Thursday, September 12, 2013

What about Sprott's 4,500 tonne export 'gap'?


Someone emailed me yesterday:
FOFOA,

I was reading Turd Ferguson's blog the other day and he brought up a pretty interesting point about Western CB's not having any more gold left (based on Erik Sprott's research regarding the gold exports from the US) and it's impact on Freegold.

Would you be so kind as to share your thoughts on this topic?

I've included the link to his post below for your reference.

http://www.tfmetalsreport.com/blog/5041/fifty-five-thousand-dollar-question

Regards,
Paul

I read the article and followed the comments below it, Motley Fool's in particular. I see that he is very popular over there! ;D I also got a kick out of this comment by Nickelsaver:


One of the primary hypotheses of the gold bug/GATA camp that stands in stark contrast to A/FOA says that the Western central banks have surreptitiously emptied their vaults supplying physical gold to the market. The TFMetals article highlights this contrast in particular, pointing to the latest "smoking gun" which has been circulating for about six months since Eric Sprott wrote Do Western Central Banks Have Any Gold Left??? Part II last March.

The "smoking gun" is the net U.S. gold exports spanning 1991 through 2012 as reported by the U.S. Census Bureau which Eric Sprott says exceeded what the U.S. should have been capable of exporting based on supply estimates which excluded private sales as "unknown." The amount of gold exported in excess of what should have been possible (not counting private sales) was 4,500 tonnes over the 22-year period:

"We used this framework to analyze supply and demand in the US going all the way back to 1991, which is as far back as the FT900 documents go. Over the span of 22 years, the total amount of gold that the US has exported – above and beyond its supply capability – is almost 4,500 tonnes! A truly stunning figure. (See Table 3)."

Sprott discounts the possibility that the extra 4,500 tonnes could have come from private sales by claiming that Western gold investors have been net buyers over the last 22 years:

"Admittedly there is an unknown in our analysis, that being gold bullion acquisition and disposition by private investors. However, strong demand in ETPs such as GLD and PHYS and demand for gold coins provide strong evidence that the private investor has been a net buyer over the years. The inclusion of the private investor on the demand side would in fact skew the ‘gap’ of 4,500 tonnes higher to a figure that would lie somewhere between 4,500 tonnes and 11,200 tonnes, which represents the gross exports out of the US. The only US seller that would be capable of supplying such an astonishing amount of gold is the US Government, with a reported gold holding of 8,300 tonnes. The US Government gold holdings have not been audited or verified in more than four decades. The US trade data defines the export of nonmonetary gold as a sale of gold from a private seller within the US to an official agency. In September 2012, we espoused that the Western Central Banks have been surreptitiously selling/ leasing their gold through private channels in an effort to increase the available supply and in turn suppress prices. This new analysis using official US agency numbers seems to provide the strongest validation of our hypothesis to date. It is worth noting that our data only covers two decades and that the export ‘gap’ could in fact be significantly larger if earlier numbers were included or the real private investor demand for gold was known."

Note that this contradicts what Another said about Western gold investors trading their physical for paper gold.

Motley Fool did a good job addressing this weakness in Sprott's analysis in the comments over there:

Submitted by Motley Fool on September 10, 2013 - 7:36am.

I went ahead and read the only 'proof' you offered, being the two part paper by Sprott et al.

Sufficed to say the analysis is very weak, and has huge gaps.

Their figure for the 2012 disparity was 50 tonnes. The average for the period was just over 200 tonnes. The timeframe as 1991-2012.

They do not link the exact data, but this implies that most of the disparity came from the earlier period, rather than the later one.

Now think about gold and sentiment regarding it in the general public sphere from say 1991-2000. Horrid would be a good word. Hell, even today, despite a bull run the general public sentiment is an abhorrence for the barbarous relic.

Their weakest point in analysis is private supply/demand. I think it very feasible that that amount could have been supplied from private hoards, over the period, especially the first part ( where I am guessing most of the discrepancy arises).

Furthermore no differentiation is made between physical bullion, and say unallocated spot. On the demand side many 'sophisticated' investors over this period would have opted for the latter, which is in effect no demand at all. This lack of differentiation also skews the analysis.

Did the US public have the wealth to supply this differential? Yes.

I think this is the more likely explanation for the remainder in difference, once one makes a distinction between paper gold and real gold.

The author of the article, "Pining 4 the Fjords", then defended Sprott's claim that 4,500 tonnes is too much to have come from the American public alone:

Submitted by Pining 4 the Fjords on September 10, 2013 - 8:49am.

…Third, you correctly mention the possibility that this could have come from private sources. Indeed, Sprott et al noted that this was a possibility in their second article. However, they are positing that this much gold is too large to have come from private sources. So the question is, how likely is it that 4,500 tons would have come from private owners of gold in the US? Here is the list of gold reserves

Rank Country/Organization Gold (tonnes)

1 United States 8,133.5

2 Germany 3,390.6

3 IMF 2,814.0.

4 Italy 2,451.8

5 France 2,435.4

6 China 1,054.1

7 Switzerland 1,040.1

8 Russia 1,002.8

9 Japan 765.2

10 Netherlands 612.5

Now here is a list of the top ten largest holdings of physical gold in private hands worldwide:

Privately held gold Rank Name Type Gold (Tonnes)

1 SPDR Gold Shares ETF 1,239

2 ETF Securities Gold Funds ETF 259.79

3 ZKB Physical Gold ETF 195.53

4 COMEX Gold Trust ETF 137.61

5 Julius Baer Gold Fund ETF 93.50

6 Central Fund of Canada CEF 52.71[14]

7 NewGold ETF ETF 47.75

8 Sprott Physical Gold CEF 32.27

9 ETFS Physical Swiss ETF 27.97

10 Bullionvault Bailment 37.1[15]

Please note that 4,500 tons would be more than 2x larger than all of the 10 largest worldwide private holdings of gold combined! How likely is it that from 1991-2012 private owners of gold in the US sold the equivalent of what would be the second largest gold hoard in the entire world? Is it likely that they would sell (or even own) more than the top ten worldwide privately held gold hoards combined? I think not. That is why Sprott was saying they only reasonable source for this much gold was the US treasury. I still believe this is a reasonable conclusion…

MF then countered:

Submitted by Motley Fool on September 10, 2013 - 11:49am.

As to the first, yes I appreciate it.

As to the second and third.

No. This is their assumption.

"However, strong demand in ETPs such as GLD and PHYS and demand for gold coins provide strong evidence that the private investor has been a net buyer over the years."

I call BS.

"Please note that 4,500 tons would be more than 2x larger than all of the 10 largest worldwide private holdings of gold combined! How likely is it that from 1991-2012 private owners of gold in the US sold the equivalent of what would be the second largest gold hoard in the entire world?"

Yes. Over a period of 22 years. I think it is fairly likely. If he would, I would appreciate some input from 'Nick Elway' who I know comments on these forums as to the possibility US citizens held and were able to sell that much gold privately. He has some of the best data in the business, and I think his input would be valuable.

In their study they simply say that private supply/demand are unknowns, and proceed to ignore them. Since they provide no breakdown of the import/export data, it isn't possible to check, but are we then to deduce that they conclude that over the period from 1991-2012, no private holder of gold sold any of it to someone else outside US borders? Seriously? Not even an ounce? All of it 'must have' come from CB stockpiles?

And you wonder why I call their analysis flawed and weak. :P

…Much of this lies in the realm of speculation, as very few hard facts are available. Unfortunately we may not known the truth, till the chips are down. That said, the 'western banks have wasted all their gold' idea does make some assumptions which I consider insane, such as central banker stupidity.

MF

I documented this discussion here because I want to present another possible explanation for this 4,500 tonne "export gap," or at least part of it, that I haven't seen anyone acknowledge in the six months that Sprott's analysis has been circulating. As it is framed by Eric Sprott and Shree Kargutkar, his co-author, there are only two possible explanations (or a combination of the two). It was either public sales (unlikely says Sprott) or it was physical transfers (sales or leases) from the central banks into the physical market, with the implication that at least some of it would have come from the U.S. stockpile since we're talking about U.S. exports reported by the U.S. Census Bureau.

The Federal Reserve Bank of New York (FRBNY) holds mostly foreign gold and only a small portion (about 5% or 418 tonnes) of the U.S. stockpile. The rest of the U.S. gold (7,715 tonnes) is at Fort Knox, West Point and the Denver Mint. The FRBNY also reports how much foreign gold it is holding as "Earmarked gold". In his post on Central Bank Gold Leasing last November, Victor The Cleaner made a chart of foreign official gold held at the FRBNY from 1982 through 2012. This is Exhibit 1 in my alternative explanation:


As you can see from the chart, close to 4,000 tonnes of foreign official gold left the FRBNY between 1991 and 2012. Could that gold have shown up as exports in the Census Bureau data? Exhibit 2 is a conversation found in the minutes of a Federal Open Market Committee (FOMC) meeting on December 22, 1992. The Fed releases these minutes 5 years after the meeting:

CHAIRMAN GREENSPAN. Did I hear you correctly when you said that the gold exports in October appear to have come from the coffers of the Federal Reserve Bank of New York? Has anyone looked lately?

MR. TRUMAN. Well, I didn't want to tell too many secrets in this temple!

VICE CHAIRMAN CORRIGAN. Obviously, we knew what happened to the gold, but I don't think we knew what it did to exports.

MR. TRUMAN. What happens in the Census data is that the Federal Reserve Bank of New York is treated as a foreign country. [Laughter] And when a real foreign country takes some of the gold out of New York and ships it abroad, it counts first as imports and then as exports. However, the import side is not picked up in the Census data. So there you get the export side of it.

MR. LAWARE. Great accounting!

MR. BOEHNE. Great confidence building!

MR. TRUMAN. That's because you haven't been filling out your import documents!

MR. ANGELL. Let me run this by again. You mean a country owns gold and has it stored in the Federal Reserve Bank of New York and if they ship it out, that's an export?

MR. TRUMAN. And in the balance of payments accounts it also counts as an import, so it washes out.

CHAIRMAN GREENSPAN. The Federal Reserve Bank's basement is a foreign country. When they move it out of the basement into the United States, it's an import. Then, when they ship it out again, it's an export.

MR. ANGELL. That makes sense!

MR. TRUMAN. And sometimes when they sell the gold, it might be sold into the United States, so it should count as an import. It doesn't necessarily always show up as an export.

MR. BOEHNE. That really clarifies it!

MR. KELLEY. Does it have to get out of your vault at all in order to be considered an import and an export?

VICE CHAIRMAN CORRIGAN. Well, I'm not even going to try to answer that. In this particular case I know what happened, so I think the description you have is correct.
Source: http://www.federalreserve.gov/monetarypolicy/files/FOMC19921222meeting.pdf

[Credit for dredging this out of the old FOMC minutes goes to Adrian Douglas of GATA who passed away this year. gata.org/node/8429 gata.org/node/12137]

I want you to notice a couple of very interesting things in that exchange. First of all, Truman says that in the BOP accounts it counts as both an import and an export so it "washes out," but in the Census data it shows up as a net export. And then he also says that if it is sold into the market in New York, like say to the bullion banks like JPMorgan, it would actually show up as an import. Extending that logically, if it was CB gold coming out of the FRBNY being sold into the market and then exported (which is Eric Sprott's theory), it would show up as an import first and then an export and it should be a wash rather than a net export. So the only way it should be a net export is if the foreign CB is taking it home and there was no transfer of ownership or sale into the market.

And finally, in the last two lines, it almost sounds like there may be cases where gold could show up in Census data as an import or export without ever leaving the FRBNY. So there's certainly plenty of room to question the Census data, especially as it relates to central bank gold. Yet Eric Sprott doesn't seem to have even considered this issue in his articles. Was he not aware of these FOMC minutes published by GATA three years earlier?

The approximately 4,000 tonnes of gold that left the FRBNY during those 22 years was not American gold because it came out of the "earmarked gold" which is simply custodial gold held on behalf of foreign governments and central banks. So there's no reason its movement should show up as "monetary gold" on any U.S. national account for any purpose. The only thing that makes sense in light of the FOMC minutes above is that physical transfers of foreign gold (as opposed to transfers of ownership) are being treated as nonmonetary gold movements for the purpose of import and export reporting. And if that gold was sold into the market, then it should have shown up as either a net import or a wash rather than a net export. But I can easily imagine how a CB gold repatriation (which is most likely what the 4,000 tonnes leaving the FRBNY was), especially if it was done in secret, might show up as a nonmonetary gold export in the Census data.

Thanks to releases by the Bundesbank over the past year, we now know that Germany moved 930 tonnes from London to Frankfurt in secret and only revealed the move ten years later. From a Q&A posted on the Bundesbank website on October 25, 2012:

"At the beginning of the last decade, we brought 930 tonnes of gold to Frankfurt from London and subjected it to a painstaking inspection. Part of the gold was melted down in order to create new bars which conform with the “Good Delivery Standard” which is customary nowadays in gold trading. Of the 930 tonnes of gold, not one gram was missing. We do not have the slightest doubt that our holdings in New York and Paris are also made up of the purest fine gold. We have at our disposal fully documented lists of the bars, and our partner central banks send us every year confirmation not only of the bars’ existence but also of their quality. We receive confirmation of our gold reserves, measured in troy ounces. The Bundesbank has been drawing up its accounts on this basis since it came into existence. All external auditors have confirmed our accounting practices outright since then."

Moving hundreds of tonnes overseas is serious business. You can imagine why it would normally be conducted in secret. Whenever physical gold is in transit, it is subject to loss by theft or even accident. Remember the story about the Indian van that broke down on the freeway while transporting official gold to the airport? And this isn't the old Bretton Woods era where national treasuries and central banks were the most adept at moving gold. Today is the era of the LBMA, when bullion banks like JP Morgan and private transports like Brinks and VIA MAT are the experts at transporting gold bullion.

So I can imagine that a CB who was repatriating some of its gold from the FRBNY might contract with these private firms to have its gold fully insured through the private sector while in transit, rather than pulling an Indian van stunt. And this would mean the technical "demonetization" of the gold during transit such that it would show up as nonmonetary gold the moment the FRBNY handed it over to Brinks or JP Morgan. And as Edwin M. Truman said above, that would technically be a gold "import" as it left the FRBNY but it wouldn't show up on the Census data; it would only show up as an "export" when it left the country.

It's actually quite interesting to think that the Fed treats these CB repatriation transfers as nonmonetary gold movements. It certainly makes sense from the $IMFS perspective! And it also tells me that they are likely transporting via the private sector, like through JP Morgan who has direct tunnel access to the FRBNY. That would be the "import" when it is moved off of Fed property into the tunnel, and then when it leaves the U.S. via JFK airport would be the "export" which should theoretically "wash out," but as Truman, a Fed economist, told the Fed bureaucrats in 1992, it shows up only as a net export "because you haven't been filling out your import documents!"

So the Fed bureaucrats don't bother with the "import" documents but JP Morgan or Brinks or whoever is flying it to Europe does fill out the export documents and it shows up in the Census data rather than washing out!

MR. ANGELL. That makes sense!

MR. BOEHNE. That really clarifies it!

MR. LAWARE. Great accounting!

Eric Sprott's research found that gross gold exports from 1991 through 2012 were 11,223 tonnes. Some of that must have been movements out of the FRBNY, else why would Edwin Truman have been explaining to Alan Greenspan how gold exports in October of 1992, appearing as part of the U.S. balance of trade, appeared to have come from the coffers of the FRBNY?

We certainly have a mystery here, but we also most-definitely have a potentially significant source of gold "exports" that was not even considered in Sprott's analysis. And by potentially significant I mean potentially accounting for up to 88% of Sprott's "export gap" which means, given an expanded statistical margin of error, potentially accounting for all of it.

By expanded statistical margin of error, I'm referring to two things. The first is that Sprott's analysis of the Census data had to convert currency terms into weight terms. The Census Bureau reports exports monthly in currency terms, so his analysis had to assume a monthly average for the volatile price of gold in its conversion delivering a considerable margin of error. The second is that, apparently, the Census Bureau receives some lower purity nonmonetary gold export data from the exporters in weight terms and then bureaucrats systematically convert it into questionable currency terms, and then when the gold bugs convert it back to weight it could be off by an even more considerable margin.

Yet while Eric Sprott's 4,500 has a considerable margin of error, the ~4,000 tonnes that left the FRBNY does not. It is also reported in currency terms, but no averaging is needed because the price of gold reported here was frozen at $42.22 per ounce for the entire period!


Sprott acknowledges one unknown in his analysis, that of the private investor, but doesn't even consider alternative explanations for the "stunning figure" of his "export gap" because it fits so nicely with the gold bug/GATA hypothesis. And again, we do know that at least some of the 4,000 tonnes of gold that came out of the FRBNY during those 22 years showed up as exports in the Census data because Truman said so in 1992, in the privacy of the "temple", and long before it was even an issue with GATA and the gold bugs.

So to answer Paul's question, I'd say that it looks like Eric Sprott spent a lot of time and words blowing smoke in those two articles and then tried to imply it was a smoking gun that you were smelling. So what do you think? Smoking gun or blowing smoke?

Sincerely,
FOFOA

510 comments:

1 – 200 of 510   Newer›   Newest»
Motley Fool said...

Thanks for your posting. Even if we take the 4500 discrepancy at face value, this only leaves 500 tonnes of private supply over the 22 year period. A much more reasonable number to be sure.

Bron Suchecki said...

Good find but we won't see any retraction and it will be completely ignored by the pumpers.

A case of jumping to conclusions and not thinking "wow, this discrepancy is really big, maybe I should investigate further" as it confirmed one's biases.

Just like the LBMA survey "discrepancy" - maybe we should think a bit harder about whether a methodological/recording flaw is involved?

Back to my hole.

DASK said...

