Saturday, June 8, 2013

Black Gold? Massive hoards hidden for ages? Not!

This is a repost that was originally published on 2/25/11:

A few thoughts on "Black Gold." I hate to draw attention to ridiculous notions with no basis in history or logic. But apparently this notion of massive secret storerooms of gold is still providing some with the comfort they seek in their aversion to taking action to protect their own wealth. So I suppose it is worth a brief comment.

I have noticed that the most cynical among us tend to view the world as an ant might view the giant humans that massacre hard-working legions of his own kind whenever passing by. And while I can, and often do, entertain such perspectives without accepting them, for the purpose of exploring probability, I can find no logical train of thought that leads to the existence of massive stockpiles of gold as the source of power for our evil overlords.

In fact, massive stockpiles of easily printed cash make a lot more logical sense!

The history of gold mining is well documented, as is the amount of gold in existence during various eras in which it was openly used as currency. So the existence of hidden quantities of the stuff has a tremendous logic threshold to clear before Occam's razor can even be considered against the supposed "evidence" rebutting massive quantities of known history.

And because of the non-clearance of this threshold combined with the relative scarcity of time, I find it extremely wasteful to explore the voluminous fiction that exists on this topic. And I am comforted to share this perspective with ANOTHER, FOA and Randy Strauss (see below).

This topic seems to pop up periodically, each time some poor soul stumbles across one conspiracy-oriented site or another. Each time it is presented, again, with the same zest as the last. And each time, logic, history, reality and fine minds stand firmly in the way.

Remember this Foundation X story from last November where a mysterious organization claiming massive secret gold offered to bail out the UK? I wonder why that story just kind of disappeared. You see, when stories are false, there is a lack of "infinite resolution" to be mined. Perhaps this story went nowhere because scam artist Ray C. Dam of the mysterious OITC that claims to have control of millions of TONNES [see pg. 195 in linked pdf] of secret gold was arrested in Cambodia on December 18, 2010.

This is the kind of resolution you find when you dig into fantastical stories like this. What a waste of time! You can learn a lot about the credibility of the Seagraves who wrote "Gold Warriors" by simply reading the negative reviews on, a big time-saver! Here's one:

Many of the earlier reviewers of "Gold Warriors" have admired the voluminous references presented by the Seagraves to support their incredible assertions. However, I'd like to point out that my personal investigations into a sample of their sources have exposed the Seagraves' quite cynical "research" methods. They are prepared to use sources that are laughably insubstantial, and then present these sources as if they are highly credible. The Seagraves also deliberately misrepresent the words of a source to make it fit the story that they wish to convey.

The whole of page 62 of "Gold Warriors" is given over to the Seagraves' theorising that nearly 400 Allied Prisoners of War were massacred after stowing gold bullion in a mine on Sado Island, Japan. This is outrageous. The source that they use, "Betrayal in High Places", is a book that looks extremely unreliable when first picked up, and its claims fail to be confirmed by any other historical source. In any case, "Betrayal in High Places" does not actually claim that any stolen gold was stored by the POWs!
I am one of the authors of a recent historical paper, published in the Journal of Military History, which has proven the Sado Island Massacre story to be pure fiction. The Seagraves are smart enough to have worked this out for themselves, but they have chosen to legitimise this fantasy in order to sell their books and CDs.

The Seagraves further illustrate their manipulative ways when they cite an innocent travel book as the source of their further assertion,
"more than a thousand Korean slave laborers ... on Sado Island also vanished without a trace" (bottom of p62).

This is just another dishonest misquote. The travel book (Waycott: "Sado: Japan's Island of Exile") actually says, "...During these years, forced labor was certainly used: of the tens of thousands of Koreans imported to work for Imperial Japan, more than 1,000 are known to have been sent to Sado. Of these, 145 are said to have 'escaped' (but where to?) and a dozen or so - surely a low estimate - were killed. Their existence became public knowledge in 1991, after records were released of Mitsubishi's distribution of cigarette rations to its workers."

Westcott's travel book is actually quite pleasant and informative, and there is nothing dishonest about his speculation - but it's only a travel book! Historically, it's clear from post-war Korean records that many "escapes" were indeed successful (often into the local community, or by fishing boat back to nearby Korea). It's also true that a relatively small number of Koreans were killed in mining accidents, and that no "massacre" occurred. Waycott doesn't allege a massacre in any case - but the Seagraves do!
(Page 62 of "Gold Warriors" can be previewed online here on Amazon, for those who would care to check for themselves...)

The Seagraves are obviously misusing these sources quite deliberately. I think it's very reprehensible for modern authors to push this type of mean deception masquerading as history. This is not a victimless crime. (My mum's brother died as a prisoner of the Japanese in WW2, and it is upsetting to see authors such as the Seagraves take these liberties with the emotions of dead POWs' families.)

Not content with pocketing their customers' money for this book, the Seagraves also use their book to continually push their privately-sold CDs, which they claim contain the "evidence" to back up their assertions. In fact, most of the documents on the CDs are just correspondence between "treasure hunters" - who also make their money by selling their Treasure Maps to the gullible... These are hardly independent or authoritative people! Many of the "certificates", which have been laboriously translated (possibly to tire out the reader) can easily be seen to be fakes once you look at images of the "originals". They have cut-and-pasted values for the gold on deposit!

The CDs even torpedo the Seagraves' own assertions in some places. On CD#1 (Jones.PDF file, page 65), a 1997 letter from "R. A. Medland, Senior Manager, Commonwealth Bank Group Investigations/Security Dept." [Melbourne, Australia] says that the gold deposit certificates are, "utter rubbish"! There's also a scary-looking photo of a sleazy Indonesian "lawyer" displaying the "certificates", and a hilarious document very reminiscent of a "Nigerian Letter", purportedly from President Suharto of Indonesia, on the same CD.

Gee, it's a pity these Certificates are rubbish - they were for 420 tonnes and 120 tonnes of Gold !
(US total annual production in 1940 was 155 tonnes, just to show how incredibly unrealistic these numbers are.)

With the kind of resolution one finds when only scratching the surface of these fantasies, I have to wonder that the appeal of such stories must come from their ability to assist in the smoothing of the rough edges of some other square peg these cynics are trying to jam into the round hole of reality. But again, it is a big waste of time to go any further than this when even the simple threshold of logic hasn't been cleared.

Before getting to the archived arguments, I would be remiss not to mention Costata's comment from the end of the last thread:

costata said...

I have read the book [Gold Warriors] that FGA and TDF are referring to. It is mostly BS. The authors (husband and wife) have written about some interesting people and events in Asia. The husband was a journalist who had some good contacts. Some of the stuff they have written about did step on a few important toes but a lot of it is "ancient history" now. IMO Lords of the Rim is probably their most accurate book. It's the story of the Chinese diaspora.

The Yamashita gold story was actually true up to a point. The Japanese did loot gold in China and SEA.

My source was part of the occupation forces in Japan after WWII. He was an officer in charge of a unit involved in decommissioning chemical weapons and logistics. The Japanese stockpiled a lot of materials and valuables in old mines that had been worked out long ago.

A lot of the valuables the Japanese looted during the war were used to fund their war effort. Apparently gold was held in higher esteem by their suppliers than IOUs from the Emperor (despite his unique lineage). Bear in mind too that Japan had some incredibly rich gold seams in their local mines as well. Nothing like the scale of a Boddington of course.

Here's a WA connection you might be interested in. After Australia began to trade with Japan again post war some of the big Japanese trading houses had maps of promising resource regions in WA that the locals had never seen before. The story goes that prior to, and during WWII, the Japanese put teams of engineers into remote areas of WA to identify promising areas for resource exploration. There could be other ways they acquired the maps but as the saying goes "never let the truth get in the way of a good story".


And now I take you back a decade to early 2001, when FOA and Randy "@ The Tower" Strauss took on the reality-challenged cynics of the day with the sharp razor of raw logic and known history. Dismiss these great Freegold minds at your own peril. The comments are presented here in the order they were posted. And as is usually the case, the discussion evolved to the point of depositing the strongest arguments at the very end. My favorite line of the bunch comes from Randy: "…it remains my objective view that such tall tales must have long bodies and necks because they certainly have no evolutionary (historical) legs to support them."

FOA (01/10/01; 17:50:30MD - msg#53)
24 hour hike.

Black Gold?
If I understand the reasoning, some people think there is a mass of physical gold out there and it's being used as underground money. This is what explains the low price of gold today, as all that black market gold surfaces?

Well, that may not be the proposition, but if any of you want to know; none of our evil outlaws are so stupid as to use gold for trading when there is literally "TONNES" of cash circulating around the world. Please, give all of us a "logic break" for a minute? Why would I, as a crook, carry even one ounce of gold when three crisp $100 bills can take its place? Even ten $100 bills are easier than gold priced at, say $1000. And there is no shortage of that cash stuff around! Hell, I bet there really is more tonnage of "Black Market Cash" in the world than all the gold still in the ground. Cash for ounce,,,,, gold still priced in the thousands! Believe it!

FOA (1/11/2001; 11:35:06MD - msg#54)
The Curve!

OK,,, I had my coffee and morning walk in the woods to see the wildlife,,,,, packs on,,, let's go.
It's always great to spend time out here,,,, away from the city,,,, out on the Gold Trail.


One more point on Black Gold as we walk:

All that gold, more than triple what we think is out there, would have been in existence for some time prior to our life spans,,,,,, given the timeline required to produce the stuff. Remember, Black Market production could not have existed prior to, say 1971, as even public mines were not making cash profits. Also, it takes real cash and investment to produce both White Gold as well as Black gold.

Indeed, simple extension of physics concludes that nowhere near that much "EXCESS" gold could have been dug over the last 25 years. It didn't happen, even with slave labor. Because, as in above, even lawbreakers have to sell most of the gold in the open just to cover the illegal "Cash" they invested in digging the ore in the first place. These guys don't do such a "wash" business when their cash works just as well in the first place?? Get my point?

Also, the gold would have been moved into the open as the majority of goods and services bought with illegal money, to create their evil lifestyle, must involve the White Market Economy too. Black market wealth is mostly in cash, it's just too easy to move and spend. So, there is no reason to go through gold first, just to buy in the real marketplace.

With all that gold out there, the Dollar powers would not need to create paper gold debits to placate strong dollar backers. In fact, I suspect they would have created channels to flush all that gold into the market. Illegal or not, this action would have suited their end result.

No, the natural trend of easy money humans, both good and bad would be to spend said gold for other consumable wealth and keep cash in the background. Indeed, this is truly what has been happening as regular investors trade physical for non-physical substitute gold. The small amount of physical supply vs the monstrous paper trading denotes how such existing gold has bridged the industrial use gap. It didn't take a vast new unaccounted supply to make paper seem real, just moving the existing into new hands did the trick. OK, we finished burning that story in the fire.

Randy (@ The Tower) (1/16/2001; 4:07:45MT - msg#: 45719)
ORO: some of my thoughts on being "not ants"

In your post you make many worthy comments, and certainly the essence of human motivations driven individually by self-interest has not likely changed substantially through time or by geography. This issue of black gold, however, requires an additional depth of understanding suggested earlier this weekend--that we are not ants.

Loosely, I suggest that from the perspective of "antkind" in its struggle for survival, the world is the same as it ever has been...particularly with respect to the "rules of the jungle". And further, seen from the perspective of "the world" itself, the essence of antkind behavior and its impact is also the same as it ever has been (for most practical applications).

In stark contrast to antkind's "same-as-it-ever-was" interaction with Mother Earth, any meaningful assessment of mankind as a whole reveals a performance more akin to the evolving development of a single entity (such as a butterfly) throughout a single lifespan of that entity.

More fully said, as evolving civilization establishes new "rules of the jungle" (laws of the land), men -- like butterflies -- do behave differently depending on the specific "rules" for the stage of the game faced at the given time in life, even while their self-interested motivations remain. Such self-interest may require a body to crawl hidden and eat leaves under one set of rules while exposure to another following set of rules (i.e., opportunity) enables that body to fly forth in a display of nectar-sipping "birth" into the seeing world. And yet, even as the caterpillar's nature is inclined to a hidden existence during a particular stage, a premature and unintended flight into the open can occur even under the old rules of the jungle through discovery/conquest by superior forces (e.g., a bird in this extended metaphor).

Concerning gold and mankind, a rich history of conquest (generally by "official sectors") and of rule changes through time and geography have given ample opportunity for significant gold exposure--by force or by choice. It must certainly be acknowledged that once our civilization's "lifespan" developed to such a point where incentives arose for some gold to be kept hidden at the time of its discovery, clearly the stronger precedent of experience was that such gold was useful when "revealed" (spent) as a suitable alternative to its owners starving in the dark...and this would hold true for any point in this would-be black gold's post-discovery coexistence with mankind.

"Black markets"... "white markets"... go back far enough and you find there were simply "markets". Looking back to one full century after Europe limped through the economically plagued 1300's, estimates from historical evidence suggest there to be found at the time less than 150 tonnes in total gold. Over the next 350 years, and prior to the productive gold rushes of the mid-late 1800's on the several continents, the free and open coinage of precious metals brought to mints for ease of circulation (use as currency) in this more highly sophisticated stage of mankind's existence provided reasonable records and estimates that gold in known use in the civilized world increased by only 3,000 tonnes. Then, the "easy pickins" of the gold rush years prior to the cyanide leaching process instituted from 1890 onward yielded barely a tenth of today's highly scrutinized corporate production totals of roughly 2,500 tonnes per year. (By 1908, the new gold discoveries and extraction techniques had helped companies boost global gold production such that above-ground gold supplies swelled to nearly 18,000 tonnes.)

We must ask, when considering the political backdrop of this turn of the previous century, where was the incentive for significant quantities of that newly unearthed gold (or previous hoards) to be kept hidden ("black") from free coinage or other wealth-utilization? Arguably, only with the cyanidation process of the single past century do we get gold production volumes remotely capable of feeding black supplies on a level suggested recently by some posters here.

Equally important, only with our very modern era of fiat currencies and tax policies do we face "rules of the jungle" in this collective lifespan of mankind whereby self-interested motivations would favor a degree of unreported/hidden new production. Certainly too little, too late to provide the levels of black gold cited to exist beyond that which is commonly acknowledged as historically produced totals.

To wrap up this commentary, one other element warrants brief discussion. You said in your #45689:
"The supply of actual gold, not only paper gold, relative to dollar denominated debt had to be substantially greater than "officially" stated, else the system would have collapsed long ago as a result of over-leverage."

