Saturday, June 29, 2013

Snapshot Day



Yesterday was Snapshot Day at the ECB. It's the day that the ECB takes a snapshot of the current price of the four "foreign currencies" that populate the Eurosystem's reserves. They take this snapshot at the end of each quarter for the purpose of the quarterly revaluation of their reserve assets. Marked to market (or MTM) reserves was one of the founding principles of the euro.

The four snapshots are:

Gold
USD (US dollar)
JPY (Japanese yen)
SDR (Special drawing rights)

Each snapshot is recorded as the unit's price relative to the euro because the Eurosystem's reserves are all reported as denominated in euro. So even dollar reserves are reported as a euro-denominated value. And just for the record, gold is both the first line on their balance sheet and also the top snapshot reported. I don't know if this is intended to imply the order of importance… well, yes I do. ;D

If you'd like to read more about this, I recommend any of the following posts as a good place to start:

RPG Update #4
Euro Gold
Reference Point: Gold - Update #1

If there's any doubt as to the importance of gold on the Eurosystem's balance sheet, last quarter gold constituted more than 63% of the Eurosystem's reserves. That means that dollars, yen and SDRs combined made up less than 37% of the reserves.

We won't know yesterday's precise snapshot until next Wednesday when they release their quarterly ConFinStat (Consolidated financial statement of the Eurosystem). But we know it should be somewhere between €914.39 and €948.33. At some point during the day, someone at the ECB noted the current price of gold in euro and wrote it on a form. They don't use the London fix price, and the time at which they take it seems to vary. In April, they took the snapshot very close to the AM fix. But many other times I've noticed it's closer to the PM fix.

In any case, yesterday's AM fix was €921.889 and the PM fix was €914.391. Shortly after the PM fix yesterday, the euro price of gold rallied up, ending the week at €948.33. It would be a bit unusual for them to take a snapshot long after the PM fix, so I will guess it will be around €920.

I have made a simple chart of all of the quarterly snapshots since year end 2001, when the bull-run began and the ECB launched its new notes and coins. For the purpose of this chart, I'm using yesterday's high of €948.33 rather than what I think it will actually be, just so you can see how shocking even the least-shocking possible snapshot will be.



As you can see from the graph, the last time they had a gold snapshot lower than this was April 2, 2010, more than three years ago. Just for fun, let's compare the other snapshots from April 2010 with April 2013 to see if the USD, JPY and SDR fluctuate as wildly as gold.

2010:

Gold: EUR 823.132 per fine oz.

USD: 1.3479 per EUR

JPY: 125.93 per EUR

Special drawing rights: EUR 1.1265 per SDR

2013:

Gold: EUR 1,251.464 per fine oz.

USD: 1.2805 per EUR

JPY: 120.87 per EUR

Special drawing rights: EUR 1.1698 per SDR

For the US dollar, that's a 5% change. For the yen it's 4%. And for the SDR it's less than 4%. Yet gold, because traders think of it as just another commodity rather than a monetary reserve, changed price by 52% over the same three-year time frame! And now it's down 25% in just one quarter.

There's a point here, but I'm more inclined to let you figure it out for yourselves than to spell it out for you. Somehow, gold ended up in two different worlds at the same time. One which fluctuates wildly in concert with all other commodities, and another one of great monetary significance and relative stability most of the time. Just think about which of these worlds gold actually belongs in, and how it can possibly escape the other one, while you watch this short video presentation:


That video is from my post Fallacies – 1. Paper Gold is just like Paper Anything in case you would like to explore that question a little bit further. ;D
_______________

On December 8, 2010, at the bottom of my post Freegold in the Proper Perspective, just for fun I put up a poll for my readers to vote on two contenders for a Freegold theme song. The origin of that poll was an email from Aristotle who, if you don't know, was one of the main contributors while Another and FOA were posting, so he's been following this for as long as anyone.

Anyway, he had this song 'Firework' by Katy Perry come across his screen and he thought it made a great Freegold theme song. He emailed me on Dec. 2, and at that time almost no one had yet heard the song. It was just starting to get airplay and it had just been featured in Victoria's Secret video, which is how it happened to come across Ari's screen. ;D

He thought the imagery in the Victoria's Secret video was particularly "golden", but more importantly, he thought the lyrics were great for those who understand what Freegold means on all levels. Here, judge for yourself:



The reason I bring this up is because he followed that Katy Perry email up with another one that also made reference to the song, as well as to his favorite series of movies. Here's part of that second email:

For the past half-decade, many international policy stirrings gave every indication to me that 2010 was to be the targeted year for assertively rolling forth the freegold paradigm. But as I've said previously, I feel that the ongoing financial crisis that began with the subprime fiasco has caused instability of such magnitude that the central bankers have been forced to delay briefly and "play it safe" -- one does not dare rock the boat (if there remains any choice in deciding the matter) when the financial waters have become so turbulent and choppy. As for the new timeframe, I'd say that the reported EU plan "to make private bond holders shoulder some of the pain from any sovereign debt restructuring after mid-2013" is as good an indication of a benchmark as any I've seen. Plus, that timing nicely accommodates my additional view -- embracing a culturally significant standpoint -- that the December 2013 conclusion to The Hobbit will forever cement the desire for gold into the minds of all western moviegoers, resulting in a perfect storm of the golden variety. ;-)

On the point of the midyear "benchmark" mentioned above, it's almost spookily funny that the song lyrics mention "You just gotta ignite the light and let it shine; Just own the night like the Fourth of July". Indeed -- 2013. (Or sooner, if *necessity* precludes all freedom of choice in the matter!)

--Ari

Now obviously the specific timing of July 4, 2013 and the Hobbit reference were made in jest, but as I mentioned in my New Year's Day post, Ari has been closely following everything written by the central bankers in particular for more than a decade. And he's also one of the smartest people I've met in more than a decade, so I don't take anything he says lightly.

With that in mind, as the dawn of 2013 was approaching, I decided it would be fun to put the only timing prediction I'd ever seen him make to the test. I'm sure he was less enthused about this than I was, but I thought it would be fun! I suppose it's not really fair to call it a timing prediction, because it wasn't, and it was also made in private by email. So it was more like a working hypothesis that he shared with me way back in 2010. And this is actually a much better way to view it because, not only is it more fair to Ari, but also because I had an observable phenomenon that I could use to test the hypothesis once every three months. Snapshot Day!

About five months before the Katy Perry email, Ari sent another email that also inspired a post. That one was the very simple observation that the price action in gold behaved strangely around Snapshot day on 7/2/10. The implication I took from his email was that, perhaps, there might be some "official support" at play in the gold market.

Then, again, on 12/30/11, I took note of some more strange behavior around Snapshot Day. So in this post on 12/26/12, I proposed that we watch the upcoming 2013 year-end Snapshot Day for any sign of official support. The thing was, the price of gold in euro was already languishing at €1,255.94, down 9% or €121.48 from the October snapshot. So it was a prime opportunity to watch for any mysterious levitation surrounding Snapshot Day that might imply "official support" was still underway, even though 2013 had finally arrived.

In anticipation of no support, I went ahead and dubbed 2013 "Year of the Window" on New Year's Day, meaning "window of opportunity for Freegold transition." Snapshot Day was on January 4th, and while it did come in a little bit higher at €1,261, it ultimately proved inconclusive based on my criteria. So we watched… for any sign… which way would it go? Was the window open or not? Decisively up—window not open. Decisively down—window may be open. The rest, as they say, is history. ;D

So here's that shocking chart once again, this time using €920 which is my guess. Decisive? Window open? Window closed? You decide:



If you'd like to read more of my ramblings about the Year of the Window, I recommend these posts in this order:

1. Happy New Year!
2. The Two-Legged Dog
3. Legs
4. Checkmate

Happy Independence Day, everyone!

Sincerely,
FOFOA

552 comments:

«Oldest   ‹Older   201 – 400 of 552   Newer›   Newest»
One Bad Adder said...

@Blair Eric: - Following the Logic I've tried to present to John (above) Another point is the multi-generational aspect mindset that goes hand-in-hand with GOLD acquisition.
Nowadays Corporation and State have usurped a lot of the high-ground which was the exclusive domain of "Families".
To think like a Giant means one has to STOP thinking in terms of 100years or so.

John said...

@ OBA

Many thanks OBA.....it really such a simple concept to grasp and so difficult to argue otherwise. It is truly amazing that virtually all the horsepower of this present financial world fails to see it.

We are so close...time to breakout the popcorn as we watch and wait.

Edwardo said...

Hi Bright Aurum,

I wish I had some information that might be news worthy, but I'm afraid I don't.

enough said...

Wil FAA,

We are in a reality bear market and a fantasy bull market....

I agree, when the reality bear ends it will be gold that leads the charge and crushes the fantasy bull....

Roacheforque said...

Milamber,
As you quoted, "Debt under Freegold will not reach such destructive levels."

But debt DOES reach such destructive levels TODAY.

I am in agreement, for the most part, with the quoted material, but my attitiude toward certain things today is based on how they operate TODAY.

As I said above:
"I think post FREEGOLD some terms will change, and some will stay the same, though their meanings will change.

As the nature of FIAT changes through FREEGOLD so shall my attitude toward it."


This same holds true of debt. We are evolving from a system of "debt as wealth" to a system of "equity as wealth". Obviously concepts such as "debt", "equity" and "wealth" will be altered in a change so dramatic.

And I also think that debt bubbles (in the here and now) evolve through a bit more complex process than just (or even primarily) the existance of fractional reserve banking.

Yes, low interest rates are a part of it, but excess credit is not the only reason for, or cause of, those either. Much more is at stake, and causes and effect more complex.

We live in a command and control casino economy where banks like JPM and Goldman are bankrupting utility companies, municipalities and even sovereigns like Greece with wrong way interest rate bets THEY control, through the same (debt) derivatives they use against their marks.

Bubbles are often times a wealth confiscation trap for the unwary, and they are set up as such by those who benefit from the ill-informed, in a much more complex way than the basic Austrian school formulae.

When banks were stuffing my mailbox with offers to lend me twice what my home was worth between 2003-2005 they did so because there was an implicit guarantee in place - neither the home's collateral value nor my creditworthiness mattered at all, these collateralized debt obligations were guaranteed by future bailouts.

This is the destructive level of debt today. It abandons all risk and all collateral models. And it socializes not just "bad bets". It socializes losses that are a foregone conclusion to occur. There isn't even the pretense of sound banking practices, it is open theft IMHO.

So let us just say that FREEGOLD will indeed neuter, to a great extent, non-productive credit expansion, which is exactly what I was alluding to when I said that post FREEGOLD FIAT will be much less Bubbliscious.

That is to say, when you put your (real) money where your mouth is you won't write a check with it that your (real) reserve can't cash.

So I'm not sure where the error lies in my thinking, even though some might endeavor to point it out with my own arguments.

I fly out of here tomorrow, so there will be no more blathering for a while.

Bright aurum said...

@Edwardo
Thanks anyway.
The spider-web of information (as Costata had put it) will benefit the bullion banks only, I guess :-(
Where is he by the way?

One Bad Adder said...

@John: - as Wil so eloquently points out, the Fractional Reserve Debt-based System we've "enjoyed" these last several decades has driven Society into a wholly unsustainable position.
The NEW paradigm will likely be a far more sustainable / austere model which may (will) prove VERY unpopular across-the-board.
It might be prudent / advisable to hold off on the popcorn ...particularly in public ;-)

One Bad Adder said...

For those of us who are having a little flutter on Silver as a proxy Gold hold, we might be seeing the G-S ratio starting to roll over here.

Logic would have it that - as the "price" drops further, the superior "utility" of Ag will see it holding up MUCH better than Au.

STRICTLY for Trading tho ...Let's watch!

DASK said...

Found the first new blog in a while to add to the reading roll. Deals with 'narrative' and perceived 'common knowledge' in investing (the epsilon in alpha beta epsilon = returns). Sounds a lot like FOFOA describing game theory and shifts in preference and what is. I found it fairly thought provoking.

Manifesto here:
http://epsilontheory.com/epsilon-introduction/

And a good piece on the recent decline in gold here.
http://epsilontheory.com/how-gold-lost-its-luster-how-the-all-weather-fund-got-wet-and-other-just-so-stories/

DASK said...

Just wanted to add that one of the things that FOFOA and other commenters here have gone on about, and that I am starting to appreciate is the concept of 'fractal resolution'; that when the same set of premises and logic work at all scales without modification, one may indeed be getting close to a theory. Thanks again to all and especially to our host for this place of learning and contemplation.

M said...

@ Simon

I'm holding all of my gold stocks and even averaging down. Just hold them. The re is no point on selling. I made a lot of money on them in 2010 but I'm 20k in the red. No worries

Bright aurum said...
This comment has been removed by the author.
Bright aurum said...

@all
Since the bullion banks had all the CB support they wanted in the past 15 years. What are the chances they rolled down their fractional reserve bullion position (covering aprox. 500t/year); the ETF holdings being their coat in the coat check room witch they leave and go out naked but not as in 'naked short'?

Bright aurum said...

After all no exact figures for cash-for-gold have been given.
And the gold coin turnover in my home-town were aprox. 100x100 kurush coins per 5 coin dealers per week in the 80ties and the beginning of the 90ties. And now there are 5x5 kurush coins (or their equivalent in other coins or jewellery) per 10 coin dealers/jewellers!)

Bright aurum said...

5x100 kurush coins I should have written!

Anonymous said...

Intersting article at Z/H by Peter Tenebrarum on Central Bank words vs. deeds.
http://www.zerohedge.com/news/2013-07-08/guest-post-central-banks-%E2%80%93-words-and-deeds The author reviews some of the remarks made recently by Bundesbank president Jens Weidmann. The critical part is here, I think:

"As Jens Weidmann's additional remarks showed, he is apparently hoping that central banks can really become separate entities that worry solely about the value of the currency instead of being the nexus and handmaidens of the unholy alliance between the State and the banking cartel. In fact, the ECB's statutes indicate that the ECB was originally supposed to be such a central bank, but as we have seen, ways around the limitations imposed by the statutes are constantly found as soon as perceived emergency situations arise. Said Weidmann:

“In addition to stronger rules, we need to make sure that in a system of national control and national responsibility, sovereign default is possible without bringing down the financial system. Only then will we really do away with the implicit guarantee for sovereigns."

The Bundesbank chief also called for euro zone governments to sever what he describes as the "excessively close links" between banks and sovereign governments, saying that European banks hold too many of their own governments' bonds. "This is because banks do not have to hold any capital against their government debt, as the risk-weight assigned to sovereign bonds is zero. To counteract excessive investment in sovereign bonds, Weidmann believes that the capital rules need to be changed to take account of risk and exposure levels."

