Tuesday, November 5, 2013

Advance Warning


This post is my replies to two reader emails. The first one was to "Victory", one day after my Gold as a FOREX Currency post went up. And the second one was to "Burningfiat" on Friday.

Hello Victory,
"... My thinking is this, won't the end of $ support be clearly visible in the currency exchange rate? Isn't that where the rubber meets the road, there really should be no guesswork needed. The US is a perpetual net exporter of dollars and has long ago hyper-inflated…"
There is definitely a glut of dollars right now. In September the Fed announced its new "reverse-repo" operations. There is, of course, a lot of debate about what those are really about, but I think it is obvious that they are to mop up the glut of dollars and raise short term interest rates in money markets and t-bills. The Fed even said so. They said that these operations will raise overnight rates in the money markets so that lenders can actually earn some interest.

When there's a glut of dollars, it's hard for banks (who create dollars) or money markets (who auction existing dollars) to make money on interest because there's so much competition for the limited pool of borrowers. Too many dollars drives interest rates to zero and even negative in some cases. So the Fed is actually competing against real organic borrowers for its own liabilities. The Fed will pay you to lend your extra dollars back to the Fed, even though what the Fed is "borrowing" are its own liabilities. So the Fed is creating synthetic demand for its own product to drive overnight and short term interest rates higher.

You're looking for a crash in the USDX to indicate the imminent end, but I have always expected a spike in the dollar, and I think Another expected that as well. I have written in the past that we could even see the USDX spike (very quickly mind you, not a slow rise) to something like 150.

What we see right now is big money piling into short duration, even overnight, assets. To escape, that money will have to pass though dollars once again. Where the rubber meets the road, in my opinion, is not anywhere inside the monetary plane. Instead, it is where the monetary plane intersects the physical plane, and that is in prices, the prices of real physical things, the price of physical gold and the price of (primarily imported) necessities. That's where I expect to see the break, in one of those two places: the LBMA or a real price jump in necessities. Whichever one comes first, I think it will quickly cause the second one to follow.

What that means, practically, is that either physical gold goes into hiding first, or there's a sudden devaluation of the dollar against the physical plane, meaning necessities, especially those necessities needed by the USG which must be imported. When that happens, the USG will print whatever is needed to keep its imported necessities flowing in under the aegis of national defense. Actual hyperinflation will follow.

When this happens, or a top level disruption within the LBMA, all that money piled into short duration assets will panic out and bid for dollars which it needs in order to pile into anything else. This will briefly drive the dollar way up on the USDX. It may even happen before you know what's happening, because big money tends to panic before small money even knows there's something to panic about. Remember this story from Unambiguous Wealth 2?

"Compare these big money folks to the average guy who rides the bus. You miss a bus, so what? It's inconvenient but another bus will come. It takes a long time to sink in that another bus isn't coming. It's not until there is such a big crowd waiting at the bus stop for the next bus that people start thinking "even if a bus comes there are too many people to fit on one bus." In that mindset the surest way to cause a riot is to send one bus i.e., not enough buses. You have to fight to get to the front of the queue. This is a bank run mentality.

And this is a key difference between the average guy and the big money. Big money isn't used to being kept waiting. Big money owns the "bus company". They know the buses aren't going to run before the little guy. They panic early. There was an electronic bank run around the time of the Lehman collapse. That was one of the reasons why governments around the world stepped in with fresh deposit guarantees. But there were no lines outside the banks to alert the average guy to what the Giants were up to.

Right now gold is $1,712 per ounce. If you have $200,000 in ambiguous claims floating through system-space, your account is right now worth 116 one-ounce gold coins of unambiguous wealth. But here's the thing. You are never going to beat the big money to that panic button. There are enough gold coins on the market right now that you could get your 116 of them without affecting the price. But if you're waiting for the first signs of panic, you're not going to get anywhere near 116. You'll be lucky to get six or seven.

There's only one way to beat the Giants to the gold, and that is to run in front of them."
Apply this reasoning to the signals you are watching. Even though you aren't waiting to buy gold coins at the last minute, you are still looking for signs that systemic transition is imminent. So what you want to look for are signs that big money is panicking, not the signs that you think will cause big money to panic. Because chances are that the really big money will see those signs before you do, and panic before you even know they are there. Therefore, signs that you think should be making big money panic, when it's not panicking, are probably the wrong signs. See?