Could it be that you are overlooking an important phenomenon--growth of the (bullion) banks’ operating sophistication through global integration, and with it the growth of the participants’ confidence which counts for everything? For possible validation of this thought, look no further than the similar absence of U.S. bank collapses against the backdrop of meager "physical" vault cash which has been bolstered by sophistication of operation throughout the latter two-thirds of the Twentieth Century. To be sure, now that the banking structure has gone global beyond the safety of any deep-pocketed lender-of-last-resort, only additional time has been bought by the over leverage, and the eventual failure will be all the more spectacular when it occurs. My friends and myself in The Tower hold physical gold in anticipation of that day. The latest shifts in the "rules of the jungle" indicate the day is near at hand.

Randy (@ The Tower) (1/19/2001; 15:55:58MT - msg#: 45942)
A simple notion for barnacle bill

Inspired by your comment:
"...until there is a clearer picture on the Marcos Gold situation. If those million tons of gold are really there; and they are in the camp of the enemy, then this manipulation can go on indefinitely."

As can be gleaned from my last post, the most powerful nation on Earth -- blessed with a large and technologically clever populace, abundant natural resources, and a vast network of supportive infrastructure -- is only able to produce 355 tonnes of gold per year through the highly scrutinized efforts of its publically owned mining corporations. Fanciful notions notwithstanding, where in space and time did mankind EVER find either the human inclination or capability to gather a million tonnes of gold from the firm embrace of Mother Earth?

Certainly, do not trust the precision of the conventionally accepted numbers of 130,000 tonnes as sum total of all past accumulations, but they come nearer the mark than the output numbers that could only be achieved through the efforts of Paul Bunyan and Babe, his blue ox. (I have it on good authority that Mr. Bunyan spent his days lumberjacking, not secretly mining or panning.) Let your common sense as born and raised unto the physical world be your guide in this and all things... Numbers are, after all, just numbers.

Randy (@ The Tower) (1/19/2001; 18:18:52MT - msg#: 45952) thoughts

"Randy. 200 tons a year for 5000 years. I don't know how the pyramids were built either. They look impossible to me also."

Sure, any combination of production values over years will provide the fanciful number, but will not provide for the sustained secrecy that must accompany it...otherwise this would not be "black gold" above and beyond the recognized yet still impressive (impossible?) historical production. One would think the history books and archeological evidence would be rich with tales and displays such overwhelming pre-Columbian bounty, no?

What say we ask YGM, our most favorite miner, if such numbers are viable without the aid of modern infrastructure and technology?

Otherwise, we are left only to ponder the grandeur of the black pyramids which as assuredly were built above and beyond those that have been accounted for, and the accomplishments of many moon landings that did not survive the oral traditions of our cave dwelling ancestors reaching back into antiquity...leaving us only with imaginations to fill in the gaps of astronautical marvels of what surely occurred prior to 1969.

Randy (@ The Tower) (01/28/01; 15:38:58MT - msg#: 46755)
auspec...another read-through may prove more luminescent

You said:
"Trail Guide has several times mentioned he was going to weigh in on the Black Gold issue, but I have yet to see anything of substance."

Have another look at FOA's latest (msg#56 "The Gold of Troy!") at the Gold trail. While he does not explicitly state that this commentary is to address the "Black Gold" issue among other things, it clearly forms the foundation of thought that more thoroughly builds the necessary historic context that I myself so failed to impress anyone with in several commentaries during recent weeks.

His skill of presentation in this effort greatly exceeded my own attempts, and I was quick to call attention to this fact in my early morning post Friday the 26th. Again, (but perhaps to my rooftop eye only(?)) this post serves to prepare the reader for engaging in critical analysis as to whether such magnificent tales of great storerooms of "black gold" can stand upon their own firm legs in a real world historically shaped by human motivation. For reasons I have previously expressed (however poorly), it remains my objective view that such tall tales must have long bodies and necks because they certainly have no evolutionary (historical) legs to support them.

Randy (@ The Tower) (02/01/01; 16:36:19MT - msg#: 47141)

Hello Trail Guide. Thanks once again for providing a well-lit walking tour through the past
In days past, when I finally chose to weigh in on the fanciful debate over the (un)likelihood of copious amounts of stockpiled "black gold" in existence in bunkers somewhere, I tried to put forth a focus on two elements that would satisfy any farmer regarding the veracity of such claims. (Why farmers? It has been my experience that a majority of farmers are endowed with common sense, and more importantly, they do not hesitate to use it!). I talked against the presence of massive black gold stockpiles due to 1) the many technical/logistical obstacles which do not support such levels of production in human history, and 2) the socio-political-economic realities of our ancestors which would not be conducive to the permanent suppression of any such easily and secretly mined wealth against exposure to the light of day--implying that the ancient chain of owners ALL denied themselves the improved life that would have come from spending what it was they held..."money". Not likely.

In conjunction with your #56, I hope that readers of your latest message come away with a clearer sense of the realities of point #2....that gold would not sit idle or hidden in those days if it could (and it COULD!) be used to purchase a better lifestyle. Truly, while human motivations remain similar through time, the socio-economic environment that we shape for ourselves has evolved, and with it, so too has evolved changes in our behaviors as guided by our unchanged human-creature motivations.

I am certain you have opened a door to greater understanding when you explained how the item selected to be spent for other goods was that item which would bring the best trade. For travellers on the road, the necessary convenience of gold dictated its superior performance and hence, its use, whereas in town, one would likely see a flourishing free-for-all "bartering" economy where gold needed not pass from hand to hand for each transaction.

The small parallel we might find helpful to draw is that modern times and commercial banking has given us all the "town" mentality whereby we set our gold aside as the function of our modern currencies allow us to bargain for the best trade for an improved lifestyle. But importantly, we must all recognize that there are distant towns that offer goods to improve our lifestyle, and also recognize that specialization/division of labor has helped to make us each "towns unto ourselves". It is in this sense, therefore, that it remains in our best interest today to hold these golden "hunks of metal" because as travellers in this modern-life environment we are ALWAYS "on the road" figuratively speaking.

But clearly, the problem many people seem to have with this concept is recognizing the necessary transitionary period we are in regarding a shift in popular western thought.

Thanks again for your sharing your considerable talents for elucidation.

It is quite common for unstable, overly cynical persons to seek out extraordinary explanations for ordinary events and conditions that seem to them like giant humans must seem to simple ants. But even so, it is extremely arrogant to believe that such enormous secret stockpiles of, to date, foregone wealth will be deployed in our time, in our "crisis," when it somehow remained hidden through so many generations faced with much more existential challenges than we face. It borders, in my honest opinion, on lunacy.

I highly recommend reading Gold Trail Three - The Scenic Overview which, as Randy noted above, was written by FOA partly in response to all this "Black Gold" talk in the forum. There you may gain a much wider view that actually does have infinite resolution, founded on both logic and history.

Finally, I will close with one last Thought for you. The actual quantity of the gold stock in the world doesn't matter nearly as much as its flow, or velocity, when it comes to storing value. In fact, the greater the stock relative to the same flow, the greater the price stability and therefore the greater the potential value. Again, the greater the stock:flow, the better the store of value. (See: How Can We Possibly Calculate the Future Value of Gold?) So imagine, if you will, a single individual who controls an amount of gold equal to, but separate from, the known stockpile. Mr. X has 160,000 tonnes, and the rest of the world has another 160,000 tonnes. Mr. X is the de facto "King of the World." From a game theory perspective, what would be Mr. X's best move, at any given time in history, with his gold?



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Beer Holiday said...

I have never understood these conspiracy theories of huge hidden gold stockpiles. From my point of view geology and production rate pre verses post industrial revolution rule them out completely. But now I realise, that was just the tip of the iceberg in debunking. Cool.

BTW I finally beat Tyrone it appears.

Motley Fool said...


Long necks. ^^

Nand said...


Good to see another developer onboard ;) Most of us unfortunately end up being more "narrow-focused" on the implementation of stuff and finish as Bitcoin fanboys :/


Sure, the actual transition will be overnight, and could happen with GLD inventory at any level.
Could be tomorrow or in 5 years. I'm long past the point at trying to time that and find out how it will happen; I just know it has to happen. I'm just making my own crystal ball for fun ;)

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

While I disagree with, but am sympathetic to the 'amount of gold' theorists (Yamashita etc). If and when FG happens, it will be an important transformation of the wealth and more importantly, power structure of the world. Big loser, America and its banker class. Big winners are probably China from an international power perspective, India from a per capita increase in wealth perspective, South Africa from an economic importance perspective. FG will change much beyond the price of physical gold, and trying to understand who and by how much the winners and losers would be is important. And knowledge of who owns how much physical is vital, scarce and unreliable...thus the theories fill the void.

KnallGold said...

Its hardly coming from lunatics, cynics and what, these stories always come at a certain "coincidental" point, serving an agenda (overhang, glut of Gold, sell your Gold! Sounds familiar? Heard it in other variants?). So its not absurd, but simply rational in the view of the agenda. So my disagreement lies in the origins of the stories, not in the feeling that its wasteful to our precious time.

Beer Holiday said...

This is an interesting question:

"Mr. X has 160,000 tonnes, and the rest of the world has another 160,000 tonnes. Mr. X is the de facto "King of the World." From a game theory perspective, what would be Mr. X's best move, at any given time in history, with his gold?"

I say, Mr X gets rid of gold as quickly as possible. Swap it for other assets - an large army, airforce and marine corp would be a start. At 50%, your in danger of becoming Smaug, and a large hoard of hungry hobbits is going to visit at some point.


You're really sympathetic to that view point? To what extent do you think these hidden gold guys are plausible.

300 000 tonnes world wide?
>1 million tonnes world wide?

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

Beer Holiday, not sympathetic to the part about there being a massive overhang, but sympathetic in that I wish I knew with far greater precision who actually has what. How much gold do the US and Chinese gov'ts actually have? Who are the 10 largest private/individual gold holders? How much would a post FG forbes 500 list change? The information void is real, even if what they try to fill it with isn't.

Daedalus Mugged

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

T think I answered the question behind the question more than the one you actually asked.

In one of the comment threads here one of the commenters did a pretty good job of estimating total gold...I thought it ended up being something like a 5 to 10 percent range of uncertainty in total gold above ground, mostly due to uncertainty about modern Chinese and Russian production amounts. Hat tip to whoever did that analysis.

And to build on your Mr X question, if he could get something like post FG price for giant physical, I would sell a large amount of it to buy both productive assets as well as things that would make it more likely to be able to carry my physical through a transition period. I personally would try to buy the NSA database. :) In addition to an army navy and air force...information is more valuable than soldiers, now more than ever,


Jeff said...

That's just your western desire to know who is rich. It's not important for us to know, and we won't know anyway.

FOFOA: The West loves its paper wealth. It loves to record it, to publish it, to know where it is, to know where it stands, to throw its weight around with it, to tax it, to track its movements, and occasionally to take it away. It is this $IMFS fascination with paper wealth that made it possible for you to even find a number for "Global Household Wealth", Stefan. And when I think about this number for a while, it is hard not to laugh at the absurdity of it.

Let me ask you this. Does that UN survey take into account the "stored purchasing power" of the Indian wives? How about the sovereign wealth hidden in Saudi Arabia? What about "old money" and "royal wealth" hidden in Europe? Large swaths of the "everyone else" 75% never stopped storing their purchasing power privately in gold, knowing that one day it would be restored.

The true Giants of this world that hold large amounts of gold have a good idea what their gold is worth. And yet, when it finally gets there they will still not liquidate their "stocks". This is because gold as a store of purchasing power has an infinite time horizon. These Giants are not interested in "catching the top" like Western traders. They are interested in storing purchasing power well into the future.

I guarantee to you that the Noble families of Europe still possess some of the same exact pieces of gold that were in their families in the 16th, 17th and 18th centuries. And this is purchasing power stored (and increased) through several currency collapses!

Beer Holiday said...

@ Daedalus Mugged

Good questions - I'm just saying that the total amount of gold out there is unlikely to vary from estimates by that much. < 20% either way is my guess.

Jeff said...

For a currency issuer having the most gold isn't as important as having the most credibility.

FOFOA: You see, the European gold reserves are far better, far more credible than the US gold reserve, simply because they engage in a two-way gold market, and have for decades. The US gold has been hoarded and locked away for more than 30 years, never deployed in case of emergency. The European CB's took a lot of flak for selling gold over the past two decades, but that action is precisely what makes them so much more credible (and valuable!) than the US gold hoard. Any trading partner knows full well that if all else fails, gold will be paid.

Grumps LaBastard said...

Why does Black Gold bother the gold community? It will never come to market. It represents something else to the Custodians. A hint is in my June 8, 2013 at 8:56 AM post on "What is Freegold?" The Custodians don't hold their wealth in gold most of the time. They are happy to make 6% off their CB holdings and have it compound taxfree in their Basel accounts. They've got something much better than gold. It's us. It's slavery. We are the gold for most of the credit cycle! We give them cap gains and a yield from the sweat off our balls. The accumulation of gold for them isn't so much the accumulation of wealth--it represents the accumulation of human souls to gain leverage in the spirit world. Gold just serves a financial purpose when their tax farming paradigm needs a reboot.

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

Jeff, it isn't about knowing who is is knowing who is powerful.

Victory said...

'From 1944/5 - 1994/5 The Trilateral Trillenium Tripartite Gold Commission (TTTGC) was organised and implemented, by the Nations of the World, with a Term period of Fifty (50) years. During this term period the Commission held the Mandate, Rights and Authorities over The Combined International Collateral Accounts of the Global Debt Facility. (Note: This Commission should not be confused with the Trilateral Commission that exists today). Following the expiry of the 50 year term, the Nations of the World, disappointed with the biased way The Combined International Collateral Accounts had been utilised within the 50 years, agreed not to extend the term of the TTTGC, but instead appointed a single independent person to the position of International Treasury Controller with full rights, authority, and legal ownership of the Combined International Collateral Accounts.'

....'The Trilateral Trillenium Tripartite Gold Commission (TTTGC),' LMFAO!


gary said...

Thanks for the post FoFoA!

M said...

@ GrumpsLB

Quote"They've got something much better than gold. It's us. It's slavery. We are the gold for most of the credit cycle! We give them cap gains and a yield from the sweat off our balls."

Umm no they don't. If you look at the slavery oriented aspect of our society, we are the ones doing it to ourselves for the most part. Anyone stupid enough to save or invest their savings in government bonds(muni, State, Federal) is aiding the central banks in creating non price inflationary money printing.

The withdrawal of savings from instruments that are paramount to the ability of central banks to create non price inflationary expansion is Freegold.

Indenture said...

"Mr. X has 160,000 tonnes, and the rest of the world has another 160,000 tonnes. Mr. X is the de facto "King of the World." From a game theory perspective, what would be Mr. X's best move, at any given time in history, with his gold?"