I am wondering what the Fofoa superorganism thinks the implications of this are for FG. My takeaway is that the long-term plan of the ECB
is to achieve insulation of the European commercial banks from sovereign default risk. I believe this implies a pretty long time horizon for the transition to FG, at least insofar as its implementation is trigerred voluntarily by Europe rather than, say, being forced into existence by the collpase of the dollar as the reserve currency via BRIC barter and gold settelement networks. An all-paper-will-burn collapse at this point would destroy most European commercial banks, because they hold too much sovereign debt. It appears to me that if the ECB has its druthers, it will bide the time it takes for the commercial banks to insulate themselves from the effects of sovereign default. The plan seems to be to risk-weight sovereign bonds and require them to hold capital reserves against sov. bonds. Over time, this will build a buffer against default.

Of course, Tenebararum beleives this is fantasy-land; how could the banks ever achieve this? The political will is to keep spending money/issuing bonds, and the banks have little choice. He may be right about that, my point is that it seems that the ECB has the patience and desire to play a very long game, and is in no hurry to transition to FG.

Robert said...

Today I had an interesting conversation with one of the big numismatics dealers in Europe. He sells bullion too, but the bulk of his business is selling numismatic coins, both ancient and modern. He travels around Europe all the time, taking a trip about once a week to the various European capitals. He commented that he sees a huge disconnect between what is happening in numismatics and what is happening with the price of gold. Numismatic sales and auction prices are practically off the chart, and he fears that they create unreasonably high expectations for the future. And he says "Those prices have nothing to do with what is happening with the gold price." He deals with a high volume of gold bullion, but he says that these days the volume has been drying up. Volume is still steady, but at a lower level than before.

JR said...

“...Yeah, it might be 1 o'clock and it might be 3
Time don't mean that much to me
I've felt this good since I don't know when
And I might not feel this good again...”



Fed’s G-19 report says: CONSUMER CREDIT SURGES

”The Federal Reserve's G.19 report on consumer credit outstanding is out.
Credit jumped by $19.6 billion in May to $2.838 trillion, which was far higher than the $12.5 billion forecasted by economists.

Revolving credit (e.g. credit card balances) jumped by $6.6 billion to $856.5 billion.

[…]

As households have made significant progress in repairing their balance sheets, consumers have been more willing and able to take on additional credit," said Wells Fargo's John Silvia ahead of the release. "The Federal Reserve’s Senior Loan Officer Opinion Survey indicates that banks on net have been increasingly willing to make loans to consumers in the second quarter and are loosening standards.”




Let The Good Times Roll

"Yeah, it might be 1 o'clock and it might be 3
Time don't mean that much to me
I've felt this good since I don't know when
And I might not feel this good again

So come on and let the good times roll
We're gonna stay here till we soothe our souls
If it take all night long
And all night (all night) and all night (all night)
And all night (all night) and all night long (all night)
Somebody said it might take all night long
And all night (all night) and all night (all night), so
Come on and let the good times roll
We're gonna stay here till we soothe our souls
If it take all night long"

Let the Good Times Roll (Sam Coke’s original)

Woland said...

I believe that's "Cooke", (like in Alistaire Cookie) {:<)>

although, things do go better with Coke.........Greetz

Woland said...

BTW, I hope you are impressed with the most parsimonious depiction
of Faisal, Khalid, Fahd or Abdullah yet devised. {:<)>

byiamBYoung said...

15 tonnes gone from GLD today. All the way down to 946.96.

Drip. Drip. Drip.

Dante_Eu said...

..."Numismatic sales and auction prices are practically off the chart, and he fears that they create unreasonably high expectations for the future."...

Interesting Robert. Similar could be said for Freegolders. Although, one sleep well knowing that ones purchasing power is stored in world class reserve asset, it can be disappointing from time to time. Because anticipated onetime revaluation is allways around the corner, but, not quite there.

Which got me thinking about the Danes. Danes allways come on top as the happiest people on the planet in different evaluations. Why so? Well, from what I read, see and hear, it is because Danes have really low expectations for the future and think the worst case scenario is gonna happen. And then, when the life moves on in normal manner, without big suprises up or down, they become really happy!

So, maybe we can learn a thing or two from the Danes. :-)

PS As a sidenote, a danish coworker once said to me that the Danes lost every single war they fought. I haven't verified the claim, but he seemed to know the history well. So maybe someone of many knowledgeable danes here can verify it. ;-)

Unknown said...

One and three month GOFO goes negative.

http://www.lbma.org.uk/pages/index.cfm?page_id=55

Edwardo said...

Bright Aurum,

You may find this of interest.

tintin said...

GLD lost 15 tons, new inventory 946.96tons.

milamber said...

@ Phil,

"What do you all make of the continual loss of gold from the Comex? At some point I would think that this is going to implode."


I think it is like a pimple popping on the ass of a Gorilla. It's messy, smelly and really annoying, but in the final analysis, irrelevant.

Or as ANOTHER put it...



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

I ask you now: " Is it hard to believe or hard to understand"? When it comes to money it's usually both.

Know this: "gold transcends human valuations thru time and life". . Take your time on this one!

"Gold is now caught in a crossfire of world thought. The traders are viewing it as a commodity and trying to make money on it's moves using various paper trading vehicles. Their opinion of the market is flawed because the "real value buyers" would never deal with these people or let anyone in that circle know they are buying gold as "money"!

The major buying and selling is between CBs, nations, merchant banks, "the super rich" and the hordes of small buyers in forgotten places. That is one of the small many reasons wall street hates gold, they are not part of the real action.

Comex is a side show!"


http://www.usagold.com/goldtrail/archives/another1.html

Milamber

milamber said...

Some months back I reviewed this book,

China's Superbank: Debt, Oil and Influence - How China Development Bank is Rewriting the Rules of Finance

I am providing this comment to give an update of how/what China is doing now (in relation to my previous comments).

I can’t remember if I commented on it here, but keep in mind that right after I did my review of the book referenced above, China had their 1st bond failure in the history of the Chinese bond market (going back to 1994).

The times, they are achangin… :)

What follows are some links of interest on China & the rather dramatic policy change that was publicly unveiled back in June.

First, I think it is now safe to say that the PBoC is fomenting an event. They can't control the actual timing or how it will play out, but IMO, they are clearly laying the public foundation for HUGE changes in their economy.

I read it as they think that they are ready for the transition from the current IMS to whatever will follow.

Some here call it Freegold :)

a sampling..

http://english.caixin.com/2013-06-28/100548561.html

http://english.caixin.com/2013-06-26/100547177.html

http://english.caijing.com.cn/2013-06-28/112969248.html

http://english.caixin.com/2013-06-28/100548585.html

This development (In conjunction with letting defaults occur in the bond market & arresting bankers and bond/financial figures) is the key one IMO.

Land confiscation, followed by development has driven the Chinese banking industry, and if they are putting a stop to it (which from appearances they are), then that is a MAJOR shift away from their modus operandi for the last 20 years.

http://english.caijing.com.cn/2013-06-28/112967727.html

And why might they be ready for it to come to an end & move on to another IMS?

http://english.caijing.com.cn/2013-06-28/112967771.html

how it's being spun...

http://www.project-syndicate.org/commentary/the-tolerable-slowdown-of-china-s-economy-by-jun-zhang

https://mninews.marketnews.com/content/china-pbocs-zhou-says-banks-need-adjust-assets-press

http://blogs.wsj.com/chinarealtime/2013/07/01/chinas-financial-regulation-mess/

Cont…

milamber said...

All together comrades!
http://news.xinhuanet.com/english/china/2013-07/01/c_124933419.htm

And I save the best for last (for those still reading)...

http://blogs.wsj.com/chinarealtime/2013/06/30/gold-standard-china-doesnt-set-it/

some choice quotes (all emphasis mine),

"Without all the restrictions lifted, such as in trade, tax, foreign exchange and currency, China isn’t going to have any pricing power. However, you should know all these are under our own control – that is to say,we choose not to have any impact on global prices,” said Andrew Wang, general manager of precious metal department at Standard Bank, one of South Africa’s largest lenders by assets."

China allows only nine commercial banks to import and export gold and silver, and has quotas for trade of the two metals. The National Bureau of Statistics never releases official data for gold imports and exports, citing national secrets.

Chen Zhiwu, a finance professor at the Yale School of Management, shrugged off the idea of China pursuing pricing power in gold.

“I don’t think it is all that important. China doesn’t have the pricing power, so what?” Mr. Chen said. “No one’s going to die if we don’t have it.”

...

In Asia in particular, gold is also something that’s worth to own and to pass onto generations after generations. Central banks have been net buyers of gold over the years and are one of the main factors behind gold’s 12-year bull run that ended in April, where prices suffered their biggest daily slump since the 1980s.

“There are plenty of other ways to hedge and to make money, such as bond and stocks… gold can’t generate returns, so why do we so care about gold pricing power?” Mr. Chen said.



---------------------



What does it all mean?

Like I said, above, my guess is China thinks that it is now in position to be able to withstand the destruction of the model that has propelled them forward for the last 20 years. They are willingly allowing their paper to burn, which they haven’t done before (Since they have joined the current $ based IMS).

Why?

Ya got me boss.

I’ll tell you this; I think that we are markedly closer to the death of the 1971 US dollar than its birth!

Hth (someone),

Milamber

tintin said...

milamber,

That yale professor is a laugh. Nobody of real importance in China takes him seriously.

According to this professor, China was poor not because of lack of production or technology, but because China did not monetise all she had: land, resources, enterprises, etc.

JR said...

Hi Woland,

Cookies!

Yes indeed, Sam had a flaw of Biblical proportions: his unbridled libido, aka his love for cookies. That's apparently how you end up getting shot dead at 33 wearing nothing but shoes and a sports coat.

“Sam would walk past a good girl to get to a whore.”


milamber said...

@ Wil,

What I was trying to get at, is in your posts (possibly after too much time spent with the flower? -smiles-), there seems to be a white hot hatred for TPTB & FRB.

And I am sorry to say, I don't think that Freegold is going to bring about all the changes that you are envisioning & heaping on its shoulders. :)

Or to put it in Star Wars terms (for me),

This is the not the utopian paradigm you are looking for :)


FOA (08/09/01; 10:27:19MT - usagold.com msg#93)

"everything to do with a gold bull market"

This not only has "everything to do with a gold bull market", it has everything to do with a changing world financial architecture.

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

And I have to admit: if you hated our last one, you will no doubt hate this new one, too.

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


However, everyone that is positioned in physical gold will carry this storm in fantastic shape. This is because the ECB has no intentions of backing their currency with gold and every intention of using gold as a "free trading" financial reserve. None of the other metals will play a part in this.




-----------------

There will still be PTB and FRB for you (and anyone else I guess) to hate. There will still be corruption and people/gubmmits gaming the system.

In short, there will still be everything that you hate about our current system except for one "minor" change that will change everything (if you follow me)for savers.

Will other positive change flow from that?

Probably.

And I certainly hope so!

But as I have enjoyed your writings over these last several months (since you have been "quoting" the flower -smiles- ), I have noticed that you seem to think that Freegold is going to restore balance in everything and all things and the righteous will prevail & the wicked will be cast done, &....well, you get the point.

Anyways, just my .02 cents.

Milamber

milamber said...

TinTin,

I follow a lot of China chatter, which Yale professor are you referencing?

Milamber

Unknown said...

As noted on Screwtape Files, one through three month GOFO goes negative for first time since 08.

http://www.lbma.org.uk/pages/?page_id=55&title=gold_forwards&show=2013

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

Hi Milamber,

I don't think it is "Chen" of "Ben and Chen" fame :)


But I did find this hint in the WSJ article you graciously linked:

"Chen Zhiwu, a finance professor at the Yale School of Management, shrugged off the idea of China pursuing pricing power in gold.

“I don’t think it is all that important. China doesn’t have the pricing power, so what?” Mr. Chen said. “No one’s going to die if we don’t have it.”

byiamBYoung said...

Thanks, Stuart.

Could someone with some knowledge at this depth comment on the significance of the GOFO going negative?

Thanks!

byiamBYoung said...

Stuart,

My comment was not meant to imply that you had no knowledge about the GOFO rates. No slur intended, sir.

I am simply looking for additional guidance.

Cheers

tintin said...

hi milamber,

"which Yale professor are you referencing?"

Chen Zhiwu.

Phat Repat said...

Here's an interesting dicussion relative to the meaning of GOFO (an article from FOFOA "Checkmate" is referenced as well): GOFO Rates spell trouble ahead

byiamBYoung said...

GOFO from Zerohedge

RJPadavona said...

Hey Woland,

I kinda figured "jelly roll" would've been the vernacular for your era ;)

Sorry for that. There's way too many Faulkner novels floating around in Southern prisons.



Wil,

And I have to admit: if you hated our last one, you will no doubt hate this new one, too.


I used to think that quote meant the next monetary system would end up being just as unfair, oppressive, etc as this one, so don't think it's gonna be sweeter than duck butter just because gold is re-entering the system.

But during an email exchange I had with JR one night, I seen a light. "Now it won't a light like Paul seen, but a light nonetheless." 

I realized that FOA wasn't trying to tell us the next monetary system was going to be bad, but the point he was trying to convey was that you shouldn't hate ANY monetary system. You just need to understand its structure and save accordingly because that's really the only course of action a Shrimp like you or me can take.

"IFyou hated our last one...."

The key word is IF.

IF is a big word.

IF Mama Cass would've given Karen Carpenter a sandwich, they both might be alive today.

IF I hated the last one, I'd hate the next one too. But I don't hate this system. In fact, I love that it's still in place. "It was good business. It bought me more time."


RJ

Aaron said...

Words of wisdom to live by, RJP. Well said.

I realized that FOA wasn't trying to tell us the next monetary system was going to be bad, but the point he was trying to convey was that you shouldn't hate ANY monetary system. You just need to understand its structure and save accordingly because that's really the only course of action a Shrimp like you or me can take.

"IFyou hated our last one...."

The key word is IF.

IF is a big word.

byiamBYoung said...

RJP,

"IF Mama Cass would've given Karen Carpenter a sandwich, they both might be alive today."

LOL


JR said...

Hi byiamBYoung,

Here's a start from a slurrable source: ME!

Fekete has commented that FOFOA's Red Alert: Gold Backwardation!!! basically demonstrates the gold lease rate (which GOFO is a proxy) isn't really correlated with physical gold.

Who needs a thermometer to know that the heat-wave is on?
Fofoa has just published another thoughtful paper with the title: Red Alert: Gold Backwardation!!! http://fofoa.blogspot.com. It raises the question nobody has apparently raised before: "Is the dollar bidding for gold, or maybe gold is bidding for dollars?" And it gives an amazing answer: the gold basis has been screwed and it has been giving bogus signals for more than a year. We have likely had backwardation all this time but it has been stonewalled.


GOFO may more be about the ability to borrow dollars with paper gold rather than physical gold. So its more about paper gold than the availability of physical.

VTC:

GOFO is the interest paid if we lend gold and borrow US$ for the same period.
[...]

Note that the transactions at the LBMA may be in unallocated accounts, i.e. they do not involve the delivery of physical gold, but rather credit or debit in an unallocated account.

Bright aurum said...