In the comments section, it often seems like the Freegold holy grail is to be able to predict the proximate cause, and therefore get some advance warning, and therefore be the first to make a correct timing call on Freegold, even if it's only by days. But if you follow my reasoning, then it is most likely a waste of time trying to gain some advance warning. The advance warning is in the logic, and in the A/FOA archives. And the holy grail is simply buying physical gold now, before it happens. That alone will make anyone look like a genius in hindsight.

Some people look for rising short term interest rates as a sign of systemic stress, while others look for rates to fall to zero or below. Some look for a falling DX while others look for a spike. That's all monetary plane stuff, and not where the rubber truly meets the road. As I said, the Fed is trying to levitate short term rates right now, so why would rising rates indicate stress? To me they indicate that the Fed has sufficient control over the monetary plane, which I kind of assumed it did. What it has no control over is where the monetary plane intersects the physical plane.

"So my question is really this, until we see the $ drop rapidly on the FX market don't we know that official support from someone besides the USG is still in full effect. And the corollary that FG will not be imminent until this support is withdrawn, which we would see immediately in the FX market as a $ devaluation?"
We could see a sudden drop in the USD versus other currencies in the FX market, or we could see a spike. But I think we will eventually see some sudden, unexpected and highly unusual volatility. That's what I would watch for if you're one who likes to watch the pot, waiting for the water to boil. Watch for unusual and extreme volatility, because that should be what we see when the monetary plane comes unhinged from the physical plane. And don't forget the concept that there can be a head-fake right before a phase transition, a sudden and major move in an unexpected direction.

For me, I already have the advance warning in the logic and the A/FOA archives. I try not to watch the pot, but instead to explain the logic to others, because I think that's better than trying to predict how the monetary plane markets will behave at that moment when the physical plane lets go.

Sincerely,
FOFOA

Hi FOFOA,

Hope all is well!

Do you have an opinion of the latest strange GLD inventory update behaviour?

Could it be a sign of rumblings further down in the machine room? Or do you really think it's all just meaningless pot watching? :)

/BF

Hello BF,

I certainly think it is interesting, but the short-term variations we see don't change my opinion of what is happening behind the scenes. I think the consistent drain this year is a sign of rumblings further down in the machine room, but I find it hard to believe that the reporting anomalies are reverberations from the same thing that is causing the drain. More likely, I think, there is probably some explanation for the reporting anomalies that we just don't know about, something that we haven't even considered.

The indisputable story is that GLD has lost 36% of its inventory, 487 tonnes in 10 ½ months. Title to that gold was transferred to someone. The only question that matters is whether it was transferred into BB reserves (the plenitude view) or into private ownership (my view, and obviously the correct view ;). That's more than 46 tonnes per month.

The BBs probably have at least twice that much coming in through mining and scrap (just a guess), so let's imagine they have 100 tonnes coming in each month. The outflow is obviously higher than the inflow, but the pressure is widely distributed across the LBMA. So the rumblings in the machine room are widely distributed and therefore isolated from what we see in the reservoir drain reporting. GLD is where the buck stops, where they obtain that shortfall of incoming gold, but it is not likely going to a specific buyer. More likely, it is simply restocking the subterranean stream.

The point is, I wouldn't expect the underlying cause of the drain to transfer "short term vibrations" into the daily reporting of the drain, I only expect it to show up in the greater trend. Therefore I think it is more likely that there must be a more mundane explanation for the reporting anomalies that we see, something we simply don't know about and therefore haven't even considered. That's the way I apply Occam's razor to a situation like this.

I expect the short-term machinations of the system to appear outwardly normal right up until the moment the pistons seize up and the whole machine comes to a grinding halt. That's the way these things usually seem to end. So I expect that could happen at any moment, without visible warning signs. In hindsight, I think we'll realize that OBA was right, it was just a hair's breadth away. But watching the pot can make even a hair's breadth feel like an eternity from the watcher's perspective.

So yes, it's interesting, but Occam's razor tells me that we are most likely watching the effects of some mundane cause we are not aware of while "superstitiously" trying to attribute those effects to the greater cause which is clearly obvious in the long-term trend. That's fine, and it is human nature to do so, but at what cost? The cost is that a hair's breadth starts feeling like an eternity, and some people can't handle that feeling and end up throwing in the towel.