Nice one FOFOA. I can't believe the facility you have in sourcing historical/archive material to support arguments. I was wondering about Sprott's article, but had put it on the 'that doesn't quite seem right' back-burner mentally.

500 tons private dishoarding is easy to believe. I've seen (what seemed) credible estimates that German citizens have ~5000-6500 tons in private hoards.. not hard to believe the US wouldn't be similar/more. Dishoarding 10% during a multidecade decline in real value? Someone has strong hands.

Jonathan said...

Thurd!!!

Pumpers? as opposed to...
the FriendofHyperpumpers!
Yea great place to insert that choice nugget.

Jonathan said...

Thurd

Pumpers?
As opposed to... FriendofHyperpumpers.
Yea great place to post that nugget.

罗臻 said...

I never understood the argument for why the U.S. would give up control over their gold, which is under political control through the Treasury. Just the fact that it is stored at military bases should tell you what the "owners" of that gold think of it. They aren't going to allow it to enter the market as part of a leasing scheme.

Besides, leasing can be done with paper and it makes more sense to use paper unless a buyer is looking for physical control. The whole operation is being done with paper, from the Fed's gold certificates to the banks leasing operations.

Also, a thought. Is the Fed not senior in the chain of creditors? Perhaps the place to look for gold "confiscation" is with bullion banks that have leased Fed gold.

Wil Martindale said...

Yes to Motley and Bron, as of course to FOFOA, the private sales, plus the accounting "oddity" could certainly clear up the "empty vault conspiracy" if indeed "clearing it up" was good for business.

In the case of Sprott and his ilk, it simply is not.

And all information is this world is strained through the "good for business filter" before it ever reaches the ears of the little people.

So says Lorde Roacheforque, in his annals ... in concurrence with the flower of understanding.

Pining for the Fjords said...

As the author of the TFMR piece, I first should give credit where credit is due: The Dec. 1992 FOMC minutes info is certainly pertinent and does provide a potential explanation for this 4,500-4,000 ton discrepancy- a good find and possible explanation, well done. A few small clarifications, though:
1. For the record Bron, I am not employed by anyone in the industry (unlike yourself, I would add) so I am not "pumping" anything and have no financial interest in this other than wishing my gold investments to do well, a trait I am sure I share with your clients. My sole purpose here was to begin a conversation to explore whether western CB's have the gold they say they have, absent any official audit for the last 70 years (in the case of the Fed, at least). As this question is directly relevant to all of us, freegolders or no, I do not think some curiosity on this question is a bad thing. Do you?
2. FOFOA, it seems that at the core of it, your piece essentially says that IF the Fed was selling gold through BB's into the open market, the import/export data would simply be a wash... and therefore, IF this were taking place no record of it could be discerned through this data? So while the Sprott export data would seem to pertain to foreign CB's selling or repatriating Fed-held reserves, this data would not give any indication whether the Fed was selling into the market or not?

Thank you for your time, Pining

Kricke said...

"that I haven't seen anyone acknowledge in the six months that Sprott's analysis has been circulating"

I commented on this back in March on TFMetals:
http://www.tfmetalsreport.com/comment/284508#comment-284508

Silverdoctors saw my comment and picked it up:
http://www.silverdoctors.com/fomc-minutes-answer-eric-sprotts-questions-regarding-source-of-us-gold-exports/

And then Max Keiser:
http://www.maxkeiser.com/2013/03/fomc-minutes-answer-eric-sprotts-questions-regarding-source-of-us-gold-exports/

Brady said...

fofoa, great post and than you for providing further and greater understanding of the transcript/exchange.

I liked VC Corrigian's response to Chairman Greenspan's sarcastic comment (has anyone looked lately!):

VICE CHAIRMAN CORRIGAN. Obviously, we knew what happened to the gold, but I don't think we knew what it did to exports.

and Truman's a gem: That's because you haven't been filling out your import documents!

Agree with MF & have thought so since I began reading fo/fo/a - one would have to be insane to assume central banker stupidity.

jojo said...

I think that was quite a blowjob Mr. Sprott performed.

A PIIG said...

@Pining for the Fjords

don't be too offended, your curiosity is not a bad thing, it lead to this post.

Motley Fool said...

Kricke

So you did. :)

I certainly didn't notice it, and going through the rest of that thread it doesn't seem anyone else picked up the importance of those minutes.

@Pining

If the shoe fits. Sprott certainly has a nice pair. ;)

"FOFOA, it seems that at the core of it, your piece essentially says that IF the Fed was selling gold through BB's into the open market, the import/export data would simply be a wash... and therefore, IF this were taking place no record of it could be discerned through this data?"

That is one point made, to conclude the likely effect of the central bank gold repatriation on the census data. No net effect would be discernible yes, assuming they do the paperwork right. ;) Still there would be even larger import and export data in that case.

Sir Tagio said...

I don't get the gold bug desire to confirm that the Treasury and Western CBs don't have the gold. I really don't get how, if it is true, that fits into their world view about how gold is going to become the new backing for currency, or how and why that helps increase the POG to the skies. How are we going to have a gold-backed currency, or use gold as currency, if our government doesn't have any? I don't get it. To me, if the Treasury doesn't have the gold, and the Western CBs don't have the gold, that is a terrifying prospect, because the desperation of western governments, and the resulting depradations upon their citizenry when the $IMFS collapses is going to be off the charts. The only thing I see that anyone gets from this theory is that it scratches the conspiratorial itch and provides a tingle of pleasure from the thought that our banking overlords are stupid morons because they don't "get" gold, while we the lowly goldbugs of the world do.

Michael dV said...

Nice work fofoa.
There are many people who look at the black box that is gold. All the statements of possession and movement are hidden from view. No one wants to declare what they have or what they are doing so we get central banks telling us how much 'gold and gold receivables' they have. Physical gold vs gold derivatives are routinely obscured. When the price of gold is quoted we seldom are told the hour or minute that the quote is based upon.
In this murky environment we have many writers who make bold statements about what is and is about to happen in the gold market. Sometimes it is obvious that the person is 'talking their book'. Often though the writer is just not clear.
In Fofoa's work he uses a special sauce. It is one part clear and precise language, one part honest detached analysis, one part good data and the 'secret' ingredient is the overview given by Another, FOA and a select few others. So far I have not read better. Many other writers are guided by other overviews, the 'criminal bankers', the NWO Fed, aliens in search of gold or just plain touting.
This piece shows that some ways of approaching the topic can leave one's reputation intact even if every single question has not been answered. When trying to figure what is in the black box there will always be some uncertainty. One cannot always be completely right but with caution one can avoid being just plain wrong.

dieuwer said...

No more physical gold in the GLD ETF?

http://news.goldseek.com/GoldSeek/1378990800.php

burningfiat said...

Thanks PFTF, MF and FOFOA for shedding some light on this issue.

It's often difficult (for me anyway) to form an opinion on such secretive matters as large-scale physical gold movements, but this piece certainly clarifies a lot.

Still odd to think that it all comes down to some bankers not filling out some import documents when moving gold through a tunnel on Manhattan... I thought they were so smart these bankers!? What a weird world!

Dante_Eu said...

Nobodys perfect, BF.

Good workout by the way! :-)

dieuwer said...

Bullion bashing on FT: "No more Indian Buying"

http://ftalphaville.ft.com/2013/09/12/1631522/a-gold-surplus-no-more-indian-buying/

Blah blah blah blah...

Brady said...

dieuwer,

key wordss - "heard stories"

Williams: “Yes ... The minimum basket of shares you need now is roughly $14 million worth, and I’ve certainly heard stories of people who have taken that kind of size redemption requests to the custodians and been told that they can’t have the gold.”

But now it's fact. Here's King:

Eric King: “John, I know you have seen today’s interview with Grant Williams, but I don’t think people around the world understand what’s happening with GLD. People have tried to get their gold out of that ETF and you just can’t get it.”

and then Hathaway confirms Williams/King's statement without providing any shred of evidence.

May or may not be true, but unless evidence is produced vs. hearsay, I'll continue to assume John Smith can take his 100,000 shares in GLD and redeem for physical.

To be fair, I haven't and do not listen to the interviews so William's might have some actual evidence. If not and to only say "I've heard stories" and use that as the basis for the conclusion? lol

dieuwer said...

@Brady

everything in life is hearsay. Even on this blog, people tout the party line. But I'm sure less than 5% did check the facts themselves.

victorthecleaner said...


FOFOA,

nice!

Btw, is this the article in which Sprott claims that GLD were loco New York (and would therefore contribute to U.S. demand)? That would explain another 900 tonnes.

Pining,

this data would not give any indication whether the Fed was selling into the market or not?

The Fed cannot sell any gold simply because they haven't owned any gold (since they lost sovereignty over reserve and exchange policy with the 1934 Gold Reserve Act).

Brady,

if you as a private investor own shares in GLD, you have no way of redeeming, and you have known this fact from day one simply because you read the fucking prospectus.

The only entities that can redeem are the Authorized Participants, and they cannot take out any physical gold either. They receive unallocated from the Trustee and, at the same time, the Custodian deallocates the physical and releases it to the the clearing house (LPMCL).

Nice. GLD is just another flavour of paper gold - you cannot hold it in your hand, only your bullion bank can - well, not even any odd bullion bank, but rather only the LBMA clearing members. GLD is therefore, as FOFOA rightly claims, part of the bullion reserve of the LBMA banks (hey, Bron!)

Victor
Btw FOMC meetings must be fun.

Sam said...

+1 Sit Tagio
+1 Victor

Bron Suchecki said...

Pining for the Fjords - wasn't calling you a pumper, the fact that you are here engaging says you aren't. The pumping comment refers to those who ran the Sprott story and endorsed it and who will NOT run the counter explanation given here.

VtC - ETFs aren't reserves because BBs can't make (rely on) the holders to cough it up at will when the BBs need it. Yes there is currently a lot of hot money in ETFs but as this progresses the holders will become more strong hands and then the ETFs become locked out.

You then also have ETF Securities now offering retail physical redemption (10 years after the Perth Mint's ETF didn but good on them) which provides another avenue for ETF metal to attract stronger hand investors and provide a way to have the physical flow directly to the investor and not the BBs.

I will be surprised if the other ETFs don't follow suit. If BBs use ETFs as a reserves pool why are they allowing people to easily get those reserves instead of only allowing them fiat redemption and BBs keeping the physical?

Biju said...

Good one Kricke, you caught it like FOFOA.

Indenture said...

Bron: You said, 'allowing people to easily get those reserves'. Who are the people you are referring to because it was my understanding that "the only entities that can redeem are the Authorized Participants"? (as just said by Victor)

Warren James said...

@Indenture, 'Shareholders who are not Authorized Participants will only be able to redeem their Shares through an Authorized Participant.' page 19 (link), I take this to mean 'anyone, with arrangement'.

Nothing said about the cost of doing this of course, i.e. whether it's worthwhile or not (ETF Securities new redemption charges amount to a 4.5% premium).

These days about the only Fund you can't redeem gold from, are Sprott's funds. ;p

S P said...

I'll admit that I haven't read through the prospectus of every single gold ETF out there. This thought is rather absurd; some of us do have other things to do and think about! Moreover, why would I read the prospectus when I never would own shares in an ETF to begin with? As far as I'm concerned, only fools would accept the broker and bank custodian counterparty risk as well as the high management fees.

Having said that, it is clear to me that, generally speaking, gold funds are created to track the spot price of gold. If you own a share in a gold fund, you own a share in an investment vehicle. You do not own any physical gold, at all. Just before the freegold revaluation, you will receive currency settlement, if any at all, the investment vehicle will go bust, and the banks who act as custodians will claim the physical gold as their own.

This is contrast to the model employed by the likes of Goldmoney and Bullionvault, in which you legally own the gold contained in the good delivery bars. There is also no bank custodian, the gold is stored privately.

As such, I find the latter considerably safer to use and in fact expect more options similar to them post freegold.

罗臻 said...

If authorized participants cannot redeem ETF shares for gold, it doesn't mean they don't have the gold. What it most likely means is that they realize they have a scarce resource, a large and liquid stockpile of gold, and if they give it up, they may be unable to rebuild it. If they were unable to find physical gold on the open market, they would have to suspend creation of new shares and GLD would begin trading at a premium in order to attract physical metal into the fund.

byiamBYoung said...

This is an excellent time for me to re-submit my question about GLD, which has never been answered (well, at least not to me).

I checked GLD's tonnes in the trust today... 917.13. For the fourth day in a row. Prior to that, it was 919.23. For four days in a row. Prior to that, 921.03. For four days in a row.

What explains this sticky figure phenomenon?

Cheers

FOFOA said...

Hello Bron,

Long time no see! ;D It is funny to me that you are trying to draw a comparison between Eric Sprott and me with regard to the LBMA survey discrepancy. For those of you who didn't catch it, that was his implication here:

"Just like the LBMA survey "discrepancy" - maybe we should think a bit harder about whether a methodological/recording flaw is involved?"

Bron's implication being that I am trying to fit the data into my hypothesis, narrative or bias. The reality as I see it, Bron, was that it was you trying desperately to find an alternative explanation that fit your bias. First of all, my narrative doesn't rely on the explanation for the 7,676 "tonne" discrepancy in the LBMA survey. My blog was three years old by the time it was released. I simply pointed out the most obvious explanation which was that somehow the volume of "spot gold" was expanded during that quarter.

Yes, the obvious explanation does fit the narrative that LBMA "spot gold" includes gold units represented as XAUWHATEVER used in currency trading. This narrative has been around since 1997. From the Red Baron series circa Sept. 1997:

"The formidable volume of daily trading strongly resembles that of currency trading."

"This suggests (at least to me) the trades are non-Central Bank transactions - and more probably commercial operations related to CURRENCY TRADING."


It is well known that banks use delta hedges or complex derivatives based on correlated assets and currencies in these high-volume markets, which provides a reasonable explanation for how and why "paper gold" could have expanded so much in one quarter. But that didn't fit your narrative in which the pristine LBMA gold market that you know so well only hedges within other areas of the gold market, like the COMEX, which would limit such a paper gold expansion far below what the survey implied.

So you went in search of an alternative explanation that would better fit your narrative in which all LBMA paper gold is hedged somewhere within the gold arena. The first explanation you came up with we called "survey statistical methodology" or something like that. You presented a toy model with 4 bullion banks and 9 transactions that produced a discrepancy similar in magnitude to the LBMA survey. I then proved (even though you never accepted my proof) that your model was an insufficient explanation because, when scaled up to the real world, the discrepancy attributable solely to the survey methodology became vanishingly small without something else going on. Another supporting explanation was needed.

So you came up with another explanation in support of your model. This second explanation we dubbed "asymmetric reporting" which was the net sellers reporting on the survey while the net buyers didn't. Again I showed that this explanation was insufficient because it required something much more improbable than the obvious explanation. In order for "asymmetric reporting" in combination with the "survey methodology" to account for the 7,676 tonne discrepancy, it required a net flow of twice the discrepancy, or 15,000+ tonnes in one quarter, from the reporting members to the non-reporting members.

Cont…

FOFOA said...

2/2

At that point you dropped the debate because you got busy at work and simply rested on your decision that I hadn't shown your alternative explanations to be sufficiently insufficient. And even though mine is the obvious explanation for the survey discrepancy, I think you believe your narrative to be so much more reasonable than mine that you have convinced yourself that it is me trying to fit the data into a narrative when it was actually you who had to come up with multiple complex alternative explanations to make it fit yours. Perhaps you could take another look at your narrative and see how it is also less probable, especially give the sheer volume in the survey regardless of the discrepancy, than the one that began in 1997 with the first LBMA revelation and also led to Another and FOA posting for the next five years.

And with regard to GLD, you said:

"VtC - ETFs aren't reserves because BBs can't make (rely on) the holders to cough it up at will when the BBs need it. Yes there is currently a lot of hot money in ETFs but as this progresses the holders will become more strong hands and then the ETFs become locked out."

As far as the Trust is concerned, the bullion banks are already the owners of record of all existing shares. They don't even need to pry them out of strong hands in order to redeem. They can potentially redeem at any time they want. From the prospectus which Warren already linked. Page 31:

"BOOK ENTRY FORM

Individual certificates will not be issued for the Shares. Instead, global certificates are deposited by the Trustee with DTC and registered in the name of Cede & Co., as nominee for DTC. The global certificates evidence all of the Shares outstanding at any time. Under the Trust Indenture, Shareholders are limited to: (1) DTC Participants; (2) those who maintain, either directly or indirectly, a custodial relationship with a DTC Participant, or Indirect Participants; and (3) those banks, brokers, dealers, trust companies and others who hold interests in the Shares through DTC Participants or Indirect Participants. The Shares are only transferable through the book-entry system of DTC. Shareholders who are not DTC Participants may transfer their Shares through DTC by instructing the DTC Participant holding their Shares (or by instructing the Indirect Participant or other entity through which their Shares are held) to transfer the Shares. Transfers are made in accordance with standard securities industry practice."


If I'm reading that right, it seems to me that any AP can redeem any amount of shares up to the amount which its own clients are holding, i.e., those shares to which the AP is the registered owner as per the DTC. Forget for a minute how they would square their books and/or hedge their exposure if they did this. Aside from that consideration, would you agree that it sounds like they could potentially redeem baskets of shares while still carrying the liability of price exposure to a GLD share to their clients? From what I understand, broker dealers can do this. They can accept a sell or purchase order from a client, guaranteeing their client the price exposure he purchased, prior to securing the underlying. If another client simultaneously purchases the opposite price exposure, there's no hurry to even purchase the underlying at all because the broker has offsetting liabilities. So what makes GLD shares so different?

How can the APs be "locked out" by GLD shareholders when the AP is the owner of record of those shares and also the market maker and broker to the shareholders? It seems to me that the APs could potentially redeem at will as long as they can manage their price exposure and square their books eventually. And that's how GLD is therefore part of the bullion reserve of the LBMA banks, as Victor said.

