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?Source: http://www.federalreserve.gov/monetarypolicy/files/FOMC19921222meeting.pdf
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.
[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
509 comments:
«Oldest ‹Older 401 – 509 of 509@BH
Thanks for the rec; no, haven't tried that one but will look for it tonight. I am in South China area for visit and they don't have Guinness on tap like some places I have found in Shanghai.
Trading is something to keep me sharp technically and GLD is one of many that I use for this purpose. I also track it for the purpose of acquiring more physical at 'bargain' prices (though one could argue that anything at this point is a 'bargain'; and I would have to agree). But hey, if I can spend less fiat for more metal, might as well. Prost!
Just for #%*s and giggles, I'll offer that the best information I have is that paper gold will be making a low around mid October, possibly a major low. I'd like to think that it will be the kind of low -a full on, total collapse- that precedes a revaluation, but, then, who wouldn't.
FWIW, January of 2014 is a Fibonacci 34 years from
the inflation adjusted ATH in gold. For my money, an October low is close enough to January for gubmint work.
My respect to all of those that can drink Guiness Stout. I tried that twice actually- the first and the last time.
On another note: From My Cold Dead Hands They Will Pry My gold. It would be nice though if the reset comes before I am too old or too dead to enjoy it.
@Edwardo
Yeah, that's certainly possible. Especially if an agreement can be reached to avert a govie shutdown; then it is risk-off and the paper price could easily plunge. Possibly a reason I didn't receive a weekly buy confirmation on GLD yet. Either way, the band plays on...
@Phil
But, it's such an incredibly smooth beer. :) Though an acquired taste.
@BH
Couldn't find the Yanjing Stout you mentioned but did try their regular beer. Not bad, but prefer Pearl River and Tsingtao. Thankfully the beer Gods make such a broad variety to slake all our thirsts. Kanpai!
Phat
I have an iPhone (condolences accepted in advance). How do you use phone service in the Orient without getting huge involuntary data charges?
I would like to be able to just take my phone with me but I have heard many stories of folks getting bills in the thousands without even knowing their phone was having a party without them.
Beer
I went through a home brew phase a few years ago. Quite fun.
A friend from Bolivia told me the secret of pitching for beer some of the natives use....baby poop. Apparently it works well. I'm not sure why as it should be bacteria and not yeast but for those wondering how it was discovered...It seems almost anything will make alcohol given the right wort.
M dV
I have an Android phone and, prior to my departure a couple years back, I obtained an unlock code from AT&T which turned out to be just one part of the battle. The other part was the difference in network that required me to install, actually downgrade, my Android to allow my HTC to work on the Chinese network. I then purchased a local SIM through China Mobile (~$16 per month including 400 MB data). Since my Chinese is rather poor, I certainly had help with the above tasks.
Another option, if I recall correctly, through AT&T (not sure your provider) it was possible to get international roaming that allowed me both voice/data and wasn't too unbearable for short visits. And, yes, condolences, but iPhone is a completely different and difficult, if not impossible, beast.
Hi all –
Is my understanding correct regarding the below:
Once the flow of physical stops at the top level, a revaluation is the only way to get it moving again. Therefore, the BIS will bid for physical gold at an exponentially higher price. The initial sellers of physical gold would be the member Central Banks of the BIS. Thus, flow would resume. Further, those Central Banks would be the first sellers because they have the ability to print. Otherwise, I do not see how it would be in the other “Savers” (Giants, SWFs, or Super-Producers) interest to sell their wealth (no matter how small) for fiat, especially in a HI environment when the longer they hold that fiat, the less wealth (i.e. gold) they can purchase at a future date.
Thanks in advance.
Blake
I suppose there would be communication among certain of the giants to assure them of stability and giving them an OK to sell.
We shrimps would do well to let the smoke settle before selling our small bits until we know we are getting a stable currency....especially if one is taking Fed Reserve dollars in exchange.
In the Weimar period there was another failed currency right after the Reichsmark (the Rentenmark) which did not last more that a few months (maybe 2 years) but it was not something one wanted to store wealth in.
Does EO16303 and the reverse repo make the debt ceiling irrelevant? It seems that the stage is set to issue currency/bonds/bills directly from each department and let the Fed launder them into real cash.
I think you have your numbering wrong; are you referring to EO13603 (pdf) (National Defense Resources Preparedness)? This EO has been around for quite some time and was apparently updated to account for DHS (Snopes review of EO). Do you have specific examples within the EO (or elsewhere) that support your comment?
Phat,
I'm with ya on the Guinness... I drink gallons of the creamy, dark nectar:-) It'll be the import on tap at my personal little poolside bar. I also like a couple local brews that'll probably rotate in and out. After drinking stouts I'm having trouble appreciating the other varieties.
And for now, some Elliott Smith for the rain.
/SV/
Gallons, yeah, that's what I'm talking about! :-) I hadn't thought about the poolside bar but that's a great idea! I'm gonna need to wear a vest though since I could imbibe a bit much at the start. ;-)
Elliot Smith, nice... I do recall from the movie, however.
Not sure if I found this song here or as I traversed the ether: Don't You Worry Child Prosit!
@BH and other beer lovers. I'm actually not sure the Brew Dog Z is even a stout. I looks like a stout but when I first tasted it the words "surprisingly fresh" popped into my head.
As for drinking gallons of guinness... I've always felt that a pint or possibly 2 if there is no food involved is more than enough to make me feel like I've had a huge dinner. :-)
Blake:
I think the Gold will start to flow again, when a particular CB will start to buy it at a very high price. The Sellers at the top level will have faith in the Currency of this particular buyer.
The price at which they will be willing to sell will be the initial revaluation price of gold. It should still move up from there after an initial drop, as people (giants and shrimps) start to sell at that high price. But it will not last, and the price will start to rise again as the initial deluge starts to look like a trickle for international BoP. It should rise again to a double or triple value, I think, before stabilizing.