His gold will remain still and he will manage his currency to make sure the population continue to use it. Selling gold to make money is unnecessary when you can just make money.

Grumps LaBastard said...

Maybe somebody can help me with what I feel is an existential issue for Freegold in the hereafter.

If real interest rates are positive then why would a shrimp who does not have enough savings on which to retire want to be overweight gold? Holding all savings in gold for this shrimp would be like settling for a lump sum payout instead of an annuity. If this shrimp doesn't have the critical mass in savings to withstand a zero yield then he needs a yield to at least mitigate the burn rate of his nest egg. It's a good guess that a big demographic fits this profile.

Or is it that real rates will be negative in perpetuity? Gold will always deflate, increasing in purchasing power? How are savings coaxed out into investment if money has a real negative rate? If gold is always deflating then why invest any savings? This makes no sense. There would have to be an interest rate at which an equilibrium would be reached between savings and investment.

gary said...


You continue to flog this dead horse.

You are exporting the idea of a black and white scenario where logic will dictate where ALL investors will go post FG. It smells like you are attempting to discredit FG with a strawman imbalance in the investment sphere.

Does logic indicate where ALL investors will go today? Some buy Bonds (how logical is that?), some save cash, CDs, GICs - there is even one guy in this forum touting mining shares (believe it or not). Most in this Forum would probably keep their excess in Gold. This is despite the MTM leanings. See, everyone is different regardless of the, perception of your logic - everyone has their own logic (even with obvious interest rate enticement or rejection) - everyone sees different shadows in Plato's Cave. There are many options - YOU may not find merit in them but that is why they have horse races - people disagree. I doubt this will change post FG. If there is an investment opportunity imbalance - the marketplace has a great way of fixing that.... works every time.

M said...

@Grumps LaBastard

A 30 year old shrimp, who is making good money wants to save so that he has an income generator when he is 65. Under freegold, he would accumulate gold(unencumbered,tax free,inflation free,commission free, floating raw capital gains) slowly over time until he needs to sell it and invest in an income generator. Or he could divest himself of the gold as needed.

FOFOA even said in his hit piece on Warren Buffet that some of us freegolders could very well be holders of Berkshire Hathaway stock in the future.

Grumps LaBastard said...

But you guys miss the point about positive real rates and what that means for gold. Think of Le Chatelier's principle in chemistry. If real rates are positive this pushes the SoV equilibrium point away from gold and into whatever serves as money.

For a Giant it does not matter. His gold goes down in value , but he is compensated by a bump up in his financial assets. When the sytem goes pear-shaped his wealth pie stays the same size, but now gold represents a big chunk. The shrimp doesn't have the excess wealth that can absorb a decline in value. That shrimp has to get the megatrend right for the 30-40 years of his investing career to have a nest egg. If rates are positive then it makes no sense to be overweight ( more than 5-10%) gold.

Jeff said...

Your debt paradigm conspiracy theory can't be reconciled with Freegold. You chose...unwisely.

Grumps LaBastard said...

Interest rates are a conspiracy? Come to think of it, I can't recall any kind of treatment amongst FOFOA's posts about how interest rates would interact with gold after the transition. Just that gold would be in an isolated circuit away from the monetary plane. Wouldn't there be any potential field between this circuit and the monetary plane? This is Grump's Conundrum.

Indenture said...

Naming the problem is a good start!

You come out and say, "If real interest rates are positive then why would a shrimp who does not have enough savings on which to retire want to be overweight gold?"
My question is: How are your Real Interest Rates produced and in what medium are they being produced? Are you talking a 'real rate' in equities, a profit over and above inflation? Where is this 'real rate' generated? Because in my mind if a real rate has to be greater than inflation then we are talking about Investing. How can chasing a 'real rate' be anything but an investment if it is greater than inflation? And what exactly matches inflation in Freegold?

There is a difference between Investing and Saving in Freegold. In Freegold:
Investors seek a real rate of return above zero.
Savers seek a real rate of return of zero.

There is a time to save and a time to invest.
Now is the time to save.

Michael dV said...

I am wondering if Mr X having so much gold does not decrease its use function.
If I am Mr. X I'd do what ever I felt like doing.
If Mr X does not have the ability to print a currency he would have to convert some to spend but he could also deploy capital and eventually earn more gold.

Beer Holiday said...

@MdV deploying capital to earn how much more gold? at 100%* - no one cares about gold anymore, only escaping your evil Smaug-like control of money/SoV, and they'd chose another focal point.

Maybe the king of the world gets the best game theory guys + Henry Kissinger + some others and locks them in a room until they figure out the answer :-)

Who thinks they would come back with freegold :-) Maybe they don't have a choice?

* I think it's less than 10 %.

Grumps LaBastard said...

Savers are in gold now b/c rates are negative due to financial repression. Our payday will come with the reset. But afterwards, the new system will have a positive interest rate structure. Gold will become a reference point from which CB's will settle imbalances, but it will be a poor choice for shrimps to save in. They would have already missed the move. It's important not to confuse that reference point function with the SoV function. The SoV fn will become intermediated back up Exter's pyramid.

Motley Fool said...


How I read your comments : blah blah blah...I didn't bother to read replies to me because I know i am right...blah blah blah...thinking is overrated.

Yes positive real rates of return should temp some savers out of gold. Two things. One, as they change medium this impacts the rate of return. Two, this assumes they are able and willing to take on the real risks inherent in such holdings.


Michael dV said...

I'm not sure I understand your reply. Mr X only has half the gold. The rest is free to circulate as a SOV for the rest of the world.
My point was that he could afford to deploy some (to enjoy the finer things) because he has capital and therefore the ability to generate more gold should he need it.
The question fofoa asked did not tell us if the ROW knows Mr X has half the gold. Maybe they don't and he can play his cards as he wants to without interference from the envious.

Grumps LaBastard said...

Keeping money in a bank or a AAA bond will be safe in the hereafter. A deposit insurance scheme will be able to cover the once-a-decade collapse of an overextended player. Notice the BIS is realizing that the market must have confidence that insured deposits will not be bailed-in. Savers will gravitate to yielding vehicles b/c gold will not keep up with inflation. It isn't an inflation hedge. It's a debt deflation hedge. Gold will only reflect the growth of some monetary aggregate base, but end-user cost of living will exceed that. The windfall from your revalued gold will be whittled down. Put yourself in the shoes of a shrimp who had no gold before the reset. What does he do now? Saving in gold would be a loser prop. He will need yield.

M said...

Top Australian gold miner Newcrest to write down $6 bn; cut 250 jobs.

Newcrest Mining free falling takes firm to a nine-year low. Newcrest was profitable when gold was $300 an oz but its not profitable at $1300.

Why does a country let this paper ponzi destroy one of its biggest industries ?

Wil (from another account) said...

Please add "confiscation" to the list. Makes me wonder about Doug Casey ....

You seemed to have the flower in your grasp, but the present paradigm produced a gust of bias which blew it from your fingertips.

Interest rates are INDEED a conspiracy today. How will they work post FREEGOLD? Naturally (i.e. not like LIBOR).

As I have said several times now, FREEGOLD is the TRUE "gold standard" that always should have been. Past gold standards failed by "fixing" instead of "floating" against gold.

And GOLD too, as we savor it's unique merits, is a truly humanly organic element, from an emotional/psychological standpoint. If one group has "all of it" and an equally important group "wants none of it" then it will fail in it's historic purpose. This the Flower's lesson about Mr. X. It has never failed over time, but one important group seems to pretend today to "want none of it".

We shall see ...

Yes, people did use FIAT for saving due to it's rate of return, a spectacular feat at one time considering the forgone conclusion of its present day risk (Cyprus, MFG, etc.).

And people can always invest in currencies for rate of return, but with gold as a reference point anchor, governing the issuance of FIAT, let us hope that there are better yielding investments, perhaps some that even free us from this "planet earth as the final frontier" mindset.

Europe does struggle today to adopt (or maintain) a FREEGOLD attitiude pre-FREEGOLD. It is a challange, no doubt.

The object of saving is LONG term wealth preservation, through change, over TIME. The yield from a rate of return is "investing".

Surely we can still have both, post freegold, and perhaps a little less "bubbly" the latter?

M said...

@ gary

Quote "there is even one guy in this forum touting mining shares (believe it or not). "

I am buying more mining stocks now as a hedge against another 5 or 10 years of Zero % interest rates. If any logic entered the equation, then this would have been over 10 years ago. But no logic exists. We have to deal with this reality. Especially when you consider that a bubble in paper gold and white metals would actually prolong the life of the IMFS. We think that the drain of the GLD is a sign of the end but what if its not ?

It doesn't take long for the yahoo's to get another bubble going. Look at Japanese stocks. Up 80% just like that.

Consider that Japan first hit ZIRP in 1995 and yet here we are 20 years later. That's not 20 years of falling interest rates. That's 20 years of 0% rates.

gary said...


I am buying more mining stocks now as a hedge against another 5 or 10 years of Zero % interest rates

?? - you have no consideration of them falling to zero as paper gold (that they are contracted to sell to refiners in) continues its downward trend? We've had X years of ZIRP and this hasn't done anything positive for the miners - who are ALL down. How do you consider this a 'hedge'?

Especially when you consider that a bubble in paper gold and white metals would actually prolong the life of the IMFS.

Please elaborate your theory on this... thanks. NOTE: personally I think the word 'bubble' is misused here.

Consider that Japan...

Trade surplus (until very recently) vs. trade deficit (US). Why do you suppose they are printing full-bore now? and not 2 years ago? Perhaps focusing on ZIRP isn't the way to go - how about massive QE... what is that telling you? It could be telling you to buy stocks, but what about long term?

My personal gamble would be ZIRP through to the reset, but I can't figure that mining shares would be a hedge against it. You'd be taking away from funds you could allocate to physical. Tantamount to pure lunacy, IMVHO. LOL.

We think that the drain of the GLD is a sign of the end but what if its not

What if it IS - along with dropping paper price, and scarcity surfacing worldwide (and in small coin shops.) You wanna miss that train? The revaluation increase is so great - it eliminates the gamble for more USD, IMO. What are you intending to do with the millions you make on miners? buy three eggs in HI?

Perhaps GrampsLambBaster can chime in on his theory of buying all the miners through funds - kinda like "the wheel' at the horse races... you lose in most but get a huge hit on the survivors. Or something akin to that.

Best of luck,

John said...

@M "a hedge against another 5 to 10 years of ZIRP" as a means of extending the life of IMFS.

I think you make a very good point and point to a plausible scenario. In short the is a variety of "tools" in the toolbox currently in play as a means of extending that very life of IMF$ which in itself is plausibly the most lucrative racket in the history of mankind....certainly its value rivals the hoped-for value of a reset Freegold valuation. It seems to me that despite how far off we may be in the shelf life of the old IMF$ it can continue on well past this point as it already has. The turning point will be that juncture at which employing the two most important tools at "shelf-life extension":
ie interest rates and QE, no longer produces desired outcomes but rather the undesired kind. That's when someone breaks the glass and reaches for the reset button. There are indeed signs presently that vigorous use of said tools are beginning to show signs of regurgitaion...but until then surely every means of continual extraction of tremendous fraudulent gain seems assured.

Sam said...


Don't you feel like almost every market investment these days is rigged in one way or another? I can't say the stock market has followed any form of fundamentals for at least 10 years. Do you really feel comfortable with an investment into the partial ownership of the claims of a business designed to pull national resources out of the ground and sell it for a profit.

I personally have found great comfort in withdrawing myself from all paper profits and just buying gold at the end of each month with the excess I earn from my labor. You could look at it as an investment in a way but I’m training myself to just call it savings. It’s a simple life I suppose. One day I hope the purchasing power of my savings gets a boost, but if it didn’t, I honestly would be ok with that. I have been paid in full and I am happy with my physical wealth absent counterparty risk. To me it is possible that this is the true lesson to be taught from the study of freegold.

S P said...

The basic question is when do we get a critical number of people choosing to exit the matrix. Only when that happens will their be a demand for proper gold accounting.

A 13 year gold price bull market and the spread of information via the internet is apparently not enough for this to happen.

It can be argued that only a collapse will bring it about, and I think this is coming. Poor people have to lose everything, middle class people have to lose 75% and the wealthy have to lose 50% in real purchasing power before they'll change.

Grumps LaBastard said...

I read the Newcrest release. The writedown in carrying values is due to company trying digest recent acquisitions. A 200-300 dollar rise in gold would fix the problem. In fact the actions listed in the release shows what a miner can do in an adverse market:

"Newcrest reconfirms its focus going forward will be on maximising free cashflow by reducing operating costs, corporate costs
and capital expenditure. Free cashflow (after $1 billion of capital expenditure) is budgeted to be neutral in the 2014 financial
year at current metal prices and exchange rates. The Company is projected to be free cashflow positive in the years thereafter
at current metal prices and exchange rates, and the Company will apply these funds to reduce debt and return cash to
In response to the change in market conditions, Newcrest has taken and will continue to progress a range of actions to
maximise free cashflow over the next three years. These actions include:
 cutting discretionary spend on projects and studies;
 a significant reduction in exploration activities;
 a continuous “cost out” program across all operations;
 increasing stockpile utilisation at Lihir and reducing open pit material movements generally; and
 suspending production of higher cost ounces across all operations.
Corporate office and support functions will be further rationalised, resulting in a reduction of at least 20% in corporate costs and
the closure of the Brisbane office."

If the Comex price goes to zero, it's b/c nobody is playing there. The miners and refiners would strike deals at other markets. Why wouldn't the BRIC Development Bank support an legitimate exchange?

BTW, it's curious how there was a flood of stories about the govt spying on us before this whistleblower popped up. Trying to get in front and inoculate the public?

M said...

@ gary

"How do you consider this a 'hedge'?"

Mining stocks beat most indexes by hundreds of percent from 2000 to 2008. It is a hedge because it is my best guess at another inevitable bubble. Down markets turn to up markets like night follows day. We are decades ahead of our time. We are years ahead of guys like Peter Schiff.

"Please elaborate your theory on this... thanks. NOTE: personally I think the word 'bubble' is misused here."

The dotcom bubble soaked up years of easy money and created an illusion of stability while proofing the dollar bloc from price inflation. The housing bubble did the same. All bubbles do the same. A paper gold bubble will do the same. Wall street specializes in creating bubbles which buy yet more time for dollar price inflation proofing.

"Trade surplus (until very recently) vs. trade deficit (US). Why do you suppose they are printing full-bore now?"

I said right at the start to throw all logic right out the window. We are dealing in a world with ZERO logic.