Sincerely,
FOFOA

Victory said...

Sherlock 'FOFOAing' Holmes,

Comments section has me laughing out loud...priceless

Church 

michael3c2000 said...

http://sirratatap.com/2013/09/12/9-12-13-uu8734-not-till-october/ Mtn goat has another bleating for you atop her Bavarian mountain trail. This is short but has a good kick, just read it for kicks, or butt heads with it.

M said...

I don't get the animosity....

I truly believe Eric Sprott, King World News and GATA have the same desires for understanding as us freegolders do. When Eric presents this stuff, he does it in a no BS way. He grins and laughs when interviewers label him a conspiracy theorist. He understands that what he is saying is up for debate.

I highly doubt Eric King would turn down an interview from someone advocating all physical gold. We are all cut from the Austrian cloth and this internal warfare doesn't look good on any of us from the outside...

M said...

@ Sir Tagio

"I don't get the gold bug desire to confirm that the Treasury and Western CBs don't have the gold"

They don't have that desire. They want answers just like all of us. Sprott is just putting it out there. He's already a billionaire. He doesn't need more money. This is his philanthropy project.

A PIIG said...

@M

Being cut from an Austrian cloth can come with a lot of baggage, where political activism and hard money views get in the way of understanding. The CB's hate gold and CB's have no gold in their vault themes also get in the way.

Robert said...

I am skeptical of Eric King and many of the people he regularly interviews on the site. Take the recent Grant Williams interview and the sensational headline that "Amazing - GLD ETF Tells Customers You Can’t Have The Gold." Hmm. Is that really true? Here is the quote: "The minimum basket of shares you need now is roughly $14 million worth, and I’ve certainly heard stories of people who have taken that kind of size redemption requests to the custodians and been told that they can’t have the gold.”

Okay, so this is all hearsay. Stories that Grant Williams has heard. Are any of them confirmed? No. And who supposedly denied the requests? Did the Trustee deny a request from an Authorized Participant? Or did one of the many Authorized Participants tell its customer that it refused to redeem a basket with the Trustee? No details at all. If the custodian (HSBC) denied a request from anyone other than an Authorized Participant, they did exactly what they are supposed to do. Everyone is supposed to go through an Authorized Participant. That's how the trust works.

Personally I do not believe a word of what I read on KWN.

Gary (not the evil one!) said...

KWN, IMO, just continues to beat a dead horse - they seem totally incapable of switching gears to admit maybe, just maybe, they are barking up the wrong tree by continually anticipating the paper gold price to increase - and blaming manipulation when that doesn't transpire. Eric King is simple selling an idea and reaps profit from it in the form of mining advertising revenue. His guests make frequent inaccurate predictions... without him ever referencing them or taking the interviewee to task. Ever. His headlines are sensational often misrepresenting the direct quotes of the segment. I would expect that he has lost a huge amount of credibility with his readership - even those who don't look at things as practically as FG'er do.

And while I am at it, THIS:
Sprott is just putting it out there. He's already a billionaire. He doesn't need more money. This is his philanthropy project.
is, maybe, the most naive thing I've read on this site. I wonder how those investing in Sprott's funds would feel about him being satisfied with his wealth (I mean, 'He's already a Billionaire') pursuing knowledge for 'philanthropy' as opposed to accruing knowledge to make better investments for his customers. And he doesn't do interviews on KWN et all because he is a philanthropist. It is public relations marketing promotion for Sprott Inc. These guys are in business - FoFoA should stick out to you like an elephant's penis as someone who is not promoting for profit - someone who has no 'axe to grind'.

Beer Holiday said...

Awesome analysis FOFOA!

@M Is Sprott being a philanthropist when he scalps the premium off PSLV?

CISAs unite lol.

Roacheforque said...

I have to agree with Gary, the continuing drum beat of "(paper) gold price set to explode" does wear thin the veil of credibility.

But the sparring of Giant Intellects (Bron vs. FOFOA) I like!

Cheerio!

Grumps LaBastard said...

Gary,

This blog has become a business. Recall the periodic threats to shut down unless contributions start flowing.

MatrixSentry said...

Sir Tagio,

I don't get the gold bug desire to confirm that the Treasury and Western CBs don't have the gold. I really don't get how, if it is true, that fits into their world view about how gold is going to become the new backing for currency, or how and why that helps increase the POG to the skies.

I have often had the same thought. My conclusion is the same as yours as well. I thought I was pretty smart when I first got the smallest glimpse behind the curtain we commonly think of as money. Then I started the process of maturing. These people are either "young" in the process of discovery, or they are incapable of growth.

I brought this very topic up with a serious gold bug and asked him to resolve the ambiguity in his view. He simply said when the time was right the PTB would simply seize all the gold from private interests. I laughed. He was not amused.

Indenture said...

If Aaron were here he would remind Good Gary, "Then there is an alternative site the FOFOA blog. I don't recommend it anymore. The thesis there is that gold will stay external to the system at a price of 55,000/oz. There will be no mining of gold, no gold lending, easy credit creation in a currency will be punished by a higher gold price in that currency. It is bizarre. I post there under GrumpsLabastard telling the cultists there they're full of crap. My name is mud over there."

MatrixSentry said...

M,

I don't get the animosity....

I truly believe Eric Sprott, King World News and GATA have the same desires for understanding as us freegolders do. When Eric presents this stuff, he does it in a no BS way. He grins and laughs when interviewers label him a conspiracy theorist. He understands that what he is saying is up for debate.


Respectfully, I hold a different view of Mr. Sprott. He is a billionaire in the business of gold. He didn't become a billionaire by accident or by not knowing what gold is and how it works. In fact, his wealth depends on the gulf between his level of knowledge and the knowledge of his customers and counter-parties. Mr. Sprott is a businessman.

Mr. Sprott holds the majority of his wealth in paper. He probably holds a relatively small amount of physical gold as a reserve, at least relative to his net worth. Lets say that he really is a philanthropist and is not preoccupied with accumulating more wealth. Would he be interested in simply preserving the paper wealth he has already accumulated? Maybe just like a Giant? I think so. So what to do when the paper unit of account goes into meltdown mode?

Here is what I think I would do if I were him. He retains the sole authority to shutter his gold fund (PHYS) at any time for any reason. I would fold the fund and cash out all share holders with my copious load of soon to be dead $s.

Funny though, he really doesn't need to wear a black hat at all. We Freegolders see the future price of "gold" collapsing as the transition to Freegold gold occurs. There will be many, immature in the concept of gold, that will be eager to sell. In fact, I would wager that the vast majority of PHYS shareholders are very weak hands who will be bewildered as the price of "gold" plummets. Mr. Sprott is very mature in the concept of gold and will be a big buyer of shares all the way down to the point where the market collapses and the fund is no longer trading in any meaningful way. He then folds the fund and pays off any remaining shareholders. Sprott then sails into the sunset with a nice pot of gold.

A philanthropist gives away his wealth. Sprott is a businessman. A businessman seeks profit. Until Freegold, Mr. Sprott will make a profit by providing a service to the goldbugs and in doing so will churn a handy paper profit. During the transition, he will look to secure his paper wealth.

I did the very same on a smaller scale. I made my money in the markets by making more profitable trades than losers. I was smarter than someone else, and I was providing a service to a "customer" when I bought and sold. Since I am a shrimp and cannot move the gold market, I simply acquired physical gold with my paper profits. Mr. Sprott likely wets his beak in physical, but will be able to plow into gold more efficiently with the bulk of his wealth when the transition comes. I think Mr. Sprott stands at the front of line when the time comes to allocate.

As for GATA and KWN, I do not think they are on the same level as Sprott. GATA may have the best of intentions (immature in the concept of gold), but KWN is in the business of pumping, plain and simple. Both are viable tools for someone who knows where we are headed. Someone like Mr. Sprott.

Gary (not the evil one!) said...

Thanks Indenture!
In regards to GrapeapeLaxativeBactericide he says, on one hand:
FOFOA blog. I don't recommend it anymore.
but still comes here to post. ?
telling the cultists there they're full of crap
You have done so. Why don't you move on? You are closing in on Troll status.
You've dismissed us - we have dismissed you and after having your ass handed to you by the mining sector you don't dare bring up that topic again except if they get a slight bump - then you come to childishly gloat for a few hours. So,
My name is mud over there.
Agreed. It's a shame when your words come back and haunt you, but they continue to.

poopyjim said...

Sprott is scum. The proper way to apologize for Sprott is not to say "oh he's just a humble truth seeker like the rest of us," but rather to say, "it's his job to screw you over and mislead you when he hawks his products! You should expect it!" - i.e. the same justification one would use when defending a used car salesmen.

For example, Sprott constantly attempted to create FUD (fear, uncertainty, and doubt) over non-existent "delivery problems" to promote PSLV.

I'm not sure if he directly promoted the myth that the higher premium for PSLV means that "OMG it actually has the silver and there's a shortage!" rather than what it actually means: that PSLV is overvalued. But he certainly profited off it!

He has never recommended YOU sell your silver even when he was selling his, but um oh yeah - that's just because he's even MOAR bullish on silver mining stocks! LOL!!! If he were honest he would have come out and said he's "bearish" on silver at some point (he is not honest).

So yeah, my primary criticism of Sprott is not that he's in it for profit, but that he's a dishonest snake oil salesman saying one thing and doing another. Most of those guys at KWN are just talking their book. KWN is a mining stock infomercial, is all.

And to counter all that by saying "Well FOFOA is motivated by profit too!" is ridiculous - there's nothing wrong with being a professional blogger. The problem with Sprott is not that he's getting paid but that he is LYING. Now if FOFOA were secretly selling all his physical gold and buying T-bonds, despite continuing to promote phys. gold here, that would be "pulling a Sprott" so to speak. However, I sincerely doubt that's the case. =P

Doc said...

Talk about smoke it was not mentioned that the gold that left the FRBNY was custodial gold owned by western central banks(Germany, Italy, France, Switzerland, Netherlands).

Grumps LaBastard said...

It's a long haul. Payday might not come until the end of the decade and great volatility likely will be par for the course. Hence, no leverage is a must. Losses or gains aren't realized until just that. I just cast a few limit orders for some miners hoping to take advantage of the mispricing.



Archer said...

+1 poopyjim.

Beer Holiday said...

@Grumps - Clear as mud!

Brady said...

@ victor,

great point - thank you for clarifying.

Dante_Eu said...

@M:

I have several years experience working (successfully) for charity and know a thing or two about philanthropy.

And I can tell you that ordinary people ie. shrimps are the REAL philantropists! Without shrimps and their contributions (10€ - 20€ recurring gifts) there would be no charity. Forget billionaires! Especially forget financial billionaires ie. billionaires from financial sector.

That's true for Europe. For North America I don't know. I suspect it is the same, even though you read and hear the opposite in the news.

jojo said...

Nice post Fofoa

Knotty Pine said...

I don't think anyone here needs to be "protected" from the evil gold bugs at KWN. While occasionally one might find an interesting story there personally I don't have time to wade through all the BS to find it (although I do like Dan Norcini). Sites like KWN remind me how nice it is to read this blog (and yes, GripsLameStocksHard even send the man a donation every so often).

Speaking of Turd did anyone see this bizarre interview of Turd by a jacked up Max Keiser? It looks like he went to her for make up!

Sir Tagio said...

@MatrixSentry,

You said,
These people are either "young" in the process of discovery, or they are incapable of growth.

I think that that is a very good observation & encapsulation. The trail is long and not all of us have started at the same time or place. Some people like the view so much from a certain spot on the trail that they set up camp and never move on.

Further regarding claims or suggestions touted by the “book-makers” that “OMG they don’t have the gold!!”, I don’t believe we talk about it a lot here, but one of the key, free-your-mind pieces of understanding for me was Fofoa’s analysis of how essential it was, for gold to have value, that it’s ownership be – if not “widely held” then let us say, sufficiently common and sufficiently widely dispersed. I can’t remember exactly where this topic was discussed, but I remember the fairly clear implication or statement that if all (or to use the lawyerly expression, “substantially all”) of the gold were held by one or a few persons, it would have little to no value. Another reason – albeit admittedly philosophically grounded rather than factually confirmed – to doubt claims that “the gold is gone!”

In this regard, it is interesting to me that James Rickards (whom, as an aside and as my very own personal conspiracy theory, I believe, based on his high regard for, and relationships with, the U.S. military and other government insiders, knows more than he lets on and has a mission to get the word out to those who have ears to hear, in as readily digestible form as possible) NEVER doubts that the gold is there, and has even advanced the notion that it is possible that the G20 nations know that a reset is coming, that gold will play a key role in the new system, and that they are cooperating to prolong the time so that China in particular can accumulate enough gold relative to the participants’ relative economies before imploding the $IMFS. Rickards’ suggestion of this as a possible covert plan is essentially pragmatic, based on facilitating a relatively smooth transition to a new international financial system that avoids an abrupt, severe dislocation in the relative economic standing of, and trade patterns among, the world’s largest economies. I am not saying this theory floated by Rickards is correct, and he certainly doesn’t harp on it, but it is telling to me that it at least accords with Fofoa’s - I would say philosophically grounded – understanding and exposition of what it takes for an asset to have value, even more so to function as a world-wide, focal point “wealth asset.”

DP said...

Maybe JPM really are clued into where gold is going, and that's why they've not switched right around and gone long silver? #JustAIdea

DP said...

With the caveat: there's going long, and then there's going long. #CaviarEmpty

Grumps LaBastard said...

Dagnabbit, the miners are recovering. Hopefully, with all the psychodrama on deck next week the HUI can retest 206. Some Agnico or Goldcorp below 25 is just plain stupid.

victorthecleaner said...

Bron,

I will be surprised if the other ETFs don't follow suit. If BBs use ETFs as a reserves pool why are they allowing people to easily get those reserves instead of only allowing them fiat redemption and BBs keeping the physical?

we are only claiming that GLD is used as a bullion reserve by the BBs. As far as I remember, neither FOFOA nor myself nor Randy Strauss made any such claim about any of the other ETFs (which are all small compared with GLD by the way).

Here are a couple of predictions:

1) GLD will never allow their retail investors to take any physical gold out. In fact, the physical gold will never be directly available to the APs either (who can only get unallocated), but the allocated is rather locked up at HSBC, one of the six LBMA clearing members. When the difference between allocated and unallocated eventually surfaces, only the clearers (who, in an emergency, are subject to instructions by the Bank of England, their regulator) will have access to the allocated, but nobody else will.

In fact, the difference between SLV (APs provide and redeem allocated) and GLD (APs transact in unallocated only) is a nice hint that they (i.e. LBMA clearers, BoE etc.) have done their contingency planning.

Since serving as an extra reserve of the LBMA clearers was one of the main rationales for the creation of GLD, they are not going to change the way GLD operates.

2) When the difference between allocated and unallocated eventually plays a role, most of the other ETFs or similar funds (Sprott PHYS etc.) will be wound down "due to a serious market disruption". In this case, investors will be cashed out at the most recent official price while the fate of the physical will be negotiated off-market.

In particular, investors in those ETFs that allow redemption of physical (or similar financial products with redemption option such as GoldMoney or BullionVault) will never see their physical gold either, simply because their financial products will stop operating one day before they realize that they urgently need to redeem.

This is one of the reasons why you may find plenty of goldbugs in these ETFs, but why the true strong hands will never hold any of these financial products that do not entail ownership title to specific bars of gold.

...

victorthecleaner said...

...

ETFs aren't reserves because BBs can't make (rely on) the holders to cough it up at will when the BBs need it.

3) When the day X comes and the LBMA clearers need more reserves in an emergency, they can simply borrow GLD shares and redeem
a) borrow from the market: Many owners of GLD are passive investment funds who habitually lend their shares for a fee. As FOFOA would say, these funds are interested in "price exposure to the price of gold" rather than in "ownership of gold". Plenty of stuff there to borrow. In fact, borrowing GLD is sometimes cheaper (per ounce) than borrowing unallocated.
b) borrow from their own customers. As FOFOA said, no investor has legal title to their shares of GLD. They only have a claim on their broker who is owning the shares on their behalf. So it is perfectly legal if the broker=BB=AP redeems the GLD and, once the customer sells their GLD, they have to credit him the share price in dollars.

Should the BBs eventually get squeezed because they borrowed too much GLD (FOFOA probably thinks this is unlikely to ever happen because the gold price will drop rather than spike in that situation), the BBs may require some form of "bailout". It is perfectly legal to wind down the entire GLD in this case. The APs will sell the unallocated for cash and pay the investors cash while the custodian will release the allocated to the clearing house. Nice.

It will be totally counter-intuitive that just as physical gold will become scarce,
a) the gold price (unallocated) will drop because of the huge wave of liquidation
b) GLD share lending will spike (which, however, will be borrower induced rather than lender induced, but nobody tells this to you when you look at the reported figures)

4) Probably on that morning, you will have a fax from your Treasury Department on your desk: capital controls. No gold and no foreign currency is to move anywhere, especially not abroad. The mining companies will not ship any ore to you, and you cannot sell anything to anyone other than your government.

You'll phone your in-house legal advisor and they will tell you that you already have the required small-print in place. You'll will have to wind down your retail products, too. No auction that Friday, sorry.

The next financial crisis will not be like a little short squeeze in zinc futures with a little more inflation. The next financial crisis will be about how much one US$ is worth in real terms, and entire industrialized countries will suddenly realize they don't have enough credibility for some necessary imports.

Victor

Dr. Octagon said...

M said... "I truly believe Eric Sprott, King World News and GATA have the same desires for understanding as us freegolders do..... We are all cut from the Austrian cloth..."

Um, no. I do not consider myself an adherent to Austrian economics, and I very much agree with the above negative comments from others regarding Eric Sprott and KWN.

Roacheforque said...

Sir Tagio,
I do believe you are in agreement with someone who once said, "If one important group has all of a thing, and an equally important group has none, and wants nothing, of it, it's value is destroyed".