@anand
As someone convinced that the revaluation is a certainty I have been increasingly interested in post revaluation tactics. Are you able to elaborate on why you think the currency price will behave the way you stated or is it just a gut feeling?
@Sam
It is a gut feeling. And I did mean value not really price. Euros should more likely be value stable.
I think when initial revaluation happens, the economy will be down in the dumps. Many people would have lost a lot of paper value. They will be selling gold at that time, to build up or rather diversify their holdings. I think even some small giants would also do that.
Initially I think there will be a lot more gold, which suppresses the price. But it will take some time to get the economy up so that people will be able to earn enough to save in gold again.
When the economy improves, there will be less gold that is being sold by people and more demand for buying gold. This would be opposite to the trend during the times of the crisis. I would think this would cause a large rise in gold value. Not as much as at the time of gold revaluation, but pretty large still.
Note at the time of crisis, either currencies will be losing value, or people will be losing money. There will be no unaffected zones. So there will not be much money to put in gold. But gold will be required to rebuild everything. So the price of gold will necessarily be lower in crisis than when the good times come back again.
http://www.silverdoctors.com/deepcaster-profit-from-a-dangerously-fat-left-tail/
Summary by Deepcaster - current events and what can arrive on the coat-tails of many fat tails wagging the dog packs.
Phat,
You are correct on my dyslexic numerology. I'm referring to section 3 of the order, which as usual references other sections of other acts, but implies broad ability to "do what it takes". I read enough ambiguity here to see an end-run around the Treasury debt limit, using the Fed to launder/back the loans/guarantees defined by the order.
@ Knallgold (September 19, 2013 at 2:15 AM);
Well, maybe it's not us (the shrimp-savers) versus them (the giant-savers), but it's certainly us (the savers) versus them (the usurpers).
The prescient question then becomes, "who is us," and who is them? Is the USG us? Or is Europe us? Or, to put a finer point on it, who in the USG is us, and who in Europe is us?
Is a free-market-oriented libertarian us, or is a collectivist socialist us? Is Obama us, or is Hollande us? Is Di Rupo us? Is Cameron us? Is Merkel us? Is Van Rompuy us? Is Draghi us? My point being, Europe (politically speaking) is more of a usurper than a saver.
I am a saver in gold, not in euros.
So I reiterate; Is the fact that the ECB marks its gold to market a sound reason to buy eur?
"Is the fact that the ECB marks its gold to market a sound reason to buy eur?" Do you have a goal in mind when you buy these Euros and is this before or after transition?
"Is the fact that the ECB marks its gold to market a sound reason to buy eur?
I would say it is a sound reason to want your debts denominated in euros if you are the person issuing the debt.
That statement by the currency issuer means they plan and are treating gold unlike any other currency issuer in history. One that won't try to manipulate the value of gold.
I don't think ECB marking its gold to market has anything to do with the reason to buy Euro.
The Gold when marked to market will be useful for settling balance of payments.
Why we rely on Euro is, because it has severed its ties with the Nation State. So the Nation aka the politicians cannot force ECB to debase the Euro, for their deficits.
So the MTM makes it future ready, and the severed ties makes it stable through the crisis. Yeah there will be a lot of unstability upto the crisis, but it should be minimal compared to the rest of the world.
I am buying the Euros now. I think they will get more and more expensive, in other currencies, even if they lose some VALUE before the crisis. So it is better to buy them now.
I know people here consider Bitcoins to be useless. They are not good as a MoE, and they are not as good an SoV as Gold.
So what is its worth?
Bitcoins are the best means to move wealth out of a jurisdiction. They are not in the control of any govt. Buying them does not require using the standard methods, which a govt can control, during capital controls. Carrying them is as easy as a small file stored anywhere. You could even write it down on a piece of paper.
It is the most important SoV during a crisis, if you need to move. I do expect it to jump very wildly during the coming crisis.
Blake (and many others) say:
"Once the flow of physical stops at the top level, a revaluation is the only way to get it moving again."
But what causes physical to "stop flowing at the top level"?
Is it a planned collusion, a collective response, or just a random but coincidental circumstance?
Something else perhaps?
There may be some value to thinking through just how this blockage is to occur, rather than to just assume it will happen and attempt to draw further assumptions from there.
I for one do not think this stoppage is "the event" but an "effect" (rather than "the cause") of a FIAT based credibility issue.
Fiat will become an unacceptable trade for gold, rather than gold becoming too important for FIAT.
It is always in the way of looking at things in which perceptions are defined...
Hi Roacheforque - An interesting question!
But what causes physical to "stop flowing at the top level?
My guess is it will be because the gold price crashes and the mines shut up shop. No mine supply - leads to giants that can't get the gold they want - leads to collapse of the gold market as insiders who see the big picture get as much gold as they can.
Beer,
A response almost as quenching as your handle. I wonder if that is the consensus view?
Happy Trail!!
-R
de re platinum redux: PLATY MAKE HULK WANT TO
SMASH
Oh my Gods! ( even the Gods' money may not be safe)
Via Reuters: "The Reserve Bank of India....... has sent
letters to some of the countries richest temples, asking
for details of their gold."
Woland
Isn't that old news? From what I recall the indian government requested from the richest temple, who is said to hold over 1000 tonnes, some gold. They politely declined, and pointed out they already have some 300 tonnes held at the RBI.
TF
Funny, today's POG intraday chart from 02:00 looks like a fractal of the last 3 years - let's see how it's going to play out...
Roacheforque wrote:
I for one do not think this stoppage is "the event" but an "effect"
Gold ceasing to flow at "the top" is, indeed, an effect of systemic failure that is the result of accumulated "insults" to the system that, eventually, can't be managed in such a way that precludes the system's destruction. And, yet, the culmination of those crushing effects could easily occur in the form of flow drying up at the "top level". Therefore it is, quite possibly, perhaps, probably, a singular event that may act as the proverbial last straw, the ultimate catalyst, in much the way a massive heart attack acts as an organism's last act unto death. In that sense it is, most certainly, an event of no small importance.