"What if it IS - along with dropping paper price, and scarcity surfacing worldwide (and in small coin shops.) You wanna miss that train? The revaluation increase is so great - it eliminates the gamble for more USD, IMO. What are you intending to do with the millions you make on miners? buy three eggs in HI?"

I buy physical gold every month. I have pounds and pounds of it. I will continue to buy physical. I am sick of thinking logically. It is getting me nowhere. This is a pretty simple trade. There is blood in the streets if there ever was blood in the streets. It is a screaming buy. Not based on any logic what so ever. Plus we have tax free investment accounts in Canada. I can trade up to $30,000 tax free.

Get with it. Logic doesn't matter. Get in on another bubble.

M said...

@ Sam

"Do you really feel comfortable with an investment into the partial ownership of the claims of a business designed to pull national resources out of the ground and sell it for a profit."

Yes I do. These countries have been getting fleeced for 30 years. Canada and Australia were even convinced to give away the little physical they had. Newcrest mining just fired 250 Australians. Explorers are dropping like flies. Mining towns are turning into ghost towns. Do you see the Aussy government doing anything about wall street destroying one of their most important industries for fun ? I don't.

Now that wall street has torn down the gold industry, its time to set it up again, just to tear it down one more time. All possible when they have a free cost of capital.

M said...

@ S P

"The basic question is when do we get a critical number of people choosing to exit the matrix. Only when that happens will their be a demand for proper gold accounting."

This critical number of people already think they have exited the matrix. Bonds man !

Grumps LaBastard said...

It appears JPM is net long gold if the COT is worth anything. The BPGDM index is still in toilet so pessimism can't get any worse. The xau/gold ratio is just at a historically stupid 0.07. What does that mean? The sector could nearly quadruple from here to be normally valued even if gold stayed at this price.

byiamBYoung said...

Brother Wil,

That is the way it seems to go with the FOU. Some Inhale and gain tremendous knowledge. Some inhale and sneeze.

As for Mr X, my play, if I had 160,000 tons of bling, would likely involve some rather impressive hookers.

Jus sayin'


gary said...


Your statements:
It is a hedge because it is my best guess

I am sick of thinking logically. It is getting me nowhere.

We are dealing in a world with ZERO logic.

So your guess is kinda like throwing a dart at a dartboard, no?

Plus we have tax free investment accounts in Canada. I can trade up to $30,000 tax free

Isn't it $25,500 total including 2013? I am also in Canada.

As of January 1, 2013, Canadian residents, age 18 and older, can contribute up to $5,500 annually to a TFSA. This is an increase from the annual contribution limit of $5,000 for 2009 through 2012 and reflects indexation to inflation.

Best of luck,

Wil (from another account) said...

Br'r Young,
We have crossed time and space, while plowing these fields of understanding.

It won't be long before the rains come and the ground begins to open ... to you know what (the FOU)!!!


Grumps LaBastard said...

Estulin is on red ice again...about build a better burger

M said...

@ gary

"So your guess is kinda like throwing a dart at a dartboard, no?"

Yes. Do you see any end to the retardation ?

-Google Is Said to Be Acquiring Waze for $1.1 Billion

-Yahoo buying Tumblr for $1.1 billion, vows not to screw it up | Reuters

Looks like we have tech bubble 2.0 You cant make this shit up.

anand srivastava said...

There are several kinds of real interest rates.
Some are risk free others are with risk.
Risk free are basically investing into Government bonds or Banks. Of course these are not risk free in the extremis.

Post the coming Dollar crisis, people will be so burnt by these two so called risk free investments that people will not go in them. This means that even if the returns are great, most people will not take them. I don't expect that the govt will be able to give a very good interest rate there. Assuming 2% inflation and 6% interest on an average on good with risk investments. You can't expect more than 3% on the risk free investments.

I would expect gold will give about 4% in the long run. Provided the zone remains stable. No banana republic type govt.

So bottom line, gold will give slightly better than risk free investments but not as well as very good with risk investments. Since most people are not be able to determine good investments from bad, it will be better for them to save in gold.

gary said...


Yeah, its called Hyperinflation. And your problem is timing the top not just riding the bubbles - Dow 20K, 25K, 30K, 35K, 40K, 45K? When do you decide to get out of USD and into Gold? It's one party you want to leave early rather than stay too late. Kinda 'a year early than a day late' dealio...


Beer Holiday said...

Someone mentioned Newcrest. IMHO they have been the stereotype for a gold co share price failing as freegold approaches. I feel sorry people holding NCM. Reminds me of the terminal decline of the Australian steel companies, some just couldn't believe it was happening, but it was inevitable.

I want to own some NCM, because I just like them. But I'm not touching them over 7 $ .

@MdV Please ignore my incoherent rant above about being king of the world :-)

Beer Holiday said...

Relevant link to the above comment: an article with NCM share price Vs gold price

I'm of the opinion that the PoG is going lower, maybe much lower. Not good for the miners, sadly.

Beer Holiday said...

Hope the link works, that news site has a weird pay wall setup.

If not just imagine a share price chart which looks even more pathetic than the PoG chart since the start of this year :-)

Grumps LaBastard said...

Interbank lending collapsing in China and Europe...solstice coming up as well

Franco said...

"solstice coming up as well"??? Are you for real?

Grumps LaBastard said...

It's an important day for Baal worshippers.

8 Annual Illuminati Human Scacrifice Nights
 March 21
 May 1 (second highest)
 June 21
 August 1
 September 21
 October 29-31 (highest, Oct 31 = Halloween )
 December 21
 February 1

And don't forget we have a Uranus-Pluto square thru 2015. Don't ya hate it when Uranus is squared.

Grumps LaBastard said...

Stuart Unger said...

If I may please lean on this boards collective intelligence for a moment I'd like to ask how many of the board regulars are choosing to manage debt vs gold purchases. I am sure many will simply say to pay off your debt before you buy gold, but I'm afraid that simply isn't an option for me. If I sold all my gold at the current fiat conversion rate I would only be able to pay off half my home and then I'd be left with debt and no gold. Why wouldn't I just let hyperinflation eat up the value of my debt while the value of the equity of my gold skyrockets through the roof? I do maintain a sufficient cash position to pay my bills for a about a year. This question was sparked by a recent comment by a board participant asking why would you leave any money in the gold miners, even if they go through the roof the fiat would be worthless, but not against my existing debt! Things could get crazy, maybe even so crazy that I couldn't make my mortgage payments, but I imagine at the moment of truth that problem would be so widespread that the transition would be complete before any action would be taken and by then I'd be able to make good easily.

I'm an avid reader here and have great respect for the boards collective intellect, to the extent many of you feel comfortable I'd be fascinated to read how many of you are positioning this debt/gold balancing act. In a perfect world I would have no debt, but for me and I suspect many of us, that is simply not an option. How would it be preferable to pay everything off to the extent that I drain all my gold?

I should also add that in 2008 I took a variable rate mortgage because I saw the writing on the wall that rates were very unlikely to go up. since then I've been paying less than 2% interest on my mortgage, and putting the monthly savings into an ounce or two of the precious a month.

Sorry if off topic, I'm simply looking for some ideas on how I can better position myself, and who better to ask than the participants here?

Edwardo said...
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Ashley said...

@Stuart: I'm following the same basic course. We have no debt besides our mortgage and significant equity in our home, but not enough cash available to fully pay it off. All retirement accounts have been liquidated and surplus is going into gold. I won't pay down our mortgage, but I would consider liquidating some gold to continue making payments if worst came to worst. I will not take on debt to buy gold. For a couple of years after 2008 I was paralyzed by the deflation vs hyperinflation debate as well as the fact that most of my energy was going into bootstrapping a small software company. I started really digging into the topic in early 2012 and by the time I found FOFOA in August 2012 I had already read 5-10 books (current state of affairs, history, and economics) and hundreds of articles and blog posts and concluded on the near certainty of a hyperinflationary denouement. (I stumbled across one of FOFOA's hyperinflation posts which helped fill in some details and further my understanding of the multiple, lurking hyperinflationary triggers.) I read the complete archives (sans comments) in about a month (thanks Matrix) while beginning the painful process of restructuring our physical and financial lives. I am blessed with a wife who--while perhaps suspending final judgement on my economic predictions--is content to let me make what preparations I deem necessary as long as they are reasonably balanced against our ongoing daily lives and family needs.

Edwardo said...

I see we have a number of characters here all "bulled up" and ready to go. Before one gets too excited about a return to business as usual, here are a few ideas to consider, in no particular order of importance:

Crashes generally occur from deeply oversold conditions. With that in mind, the "gold" market is about as stellar an example, (notwithstanding the position of the COT, which I view as far less meaningful than those who, seemingly compulsively, promote its value as a forecasting tool) of a market that has the potential to crash as one could find given that it has fallen precipitously, and, yet, can't get (it) up. All this despite some technical data that (broadly defined) looks like it should send "gold" north in a fast and furious fashion.

As I look at a chart of "gold", what I see, basis the monthly, is that since the April swoon the market has traded "inside" the big candle painted that month. That ain't bullish, nor is the triangle, or pennant, if you prefer, that has formed since the nasty collapse of two months ago. In sum it all spells continuation. The monthly stochastics on my charting service are certainly in the bottoming out zone, but the Price Momentum Oscillator is still in a decided down trend, as the action since April has done nothing to change that indicator's trajectory.

In the meantime, I see that GLD added physical today to the tune of 2.71 tons. If memory serves that is only the third time since the beginning of the year that physical has been added to the fund.

And speaking of physical, since that is what it is all about, the "we are going to have another bull market" folks need to come up with an answer to the following question:

Who, at this stage of the game, is going to feed physical into the market in sufficient quantities to keep the paper gold game going? Who would have the incentive to waste (and it would be a waste) physical for such a purpose? Riddle me that, jokers.

Stuart, I am afraid I can't advise on your particular case, but, were I in your shoes, I would do whatever possible to "defend" the asset par excellence.

Michael dV said...

your question has an easy answer...DO NOT PAY DOWN DEBT!!
If you believe HI is coming why would you get rid of debt? The value of debt goes toward zero with HI. It is the one salvation for people. Their currency gets trashed but the debt becomes minimal. Read "When Money Dies". In the Weimar several scoundrel did borrow heavily (by bribing bankers). they used funds to buy factories and other real things. Loans were paid back with currency rapidly decreasing in value.
It drives me nuts to hear or read supposedly smart financial advisors telling people to 'pay off your debt and buy gold.'
If you think it is deflation you sell gold and buy treasuries. In hyperinflation you sell treasuries and buy gold. These advisors are just spouting nonsense.

M said...

@ Edwardo

"Who, at this stage of the game, is going to feed physical into the market in sufficient quantities to keep the paper gold game going? Who would have the incentive to waste (and it would be a waste) physical for such a purpose? Riddle me that, jokers. "

If any fundamentals mattered one iota, this game would have been over 10 years ago. That is the only thing ANOTHER got wrong with regards to his timing. He relied too much on basic reality.

All you have to know is that a paper gold bubble will prolong the life of the IMFS if they get it right.

So you are bearish near term I see.. Do you know anyone that isn't ?

Im looking at the dollar and it is over bought.

byiamBYoung said...


When my Aha! moment arrived, I was in quite a bit of debt from a business that fell victom to a profoundly better financed competitor.

I realized that if I dutifully paid down my debt before buying gold, I might never get the chance to hold physical through the transition.

I started aggressively rolling debt and buying physical, later switching to more of a balance of debt repayment and gold purchases.

I could retire my remaining debt in about a year if I chose to, but have continued to put an emphasis on buying gold. Once I reach my minimum target, I will likely finish off the debt, just because there is about 10% blind skeptic in me that will never fall silent, regardless of how well I understand the state of affairs here in the trenches.

But, now that I have a modest (and growing) stack of physical gold in possession, I sleep better at night due to choosing the path I have been on.


Grumps LaBastard said...

If anybody insists on delivery at first they may be offered a premium for cash settlement.

Next it would be, "look at the fine print."

If it gets bad enough then the price discovery center-of-mass will move East.

I wouldn't focus on price action on the Comex so much. It's open interest on the futures market. The death of paper gold could have a rising price as volume drops to zero.

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

M wrote:

If any fundamentals mattered one iota, this game would have been over 10 years ago. That is the only thing ANOTHER got wrong with regards to his timing. He relied too much on basic reality.

The game was extended because of China not because "fundamentals" somehow ceased to exert their inexorable influence. To suggest otherwise strikes me as as akin to asserting that the laws of gravity were, at some point in the past, suspended.

All you have to know is that a paper gold bubble will prolong the life of the IMFS if they get it right.

I am going to avoid asking you who "they" are, because I have a reasonable idea who you have in mind. Suffice it to say that the evidence has been piling up for quite some time that "they" don't have proprietorship over the script in the way they once did.

So you are bearish near term I see.. Do you know anyone that isn't?

Well, now you've put your finger right on it, because, from where I sit, "they", with few exceptions, have been bullish all the way down or haven't you noticed? If they are a somewhat chastened now, it's only because every bottom call has been summarily poleaxed and, yet, somehow, despite the fact that the market, such as it is, sports sentiment and technicals that are literally and figuratively, off the charts, I see no one, save for a select few, who have even asked if, maybe, just maybe, something monumentally different from the dynamics we (gold lovers) are traditionally apt to register informs the market. Jim Sinclair gets a smidgen of credit for at least realizing that his model for organizing the gold data is as cracked as The Liberty Bell, but he can do no better. Witness his gutted gold guru schizophrenia wherein he incoherently and less than honorably espouses freegold on the one hand yet touts the likes of Bo Polny (or whatever his name is) on the other.

Grumps LaBastard said...

There is another scenario that may unfold. HI could be put off for awhile. It would not help the creditor nations to have Treasuries tank all at once, even if they have enough gold for an overnite revaluation. They may want their cake and eat it too. They may force the Fed to withhold revaluation to protect Treasury holdings. Keep an eye on the BRIC Development Bank. It may act as a throttle on the liquidation of USTreasuries allowing an orderly as possible absorption of dollars into gold. This would mean a gentler rise in gold and fall in Treasuries.

Luke said...

Stuart, I am in very little debt and am actually looking to take on more. I am hoping there is another April style crash and I can put a large purchase on a 0% APR credit card.

Phat Expat said...

Yeah, I believe the dollar is toast but can bounce back to 82.3 and then 'plunge' to 79.

Gold/Silver feels odd as I was expecting a bounce. And, as M points out, with all the negativity, you want me to believe the crowd got it right? Hmmm...

What's interesting, and maybe indicators of the coming (hyper)inflation, are the other white metals; Pt and Pd (and especially Pd right now). 780'ish for Pd will be telling.