Have you noticed how many people that have only been following my blog for a year or so eventually start making emotion-based predictions that Freegold must be 5, 10, or 20 years away? I have been at this for more than five years, and I still have the same view I had in 2008, that it could happen at any moment and each moment that passes brings us one moment closer. In fact, I think it must be almost here right now! And I think the reason I am able to maintain that view is that I have never been a pot watcher. I have always paid more attention to FOA's logic and the long-term trend than to the short-term vibrations.

The long-term trend is that the commodity bull/dollar bear market ended more than a year ago, even though dollar inflation *policy* is firmly in place. Shortly after that, the GLD drain began. And shortly after that, support for "foreign dollar settlement with CB storage" reversed and began declining. This is very close to what FOA said in one of his last posts: "The game is to let the US economy suffer from its own bloated expansion by moving slowly away from supporting foreign dollar settlement with CB storage. This is more than enough to end the dollar's timeline as we are already stretched to the leverage limit. They know that [the Fed] has but one policy to use and that will be super printing."

Anyway, keep up the great work with your auto-pot-watching app! I do enjoy the short-term show, even if I don't put much stock in it. ;D

Sincerely,
FOFOA


884 comments:

«Oldest   ‹Older   801 – 884 of 884
Michael dV said...

…and just for the fun of it all
turn the page...

ein anderer said...

Everybody knows
it is now or never …


Thanks, FOFOA, for this great Cohen take BTW.

BustinStones said...

Per our host... 12/29/2009

The COMEX gold price, which is really just the price of paper, may drop to $200 or lower before trading is halted.
You can expect this kind of "spiritual experience" price volatility to be heralded as proof that the goldbugs were wrong all along. But don't be fooled. Many a strong hand will turn weak at the worst possible time. Many a bug will be lured by the warm glowing light only to be electrocuted. Don't be one of them

$200 dollar Gold? Try and find you some... ;)

ein anderer said...

It's a long way to Tipperary!

Unknown said...

Goldtrailfour:
"I think however that you need to expand your understanding of what Another/FOA are trying to convey, because it is not a simple advocacy of the euro over the dollar -- but a much deeper and important advocacy of competition in currencies, much as we have competition in other realms within the economy ... I do not believe that Another/FOA are advocating a fiat euro which would "replace" in toto the dollar. Instead they advocate the euro, dollar and gold should "compete" for the hearts and minds of ordinary people (in terms of the currency they employ to store wealth), important financiers (as a hedging methodology), and, yes, central banks and nation states (as a reserve asset). In the case of nation states, the competition would inherently create circumstances leading to each doing what is necessary to make their "reserve" better than the other "reserves."

Under such a regime, the importance of gold ownership, for nation states, as well as individuals, would not be diminished because any nation state is capable of dalliance along the road to currency inflation making it necessary for the other participants to "hedge" their holdings. It is in fact a novel concept built closer to the von Hayek foundation of competing currencies -- including gold -- than possibly your own reliance on a gold standard as the ultimate and only magic dart that will find the target's center."


And BTW, the YUAN has now surpassed the Euro in trade finance.

ampmfix said...

Why pegged to the dollar?... maybe because of the US military? what dollar demise are we talking about? sure, structural support retired, it is not enough!

http://gulfnews.com/business/economy/four-gcc-countries-to-announce-common-currency-by-end-december-1.1262037

frankthetank said...

@ampmfix: Don't you think it would be much easier for a GCB(or whatever the new Bank will be called), which is not being accountable to a single government, to cut the chains to the $, than for single national bank?

DP said...

Pay us in gulfos for our exports - what's the difference, they're pegged to dollars anyway.

… Hey, our trade is no longer mostly with the US… perhaps we should switch to a peg against a trade-weighted basket of currencies?

Anonymous said...

At these prices, my only regret is my limited stream of excess dollars.

Anonymous said...

Can someone tell me when is the end of year ECB mark to market? Or better yet, post the link for the relevant page in the ECB website?
I'm just totally incapable of finding it!!
Thanks a lot!

DP said...

ECB 2013 suggests what you seek may in fact be Week 01, 2014?

Anonymous said...

Thanks DP, it does seem so.
Let's hope for one hell of a new year's mark to market party! :)

Edwardo said...