I agree with Beer Holiday that a restriction in mining flow of an unknown duration and magnitude amounts to an insuperable condition for the system. Perhaps said restriction should be thought of as the arterial blockage that leads to the system's massive heart failure.
After all, in a world where the hoarding of physical is occurring at every level of the market, mining supply constitutes the critical marginal flow.
Roacheforque --
As for how flow would stop, I agree with Beer Holiday that it would be a slowing/stoppage of marginal flow from the mining industry due to a crashing price of gold. Of course, this begs the question of what will precipitate a crash in the price of gold? I, like FOFOA, believe that a crash in the price of gold will most likely coincide with a general market crash a la 2008.
Nope. The 2011 audit of the Sree Padnamabhaswamy
temple's 6 vaults was a result of claims that some of the
treasure had been sold, and was not a a result of any
request from the RBI. The contents were revealed to
be a combination of jewels and gold, some going back
as far as the 17th century, with an estimated value of
$18 to 20 billion. None of that wealth was moved or
otherwise liquidated, and no other temples were audited.
This is a new story unrelated to those events.
{;<)>>
New 2013 lows at the GLD prompted me to update my divergence Chart
Didn't Obama say today that the he aint messing with the reserve status of the Dollar? Well that certainly spoils things, I might as well give up the precious now.
While the probably will be a 'cause' for a collapse/ reval, it could also simply come from a decree. In this case I see Comex quietly announcing that due to 'market conditions' it will cease operations followed shortly by the news that the BIS 'is trying to establish a price' for official sales etc...
It could all be done kinda low key, it would be big news for us but the rest of the world would switch to the low price spread (?palladium?) for wedding bands and continue with living.
Funny that somebody asked "but what causes physical to stop flowing at the top level?" a few posts above, because I was asking myself the exact same question. Anyway, I don't quite follow the argument that it would be because mining shuts down. I mean, if the gold that goes into hiding is mining gold, then why would it demand a five-figure price in order to come out of hiding? Wouldn't it just demand a price that make mining profitable again, say $1500/oz or whatever?
So, this brings me to an even more basic issue that I'm curious about: nowadays, how does gold "in size" move around? I mean, how much weight changes hands on a given year, and who are the buyers and sellers? Anybody...anybody...Bueller? (Thanks in advance)
So, the flow of gold in size becomes constricted because mining supply becomes constricted, because of a crashing gold price (in dollars) because of ....
And in this potential infinite regression, we trace the origins back to strings of less dramatic dominoes tumbling ... until we get to that single anachronistic first domino that hardly tipped the scales from "status quo" to "the beginning of the reset".
But haven't those first dominoes already fallen and aren't we already in the midst of a slow motion chain reaction already in effect?
Perhaps it is to say that when gold stops flowing in size we are down to the last few dominoes before revaluation, but I think a constriction in the flow of energy could be somewhere in the path.
Even in our global deflationary spiral, if dollars fail to fuel economic production they will suffer a credibility problem that outweighs their sheer numbers. We almost had this with Carter in the 70's.
Once dollars lose the bid for oil (and natural gas) gold will cease to flow in dollars, and that could trigger the top-level restriction.
But the dominoes will topple either way, in this direction or the other, and they have already begun their fall. It could take 50 years to reach the end of them, we just don't know which one dropped first, and when.
IMHO
Happy Trail!
We could call Nixon's SHOCK the first domino, but ... we had BRETTON WOODS before that .... and THE FED b4 that .... and ...
:)
I agree partially with Franco above. There is no way marginal flow ceasing could cause a 10x revaluation in the price. But I do believe marginal flow decrease will expose the fractional reserve banking of the bullion banks. I believe that is at the heart of the revaluation. That and of course the hyperinflation of the dollar.
Well, one domino that seems to have toppled (and if I understand the freegold thesis at all, it would be a critical one) is the withdrawal of structural support for the US dollar from foreigners, as seen by four months in a row of net selling of US bonds. If that train is in motion and doesn't reverse direction, then the party is guaranteed to be over.
In my opinion, once the GLD gold is gone as it essentially backs the dollar than the initial dollar devaluation kicks in as first seen in POG - quoting FOA ...This all leaves us in the present political situation, where the IMF entity, that was formed to replace the gold standard, is now trying to back the present paper gold with physical to prevent a run on the dollar. It is a futile effort as the ECB / BIS have grown the gold market into massive proportions by encouraging the many year expansion of holders through paper securities. All denominated, ultimately, in dollars. We will see $10,000 gold, count on it! It’s the only way this can be resolved. That same figure will create massive backing for the Euro and hasten it’s journey into world reserve currency status. Expect most of the ECB liability for gold to be easily converted into Euros at the dollars expense... end of quote.
Now this 10000$ figure is obviously not accurate but you get the picture. It just reads the last hiccup in the POG cardiogram before the fall and the straight line of death at a much lower level.
Or alternately, the 10000 POG show, just before the hyper printing stage, can be the last attempt to satisfy giants of middle importance by mobilizing the last little bits of shrimps` gold (India?) as the supper giants would have already gotten the last tonnage from GLD and other ETFs.
An odd eeriness is permeating these markets; irregardless of the clownish behavior exhibited by our Govies. Things look ready to break violently one way or the other but no clear direction. As such, I will stand aside for now and watch the show from afar, though I suspect we won't have to wait long for resolution. ;-)
Here's the latest for GLD on 01 OCT 2013:
BUY above 129.61, STOP 128.08
SELL below 127.50, STOP 129.02
See, clear as mud.