M said...

@ Edwardo

Eddy wrote: "The game was extended because of China not because "fundamentals" somehow ceased to exert their inexorable influence."

ANOTHER's work about timing pertained more to the dislocations in the gold market. And yes, I think gravity has been compromised here..

"I am going to avoid asking you who "they" are, because I have a reasonable idea who you have in mind."

The paper gold market is who they are. You know, the creators of the paper market that makes the gold price go down when there is more demand for gold.( FOFOA's words) I thought you said gravity couldn't be compromised ...???

"maybe, just maybe, something monumentally different from the dynamics we (gold lovers) are traditionally apt to register informs the market. "

I sure hope you are right but I am diversifying with the anticipation that you are wrong and this paper market will live for another bull phase. I am a believer in freegold, have been since early 09 if I remember right.. But I still think we are too ahead of the game.

M said...

@ Grmups

"It may act as a throttle on the liquidation of USTreasuries allowing an orderly as possible absorption of dollars into gold. This would mean a gentler rise in gold and fall in Treasuries. "

Could very well be. They seem to be capable of anything.

Ashley said...

@Michael dv: I wouldn't advise anyone to count on HI rapidly wiping out their debts. We could go through an extended multi-year economic collapse before entering the final hyperinflationary phase. Besides, governments have been known in the past to apply different ratios when converting cash, bank accounts, and loans into new currencies (see Fiat_Money_Inflation_in_France for one example of this).

Grumps LaBastard said...

Let's see if this 3am drop portends a GLD puke.

ampmfix said...

Michael dV said...

I am aware that the French once tried to 'make it fair'. I'll check out your suggestion. My impression was that their efforts were unsuccessful.
I realize that these things can be hard to predict. I am financially well disciplined and I should paraphrase my comments to indicate that.

JR said...

German high court cage match Tuesday and Wednesday- are ECB bond purchases illegal?

Jens Weidmann, the president of the Bundesbank,


Jörg Asmussen, a member of the executive board of the European Central Bank.

[...]Much of the intellectual foundation for the legal challenges comes from the academic work of people like Mr. Neumann, the University of Bonn professor. His views, including a fixation on inflation and an almost moralistic belief that countries must live with the consequences of their past mistakes, have had an obvious influence on Mr. Weidmann, the Bundesbank president. Mr. Weidmann worked as a research assistant to Mr. Neumann while earning his doctorate in the 1990s.

“The position that he represents is also the position that I would take,” Mr. Neumann said of his protégé on Monday.

As for Mr. Asmussen, his other former pupil, Mr. Neumann was more restrained in his praise: “He has to formulate the majority opinion of the E.C.B. That is different from the German position.” [...]


So far the debate is largely theoretical. The European Central Bank has not bought any government bonds since it announced a willingness to do so last autumn. The mere threat of action was enough to calm bond markets and lower borrowing costs for Italy and Spain.

One Bad Adder said...

@Ashley: - Pragmatists-R-Us ...good efforts!

One Bad Adder said...

Despite being wrong-footed on DX this past week or so, our short T's canary has hardly blinked!

The associated details indicate a steady-as-she-goes roll-over without any signs of an (anticipated) across-the-board flight into the "safety" of T-he present.

One Bad Adder said...

There HAS however been a marked divergence with PaperGold visavee PaperPaper
This suggests a lack-of-confidence is developing re: PaperGold ...a pre-necessity to FreeGold IMHO.

One Bad Adder said...

OT: ...and HERE IS a look at DX:$IRX (6 mth) identifying the (unanticipated) DX Cliff-dive ...and concurrent $IRX activity.
There is NO WAY DX will remain "down here" ...OR go (much) further south ...IMMHO.

Edwardo said...

This will interest you, M.

Here's someone who thinks the paper gold market game continues courtesy of Chindia. Vamos a ver.

byiamBYoung said...

Just dawned on me. Every single gold purchase I have made is captured in the NSA treasure trove of private citizen secrets.

How ever will I explain that boating accident?


Luke said...

Does this really matter?

Brady said...

Edwardo, was thinking about your comments & a/foa/fofoa's writings - and you mentioned the one leg - support via buying of treasuries (china); then there's the other leg - the gold must flow...enter Central Bank Gold Agreement 1 (Sept 1999), 2 and 3 (ending Sept 2014) & my understanding is other central banks selling gold in the late 90's/2000's...

But QE has been upon us and cannot stop- less/limited support on this leg; and it seems gold is flowing less thus less support on the other leg.

Who knows what happens next - but as fofoa has stated, it seems support has/is waning for both legs.

In this big picture context, I find the timing of QE, ever increasing QE & CBGA 3 (sept 2009) and the end of the CBGA 3 (Sept 2014)as interesting timing.

byiamBYoung said...

GLD is dog paddling just above the 1000 Rubicon. Suspenseful times, indeed.

Logic fails. Fundamentals fail. I guess all that is left is a hope for
some good luck


tintin said...

very slow changes to GLD lately, again I am thinking, is that the line in the sand? the 1000 ton line?

Phil_O_Dendron said...

GLD 1000 tons may be important but another part of me suspects that this too may be a diversion to distract attention from some unseen activity. These bankers are a tricky lot and they always seem to have some new angle to prolong this game.

"No matter how cynical I get I just can't keep up."

farmersteveg said...

Tried to explain to someone how if you are long gold futures you are short physical gold. Became apparent I was not sure myself.
Can anyone explain theory or mechanics of this.

Seems to me this stuff is slowly starting to become mainstream in bits and pieces (ex: lots and lots of references to diff between paper and physical lately) but the commentary with it is not even remotely close to FOFOA so I'm not sure much good comes out of it.
Anyway, would appreciate a response.

Michael dV said...

Do you really think there is a banker's deception just to fool fofoa?
There is not a single other gold writer in the world (I read or listen to several) of any prominence that is saying anything but 'gold is goin to da moon'. They all seem to believe that the paper market will carry gold higher. They believe the COMEX will fail due to buying pressure. Few make much of GLD inventory though the COMEX and JPMorgan stashes do get some attention.
I suppose if they found out we are hot on the trail but my guess is, even if they knew we knew, they would ignore us as being trivial in numbers. I do believe fofoa would feel flattered however if they were going to a lot of trouble just to throw him off the track.

Michael dV said...

might want to look here:

Michael dV said...

I'd like to take a crack at explaining why the paper gold market needs support.
In every market there exist stop loss orders. These are orders left with a broker who computerizes them for automatic execution. When the price goes down to a certain point share are sold with no further input. They represent the lowest price the owner can bear before selling. The price level may be chosen to prevent a loss of more than say 25% of purchase price or to lock in a profit. There are also orders for the rising price market but for the big banks I believe that playing with stop loss orders is more profitable.
All the big shots have to do is have enough margin to back a large short sale like the 400 tons or so sold April 12 and 15. The short sellers put enough sales into the market to move the price down to where a lot of stop loss orders reside, and they know where and how many there are.
Using this method they can predict how low the price will go and where they need to start buying back the shares they have borrowed.
It is claimed that one billion dollars was used as margin and 3 to 400 hundred million in profit was booked in the mid April bear raid.
None of this requires any more motive that the desire to make money.
Think about this, why should gold ever rise in price? There is always plenty to buy, the supply is stable. Supply disruptions can influence price but not like with corn or cotton. The greater fool is the only one who will buy your gold for more than you paid for it.
So there is not much pressure for gold to rise (except for the relatively small demand for physical) and there is a profitable game to be played that constantly puts downward pressure on the paper price. As long as some physical flows the paper market is a ripe endeavor for big shots, with enough dough to move the market, to prosper...and the authorities do not seem to care if the price is kept low. They seem to like least the dollar faction does.
So now the game is being played with no support (no one buying paper to push the price up at key moments) while the shorts seller continue their usual behavior. We continue to see drops and then rises as they buy back the borrowed shares. A little time passes and more stop loss orders accumulate and soon it is time again to make some easy money.
The abrupt drops often seen on certain weekdays have been a part of the gold market as long as I have been watching it, about 3 years. As it continues, with no one doing any heavy paper buying, it creeps lower and lower. Soon there will be a problem though as SOME gold must flow. No one who wants physical can be denied. The idea that a lot of people can simply be cashed out of COMEX or any market that purports to be a commodity market is preposterous and gives the idea that all are just engaged in a gaming event. Physical gold must be a part of the process for the few that demand it. Those who have a lot of gold who could supply it do not seem interested in selling at these low prices.
So that is the mechanism and process that I see causing the constant downward pressure on the gold market. I know fofoa has explained it before but those are the ways and reasons that allow me to understand why gold is going lower and lower.
I am always open to others ideas as I have traded stocks for decades but am not a pro.

Grumps LaBastard said...

Maybe price discovery could go where supply is available...East. Why hold off this inevitability? Game theory. Both West and East derive benefits from current arrangement. East needs time to rebalance from mercantilist model and enjoys the lack of burden of policing the seas. The leverage of being creditor also has allowed China to extort technology from the West. Oh to be a fly on the wall for that Palm Springs meeting.

farmersteveg said...

Thank you Michael dV

Phil_O_Dendron said...

"Do you really think there is a banker's deception just to fool fofoa?"

That is not what I said or what I meant. If most/every other set of data from the gov is mostly bogus why not this data also? The point is: How does one sort out the good data from the bad data when it is clear that much of it is made up, fudged, changed, massaged, manipulated and lied about?

Edwardo said...


While trying not go all (cocked at a rakish angle) tin foil hat, I'd like to offer that your perspective is, to my view, a sound one. All reported data, especially in these times when so much is on the line, must be viewed with more than a dollop of circumspection. There is no way to be certain, at least for those of us on the outside looking in, what maneuvers, sleight of hand, trickery, or other modes of subtle deception may or may not be operating in any sphere that has something to say about the real and perceived present and future condition of the $IMFS.

Wil (from another account) said...

When what is good for Shrimp is also good for Giants, then, and ONLY then, will shrimp ever be allowed to see beneath the many layers of the Onion of Propaganda.

Hence the APPEAL of Freegold, as it gives hope in times of great despair, thet "we are all insiders now".

Will the Flower of Understanding finally defeat the Onion of Propaganda?

When Giants wield the flower and abandon the onion ... it will.

Wil (from another account) said...
This comment has been removed by the author.
Jesse McL said...

Good to see that this professor, columnist for the FT, recognizes the Euro for the failure that it will become and the UK as the beacon of hope to the rest of us that it surely is! #FAIL

Financial system ‘waiting for next crisis’
By David Oakley, Investment Correspondent
June 2, 2013 10:33 pm

John Kay, the economist and author, will warn this week that the world is heading for another financial crisis because the economic system is geared around trading profits that create market bubbles that inevitably burst.

Almost a year after the publication of his groundbreaking review of the UK’s equity markets, the London School of Economics professor will say in a keynote speech this week that the world is “waiting for the next crisis”.

Prof Kay, who is a columnist for the Financial Times, warns: “I think the eurozone does look likely to be it [the next crisis].”

The professor, who spent a year gathering material for his 40,000-word report which was published in July, says the reason for his gloom is because the financial services industry is designed around trading activity that is prone to instability.

“We have been through sequential crises, of which the prominent examples have really been the emerging market debt crisis in the mid- to late-1990s, the new economy bubble, credit expansion and bust, and the eurozone crisis.

“They’re trading crises, fundamentally, and the system is geared around trading profits, which are, in large part, money that is borrowed from the future. A crisis results from the moment at which this money has to be paid back.”

Prof Kay’s speech, which will be made at the Russell Investments’ annual pensions conference in London on Wednesday, also looks at the likely evolution of the financial services sector over the next decade and how the structure of global markets is expected to develop.

The professor says that there should be less trading in the financial system. “I’m starting to query in my mind whether the role of public equity markets isn’t just over, from the point of economic value. I don’t see the need for them any more.

“We have a kind of casino activity, which is associated in large part from what these companies actually do, and that’s OK so long as people understand the facts,” he says. “It’s rather like betting on horseracing. It doesn’t actually affect the performances of horses, or it shouldn’t.”

He will add that bubbles are created in certain asset classes as people search for momentum-driven profits. “Prices are driven to silly levels, but everyone makes a load of money in the meantime, and then you get a correction.”

Prof Kay says that he would “personally stake modest sums” on the euro collapsing.

However, one ray of light is the UK. He says the UK government has introduced reforms such as separating the retail and investment operations at the banks that should protect depositors from market crashes.

“We’ve seen some reform in the UK, like the attempt to recapture Barclays and make it a bank,” he says, while pointing out the lack of change elsewhere. “We haven’t seen it in the US, Germany or France. Only UBS has instituted reforms outside the UK. Overall, I still remain gloomy about the outlook for the economy and the financial system.”



Wil (from another account) said...

A good take away from Michael Kosares, a man who conversed with Another during the inception of the original THOUGHTS ...

Michael dV said...

I will admit that I don't trust 'data' either in the larger sense. I was referring to the GLD inventory numbers alone. those I have no reason to believe to be inaccurate. There certainly (and likely are) rules for posting these numbers that we do not know. They could hide something in those rules.
My point was that I do not see many others that even mention these decreasing inventory numbers. Indeed who else besides fofoa has even called upon its readers to watch the GLD inventory?

byiamBYoung said...


I totally agree with your position. Misinformation has become a high art, and it is everywhere you look.

Except here ;)


ein anderer said...

Michael dV,
GLD: Someone asked me why the decline of the GLD ETF inventory is a problem at all. His arguments where:
There was a time when there was no GLD at all (they started Nov 2004?). And there where years when the inventory was very low, some few hundred tonnes.
He said: If the GLD engagements dry out bit by bit this will have no effect at all. In the end we will have a pre 2004-situation again. Without Freegold as 2004.
I didn’t knew what to answer. His figures seem to be right.

Aquilus said...

Ein Anderer

The answer is: at that time CB actively supported the marked with leases, outright sales, and guarantees for paper while mines delivered on gold loans against that paper.

Do you see that happening today?

FOFOA said...

Here's a conversation I had with FOREX Trader (FT) yesterday:


Nothing new on the wire to report from my end. But I did have an interesting note for you which I've been meaning to email about, unfortunately been very busy.

The note is that carry is kind of screwed up in the FX market. As a simple example, EURUSD shorts are paying carry. Also, XAUUSD and XAUEUR shorts are as well, at least for the last couple of weeks since we noticed here in the office. Relative to the other G10 carries available, especially if you don't include the comdolls (NZD/AUD/CAD), the rate available is pretty good ($16/$1,000,000/night) on a relative basis. About a quarter of what you get for an AUDUSD long and about 4 times what you'd get on a USDCHF long.