Thank you Edwardo,
This sentence was especially telling:
''The bounce was facilitated by a 580-ton purchase by European central banks on Friday. The rumour is that they’re going to buy another 500 next week. There’s only 2200 tons a year mined on average, so that would be remarkable.''
It sounds a lot like ...POG under the cost of production BIS will put a direct floor under it buying it for all the world to see /paraphrasing/

Sam said...

RJP

I agree with you on 100% on the FOA monetary system comment.

Beer Holiday said...

Thank you for posting the China links Milamber.

Have you read this essay by Dr Zhou Xiaochuan, Governor of the People’s Bank of China, 23 March 2009 ?

http://www.bis.org/review/r090402c.pdf

They say that the new government regime in China is all about economic reform.

I don't know what they mean by "economic reform", but essays like this one make me think they'd like to move to a new monetary system, one that fixes Triffin's dillema.

DASK said...

Thanks Edwardo.. it would be stunning if European banks had purchased 580 tons on Friday, is there a second source for that? I can only find that one interview. Another meme going round was that 580 tons had been purchased over a 7 day span in June (the 580 comes from the drop in identified gold stocks) .. by Andrew Macguire, and attributed to 'eastern central banks'.. could these stories be confused? hard to get a signal from the noise.

Edwardo said...

Bright Aurum and Dask,

I put that link up because of its supposed coin content, since Bright Aurum inquired about the coin market. I'm more than a little skeptical of the claims about such large size purchases. As for gold falling below the cost of production, that is a development whose profound implications I've discussed here on a number of occasions.

John said...

Surprised there aren't more comments about the link Edwardo provided. If it is true I'd say it's one of the most important news events for us freegolders ever.

Motley Fool said...

John

That is likely because it doesn't seem to pass the bullshit test.

Me, i'm ignoring it, at least until such time as credible sources report the like.

TF

Aaron said...

Hi DASK-

I'm with Motley on this one. We've only got one source and so far this "fact" about CB purchases seems to have been pulled out of thin air. But I can help you weed through the confusion, take anything you read that uses Andrew Macguire as the source and toss it straight into the trash bin. His claims were thoroughly debunked in Chris Martensen's blog a while back by (if memory serves me correctly) a guy named Pete T along with Victor and a few others. How anyone gives that guy any further credibility is a mystery.

milamber said...

JR,

Too funny :)

TinTin,

I noticed that you posted 10 minutes after I put up the articles. Kudos on being able to speed read all of them, think about them and then respond to the most compelling point (at least rom your perspective) that,

“Nobody of real importance in China takes him seriously."
.

After reading his resume (which I hadn't before), I can see why you would think that.

He is such a tool!

http://mba.yale.edu/faculty/profiles/chen.shtml


Professor of Finance
Professor Zhiwu Chen is an expert on finance theory, securities valuation, emerging markets, and China's economy and capital markets. Dr. Chen started his career by publishing research papers in top economics and finance journals on topics related to financial markets and theories of asset pricing. Around 2001, Dr. Chen began to expand his research focus by going beyond mature markets and investigating market development and institution-building issues in the context of China’s transition process and other emerging markets. What institutions are necessary for markets to develop? Why is finance important for society? How does financial development affect social structure and individual freedom? His work has been featured in newspapers and magazines in the United States, Hong Kong, China and other countries. He is a frequent contributor to media publications in China on topics of economic policy, market development and legal reform. His list of books published in China includes: How Is Wealth Created? (2005), Media, Law and Markets (2005), Why Are the Chinese Industrious and Yet Not Rich? (2008), Irrational Overconfidence? (2008), The Logic of Finance (2009), 24 Wealth Lectures (2009), and Assessing China’s Economic Growth of the Past 30 Years (2010).

Achievements and Awards
Named "10 Public Intellectuals influencing China in 2010" byTimes Weekly (a national newspaper in China)
Received 23 "Best Books of the Year" awards in various categories for his book, The Logic of Finance, 2009 & 2010
First Prize, "Hexun Best Books of 2008", for his book, Why Are the Chinese Industrious and Yet Not Rich?
Named "10 Most Influential Economists in China" by Wall Street Wire, 2006
Pacesetter Research Award, Ohio State University, 1999
Merton Miller Prize, 1994
Chicago Board Options Exchange Competitive Research Award, 1994

Boards
Chief Academic Advisor, China Central Television (CCTV) documentary series, 10 episodes, "Wall Street" 2009-2010 and "Money" 2010-
Expert Advisory Commission to the Beijing Government on the 12th Five-Year Plan, 2010-
Board of Directors, Yale-China Association, 2010-
Board of Directors, Bank of Communications, China, 2010-
Academic Committee, Unirule Institute, Beijing, China, 2008-
Board of Directors, Lord Abbett China Fund Management Company, China, 2006-
Expert Advisory Panel on the Formation of the China Investment Corporation, State Council, China, 2007

cont...

milamber said...

cont...

http://mba.yale.edu/faculty/profiles/chen.shtml


Editorships
Editor:
Annals of Economics and Finance
Associate Editor:
Journal of Financial and Quantitative Analysis
Journal of Empirical Finance
Pacific-Basin Finance Journal
Selected Articles
"A Valuation Study of Stock-Market Seasonality and Firm Size" (with J. Jindra), Journal of Portfolio Management, Vol. 36, No. 2, 78-92, Spring 2010

"Mechanisms of Rural Credit Markets in Modern China" (with P. Kaixiang and Y. Weipeng),Economic Research Journal (China), Vol. 43, No. 5, May, 2008

"China’s Stock Market in Historical Perspective," The PB Newsletter, No. 5, 29-40, July, 2006

"Development Prospects of Chinese Industries," in S.C. Jain, ed., Emerging Economies and the Transformation of International Business, Edward Elgar Publishing, Inc., 2006

"Can Compensation for Cash Flow Risk and Discounting Risk Reconcile the Equity Premium Puzzle? (with G. Bakshi), 2005, in R. Mehra and E. Prescott, eds., A Quantitative Analysis, forthcoming

Handbook of Investments: Equity Risk Premium, edited by "Stock Valuation in Dynamic Economies" (with G. Bakshi), Journal of Financial Markets, May, 2005

"Informed Trading in the Options Market" (with C. Cao and J. Griffin),Journal of Business, 2004

"Capital Markets and Legal Development: The China Case,"China Economic Review, Vol. 14, No. 4, 451-472, 2003

"Viable Costs and Equilibrium Prices in Frictional Securities Markets," Annals of Economics and Finance, Vol. 2, No. 2, 297-323, November, 2002
"Do Call Prices and the Underlying Stock Always Move in the Same Direction?" ( with G. Bakshi and C. Cao), Review of Financial Studies, Vol. 13, 549-584, 2000
"Pricing and Hedging Long-Term Options" (with G. Bakshi and C. Cao), Journal of Econometrics, 1998
"Empirical Performance of Alternative Option Pricing Models"(with G. Bakshi and C. Cao),Journal of Finance, Vol. LII, No. 5, 1997
"Equilibrium Valuation of Foreign Exchange Claims" (with G. Bakshi),Journal of Finance, Vol. LII, No. 2, 1997
"An Alternative Valuation Model for Contingent Claims" (with G. Bakshi), Journal of Financial Economics, Vol. 44, 1997
"The Spirit of Capitalism and Stock Market Prices" (with G. Bakshi),American Economic Review, Vol. 86, No. 1, 1996
"Portfolio Performance Measurement: Theory and Applications" (with P. Knez),Review of Financial Studies, Vol. 9, No. 2, 1996
"Inflation, Asset Prices, and the Term Structure of Interest Rates in Monetary Economies" (with G. Bakshi), Review of Financial Studies, Vol. 9, No. 1, 1996
Working Papers
"Price Impact Costs and the Limit of Arbitrage" (with W. Stanzl and M. Watanabe)

"Discounts for Illiquid Stocks: Evidence from China" (with P. Xiong)

"Stock Valuation and Investment Strategies" (with M. Dong)

"Stock Valuation in Dynamic Economies" (with G. Bakshi)

"Market Frictions and the Preferred Habitat Theory of the Term Structure of Interest Rates" (with G. Bakshi)

Education
PhD Yale University, 1990
MS Changsha Institute of Technology, China, 1986
BS Central-South University of Technology, China, 1983


---------------

Yup. Clearly a person not worth listening to.

Milamber

milamber said...

@BH,

Yes and agreed on all counts.

Milamber

byiamBYoung said...

Thanks JR.

It looks like the 6-month GOFO has now joined the negative trend.

Franek said...

Can GOFO going negative be interpreted or thought of in light of FOFOA's "...Gold bids for dollars..." as Gold starting to not bid for dollars?

Aaron said...

@Franek

The Gold Backwardation Story

Do any of you check the GOFO rate from time to time just to see if it is getting close to zero? GOFO is a relatively good proxy for the gold contango because it represents the cost basis a dealer calculates to take either side of a 'gold for currency swap' over a fixed length of time. It is also a good proxy for liquidity in the gold market. It should never turn negative because that would mean it costs more to borrow gold than to borrow dollars. (GOFO = $ interest rate - gold lease interest rate) In other words, if GOFO goes negative, the message is that gold is more precious than dollars.

From Red Alert: Gold Backwardation!!!

Franek said...

Sounds like a resounding "YES" then! Thanks Aaron.

JR said...

The LBMA says:

GOFO (Gold Forward Offered Rates)

What is GOFO?

GOFO stands for Gold Forward Offered Rate. These are rates at which contributors are prepared to lend gold on a swap against US dollars. Quotes are made for 1-, 2-, 3-, 6- and 12-month periods.

Who provides the rates?


The contributors are the Market Making Members of the LBMA: The Bank of Nova Scotia–ScotiaMocatta, Barclays Bank Plc, Deutsche Bank AG, HSBC Bank USA London Branch, Goldman Sachs, JP Morgan Chase Bank, Société Générale and UBS AG.




So GOFO is indicative of the LBMA banks (the gold bullion banks) willignness to lend gold for dollars, how much they will pay to borrow dolalrs collaterlaized by "gold" (really paper ala unallocated gold). But another way of looking at it is from the gold borrower's persepctive. As VtC put has it:

Whenever GOFO turns sharply lower or even negative, this indicates stress in the London gold market, i.e. that some of the participants are desperate to get their hands on gold on short notice and are prepared to pay a premium for borrowing gold against US$ collateral.

I think this is a key idea to understand from the same VtC link:

Under normal market conditions, GOFO is positive, i.e. the interest on US$ loans is higher than the GLR. This means that we need to pay interest if we lend gold and borrow US$. The gold basically serves as the collateral for borrowing US$ at a lower interest rate than we would have to pay for an unsecured loan.

So positive GOFO is basically dollar lending secured by gold. The gold gets you a cheaper price than borrowing the dollars without the gold collateral. But from above:

Whenever GOFO turns sharply lower or even negative, this indicates stress in the London gold market, i.e. that some of the participants are desperate to get their hands on gold on short notice and are prepared to pay a premium for borrowing gold against US$ collateral.

See that - "pay a premium for borrowing gold against US$ collateral"

So at the end of the day, which one is the collateral, and which on is the real asset being sought to be borrowed? Gold appears as the collateral so long as the system works well, but when things get tight, are we seeing the real relationship at work? Is it really gold bidding for dollars that matters, aka the system works so long a gold holders want dollars.

FOFOA

"Gold bids for dollars. If gold stops bidding for dollars (low gold velocity), the price (in gold) of a dollar falls to zero." So you see, there doesn't need to be a stampede into today's "gold" for real, physical gold to become "priceless". ANOTHER wrote, "Gold! It is the only medium that currencies do not "move thru". It is the only Money that cannot be valued by currencies. It is gold that denominates currency. It is to say "gold moves thru paper currencies"."

So now I'm looking only at physical gold **IN SIZE**, the kind of size that represents entities that know WHY they are holding gold (i.e., not for paper profits). And I'm wondering when physical gold will stop moving through paper currencies, at least at parity with today's "gold", the $PoG.


JR said...

One idea following up on the notion "Is it really gold bidding for dollars that matters, aka the system works so long a gold holders want dollars."

In Once Upon a Time, FOFOA referenced the idea of the monetary plane being connected to the physical plane by two things: the price of goods and services (CPI or the general price level) and the price of gold.

GOFO is indicative of the price people are willing to pay (in dollars) to get gold. Gold is a sense is representative of the physical plane's connection to the monetary plane. We can posit gold exists in both planes today.

So what does it mean when gold (the physical plane) does not want dollars (the monetary plane), when gold (the physical plane) isn't bidding for dollars (the monetary plane)? I think it sounds quite similar to this idea:

Remember this: in hyperinflation the physical plane FEARS the monetary plane because it is crashing. It is not GREED that drives the prices up, "give me more credits for this apple." It is FEAR of the credits, "get those credits away from my apple"... "but wait, sir, here I can double my offer, two wheelbarrows of cash for your apple."

Gold bidding for dollars is sort of a proxy for the physical plane's desire for money (credits). And when the physical plane fears money (credits), when the physical plane goes "get those credits away from my apple," how does it manifest itself?

Well there are two ways the monetary plane is connected to the physical plane: (1) the price of goods and services (CPI or the general price level) and (2) the price of gold. Basically hyperinflation and soaring gold prices?

Does that make any sense? What else am I missing that helps round out the tale, or is my rambling, incoherent response so devoid of rational thought that you can only cocnlude "may God have mercy on your soul."

Lisa said...

JR

Thanks for your explanations.

If GOFO going negative means "gold is more precious than dollars" - should we be expecting to see gold going into hiding rather than a soaring gold price?

Historically a negative GOFO has meant a soaring gold price, if I am understanding correctly.

However, from what I have learned here, and considering the GLD drain, it seems more likely that gold is going into hiding? Is that the correct conclusion?

Franek said...

Thanks JR! Your explanation brought even more light to my shaky understanding of the concept and preempted some of my other questions. Greatly appreciated.

michael3c2000 said...

Thanks posters on China. Here's something "new", an update of "old news". http://news.xinhuanet.com/english/china/2013-07/10/c_132526714.htm

michael3c2000 said...

Kaye reports on the ground from the scene of the shine, exploring what the "new alchemy" means to meltendom, meltdowns and melt(spot)"values". Why forgotten luster shows up East etc. Part 1 of 2: http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/7/9_Game_Over_-_Its_All_A_Farce%2C_The_Fed_%26_German_Gold_Is_Gone.html

ein anderer said...

JR,
very helpful, indeed :D

byiamBYoung said...

Golden backwardation rabbit hole gets deeper

ein anderer said...

byiamBYoung’s link is leading to quite some interesting discussions there too! Not so enlightend as folks here, but as Legolas put it: They are smelling an
impending calamity too!

Biju said...

JR,

The GOFO going negative - we have seen this in 1999, 2001, 2008 and now. I think now is different. This time when GOFO goes sustained negative , people will be perplexed and I think Gold will not bid for dollars and paper Gold price will crash.

Everyone including Gold bugs will be surprised, why is GOld falling when GOFO is negative ? I hope I would be able to hold my nerves.

Tommy2Tone said...

I think we DO need to award points for that JR.

byiamBYoung said...