TLT for 01 OCT 2013
BUY above 107.27, STOP 106
SELL below 105.52, STOP 106.78
If the dollar buys everythiung it used to except GOLD (shooting to the moon) fine for the dollar. We've already done that - it's price in dollars increasing a hundred fold in a barely more than a lifetime.
But let the price of oil double in dollars, everything else being the same ... the dollar is done.
$6.42 gas in dollars in US is catastrophic, and will spread throughout. Dollar prices can be the same for everything else, but even a 100% increase in oil price ($225 barrel) kills the dollar dead.
Acceptance and confidence = LOST
Somebody pulled the plug on $POG this morning. Straight down. Have not seen the bottom yet.
Down The Drain..
Papergold is like "Boris the bullet dodger" you just can't take that Mo.Fu. down...and make it stay down. :-)
I guess the thinking goes like this.
The first event will have to be Paper Gold and physical diverging. It will necessarily be brought down by physical demand far exceeding availability, due to low price of gold.
Currently we have this situation. Price of gold is too low, and the East is demanding gold. How long can this demand be satisfied. I think a lot of Goldbugs gold is moving to the East.
There will come a time and soon, when there will be no gold to supply the east. This is the time, when the price of gold must move up, but the price of gold is linked to paper and cannot move up. Then the two will delink. As it will be traded in the East at a higher price, due to unavailability.
Once this happens Price of gold will go down, as it is dependent on paper. And nobody will want paper, if the physical premium is too high.
Once Paper Price goes too low, mines will close down. When there is no mine supply even the critical gold consumers will not get gold. A critical consumer is Saudi Arabia. If they don't get gold, the agreement with US breaks down. Oil will stop flowing.
This will cause the USD to lose its Reserve Status.
Oil must flow, so quickly BIS/ECB will intervene, by asking Giants at what price they will sell gold, and thereby setting the Reval value of gold. It will necessarily be in Euros. Once Gold starts flowing in Euros, Oil will start flowing in Euros. The price will probably go down from present, as the current politics that keeps the oil high will not be required. Even though Oil will become even cheaper in Gold.
USD losing its Reserve Status, will cause it to hyperinflate nearly instantaneously. Other currencies which will not be able to control their deficit, may try to continue their extravagant lifestyle, and follow into hyperinflation. Or they may sell gold to avoid the hyperinflation.
Hope this sums up the theory accurately. If there are any problems please tell.
This does mean that USD hyperinflation may occur along with Gold Revaluation. So the crisis, for us Gold stackers will not be long. May be a couple of weeks at most. As it coincides with lack oil. Once Reval happens, we can destack to avoid the worst of the hyperinflation.
I am not sure if they will convey the reval price to giants only. It doesn't make sense to me. This may cause the crisis longer for us. And also would prolong the crisis.
Nice! The development of the fractals I observed yesterday had the feeling of a marriage of the intraday with the 3 year pattern. As the short term would develop so would the long term follow and I have expected down. Although it was unclear going into the close as it went flat.
This gave rise of a scenario that the whole death of paper Gold could be unspectacular, no volatility, just flatlining (Michael dV's "low key job"). beep beep beep beeeee. Though this could still be followed by a sudden and extremely quick waterfall. And what do we have now on the intraday ?
Surely I keep in mind what Ari or FOA once said, that theoretically, this paper Gold charade could go on forever. So yes, lets wait for Another 20 years and acquire Gold, ugh. Credit to Mr. Phat for making us unsure again - but I must say that if the FreeGolders here at FOFOA are starting to doubt, it hits a certain contrarian spot in me.
The crucial question on the "forever" is: but is this the political will? Remember about a year ago when certain posters expressed quite some unease, Giants not sleeping well etc. A sense of urgency and to speed up things. Then in April support of paper Gold was withdrawn, April plus 6 months gives, hmmm!? (the 6 months taken from "Snapshot Day").
As for the prevailing consensus of complacency around budget crisis/debt ceiling- at least it starts to hit the contrarian nerve here. Remember the taper consensus? What are the odds of a loss of confidence?
Edwardo expects "Rocktober", El Camino d'Oro surely has gotten steep and rocky. But there's "Gold on the Ceiling".
http://www.youtube.com/watch?v=OAdTbE9LAtY
I love to put my savings in something which is as physical, as durable, as universally respected and as rare as gold.
The mechanics of Freegold are another matter. For example this sentence of anand srivastava:
A critical consumer is Saudi Arabia. If they don't get gold, the agreement with US breaks down. Oil will stop flowing.
Is this still part of the Freegold theory? Is there still such an agreement? From where we know? ANOTHER and FOFOA say, there was. But today?
It seems strange to me that no-one is »aware« of this agreement, no-one but our small group of Freegold enthusiastics. A belief? A hard fact?
I am not sure if they will convey the reval price to giants only:
Who is buying oil? States? No. CBs? No. Who? Is it possible that large amounts of oil are sold and bought without publically known, transparent prices—be they in Dollar and/or Gold?
Ein Anderer:
I don't think there is any formal agreement. But Saudi Arabia wants gold for the oil. They will support the dollar till there is gold being sold in Dollars. If there is no gold to be bought for dollars, their unwritten agreement is lost. They will stop supporting US and USD.
There is no need for a formal agreement.
Ein Anderer:
I missed your second part.
If the ECB will be able to buy gold in Euros, then the SA will also be able to do so. Only they need to know the price of gold in Euros.
So technically they can only tell the concerned parties and have the oil flow.
But I don't think they will want to prolong the crisis. And increasing exposure could increase the flow of gold. Also open up mines, although with much higher taxation.
@ein anderer
Yes, I had a hard time with that part too. And then the following:
Once Gold starts flowing in Euros, Oil will start flowing in Euros.
