to do, it seems.
"If such the basic logic error in such a central point has gone unnoticed, ... [unhelpful commentary] ...well what other things might someone with that mindset have missed?"
When I said that you may be correct in the "strict and narrow line of reasoning," I was not agreeing that there was a basic logic error in a central point of the freegold thesis espoused here. I was simply acknowledging that such a broad statement (made simply for the sake of framing a thread of discussion in an understandable format) could be tortured into a range of interpretations, and yours is defensible. Mine differs, and I don't see a lot to get tussled over in the difference.
You might take comfort in understanding that many, many people have come gunning for the freegold theory, but in the years that I have been a reader, I haven't seen a solid glove landed.
One would think that if large deficits existed in the theory, they would be widely presented here in the peanut gallery by now.
They are not.
I welcome dissent, because I only care about the truth of our fate. But I remain unconvinced that you have poked a meaningful hole in the theory.
Thanks though, for the civil discourse.
Cheers
Well I have just finished reading the 16 or so posts at Two Short Planks (Kudos to GRUMPS!).
This appears to be another gold-minded contrarian who arrived at destination FREEGOLD via a different route ... and an interesting trail it is. He never quotes A/FOA/FOFOA but does quote numerous other sources which support the destination.
He seems a bit bent toward TPTB, but not in so vulgar a fashion as say an Alex Jones.
Like so many, he too believes that Western gold supplies have severely dwindled below what is reported, and he seems to have no understanding of the construct of the Euro in relation to FREEGOLD (or at least never refers to it).
Frankly, those are two subjects which I am less sure about than most here, though I think the understanding of both here is a bit more sophisticated than "twoplanks" and quite well thought out, if not a bit hopeful - I won't say biased - quite yet.
But I am always keenly interested in the thoughts of those who arrive at FREEGOLD from different paths, since it validates the empirical "double blind" aspect of the inevitability of the final destination.
Also, because he only came on the scene in May, there are less than 2 dozen posts to pour through, and he is posting fequently, probably as a result of a slightly more recent AH HAH moment and the excitement which accompanies such moments to push the concept outward.
As I said a few posts ago, and I see this mirrored in some recent comments signaling anticipation, all roads do seem to lead to FREEGOLD, more and more, and not just Sinclair. Even Addison Wiggin (Agora financial), from my old home town has seen the light, and I followed him a bit in 08/09 when I was pushing out letthemfail.us, before I realized the importance of gold, and Addison and I were thinking quite a bit alike back then as well.
Naturally, to see others coming around to the logical realization of FREEGOLD does excite me, and it also indicates to me that conceptually the worlds thoughts are driving us toward it, and I truly think that this process of collective thought arriving at FREEGOLD will do more to bring it about than some extraneous event, though the two probablities, a black swan and a conscious awakening, may be synchronously aligned.
At least, this appears to be the direction emanating from within the flower of understanding.
I BESEECH THE GIANTS, FOR THEIR OWN SAKES, TO LET THE PAPER BURN AND FREE MY GOLD!!
(that is all - cheers)
Countdown?
http://www.freegoldclock.org/
Hey Jeff,
Kinda like the nuclear DOOMSDAY clock on Watchmen?
Where's Dr. Manhatten when you really need him??
;0)
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