For those (like me) who seem to perpetually be in learning mode, this glossary at the LBMA could be pretty useful.

Hope it helps.

Cheers

Aaron said...

Ned Naylor-Leyland of Cheviot Asset Management has recently issued a 2-page data-packed update which is worth the 10 minutes IMHO. What I found most interesting was the barchart he published on page two of his update, his estimate of the physical vs. paper gold market based on Reserve Bank of India data. Ned admits the gold market is very opaque so it's hard to know how close he is to accurately mapping reality, but if you flip to page two and focus on the thin red line atop the gold LBMA bar on the chart, that's what he's calling physical. Sometimes a picture really is worth a thousand words.

burningfiat said...

FOFOA 2010 article reprinted here:

http://www.gotgoldreport.com/2013/07/red-alert-gold-backwardation.html#more

byiamBYoung said...

Aaron,

Amazing. It makes one wonder just how the hell we got to this incredibly disjointed and overwound state.

The backlash is going to sever more than a few limbs.

Cheers

AT said...

@michael3c2000: That is a shocking article by KWN. I was amazed--stunned even--when I read it! :)

milamber said...

Ashley and Michael3C2000:

Me to!

I was shocked, SHOCKED I tells ya! :) To learn that the Fed had gold.

Silly me thought they had gold certificates since that is what the Treasury gave them back in 1935 when they pulled all the Fed gold back in.

"...the Fed's "gold stocks" are irredeemable paper gold Treasury certificates marked at $42.22 per ounce.

The US Treasury owns all the gold.

The Fed owns paper (and electronic book entry, post 1935) certificates that are irredeemable to the Fed..."


http://fofoa.blogspot.com/2010/10/its-flow-stupid.html?

But if you want to check it out for yourself, here is the link:

http://www.federalreserve.gov/releases/h41/current/

Look for the Assets line:

Assets
Gold certificate account 11,037

I know it is easy to get suckered in by KWN, & I still listen to KWN because sometimes Eric has decent people on (the last one was the interview that Woland highlighted); but pretty much all the rest should be viewed the same way one views the current governor of Texas:

All hat, no cattle.

hth,

Milamber

michael3c2000 said...

@Malimber
William Kaye referred correctly. To the US government's stockpiles. Not the Federal Reserve.
He mentioned Fed in the context of Federal Government.
FOFOA's flow post good compliments Kaye's interview well as it happens.
There was a part 2 http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/7/9_William_Kaye_-_The_Savage_Gold_War_Behind_The_Scenes.html
and just tonight one of several related pieces:
http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/7/10_Wall_Streets_Worst_Call_In_20_Years,_The_Sucker_Trade_%26_Gold.html
@Ashley
Truth is stranger than fiction,
but the boundary between them is more subtle than thoughts.

One Bad Adder said...

We're looking quite tight here in the short end of the curve. This weeks 1 mth Auction is off a bit on last weeks but we saw an increase in the TD allocation.
I think the Treasury-Direct allocation might well prove to be the Canary-in-the-Coalmine as we devolve further FWIW.

Unknown said...

This is interesting. It shows the increasing lead time of backwardation.

http://www.24hgold.com/english/news-gold-silver-a-picture-of-gold-availability.aspx?article=4436415894G10020&redirect=false&contributor=Keith+Weiner

Indenture said...

"What will change the confidence that people have in the dollar? Will there be some catastrophic event?

That's the $55,000 question. It is impossible to predict the exact pin that will pop the bubble in a world full of pins, but I have an idea that it will be one of two things. I think the two most likely proximate triggers to a catastrophic loss of confidence are a major failure in the London gold market, or the U.S. government's response to an unexpected budget crisis due to consumer price inflation. Most people who expect a catastrophic loss of confidence in the dollar seem to think it will begin in the financial markets, like a stock market crash or a Treasury auction failure or something like that. But I think it is more likely to come from where, as I like to say, the rubber meets the road. And here I'm talking about what connects the monetary world to the physical world: prices. I think these "worlds" are connected in two ways. The first is the general price level of goods and services and the second is the price of gold. If one of these two connections is broken by a failure to deliver the real-world items at the financial-system prices, then we suddenly have a real problem with the monetary side. So I think it will be a relatively quick and catastrophic event, but maybe not as dramatic as a major stock market crash. It will be confusing to most of the pundits as to what it really means, so it will take a little while for reality to sink in.
"

http://fofoa.blogspot.com/2012/07/interview.html

Woland said...

Chapter 1 (what is the title????)

"One hot spring evening, just as the sun was going down, two men
appeared at Patriarch's Ponds. One of them, fortyish, wearing a gray
summer suit, was short, dark haired, bald on top, paunchy, and held
his proper fedora in his hand; black horn rimmed glasses of super-
natural proportions adorned his well shaven face. The other one - a
broad shouldered, reddish haired, shaggy young man with a checked
cap cocked on the back of his head..............."

{:<)>

Tommy2Tone said...

Nice Woland.... craving burgers obviously ;)

Lisa said...

Woland


I know I know!!!!!!!!!

Master and Margarita

Indenture said...

milamber: So how do you really feel about King World News?

Tom R: Thanks for the link.

DASK said...

Nice one Lisa.

Fantastic book and a devilish riddle, Squire Voland.

Indenture said...

http://en.wikipedia.org/wiki/The_Master_and_Margarita

Lisa said...

The book from which Woland gets his name. He's a devilish guy, isn't he?

tintin said...

Milamber,

regarding my comment on Chen Zhiwu:
I am Chinese. I browse and read stuff in Chinese out of China and around the world. I know very well the views of this Chen Zhiwu.

Credentials have no value to me if they are earned on a theory that's wrong in real world.

How about bernanke's credentials? Are we to believe him?

Two Nobel prize winning economic professors collapse Long Term Capital in 1998. Shall we accord any weight to their valuation models in real world?

Cheers

sean said...

Aaron, nice letter from Ned. The chart of physical gold delivery on the Shanghai gold exchange appears to support the idea that supply is tight. It’s a shame he finishes with promise of a short “squeeze”, which will only happen if people continue to buy (literally) into the idea that paper gold is real.

Regarding his comment that the decrease in POG is due to the (failed) attempt by the bullion banks to get Gold “back into contango and stop the movement of remaining inventories”, I have been wondering if all the effect of the “taper” talk could actually be intentional and it is really more about:

a) A last-ditched attempt to increase the price of gold (the "third leg"), thereby decreasing the flow of physical gold from West to East (higher price means less weight), or

b) increasing interest rates in Europe, which is stressing the European states to breaking point (see AEP article today) and thereby trying to force the ECB to join the print-fest?

Any thoughts?

Edwardo said...

Sean,

I wouldn't ascribe too many machinations to "taper talk". The Fed is a one trick pony with only one mechanism at their disposal to mitigate their all too predictable behavior. They will be in the business of picking up the slack vis a vis government debt until the entire system resets with the U.S. Ex Priv Pony well out to pasture. All the Fed has are their periodic adumbrations with which to keep market forces temporarily at bay.

However, the timing of their taper talk (say that three times fast) may, in hindsight, prove to have been an exceptional blunder coming in tandem as it did with recent reports of divestiture by foreign holders of U.S. sovereign debt instruments. As FOFOA has opined, there are many pins uncomfortably close to many bubbles, and where the bond bubble is concerned, The Fed appears to have unwittingly let the genie out of the bottle. In truth, the genie, if it is indeed out now, was never going to do anything but escape, and yet there may be some cruel irony at play if The Fed, in attempting to cause the barbarians at the gate to back off a bit, just handed them a few catapults and a battering ram with which to revive their assault.

Sherlock said...

DATE 1 Month 2 Months 3 Months 6 Months 12 Months
05-Jul-13 0.01500 0.03167 0.05167 0.09667 0.21833
08-Jul-13 -0.06500 -0.04333 -0.03000 0.03500 0.18167
09-Jul-13 -0.10600 -0.08400 -0.07000 -0.01000 0.13800
10-Jul-13 -0.11167 -0.08000 -0.05833 -0.00167 0.14000
11-Jul-13 -0.05167 -0.02833 -0.01500 0.04667 0.15833

http://www.thedailybell.com/29047/Anthony-Wile-Antal-Fekete-Gold-Backwardation-and-the-Collapse-of-the-Tacoma-Bridge

In the article above, Fekete talks about permanent backwardation. It appears GOFO is headed back to contango. Would this be caused by the Chairman's comments yesterday and the perception the Fed will continue easing ad infinitum? If so, I'd like to offer Bernanke a walk-up song for his next public appearance!

http://www.youtube.com/watch?v=jONeYvQOXeA

"Be cool bitch!"

Anonymous said...

Post at jesse's cafe americaine stating that there has been a 70% decline of the gold stored at Brinks in one week. "Jesse" states: "If this is data is correct, it would not be too much of a stretch to say that this has the appearance of 'a run on the bank.'"
http://jessescrossroadscafe.blogspot.com/2013/07/brinks-is-being-drained-of-gold-with.html

Also a link at JCA to a Goldseek article explaining why some people believe that the Fed leased 4,500 tons of gold it was holding for Germany and other foreign countries, and that 4,500 tons of U.S. gold are now encumbered by swap liens. I.e., that total U.S. gold holdings are now 8,300 - 4,500 or 3,800 tons.
http://news.goldseek.com/GoldSeek/1366140621.php

Jesse McL said...

Edwardo, that's gotta be some record for metaphors-per-column-inch! On the money always though.

One Bad Adder said...

On the basis of THIS CHART we (a) will hardly see the month out ...or (b) we may not even see the WEEK out!
EOD (3 mo Index) today could well be EO(Systemic)Days ....a doosie!

We watch!

Robert said...

Although these days I generally sleep pretty well, last night I had insomnia. And in my insomnia I felt like I had a moment of clarity. None of this is new, but it felt like I was realizing all at once the things that I already knew:

1. The failure to prosecute any fraud, by itself, is enough reason to get out of the system. Given human nature, the blanket “get out of jail free” card virtually guarantees that someone will precipitate another crisis.

2. Historically the period between major market disruptions has been 2-5 years. Black Monday in 1987, S&L in 1989, Japanese double bubble in 1991, Asian flu in 1997, LTCM in 1998, Internet bubble in 2001, Subprime in 2006, GFC in 2008, Greece in 2010. Are we overdue for the next shock? Are FASB 157 and control fraud concealing symptoms of the next disruption?

3. Pension funds, which control a substantial part of the debt and equities markets, need to grow at 5-7% per year. The longer we stay in a slow growth/low interest rate phase, the more pressure they come under. The system cannot be permitted to remain in “muddle through” mode.

4. M1 and M2 velocity are at long term lows. Growth cannot come back as long as velocity continues to decline. Isn't think the most important data point (and the one that is the most incorruptible)?

5. Five years ago -- after Bear Stearns collapse but before the Lehman collapse -- only a handful of people really thought the entire system was at risk of an epic global collapse. I had done more reading than almost anyone I knew personally and I remember being shocked by Chris Martenson's bizarre prediction that gold was going much higher. Back then there was still enormous faith in government's power to "do something" and very few people thought there was any risk of a USD collapse. The psychology has changed, people know in their gut that the system is sick, and the risk of an epic collapse has crept into the public consciousness, even if most people are not expecting that to materialize.

6. The mainstream story now is that the hyper-inflationists have all been discredited. This sets the stage for an even more aggressive intervention is response to the next disruption.

7. There is a growing restlessness, like a desire to increase the speed of history.

A week ago I believed that the dollar could survive for another 20 years. This week I am a lot more skeptical.

ein anderer said...

For Germans:
https://mobile.twitter.com/einandererblog/status/355562159910039552

Roacheforque said...

If you accept FOFOA's premise in "metamophosis" that we are gradually evolving from a debt based valuation system to an equity based valuation system, there are implications to that acceptance which cannot be ignored.

Perhaps I should clarify what I mean by a "valuation system".

We work for debt, we are paid in debt, our lifestyles are based on debt, our wealth is measured in debt, our personal and objective values are based in debt.

Now this debt is privately issued by a command and control authority of global central banks whose owners (major shareholders) are the primary dealers, that is the Too Big To Fail, systemically important banks whose valuation of debt is protected by the very scenario I have just depicted above.

This debt is not governed by any equity based valuation constraint (such as a finite supply of a physical substance). As anyone can see, it is freely issued by the command and control central banking system (primarily the FED, since it issues the preferred debt which denominates most all other debt in the system ... in this present debt valuation era).

So I am trying to think of a single word that conveys this principle, in order to contemplate a simple word substitution experiment which would help drive home my point.

But the connotation I am trying to reach in this "single word" is that the debt which is issued has a primary function, and that primary function is not to promote the public welfare of the common man (though some may disagree with this).

But you think the present debt based system is "equitable" than I suggest we have a bit of a contradiction in terms. I believe it becomes "less equitable" as it nears the end of it's timeline (meaning that it does more harm than good as it nears the end of its usefulness).

Take a good look around you and compare, say, the world of the Reagan era, where we dealt with the S&L crisis one way, and the world of the TARP era, where we dealt with the 2008 crisis in a much different way, then, and moreso going forward.

The debt we are protecting today is much less beneficial to the general welfare of the greater good (though again SOME mau disagree) than the debt we protected when this system was contrived out of the massive destruction of equity from which said system had nothing to draw.

Roacheforque said...

I would say that the primary use of newly issued debt today, beyong the technical, structural or systemic explanation of "liquidity" is to now service fraudulent equity valuations.

Fraudulent equity valuations of loan risk.
Fraudulent equity valuations of collateral.
Fraudulent equity valuations of the derivative rate (interest) risk
Fraudulent equity valuations of the global wealth reserve asset.
Fraudulent equity valuations of the primary transactional currency world wide.
Fraudulent equity valuations of all derivative positions.

Fraudulent equity valuations of debt.

So though it is an imperfect choice, I will choose the word FRAUD as the synonym most closely associated with systemic debt at this stage of unsustainable expansion. A fraudulent wealth extraction "system" which inures primarily to the benefit of the major shareholders (generational wealth dynasties) of the major shareholders (systemically important global banks) of the command and control system (central banks) which issue the debt primarily for that benefit which benefit of course "sustains" this debt based valuation system because said debt maintains its transactional value in the transferance of debt for physical plane equity."

Therefore now let us do the susbstitution:

We work for fraud, we are paid in fraud, our lifestyles are based on a fraud, our wealth is measured in fraud, our personal and objective values are based upon fraud.

And we are evolving/working toward a valuation system whereby:

We work for equity, we are paid in equity, our lifestyles are based on equity, our wealth is measured in equity, our personal and objective values are based on equity.

Do I think that the metamorphosis from a "debt based" to an "equity based" valuation system will leave us with a "better system"?

Yes, I do.

Do I think human nature, as in greed, covetousness, and the abuse of power will somehow change? No I do not.

I hope this clarifies my position.

Roacheforque said...

So I think one confusion comes from:

Is FIAT intrinsically good?