Well, possible, but is Europe able to provide the security arrangement that the Saudis currently 'enjoy' with the US? Can they even stomach the thought of such an arrangement? Personally, I can barely type that sentence without wanting to rush away to wash my hands. But, it is what it is. Maybe I'm not quite following Anand, but I have a hard time believing such an arrangement is possible.
KnallGold
I'm just trading a mechanical system I built that has no care nor concern for FG. I thought it would be interesting to share that here since we are all sitting around on death watch for the paper gold pricing system. Aside from earning a few bucks here and there, I like the fact that I am able to time relatively well my next purchase of physical. I doubt any of us FG adherents would be seriously threatened or concerned by the sharing of these ideas. Others, seeking profit/riches, and not primarily the SOV benefit derived through FG, are the ones that will not be with us for the transition. And a good call by both you and Edwardo on this decline.
To Anand's comment:
USD losing its Reserve Status, will cause it to hyperinflate nearly instantaneously. Other currencies which will not be able to control their deficit, may try to continue their extravagant lifestyle, and follow into hyperinflation. Or they may sell gold to avoid the hyperinflation.
The condition of the U.S. and their widely held currency and dollar derivative debt will have a considerable amount to say about what revaluation price will be attained. This is, in my view, a key reason why five digit revaluation price targets are silly. The lenders of last resort, not just here, but all across the world, will be recapping themselves and there will be a hell of a lot of recapping to do.
Phat Expat:
I am not taking Security into consideration.
But my view is that US is the aggressor. Without US, they wouldn't need the security. The world is no longer polar, where you have to take sides.
And, for the heck of it, having crunched the numbers based on the current snapshot of GLD, I have the following:
SELL below 126.70 with STOP at 128.21 and TARGET 1 of 121.57 followed by TARGET 2 of 114.41.
Things that make you go, hmmm...
Edwardo:
The lenders of last resort, not just here, but all across the world, will be recapping themselves and there will be a hell of a lot of recapping to do.
How will ECB recapitalize? Isn't it pretty much decided that they will use bail-in to recapitalize the banks.
I am sure many other countries that do care about their currencies will follow suit.
Yeah some countries like US/UK/Japan will recapitalize. But that is not going to be a universal trend.
Anand
"I am not taking Security into consideration."
You don't say. So FG comes along and MENA is one big happy family? That would be wonderful. Of course there's no historical basis for that.
We have this "There is no way marginal flow ceasing could cause a 10x revaluation in the price." and this "We will see $10,000 gold, count on it! It’s the only way this can be resolved. That same figure will create massive backing for the Euro and hasten it’s journey into world reserve currency status."
Funny how they can both be wrong. We will see $10,000 gold or we won't see $10,000 gold. One of the two as to be correct, doesn't it? There is a third choice where the current Dollar hyperinflates and dies and a New Dollar then bids for gold. Gold can not be priced in current dollars at $10,000 because of the ties it has to other commodities in the algorithmic system and gold priced at $xxx,xxx in New Dollars will not make the Euro a world reserve currency but instead a world oil currency.
The old dollar must evaporate and a new one, yet unspoiled, must bid for gold. Fresh new dollars must entice gold out of hiding and I agree that it will take many, many new untested dollars to overcome inertia.
And I'm not trying to slight you Anand, I'm just having a hard time following along with your scenario. That area is one of the most vexing places on the planet to me. I would be quite delighted if we were to depart there, only to return for humanitarian requests.
Phat Expat:
Why was Saudi Arabia so intent in letting USD get killed in the 1980s. When they were openly asking for gold.
Didn't they get security from the US at that time?
I am pretty sure security is a secondary concern for them, compared to gold. I believe they are willing and able to defend themselves. They are actually behind some terrorism in other countries, like Syria. right?
Phat Expat, certainly no threat when you share your ideas, keep em coming. I always understood your trades as a mechanical system (and as a Roulette player won't accuse anyone of trading ;-) For me the small picture is intertwinded with the bigger picture and necessary for better understanding. Its all about coming through this mess as best as possible.
Btw I was not ironic when giving you credit for putting up the cautionary notes on "FG imminent" timing. Its necessary for not becoming victim of group thinking. I mean, what speaks against just more simple bear market action? 1200, 1100, next year 975 etc. We remember the old "magical" lines" on the way up of 350 and such. Although moves down are usually faster, like it its now.
What you can bank on though are the big updays in Gold, they NEVER have a follow through, for whatever reason. So there goes the recent 60$ pop.
Sorry that should have been late 1970s instead of 1980s.
Phat Expat:
No offence taken. It is much better than getting no response at all. As normally happens to my posts :-).
Yes, Anand, these are the dominoes I see toppling in a general sense as well. Russia or China will stand an army in fields where energy pipelines are to cross, or to ports reaching Asia and Europe, if the gold reserved currencies become the new petro-currencies and the dollar's death rattle becomes audible. All do still fear the EMPIRE and its armies, but a MAD doctrine of a mutual assured deflation will accompany withdrawal of economic fuel to the dollar faction.
The dollar cannot survive if it cannot buy energy. It can and has survived most all other unfavorable circumstances but it cannot survive energy hyperinflation even in a vaccum where all else deflates.
Even if the USA could somehow meet its energy needs internally, dollar holders globally will have no use for the paper if oil sales cannot proceed as before.
And natural gas is a similar enough wealth reserve to warrant infrastructure modifications to mirror oil.
Anand, KnallGold
It's getting late for me but I do appreciate the feedback. Look forward to reading more of your thoughts as we travel this FG trail together. Good day/eve.
@matrix
Freehgold is my thing assuming you mean freely floating physical gold. But all parts that are discussed here are now a requirements particularly things which are unseen without evidence. As for what i believe, I believe unallocated vs allocated metal "ownership" will be a spark to a physical only system. This will be brought on by(among other things) the usd losing support as our exorbitant privilege can only go on so long. These are things I can see, similar to your blackhole example. But I don't know the future and I certainly wouldn't look down on someone for something unseen. If someone disagrees with reality certain comments are probably warranted.