I hate when this happens.

ampmfix said...

To me it is obvious that such a move (gulf currency mentioned above) sends a celar signal to the rest of the world of confidence in the dollar, that is helping tip the balance of the undecided, kicking the can another x number of years, etc... It is certainly NOT good for an incumbent RPG. Whatever the bright minds say. In fact it is probably a forced move by the USA onto the gulfies.

ampmfix said...

clear signal...

Jeff said...

So the blackmarket cryptocurrency that's free of government 'control' is kind of risky? No FDIC stickers? Atlas robbed? heh

burningfiat said...

Jeff, In related news, no FDIC sticker for Detroit. Or...

Let's see what the Federal level can do to reimburse those evaporated pensions...

One Bad Adder said...

As we patiently await the results of the deferred 3 and 6 mth Auction, (hyperlinking practice ahead ;-) THIS is the current $IRX (Daily) which is showing us a nice cosy 50/200/ current convergence. Toggling to the Weekly Chart, indications are that we'll need to see a definite breakthrough on the 50 / 200 wma before a trend-change gets established ...to wit, more grinding down ahead...eventually into the abyss of Deflation - IMHO.

One Bad Adder said...

This is the Chart referenced above - Hyperlinks not appearing for some reason: -http://stockcharts.com/h-sc/ui?s=$IRX&p=D&b=5&g=0&id=p73458434997

KnallGold said...

Yesterday I felt (gutstinct...) something happened and I was sure if I asked OBA, he would have a chart backing it up! And he posted, without even being asked to...

Another orange signal flaring up. More to discover in the next days imo!

Yeah, Gary is right, it IS happening. What scale the time axis has though is left to guess. But it behaves like the window is open which btw is not a prediction IMO just a description.

It certainly can remain open in 2014, just check the environment. I see no reason speaking against it, respectively why the process would be aborted. No need to panic guys, it takes what it takes. Maybe we should put the timerscale from y to m ?

OK Dante is going for 21. December (I remember that). At least one is crazier than me :-)

To keep in mind is the Chinese record buying, they STILL get their stuff. I'm looking out for an accelerating pace, Nov. numbers not published yet. Or, if reduced buying, either satisfied, or passively signaling "we didn't get more (tbhng...)"?

And for the Sinclairs et al burning the paper Gold market- you don't burn the marketplace you are going to sell do you?

Robert said...

KnallGold, when you say "it is happening" -- what is happening? Is something imminent? If so, what? I am still trying to figure out "which decade?" but now you are ready to go to "which month?" Call me skeptical! Didn't FOFOA suggest we see another deflationary plunge right up to the brink of HI?

tEON said...

@KnallGold

What scale the time axis has though is left to guess.

That would be the best way to put it, IMO.

@Robert

Is something imminent?

Neither of us said anything was imminent.

...but now you are ready to go to "which month?"

No, I wouldn't say that (see first statement). When he said

...should (we) put the timerscale from y to m?

KnallGold is inquiring about shortening a timeline (he could have said 'hours to minutes' and it would have the same meaning) - but he knows that there is no timeline at all, really. Just more positive signs. I think there certainly is a light at the end of the tunnel - although we don't know the length of the tunnel or speed (or acceleration/deceleration) of the vehicle. Arrghhh, I guess that is akward. LOL.

I think there are plenty of signs we are moving in the direction FoFoA has anticipated. Where the Gold community pundits, mostly, see a price-rise - we look at it that the paper market must go to zero, first... before revaluation. So the immense decrease this year in SPOT points more to FG... than away from it according to FoFoA's theory (which would have the least impact on the marketplace.)

This is exactly as FoFoA has infered lately - we don't know which indicators are valid and the event will happen when we least anticipate it. And why A/FoA encouraged monthly buying (or each paycheck) as timing the event is impossible for shrimps. Timers lose. So remove 'timing' from the equation. Buy monthly, live your life.

I remain confident that all the weak hands will toss in the towel as this price continues downward. My friend called today to sell me his last 8 ozs. I told him that I don't have any money and he went to two coin stores - one only bought 2 ozs claiming it will take him 2 weeks to sell them, and the other one (a store filled with silver coins) in a large Mall - just flat out said 'No'. I expect more similar stories...

Sam said...