Sir Victor,
Plus 2 on your last paragraph.

M said...

@ Matrixcentry

So you really think that this conspiratorial stuff is good for Sprotts image ? Its not. But he still does it.

Eric Sprott is one of the few owners of the 100kg Canadian mint gold coins. He also tried to buy physical from the IMF.

/SleepingVillage/ said...

Whatever anyone might think they know of Mr Sprott... well it doesn't really matter...

If the man has any integrity at all he will reprint and stand behind this (proper) analysis presented here by FOFOA. THEN, he will donate a sum exceeding that which he paid his "experts" to come to an incomplete and faulty conclusion.

Then I will have respect for Mr Sprott... and I think many others may as well.


Sloth (Open Up Your Eyes)



Jeff said...

Conspiratorial stuff (price pumping) is good business if you are in the business of selling ETF shares(at a premium) to conspiracy theorists.

Victory said...

Victor, why are lumping GoldMoney in with GLD? GoldMoney does allow title to individual numbered bars if you have enough to own one. Otherwise one would have a pooled claim to physical gold (smaller bars) stored in a private vault (viamat.) An ownership claim that is not fractionalized nor is the gold an asset of GoldMoney but rather of its clients. Even with capital controls which I don't foresee such an event would be brief IMO. To draw the conclusion that GoldMoney owners will be cashed out against their will (forced settlement) seems a bit conspiratorial to me. And who would have claim to all of the Gold in viamat's vaults, in other words who are customers being forced to sell their gold to, James Turk ? :-)

Luke said...

Matrix said

"Then I started the process of maturing. These people are either "young" in the process of discovery, or they are incapable of growth."

So then you started to believe in a story about giants and a prophecy of gold not flowing at the highest level among them? Something that came from two people on an internet message board over 10 years ago.

I love this board because it offers original theories on the gold market and excellent economic commentary, from an obviously very intelligent author. but the arrogance from some of the comments is stunning. All theories here are treated as gospel. $55k is a fact and everyone is absolutely positive somewhere gold is exchanging hands at levels that are many multiples of today's "shrimp" price. even what fofoa put in this article is an unknown to whether it answers the question raised by sprott(though this has some great evidence). Yet so many here look down at those just haven't seen the light.

John said...

I don't post here often but try to keep up with FOFOA's posts. Anyway reading this post I can't help but think of what I think is a large outflow of gold from private hands to Giants. All the we buy gold shops that have emerged over the last decade must have had a substantial effect on vacuuming a lot of gold out of soft hands, recasted and then presumably shipped east. What I'm saying is that can't the privaye sector be a larger part of the US export then what people think?

John said...

Oh yeah and I'm John2 not the John that usually posts here..

/John2

Koos Jansen said...

Thanks for the post FOFOA.

I think it's very likely that the gold Sprott refers to came form the basement of the FRBNY, but I'm not sure if this was ALL for repatriation purposes.

Isn't there a possibility that some of this gold left the NY vault and was sold (or leased) overseas? In a way it got washed out on the BOP and picked up by the Census bureau as net export, so it would look like repatriation but was actually a sale overseas.



Pete T said...

Oh dear, you're all still missing it. The clues are all there in Another's writings, and -believe it or not- even he didn't have access to knowledge of each and every large private gold BULLION owner's holdings and where they went! How could anyone (even were he a Saudi prince or deep inside the BIS... yawn!!he wasn't!!) have that info?!
Another's position meant that the claims he made are wholly valid and reliable. But you are sniffing up the wrong lamp-post whenever you assume he was referring to private owners' Gold Bullion holdings and their 'known' movement. (A bizarre notion).

sean said...

Victor, you ought to update your understanding of Goldmoney further before slating it. They do indeed allow registered ownership of individual numbered gold bars, and also registered ownership of bars down to 100g and 1 kg. You can even store your own gold with them. Obviously there are storage costs, which you may prefer to avoid, but I believe they are a valid alternative to storing gold in your sock drawer.

Knotty Pine - good grief! Something bizarre certainly did happen to Max between the first and second half of that video. :-/

anand srivastava said...

Luke:

I don't know about you, but it seems to me that most people here have actually thought about the theories. And there are a lot of differences among us. Check out M's message above. Then some of us don't agree with Victor's FreeFiat. Some believe in mines, still. But yes, people do come around to the logic of FOFOA, sooner or later. To a person looking from outside, who doesn't understand the logic much, it will look like everybody is just repeating the Gospel. But look closely its not that uniform. Its just that FOFOA's logic is so good, nobody is able to break it.

ampmfix said...

Anand, +1

Roacheforque said...

Pete,
Is there a point somewhere in your comment?

All,
"The wealth that was had was not real. The Pacific Rim started, now South America. Next will be Europe closely followed by the US. Remember, all currencies are the same now as they are "digital paper"! Nations will defend the system at all cost They will never sell US$ treasury debt as that debt is their currency! The dollar will soar as a final defense! As part of this defense they will allow oil to rise as oil is priced in dollars. How do you get oil to rise? Today, we stop our CBs from selling gold!

Today, WE stop OUR CBs from selling gold.

Cheerio!

poopyjim said...

@Victory

To draw the conclusion that GoldMoney owners will be cashed out against their will (forced settlement) seems a bit conspiratorial to me.

And this seems a bit like it was spoken by someone who has a lot of gold in goldmoney! Of course Sprott et al. (Goldmoney is owned by Sprott, yes?) don't seem to share your view that shutting down in the event of a financial collapse is very "conspiratorial" as they state right in the customer agreement that they may completely reneg on their obligations to you in the event of such an occurrance:

E. We shall be relieved from Our obligations under this Agreement if and to the extent that We are unable to carry out all or any of Our obligations hereunder owing to:

i. Wars, civil commotion, vis major, acts of God, strikes, riots, lockouts, governmental controls or restrictions, non-availability of any equipment or telecommunications or computer systems or any other causes beyond the reasonable control of GoldMoney and Net-Gold


I still have a bit of gold in Goldmoney myself (.6 oz.)! I would consider it a small miracle if it survives the crisis. In order for your holdings to survive Goldmoney has to remain open and operable. If there's no liquid gold market and currencies are hyperinflating, how will storage fees be paid?

What if you can't transfer anything due to capital controls? What if you can't take delivery because international mail is not functioning? Why do you think these things are "conspiratorial" if you acknowledge (presumably) that we are heading for a massive worldwide financial collapse, perhaps the worst ever?

And who would have claim to all of the Gold in viamat's vaults, in other words who are customers being forced to sell their gold to, James Turk ? :-)

SPROTT

MatrixSentry said...

Luke,

So then you started to believe in a story about giants and a prophecy of gold not flowing at the highest level among them? Something that came from two people on an internet message board over 10 years ago.

Is your understanding of Freegold really this superficial? Another, FOA, and FOFOA's description holds up quite well over the last 5 years, certainly better than Sprott's or any other gold commentator. That is why I believe in Giants and two anonymous bloggers.

I have never seen a black hole, and never will. However my understanding of physics is such that the description of a black hole is logically consistent and holds up to mathematical scrutiny. Therefore I accept that description as sufficient for the universe I inhabit.

What would you ask me to believe in? Something logically inferior, or better yet, nothing at all? How about everything? I have tested the others with my mind and intellect. As Jesse likes to say these days "weighed, and found wanting."

I have been here nearly since the beginning. I have been waiting patiently for a competitor to steal me away. It hasn't happened yet. Until it does happen, I will do what I do everyday, and I will Read This Fucking Blog. I will read those that I am skeptical of as well, looking for the allusive piece of the puzzle that suggests A/FOA/FOFOA's view is incorrect.

I am curious, since Freegold is not your thing, what is? What is your best guess of a model that best describes the world you see? To make it easier, who best articulates your beliefs? With that piece of information I can glean your viewpoint and you do not have to take the time to hash it out here.






Grumps LaBastard said...

The fees are taken out automatically in terms of goldgrams.

The "We shall be relieved..." language is a standard boilerplate disclaimer. Everybody has it.

GoldMoney is a good way to diversify your stash. And if gold is to be revalued 30X then it won't be a problem to melt down the 400 oz bars into smaller denominations if it's necessary. They already melted down all the bars back during the tungsten scare.

Cap controls when they come won't be around forever. The crisis period will end.

Gary (not the evil one!) said...

The "We shall be relieved..." language is a standard boilerplate disclaimer. Everybody has it

Is that supposed to legitimize it? That it is in the same fine print as every other contract legally leaning to a corporate monolith and away from a shrimp?

Even if you believe there is only a one percent chance of that they "are unable to carry out all or any of THEIR obligations" towards their clients - then, IMO, it would be prudent to treat that as a certainty. Why 'gamble' your wealth on GoldMoney. Does anyone not feel these:
"Wars, civil commotion, vis major, acts of God, strikes, riots, lockouts, governmental controls or restrictions, non-availability of any equipment or telecommunications or computer systems etc."
are a reasonable possibility?

This is also how I feel about your mining speculation GreatLumpyBulimic. If there is a even a one percent chance you won't be able to convert the cash in those shares (or 1% chance that they won't hold any value after taxation/nationalization or after the continued paper price decline) to anything but paper when the physical Gold market has dried up - it makes sense to treat as a certainty.

Cap controls when they come won't be around forever. The crisis period will end

Yes... they will come to an end, and at that stage you should be able to buy all the gold you want at, in excess of, $55,000 /ounce. Good luck with that and continuing to diss this Blog on other Forums.

Jeff said...

It's heartwarming that some people still have faith in counterparties. I have no desire to go through the gutcheck moment with some custodian as paper burns, but bully for you that have such intestinal fortitude.

FOFOA: What you are talking about is a risk assessment exercise. Here is how I see it. "Unallocated" and "fractionally reserved" are not the same thing. There are some paper gold investments that are unallocated yet fully reserved. Also, in certain cases, gold can be "allocated" to a company whose business model is to own physical gold in full reserve, but you owning a share of that company only makes you a creditor. So to you, the gold is still "unallocated."

In the case where you are an unallocated creditor, whether fractionally reserved or not, there is a fee in order for you to convert your share into physical possession or allocated storage. If you are in this kind of an investment, then your paper gold, even if it is denominated in ounces, is still only a paper claim until you pay that fee.

If there is ever confusion surrounding "the price of gold" (**which there will be, see below), then that fee will be where it is reflected. These conversion fees could go astronomically high, and if you refuse to pay them, then your only option may be to sell your shares at the going share price for cash and to buy your physical elsewhere. This is where shifting to a Freegold perspective is helpful in assessing the risks.

This could potentially apply to all unallocated pool accounts, even ones that are fully reserved. This is where trust comes in. How much do you trust your debtor (remember, you are the creditor) to do the right thing, when doing something legal but not quite right could result in a huge Freegold windfall for your debtor?

This is where I have written in the past on this blog that if the potential windfall is big enough, I wouldn't even trust my own sister with such a temptation, let alone a stranger, a corporation, a bank or a government operation.

So, other than physical in your own possession, the next best thing is fully allocated (to you personally) gold. That is, gold where you have paid all fees up front, and the company is merely storing it for you. Ask yourself this: "Can I walk in and take possession of my gold without paying a dime in conversion fees?" If the answer is yes, then you have the next best thing. But I would also remind you about the gentleman Jim Rickards spoke of who reportedly had to wait a month to take possession, from a Swiss bank. We don't know the details of the case, but I think it demonstrates a potential risk, even for allocated gold.

Jeff said...

ANOTHER: "However, at some point, when the dollar market is destroyed, noone will know the currency value of gold thru an official market."

(...)

"The big buyers fully well expect gold to stop all trading as the governments enact DRACONIAN MEASURES to deal with a worldwide currency problem. The public in general will ask for these measures and to that effect, all paper connected to bullion will become "fair game"!"

Daniel Yu said...

It looks to me that we are all skeptical (to some degree) of what FO/FO/A has posted regarding the Freegold concept. This is the way it should be, as we are all intelligent and thinking people, not zombies.

Even FO/FO/Another has posted and warned that they do not have all the answers (as to when, how, and how much - on the REVAL moment) and to RUN AWAY from those who would dare to claim so.

I see that a lot of questions about What happens after; What about miners/mining; Confiscation; etc. are being posed. It is only human to want to know the future, but, it will be what it will be.

Note that I conclude that Confiscation will not happen, simply because - it will be necessary for everyone (big and small) to be able to own, hold, and exchange physical gold, in order for the Revalued Price of Gold to be VALID and ACCEPTED by all The World.

This validation and acceptance is vital to - The Preservation of Wealth of THE WEALTHY, as well as any shrimp who can afford to gain wealth.

From the concept of Freegold, my conclusion is that it is simply due to The Need To Preserve Wealth (as needed by The Wealthy). And how do they accomplish this? They need to establish a True Storage of Wealth/High Value, which does not exist.

The main problem throughout all our economic history has always been simple - The Storage of Value has been combined with the same Medium of Trade/Transaction (which is called Money, for which all currencies, fiat or gold/silver/copper/paper/etc. have been used).

It is the debasement of money/currency that is the cause of all money/currency failures, throughout history. Without Exceptions.

Therefore it is essential to separate and create a Valid Storage of High Value (Wealth) and free it from the shackles of being tied to Money/Currency. It is because all money (currencies) can hold only VERY LOW VALUES, because it needs to be able to trade at the Lowest Level of individual transactions.

Gold is the perfect medium/metal for this new Storage of High Value, for reasons we all know, especially due to its historical acceptance and Non-Industrial Use.

So, the initial moment to establish and decouple GOLD, as the Independent Storage of High Value/Wealth is what we are all calling The Revaluation Moment, and what we are all waiting for !!!

We are trying to catch this one time moment, so that we can ENHANCE our pitiful small amount of money, for a greater amount, like buying a lottery ticket. So, we buy and hold physical gold, because we want to cash in, after the revaluation, to 35 times of what its depressed value is today.

Freegold is for and by The Wealthy. It is not for us, THE SHRIMP & SMALL FRY. We are some of the Beneficiaries of this action (still to be taken). So the challenge is - Can we hold on UNTIL the moment arrives? Or do we lose faith, as The Others are trying to demoralize us (via Psy Ops, Financial Shennanigans, etc.).

poopyjim said...

@Grumps

The fees are taken out automatically in terms of goldgrams.

But the expenses incurred by goldmoney to continue its operations are in currency. If goldmoney cannot pay its expenses with currency it will cease operating.

Goldmoney's primary purpose for existing is to enrich Sprott et al. Its secondary purpose is to store "gold" for its clients. Once it is not profitable to operate goldmoney such as in the event of a world financial collapse, I submit to you that Goldmoney will immediately shut down and be resolved. The customer agreement will be void and its clients will have to accept whatever resolution is available under the law.

Trust me, Sprott et al. will not continue to operate Goldmoney for ONE SECOND if it's not profitable for them to do so.

The "We shall be relieved..." language is a standard boilerplate disclaimer. Everybody has it.

Yes most contracts have a force majeure clause but it's rather interesting they specifically mentioned "government controls," eh? And just because most contracts have them does not mean it won't be relied upon when the time comes.

GoldMoney is a good way to diversify your stash.

NO. It isn't gold.

Cap controls when they come won't be around forever. The crisis period will end.

Of course but way to completely miss the point. Even if cap. controls are only in place for a couple weeks, if goldmoney shuts down your "gold" may be completely forfeit and you'll be subject to whatever legal recourse is available to you.

Daniel Yu said...

I also see that after the revaluation moment, and gold is at $55k+ per oz, all the world's currency and monetary problems are not solved. It is up to the individual country's officials to Balance their Budget (or continue their spendthrift ways). There will be currency devaluations, high unemployment, inflation (how high?) and much social unrest.

To me, the less than handful grams of gold I have is going to be of much help to get through those Hard Times (that are a'coming). What your motives are, for being in this Freegold forum, is your own.

Grumps LaBastard said...

What if everybody prepped for a dollar holocaust, but it never came? The ROW has an interest in not seeing Treasuries implode. You guys only focus on one quadrant of the game theory square. Rather than run for the exits, what if the ROW chose to cooperate in an orderly transition from US Treasuries to an alternative?

CharlieBravo said...

Gramps, please explain how you see a transition taking place. How will all of the debt obligations that have been promised be fulfilled. Why would the US want to fulfill these obligations when it is has an easier alternative? Why would the ROW continue to want to fund the US exorbinate privilege?

Maybe the ROW, and the US, ARE planning for the transition. Does that mean it will be pretty? Does that mean the debt (often the savings of the populace) will be saved?

You seem to be locked in the "it can't really happen" mentality, yet you are here, reading and posting. Why are you not absorbing?

Jeff said...

Some people can't let go of the debt based paradigm of the past, I mean present.

FOA: After operating on a fiat system for 20+ years people are starting to realize that the only thing that backs a currency is the real productive efforts of their people. Yes, over time we always borrow more than out productive efforts can pay back and proceed to crash the money system.
But what else is new? (smile)

We call this a money's "timeline" and it's as new an idea a life, death and taxes! Time and debt age any money system until it dies. The world moves on. Only this time gold is going to play a different part in the drama. We will all watch it unfold.

https://www.youtube.com/watch?v=emFUtuotHL4

Grumps LaBastard said...

The dollar is split into an external and an internal dollar. Remember when China insisted on having direct access to their Treasury holdings, bypassing the the PD's? And we've seen since April a decline in Fed Foreign Holdings of US debt? The establishment of the BRICS Bank? The BRICS could control the value of their dollar holdings and let the US do want it wants with its new Republic Dollar. It looks like Summers is coming to execute the two paragraphs under Fiscal Policy in the 2002 speech--Helicopter Money. This might not be hyperinflationary. It could be deleveraging in an inflationary sense. HI occurs when the govt bond market implodes. If the Fed holds most of the domestic treasuries then bond market is in the strongest of hands. Nominal GDP could rise to 30T. Pensions' losses on bonds would be mitigated by gains in equities. At the end the Fed saves itself by revaluing gold on its balance sheet. I know it's more complicated than that, but it's the cliff notes version.