On phone, sorry if the grammar is off.
Anand asked,
How will ECB recapitalize? Isn't it pretty much decided that they will use bail-in to recapitalize the banks.
A potential precedent of sorts was set with Cyrprus, and there has certainly been a lot of ink spilled that takes that line, but I don't see anything that says unequivocally that it's bail ins from here on out. But, even if it is, the ECB/Euro is not immune from an existential threat. And should they experience one they will pull the rip chord so to speak.
Edwardo:
I think there is another option for the ECB.
Yes the first step would be a bail-in, with shares of the bank given based on the contribution to bail-in. Because the reval will happen a little bit later.
Later when Gold is revalued, equal amount of Euro can be printed to replace the shares, so as to make the investors (aka depositors) whole. Since Euro will be used all over the world for transactions, so this extra Euros might be of help in providing liquidity for international trade. Similarly for Euros printed for buying gold during Reval Price determination. I don't think this will cause the value of Euro to drop.
Yes Gold can be used to recapitalize banks by other CBs as well.
Oh man, never saw this coming, headline from "you know where":
Maguire - Gold Plunge, Who’s Responsible & What’s Next?
Is there any betting site on Internet which is taking bets when and where A. Maguire is going to appear and what he's going to say?
Forget FG, I would bet my whole stash on this guy. :-)
@ anand
You write ...Once Paper Price goes too low, mines will close down. When there is no mine supply even the critical gold consumers will not get gold...
In theory mines will sell at the then current POG. In practice though that may not necessarily be the case.
@Indenture
...We will see $10,000 gold or we won't see $10,000 gold.../and further on/ ...Gold can not be priced in current dollars at $10,000 because of the ties it has to other commodities in the algorithmic system...
Much more important issue is whether $10000 POG will be a viable POG where some gold does flow or it is only a price in a hyperprinting environment where nobody takes it seriously. The key factor that must be taken in consideration when answering this is the time lag. Surely gold is currently tied to other commodities but price signals are not always taken simultaneously throughout the economy. A sudden semi-revaluation of gold could be used by interested parties to the effect of scooping as much gold as possible from debtor nations before it dawns to the masses that the jig is up. It all depends on the POOil and how quick it follows gold`s lead. If you compare brent to CCI for instance you might notice that brent holds its position quite nicely. That may mean that the oil producing nations can play the goldspike strategically and hold the POOil down just enough to get paid for the quantity that is already 'in the pipeline'. At that time I am quite sure that the computer trading platforms will be switched off by the interested parties and short selling will not happen to the degree that we see it now (maybe as a part of the capital controls that will be in place as stopgap measures to the failing dollar). Three months will suffice in my opinion to settle as much and as relevant claims as possible in the gold-oil arena. Then the damns will break open and the dollar will die. At the same time POG in euros, renmimbi and roubles may either gain a bit or decline depending on the quantity of paper priced claims nominated in each of these currencies.
And of course as far as shrimps are concerned it will be a buy price only. Dealers will sell over the counter to the highest bidder.
"Why we rely on Euro is, because it has severed its ties with the Nation State. So the Nation aka the politicians cannot force ECB to debase the Euro, for their deficits."
To Anand;
Has the ECB severed it's political ties? Is the ECB independant? Then the question becomes; Is the ECB independant from the BIS?
I would dearly, and I am not being sarcastic here, like to believe that there is a class of people who, some while ago, hatched a plan to "save us." Maybe saving us shrimp is a byproduct of saving themselves, but save us nonetheless.
There may be a difference between the balance-sheet of the ECB and other central banks, but the last time I checked, the European economy is in shambles as well. In my country, september was the worst month EVER concerning new bankruptcies.
So again, if this was planned all along, as this blog has made me believe, it is some strange trail they have taken us on to.
To whit, I am buying and selling eur, but I am saving gold :-)
So, are there two factions within this blog, one that expects that the dollar will be replaced by the euro as the world's reserve currency, and another that expects that the dollar will be replaced by...nothing (meaning there would be no world reserve currency post-dollar-mortem)?
Franco: Why does the world need a reserve currency?
"Much more important issue is whether $10000 POG will be a viable POG where some gold does flow or it is only a price in a hyperprinting environment where nobody takes it seriously. The key factor that must be taken in consideration when answering this is the time lag."
Where some gold flows? Gold flows when a enough currency with use value is offered and accepted. This proves a currency is working. But concerning $10,000 gold if it happens it will be but a moment and we will only pass it once on the way up. There will be no time lag, no gold hovering at $10,000.
A "semi-revaluation of gold" is impossible. Every trading computer would correlate the gold price to known ratios of other products. The system simply can't take it.
There is a maximum price of gold in current Dollars and it is well below $10,000. Not including Prechter's 15 Minutes of Fame :)
The Euro is what it is. Look, if the founders of the Euro wanted to separate from the nation state to have a more tightly managed currency, well, they got what they wanted but this means terrible austerity for the southern European nations. They are locked into deflation because they cannot competitively devalue, nor can they default on Euro denominated debt. The end result of the Euro is inevitably civil war between the north and south of Europe.
This has been obvious for some time in the doomer financial blogosphere, but less appreciated here due to the irrational love of the Euro amongst freegolders.
Freegold is still perhaps an inevitability, but the Euro is probably finished.
It's looking more and more like the following will take place:
Euro collapses, everything deflates against dollar, U.S. becomes uncompetitive, U.S. hyperinflates dollar, China announces gold backed yuan, rest of world agrees to freegold to prevent China from controlling the world. All sovereign debt is defaulted on, currencies float against gold, and we start over from scratch.
That seems to be more likely given everything that has taken place, and all the knowledge we have now. We must update our understanding for the present age. Another and FOA showed us the way, but they did not foresee everything that has happened.