Yes it is in principle, from a systemic lubrication standpoint, but unfortunately today all FIAT is based upon (primarily) systemically fraudulent and unsustainable debt.

So FIAT today happens to be an excellent lubricant for a systemically flawed (and increasingly fraudulent) valuation system.

When FIAT is constrained by an equity based valuation system, (i.e. based upon equity) it will then be "good" from a practical standpoint as it lubricates an inherantly stable equity based IMFS.

This we learn from the Flower of Understanding.

Anonymous said...

Wil,
FWIW, I believe the heart of the problem is that savers save their surplus in fiat which, I believe, they do ultimately because they mistake money (primarily a MOE) as wealth itself. In a fractional reserve banking, adding the surplus back into the system increases the "pumping" of credit to unsustaniable heights. I.e., the capacity to generate credit quickly surpasses and overwhelms growth and real value in the real economy. THIS, I believe, leads the financiers to play games and to commit fraud. Both as a cover up of reality, and because the financiers can't let go of the benefits of all that credit to their own personal bottom lines, even though it is ultimately suicidal to the economy and society at large.

It's not the credit or debt basis of fiat per se that is the problem; it's that people mistake money for wealth and try to save in it, within a fractional reserve, hypothecation and rehypothecation system. Eventually, there are too many claims chasing the same limited pool of real collateral, all driven, ultimately, because people keep trying to save within the financial system. Ultimately, it is a failure of people to know how to live. THIS is the main reason I take Another and FOA at their words. The understanding that one should live and enjoy life resonates in their words.

My 2 cents.

zabba said...

Listen to the Flower, people.

DP said...

Bravo, Sir.

The people extend bankers far too much credit.

DP said...

Is #GOFO backwardation due to a revised form of "support" for the gold market?

In the past the problem for Central Banks was demand for gold. To suppress this issue, until they had time to rearrange their affairs via a system that could withstand the problem created by this demand for gold, past support for the gold market was provided via CB leasing of physical (that was sold into the market by lessors, who then purchased forwards in order to close out the lease at maturity… as long as the forwards perform, of course…).

There was a correlation between the demand for futures and the supply of physical.

The BIS/ECB don't want the underground stream of physical gold - which underpins the whole gold market, and by extension the currencies - to actually dry up… but to "merely" break the fractionally-reserved, paper-based, spot price setting mechanism of the LBMA. Where demand for gold is mostly satisfied by promises of gold (bank credits).

So are the BIS/ECB supporting gold today via purchases of spot gold that will be demanded for allocation/delivery, to keep the price up where miners can maintain the dwindling mine supply?

If so, this might explain why demand for spot paper is greater than for speculative futures paper in recent days. The correlation between demand for futures and supply of physical is absent… or at least weakened.

No?

DP said...

#Another: The BIS, it force performance, on any [(smile)] economy!

[…]

This is why oil can take a small amount of physical gold out of world supply, at current "freely traded", "managed prices", and hold it at a many times valuation. That is what gives this "new world gold market" much value in trade at high levels. Look even at your "Comex", and divide the daily volume by the "eligible stocks for delivery". That number ( perhaps three million ounces divided by 150,000 stocks, deliverable, times the spot close gives close, real world price of physical, $6,000 [this was 1998] . It follows close to paper trade on LBMA.

You see, "physical gold is of much greater value than public traders can move it for"! In your world, this cannot be, but it is, and will show for all to see in your time.


http://www.usagold.com/goldtrail/archives/another3.html

Edwardo said...

Let me second DP's kudos to Sir, and let me attempt to deepen the validity of Sir's post by pointing out that prior monetary systems have been dashed on the (sometimes) craggy shores of reality because the MOE and SOV were fused. We aren't the first one, but (for those of us who aren't confused about the source of the problem) we would surely like to be the last.

DP, while I don't like the implications of further support, I have to admit that yours is an interesting, perhaps, even compelling, surmise.

Unknown said...

Ahhh, Sir Tagio:

As you say:
" ... the heart of the problem is that savers save their surplus in fiat which, I believe, they do ultimately because they mistake money (primarily a MOE) as wealth itself."

You have indeed reached the crux of the matter in, "because they mistake money as wealth itself."

They do so because it has transactional value to acquire "wealth" (like gold) and even the bare necessities (like food and shelter) which define their existance. Therefore, in their reality, it is no mistake. Today, their money is their wealth, their survival, their very existance.

But FIAT has a different USE VALUE for Shrimp than for Giants.

Shrimp support FIAT in order to exist, whereas (certain systemic) GIANTS use the dependence of Shrimp upon it to fleece the Shrimp themselves.

Shrimp will not stop saving in the mnedium that defines their very exitence (as long as it continues to do so) and Giants will not stop supporting the systemic gains they reap from a medium that allows them to fleece the Shrimp so effortlessly (as long as the Shrimp willingly support their own sodomy).

This dilemma cannot happen in an equity based system as no GIANT will put up their own gold as equity for a debt based Ponzi scheme in an equity based system. There is no guarantee that this gold will not be "spurred away".

But in a debt based system, what is there to loose? We just print more.

So if savers were to abandon FIAT and turn to GOLD, will it help bring about this transition from a debt-based to any equity based system (a transition which appear to me to be already underway, BTW) ??

Yes, I think it will.

So I believe we are in agreement.

You would not know this from the Western hemisphere, but elsewhere, as zabba points out, "the message is getting louder every day".

Aaron said...

So if savers were to abandon FIAT and turn to GOLD, will it help bring about this transition from a debt-based to any equity based system (a transition which appear to me to be already underway, BTW) ??

Yes, I think it will.

Sorry Wil, but you've got it all backwards. Shrimps switching from saving currency to saving gold is not going to make a dent in bringing about "this transition from a debt-based to any equity based system"

Giants no longer willing to supply physical to the market? Now that would do it.

Franek said...

Does anyone have or can suggest a good source to read up and gain more organic understanding on the subject of what's wrong with a debt-based system and how it fleeces shrimp population?

I find that much of a breathing population (myself somewhat still included) is primarily and "comfortably" unaware of perils of the "matrix". I think that oftentimes people instinctively feel that something is not right, but have, more often then not, no tools to properly analyse the what and why, typically because if often feels overwhelming and helpless.

The more experienced commenters here obviously have that deeper understanding, but oftentimes, when they talk, the talk may appear, especially to the uninitiated ones, somewhat too lofty and thus inaccessible.

Nickelsaver said...

Franek,

http://fofoa.blogspot.com/2010/07/debtors-and-savers.html

JR said...

Good stuff Wil,

A quick comment:

Is FIAT intrinsically good?

Fiat is.

Good or bad is a human judgment.

From where I sit, the question of interest *IS NOT* whether something is good or bad. Opinions are like assholes, we all have them.

Rather, the real question to answer is "can I escape myself and see it through another's eyes."

It's all in the view—the perspective. And even though you may not be a giant, you can still learn to view the world as a giant with a little practice. It's easier than you might think. All you have to do is gently set your shrimp baggage on the ground and walk away.


Blondie's View

Aaron said...

Hello Franek-

I should have been more clear. When I copied Wil's statement about an equity-based system, I realized he was confusing this with Freegold and as such I should have chosen my words more carefully. My comment would have been more accurate if I had said shrimps buying gold will not pull Freegold's initiation closer to the present. Freegold's trigger is much more likely to come from a withdrawal of sales by giants.

I've excerpted a comment made by FOFOA in his Sept 2009 post, Say Goodbye to Wall Street which should help you see the difference.


Mansoor H. Khan said...

FOFOA,

I see the advantages of having a mostly equity based economy over a mostly debt based economy specially where maturities are not matched


Hello Mansoor,

With all due respect, I think you are completely misreading me.

You say, "I see the advantages of having a mostly equity based economy..."

You misunderstand what I am saying. I am not proposing this. We can have circulating debt-based fiat currency as a medium of exchange and a unit of account. But we do not need to harm the savers anymore by trying to make it a store of value. When the dollar collapses, gold will be set free to fill its age-old role as a store of value without counterparty risk.

Aaron said...

In case I haven't confused everyone enough, more thoughts from FOFOA on an equity-based system.

FOFOA: In an equity-based system, any entity can still issue unlimited paper notes if it wants. Just like the US government does in its crazy debt-financed world. The difference is that the marketplace will price that paper against the real underlying property as it is issued. If a company doubles its issue of stock certificates to raise cash, then the price of each outstanding share will be cut in half. If a sovereign money-printer doubles his currency base to pay his cronies, then the value of each currency unit will be cut in half. But in today's debt world, a company can keep issuing more and more bonds until it ultimately collapses under the weight of its debt service. The same goes for countries.

Bright aurum said...

@ DP, Edwardo ...or Victor perhaps?
Is there any explanation of the anaemic action in the lease rates. Nothing like 2008 for sure!
Cheers

Franco said...

Sir Tagio said "savers save their surplus in fiat".

Do you have supporting evidence for that assertion? I mean, people throw that around a lot on this forum, but from data I've seen before, it seems that a lot of the wealth (in the USA at least) is in real estate, business equity, and stocks. My guess is that the portion of surplus that goes more or less long-term into currency or currency-like instruments such as bonds, is 20%-30%. Aside from keeping a few months worth of living expenses as a rainy day fund, I don't know anybody who saves his/her surplus in fiat.

Anonymous said...

Franco,
You ask a good question, it is more accurate to say that people put their suprlus into the financial system as a whole, not just fiat. However, in response to your question, as of April 2013, M1 was about 1.9 trillion and M3 was almost 10 trillion, so there was about 8 trillion stored in what is essentially "fiat."

http://www.shadowstats.com/charts/monetary-base-money-supply

If you compare it to MZM, which includes money market funds, that was about 11.8 trillion early in July, so then there is about 10 trillion in fiat "saved."

http://research.stlouisfed.org/fred2/series/MZM

These are just the numbers for the dollar, of course. Obviously people are also saving in Euros, Pounds, Swiss Francs, etc.

Unknown said...

Aaron,
Are you saying that what savers in China and India are doing over in the Shanghai exchange is not currently, and never will, make a dent?

Really ??

Additionally, Westerm shrimp supply plenty of gold to the system today, as they are clueless. Just try talking to any one of them about Freegold.

This United States was once quite rich in gold, held far and wide from shore to shore, but no Western shrimp will hold "an asset going nowhere" in currency terms, and here we are today with the "hated paper losses" of fool's (trader's) gold.

So Giants can withold all they want, shrimp will keep the paper chase alive. I know of one planning to withhold quite a few tonnes for 7 years, on BEHALF of the sovereign claimant just trying to repatriate their physical.

Any bells going off there as we sing Ring around the Bundie's Posey? "All fall down" yet?

I won't go as far as to say you have it all backwards. I just disagree ... which is my opinion.

Like assholes (per JR) we all do have one.

DP said...

Perhaps few are brave enough just now to lease what they are not confident they can return later??

Anonymous said...

Franco,
One other comment. One has to be careful when saying people are "saving in stocks." You are probably thinnking of all the pension investments in stock mutual funds, e.g. However, unless the saver has actual possession of a stock certificate registered in his name, it may be more accurate to say that the saver is saving in "claims" on stock. Most shares are registered in street name of the broker/dealer to allow easy trading. If the broker/dealer is hypothecating the shares in the repo market to secure overnight or temporary fincancing, i.e., using other people's assets as collateral in the shadow banking system to make money for itself by investing the credit extended against that collateral, then if there is a daisy-chain collapse in the financial system or the saver's particular broker/dealer has an MF Global type event, the saver will wake up one morning to suddenly realize that he didn't own stocks, he owned a claim against stocks, and some secured investor who extended credit in the shadow banking system now owns "his" stocks and the saver has zilch.

Unknown said...

JR,
I think that the way debt-based FIAT is abused today by those who are in a position to abuse it is morally reprehensible, ergo "BAD".

When FIAT is equity-based, as I hope it will be in the future, the system it lubricates, and the lubrication itself will be more equitable, ergo "good".

That is not to say that FIAT in an equity based system represents true wealth, only that it supports a more equitable system.

And BTW Aaron, there isn't anything in the least bit confusing about the passage you quoted above. Any reference to "Metamorphosis" merely strengthens the core argument represented in this blog.

DP said...

When action is anaemic, we can guess that neither support or demand is getting the upper hand. Any raise in demand is being met by raised supply, or any fall in demand is met by a commensurate fall in supply.

Given the GOFO backwardation, and the chipping away of physical from the rocks such as GLD, I am guessing that there is not a heightened level of supply in the marketplace. So, on that basis, some emotion or another must therefore be keeping the animal spirits for gold leasing subdued. Is there an emotion that fits the bill, other than fear? Or at least trepidation.

In the past miners took the other side to the bet. But I note that at the moment many of them are making a loss if they were stupid enough to lock in a "hedged" sale price at the current level.

The hedge funds have also in the past engaged in this sort of speculation. Are they uncertain that the price will be pushed further down from here, enabling them to cash in on the cheap lease-finance route to profits again? I wouldn't be, but then again I am working with my own money and I don't feed my family and fuel the yacht/Porsche out of my sweet trading profits.

Unknown said...

The trigger for Freegold (IMHO) will be a major debt default, again most likely in the derivatives market -- since the sheer risk AND SIZE of the potential default in nominal FIAT terms dwarfs global GDP (future debt expansion capacity).

It follows that the only thing which gives the current USD IMF$ credibility is its prevailing MoE use value in exchanging debt for real physical plane assets (or equity of you prefer).

Its use value will never be challenged as long as CONfidence prevails. Which will come first, hyperinflation or default? They will come together if they come at all.

When debt defaults, FIAT dies. Another has told you this. But whether or not debt defaults is purely a matter of choice, and only one entity has the credibility, today, to make that call in a major multiple counterparty EPIC claim event.

If one group of systemic banks were to bankrupt another group of systemic banks in wrong way interest rate bets for example, say to the tune of 80 trillion, will the BIS allow those banks to make 100 cents on every dollar of that claim?

If they do, the transactional MoE value of FIAT will be preserved ... but at what cost?

One groups sovereign backing would be destroyed just as if in a nuclear holocaust. All hopes and dreams of prosperity abandoned for generations to come.

Unless ... gold is repriced and we simply Hoover it up (assuming it is there) to make good on the winning groups systemic claims... so you get Freegold that way.

If it is simply allowed to default, then all (FIAT) bets are off and you will have the price hyperinflation of epic proportions that the system of guaranteed debt servicing debt has so long propped up.

But you'll definately get freegold that way as well. As in "Just Another Hyperinflation".

So with either choice, you get Freegold, we simply need the debt to be large enough to question the credibility of the system.

When it is, we will reprice gold and use that, instead of the hopes and dreams of nations for generations to come, slaving away to make good on the bets of an opposing sovereigns group of precious systemic banks.

So far we haven't questioned it, we just bail it out. But the BIG DEFAULT is coming. Expanding debt, as in a system that services debt with debt, guarantees it. It is a mathematical certainty.

The BIS had better have the good sense to make that call or lose credibility themsleves. Conventional nuclear war of course IS an option when the paper burns and the thoughts of men turn dark.