Gary (not the evil one!) said...

What if everybody prepped for a dollar holocaust, but it never came?

Aa Edwardo said in his interview on RT (it was the first question, I think) - Hyperinflation of the dollar is not necessary for FG - it is just has a high probability.

You guys only focus on one quadrant of the game theory square. Rather than run for the exits, what if the ROW chose to cooperate in an orderly transition from US Treasuries to an alternative?

What alternative, GrassLardoButtcheek ?
If I felt the way YOU do I would probably go to another Forum, read KWN, Sinclair, buy mining shares etc.... I would dismiss FG. Are you shocked that most here don't think the way you do? You seem to be batting 0.00 in convincing anyone on your interest-rate/mining-share spiel. Get over it. Do yourself a favor and read all of Another, all of FoA and most, if not all, of the suggested reading list of FoFoA articles. I still have doubts about you 'getting it' - you seem incapable of accepting the idea of a paradigm shift.

CharlieBravo said...

Gramps, how does the fed revalue gold it doesn't have.

Grumps LaBastard said...

The Treasury conducts gold operations. The gold certificates on Fed balance sheet get revalued.

Flore said...

out of Brinks annual report

Asia-Pacific
Revenue in Asia Pacific increased 22% ($27.2 million) primarily due to Global Services’ performance during the year, reflecting increased
commodities volumes, as well as the favorable effect of currency exchange rates ($5.7 million).
Operating profit increased $1.5 million driven by organic growth ($1.2 million).

CharlieBravo said...

The BRICS could control the value of their dollar holdings and let the US do want it wants with its new Republic Dollar.

How would they do this?

If the Fed holds most of the domestic treasuries then bond market is in the strongest of hands.

And they just continue to purchase excess bonds indefinitely without detriment?

Grumps LaBastard said...

"The BRICS could control the value of their dollar holdings and let the US do want it wants with its new Republic Dollar."

US Treasuries held as reserves could be processed into gold-linked trade notes in the BRICS Bank charnel house. This could allow for an orderly disgorgment of US debt. This would be the in control of the BRICS contingent--their version of a gold certificate ratio.

"If the Fed holds most of the domestic treasuries then bond market is in the strongest of hands."

We could see what Gordon T Long calls Overt Permanent Financing Operations. The Treasury wouldn't issue bonds anymore, the Fed would just openly finance the government. I've been keeping an eye on the US Debt to the Penny and something funky has been going on since May. The Intragovernmental Holdings have gone down while Publically Held debt has gone up equally. And the Fed's balance sheet has only increased by 16B the last four weeks. Something is up. Perhaps the Fed has opened a direct link from the black book ( The Electronic Printing Press) to the Treasury already, but hasn't told anybody.

You see at some point for financial repression to work, the nominal GDP has to increase faster than debt growth. That hasn't been happening. Hence radical measures are called for.

Roacheforque said...

Grumps.
It does appear that a fair amount of the ROW is indeed orderly transitioning from UST's to an alternative, GOLD.

That doesn't exactly bode well for the dollar now does it?

I'm really not sure it needs be much more complex than that.

Roacheforque said...

On the "vast sums" in fiat for gold to flow in size among Giants (Another fairie tale?) ...

Remember that lifeboats were considered worthless an hour before the Titanic struck ice. An hour after they were considered priceless.

The point? For gold to move in size there must be a reason and if the reason is important enough and the timing critical enough, there may only be one supplier willing and able to deliver for FIAT in any amount.

This is not about "how many dollars per ounce", this is about "how systemically important is this" to our survival?

Therefore, a time will come when "no amount of fiat" will do.

Yes, Luke's prophecy of gold not flowing at the top will come true. But that will not be the cause, it will be the effect, of "no amount will do".

CharlieBravo said...

Gramps, would these newly printed dollars from the fed printing press to the treasury be considered an asset or a liability on the CB balance sheet? What would be their counter balance if there are no longer bonds being issued? If bonds are no longer offered, how do the foreign central banks (or domestic savers) recycle any US dollars back to the US govt?

I don't follow the BRICS linking of US debt to gold (gold linked trading notes).

Grumps LaBastard said...

The dollar would be bifurcated. If we wanted to trade with a BRIC we would have to pony up gold for a trade note. Our internal dollar would not be accepted.

I guess there would be no counterbalance to the newly printed dollars, they would be liabilities. In effect, an economic Dyson sphere would be erected about the US economy while we drop the pretense of a bond shell game to achieve deleveraging. The price of gold may be released to keep the Fed solvent while we embark on this journey thru financial bizzaro world. Keep in mind, whose going to care if the Fed is solvent if everybody gets a check in the mail for 50 large? There will be dancing in the streets....at first.

Motley Fool said...

Grumps

“The ROW has an interest in not seeing Treasuries implode.”

This is true.

“You guys only focus on one quadrant of the game theory square.”
This is not.

“Rather than run for the exits, what if the ROW chose to cooperate in an orderly transition from US Treasuries to an alternative? “

The rest of the world are trying to protect their interests, and have this transition be as orderly as possible. Are you not paying any attention? However. There is a real limit as to how orderly the transition can take place. You try to imply that there can be a gradual phasing out of the dollar, and phasing in of something else. I am sorry, that is insane. Phase transitions have discontinuity's. In this case when it becomes apparent that further stalling provides no benefit and runninng for the exit First is the best course of action.

Obviously we have not reached that point yet. Assuming it will never come is delusional though.

“The dollar is split into an external and an internal dollar.“

Theoretically, sure. Practically no. The fungibility of these is what ensures the flow of goods and international trade for the US.

“HI occurs when the govt bond market implodes. If the Fed holds most of the domestic treasuries then bond market is in the strongest of hands.”

There are multiple factors at play here. To simplify I will categorize them as the volume and holding of bonds, the value of the currency, and the intersection of currency with the plane of real goods. You cannot control all factors ar the same time, kinda like the Heisenberg uncertainty principle. In your above scenario the last is where you will find your problem.

“US Treasuries held as reserves could be processed into gold-linked trade notes in the BRICS Bank charnel house. This could allow for an orderly disgorgment of US debt.”

Whose gold?

“If we wanted to trade with a BRIC we would have to pony up gold for a trade note. Our internal dollar would not be accepted.”

Side note : You reference future trade here, and a unneccesary comlicated mechanism for international gold movement, while at the same time acknowledging US hyperinflation, which you stated earlier could be avoided.

But let's get back to my question, whose gold would be backing up the existing international debts in this gold linked bifurcated dollar scheme?

...

In my honest opinion you seem to be seeking a way out in a trapped corner of your mind because you refuse to acknowledge reality. So you are trying to make up plans, without thinking them through, that allows you to hold on to the preconceived notions you hold so dearly. At some point or another you will have to face your demons. Whether by choice, or because reality drags you kicking and screaming along. The former is harder at first, but easier on the whole.

TF

S P said...

Nothing in this life is perfect or certain. Even during period of transitions liquidity is needed, so there is a serious risk with the freegold perspective that you are simply waiting for a moment that never arrives, or, if it does arrive...oops, you were diagnosed with terminal cancer 1 year earlier and your wife divorced you, and you are all alone, dying, with your revalued stash of gold. Yes, this has been discussed here, but based upon what I'm reading it's not really being taken to heart. There is an obsession here, common amongst all gold people, on what is the "correct" answer to all of this. There is no correct answer! There is only risk and reward.

So you don't trust Goldmoney? Fine, I can understand that. But why do you trust any other alternative? According to the comments above, any and all storage solutions are subject to bankruptcy and confiscation risk, even if you, in writing, have allocated and segregated pieces of physical gold, which you can take delivery of at any time, without a fee. OK, so you trust that this company is going to make it past freegold, and actually send you your pieces of gold post freegold? If you do, you must provide a reason why this is a case, not just idle speculation. You have to prove "X is better than Goldmoney, or Sprott, or Hard Assets Alliance because...".

Not to mention the fact that the storage fees for allocated, segregated storage of pieces of gold give you a negative currency return and render you insolvent, both pre and post freegold.

So ultimately, freegolders might just have to accept that their perspective is, in fact, that NO COUNTERPARTY RISK is acceptable and that you have to have physical pieces of gold hidden in your own possession, ready to wait that special day after the hyperinflation of all currencies, when people will finally realize they need to store their surplus wealth in gold, and you will emerge into the sunlight with your pieces of gold, take them to the bank, and trade them for alot of fiat money and the world will be intact and pretty and sustainable, and you will be healthy and happy and buy whatever you want, and will have a great, peaceful life from that day forward.

Now, can't you see why many gold people, much less the average joe, have a problem with that perspective?

Motley Fool said...

SP

Good comment.

Life is filled with risk. I could die tonight. One must learn what risks one is willing to take and what not.

I agree with what you imply though, as do many of the people that have been on the trail a long time.

Life is for living, whatever it may bring. This FG knowledge should not derail one from doing so.

TF

Grumps LaBastard said...

If they mailed everybody a check for 50 large, you are assuming that will be hyperinflationary. What if people chose to pay down debts instead. Monetary aggs would drop. They send another check this time for 100K. A little more deleveraging and some attempt to consume, but wait there is nothing to buy unless there has been some investment in productive enterprises rather than rent-seeking.

Whose gold? Haven't you noticed the accumulation by the BRICS.

Motley Fool said...

Grumps

Do you have any understanding of people in general's psyche at all?

What?

The BRICS will use the gold they have accumulated to back the debts already incurred by the USA that is represented by the notes held by said BRICS?

What?

TF

Archer said...

The following statement...

US Treasuries held as reserves could be processed into gold-linked trade notes in the BRICS Bank charnel house. This could allow for an orderly disgorgment of US debt.

has the cartoonish aspect and malodorous stink of Jim Willie all over it. I think it was the use of the term charnel house, a staple term of The Jackass, that really gave it away, though the central idea is vintage JW. Mr. Willie, who seems to be fed most of his thoroughly unsupported suppositions from one (or perhaps two) all knowing sources, probably doesn't know he has an unpaid fellow traveling mouthpiece in Gimpy.

TF has put it well:

You are trying to make up plans, without thinking them through.

Stop pockmarking the comments section with your third hand Jim Willie wank fest.




Grumps LaBastard said...

The Treasuries the BRICS hold would no longer be held with the idea of ever redeeming. It would be an agreed-upon token of a certain value already widely held by other nations that have accumulated these IOU's. This is why China wanted direct access to their holdings at the Treasury. The didn't trust the custodian. The US Government can go ahead and do what it likes with its internal dollar. China will say go ahead and print to your heart's desire, but foreign goods won't bid for your new dollar.

The BRICS would have gold at deposit at the BRICS Bank. US Treasuries would be converted to gold-linked trade notes. The conversion could be whatever you like $5000/oz or $25,000. Then if the Western Banks want to do deals with them they will have to accept these Treasuries as collateral. The shoe will now be on the other foot. After all those years of denying the Chinese no investment alternative other than Treasuries we'll be getting screwed. They don't need us. They've got energy, food, metals, and a good relationship with Africa.

Gary (not the evil one!) said...

@S P

...ready to wait that special day after the hyperinflation of all currencies

You realize that you are misrepresenting the FG viewpoint, mostly, IMO, because you have not read enough to fully grasp it. Where have you read that HI must transpire before FG? You have tried to simply a FG'er's viewpoint but you have your facts per-judged (which happens frequently here).

So you don't trust Goldmoney? Fine, I can understand that. But why do you trust any other alternative? According to the comments above, any and all storage solutions are subject to bankruptcy and confiscation risk

Because the re-valuation will be so high, it will encourage legal (or non) disputes over Gold ownership. Surely, that isn't hard to accept, is it? That is being realistic. You make it sound like FG'er's have tunnel-vision when actually the rose-colored glasses of a Gold-bug have been removed with most FG'er's lens.

@GrilledLakeBlister

You seem to infer the Fed will pull and push the exact right levers to create an orderly departure from the USD. You surely need a leap of faith to accept this - they have never been able to balance those equations so precisely in all of (their) histories and I sincerely doubt it will transpire this time around. Panic must ensue... at some stage. But even if they do, and skirt HI, keep the Bond market injured but intact... so what? It is all separate from FG. You need to widen your perspective, not unlike S_P. HI is no prerequisite to FG, so stop finding a solution to HI to discredit FG. Even in your complicated internal/external dollar scenario (that may transpire) the RoW marketplace will have no choice but adhere to FG - either with or without initial US consent. You can't control the marketplace in the long term - the signs are evident that it is ending. I see FG as paper burning (all major economies are printing like never before) including, and importantly, the decline, and eventual destruction of paper Gold ('wealth's' reference point.) FG isn't so much about a re-valuation as an accurate valuation. The price mechanism today in Gold is faux... it has a fraction of the physical to back it. This will be resolved. Not for our benefit, but as Daniel Yu said so well...Freegold is for and by The Wealthy (The Need To Preserve Wealth). It is not for us, THE SHRIMP & SMALL FRY. Super Producers/Giants are in the position they have held for a long time for a very specific reason... and that won't change by whatever is coming. They aren't influenced by Jim Willie's trade-note concepts, Sprott's fist shaking at bankster manipulation, KWN charlatans or MSM financial rhetoric... that is just noise. Dismiss it and rise above it.
The world runs on Oil.
Oil producers invariably will no longer accept devalued/devaluing paper as payment.
Paper Gold will be the precursor (probable but not certain) to a lack of confidence inevitably rising in paper representations of value.
Physical Gold's true valuation is the most effective and simplest way to continue this, essential, system.


These complex theories of yours to extend the life of paper have value but they won't affect the above. They won't change the above. The above is inevitable.

Since no one can read the future - all other investments as opposed to buying physical Gold are a 'play', a 'gamble', a 'speculation'. I'd say most here, fully cognoscente of FG, aren't too interested in imagining the myriad of variations on the accepted realism of the next series of financial monetary events. I'll continue to generalize that most here are very aware and prep for HI, but in such a way that it isn't a wasted gamble. I hope you can join us as the knowledge of FG is, more than a 'light bulb' moment, like a weight off your shoulders. It's very free-ing....probably because (again) everything else is just noise. Best of luck.

Grumps LaBastard said...

But Gary, I have read thru the Holy Scriptures and there are flaws. I wish Max Photon would come back. He last comments about FG being a special case unlikely to be stable echoed what I said months earlier.

A common assumption I find in the gold community is that there is a somewhat constant store of value that must be available. What this blog has done for me is that the flaws in FG have allowed me to see that value cannot be trapped and isolated for a long period of time. The SoV and MoE functions cannot be separate. The concepts delineated on this blog are zero order, linear. I think the truth may lie in Fekete's Theory of Interest. It's the tension between saver, investor, and producer, the first and second order derivative relationships that make it impossible for the SoV not to be intertwined with the MoE.

Gary (not the evil one!) said...

Perhaps you can't envision, or refuse to accept, a large paradigm shift (do you admit you seem reluctant to massive change? - this certainly separates you from much the PM community who see buying gas and groceries with Silver - perhaps it makes you feel... practical. Perhaps you are!)

The SoV and MoE functions cannot be separate.... It's the tension between saver, investor, and producer, the first and second order derivative relationships that make it impossible for the SoV not to be intertwined with the MoE.

Firstly, I hope you can humor me with a few questions.

Intertwined is an interesting word. Why must it be intertwined, GrainLaneBarnyard? - maybe we are getting somewhere. May I reverse this on you? Can you envision what the monetary system would be like with an, essentially (or frequently), separate Store of Value and Medium of Exchange? What would this system be like? How would it be different than today? How could credit work? Interest rates? Is there no system where it could be possible for commerce to function?

Are you familiar with this?

...the ancient times of the Roman Forum and its Greek equivalent. People gathered at the market place for trading, and used scrip money to facilitate transactions. Their scrip money was not intended to be a store of value, and a surplus of scrip money was converted to something more resembling a store of value like gold or silver.

I'm not saying I endorse the above description, but I was curious whether you knew about it. Scrip nowadays can include subway tokens, arcade tokens, tickets, and things like "points" on some websites. Do you feel the MoE must be legal tender? Let's look at things on a local scale. At $100,000/ounce Gold (because I like that number) do you see anyone going to the McDonald's drive-thru paying in Gold? or buying a new car with a one ounce coin? Do you think the car dealer would accept it and give change? Would you pay your taxes in Gold? I don't see things working out like that with FG.

A medium of exchange permits the value of goods to be assessed and rendered in terms of the intermediary, most often, a form of money widely accepted to buy any other good.

Sounds like the USD.

With so very little gold in public ownership (less than 1% ?), do you still perceive Gold as a SoV would be 'intertwined' with the legal-tender Medium of Exchange on a local level? or any Scrip type MoE? Barter? I see a separation. Pretty big one. I don't see $100K Gold being widely accepted as a MoE. Do you? Buying Real estate with gold earrings or 5 Gold Maples, jingling, in your pocket? No, I still don't see it. No, still gotta use the MoE.

If people won't be buying goods and services daily with Gold (NOT MoE), is your dispute as Gold being a SoV? Which it has been for 1000s of years, as I am sure you know. To act as a store of value, it must be able to be saved and retrieved at a later time, and be predictably useful when retrieved. Gold fit? Seem reasonable? Go to the bank, give'em some gold, they top up your bank account and you go buy a new toilet (or whatever the frig you want!)

I don't think it's a stretch to say that for everyone in this Forum - Gold is not a MoE but is perceived as a SoV. So how would that change in FG? For some the USD is considered their SoV. If (read 'when') the Petrodollar is replaced by Gold, do you perceive that consideration changing? How do you think will Gold be perceived then?