I am very certain that this carry (combined with the technical position of the charts) is incentive for a lot of traders to short the FX pairs on leverage, carry can be a major consideration when trading a levered position. For example, we pretty much never hold overnight positions in AUDUSD or AUDJPY.

FOFOA: Can you explain this a little more? Are you saying you earn a small "interest rate" when you short the euro or gold?

FT: Surely you have heard of the "carry trade" before? Let me explain it. Basically, the original investment thesis was essentially: given two "risk free" instruments, yielding differing interest rates, a trader purchases the instrument with the higher rate on leverage, and funds that position by shorting the instrument with the lower rate, at the same amount of leverage. This allows the trader to collect the "carry" or "swap", which is the overnight interest rate differential between the two instruments.

This concept is the cornerstone of almost all financial activity which occurs, as long as there is margin to borrow. Obviously a simple example would be the "bank spread", i.e. short 1-3Y Treasuries and long 10-30Y Treasuries.

Same applies, implicitly, in spot FX. If I am long $1,000,000 AUD and short $1,000,000 USD (i.e. long 1 AUDUSD contract) then each night as the banks roll over their intraday positions (squaring the books), I earn the interest rate differential (e.g. AUD LIBOR minus USD LIBOR divided by the number of trading days in that year) from whoever is on the short side of my long (through the broker). If I am short 1 AUDUSD contract then I must pay the differential to whoever is on the long side of my short.

Currently, both XAUUSD and XAUEUR shorts are paying carry. During a technical uptrend in an instrument like AUDUSD, this is a strong disincentive to short the instrument, as the trader must pay the differential to hold the position. A technical downtrend which pays carry on the other hand, gives incentive to the trader to short, the more leverage applied the higher the multiple applied to differential earned.

FOFOA: Thanks. Yes, I understand the basic carry trade (borrow one currency and sell it short to invest in a different, higher-yielding currency). Like the yen carry trade – borrow yen, sell them for dollars, use the dollars to buy Treasuries. Or the gold carry trade. Borrow in gold units, sell them for dollars, invest the dollars. You not only earn the interest differential but you also profit even more if the borrowed unit falls in value relative to the invested unit. And if enough people are doing this, the very act of doing it pushes down the borrowed unit. It's all great until it's not and everyone rushes to unwind the trade first. Sound right?

I just need to wrap my head around it in FOREX terms since I've never traded currency pairs.


FOFOA said...


FT: Yep that is exactly right, the only difference is that in spot FX, all of it is implicit, i.e. you don't need to go out and borrow to short, or invest the dollars in Treasuries, your short is part of the pair and you can earn the overnight rate directly.

FOFOA: One thing that was confusing me was your trader lingo: "the shorts are paying carry." To a non-trader who doesn't know the lingo, that could be taken both ways. As in "the short traders are having to pay the interest rate differential," or "short positions are now being paid the interest rate differential."

FT: Sorry about that! Never even occurred to me :P

I'm not sure I remember the last time trading XAUUSD paid carry in either direction, so I thought it was quite interesting. Obviously interest rates have had a jump over the last month, but I doubt if that's enough to account for this. It seems possible that the "interbank/overnight rate" for XAU has gone down significantly, driving up the rate differential?

The way I like to think of it is, if the US 10Y yield goes from 5% to 2.5%, then this indicates there has been strong demand from the market to lend 10Y money to the US Government.

So if the XAU "interbank/overnight rate" goes down, this indicates there is strong demand from the market to lend overnight money to ...???

FOFOA: Just to be clear on this "the shorts are paying carry", if I hold a $1M short position in XAUUSD overnight (I'm shorting gold because I think the $POG is going down), do I get paid $16? Or do I have to pay $16?

FT: Haha sorry, yes, to be clear, if you short XAUUSD then you get paid $16.

FOFOA: Thanks! And now who is paying me? Is it someone who holds a $1M long position in XAUUSD overnight? Does it now cost $16/night to bet on gold in the FOREX market?

FT: The person paying you is nominally your broker, but what's happening is everyone that has a long on XAUUSD is paying the broker and the broker is disbursing that accordingly to the shorts.

The differential is not nominally symmetrical because FX contracts are denominated in the "right hand" currency in the pair (in this case USD). So it actually costs $21 to bet on XAUUSD longs. Although I believe the differential expressed in percent should be symmetrical.

FOFOA: So it sounds like this is a big incentive to be short gold on the FOREX. How do you read this?

FT: I think it could potentially be a big incentive in the same way as I've been using AUDUSD as an example. Following a trend is nice because of the potential for capital gains. Following a trend which pays cashflow is obviously nicer. Leveraging a trend which pays cashflow, nicest of all, back up the truck.

MY SUMMARY: There is an unusual incentive right now to short gold on the FOREX. You get paid to do so, and it's the longs that are paying the shorts. This is separate from the capital gains made when gold actually goes down. So if/when gold goes down, the longs are not only taking capital losses, but they are paying the shorts an interest rate differential for the "privilege" of being long paper gold (overnight).

Michael dV said...

I'd refer you back to fofoa on this. The entire existence of a paper gold market was 'good business' (Another). It maintains a downward pressure of the POG. It marks gold as a commodity. When the GLD folds that will be one less paper market and that gold will finally be off the BB books and will reside in the strongest hands.
If you have followed fofoa's thinking, the BBs have used their gold to make money from an otherwise 'dead asset'. When they stop doing this is will be for a reason.
To me it will signal a significant change. Their dead asset will be allocated and it we will be at the end of the era of commodity gold.
I think this is the reason for the interest in this number. We are watching for the sign that this asset, which has been a profit center for the BBs is about to undergo a change. They will give this activity up only when they have to, only when those who wish to hold it allocated are willing to pay more than the BBs make holding it for profit.

Wil (from another account) said...

Funny coincidence but the comment I deleted yesterday was in reference to a ZH article about rigging of the FX markets, and I deleted it because (as usual) I can't hotlink to a ZH article unless I take the hashmark out at the end out (or something or other, and I was just sick of it) but I'd be willing to bet there are more ways to incentivize shorting gold than there are layers beneath the onion of propaganda.

In the end, it is all because GOLD is so hated by the "system", because it brings truth to the system, integrity to the system, and freedom to the markets.

If FREEGOLD doesn't come soon, the outlook for mankind is quite grim. This is why PGA's are mankind's greatest hope. This is why the dark side paints them barbarous, hoarders and cultists.

The pot calling the kettle black.

Grumps LaBastard said...

Just looking at Pretium's econometrics for the Brucejack field. Compare how the payback number decreases with the price of gold moving from 1350 to a measly 1415. Now imagine 3000 gold...4000...5000...7000 and with a strengthenig loonie to boot. I would wait to accumulate more. Usually after a 43-101 the street shorts these projects that will have to raise capital.

The Dow Theorist said...


Does it imply that the longs are willingly losing money (interest paid and capital losses) just in order to depress the price of paper gold? Are they maybe banks paying the interest to the shorts with printed money?

It seems someone is willing to lose fiat money just in order to attract short sellers.

ein anderer said...

Michael dV,

thanks. Your

the BBs have used their gold to make money from an otherwise 'dead asset'


which has been a profit center for the BBs


They will give this activity up (…) only when those who wish to hold it allocated are willing to pay more than the BBs make holding it for profit

put some further important bricks onto my tower of understanding :D

(OT: I don’t know how other foreigners are experiencing this:
Reading my mother tongue is leading to concrete conclusions and collections of informations which I can teach if I want. Reading a foreign language leads mainly to a feeling if those informations are right or wrong and to overall conclusions mainly.
Therefore it is very difficult for me later to build up this result again with informations and arguments. It is as if these results are sitting on a glassy building whose structures are only partially visible.
All the more many of these informations stem from the financial discipline which I was never in, almost not in my mother tongue and still much less in English.
So I went into Gold 100% (may be some percent too much), but I have difficulties to explain my move on a solid theoretical basis.
Therefore many thanks ((also to FOFOA)) for helping me through once in a while.)

ein anderer said...


thanks to you of course too!

Yes, I see the difference. But still wondering:

Are ETFs a Ponzi Scheme in terms of "100 go in, only 1 gets out"?

If no, why there is a problem if 99 get out at least with cash? Where do the panic come from? If I wish I could get out with physical and reality tells me "no, you can get out only with cash", then I may be dissapointed. But panic? What will I loose if I get only cash back?

I am sure this question of mine shows that I do not know really what ETFs are all about. Is it really necessary to step into this unloved area?

ein anderer said...


of course thanks to you too!

Yes, I see the difference! But what I do not understand yet is where the panic will come from. I understand (may be wrong?) that ETFs are no Ponzi Scheme. If 100 go in 100 (and not only 1) come out.
Yes, some would like to get the physical. Ok, they will be dissapointed!
But what they are loosing if they are paid out only with cash?
This would lead to panic only in the midst of HI, doesn't it? But all the probably long months before?
In other words: GLD’s inventory could decline slowly down to 2004 values. Wrong?

I fear that I did not grasp this detail of FG too … :(

Michael dV said...

ultimately we wait for a big change, the death of the dollar. When the dollar dies the fact that one gets cash instead of gold will make all the difference in the world. Yes there could be a period of time after a rest during which gold is very high priced in dollars but I suspect that time period will be brief. After all what good is a dollar if gold is at $55,000/ ounce?
It may take a while to sink in but ultimately all currency is/will be backed by gold. the Euro already has gold on its balance sheet. It will look great at higher gold prices. The dollar will just look weak.
I am coming around to thinking that the reset will be brief, perhaps instantaneous. The gold market breaks, panic ensues type of thing.
All I really know is that I'm holding gold more for this reset than for an appreciation in dollar terms.

Michael dV said...

Dow t
this interest thing is a part of every FOREX transaction. It is just a part of buying one currency with another currency and leverage.
Consider if you put down $1,000 and tell your broker to buy Yen with Australian dollars. The yen pays very little interest. The AUD pays a few percent. You broker has to borrow the AUD and pay interest on it as long as the trade is on. Remember, in FOREX you are just putting down a deposit and using 50:1 leverage. That is where the interest comes in.

The Dow Theorist said...

@Michael dV

thx for your explanation. But this implies that paper gold is paying a lower interest than dollars, right? My question: is there something abnormal in this as Fofoa seems to hint?

Aquilus said...

Ein Anderer,

For GLD, the problem is not that the physical does not exist. The problem is that the GLD price must follow paper gold price, but in order to obtain the physical you must do it in basket increments (100000 shares/basket).

In normal markets (like we've had so far) paper and physical track close enough, so no reason why one cannot sell GLD shares and buy the corresponding physical (plus minor markup for physical).

The problem comes when the pressure on the physical market becomes great enough that the price of physical is now at greater and greater markup to paper price. At this point, selling GLD shares does not get you the equivalent weight of gold anymore, since the markup now eclipses the actual price. See where the problem is?

Of course, if you could redeem your GLD shares for physical, you would be really happy and there would be no problem. But because you need 100000 shares minimum (plus the authorization of an Authorized Participant), that option is not open to YOU even though there is physical backing every share.

Ok, so at this point what happens? Who in retail do you think will want to continue to buy GLD shares when the disconnect is so profound, with GLD (paper price) dropping and the markup from that price to physical increasing every day? No one you say? Correct.

So as retail investors dump GLD shares, who is the buyer that's always on the other side? Someone who CAN redeem 100000 baskets? Correct again!

But only until they close the fund, as the BBs that are the authorized participants already have title to the gold, and will want to make sure it goes to the right customers. They will probably be the ones purchasing retail's shares just to have everything buttoned up.

Does that make more sense now?


M said...


Pretium and Premier gold are my favorites.

Woland said...

Hi JR; In case you care, Jorg Asmussen's presentation to the C.C.
is on the BIS website (under speeches) June 12. Nothing on the
Q and A, though.

Indenture said...

Would the Authorized Participants use soon to be worthless dollars to pay the shorts whose actions are suppressing the paper market? This way instead of GLD being drained because the price of gold is going down, the paper price of gold is going down so the AP's can remove physical by matching the market they are creating. Is this a good way to drain GLD?

Wil (from another account) said...

Ahh, here it is, same Bloomberg article as ZH picked up now by GATA:

If we can trust the srticle, or the motives behind it's publication ... I would just say that the FX markets dwarf equities and commodities trades.

If rigging is rampant there, as it apears to be elsewhere, perhaps there is something to be understood in the "unusual incentive" to short gold.

Michael dV said...

Dow T I think gold IS usually cheaper to borrow than dollars so I'm not sure why this is different.

The Dow Theorist said...

Michael dV,

exactly. Maybe something escapes me, but I feel something unusual would be rising interests in paper gold, which forces those short paper gold long USD to pay interest on the spread. If currently paper gold interest is lower than that of USD, paper gold shorts will make some interest on the spread, and this is nothing abnormal.

Michael dV said...

overall we see a system that keeps a downward pressure on the POG. As Another mentioned, we should be happy. It keeps gold cheap and was not a conspiracy, 'it was good business'.
When gold is $55k/oz or more we will look back wistfully on these days when we could pull cash from our wallets and buy the precious.

ChrisF said...

Please wake us all up when Gold actually goes into backwardation because things should really start to get interesting, implying that physical is hard to find(!) and forward sellers are prepared to sell at a discount to spot - which currently seems not to be the case.
I understand this would be a major market event, if it ever happens.

Motley Fool said...


Given that pretty much all the metrics that goes into determining basis, etc are manipulated; I'm not so sure we can do that.

If memory serves FOFOA has a post on the topic dating 2-3 years back.


michael3c2000 said...

NSA troubles. No gold confiscation on the minds of those with monkey on the back... unless it's from another "faction" weeee!
I will now read this followup (by same author) just out:

victorthecleaner said...

If someone who is short XAUUSD (i.e. has sold gold for dollars) gets paid carry, this means that paper gold is in backwardation, doesn't it?

If I understand her right, she says that if I sell (paper) gold for dollars spot and buy (paper) gold forward, I receive positive interest on that swap. That interest is negative GOFO, i.e. if it is positive, then GOFO (=paper gold base rate) is negative, i.e. backwardation. (I know that COMEX futures up to 1 or even 3 months have been in backwardation relative to XAUUSD spot for weeks now, but that's different locos and so strictly speaking not comparable).

For some reason it does not show in the mean LBMA GOFO rates though.

So what is going on? Do I understand her right? Have Sandeep Jaitly or Izabella Kaminska written anything on it recently?


The Dow Theorist said...

Victor, Chris F:

backwardation...these are big words. So Fofoa was on to something. We need the big brains that abound on this blog to deepen this issue.