I do not see where Giants withholding gold has any skin in this game. Gold has no relative systemic value until AFTER Freegold. It will not predicate it, rather it will enable it.

Bright aurum said...

Thank you DP your position is well appreciated.

ein anderer said...

Jim [Willie],

thanks for "Signals".

Yes, Gold will be set free. But against ALL commodities. Inclusive silver.

And:

Setting gold free and pushing it back into any kind of "Standard" is absolutely contradictory: in logic as in all practical effects.

This free gold will be freed from ALL attempts to regulate it again. Demand and supply only. For the real. Criminal speculation, be it private, institution or government ridden ("Gold Standard"), will have no chance anymore. For a very long time. Until mankind begins to forget the lesson of this huge, huge breakdown which you are forseeing very well.

So please, you exceptionally gifted author, sharpen your eyes. Read the fundamentals. Read ANOTHER, FOA, FOFOA.

Sincerely,
ea


(because of his new essay: Signals for Breakdown on Numerous Fault Lines.

JR said...

Yes Wil,

I think that the way debt-based FIAT is abused today by those who are in a position to abuse it is morally reprehensible, ergo "BAD".

Yes, it is not the FIAT that is bad.

Yes, it is the use of fiat - the abuse of it - that is bad. Maybe we could call it the misuse of fiat.

"We have met the enemy, and it is us."

That abuse is enabled. No abuser worth its salt doesn't get along without seeking co-dependents.

But debt itself is not the cause of our problems today. Today we have a situation where the vast majority of excess production value (excess capital) is enabling massive amounts of global malinvestment through new debt creation. That has peaked and is now contracting. But the problem is not the debt itself. The problem is the enabling effect of excess capital not having a viable alternative that floats against the currency. The problem is the lack of the adjustment mechanism of Freegold. There is no viable counterbalance against uncontrolled debt growth today. So we are only left with credit collapse and hyperinflation of the monetary base to clear the malinvestment from the system.

It is easy to blame this on debt as a principle, but unless you don't mind being wrong, there are some deeper explanations out there. Debt under Freegold will not reach such destructive levels. "Easy money" thinkers may or may not get their debt-free money, but if they do they will suddenly realize the flaw in their reasoning. Oops! That it can only have expandable value (needed for the welfare state) if producers are willing to hold it while it expands. Without that, socialist welfare expansion will simply dilute the value of the currency and be as limp as a eunuch.


The Fatal Flaw



So:

Embrace the view that money is credit, to the full extent possible! Freegold is all about enabling savers with a realistic understanding of money and wealth… everything else flows from that. Money is not wealth, no matter how stable it is.
Enable yourself

JR said...

Do you see the world as it is? Or, do you see the world as you are? A tough obstacle, to be sure, as our experiences weigh heavily on our perceptions, and many people have no practical earthly experience with real money. There is hope..."the Truth is out there!"
Its all in how you see it

Unknown said...

JR:
Very appropriate. I do agree with this completely. I'm not sure where my arguments may have seemed conradictory to this, but I can assure you, they are not. When we express these things we do sometimes experience crossover in temporal semantics.

It is often a matter of word choice, whereby the words we use, and the connotations they infer, have one meaning today, and tomorrow that meaning (and those connotations) will be different.

On a more practical note, I have been thinking that the key issue now, to sustain the system, is to "balance the debt". Surely these must be the discussions taking place in Basel and nearby.

The objective is to sustain the system so that debt is serviced in a balanced fashion. No one wants a catostrophic event, and I believe most of what is being done behind the closed doors of central banking is a coordinated balancing act.

There is a choice. It can be made, or forced.

Franek said...

Wil,

When you say "there is a choice", you mean Freegold, right? Or, are you hinting perhaps at other avenues?

Unknown said...

No, Franek, I am saying there is a choice to "officially" agree on Freegold, as in former agreements among the various (i.e. Washington and its extensons, Jamaica Accord, Bretton et al) or we can have an organic, possibly more violent "metamorphosis".

It is political.

After there are only 2 great GIANTS in this game, the "public" and the "private".

Th objective is to remove all public gold, as in "held for the people" and place it into private hands.

Yes, in fascism they do merge for a time, as in the here and now, but strange bedfellows do stab one another in the back.

The straw man can never work again, now that Rob and Eric have shown that strategy. It must be much more creative now.

The FED already owns a great deal of US sovereign debt (claims) and the Treasury / ESF cannot play the intrest forward swap game today, as the CB's wil not buy these bonds and JPM will be sacrificed at the alter.

Interest rates will rise, even though they cannot.

The printer of the "derivative in chief" cannot control it any more, and even if he could, why would he?

He rolls up to the top of the private money pyramid.

It's easy to take Lybia's gold. The man was a fool.

But to rob the US Treasury takes time.

A single Monetary Union is, after all, the ultimate goal.

Unknown said...

That should be "after all, there are only 2 great Giants , etc..."
Christ! TYPOS :(
I grow old and blind ... but the flower helps me along ...

Robert LeRoy Parker said...

"He rolls up to the top of the private money pyramid.

It's easy to take Lybia's gold. The man was a fool.

But to rob the US Treasury takes time.

A single Monetary Union is, after all, the ultimate goal."

Wtf are you talking about El Duderino? Maybe your obfuscatory writing style is leading to the "crossover in temporal semantics."

DP said...

Maybe it just needs potting on?

Aaron said...

A single Monetary Union is, after all, the ultimate goal.

Didn't you know RLP, this is one of the new precepts of Freegold. FOFOA added it in last month.


Wil, you have wandered so far off of the trail here I'm a bit in awe since you've taken to explaining Freegold with such authority. While it is very entertaining to watch you twist the thesis of this blog to suit your perspective, you may want to pause here and do a little more reading with some deeper reflection.

A single Monetary Union is, after all, the ultimate goal.

Wow!

Unknown said...

There is more going on than just Freegold, and more to read than just this blog.

But some do seem to take umbrage at my offerings, so I will humbly depart for a while and let others who are more focused, erudite and adept at the subject matter carry on.

I leave you with this. No One is an authority on the future. We can all just have ideas, opinions and rationale (and I'm sure I've just opened myself up to being acused of not having the latter)

Tally Ho!

;0)

byiamBYoung said...

The flower giveth, and the flower taketh away.

tEON said...

@Wil,

The inevitability of 'change' is in the air with most (all?) analysts who probe the depths of the current IMS. While I haven't watched it in a while I refer you to an opposing, and highly educational view - Damon Vrabel - it is long (1 3/4 hours) but the gist - as my failing memory recalls - is identifying the flaws in the system, how much of the system will 'automatically' correct - and nothing will really change. No 'one' can change it. Even those at the very top of the pyramid can't influence to a strong enough degree - they simply go with the inescapable turn of the wheel. Yes, it's turning. FG'ers know one piece of the puzzle that is as inevitable as the tides.

There is more going on than just Freegold.

There sure is - mostly largely irrelevant or a distraction and you know the only course of action you should take. All the head-fakes shouldn't get you assured of a temporary direction - as my Mom would say "Don't worry about things you can't do anything about". Sit back with your popcorn, preparations and your stack - and watch with keen interest. Like many of us. It should prove a fascinating show. After it is all done - the 'system' won't diverge from its present course.

Best,

One Bad Adder said...

Whilst This Chart - the recent alt$ / $PoG is looking pretty benign, This One - the 3 monthly version, is showing distinct signs of dysfunction!
There seems to be quite the effort being exerted here in keeping DX "down" ...which they can do ...for only SO long IMHO.

Freegoldtube said...

Wil,

With few exceptions, those of us that have come to identify with the writings and perspective presented here, have had to reconciled, alter and perhaps even keep to ourselves those particular views which are not central to or in unifying agreement with that common perspective. And believe me when I tell, those of us that have had the privilege to get to know each other, are very aware of these differing views in each other.

We each carry our own particular brand of baggage. And yet we respect each other enough not to force those views on each other. We respect the blog and the collective here enough not to "teach" as if they are in fact part of the central theme.

I would encourage you to take the feedback that you receive and use it as a gauge in which to distinguish what is central to that perspective and what is really just your own take on things. You do not need to feel offended that your personal views are questioned by the collective. We have all been there.

Sometimes the only distinction between a troll and a respected participant is the ability to keep ones person views in check out of respect for the others. For the flower does not grow in isolation, but within a garden. And should any vegetation within that garden grow to overtake the garden, it should be pruned to maintain balance with in the garden, or removed as a weed.

Cheers

FGT

Archer said...

One Bad Adder,

I'm afraid I'm not seeing the dysfunction in the chart you provided. Perhaps you could elaborate on the revealing nuances you assert are in the snapshot you linked. And how does this offering from you relate to your post on July 11th at 10:40 in which you warn of the EOD before a month passes?




Woland said...

FGT;

Did I just read an out:take from "Being There?" by "Chance"
(the gardener) {:<)>

JR said...

Hi Wil,

I wrote "Yes Wil" to express agreement with you! Mucho agreement! Hence the extra "yeses!!"

And the FOFOA and ARI quotes to further illustrate the breadth of great minds in agreement!

Man thanks for sharing!

Indenture said...

I'm going to have to repeat something Aaron said (cloak of invisibility removed) "Giants no longer willing to supply physical to the market? Now that would do it. "

The thought that shrimps buying metal could change the market is the kind of thing we hear from Silverites. There are plenty of people over at TFMetals that will tell you to keep stacking and you can bring down the system. This is false.

Indenture said...

Wil: This was very good.
http://fofoa.blogspot.com/2013/06/snapshot-day.html?showComment=1372764561745#c870661732458159550

Dante_Eu said...

@Archer:

OBA has called EOD - "End Of Days" on several occasions. :-) If memory serves me well. But, lo and behold, nothing happened. IMHO emergence of Freegold will not be seen on any chart.

It will be overnight event. And I am still sticking with my december timeline. No charts, no inside\outside knowledge, no deep analysis, no nothing. Just knowledge that mother nature likes to play a trick on you and a bit of irony.

I will disclose it at some point in future. It is as profound as anyone's guess. :-)

Anonymous said...

Here is something to think about.

As I have stressed again and again, I don't like any theory that needs to assume that the major actors are all clueless or even stupid. So where are the incentives and what are the main actors' major worries?

1) Oil. They certainly like the dollar less and less. They must know that it is increasingly unlikely that the dollars they earn will keep their real value for a reasonable period of time. We observe that OPEC is far from full production (oil in the ground is better than dollars in the bank) which has resulted in rising oil prices over the past decade, and we see them go shopping for an excessive amount of expensive almost useless gadgets, military equipment, grand building projects etc. (let's spend the dollars now rather than later). On the other hand, as long as they can still buy some cheap gold for some of their dollars, they are one of the main beneficiaries of the old system. But once that's over, they have a strong incentive to switch currencies.

In any case, they obviously don't want to be seen as the ones who kill the dollar. I don't think they will switch to another currency, Euros, gold or a currency basket unless they have a reasonable cover for such a move. If they switch first and then the dollar collapses, they would be seen as the assassins and might even have to worry for their safety. With a reasonable cover, however, they would certainly be pragmatic and businessmen enough in order to switch.

2) Europe. They have insulated themselves from potential dollar problems to a large extent. The Euro zone has a balanced trade account, and as long as they receive for their exports the same currency they need for their energy imports, they will be alright, regardless of whether that currency is the dollar, gold, or even the Euro. There is one small caveat though. Europe still needs dollars in order to purchase oil. So they need to keep up some exports into the dollar world as well, and they need to remain competitive compared to the dollar world.

If you estimate that in the long run, currencies are valued according to their purchasing power and that the Euro zone stick with their inflation target of just under 2% per year, there is one situation in which they would be in trouble. This is the case in which the dollar is rapidly devalued, but oil is still only available for dollars. In that situation, they would have to devalue, too, just in order to remain competitive, and they would need to compromise their inflation target just in order to be able to acquire dollars in order to pay for their oil (or lose exchange reserves in order to pay for that oil).

I conclude that Europe would not want any devaluation of the dollar unless a currency switch by oil follows in short order. In particular, dollar HI with oil only available for dollars (at a rapidly increasing dollar oil price) would be a disaster for Europe.

...

Anonymous said...

...

3) US. I suppose they want to extend their exorbitant privilege and the over-valuation of the dollar for as long as possible. Once this strategy is no longer viable, I think they have a strong incentive to collapse the dollar as quickly as possible rather than draw out its decline, try to make all the dollars held abroad worthless before they can be spent, lose as little gold in defending the old dollar as possible, and then start over in a new currency regime with most of their gold reserve intact.

4) China. I don't really understand China. They most know it will be over one day, but they'll be in serious trouble when that happens. Well, the government could buy all the stuff they used to export, and the PBoC could pay with printed RMB, somehow mimicking the status quo. How would they purchase resources? Euros? Gold? In any case, it makes sense to start spending their dollars as early as possible, on any kind of resources at any rate that just doesn't kill the dollar.

5) Non-OPEC resource exporters, including Canada, Australia, South Africa. They are continuously being short changed under the old system, selling off precious resources for paper dollars. I don't think they are main actors.

Sumary:

Oil benefits a lot from the old system, but once they cannot get enough gold, they want to get away from the dollar, but they don't want to take the blame for damaging the dollar.

Europe is largely insulated from the old system, they want oil to switch currencies first, before the dollar collapses.

US benefits a lot from the old system, wants to keep the dollar in its exorbitant privilege position for as long as possible, then collapse it instantly and start over.

China and non-OPEC resource exporters are main victims of the old system, but they are also vulnerable during the transition.

This is why I thought that Europe would want to abandon the gold market first and let it fail. Such a failure is a technical banking issue, difficult to blame anyone in particular except for said banks, and it would force everyone else to act. It even leaves the US the option to accept the failure of the gold market, to accept the revalued price and to restart the gold market themselves.

...

Anonymous said...

...

Here is my question. We are watching the gold market, GLD losing inventory, this week GOFO negative, etc. and everything is consistent with a loss of reserves at the BBs. If this interpretation is right, i.e. Europe having abandoned the paper gold market (which I explained is the logical next step IMO), then what's next?

A) Gold market fails, London fixing skipped, market illiquid for several months, other markets including Perth Mint auctions shutting down. Capital controls, no free gold movements, no price discovery, just some black-market transactions, perhaps some back room deals with important suppliers.
B) Someone immediately restarts the market to discover the freegold price. Who? US? ECB/BIS?
C) Foreigners trying to sell their remaining dollar assets
D) Foreign exchange value of dollar collapses.
E) Domestic purchasing power of dollar collapses.
F) Oil exporters switch currency.
G) Euro devaluation relative to goods and services, or, alternatively, huge credit write-downs in Europe (otherwise with the revalued gold, they would get an inflationary push).

In which order and why?

We only know the "major foreign holders" (TIC data) of April: $70bn outflow as opposed to the usual $45bn inflow. If foreigners continued to sell US dollar assets in May and in June, this might have been Ben's primary worry, the reason for the tapering threat, and also the reason why the US don't actively support the London gold market. - If the international wall of dollars has started to move, it might be obvious that any attempt would be futile, and they may simply skip this step and focus on the next move. Does the US Treasury (tacitly) agree with the ROW that this is "it"?