I realize you are talking a different, and probably more macro, scale but I'm just curious about how you feel about these simple microcosm scenarios of everyday financial existence.

Sorry, a lot of questions. Can you answer them while I think of another name for you?

Koos Jansen said...

To get back to "Sprott's 4,500 tonne export 'gap'".

I thought it would be interesting to have a look at my UK trade data set and see how much gold the UK net imported from the US in between 1991 - 2012. Unfortunately this data set starts in 1999, but nonetheless it's significant information.

From Jan 1999 through 2012 the UK net imported 1468 tons of gold from the US. I made a chart on this which I published on my blog.

http://koosjansen.blogspot.nl/2013/09/the-us-net-exported-1500-tons-to-uk.html

If I look at Victor's chart, I don't have his data and I would like to have his source, I see foreign CB holdings at the FRBNY in 1999 at roughly 7750 tons, in 2012 at roughly 6200 tons. So they "lost" aprox 1500 tons. More or less the same as the UK net imported from the US over the same period.

This can't be gold the BOE repatriated from the US because their official reserves didn't go up over the same period (let alone go up +1500 tons). It also wouldn't make sense (to me) if this was gold other CB's repatriated. Why would they do this via the UK, or why would they move their gold from the FRBNY vault to the BOE vault?

I think it's gold that the US sold or leased overseas in a way it got washed out on the BOP and picked up by the Census bureau as net export.

Koos Jansen said...

I also noticed exports from the US to the UK picked up since the beginning of GLD in 2004, but I don't know the details of how GLD is constructed.

Motley Fool said...

Grumps

AT this point I am uncertain whether you are just stupid, or whether you are pretending to be stupid. Your lack of comprehension certainly does seem willful at this point.

I will try one more time to look at the ridiculous bullshit you have now posted for the 3rd time. After that I give up.

"The Treasuries the BRICS hold would no longer be held with the idea of ever redeeming."

What is the value of things that cannot be exchanged for anything?

"It would be an agreed-upon token of a certain value already widely held by other nations that have accumulated these IOU's."

So they will agree it has no value, and still hold them? For what purpose?

"This is why China wanted direct access to their holdings at the Treasury. The didn't trust the custodian. The US Government can go ahead and do what it likes with its internal dollar. China will say go ahead and print to your heart's desire, but foreign goods won't bid for your new dollar."

No. China wanted access as they were trying to dishoard some value, before the treasuries become worthless, without letting the market know, and being frontrun.

"The BRICS would have gold at deposit at the BRICS Bank. US Treasuries would be converted to gold-linked trade notes. The conversion could be whatever you like $5000/oz or $25,000."

Whose fucking gold?

Whose gold will give these notes value?

It can't be the BRICS gold. The US OWES the BRICS money. So the only gold that would make sense to back these notes is US gold. Fat chance of that happening.

Now before you repeat your abject stupidity again. Why the fuck would the BRICS back debts owed to them, with gold owned by them.

If the size of these entities is what is confusing you, let us take it to an individual level.

Lets say you loaned me $500,000 dollars. Sadly you realize I won't be repaying my debts. Now you back the debts I owe to you, with the house you own free and clear, which is worth $500,000, to give it value. Does this make sense to you to do?

"Then if the Western Banks want to do deals with them they will have to accept these Treasuries as collateral. The shoe will now be on the other foot. After all those years of denying the Chinese no investment alternative other than Treasuries we'll be getting screwed."

Ok, so now after you have backed these up with the collateral that is your house, you would try to pawn them off to other people. Why would they take them in payment, unless they can get your house?

Fucking hell. Stop this ludicrous bs.

TF


Wil Martindale said...

Sorry to harken back to the previous post, but I put forth a challenge just before this post was written, and going back, both Nickelsaver and Indenture had excellent feedback.

Nickelsaver, I agree with you completely, FOFOA never inferred that the USG was actively seeking to kill the dollar, only that when it inevitably happened they would see the benefits to debtors.

Not exactly the most equitable outcome there, but still most likely.

Indenture, yes in your answer the US doesn't kill the dollar, I only mention that someone who feels they represent the USG and its intentions had told KB that was their intent.

So I think we can conclude that the USG does not intend to kill the dollar, but rather to accept the benefits of its death when it eventually comes.

And until then ExPriv is a powerful incentive to try and maintain the status quo.

Zebedee said...

A little off topic, but could Bjork be on the trail?

"Big Time Sensuality"

i can sense it
something important
is about to happen
it's coming up

it takes courage to enjoy it
the hardcore and the gentle
big time sensuality

we just met
and i know i'm a bit too intimate
but something huge is coming up
and we're both included

it takes courage to enjoy it
the hardcore and the gentle
big time sensuality

i don't know my future after this weekend
and i don't want to
i just don't want to

it takes courage to enjoy it
the hardcore and the gentle
big time sensuality

youtube.com/watch?v=mg1C1-MwQIk

Awesome performance!



Archer said...

But Gary, I have read thru the Holy Scriptures and there are flaws.

Liar! You've read bits and pieces, at best, and, again, given your thoroughly dunderheaded ideas...

Lets say you loaned me $500,000 dollars. Sadly you realize I won't be repaying my debts. Now you back the debts I owe to you, with the house you own free and clear, which is worth $500,000, to give it value. Does this make sense to you to do?

it's more than reasonable, it's likely, that you didn't grasp what you read. It's time for you to return to your Jackass and Fekete infused miasma and stay there.

Daniel Yu said...

What is the corrected price of Freegold going to be? Based on FOFOA's estimated number of 55k+, I am postulating it will be either $55k+ or $110k+ depending on whether a US Dollar devaluation happens, BEFORE or AFTER the revaluation moment.

Since everything is conjecture at the moment, I am going to use The Jackass' comments during several of his interviews, that there will be an eventual devaluation of the US$, to be one in Two Steps, each time a 30% devalutaion of the USD, to results in a 50% devalue.

For this calculation, 1 x 0.7 = 0.7 x 0.7 = 0.49 (or let's round it up to an even 0.5) which translates to a 50% devaluation. This means the current USD will be able to buy 50% of what it can buy, after the devaluation. Which means, the prices of goods will be 2x of its price today.

So, if Freegold is reset at $55k before the USD devaluation, the price of gold will go up to $110k, to maintain its original buying power. If Freegold is reset after the USD devaluation, the price of gold will be $110k, to maintain its original buying power. This is why a True Storage of Value/Wealth is necessaro, to preserve the efforts of small savers, and wealth of the wealthy.

I hate to nitpick, but I want to bring up a simple question. Jim Willie )in his interviews) stated that after the 2x devaluation of the USD at 30% each, resulting in a 50% final devaluation of the USD, the inflation will be 30%. It is my contention this is wrong. If the USD loses 50% of its buying power, then the price of goods go up by 100%, which to me = 100% inflation. This is basic arithmetic. Maybe Jim Willie (with his PhD in Statistics) just miscalculated mentally? Or am I wrong (it is not 100% inflation)? Or did I make a mistake in what inflation means, and how to calculate it?

Victory said...

1 of 3

poopjim,

No you’re right, during the peak risk of transition nothing is safer than physical under your personal stewardship I can’t argue with the safety of a home storage or buried treasure accept for the risk of burglary in the case of home storage. But for those without access to private land for underground storage (so to speak) or uncomfortable with all or even part of their holding inside of their home, what’s left? A safety deposit box, GoldMoney, GBI, Bullionvault, Goldstar Trust, GLD, and so on. Even a safety deposit box can be robbed or seized/appropriated but I place the risk of that happening right under the risk of home invasion. I’m not advocating for any form of storage, the point I was trying to make is that GoldMoney (GM) and GLD should not to be grouped together under the same level of risk IMO. Just as Victor alluded to the difference between SLV and GLD - GLD being part of the LBMA reserve pool is on another level of risk entirely, that is the LBMA’s eminent domain.

In my opinon, GM, Bullionvault, GBI and companies like them will grow not dissolve with the phase transition. GM’s policy must have changed a bit because I reread FOFOA’s post ‘Game Changer’ and some of the differences between GM and GBI which Joe pointed out no longer appear to exist. At least they don’t exist if you own enough gold to constitute a 100 gram bar (the equivalent of roughly 3 one-ounce gold coins.)

From 'game changer':

FOFOA: First of all, how is this different than Bullion Vault or Gold Money? I think I know, but I’d like to know your answer.

Joe: We are different from bullion vault and gold money in that we do not sell you a “share” of a bar, we do whole bars/coins only. You have the choice to buy gold in whatever form you want. Krugs, Eagles, Pamp Bars, Kilo Bars, all the way up to 400 oz bars but it’s never a share. GBI created this model because we don’t believe owning four ounces of gold that is a part of a larger bar qualifies as actually owning gold. We want clients to own whole bars with zero counterparty risk. We really want to democratize the ownership process. Until now only the ultra-wealthy could order whole, allocated bars, stored in non-banks, audited and insured by a real firm. Now, literally, anyone can.

FOFOA: Is it true allocated storage? Do I have bar numbers on my statement? In other words, am I technically just a creditor of GBI, or am I hiring you to find, buy and store a specific, discrete product for me? And what happens if GBI goes bankrupt?

….more Q&A follows see the link above.

And this from the GoldMoney link sean provided:

Can I collect my bar(s) from the vaults?

You can collect registered small bars and registered Good Delivery bars in person from all vaults where the bars are available for storage – except VIA MAT UK and Brink’s Canada. For a quote, send us a message from your Holding confirming the serial number(s) of your registered bar(s) and we will be back in touch.

Can I visit the vault?

GoldMoney customers who hold registered bars can inspect their metal at the vault where the bar is stored. Send us a message from your Holding if you are interested in inspecting your registered bars. Please note this service is not available for bars stored at VIA MAT UK and Brink’s Canada.

...continued








Victory said...

2 of 3

How are the storage fees paid for registered bars?

The storage fee for registered bars is the same as for undivided metal and will be deducted from your Holding balance on a monthly basis. You are responsible to ensure you hold sufficient undivided metal or currency in your Holding to cover the fee obligations. If the Holding balance is insufficient, we are required to de-register your smallest bar, and we will deduct the storage fee from the undivided metal balance that will be credited to your Holding as result of the de-registration. GoldMoney reserves the right to de-register and deduct the storage fee retrospectively from the date of registration.


What is the difference between Registered Bars and Undivided Metal?

All metal stored with GoldMoney is held in allocated form. This means that you are the direct owner of your metal and you are free of counterparty risk for either registered bars or undivided metal. Registered bars do however give you the option of physical delivery, which extends your storage diversification options.

Why do some bars have a Registration ID and some not (on the bar lists)?

A bar with a Registration ID is wholly owned by one GoldMoney customer (or customers, in the case of Joint Holdings). A Good Delivery bar without an ID is either undivided customer metal – meaning ownership is split between more than one customer – or is part of GoldMoney’s inventory.

What is a bar registration ID?

When you register bars with GoldMoney for the first time, you are requested to enter a Registration ID. All of your registered bars will have the same Registration ID. The ID can have maximum 25 alphanumeric characters and there is only one ID per Holding. Do not use personal information as ID, such as your name, unless you are willing to disclose it publicly since the Registration ID will be displayed on the public bar lists that are available to all verified customers in their Holding. To view the bar lists select 'Bar Delivery & Registration > Bar Lists' from the menu in your Holding.

At which vaults can I register bars?

You can register Good Delivery bars at any vault at which you hold a sufficient metal balance. Small bars (100 gram and 1 kilo gold bars, and 1 kilo silver bars) can be registered at VIA MAT Switzerland. Registration is a prerequisite for taking delivery of your metal.

Also this is from the customer agreement link you (poopyjim) provided:

“Registered Bar” means a whole bar of Metal, and not a fraction of a bar of Metal, which is marked and recorded as the property of a particular Customer, in which no other person has an interest, save for GoldMoney in respect of any fees or charges due to it and in accordance with this Agreement

16. Winding up or bankruptcy of GoldMoney

B. Subject to the direction of the Appointed Person, on the winding
-
up or bankruptcy of GoldMoney, You can request distribution from the Vault of Your Metal in accordance with the procedure for delivery of Metal defined in clause 8.H. Any Metal that You choose not to have delivered to You or which represents the balance of Your Holding which does not equate to whole bars will be sold at prevailing market rates. Such proceeds and the balance of Customer Money will be transferred to You upon Your instruction either to Your bank account or by sending a cheque payable to You to Your last known address, less any outstanding fees.

Motley Fool said...

Daniel Yu

After dollar devaluation the number could be 100 quintillion for all we know.

Don't look at the 55k as a fixed number, it is more an idea of the order of magnitude. It could be 30k, it could be 100k, in terms of todays real purchasing power.

TF

Victory said...

3 of 3

Then this is FOFOA again from the comments section of ‘Hold on to those Gold Coins and bars’

Hello Indenture,

"I was wondering what you thought about the prospects for starting a new gold vaulting business?"

I think the model for gold storage in Freegold is something like Brinks and VIAMAT today. Some companies offer insured storage through these companies for as low as 0.5% or 0.6% of the total value per year. This is different from a bank safe deposit box because the custodian charges for storage and insurance together. Banks don't insure whatever you store in the box because they don't even know what you are keeping there at any given time. If you want it insured against theft or fire in a bank box, you have to get your own insurance, and that will cost much more than 0.5%, plus your agent will probably want to come to the bank with you and see the gold.

My view and I’m not speaking for FOFOA, is that GM, GBI, and others Gold storage companies like them will compete with those banks who also choose to offer storage service. These companies are already in place why wind them down, I don’t see the issue of them becoming unprofitable as the cause. Yes the storage fee’s are a % of the gold weight and if hypothetically speaking the $POG crashed and that % fee was not enough to profitably pay for insurance and storage then why not just have clients sent in addition funds for the nominal storage fee as opposed to selling their metal. If GM is a legitimate enterprise that wishes to remain credible grow their business post transition this option will be provided.

If on the other hand the government of Switzerland or the US is going to prevent GM clients from having their metal shipped across their borders, or are going to prevent citizens from other counties to enter Switzerland so as to prevent them from personally going to viamat and picking up their numbered bars of which they are the registered owner then, or even forcing GM a private company to liquidate the gold holdings of private citizens than that’s another story. that is another story. A story I do not believe is unlikely to take place. I place the risk of that happening on par with the risk of appropriation of your local bank safety deposit box. It’s possible but is it probable – like I said conspiratorial.

-v

apologizes for the deleted posts blogger kept placing my comments out of order, wierd

Sir Tagio said...

Daniel Yu
The 55k per oz was expressed in terms of purchasing power as of 2010 or 2011 as i recall. Think about what you could purchase with that amount. As motley fool said the number of dollar units that we end up with that equals that purchasing power is irrelevant and not what fofoa was talking about. Also the 55k is just meant as a rough approximation of the revaluation. It should not be taken as written in stone.

Regarding your inflation question, it is a mistake to assume there will be a one for one correspondence in all inflated prices. After the dollar is no longer the reserve currency things we have to purchase from abroad, like oil, will cost a lot more but things we produce here will be less effected to varying degrees. Think about how it is if you go to other countries for example in Uruguay consumer electonics are very expensive because they are imports and unlike here they cant just print the reserve currency to essentially buy them for next to nothing. However you can buy and eat high quality delicious steak and other food for cheaper than here because it is primarily an agricultural economy willie's 30 percent inflation number is probably meant as an overall number to express the aggregate effect of this.

poopyjim said...

@Victory

the point I was trying to make is that GoldMoney (GM) and GLD should not to be grouped together under the same level of risk IMO.

And I maintain that the risk is, in fact, comparable and that this is NOT "conspiratorial." GLD shares and goldgrams are comparable products; they are both paper claims on a portion of an actual bar of gold. Both goldmoney and GLD have a good chance of being wound down at the worst possible time.

I did not know Goldmoney offered allocated storage for smaller bars. That must be new. I guess you might be in better stead in that case, but your risks are still significant given you will be in a comparable situation if Goldmoney closes down and you are unable to take delivery. If you live in the US, I can tell you from experience that taking delivery of goldmoney bars can already be a massive pain because of customs.

GLD being part of the LBMA reserve pool is on another level of risk entirely, that is the LBMA’s eminent domain.

... and being a customer of Eric Sprott is another level of risk even beyond that! XD

These companies are already in place why wind them down, I don’t see the issue of them becoming unprofitable as the cause. Yes the storage fee’s are a % of the gold weight and if hypothetically speaking the $POG crashed and that % fee was not enough to profitably pay for insurance and storage then why not just have clients sent in addition funds for the nominal storage fee as opposed to selling their metal.

It's not about $PoG crashing, but there being no functioning gold market whatsoever i.e. gold in hiding. Yes theoretically they could get clients to pay currency for the storage fees, but what about all the clients whose currencies are hyperinflating? What if you can't pay your storage fees b/c of capital controls?

If on the other hand the government of Switzerland or the US is going to prevent GM clients from having their metal shipped across their borders, or are going to prevent citizens from other counties to enter Switzerland so as to prevent them from personally going to viamat and picking up their numbered bars of which they are the registered owner then, or even forcing GM a private company to liquidate the gold holdings of private citizens than that’s another story. that is another story. A story I do not believe is unlikely to take place. I place the risk of that happening on par with the risk of appropriation of your local bank safety deposit box. It’s possible but is it probable – like I said conspiratorial.

You think capital controls are "conspiratorial" during a currency crisis? Really?

Also, this narrative of evil governments descending upon Goldmoney and taking clients' gold is a straw man created by you so you can use this "conspiratorial" label against anyone who questions the wisdom of using Goldmoney as a service. What I suggested is that Sprott et al. will simply clean their hands of Goldmoney during the crisis since they'll no longer be able to operate it due to collapsing currencies, no gold market, and/or capital controls.

M said...

@ ForestGumpsLambastard

You said :

" The SoV and MoE functions cannot be separate. The concepts delineated on this blog are zero order, linear."