Indenture,
Yes ...$10,000 gold if it happens it will be but a moment and we will only pass it...not sure about the direction though.
What I argue is that there will be a much higher POG number in the current USDs than today - the last shaking of week hands before the revaluation. By then the bond market will be dead and as a last ditch defence of the USD, severe cap. controls will be installed including the decimation of the computerized trading platforms.
Why has India provided only the energy importers with USD liquidity?
Will there not be a repeat of this policy with the USGov. when the FOREX markets are in shambles and EUR liquidity is given to privileged parties only?
The old system is a trail of sand and the 40 year maticulously planned new system is a paved road. Only a lack of understanding would lead someone to complain that the Euro built a race car with slick tires and is currently having trouble in the sand.
There is no way marginal flow ceasing could cause a 10x revaluation in the price
I see flow ceasing as a result of the collapse of the paper price. If the paper gold market is 50X that of the physical then it will cause a 50X revaluation in price. If it is 100X... etc. As support for the paper price is withdrawn - the marketplace is aware that paper gold holds no value - that it cannot be redeemed for physical. "All paper will burn..." Governments can impose Draconian dictates but they can't run an economy without Oil. As paper fails oil demands gold. CBs can use slight of hand but they can't turn water into wine - or rather paper into Gold. So I don't see that we will get:
will see $10,000 gold
No. That would only mean the paper Gold market is still functioning. Revaluation will come after the paper price becomes... worthless. Physical Gold will only then flow, at the top levels, when it can be redeemed for it's 'just' value (between 50-100X). This is why I feel the miners (most of them) will go under before FG. Their contractual agreements to refiners etc. are in the paper price. I don't see a middle ground - this is where the comb-over pundits get it all wrong... and will continue to. The Turks, Sprotts, Sinclairs will continue to lose credibility as their predictions of a higher spot price don't transpire (those predictions are only used to promote their businesses anyway - who knows what they really think). The only way I see a 10K Gold price is a short faux-revaluation after the dormancy of the gold price - somewhere between flow ceasing at the top level and the time that it takes to trickle down to us shrimps. This is the period to hold on tightest - to defend your precious. I doubt it will take long - well, I hope it won't.
s p
how does China ever export anything again once they have a 'gold backed currency'..unless you mean 'backed' like the euro is 'backed by gold'.
They would have a strong currency at a time when no other country could afford their products.
@Indenture
You can make another analogy if you want to.
Try to think of GLD and the other ETFs as the US/Brit. equivalent of the proverbial gold temples of India being squeezed out of gold. And the approx. 10000$ POG as the US variant of oppressing the private ownership of gold for the greater benefit of the state. Or, remember the Korean currency crisis and its patriotic call to bring out the gold for the salvation of the won.. It will just not work in the US so why not just bate the citizens with high enough gold price and see just how much gold will come out of them?
There's no faction, Franco. There is a unanimity of opinion that while there will continue to be mediums of exchange-even a devalued dollar, or whatever they call the next iteration of U.S. currency- there will be a new (well, very old) store of value, in the form of physical gold, acting as the chief reserve asset displacing dollar derivative debt. There is no faction, or schism, or whatever term one cares to use to denote division, amongst the ranks on the question of reserve currencies. The term reserve currency was always a misnomer, and, come freegold, the term reserve currency will formally enter the dustbin of history.
@ Gary
If you read the exact wording of FOA... We will see $10,000 gold... it does not mean that this 'price' will come out of a ...paper Gold market is still functioning... It will be just a : bring us your gold and we will take it all off your hands while paying you handsomely this outrageous price - xxxxxUSDs, just hurry cause it will not last long ;-)
Franco,
The crux of the matter is that the EUR outlasts the old USD!
After that some southern European governments may choose to run parallel currencies to the euro if they can effectively tax their citizens and if government stooges accept it for their 'services'.
Stand alone currencies will not last long because they will be distrusted and will buy oil at a loss in the relative/competing purchasing power as far as the national output is concern. So if now Greece pays a 1lt of olive oil for a gallon of diesel with euros as MOE it may well pay close to 2lt of oil for the same quantity of diesel if drachmas are reinstalled as a stand alone currency in that country.
@ Gary
...Their contractual agreements to refiners etc. are in the paper price...
Maybe you are right. Or may be they do not have contractual obligations and can sell their product OTC to the end customer based on the gold content so that the customer chooses whether and where to refine it.
@Bright aurum
The way I understood FoFoA - was that the paper price will decline and trading will halt (I believe his figure was $500) for X amount of time. I don't see how a fully functioning paper market revalues Gold to 10K - despite your interpretation of FoA and the term 'functioning'. 10K might be a one-off, brief, offer - probably to scoop most of the scrap - not something I would consider 'official' - since it will not be fluctuating supply/demand driven market in that sense.... more like an attempt to 'steal' by those in the know (hey, it might be us!)
I agree that is why we will see this
bring us your gold and we will take it all off your hands while paying you handsomely this outrageous price
Hence, I said:
This is the period to hold on tightest - to defend your precious.
you say
just hurry cause it will not last long
I say
I doubt it will take long - well, I hope it won't.
Not a lot of difference, maybe semantics...
Cheers,
@ Gary
You state ...The only way I see a 10K Gold price is a short faux-revaluation after the dormancy of the gold price - somewhere between flow ceasing at the top level and the time that it takes to trickle down to us shrimps. This is the period to hold on tightest - to defend your precious. I doubt it will take long - well, I hope it won't...
I agree 99% except for the ...after the dormancy of the gold price... part.
IMHO the 2 things needed for the 'faux-revaluation' are the recognized death of the bond market (a deluge of foreign sales of bonds) accompanied with a sharp fall in the USD-EUR exchange rate. And it can last until the POOil in $ catches fire. Surely GLD will by then be already spoken for. But that does not mean that the official POG will not come down after the initial 10000+ USD bate. Quite on the contrary - it needs to go down so to create a sense of urgency.