Grumps LaBastard said...

I'm really disappointed in Bert Dohmen. On Puplava's show he turned Amerman on us spouting crap that gold is a rotten investment b/c if inflation is 50% then Au goes up 50% and that cap gain tax makes you a loser. What limpdick analysis is that?

That's the problem with these newsletter writers,when their clientele figures out they don't need any recommendations the hacks have to scare people back into the FIRE.

Michael dV said...

Trend Reversal
It is always a long shot bet but eventually it always happens.

FOFOA said...

Hello MdV and Victor,

I mentioned your comments to FOREX Trader because he doesn't really follow the comments.

MdV, regarding 50:1 leverage, he said that retail brokers usually offer up to as high as 400:1 leverage to would-be currency traders. But he said that you'll rarely see professional FX traders using more than 20:1 leverage, and even then it's usually only the day-traders using that much leverage. He said at his office it's generally more like 3:1 or 2:1.

When you increase the leverage, there is a massive increase in the "cash flow" of the invested capital, but it also increases the potential for a margin call, which he says is obviously why retail brokers offer such high margin. For example, at 50:1, you'd only have to deposit $20,000 to hold that $1M XAUUSD short overnight and earn the $16. That equates to an annual interest rate of 21% which is HUGE. But the downside is that a 2% adverse move in the underlying is going to mean a margin call, which means you could lose the whole $20K if gold goes up 28 bucks and you don't have more cash to wire to your broker.

At 400:1 leverage (just for fun), you'd be earning a "carry" (interest rate differential) of 170% annualized. But the bad news is that gold would only have to move up $3.47 before you would either lose your whole wad or have to deposit more. Imagine having to deposit another $20K each time gold moved up $3.50 and you've only got $100K. If gold goes up $18 you'll lose the whole $100K, even if it then goes into free fall right after you went broke.

My point is, the high leverage offered by retail FOREX brokers is probably a cash cow for them (not you). But the real pros (like FT) are only using 2:1 or 3:1 leverage.

With lower leverage, he says: "This is where the technical trend comes in, allowing you to run your carry position with a tight "stoploss" that should stick unless the trend reverses. If you're a large investor with cashflow requirements (think pension funds and whatnot) then positions like this can be a moderately attractive way of earning a 5% "yield" in an otherwise yieldless market."

Regarding Victor's comment about backwardation, all he said was: "I've attached a pic of the gold COMEX futs curve, you can see that it's in a pretty standard contango."


Jeff said...

Someone is long XAU and paying carry. Perhaps to lock in a delivery price?

Michael dV said...

Amerman is taking a strict 'no reset' POV. He is absolutely correct in his recs. If we continue forever on our current path I'll wager his clients would do as well as any.
Here we are really betting on a significant trend reversal. We anticipate a major shift in the monetary system. We are unique and a very small group. Our bet is highly leveraged and we expect to loose nominally for a period of time. No advisor could keep clients with such advise.
Most advisors can explain their suggestions in a short presentation.
Doing what needs to be done to prepare for freehold requires a long period of study to learn why gold will be more valuable and patience to wait for a phase change.
Guys like Amerman could never push FG. At most they can suggest a percentage of gold. Explaining why it needs to be hold close requires overcoming another hurdle of paranoia.
Without frequent refreshers it is easy to run screaming from the forum. I do understand why people have a hard time getting it.

John said...

@ Michael dV

I quite agree with your point of view....and in fact a FG scenario from this state will prove to be an absolute market "classic" with everyone caught unawares, unprepared, and "all in" the precisely worst thing (paper) at precisely the worst time. And of course with hindsight it will all look so obvious. For decades investors large and small, amateur and pro will be "kicking themselves silly" and endlessly reciting a mantra of "woulda, coulda, and shoulda".


Grumps LaBastard said...

I find fault with the Amerman assumption that gold would reflect inflation 1:1. In a negative interest rate environment gold would outpace inflation more so that after any cap gain you would still end up with more purchasing power.

There is Gibson's Gold rule as a guideline. The rule states that for every percentage point the real interest rate is below 2%, gold will increase in value by 8%.

If inflation is 7% and UST debt averages 2.5%, then real rates are -4.5%. This is 6.5 points below 2%.

6.5 times 8% is over 50%. That sure kicks inflation’s buttocks.

If inflation were 1.5%, then real rates would be 1%. One point below 2%….forecasting an 8% rise in POG, still far exceeding inflation.

gary said...

I do understand why people have a hard time getting it.

Amen to that. I see the Gold community as being inside a large circle and within that circle is another, much smaller circle with those accepting of FG. Goldbugs who don't accept FG are easy to understand - it is simple ignorance (RTFB), but those outside the larger circle - well, this is.... perplexing. I'm sure, like many of you, I've discussed Gold with at least 50+ friends and acquaintances. They fall into two camps - those who kindly listen but subconsciously ignore - and those who argue. When the second group gets defeated by historical stats and logic - they invariably just join the first group. Is it the giant umbrella of mainstream perception (read 'propaganda') that inhibits them? or is it something else? There really is a definite gap - a wide one. These guys that recommend having 5-10% AU are simply diversifying (mostly paper Gold) - I would say they don't understand Gold - and I'll wager that most don't really understand risk either (not in the current economic environment.) Of course we wonder what the one trigger will be, and when, for the masses (this tends to be the SilverBug stance) - but in reality - it won't ever arrive for JoePublic. His loyalty to the USD won't shift to Gold - but to the next currency (perhaps a digital one, but definitely a devalued one) - whatever that may be. People can adapt but they can also be happiest as lemmings or ostriches (head in the sand.) Maybe its television, and Hollywood, that encourages this... it sure is a head scratchier.

Edwardo said...

If the vast majority of Americans don't bat an eye, let alone actually take demonstrable action, in the face of the complete transformation of the U.S. into a shining beacon of police state statism they damn sure aren't about try to come to grips with the idea that their long held models of value present a clear and present danger to their financial well being.

Michael dV said...

Amerman has done a presentation which shows the diminished purchasing power AFTER TAXATION of holding gold and assuming it tracks inflation. If you accept his assumptions you'll be forced to agree with him.
He argues for borrowing at a fixed rate with leverage (say buying a commercial building) and taking full advantage of all tax breaks.
Dan is a very smart guy and unless you simply refuse to accept his premises you'll wind up nodding as you read his stuff.

Wil (from another account) said...

There are those who turn to religion as a source of salvation and redemption in this life, and perhaps the hereafter.

Then there are those who, understanding human nature, and their place in the scheme of things, turn to FREEGOLD as a source of salvation in the hopefully soon to be "here and now".

There may indeed be a bias which offers the explanation of a "cult following". But if you are aware and open to the realities all around us, there is little else to look forward to beyond the blue pill, and some tasty lotus.

And yes, the US is furthering it's police state status; and fascism is global, not just a "US phenomenon". The system is a form of global fascism, as I have stated here many times before, and never been banned.

No sense ranting and raving about it if you truly believe FREEGOLD is inevitable, as it will do more to correct this than any other single event other than perhaps "the rapture" if one is so inclined to wait for it.

We would not call those who hope for the latter to be members of "a cult" but those opinions are perhaps for another blog.

This we learn from the FOU.

jojo said...
This comment has been removed by the author.
The Dow Theorist said...

THX Fofoa for the clarifications

JR said...

"This is a repost that was originally published on 2/25/11:"


And here I was excitedly looking for "Costata's comment from the end of the last thread" until I realized... :(

Jesse McL said...

I was wondering if you had any tips on growing your own FOU? For example, when is the best time to harvest? And when it's ready, are there any recommended methods to get the best 'U' for your 'F', if you take my meaning? Cheers in advance,

Nickelsaver said...


Might I suggest some hydroPUNics...

JR said...

Hi Woland,

While more technical legal arguments with a heavy emphasis on policy/political ruled the day, I found J.Assumsen's persepective on the role of the ECB wrt financial markets interesting. I couldn't help but think of Another's comment about the BIS/ECB's palyign the "big poker hand" in the context of Assumsen's comemtns about the ECB's desire to let the other market actors know who was boss:

It's important for the largest central banks to establish a strong reputation with the markets, the central banker told reporters on the sidelines of the court hearing.

"We must build this principle that you shouldn't fight us, because we are increasingly the strongest market player," Mr. Asmussen said, adding that the ECB has done so through the announcement of its bond-buying program, known as "Outright Monetary Transactions."

The need for monetary policy operations
In order to understand the need for our monetary policy measures, it is important to be aware of the economic environment that we faced last summer.

Fears of an involuntary break-up of the single currency led to severe tensions in the capital markets. At the heart of those distortions lay turmoil in the government bond market – the largest capital market in the euro area.

Those spreads could, in part, be attributed to concerns by market participants regarding the sustainability of public finances. Fiscal reasons alone did not provide a full explanation, however, because the rapid rise in spreads in the first half of 2012 was not accompanied by an equivalent deterioration in those countries’ fundamentals. At the same time, there was an acute risk that contagion would affect other euro area countries, pointing to systemic risks that were not limited to specific countries.

A key factor driving those developments was fears in the markets regarding an involuntary break-up of the euro area – i.e. fears concerning the “reversibility of the euro” and the associated implicit exchange rate risk.

Effective action
The instrument being considered had to be effective, in order to eliminate the unfounded fears regarding the reversibility of Monetary Union and the resulting interference with our monetary policy mandate.

Fifth, we announced that our OMT interventions would be ex ante “unlimited”. We have no doubt that this strong signal was required in order to convince market participants of our seriousness and decisiveness in pursuing the objective of price stability.

In essence, market participants were acting on unfounded fears that the euro was reversible or might break up, and the ECB had to set them straight.

JR said...

The crux of the issue befoe the German high court is technical (and in reality, a political theater IMO designed to address and allay German fears about the euro and the ECB's actions).

Germany is the heart of the eurozone economy, but its not really German thinkers and German ideas that are at the heart of the ideas upon which the Euro is based. Germany needs the euro, but Germans as a whole may nto really appreciate why. Which speaks to, and casts a heroic light on, the "heavy handed" actions of Helmut Kohl in getting the Maastrict treaty pushed through and germany into the euro (

Joerg Asmussen told the eight judges that the program is not meant to rescue governments in the 17-country eurozone but only to help the ECB conduct its monetary policy. It is tasked with keeping inflation close to but below 2 percent.

The bond purchase plan, agreed Sept. 6, is an offer by the ECB to buy potentially unlimited amounts of bonds of a government in trouble, provided they apply for that help and agree to a program of reforms in return. The program - which no government has tapped so far - helped lower bond market interest rates, which in troubled countries like Spain were far higher than in financially stronger ones like Germany.

Experts say the program - dubbed Outright Monetary Transactions, or OMT - was crucial in easing Europe's crisis over too much debt by giving leaders time to fix their finances. It followed ECB President Mario Draghi's vow to do "whatever it takes" to save the euro.

Asmussen, a former German deputy finance minister who now serves on the bank's executive board, said the program helped the ECB's monetary policy function properly. That's because the high borrowing rates in financially troubled countries were preventing the ECB's low interest rates from helping the economy there. Such high borrowing rates were blocking the transmission of the ECB's policies throughout the eurozone.

byiamBYoung said...


Be sure not to rely on manure.

Save that for the OOP.


ein anderer said...
This comment has been removed by the author.
Wil (from another account) said...

Those are interesting comments coming from the ECB, and they remind me (though it wasn't stated explicitly) that the opposite of FEAR (in this context) is CONFIDENCE.

It also reminded me that the ECB, and the BIS, are WELL AWARE that maintaining CONFIDENCE in the FIAT system is TRULY the objective, for the interested parties that share a stake in their continued success, and that FREEGOLD is merely an inevitable outcome of any and all debt based wealth reserve systems, as they expand beyond their capacity to function (i.e. debt repayment feasibility).

If in saying that I have more CONFIDENCE in GOLD than PAPER that I am "dreaming on" then "dream a little dream" I shall, but if that remark is more centered upon my notion that a wealth reserve asset system will promote meritocracy moreso than a debt-based wealth reserve system, I stand ready to defend that notion as well.

You see, "money" is so integral to the human condition, it is nearly as primary a drive as procreation. We measure our own worth in it, even as the opposite sex measures US in it, and when it was based on an element with the unique properties of gold we lived in a time when honor and virtue held sway.

Today we live in a time where a man's worth is based on the FIAT whims of central planners who choose winners and losers through systemic importance, not true societal merit or free market value.

We live in a time where it is well known that unscrupulous men, through vice and corruption, through collusion and manipulation and through theft and favour are gifted wealth beyond compare through the dominance of financialization ... or would anyone here wish to put forth an argument that the 1% are the most honorable and virtuous among us? And that the 99% are "getting what they deserve" for being wicked and vile??

Yes, I will have my dream. A dream that men will know their worth by working hard for it, digging it out of the earth by the sweat of their brow, and REFINING it to a pure quality that cannot be as a "broken paper promise".

And in my naivete, I will convene with the flower of understanding, in resplendant joy that FREEGOLD has always served this purpose for those who would search the history books, knowing that in all my years I have never seen a time so desparate for FREEGOLD as this time we live in now.

It can always get worse, but we can always have our dreams, for this generation, or the next ...

This we learn ...


burningfiat said...


Good stuff. ECB knows the only way to preserve confidence in fiat is to be honest about the nature of it. Gold is better! It says so on the first line!

I think (y)our dream is worth dreaming!


burningfiat said...

Is FIAT on the first line of the asset side of GOLD's balance sheet?
Or is GOLD on the first line of the asset side of FIAT's balance sheet?

Answer this and you also know whether currency values gold or gold values currency.

Have a nice weekend all!

michael3c2000 said...

FOFOA- This latest treatise on black gold is forward thinking economics that requires independence from lazy research and historical inaccuracy.

Early this week, Jim Sinclair again brings a breath of fresh air to similar subjects even though he often obfuscates and contradicts this timing optimism days later such as at his many conferences this year. (I have perused participants notes and also his blog statements which seem to hedge one another.)
Here is a piece from Tuesday with the obligatory typo God bless him @ :
"...QE to Infinity, followed by Gold balancing the balance sheets of the sovereign balance sheet disasters. Just as there is no tool other than QE to feign financial solvency, there is no tool to balance the balance sheet of the offending entities other than Gold. It is just that simple. --Jim Sinclair

My Dear Extended Family,

Scorn if it pleases you, but know this. Gold is soon to become the friend of the market manipulators, and then the enemy of the dollar. They sense political weakness, and see loss of control amongst their masters. More than 50 years of doing nothing but this every day of my life tells me so.

Some say, why respect the enemy? The answer is that soon these enemies will be the sharks that eat the sharks, becoming your market friend.