It is already happening all over the world, all the time. Do you think millionaires and billionaires in banana republics store their purchasing power in their local currency ? No they don't. That's why inflation shows up so fast in these countries. Because the producers are not saving their excess in local currency. They save elsewhere. Thus, the local central bank has no purchasing power to steal via printing. The printing just floods the transactional side and you get instant inflation.

Grumps LaBastard said...

Hi M,

I think most are confusing the current crisis conditions and the conditions in a normalized financial environment. In a negative real rate environment such as now gold takes on the safe haven SoV fn. But when the crisis is over gold will have to take a back seat and lay dormant such as our present Supermassive Black Hole in the middle of our galaxy. If we are to have any kind of healthy monetary plane then we can't have gold acting as a deflationary vortex gobbling up potential investor and producer stars. You can't have gold sitting in the corner undergoing a consistent real positive gain exceeding other AAA assets.

Last night I caught up with the Greg Hunter/Mike Maloney interview. Something Maloney said really struck me. He said that what two assets are below their 1980 inflation-adjusted prices? I thought, why of course, Au and Ag should be way behind other assets after 30 years of paper asset inflation. Now is the catchup phase of the cycle for gold and silver.

Gary (not the evil one!) said...

@GammaLambdaBlubberbutt

So you watched a Mike Maloney interview last night and now you think we are in:
...the catchup phase of the cycle for gold and silver because they are below their 1980 inflation-adjusted prices

Okay.

You've got something wrong with you..... right?

I think you better go now.

Indenture said...

"Using gold as money creates a situation where promises to repay debts are made in gold - gold credits, which leads to more credits than gold existing and a collapse of that system.

Credit is always extended in whatever is used as money."
Motley Fool

So good it needs to be repeated!

Indenture said...

"FOFOA's dilemma: When a single medium is used as both store of value and medium of exchange it leads to a conflict between debtors and savers. FOFOA's dilemma holds true for both gold and fiat, the solution being Freegold, which incidentally also resolves Triffin's dilemma." Motley Fool

Gary (not the evil one!) said...
This comment has been removed by the author.
Indenture said...

The Return to Honest Money

Grumps LaBastard said...

Money has to go down in value for a while. Otherwise why leave the house and produce. Who is going to bother investing in a coal plant to provide electricity if he can just sit in gold that rises in PP more than a basket of commodities? Hell, we can all sit at home playing video games slurping goober drinks and wolfing down moon pies, but somebody needs to get in the hamster wheel and generate some power, otherwise nobody can play video games.

This FG wish is a wish to stop the credit cycle,the business cycle, the Kondratieff cycle. Problem is if you do that you have no economy, you're dead.

Motley Fool said...

Grumps

You may as well be, oxygen thief.

What inspired your latest stupid notion that gold gains will exceed general investment returns?

The economy is a living breathing thing. Even if that is true for a short period, that immediately begins effecting change in the returns offered on investment due to lack of capital.

Do you ever think?

TF

Motley Fool said...

@board

I hate that these village idiots are making me look like a prick.

I apologize for my language and tone.

RJPadavona said...

MF,

Please don't apologize.

"You may as well be, oxygen thief" brought me more pleasure than any other sentence on this page.

The Oxygen Must Flow

victorthecleaner said...

Koos Jansen,

the data for the diagram are from the Federal Reserve Bulletin - the links are somewhere in the article.

Intuitively (and without thinking much), I'd guess that gold exported from the U.S. and imported into the UK is primarily from U.S. mining operations. Finally, when the amount of these imports/exports changes, I'd try to understand why the purchasers of the U.S. mine output changed over time. Does this make any sense?

Victor

Grumps LaBastard said...

Your Master said it would. To counter the argument I've been making about positive real rates. Go back to the Glimpsing Hereafter 3 post. Look at the Aquilus exchanges. It's incredible. We've gone from gold being a stable store of value to an ever-growing money tree---your gold will actually increase in PP! Didn't anybody catch that?

"...it [gold] will satisfy the modest but risk-free "yield" needs of the entire saver class but not attract the risk-taking investor class that is always investing wherever it foresees the most economic potential in search of an even higher - yet risky - yield."

Remember how I've jumping up and down like RumpleBumpleForeskin the last few months about how shrimps need yield. So this presented a problem for the FG premise. And this is the rebuttal? Gold will not just preserve your PP, but increase it?

M said...

@ ForestGrumpslambastard

You " In a negative real rate environment such as now gold takes on the safe haven SoV fn. But when the crisis is over gold will have to take a back seat and lay dormant such as our present Supermassive Black Hole in the middle of our galaxy."

I have asked you a few times now.... Have you pulled up a chart of the price of gold denominated in INDIAN RUPEES yet ? Guess what ? The long protracted gold bear market in the 90's doesn't exist.

What about all the other currencies in the world ? Have you checked them ? Are the billions of savers around the world going to revolve around the US governments (one country) "positive" rates of return again ? No they are not. The only reason they did the first time was because the USD had a good reputation for being as good as gold because it WAS backed by it.

@ MF Your language is funny. No big deal...

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

The Fool asks The Gimp, "do you ever think?" Now that's what I call a rhetorical question. Not only doesn't The Gimp not think, but he parrots the one quarter baked ideas of other, lesser gold analysts as if they had any utility beyond their ability to make one alternatively laugh out loud or cringe in embarrassment. Then we have the obnoxious displays of pseudo sophistication served up with a heaping helping of hypocracy. To wit:

The concepts delineated on this blog are zero order linear.

This must be The Gimp's own special terminology created for the purpose of sarcasm. There is such a thing as a first order linear equation, and setting aside the question of whether freegold is a product of linear thinking- by definition, it's not-a few comments down from the zero order turn of phrase The Gimp extols the idea that silver and gold have some catching up to do. Now this couldn't be more classic as an example of linear thinking given that it features an idea whose premise rests on the notion that a past condition must, by necessity, be replicated in the future. And speaking of zero order linear non thinking, do you think The Gimp puts stock in the fictitious gold silver ratio"? You bet your sweet zero order thinking bippy he does.

Excuse me, did I just hear and smell another unpleasantly gaseous emission from across the room? Of course I did, but it was just The Gimp interjecting the moribund mining space into the discussion, yet again. How come those minging miners didn't perform as they did (linear, linear, linear) in prior gold bull markets? Hmm, maybe the non linear freegold model could have provided some insight and saved a few dollars.

In the meantime, while crying over milked miners, The Gimp can't address the criticisms, nay, thorough dismantling of (not) his (but Jim Willie's) BRICS gold note B.S., because, well, who the &%!* could. I submit, for any that are somehow unsure at this late date, that The Gimp is a first order troll. After all, The Gimp keeps serving up his own special brand of noxious nonsense even when he's asked to stop, even when his argument has been revealed to have zero order merit. No, The Gimp doesn't foam at the mouth and resort to the gratuitous use of caps the way another Tourette's afflicted banned poster does, but, other than the stark difference in style, The Gimp's just another twisted troll that desperately deserves to be ignored.

Motley Fool said...

Grumps

Since you seem to struggle with basic reading comprehension, I am going to attempt to keep this real simple for you.

What is required for a successful business? Production in excess of consumption.

Do all business have the same level of such? No; linked to wildly different yields.

Let's say that hypothetically gold yields 0.1% above inflation in real terms, how many businesses would be a better 'investment'? Essentially all the successful ones.

Keeping the above in mind, can you please reread the sentence you quoted by FOFOA, many times, slowly, until it sinks in?

TF

Ps. Sorry Archer. :(

Grumps LaBastard said...

Does 0.1% satisfy the needs of savers though? A shrimp probably has 30 years to build a nest egg. Much of that time other needs will supercede saving. So yield is necessary to even come close to critical mass.

If gold were to appreciate above a basket of commodities such as pork bellies, lumber, or copper, then wouldn't that present a deflationary environment for those commodity producers? No real pricing power in relation to gold? This is what I'm struggling with. Should we measure CPI in terms of the currency or gold? If we use gold, then for commodity producers to have pricing power against the yardstick of gold, gold would have to purchase less of the commodity as a general trend. Sure there could be brief periods of the price in gold dropping, but if the economy is to function wouldn't prices be at least stable in gold terms. If prices in gold terms are dropping over time then how is that conducive for economic activity?

Sam said...

"If gold were to appreciate above a basket of commodities such as pork bellies, lumber, or copper, then wouldn't that present a deflationary environment for those commodity producers?

The wealth asset known as the piece of art on my wall appreciated faster than pork bellies over the last 10 years. The pork bellies hardly seemed to notice.

M said...

@ ForestGrumps

" A shrimp probably has 30 years to build a nest egg. Much of that time other needs will supercede saving. So yield is necessary to even come close to critical mass."

The shrimp does not want yield while he is working and SAVING for retirement. He wants raw capital savings. Nothing else. When he retires, that is when he needs yield. That is when he dis-hordes his gold and finds income generating assets.

Quoting FOFOA (you probably didn't read this part)

Most people are savers, not investors or traders. Yet today we are all forced to be investors chasing nominal gains because there is no such thing as a perfect inflation hedge. If there were such a thing, a large portion of the "investing public" would not be anywhere near stocks and bonds. Even the most "risk free" bonds, US Treasuries, have the greatest risk of all, currency risk. "

"Furthermore, a saver must look deeper than the CPI, or even its shadow-equivalent, for the real inflation that must be protected against. And that is the inflating VOLUME of savings with which one must compete. A perfect inflation hedge would not only keep up with the shadow-CPI but it would also rise in VALUE (as opposed to volume) relative to changes in aggregate monetary savings (nominal gains). "

Robert said...

Sorry, I cannot help myself, I have to say something about "whistleblower" Andrew Maguire's comment from his latest interview over at KWN. Here's what I learned today:

"What’s going to happen is the central banks will turn around one morning, or evening, and say, ‘That’s it, we’re going to settle the bullion banks for cash.’ It’s just an electronic keystroke. What does it cost, a few billion dollars to bail them out on a cash basis? What it will mean is anyone sitting with what they think is physical (gold) in an account is going to wake up the next morning, having been cash-settled the night before, as the bullion banks will have been settled on that basis, it won’t even be called a default because technically the bullion banks can settle for cash, then it (gold) will take off and gold will gap up $100 or $200 (or more).”

Let me get this straight. The central banks are going to settle the bullion banks in cash, and gold is going to "gap up" . . . (drumroll please) . . . (this is gonna be big) . . . (will he pick a number higher or lower that FOFOA's estimate) . . . $100 or $200 or more! Woo hoo!

Wait. I think he means ounces, not grams.

Motley Fool said...

Grumps

You are conflating two things here.

There is definitely a problem with deflation with the medium of exchange as reference.

No such problem exists however for the store of value.

In fact, deflation relative to gold in fact incentivises savings.

Goods deflation is the natural order of things, as productivity increases and new processes are developed.

Yields on investments will rise as high as required to attract the necessary capital, assuming such enterprise is still profitable at such yields.

For 'old industries' in which not much more progress is possible, we will see less deflation.

A large part of the reason that simply saving isn't sufficient any more and risk seeking yield is required is systemic. In the current system metrics are manipulated, and people also have incorrect expectations of their standard of living post working age, and the number of years they should work.

Nature will find a balance, it always does (when one has a reliable metric).

TF

Wil Martindale said...

M,
To add to FOFOA's quote above, as to how the little people are encouraged (no one is forced) to chase yield (or invest vs. save) is ZIRP. Yes, people do want their excess wages to be protected from inflation but if interest on capital had any meaning, as in the past, it would accomplish this.

As for all this talk about 55K or even 100K per ounce gold, or even 1300 dollar per ounce gold for that matter .... that is merely the perceived value of gold. As the US Treasury has a much more stable view of things, I believe $42.50/ounce is the "correct" valuation, is it not??

Ahhh but perceptions do seem to trump reality, for they ARE our reality and trump everything outside of them. Perception, it can be said, is a derivative of reality.

And yet, what exists outside of our own subjective perceptions of reality, this derivative of "pure objective truth"?

A thought worth exploring?

Happy Trail!

Sir Tagio said...

M, +1 for your responses to Grumps. I particularly appreciated your example, and lesson, of savers in banana republics not saving in the MOE. A real illustration of a point discussed in this blog many times.

Wil, I thought American Eagles were worth $50! If they are only worth $42.50, I am going to have to save more!

Edwardo said...

While acknowledging that a lot of metrics one used to rely on are buggered so much that they can not be relied on, I note that the $IRX is trading today at 0.03% It must be weight of Larry Sumo, I mean Summers, out of the picture that has caused the sucker to fall to a wee hair above the zero bound.

burningfiat said...

Edwardo, Seems like things are heating up again :)
Also keep in mind the nice GLD outflow on Friday!

Could be interesting to hear from OBA here...
Meanwhile here's one of his usual indicators (30y rate/3month rate):

http://stockcharts.com/h-sc/ui?s=$TYX:$IRX&p=W&b=5&g=0&id=p37314807828

Sam said...

Is OBA able to track baskets of pork bellies? I'm curious how that market is holding up this morning

Edwardo said...

Yes, burningfiat, I haven't forgotten. With physical selling below the cost of production right now, I expect folks in a position to do something about it are acting accordingly.

jojo said...

@ Zebedee
Maybe :)

Wil Martindale said...

Yes, Edwardo, I have to retract my prediction that Summers was a "shoe in" in light of this new "conflict of interest" development.

I'm not sure anyone really wants this job. I just thought that with Summer's checkered past there was NOTHING he wouldn't do.

Sir T,
Indeed, I am sure we can sell those $42.50 eagles for $50, but I'm still awaiting offers to buy them for that. Perhaps Treasury has some to sell? I'd even go $60, with the additional $10 to be used toward some patriotic donation of a sort.

;0)

Grumps LaBastard said...

M,

Thank you for the homework assignment. I uncovered something beautiful. It is not readily apparent from the coarse data but only when you drill down deep. What I found will shock you guys. I want to go back and find some more sources that have more refined data and doublecheck my work but I already feel pretty confident of the conclusion. I want to get it organized and tabulated so that others can readily see it. I might not post it here. Maybe Sinclair's or Turd's site.

Here's a clue to what I found: Gold is NOT an inflation hedge. It is a piss-poor inflation hedge!

This means the FG Hereafter is built on a foundation of quicksand. That FOFOA quote you gave me was beautiful. Embedded in it is the greatest false assumption of the goldbuggery milieu.

Phat Expat said...

Okay then, GLD still a short as first target, 126.50, achieved. Next is 122.10 with current stop set at 129.25 (adjusted daily). I should really get paid for this; oh wait... ;-) Ah, when does it all end, my friend? Until then, mo money, mo stacking; these gifts are extraordinary, can't believe it will last much longer.

Sam said...

@Grumps

I found myself cringing in embarrassment for you after reading your last post. I learned that gold was not a good inflation hedge back in 2010 when I clicked on "Victor's summary." Boy did I feel late to the game back then but you just made me feel better. I think it would be best that you don't post your findings on this site or any other comments in general. If freegold was a college class I would recommend you drop it and take something more to your level.

KnallGold said...

Apropos chart: you might remember the "developing parabola" fractal I observed on all time scales couple of years ago, a fractal which never could resolve to the upside in about 10 years and always got interrupted.

What I see now is the development of this fractals inverse, the waterfall. And its also developing on all time scales since Sept. 2011, the April fall this year being a perfect short-term reference.

Last August it though appeared to being broken - but its back in line again, making it a 2 year trend. Hey, the occasional chart hick-ups were also there during the bullmarket.

What else can be read into it? The point of attraction on the way up was on the ceiling (23'000$/oz BIS prize for size?), where it really wants to go, the physical, but couldn't because of having a huge paper ballast. Now the point of attraction is on the floor so there must have happened a crack in the paper/physical tie.

Lets see now if the fractal can resolve to the downside, although it would still leave the unresolved up. Which would mean the famous inverted waterfall. Timing? experience says only that down moves are usually much more compressed.

Or is this all too circular? Of particular interest here would be if the BIS prize for size also corrected (but we'll never know).

KnallGold, reading tea leaves.

The Simple Minds have a New Gold Dream (alive and kicking, lol)...although its a bit too culty of a cover ;-)

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

Dante_Eu said...

We all know that there is good money and there is bad money.

Now say hello to: Positiviemoney !

Before all is said and done, expect: negativemoney, goldmoney (Hello Turk!), engineermoney (BitCoin maybe), doctormoney (some form of pill for headache), silvermoney (Hello Max and Maloney), anarchistmoney (no money at all), energymoney (wind turbines, batteries and dynamos)...

Good show nevertheless. :-)

Zebedee said...

@ jojo

lol! I checked out the lyrics...

"Gold, get some gold"

Much the same as "Gold - get you some"
Now where have I heard that before! ;)

Great!

Roacheforque said...

Grumps,
They say there is no such thing as "bad advertising" so keep up the good work lad and I'll be sure to check in on your next episode.

In the meantime, try to refine that "walk away close" just a bit, I don't feel the moisture of saliva on this end of your mouth watering threat to post elsewhere ...

Motley Fool said...

Sam

:D

Roacheforque said...

Just a thought here, but an ounce of gold is an ounce of gold. It really never changes its atomic structure and probably hasn't since before men were apes.

But our PERCEPTION of what an ounce of gold is worth, ahhh that changes dramatically over time, as we can clearly see, and even factually track,

This is because PERCEPTION is a DERIVATIVE of reality.

Perceptions can be altered, influenced, managed, indeed preyed upon. Thus "derivatives" are an essential component of any trickery or guile or scam, for they cause us to see a thing a certain way, and we act upon that perception, and the managers of those perceptions act upon those thoughts, for their personal gain, against our personal loss.

And the dollar became the original financial derivative which spawned this 1.7 quadrillion dollar mirage of wealth. A derivative ... of itself ... once it was backed by only "acceptance" and "use" rather than the physical reality of gold.