Victor

Bright aurum said...

@ Victor
Thank you for your input.
Here is my expansion.
1) Oil.''go shopping for an excessive amount of expensive almost useless gadgets, military equipment, grand building projects etc. ..'' In that case somebody else should wipe those homeless/? dollars once they end on its front lawn. How are they recycled back? A very important question in my mind.''With a reasonable cover, however, they would certainly be pragmatic and businessmen enough in order to switch.'' could that cover be increasing the top to bottom transfer of value so that the masses save in gold or they risk further demographic boom in doing so?
2) Europe. ''....they would need to compromise their inflation target just in order to be able to acquire dollars in order to pay for their oil (or lose exchange reserves in order to pay for that oil).'' Once the dollar becomes hyperprinted they will be most happy to lose their $ reserves! They only need to set their relations strait with Rusia and that will not be in dollar terms for the rusians will have by then a softer version of toilet paper.
3)US. ''I suppose they want to extend their exorbitant privilege and the over-valuation of the dollar for as long as possible.'' Could that be by rehypothecating other nations` gold (and I know the ovelwelming position of the comentators here), then returning 50% of it from Ford Nox besause the FED is only 50% national. The other 50% being tar and feather lynch show.
4) China. We will see their strategy soon enough. If copper used as a collateral in OTC finantial operations is ever allowed to flow out that will be a bad omen showing their (mis)undertanding of the situation.
5)Non-OPEC resource exporters. Hopefully they are pressed by their own population to reconsider this sell of (a exorb. priv. donation in fact, of course.

Sam said...

I think it may very well already be known by all of the major players what the true value of gold is at the revaluation price. They may even have a formula or something and a back room understanding. In a scenario such as that it may be believed that the motivation to allow the revaluation price to be discovered by the rest of the world would only be if their were advantages to such a revelation. Like a situation where those that have been accumulating gold would want to dishoard and get the fair value for it in sale from those unaware of its real value.

Situations like this seem possible because for instance it is probably known by these same players that the US$ hyper-inflated way back in the 80's but the peons of the world have not been let in on this fact either.

But we forget that although it seems very comfortable for those in power the status quo is very expensive to maintain at this point and getting more expensive by the minute

In reality I think freegold is now being ushered in because there is much less benefit vs cost of maintaining the status quo. To say Giants don't care about the timing and don't want to be blamed for the timing are not the same. If we have crossed over the cost/benefit barrier (which I believe we have) most Giants would like freegold to happen ASAP. They simply see no benefit in forcing something that will inevitably happen on it's own in very short order.

In other words I don't think the choices are "maintain system" or "let freegold happen" anymore. The choices are now "let freegold happen" or "force freegold to happen" and the most benefit still remains on the side of just letting it happen

John said...

@ Sam

Your point is well taken. We are at that point where the dollar system is truly dysfunctional and can be kept going with only great costs shared (forced) by the entire world. Our bias towards normalcy needs to be examined for what it is. If an alien were to land on planet Earth from Mars to study or evaluate our global financial system you would never condone or emulate a system like this. All of the related misallocations of capital and wasted human endevors along with inefficiencies in asset pricing carries with it tremendous real societal costs. We are past the point of diminishing returns, we are firmly in the zone of negative returns. In addition, use of the same shop worn monetary tools of debt monetization are clearly beginning to make matters worse. The present circumstances are begging for an overdue system replacement.

John said...

I've been reading a bit on Armstrongs site and came over some work where he comments on freegold:


http://www.inflateordie.com/files/Why%20You%20Should%20Buy%20Gold%2006-14-2012.pdf

(Pages 20-21)

Just curious what the more informed postera think of his comments. I haven't spent enough time studying freegold or not intelligent enough to be able to argue against him and I'm really hoping some people here can.

John said...

Oh and I'm not the same as the other John above. Sorry about that.

/John 2

milamber said...

Woland,

The Bretton Woods transcripts are worth the read too.

http://www.amazon.com/The-Bretton-Woods-Transcripts-ebook/dp/B009V3FO2Q


Milamber

ein anderer said...

Victor,

A is not possible: No CB with gold reserves would allow this situation for long. Their main defense would be as if non existent!

Therefore B is true. To know who will trigger the new market would be interesting. My gues: BIS twill do it to keep the ECB out of the historical books. US is very unlikely.
B would drive also immediately the $IMS into Hyper Inflation, doesn’t it?

C will be a helpless reaction to this.

D, E, F are some of the results of HI.

G is not necessary because of B.

milamber said...

Tintin,

I am American. I browse and read stuff in English out of America and around the world. I know very well the views of numerous public personas. If someone took the time to make me aware of numerous bits of relevant information concerning America, my first response would not be,

” That yale professor is a laugh. Nobody of real importance in China takes him seriously.

Then after doing that, I would certainly not draw a false equivalency between said professor and a former Princeton professor who just happens to be one of the most important people in the world, simply because they both have credentials.

Do I personally agree with how Bernanke has done things?

Absolutely not.

But I make damn certain to understand the man & his thinking because only someone of no real importance would “not take him seriously.”

See, I can use bad logic & do false equivalencies too. Doesn't really advance the debate, does it?

Regarding LTCM, think long & hard about what you wrote.

I most certainly “accord weight” & want to understand the mindsets of people that can collapse the US stock market.

So, yeah, even if “someone of no real importance” in China takes what I posted seriously, I think that I’ll keep posting things that I find relevant to the discussion at hand.

You can simply skip over them since you don’t find them important enough to take seriously.

Milamber

Sam said...

@ John 2

1) Armstrong asserts that paper gold is like paper everything else. It is not and his assertion shows a very weak understanding on not just gold itself but freegold.. FOFOA has explained it many times in various postings. You can also click on Victor’s summary on the link section to the left to get a quick explanation on why paper gold IS NOT like “paper wheat.”

2) Once you understand point (1) understand also that freegold does not expect some kind of massive short covering or any other event that will drive the price of gold to $50,000 an ounce WITHIN THE CURRENT SYSTEM. FOA spoke about this at length and the fallacies in that line of thinking. Armstrong either has a very poor understanding of freegold or simply wanted to throw out a quick explanation to write it off as a un-thoughtful theory/ conspiracy theory/ propaganda, ect. that is inferior to his own thoughts.

Indenture said...

"You see, ever since 1971 the establishment has convinced you and almost everyone else that they successfully moved the very foundation of the inverse pyramid and placed it up amongst the investments categories. But ask yourself this. Did they actually move it? Or did they just create the illusion that they moved it? As John Hathaway said at the top of this post, "The gold derivatives pyramid is a vigorous free market creature. It cannot be put down with a simple declaration that the paper is no longer redeemable in gold, as governments did with currency. It is a short selling scheme that has become a trap from which few short sellers will escape."

All Paper is STILL a short position on gold!

Bright aurum said...

Victor
I think that Another`s prediction about POG at approx. 10 000 before things break down still holds true. So US will try to bribe the strong hands off the physical gold market one last time.
They will have to think a way out of this situation and pump the paper directly into the bullion banks without arousing suspicion in the general public about their motives. For now obviously they are fighting an orderly retreat bleeding some GLD tonnage and maybe some extra phys. of an unknown source because of the low lease rates you know (unlike 2008).
Every up-tic in the POG releases some physical from the gold scrap dealers (that they bought at the bottom before the up-tic happened and only the quantity that they acquired in the lower zone before reaching the peak of the up-tic) only to realise some profits and to put bread on their table. The situation with many gold miners is analogous I believe.

So to answer your question it is 1_st Trying to save the bullion banks (the selling of some physical gold will be required after ballooning it fractional reserve style and making it look like a mountain). The bribed giants will be spending the currency immediately so we get D and E almost simultaneously.
Which of course means that some of the homeless dollars will try to find some value within the US borders.

2_nd Capital controls will be imposed so that C doesn't exacerbate E from which point F will kick in because the huge food production capacity of the US will be badly affected and as a result the oil counties will not be able to feed their populations if the status qua continues any longer. They will have no choice but to kick-start the healing process themselves by collapsing oil against gold.

3_rd From that point on it is FG in less than two months. I doubt anyone will be trusting the $IMS gold markets by then so A can happen between C and F.
Cheers

RJPadavona said...

Good day to usher in FG?

http://www.badlefthook.com/2013/7/13/4520860/mayweather-vs-canelo-winner-will-receive-belt-made-of-solid-gold-september-14-boxing-news

One Bad Adder said...

Dante, Archer: - The point being DX is clearly easier to "manage" than is $IRX ...and IF this be so, I'd be inclined to think we're REAL close!
There seems to be consensus hereabouts that Free-Gold will come about via the waving of some magic wand ...Voila! (good luck with that!)
...when in fact even the ECB's own approach relative to GOLD defers to "the Market".
What I've been attempting to decipher over the last 10 odd years are the entrails of said "Market" ...that which MAY point to an emergent state of free Free-Gold. FWIW.

Michael dV said...

OBA
how about a mini review of $IRX and DX to help those of us who are unfamiliar with these entities understand what they are and why you find them interesting and possibly predictive.
thanks

Dante_Eu said...

Hi OBA,

I appreciate your posts, but I can't say that I understand them. :-) You may well be on to something, I'm just not qualified to determine that.

I think in the end what triggers Freegold will be the sum of everything discussed here. But the trigger in it self, will probably be something totaly unrelated...like butterfly wings sparking the begining of a hurricane...according to complex systems and chaos theory.

Speaking about magic, I'm in process of seeing The Master and Margarita (Thanks Woland\Lisa awesome story and movie!). Which got me thinking, is Ben familiar with the story and has he taken this scene too literally?:

Eins, zwei, drei :-)

One Bad Adder said...

Michael, Dante: - Probably the first thing to understand is that GOLD (24k) doesn't come into it (the System) ...yet!
$PoG OTOH is most certainly IN it!
Currencies have NO intrinsic value, so the squillions sloshing around in the System (in all forms - of which $PoG is one) net out at ZERO VALUE.
Due to the deflationary nature of the fractional-reserve system, we can come to the conclusion this $IMFS has a definite Timeline ...and determining the parameters thereof is what I'm trying to do.

You might think of DX ($US exchange) as representative of HALF the CASH in the System ...all the other Currencies being (say) alt-DX.
Picture a Teeter-totter (See-Saw) with $'s on one side and "the rest" on the other ...OK?

$IRX is the proxy for short-term $US Cash Yield ...and it too can be envisaged as being on one side of a Teeter-totter - with all other alt-currency short-term Yields on the other ...OK?
We do see these various alternate Treasury Yields flirting with Zero + or - on a regular basis however $IRX (due to swaps and whatnot) is maintained at Zero + ...which keeps the System in balance. DX can and does fall and rise (with comparable rise and fall of the alts) ...however -
Were $IRX to go into a negative state, it's proverbial Teeter-totter would (will) snap!
...and the "fulcrum" (GOLD) will be all that is left!
Hope this ham-fisted explanation helps ;-)

tEON said...

In case you were ever inclined to trust the efficiency of mainstream, check out THIS 30 seconds from KTVU. Insulting morons.

Phat Repat said...

It is a sad reflection on the dolts we have in the MSM merely reading what is fed through the magic box. Truly idiotic.

That being said, it's too bad that didn't appear on SNL or Comedy Central as I am still laughing about those names. That is some phunny stuff...

byiamBYoung said...

Ding Bang Pow. Lo Wing Now. Wi Now Dung.

Michael dV said...

gary
Ho Lee Fuk...she just read it....reminds me of Ron Burgundy in Anchorman...another Will Ferrell masterpiece of satirizing those with more ego than talent.

Anonymous said...

I wrote that the different behaviour of GLD inventory versus SLV inventory was a strong support of Randy Strauss' and FOFOA's idea of reserve management. At STF, Bron came up with what I think is the first valid counter-argument:

Victor, silverbugs are far more passionate than goldbugs. I've just checked Nick's www.sharelynx.com site and all of the silver ETFs and silver balances of GoldMoney and Bullion Vault have held up.

Compare that to GoldMoney and Bullion Vault's gold, which has peaked and dropped off circa 10%, not as much as GLD and the other gold ETF, but there is a drop off just the same.

So even in GM and BV you have the silver/gold difference in behaviour. I doubt BBs are coatchecking gold in GM and BV.


If it is true that at Bullion Vault, investors have kept their silver but sold 10% of their gold, then we ought to compare GLD and SLV with that behaviour. Nevertheless, GLD seems to be losing a disproportionate amount of inventory.

Victor

Anonymous said...

Bright aurum,

Is there any explanation of the anaemic action in the lease rates. Nothing like 2008 for sure!

I don't know any public place where you can see the true Gold Lease Rate, i.e. the interest on an unsecured loan of (paper) gold. What's often published under the name "Gold Lease Rate" is "LIBOR minus GOFO" which is garbage for various reasons, one of them being LIBOR.

IMO the best indicators to watch are first GLD inventory and then, perhaps, GOFO, with the caveat that what we see on the LBMA website is an average as opposed to GOFO quotes of individual BBs (you need to phone them to get a proper quote) and that GOFO might be a swap of dollars for paper gold, not necessarily to be allocated.

Last Friday, for example, looked a lot like pre-2012 paper gold support. This week, GOFO was negative. Was paper gold scarce? Why? BBs trying to shrink balance sheets (seeing trouble ahead) or perhaps renewed paper gold support?

Victor

Bright aurum said...

@ Victor
10 000 $ POG is not possible without CB support, so yeah it just might happen under the auspices of solving another crisis such as another world stock markets chain crush or nuclear power plant incident in France, for instance, you name it. It has to be a''worldwide'' $IMF solution for the MSM; a Marshal plan for the world 2.0. Like a maintaining program for 60+ year old infrastructure for example - nuclear power stations, old dams,ports, bridges, the power-grid etc. Accomplished with the ''helping'' hand of the BBs which will be made to ''qualify'' to the conditions of financing the ''projects''. Not to mention that 60+ years of infrastructure is generally found in the west and the ROW should be picking up the tab, providing raw materials, resources, mopping up the slush of dollars, building ''reserves'' without buying physical gold of course. Perhaps an agreement will be made by each member nation to draw additional 2 trillion in SDR according to the percentages in their composition. It remains to be seen what for a temporary ''asset'' is created on the balance sheets of each of the participating CB until it is replaced by a ''debt obligation asset'' . In due course liabilities will be printed/typed into existence.
An important mistake will be engineered - all 2 trillion SDR will be made available immediately to the liabilities side of the BBs and an unfortunate commodities run up cycle will begin anew. POG will reach 5000 USD in weeks instead of months; POil will be 300$ unleashing at last the vicious cost-price-wage(/fixed and updated through the CPI obligations) hyper-printing feast in the US, from which point thing will become unhinged.
Cheers

Bright aurum said...