This is outright war called finance.

Some say never oppose the Federal Reserve. These sharks know no force they will fail to test and turn on if weakness is shown.

Bernanke wished to exit before this coming reality. The problem with my dear extended family is too much mind, and too little soul.

Prepare yourselves to soon witness a positive change in the affairs of this war for freedom.


Dealers rigged forex spot benchmarks: report
By Michael Kitchen

LOS ANGELES (MarketWatch) -- Traders at a number of major global banks have been manipulating spot foreign-exchange rates for at least a decade, altering the values of trillions of dollars worth of investments, Bloomberg News reported Tuesday, citing five unnamed dealers. The scheme involves the WM/Reuters Closing Spot Rates, which are used to provide daily benchmarks to value portfolios. However, market participants have been front-running client orders to rig the rates by pushing through trades before and during a 60-second window when the rates are set. British regulators are considering a probe into allegations of this practice, the report said.


Grumps LaBastard said...

Foreign Holdings of Treasuries went down big in April...70 Billion! Everybody dumped except for UK and Eireland. Singapore dumped nearly 10%.

Gee, I wonder if anybody took advantage of the April takedown. Getting ready for that BRICS Development Bank and gold trade notes?

Edwardo said...

Regarding foreign holder's seeming dramatic divestiture of Treasuries, I'm much less enamored of the idea that this has something to do with the BRICS Development Bank and the advent of gold notes than I am with the notion that when the single biggest buyer of the new issuance of U.S. sovereign debt starts making persistent noises about beginning the process of ending their program of hoovering up supply, it stands to reason that folks holding U.S. sov debt might see fit to sell some portion of their portfolio while the getting was good.

Perhaps these foreign entities didn't get the memo that QE, like other less than salubrious conditions, is forever, or at least until the system finally enters the event horizon of the looming financial black hole, whichever comes first.

In passing, I'll note that the long end of the curve appeared to have sniffed out a few weeks before there was any language from The Bernank about "tapering" that there was at least the potential something fundamental had changed where the prospects for U.S. debt were concerned.

Grumps LaBastard said...

There's a problem with the 70B...I can't seem to find where it went. The Fed didn't pick them up. It's like there's another entity not online yet, but the foundation is being laid.

Grumps LaBastard said...

From LEAP 2020:

"Another crucial reform advocated (11) in 2009 by LEAP/E2020 was on complete overhaul of the international monetary system. In 40 years of U.S. trade imbalances and sudden changes in its course, the dollar as a pillar of the international monetary system was the transmission belt of all colds in the United States to the world, and this pillar is now destabilizing the heart the global problem because the United States no longer suffering from a cold but bubonic plague. Failing to reform the international monetary system in 2009, a second crisis comes. With it opens a new window of opportunity for reform of the international monetary system in the G20 in September (12) and it comes almost hope that the shock intervene by then to force an agreement about otherwise the top may be too early to win the support of all."

Edwardo said...

Was that the official translated version of LEAP/E 2020? It read like a cross between Jims Willie and Sinclair. I speak of the quality of the written word, not the content such as it is.

Grumps LaBastard said...

Google Translate is mediocre at best. The English version usually comes out the 16th, but Europeans don't work on the weekends like us Yanks, so it may be a couple days.

Michael dV said...

I'll bet a fist full of fiat that this sucker pops. No way is there the understanding or the real will to fix anything, It will all be talk and blame. I'll bet they even bring out the death penalty for besmirching the dollar (unless it crashes fast) just like the French tried.

Grumps LaBastard said...

Here's the TIC data link:

The significance of this is huge. This isn't a taper---it's a REVERSAL. Typically foreign holdings would go up about 45-50B every month, so this is like a 120B flow in the other direction. I've been thinking wouldn't have rates reacted more than we've seen if such supply hit the secondary market? Especially with the leverage with the of the carry trade? I think rates would have spiked more. It's like these treasuries weren't sold but moved to a different balance sheet.

There's always been the conjecture that the dollar could be bifurcated. A green dollar for domestic use and a blue dollar for external use. Could the ROW be saying "FU Fed, go ahead with your QE, we are pegging our blue dollars to gold"?

farmersteveg said...

So in April, turns out besides paper gold collapsing and physical gold suddenly being bot by everybody and their dog (and what is remaining as available for sale is rapidly diminishing , per Comex and GLD). Then as the days went by, for some unexplainable reason the fed begins talk of "tapering" their QE while majority of macro economic data shows deterioration. And now we learn of huge selling of us treasuries in April by ROW (wonder how May is gonna look).

Very interesting sequence of events. Syria should be very worried.

JoyOfLearning said...

I'm curious what you guys think of the price of gold extended centuries into the past in the graph here:
To be honest I don't really get how it was extended though. If it makes sense though it would fit with FG views here about the historic undervaluation and how even currencies pegging to gold undervaluate it by not letting it be free.

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

Regarding the foreign Treasury dump, this analysis appears to have something to recommend it.

Edwardo said...

And this seems relevant.

Grumps LaBastard said...

Caught wind of this NASA chief's quote from Fraser Cain's AstronomyCast episode 294: "NASA will not take the lead on a human lunar mission," Foust quoted Bolden as saying. "NASA is not going to the moon with a human as a primary project probably in my lifetime."

What painful readjustments lie ahead for the American psyche.

I guess the BRICS will be building my Space Elevator.

Michael dV said...

I think an important facet of fg with regard to its value is that prior 'price' is unimportant. In fg it will have a new function that will allow it to have much greater purchasing power. In most of the past its price was fixed. Was its price real just $35? Yes because the government said so. In the past there was a brief period of appreciation following which some king slapped a number on it. At first for standardization. After that for control.

Grumps LaBastard said...

Isn't part of their code that they have to warn the proles obliquely, like a vampire has to be invited before crossing the threshhold?

/SleepingVillage/ said...

Space Elevators?

Groovy... like a dinosaur ;-)

No need to build a silly space elevator.

I've got levitation

Phat Expat said...

"What painful readjustments lie ahead for the American psyche.

I guess the BRICS will be building my Space Elevator."

No, that's called "no tolerance for malinvestment." Isn't that part of the FG 'promise'? I sure hope so.

Grumps LaBastard said...

So I guess we never advance civilization under FG? Big projects would be malinvestment? We just live in our castles as petite Black Nobility?

michael3c2000 said...

Phat Expat said...

Do you work for NASA? There will be other funding streams that allow for the 'advancement' of your grand social schemes. I believe crowdsourcing is the current term for this. And I am all for it. Google is your friend (and the NSA and CIA and ..., but I digress).

Phat Expat said...

And I have supported numerous projects through indiegogo and kickstarter; for example. If not familiar, check it out. Every genre you could ever hope for. Looking forward to the "Grande Grumps Project" offering.

/SleepingVillage/ said...

"So I guess we never advance civilization under FG? Big projects would be malinvestment? We just live in our castles as petite Black Nobility?"

No, things like space elevators will be considered malinvestment. Continuing to pursue conventional rockets for space exploration will be malinvestment. And a whole pile of other shit...

Would you ride a Donkey from Colorado to Disneyland when you could fly a plane or drive a car? No.

Why use a space elevator or a rocket when you can overcome gravity? Is that a big enough project?

Civilization will advance as long as we have inexpensive energy and creative humans with brains. We currently have one half of the equation and the other half is on its way(again). Our energy sources will evolve and our technology will evolve, just like it always has :-)

TristramBoris said...


A thought regarding timing and taking one interpretation of Cyprus a little further:

If the decision to allow depositors in Cyprus is to be the new model for bank rescues, and assuming that it is right to interpret this as the ECB demonstrating that savers should not use bank deposits as a SOV, would it not also be appropriate to think of Germany's 7 year repatriation timescale as the deadline for holding physical in your possession? Or in other words, the onset of Freegold?

After all the ECB is rather German in management.

What do you good folks think?


michael3c2000 said...

michael3c2000 said...

That's some physical delivery!

michael3c2000 said...
These many financial problems that are popularly touted as intractible, disastrous for all, leading to world war or worse- have simple solutions and comparatively short remaining tenures. Look at all this China gloom that's coming to the surface. Sure they've got debt and credit bubbles etc. But they've got solutions that still get little mention.
They (western media) can't look past their scientific, cynical and clinical worldview to see how much of Europe and the rest of the world including BRICS values tradition and pragmatism as custom and in practice. So many thrive on indulging in mass consumption, delusions, and media, and even worse self-righteous ethnocentrism.
And I'm looking into a future where not only has the balance of power in this age of information shifted away from the cult of materialism to that of human survivalism at every level, but free and fair markets, open, consensual price discovery and commerce, representative, cooperative councils and budgets and responsive, local solutions come back in favor out of the incubator existing today...

michael3c2000 said...
Here's another one. Another example of how, even in alternative media, scaremongering is so much easier than problem solving. Sure I may point out Japan's Nikkei diving or US Treasuries sinking as they did for a bit before beginning some reversals. But these everyday economics are causes and effects felt without the sanctuary, sanity and soundness of gold and wealth preservation. Simple things like gold, budgeting and hygiene are often dismissed or ridiculed just as honeybees have been diminutive versions of "barbarous relic".

Phat Expat said...

"They (western media) can't look past their scientific, cynical and clinical worldview to see how much of Europe and the rest of the world including BRICS values tradition and pragmatism as custom and in practice. So many thrive on indulging in mass consumption, delusions, and media, and even worse self-righteous ethnocentrism."

Your link doesn't show the above quote. Is this your attempt at synopsizing? Pretty poor attempt, if so.

Edwardo said...


Yours is an interesting idea, but I don't think the seven year "waiting period" is a thinly veiled timescale. So, while seven years for the return of 700 tons of the precious seems just a tad attenuated, I think it is arbitrary where the advent of a physical only market is concerned.

The planet certainly can't wait that long for a new system- and I do mean a new system not a tinkered with old one- to take hold. And I think the folks pulling the levers are well aware of the urgency to put global money/finance right well in advance of 2020.

jojo said...

So wait, you mean to tell me The People's Space Elevator won't be made??

Grumps LaBastard said...

Can't a poor ole' Grumps dream?

michael3c2000 said...

Phat Expat
What evidence have you it's a synopsis?
None of course. Thus your conscious or unconscious instigation in lieu of something sensible or silence.

michael3c2000 said...

@Phat Expat
Think before you speak. Or at least fuck off.

Wil (from another account) said...

I do not see the connection between Cyprus and the German repatriation timeline as having any predictive indication of the onset of FREEGOLD.

The Cyprus bail-in simply recognizes that all financial paper is based on debt and all debt carries implied risk, including paper savings. Dollars, Yen, Euro - these are but government backed loans which are commonly used in commerce as a means of exchange.

Gold on the other hand carries NO risk whatsoever other than risk denominated in debt and manipulated by the issuers of debt to simulate said paper risk. We must remember that since gold is denominated in debt, from a "means of exchange" standpoint, all implied risk is associated purely with it's debt denomination.

However, this debt-free asset MUST be in your physical possession. This truth is born out by the obvious realization that theft or confiscation are the truly inherent forms of risk defined by "possession of gold" vs paper promise of future delivery and manipulation of denominaire.

Which brings us to the curious case of Germany, whereby possession is actually defined by the paper promise of future delivery.

There is an incredible cost involved in the transformation of sovereign gold possession into a 7 year physical gold "loan" which stretches the limits of oxymoron.

In a stable world, a 7 year loan of paper has a calculable "interest rate". In an unstable world a 7 year repatriation of physical gold YOU ALREADY HOLD CLEAR TITLE TO does NOT have a calculable interest rate. The cost is immeasurable, as it is clearly unknown.

But the cost to maintain confidence in the current IMF$ is dutifully PAID by Germany in TIME, no matter what it amounts to, to preserve the stability of the present system.

Therefore these 2 events serve to remind us that NO PRICE IS TOO DEAR to preserve the present system and in effect DELAY FREEGOLD for as long as the present system rewards those who have a vested interest in its continuation.

These prices include MF Globalling a sovereign such as Germany, who gladly bends over and applies lubricant to the appropriate orifice, as well as the predictive pitchfork tine sharpening of the Cypriot lemmings (sans Russian oligarchs who received early red flags).

This is the only lesson we can learn from these two events as we grasp for a deeper meaning from the flower of understanding ...

Grumps LaBastard said...

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

That means you're on drugs, dissembling and not in possesion of your mind my fat friend! Itt doesn't get any better than this.

byiamBYoung said...

@Phat Expat and michael3c2000,

I generally enjoy both of your posts, and I am admittedly guilty of value-free posting. Often.

But seriously, is this current poop tossing exercise really accomplishing anything?

Maybe you could flame each other in private email?

I read this blog, and the comments, to gain insight, and to dilligently sniff the stamens of the flower of understanding.

You run the risk of becoming a distraction. Even to a clown like me.

Just a suggestion.


Phat Expat said...

Concur and retracted.

byiamBYoung said...




Nickelsaver said...

"...dilligently sniff the stamens of the flower of understanding..."

Lol. That one has me laughing and shaking my head at the same time.

While I do respect the offerings of our resident flower, Sir Wil - I long for the meat and potatoes offered by our host, and some of those that do not comment as frequently as before.

I am however enjoying a small respite from the usual trolls...

Knotty Pine said...

This shit is more surreal every day. Grab a cold beverage and enjoy the show!

CharlieBravo said...

"Interestingly, property prices are often quoted in taels of gold rather than the local currency due to the Vietnamese experience of monetary inflation and currency debasement."

Phat Expat said...

Yeah, tenterhooks; really??? We must be close to an inflection point since this is truly head shaking stuff.

And just in time, I've received my 'free' LEAP/E2020 reality check.

Nickelsaver said...


From my vantage point, the only way this 2nd crisis (I shall call "the crisis to end all crises" in the spirit of WW1) will be delayed for 5 more years is if paper gold grows a third leg. I don't see that happening. To put it plainly, there aint no more wiggle room. Interest rates are as low as they can go. Foreign support for the dollar is fading fast. Which can only mean that the FED will be entering QE to the nth. Paper gold will soon crash AND hyperinflation draweth nigh.

I'd say we are VERY years end even. The window on the space elevator is opening up...all (monetary plane) will be sucked into the vacuum of space.

I'll say it. Get your physical gold now. Don't wait for $1200, $1100, $1000... When it goes into hiding, it's going to go hard and fast.

It's that or a leg coming out from nowhere. Tell me where?

Herb said...

@Nickelsaver - If you Google "third leg" you will find that it already has a slang meaning outside the gold realm. A synonym might be "Central Banker" or "Investment Banker." :-)

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