Indenture said...

Gold is not an inflation hedge. In the $IMFS. Where store of value and medium of exchange are combined.

Gold is an inflation hedge. In Reference Point Gold. Where store of value and medium of exchange are separated.

KnallGold said...

Holy cow, a Gold plated Lamborghini Aventador! You can't top this...

http://www.youtube.com/watch?v=x0p2CrCpFA4

Archer said...

This is because PERCEPTION is a DERIVATIVE of reality.

Well, that's your perception. The point about perception is that it may bear some relationship to "reality" but, equally, it may bear no relationship to it. Perception exists on a continuum where point A.) may be defined as being utterly divorced from reality, and point B.) may be defined as being completely in sync with reality. In the meantime, have you received a fee for adopting and parroting another poster's perception, or are you just paying yourself?

Grumps LaBastard said...

You acknowledge that gold is not an inflation hedge, but your Prophet intimates that gold will be the perfect inflation hedge. How do we reconcile these conflicting concepts?



If inflation does not move gold then what does?

Boner Parte said...

You acknowledge that gold is not an inflation hedge

Today.

but your Prophet intimates that gold will be the perfect inflation hedge.

Does he now?

How do we reconcile these conflicting concepts?

By having the first clue about the difference between "gold" now and GOLD then?

If inflation does not move gold then what does?

Human action and emotion. (Greed, fear, credulity, naiveté?)

Now go away!

Clyde Frog said...

Inflation doesn't show up in gold, if at the end of the fair few hand in their scrip for the gold that is their due.

http://www.youtube.com/watch?v=_CCi13tnW5o

jojo said...

Clyde!!!!
Long time noseeum! Welcome back :)

Clyde Frog said...

I went to visit the burgundy glen.
But my home can still see be seen from there.

Frank Pansy said...

Hill of Thieves is too right, Clyde.

Too many show up here trotting out the same, tired, lame storyboards over and over, derailing all hope for everyone else that the general level of discourse might be advanced. They would steal the will to live of all who will engage in their dim-witted banter.

I say a return to the glen would be more productive, Clyde. And I might just join you.

Roacheforque said...

Archer,
It is not point (B) I am concerned with (if in fact we can truly determine point B) but rather point (A). As for your other comment, I am not parroting that other commentor's perception (if we are on the same page) rather I AM that commentor, commenting under another persona now that I have fired up a little blog in the hopes of bridging the gap between A and B, B being the complexity and time involved in reading hundreds of hours of A/FOA/FOFOA and A being (for example) the false dichotomy of a right/left (Republican Democratic) narrative that many, many people in the West are foolishly caught up in (they will NEVER do the required reading, so perhaps there's another way to reach them, and offer up links to the more serious blogs if they find it worth pursuing. That's how I found this blog, and I'm glad I did).

Not a day goes by that I do not receive an email from the Blue Camp, crying for donations to help us defeat the atrocities of the Red camp, as well as an email from the Red camp crying for donations to help us defeat the atrocities of the Blue. And that is just ONE notable example of casting a wide net with all kinds of stinky perception chum to haul in whatever fish will bite.

I did not wish to identify myself as Wil Martindale on that blog, but rather chose to create a fictitious persona (as many commentors here do who wish to remain anonymous) so that the grim nature of those revelations might be seen as more "tongue in cheek" than "deadly serious".

But alas, I don't know if it's a task worth undertaking, and whichever Google account I'm in (of the three) when I comment here is how I am presented. I don't want to log-in log-out repeatedly just to comment, any Google account will do.

So no, I don't receive a fee, pay myself or solicit donations for my time, I just sometimes make a point I think is worth repeating. If you recognized it as such, then it must have left its mark.

Happy Trail!

victorthecleaner said...

Indenture,

Gold is an inflation hedge in the $IMFS where goldbugs purchase paper gold when the dollar goes down in real terms (without the dollar system failing, however), just as in the 1970s.

Gold is not an inflation hedge in the freegold world AG where gold's real price fluctuates in order to transmit price signals and to act as a spur and break and counteract any imbalances in the trade and capital flows.

AG, any well managed fiat currency such as the Euro will be purchasing power stable and can serve as an inflation hedge. Gold will nevertheless be the ultimate reserve in order to store surpluses over generations. As such, it will of course be the wealth hedge of the last resort, insulating your reserves against political and other events that might render the CB powerless. Neither during the European debt crisis 2010 to today nor in the upcoming currency crises, the ECB is that powerless. For that, it would need to be a lot worse.

In order to act as this ultimate wealth hedge (reserve), is it not necessary for gold to be purchasing power stable (inflation hedge). In fact, making gold an inflation hedge would ultimately lead to a loss of reserves crisis and thus undermine that very purpose.

Victor

M said...

@ Forestgrumps

What did you learn from your homework assignment. Where is the gold bear market in Indian Rupees when the US was offering "positive" real returns ?

I don't see it...

M said...

Is Grumps Jim Wille ?

Motley Fool said...

M

I doubt it. Jim Willie isn't stupid, just crazy.

Edwardo said...

Victor,

Since you have, more or less, brought up the subject of free fiat, I was wondering if you would share with us what you believe was the cause of the consumer price inflation in the last fifteen years of the "key Gibson Paradox period" (the years of strongest correlation are 1879-1913 in the US and 1821-1913 in the UK).

Roacheforque said...

Frank,
I welcome your offering to advance the level of discourse beyond the interminable testing of accepted notions and labels within the current paradigm.

Not to be too totally offensive in calling out these lame attempts at academic sophistry, I really couldn't give a fuck either.

Now whether or not 4500 tonnes of gold is reputedly missing (or more - like ALL of it) from the US official stack or not ... that's at least mildly interesting, since it could impact the FREEGOLD thesis, i.e. render the outcome of a dollar collapse to be much more "militant" (IMHO) than if the US had any gold to square up with.

Here's my offering, along those lines ... it was somewhere said, recently, in my reading (and I don't remember if it was here or elsewhere) that the only thing backing a modern FIAT currency is the productive capacity, or potential, of the people (of that currency's nation).

I do agree with that to some extent, except in the case of the US dollar. At this moment in time, I believe the dollar is backed much moreso by the nation's military, shall we say, "propensities".

Now don't get me wrong, I do accept that sending our people to foreign lands to protect our financial interests militarily is a form of "productivity" but certainly a form with a peculiar bent. Not one of a country offering equal goods in trade balance but more like an ExPriv offering "our way or the smoking highway".

When we talk of the resiliency of the dollar, in use value, some of that resiliency is attributable to fear, and while separation from the SWIFT system and similar sanctions does evoke a bird flip from the likes of IRAN, these actions never come in isolation, but are rather a warning of much darker forces being "gathered up" with same said FIAT favours to do the bidding of the dollar faction.

Et cogitationibus tuis hac?

Grumps LaBastard said...

Indenture,

They lied to you in goldbug school. Inflation is not the driver for gold. Something else is. This other thing is often avoided in goldbug circles to keep the myth alive that gold is a stable SoV. It is not. Only under certain conditions does gold serve as a SoV and spectacularly so. Even when gold comes back into the system, there will still be inflation and gold for periods will greatly underperform against CPI.

I thought post revaluation we would have plenty of time to move our newfound largesse into other assets. But I'm afraid that is not so, maybe only a couple years before gold loses a good chunk of its PP. The price may not go down, but its value will.

M said...

@ Grumps

"greatly underperform against CPI."

CPI of the USA only ?

What about the rest of planet earth ?

Grumps LaBastard said...

It doesn't matter what currency. There is a relationship that this blog completely ignores b/c before this force FG is but a sandcastle facing high tide. I am completely gobstopped by what I found. For those that stay in gold after peak valuation they are going to get murdered if they don't make a move.

Jeff said...

Way to ignore the blog content, while posting repetitively.

FOFOA: Gold is actually a pretty poor inflation hedge as long as it is under external influences such as the inflatable supply of paper gold BB liabilities.

Furthermore, a saver must look deeper than the CPI, or even its shadow-equivalent, for the real inflation that must be protected against. And that is the inflating VOLUME of savings with which one must compete. A perfect inflation hedge would not only keep up with the shadow-CPI but it would also rise in VALUE (as opposed to volume) relative to changes in aggregate monetary savings. Given such a "perfect inflation hedge," I maintain that it would become the Focal Point of savers all over the world.

Sam said...

http://www.zerohedge.com/news/2013-09-17/japan-boldly-going-where-not-even-fed-will-go-anymore

Does anyone remember why it doesn't matter if net debtor nations buy our Treasuries? I do. Thank you FOFOA for all you do.

Grumps LaBastard said...

There was no paper gold in the market I looked at. I wasn't looking at the reserve currency.

There is no perfect inflation hedge. Everything floats.

Phat Expat said...

"Holy cow, a Gold plated Lamborghini Aventador!"

That is truly obscene; and I want one! :-)

Sam said...

There was no oxygen in the market I was looking at. I was looking at charts in space. You are right though. Out there it seemed like everything floats. Back on Earth paper gold exists and therefore is a factor in valuation of golds currency price in all currencies in all markets... not just the reserve currency (which ironically isn't backed by gold).

Oakay Nobmilka said...

There was no paper gold in the market I looked at. I wasn't looking at the reserve currency.

If it's answers you seek, it's better to gaze at your own navel.

Roacheforque said...

For if a currency's true value is found in the productivity of it's people, in the US only 1% of its people are truly productive and they use the peoples of other countries to achieve that productivity.
Yet many of the USAs young working class find their productivity, and the life's value of their youth, fighting wars in other people's lands, which they do not believe in.
That 1% factor seems familiar, perhaps it is the percentage of paper gold from which it's original value was truly derived.

Strange Karma indeed!

anand srivastava said...

VTC:
"AG, any well managed fiat currency such as the Euro will be purchasing power stable and can serve as an inflation hedge."

This does presuppose that Euro will try to achieve Zero % currency value fluctuation. An impossible task IMNSHO. I understand that the since Euro is acting as a an Inflation hedge, so you are talking of inflation in another currency.

This also means you are talking about another currency zone. What would be easier to own in that currency zone, Gold or Euro. I would think Gold. And Gold post Reval will require even lower storage costs. Also Gold will be giving a better than Euro performance in the local currency, as RPG will be in effect. So if Gold rises Euro will also rise and if Gold drops Euro will also drop.

AG there will be a period when some countries that have excess gold and can splurge (India comes to my mind :-), and will have gold prices going down. There will be others like US, which will be selling gold to build up their country. There will also be countries like China which are surplus nations and will be buying Gold, with a consequent increase in Gold prices.

During this aberrant period, Gold will vary for longer durations. But over time, things will stabilize, and then all currencies will be stable, except where the govt is corrupt, and the people are not able to get rid of them. Such periods should be short though as inflation will be directly proportional to money printed, as people will not rely on the banks in such zones. This will not allow the corrupt regimes free money to spend. They will be able to rule for long only as dictators.

This means post stabilization in AG, Gold will be stable along with Currency in most zones.

ilpatino said...

Wether there is in effect any gold left in central banks vaults is immaterial to the fact that that gold has now many, many owners. In that sense, GATA is right to posit that the gold "has long left the vault."
You can only extract the golf out of the mine one time, so if central banks gold has many "owners" the vault would be empty for the 99 owners that come second to the first one.
Willfully or not, but by creating so much paper gold, TPTB have in effect "manipulated" the (paper) gold price. To a holder of physical that does not matter, but we are still a very small minority. As such, the scheme of luring savers away from physical gold still works (albeit less and less).
To that effect, educating the public as to what physical gold really represents is equal to the invention of the bookprinting-press by Gutenbergh.
I therefore am convinced that the architects of "Europe" did not have some altruistic motive, and yearned power just as much as the next politician. I cannot percieve any way a European politician is trying to "socialise" the posession of physical gold. Is this because they do not understand Freegold, they do not understand the Euro, of because they want to stay spending other peoples money (not gold ;-)
The argument that the Euro was created to "save" us from the dollar has been rebutted too many times by politicians and their collectivistic ways.

Edwardo said...

As such, the scheme of luring savers away from physical gold still works (albeit less and less).

Where folks (of modest and not so modest means) confronted with making a choice as to where to deploy their surplus are concerned, there are precious few "savers". in The West. There are, however, many folks chasing a return (yield) on their "investment". The idea of simply preserving purchasing power over generations, the sine qua non of saving, is, to the extent that it is ever a conscious pursuit engaged in by folks with greater or lesser means, relegated to objets d'art, residential real estate and various and sundry idiosycratic collectibles.

I therefore am convinced that the architects of "Europe" did not have some altruistic motive, and yearned power just as much as the next politician.

Be careful not to conflate the various "architects", such as they were, because, as tempting as it might be to do so, they were not, by any means, a monolithic body. Politicians, Central Bankers and Economists, which, of course, can be CBs, may not be your or my favorite manifestation of humans in action, but they were (and are) not the same, and did (and do) not have motives that were (and are) entirely in concert with one another

ilpatino said...

Yes Edwardo, as I said, there are only a few savers, and a lot of chasers, and even more usurpers.
But it is a question of education. Coming from an economic background, 10 years ago I found myself wrongly formed by a system that was put in place to protect itself, rather then enlighten people as to what saving is really about.
Because our system is built around the fact that the more chasers and the less savers there are, the better the whole functions. One person, one vote, you see?
Therefore, other than mainly obscure people the likes of our esteemed friend of a friend of someone here, precious little REAL educating is going on. Here in Europe as well.
Is that what they mean when they talk about the Giants? Obscenely wealthy people, who seek to become even more obscenely wealthy by ignoring us true and just education?
Why then, other than the fact that the ECB markes its physical to market, should we hold "Europe" in higher regard then any other country (or alliance of countries). That is why I believe that, be it politicians, bankers, industrials or rope-pullers, they have not constructed Europe, or the Euro, for our gain, but for their's.
It would be nice to believe that all what it is happening in the world is either planned all along, or just a conflagration of centuries of mistakes by stupid politicians/CB'ers and what not.
That being said, the emergance of freegold will depend on education, and not on some pre-ordained roadmap.
To whit, what would happen if all of a sudden 8 billion people "knew where we are going
?" Would that be enough to usher in the new era?

Sam said...

@ilpatino

Most big political changes happen from the top down. The masses didn't wake up in order for the dollar to become the reserve currency. They didn't wake up and force Nixon to default on the gold standard. They didn't wake up and demand the Euro be born. They won't wake up and start buying physical gold to usher in a new monetary system. The dollar has been put into checkmate by the Euro. To the players that know the game well the remaining moves are playing out with the predicability of an already lost game. Nobody knows exactly when but in short order the dollar will lay down it's king. All at once the remaining spectators, even those with no interest in the subject, will know (ie they will be told) that the game is over. There will be no vote, no polls, no consensus on the issue. What the masses think, want, desire gold to be worth will count for nothing. Gold will DEVALUE itself in oil and by default REVALUE itself in real purchasing power against everything else....and the world will say....why didn't we think of this sooner

ilpatino said...

Well, Sam, they (the world) didn't know sooner, because everything was put in place so they wouldn't ask the question. Why do you think reality-shows are so immensely "popular?" The Giants are not here to educate us mere shrimps, but to get enough shrimps dependant on their system. The only way to become more than obscenely wealthy is to become more than obscenely immoral.
But we can see eye to eye; the moment it is too late, the world will indeed "be told" or to paraphrase "will be educated." But only after it is too late, not before, and that is the whole immorality of the matter.
I've never had the courage to ask the question, but the fact that the ECB marks to market, does that in any way or form change the possibility that "their gold" has also multiple owners? Or to put a finer point on it, €/$ is what these days, about 1,30? How will that translate under freegold. Will the exchangerate of the two MoE stay roughly the same?

tcelfer said...
This comment has been removed by the author.
enough said...

STOPPED OUT, huh Mr Phats?

or did you bottle out, throw away the discipline and still holding? I'll bet the latter.....

Franco said...

No QE pullback. Today's score:

FOFOA: 1
Deflationists: 0

Sir Tagio said...

Woo-Hoo! The Par-tay continues! Laissez les bon temps roulez!

S P said...

It's been an interesting 5 years to be sure.

Is today the day that freegold basically won? It's certainly possible.

Dante_Eu said...

I am shocked!

And I am perplexed! Because,

Hotels and Elevators pave the way
to a land of death and moral decay.


:-)

Roacheforque said...

tcelfer,
If I was buying gold (which of course is foolish because I hve NO gold at all, but ... if I was) I would have been buying in at 1400, 1500, 1600 amd even 1700, 1750 before my fiat surplus run rate ran dry in 2011.

And you know what? I don't feel the LEAST bit slighted (I mean, I wouldn't have felt the least bit slighted) even though if I had waited for gold to come down (not knowing for sure it would, because at that time, I hadn't quite gotten the whole paper gold dichotomy) I would have been able to have acquired a little bit more with same said FIAT.

What I would feel very fortunate about, would have been that I decided to buy gold AT ALL, while others all around me pondered over the whole idea of whether gold is a worthwhile "investment" or "inflation hedge" and still to this day ponder .. and ponder ... and still to this day, even with (paper) gold having reached well below 1200 in April, still have not one single tenth of an ounce.

Perhaps that is a more comforting way to look at it? If not, then see the $60 dollar paper gold spike a few hours later, the largest intraday spike in recent memory, now that the taper talk stress test is over and the test to see how things resume under QEtoI resumes.

But again it's only the PERCEPTION of gold that is rising, in it's derivative paper form. In reality, we will never know the "true price" (in relative terms) until the derivative realm, the paper realm, the perception realm meets rubber to road.

As that perception of value rises, we must pay more, as the real thing is still linked to perceptions.

But fantasies, and games of speculation, never go on forever. The paper will burn, and reality will come riding in behind the smoke.

Happy Trail!

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