1 of 2
If I were to take a shot at timing I would place my bet on the same horse Aristotle bet on all the way back in 2010. If you read the e-mail exchange between him and FOFOA (as posted in the Jan 2013 post “happy new year”) you will see some thoughts from Ari from a May 2010 e-mail, all of which were spot on in their understanding of events as they were happening and implications of their actions.

If you recall he said central bankers delayed a 2010 target because of the financial crisis and that indications were made that mid 2013 would be the new target to open the window and allow freegold to roll forth. Just as the timeline for 2010 was delayed by the financial crisis Ari acknowledged that this transition always remains in flux and that further delays could become a reality. In 2012 there were ideas on the table according to the European Commission of extending some freegold positive policies until 2018. This is why timing for freegold can be a tough business. However please recall that Ari said the surest sign of the mid 2013 date vs. further delay was the warning the EU gave to private bond holders that they would shoulder the pain of debt restructuring starting mid 2013. This policy was not delayed and I believe neither was plans for imminent freegold.

Warned as early as 2010 private bondholders have had time to now reposition themselves or at least come to grips with this new reality. Further delay for their benefit is not necessary. As we all know we saw the bail-in of Cyprus and we also see the EU recovery and resolution directive spelling out bail-ins will be a part of the toolkit in future failures. Investors, not tax payers, will bear the losses.

Ari also said that if things were pushed out we would continue to see a jaggedy march higher in MTM gold. Makes sense to me. One could argue a higher price would further extended limited supply flows and continued recycling. But a reduced price puts pressure on physical supply accelerating the day of reckoning. This indicates no desire to maintain the status quo from those with the power to do so. Isn’t it interesting that Ari’s indicator for the freegold window was in fact implemented, and paper gold promptly crumbled for the first time in a over a decade. A remarkable prediction considering the globe is still facing the same financial problems people claimed contributed to gold’s initial rise.

We also saw the discontinuation of US treasury purchases from a net surplus nation for the first time in over 2 decades in mid 2013. CB’s became net buyers of gold in 2011 but it wasn’t until 2013 that we saw that their purchases were putting a major strain by outpacing all sources of physical supply. Intelligent deduction by FOFOA showed us evidence of this physical strain can be seen in the draining of ETF’s like GLD. If CB’s stopped buying, reduced their purchases, or dumped physical onto the market to ease the strain, this would indicate support for extending the system? Anyone see that happening?

Sam said...

2 of 2

I personally think gold will continue to fall in price because its discovered by a paper market that has a very real counter party risk. People looking for the benefits of physical gold will not get it with paper gold and gold buyers are learning this. This means more selling of paper (which effects the price) and more buying of physical (which doesn’t). I still think nobody wants to be the one to push things over the edge but I also think things will be easier if done by choice rather than by force. Either way it is going to happen soon. How soon? Well lets see. The only chance of a significant delay coming from the demand side is if after thousands of years those that demand gold for their productive efforts just stop demanding it. So I give that a 1/1000 chance =). On the supply side it’s estimated that the cost of mining could average up to $3000 an ounce by 2018. So I’d bet the farm physical supply dries up before 2018 as virtually no miners will be profitable. If you think paper gold will go on another bull run to stay up with production think again. Another way to look at freegold is oil DEVALUING itself against gold. If economic prosperity can’t afford $250 a barrel for oil, then we can’t afford a bull run to $3000 gold. No, we all need oil to devalue against gold and sooner rather than later. This oil devaluation happens when gold revalues against everything else and breaks all correlations.

So when you start thinking about the major costs to everyone in delaying freegold vs. the benefits to everyone from its implementation, multiplied by the indicators we have already seen, divided by the collective brain power of the freegold community, I’d say 2014 is the year. Final Answer.

FOFOA said...

Back on October 9th, I asked: "I'm now accepting guesses for the year-end snapshot. How do you think the chart above will develop from here?" We're now 2/3rds of the way through the quarter with one month to go (Snapshot day should be on 1/3/14 this year, the same as 2003 which was the last time New Year's Day fell on a Wednesday), and here's how the MTM chart is developing with gold now under €900. I should note that half of the big drop occurred in June, the third month of the second quarter, so things can change quite a bit in the third month. In June, the €POG dropped from €1,085 on May 31st down to €919 on June 28. Right now it's at €899. Anyone wanna update their guess? ;D

Sincerely,
FOFOA

Aaron said...