P.S
And if such a senario comes to pass, it will be interesting to observe the GLD stagnate - a mere fasade to the numerous OTC deals that will direct the physical gold from the week/stupid-gready hands to where it must/is needed to flow

Motley Fool said...

VtC

Yes, good objection by Bron. Personally I am in the camp as regards the coat check theory.

TF

Motley Fool said...

that was suppose to read : ...'maybe, but it doesn't matter in the big picture,' camp...

Silly use of punctuation. < and his partner makes comments sections disappear. noted. ^^

Anonymous said...

So what happened with snapshot day, did they mark to market yet? Looks like nothing much has happened.

M said...

Gold priced in Euro's is in backwardation for what its worth.

M said...

@ VTC

Quote: So they need to keep up some exports into the dollar world as well, and they need to remain competitive compared to the dollar world.

The idea that competition among countries is mostly based on keynesian currency devaluation is a fallacy. German exports expanded all the way through the rise of the Euro since inception.

The Eurozone needs oil. The more valuable the Euro is, the cheaper dollars are. The cheaper dollars are, the cheaper oil is. The cheaper oil is, the cheaper their input costs are for manufacturing.The cheaper their input costs are, the more competitive their exports are.

Phat Repat said...

"The Eurozone needs oil. The more valuable the Euro is, the cheaper dollars are. The cheaper dollars are, the cheaper oil is. The cheaper oil is, the cheaper their input costs are for manufacturing.The cheaper their input costs are, the more competitive their exports are."

Ain't that a hoot. And the USD has been on a sell since 83.87 for me (S/L now at 83.68, Target 79.71). Hope they enjoy their ExPriv. Of course they do pay substantially more, in most cases, thanks to their whacked out greens.

Bright aurum said...

@ Motley Fool
I am sorry but since you jump in with a discussion with Bron out of the blue.. What was it all about.
Did the Perth mint cannibalize its unallocated gold holders stashes (did the gold holders sold into the take-down). How does it resupplies at the moment? What are the premiums? Is there a production bottleneck of some sort. What are the most popular denominations of the gold being sold - oz, kg?

Pat said...

I am Jonesing for a new post, tired of seeing ol' Kate up there. While at some level I know the story has been told from about every angle, and it's just eat your popcorn and wait time, I love that feeling I get when there is a new one to read.
I guess I'm like poor Lennie in Of Mice and Men...
Tell me again about the rabbits, FOFOA.

Dante_Eu said...

It's holiday time and nobody is reading anyway... :-)

ein anderer said...

athrone,

they did. And before they took no measure to push it up again.

Motley Fool said...

Bright

I was responding to VtC.

TF

Jeff said...

I don't follow Bron's logic. Bullionvault lets owners withdraw small amounts of gold (and silver); in that sense they operate like an online coin dealer. They are dealing with shrimp.

GLD allows inventory withdrawal by giants only.

Is Bron suggesting that giants and shrimps should show the same behavior? Of course giants don't coat check gold at Bullionvault; that pond is too small for a big fish to swim in.

Bron is comparing apples and oranges, and only has a weak correlation to show for it. I looked at Sprott's ETF, and it has only reduced holdings by 1 400 oz bar in the past month. Not much correlation at all between these gold ETFs.

Why would GLD have lost more gold than Sprott or BV?

FOFOA: Now let's compare PHYS with GLD and try to think like a real Giant for a minute.

The one day drain from GLD just the other day was larger than the entire PHYS ETF by more than 5 tonnes. So what would have completely emptied the Sprott warehouse was only 2.48% of GLD. The amount drained from GLD since Dec. 21st was 268% of Eric Sprott's PHYS. And what has it caused but barely a blip on the radar? Can you imagine the fuss (or price explosion!) if one single billionaire decided to clean out PHYS? That's right. PHYS represents maybe one real Giant. That's not exactly a "reservoir" for the giant class to drink from.




Roacheforque said...

Here is a dead horse to kick ...
"The ultimate goal after all is a single monetary union."

What is the dollar today if not the most successful "single monetary union" of all time?

It is accepted as a wealth reserve asset by a network of privately owned central banks who issue FIAT to their respective sovereigns (who guarantee its acceptance in common transactional use) with interest.

Oh yes, they do allow their Treasuries to earn interest in certain arangements, but it is a small matter compared to the profits reaped by their owners, the primary dealers, whose systemic importance implies a socialized guarantee of any and all (including fraudulently contrived and valued) debt.

And this systemic network of privately issued FIAT does roll up to the BIS, that is, the central authority of this network of central banks which controls and coordinates this monetary system.

Where is "the people's money" today? Are the people's money in Libya still with the people?

This dollar, it denominates the vast majority of debt in all the world, yet it is supported beyond reason.

And this system of FIAT, of which the dollar is the derivative glue, all based in debt, is the sole means for the people to survive, to feed themselves, to clother themselves -- what they are paid in for their labors, what defines their value.

So what is a single monetary union?

And yet we see this dollar is flawed.

And so what is the ultimate objective? To freely give the money back to the people, to break up the global network of exchange and to divide the system into regional or national sovereigns, with strong regional currencies and public banking? A return to the days of nationalism and sovereign authority, both monetarily and socially? An end to globalism?

Or a better, stronger, even more resilient single monetary union under one central authority?

This the flower asks.

It is incredibly important to be steadfast in your principles, yet flexible in your views, always learning, always seeing "another” perspective, always growing in knowledge and in depth of understanding.

Thank you Thomas for your kind words of invitation.

M said...

@ Wil

Please don't pull a disappearing act like some of the other good posters have. I log in to read your comments alone.

I think FOFOA should re release all of his posts starting with the very first one. Re released with fresh comment pages.

If FOFOA re released it from the start, it would put everyone , especially the new comers, back on the same page. I would read them all again. I feel bad for the new comers. I was lucky to be on the train fairly soon so I didn't have to read old ones and still try and keep up with the new posts at the same time.

Michael dV said...

M
repost all 400 + posts?
yikes.
I suggest rather than that a newbie would be well advised to try one of the suggested reading lists. about 10 or 15 of the best could catch a newbie up at least half way.

Bright aurum said...

@ MF, Jeff
You bring a discussion at FOFOA`s that you started earlier, you know where. Can you at least provide a link to the earlier debate so that one can catch up if he/she wants to.
Cheers

Edwardo said...

The "silver bugs are stronger hands" line is utter nonsense. In any context, whether it's a paper silver versus paper gold comparison or a metal to metal comparison, this assertion fails, if for no other reason than it almost certainly rests on an apples to oranges premise. Outside of pumpers like Sprott and the very few others of his ilk, the fanatical followers of silver are all shrimp.There are no giants in the "I hold silver as a wealth reserve asset" contingent.

And I defy anyone to make a decent case that outside of the U.S., in any demographic, (not that most of the demographics are even relevant, they aren't) that physical silver even remotely competes with physical gold as an asset held by those who are interested in wealth preservation. I posit, with as much evidence as Bron is apt to have, that only in the U.S. with its own peculiar, and in some cases, downright bizarre cultural features, can some select (and more saliently, benighted) cohort of "silver bugs" arguably be said to possess stronger hands than their gold loving counterparts.


Motley Fool said...

Bright

I expect everyone to do their own due diligence, if they have interest. Victor did reference the source, and so I went there and found it. Comments there is not that active so it took me all of 1 minute.

Instead of berating me, why not post the link, as you imply you read that conversation.

I was engaging victor, not the board, if others want to chime in, I don't mind, but again I expect DYIDD.

@Jeff

Good points. :)

TF

Anonymous said...

On the topic of what happens when the gold market fails, I liked Sam's comment as a guide towards further questions. Assuming the major players have a rough understanding of the true revaluation price of gold and may even be trading some gold in back room deals at that price. Under which conditions would they have an interest in making this the officially accepted price for everyone?

1) there might be a bullion banking failure and this would happen by accident
2) they have to restart international trade in case of a dollar failure

We are obviously not there yet. This leads me to the question of who benefits from the old system and who is short changed. Main beneficiaries

A) United States
B) Britain
C) Saudi Arabia provided they still receive more gold than at the revalued price
D) every net consumer who can continue his lifestyle longer than if he had to pay in real terms

Short changed

E) mining companies (who sell the precious for $1300 per ounce, basically at production cost plus capital cost)
F) more generally the resource exporters who sell for dollars only (Australia, Canada, South Africa, various countries in South America, Russia etc.)
G) all net exporters who don't import an adequate amount of gold (Japan, Korea, perhaps still China)
H) every little net producer who forgot to purchase gold

Who would benefit from the revaluation regardless of ongoing business, just because they own a disproportionate amount of gold?

I) certain family run oil countries
J) European CBs
K) US if they can somehow manage to devalue their foreign debt without compromising essential imports
L) average people in southern India

Who is fed up with the ongoing misallocation of capital and who wants this to change now? Europe? China? (although China may have intentionally accepted it for a while when their industrialization was kicked off by their exorbitant exports)

So who wants the revaluation in the open now?

Victor

Sam said...

The way I understand it the beneficiaries need those that are being short changed to keep supporting the very system that is short changing them in order for it to remain functioning. Then you have the fact that the current system is flawed and a superior system is now ready.

I think those in power that know the true value of gold also expect, perhaps have even been assured, that a revaluation is in the near future. Otherwise they have almost no motivation to continue to support a system to their own detriment. The deal they are getting is in exchange for a little more time. A deal that may be all but over if the falling $PoG and GLD drain are the alarms we think they are.

JR said...

FOFOA "believe[s] that we are witnessing a market-driven global shift to meritocracy; economic power based on merit and credibility."

It's Freegold. It is about allowing meritocracy to rise like a Phoenix from the ashes of the dollar's inevitable collapse. It's not about a transfer of wealth. It is about a re-born meritocracy.

So what is thsi re-born meritocracy? I think its important to first understand where things are now:

The United States has high income inequality across households and low economic mobility between generations.

The curve ranks countries along two dimensions. Moving horizontally from left to right shows income inequality, as measured about a generation ago, becoming higher and higher across countries. During the early to mid 1980s, Finland, Sweden, Norway and Denmark were the most equal, the United Kingdom and the United States the least.

Moving vertically from bottom to top shows the average degree of stickiness between child adult earnings and the earnings of the family in which children were raised. In countries like Finland, Norway and Denmark, the tie between parental economic status and the adult earnings of children is weakest: less than one-fifth of any economic advantage or disadvantage that a father may have had in his time is passed on to a son in adulthood. In Italy, the United Kingdom and the United States, roughly 50 percent of any advantage or disadvantage is passed on.

Does this mean that if you want to live the American Dream, you should move to Denmark?


I dunno about denmark, but getting physical couldn't hurt.

Moar: The great gatsby curve

JR said...


On meritocracy:

A meritocracy unfolds when savers choose hard assets like gold bullion to store their savings outside of the financial system. They will not loan the excess fruits of their labor and hold debt as an asset unless and until a borrower proves his credibility and merit.

They likewise will not hold excess currency digits for more than the few days needed to spend them unless and until the currency manager proves his credibility and merit.

The problem right now is that everyone holds the excess fruits of their labor in the same paper that denominates debt with very loose standards. The standards are loose because the savers are lemmings.

When people finally wake up and start saving in something that cannot be debased and diluted, this will remove power from the banking sector. Banking will become nothing more than a utility, like the delivery of water and electricity to your home. (See: Say Goodbye to Wall Street)

People WILL wake up to this when the dollar finally loses its grip on price discovery for the physical gold market.

As for good jobs in a meritocracy... I think you can figure that out. You seem to be on the right track. Real (not rigged) supply and demand will play a big role in determining a person's value. Something we have not seen in a while.

A meritocracy is not about us deciding which jobs have the most merit in society to determine a pay scale. It is about letting the free market decide in the absence of centralized control over the deciding factor, the allocation of society's wealth.



In case you missed it:

It is about letting the free market decide in the absence of centralized control over the deciding factor, the allocation of society's wealth AKA the gold has got to (freely) flow!

Unknown said...

For those who like video...

http://www.youtube.com/watch?feature=player_embedded&v=ySd1wH7A6HE

Couple of good interviews on the Kaiser Report.

JR said...

Scientists say - Dead stars colliding forged gold on Earth

About a decade ago, a team from Europe using supercomputers suggested that gold, platinum and other heavy metals could be formed when two exotic stars — neutron stars — crash and merge. Neutron stars are essentially stellar relics — collapsed cores of massive stars.

Now telescopes have detected such an explosion, and the observation bolsters the notion that gold in our jewelry was made in such rare and violent collisions long before the birth of the solar system about 4½ billion years ago.
[...]

The new work, which will appear in a future issue of Astrophysical Journal Letters, suggests gold was produced in a similar fashion in the Milky Way. It doesn't delve into how Earth was sprinkled with riches, but previous studies have suggested that a meteor shower may have delivered gold and other precious metals to the planet.


Sciencing stuff is fun!

Roacheforque said...

M,
You are too kind.

JR,
I am so happy to hear this focus of meritocracy on the coming "equity" based system ... after all, a more "equitable" system is an affirmation in terms.

Some have said that Freegold will hold no such promise of hope looking forward, and in some ways I understand that thought, but ultimately, I think we will see the promise of a more equitable world when the people's money is returned to them.

It is just another strange dichotomy that the people's money ends up also being the money of giants.

As revealed by the thoughts of Another, some will follow in their footsteps, while others will die by the money of their masters.

In the end, you can only beat the slaves so much, and eventually they will find a better way.

Bright aurum said...
This comment has been removed by the author.
Bright aurum said...

@ MF
I am not berating you. It was just that things suddenly got out of context vis a vis the posts of the previous commentators. And yes Victor mentioned STF?? doesn`t always click you know.
Still risking your further irritation... Is it not odd that Bron commented on GoldMoney when he can just check and base his observations on the data (selling/buying) for the unallocated bullion holders at the Perth Mint?
Have a fine day :)

tEON said...

...when the people's money is returned to them.

Gold hasn't been 'the people's' money for well beyond our lifetimes. The people's MoE is fiat or credit... and will remain so.... just in a different form than today's version (think more zeroes). Just like every other hyperinflation on record. Not only does the public not want Gold - when a handful wake-up it will be revalued well beyond their savings capabilities. The silverbug dream is similar 'wait till everyone awakes and uses silver, again, as money'. Not. Gonna. Happen.

....strange dichotomy that the people's money ends up also being the money of giants

Well, a handful of us 'people', I suppose.

Bright aurum said...

@ Victor
''..a disproportionate amount of gold''
Disproportionate to what?
Very much proportionate it is as they obviously did not forgot to buy gold!
When the revaluation happens?
There must be some kind of impetus for change, a strife, a need (not the distorted american meaning describing wants actually) that only a meritocratic society can satisfy.
And its not about Europe nor China really but about the giants and their positions, and their infighting until FG prevails.

Roacheforque said...

Gary,
A big handful in China in India.

Last I heard, there were quite a few people there.

After all, isn't that where the latent merit lies today?

Or does the gold not flow to where it is "deserved"?



As we know, most in the West will die by the money of thier masters

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