Bright: "just hurry cause it won't last long
Yea, like .02 seconds as the New Dollar price roars past it. Gold will require more than 10,000 ND's (new dollars) to flow. The time between the paper gold market failing and the issuance of New Dollars is a good question.
@ Gary
Well you are right. It will not be the 'official' price but it will be a price and you are right that scrap will be welcomed and unsold jewellery from the jewellers` shops as well, cause they will be getting gold later on on the cheep, right ;-) .. (hey, it might be even SOME of us, as well!) :-((
@Bright aurum
Maybe you are right. Or may be they do not have contractual obligations and can sell their product OTC to the end customer based on the gold content so that the customer chooses whether and where to refine it.
Perhaps only the large miners... a tiny percentage of the total. This won't be the case for non or small-producers who make up the vast majority in the miner space... I expect some of the large will stay in business and simply close mines and layoff everyone until/waiting they anticipate the price rising. This is happening now.
Didn't I read on ZH recently that the US government is passing, or attempting to pass, legislation that no one else can produce gold coins or bars ('cept them) not unlike Von NotHaus was labeled as a domestic terrorist by an Assistant US Attorney? Anyway, I certainly don't see that out of the realm of possibility.
@ Indenture
The acceptance of the new USD is still an enigma and it will largely be policy/tax/war/physical gold sales driven. What I am trying to speculate upon is the last days of the old USD. And how the USGov. will hunt its citizens gold in favour of connected interests and yes the gold will remain within the US borders until the new USD arrives then it will flow again east as the elite establishes the new economy`s production base.
@ Gary
Didn't I read on ZH recently that the US government is passing, or attempting to pass, legislation that no one else can produce gold coins or bars ('cept them)
What about gold concentrate/gold dust/ AuCl or whatever.
Mines will be able to sell their product OTC interim gold reval. And it will be the jumbo shrimps/small giants category that will seek out the small producers, not the other way around.
The USGov. will turn a blind eye to it until it doesn`t.
@Bright aurum
What about gold concentrate/gold dust/ AuCl or whatever.
Do you think that will keep them in business? Selling AU is a totally different business than mining it. Again, I think the few capable of making this transition, and are fortunate enough to dodge impending legalities - both governmental measures and their current contractual agreements, to save their skin is a very small percentage. And, of course, if the price of Oil escalates - that is right off their bottom line. No - they are toast IMO, and I won't be buying any miners anytime soon... :)
Edwardo:
Thanks for the response. But, if there is, as you say, a unanimous opinion that after the US dollar hyperinflates there will be no new "reserve currency", then why does the topic of the Euro continue to get discussed so assiduously on this blog? If the Euro is not supposed to supplant the dollar in the freegold thesis, then it's just another currency, right? It might be designed to do OK within the freegold paradigm, but unless one lives within the Eurozone, then it's a moot point, right? Why would an Indian or an American want anything to do with Euros?
@ Gary (not the evil one!)
...No - they are toast IMO, and I won't be buying any miners anytime soon... :)...
I am only suggest befriending the mines` owners/management; not buying the shares but the product (gold concentrate/gold dust/ AuCl or whatever) instead.
And yes, if the POOil escalates it is game over but not for the goldmines` owners or the friends of the owners that are in the know but rather for the USD and the $IMS.
Franco
I'll try answering the Q to Eduardo...
In a world with no reserve currency (if there is a sudden loss of the dollar) the whole world would use the Euro as if will have proven it's mission to be strong in gold and to be stable.
After other currencies are redesigned then any could act as a medium of exchange.
Why would the world go back to using one nations currency as a reserve? All nations will have gold (all nations who wish to play the currency game) and all those nations will have to behave or pay the price of being devalued in gold.
Who knows, maybe in the future it won't be worth the hassle of having your own currency. Perhaps many smaller countries will just pick one to use as a MoE.
If freegold can act as a stabilizer as we think it will then the MoE may become trivial...as it should be.
@ Micheal dv
The US was the biggest exporter in the world with a strong currency. Germany can export with a high value currency.
Inputs are cheaper when your currency has more value.
It is only keynesians that believe an undervalued currency is good for exports.
Franco: The Euro is discussed because it is unlike any other currency in the world and oil will be looking for a currency that can be stably converted to gold. We believe the Euro was created for this purpose and is simply waiting to display it's true powers.
FOA 10,000$ mention has always meant to me 250 (price of gold at the time) x 40 (reval factor mentioned by FOFOA several times).
It is the multiplier I look at not the absolute value in $; today: 1300 x 40 = 52,000. But maybe the 40x will be applied to the "last" price of gold, maybe 400$? in that case reval price in $ = 16,000.
Now, is it 40? or is it 100? in the last case, we get 40,000$.
More or less between 15k to 130k (FOFOA also said lately 20k too little, 200k too much).
Franco:
Adding to Mdv's answer.
AG (after gold), many countries with unstable currencies will need to peg their currencies to some international currency, to make them stable. That currency will likely be Euro.
So when New USD is introduced, instead of backing it with Gold, the USG will peg it to Euro, to prevent it from hyperinflating immediately. Pegging with Gold will cause a lot of Gold to leave the US, which is probably not what they want. Still they will need some Gold to defend the peg with Euro, if US is still not able to balance its deficit.
Someone asked the other day about two camps as regards the euro.
I think there are loads of 'camps' if you will, on some of the details of the future, but there is also broad agreement on some basic premises.
Gold will be prominent in the monetary system and needs to be at a much higher price. This is agreed on.
The possible effects of just this simple proposition are so complex that many 'camps' may,can and has spawned.
I suppose that's just the way it works when so many with so many different experiences and perspectives look at some central thesis. :)
TF
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