We have one month until the next snapshot, gold stands at €900 per ounce today and in the third month of the second quarter this year we saw a 15% drop which given current circumstances could bring us as low as €765 if the same event were to happen again.

I'll put my guess in the hat for €600. Why €600? I like the smell of Freegold in the morning. ;D

One Bad Adder said...

Hyperlinking disabled ...grrr!
Yesterdays 3 mth Auction-result (with the one exception beiing the 1.68% allocated at the high of 0.075) seems to be par-for-the-course however - the spread (Auction-result / secondary market) appears to be widening quite a lot.
This MAY imply an increase in uptake at the short end of the curve ...which will (if proven to be the case) be a precursor to Another run at Zero Yield ...and beyond...methinks?

Michael dV said...

Sam
I'll take 2013, still lots of time for the wobble to get uncontrollable.

Anonymous said...

Thats it, if it falls to the €700's and physical is still available I give up... I'll go against the advice of many wise FG'ers and stop resisting the temptation of going beyond all in! I'll trade some debt for some AU. I'll be damn if I'm not getting me some at those prices.
Whats the big risk anyway? In Germany I can get a personal loan for a fixed rate of ~5% (not so cheap but f*ck it), no need to pledge any collateral and losing my job seems unlikely. Am I missing something?

My guess for end of year snapshot: they postpone the end of year snapshot; the paper market has collapsed and they need more time to set up a new one, physical only. :)

Anonymous said...

There was no final shaking yet, if your overall premise is correct, they will have to strip the middle class hoarders bare first. That could be something like €550-750. I have seen several western bugs (Germany, Netherlands, ..), one shouldn't generalize about people but large faction indeed looks like the follows: old fashioned suits, 7-12yrs old cars, local vacations only, if still married quite strange looking nervous spouses. These guys were all about "the right and logic thing" aka frugal living deferred consumption and holding firm for years, however many will capitulate closer to such levels. The Borg has got the tools, incl. insider info and the time, which peons don't have a plenty by definition, it's that simple. Could apply to some countries as well.

On the other hand, there seems to be some increasing awarness or shall we say gradual dosage of reality pushed through german speaking media as of lately , clearly supported by certain power faction there, btw. they lost the last elections. But these circles are independently wealthy anyway and likely upstacked at least a decade ago. Those will as minority push against any post reval vitriolic reaction such as windfall taxation and similar schemes. However, the future is at this elevated point unpredictable, the pendulum of history could go yet again into totally crazy swings, erasing any traditions, concepts or rationality.

Taking the loan? Well, the deflation could turn deflamonster grade nasty for a while, say 2-3yrs, jobs security is not given right even for Germany. But the winners (not whiners) must be brave, so this roulette it's up to you..

DP said...

"both the dollar and gold rising together"

Another way to say "your other measure of value falls".

Anonymous said...

?Gary's regular post not offensive in anyway with hyperlink about how ETFs are in fact not loosing phyz. was clearly deleted/censored a few minutes ago. Hm, bizzaro as it gets, given the vulgar free rageing here of groupies previous week (and before).

Jeff said...

'Hypocrite, first take the plank out of your own eye, and then you will see clearly to remove the speck from your brother's eye.'

Indenture said...

I believe if a post is deleted it is either done by the author or because the poster has been banned by FOFOA for previous behavior.

Woland said...

Q: Central Fund of Canada sells at a 6.1% discount to NAV.
Is a risk free arbitrage between it and OTC spot or
Comex possible, given that neither provides for delivery?

Also, when a closed end fund shuts down, if its' assets are
liquidated and cash distributed, it would be just like Comex,
right? {;<)>>

Sam said...

That's correct Indenture. I know we are a pretty hip club and all but it strikes me as sad when someone keeps posting after being banned.

Sam said...

€825

Archer said...

Well, folks, in case you hadn't noticed, the last few days have revealed with great clarity the Scylla and Charybdis condition of Uncle Sam and his finances. Any good news about the economy immediately spikes the cost of borrowing all along the curve. Somewhat counter-intuitively, (at least for those that don't read this blog and/or read it but somehow don't take on board the insight offered) since QE is about capping the cost of borrowing for Uncle Sugar, which is brought on by the world outside our border systematically tapering- this raises the prospect of MOAR QE. Even as the monetary authorities yammer on about needing to see economic strength to consider tapering, they must fear signs of robustness as much or more than weakness as the debt berg grows at an arguably faster rate
when ever the economy appears to perk up. There is, in fact, Nowhere to run to (baby), nowhere to hide

KnallGold said...

-The Gulf Common Currency used to be one of the signals pointing to 2010. Delayed, not much heard since then. Now it was announced per end of 2013.

-Back in 1999 the WAG ended a similar below production cost POG, but the WAG's are something of the past now. I've heard not one suggestion to reactivate it.

Now what should save it today? It appears there's simply no interest anymore.

Biju said...

FOFOA : My prediction for end of year 2013 MTM snapshot price for Gold is E600/oz.

Biju said...

Joe Vanderbilt : I concur if Gold is still available at a paper price of E700, you should go on a debt at fixed interest rate and buy Gold. I would do that too in Dollar price if it happens.

Dante_Eu said...

@KnallGold:

Thanks for the nomination. At last I excel in something!

So, here's my crazy prediction for the next MTM-party: NULL or "Computer says No!"

Speaking about Aristotle, it would be nice to hear from him again. Just a brief:

"Hi guys, I'm in BitCoin now, see Ya!"

Just kidding! :D
Hope all is good and well with good old Aristotle.

\Dante_Eu

PS For technically impaired, here's explanation of NULL value:

The Value of NULL
Null is not zero. Null is not an empty string. Null is not a value at all. Most importantly for our discussion, one null value does not equal any other null value. In the relational database model, Null simply means that a value is not known.

Ken_C said...

Dante: "Null is not zero. Null is not an empty string. Null is not a value at all. Most importantly for our discussion, one null value does not equal any other null value. In the relational database model, Null simply means that a value is not known. "

Null is not a value....One Null value does not equal any other null value. Null is either a value or it is not. Would it be better to say Null Entry rather than Null value?

Brady said...

€901

MatrixSentry said...

Actually null means different things in different contexts. I can speak of null and its meaning in mathematics. It in fact is defined and has a value of zero.

When speaking of sets or perhaps matrices, a null set or field contains zero elements. In vector fields, a null is a zero vector. A vector is defined by a direction and magnitude, and since a direction cannot be zero, a zero vector has a magnitude that must be zero.

Many times a null set is said to be undefined. I take exception to that since zero in perfectly defined. Undefined is more akin to a discontinuity. The gold chart will become undefined at some point when the paper market folds. No function or spline will be able to be constructed to describe the curve of a momentary revaluation.

t au said...

Thanks for the further elucidation on null, Matrix.

Oh boy, I hope there is not going to be a test on this! :)

Dante_Eu said...

@Phil_O_Dendron:

That was pure copy-paste definition, don't put too much thought in it. No test there t_au, don't worry. :-)

MatrixSentry has already explained it - it means undefined. More precisely, the two null values can not be compared. For example, the moment the value of gold becomes undefined the value of BitCoin may also be undefined.

Since both are null, one might think that the statement "NULL = NULL" equals TRUE. But we know that is not true. Far from it!

Incomparable.

Hope that helps. :-)

Sam said...

FOFOA once said don't get caught up on the words, learn the concepts.

we have now established the concept of "null"

S P said...

Sam:
TPTB have been delaying freegold for what now? 32, 33 years?

It's even possible they organized 9/11 rather than implement freegold. Do not underestimate them.

So how do you delay freegold longer? Simple. Push paper gold down, bankrupt all the miners but the most profitable, then subsidize them to keep the gold flowing to the central banks and the shrimps still demanding it. Implement a police state and force everybody into electronic banking, then depositor bail-ins. Confiscate everything: 401ks, money markets, you name it.

Keep this going until virtually all mines shut down and gold is forced into black market. Force the little shrimp to liquidate for food. After virtually everybody is out of gold, then implement freegold once all of it is in the hands of central banks.

2014 is possible, but don't count on it.

Sam said...

Or.......

"TPTB" could revive Hitler with technology the USG and the illuminati have been keeping under wraps. Then have him lead nazi zombie hoards against the populace until everyone but one man and one woman are dead. Then nuke the zombies, take back all the gold, and have the man and woman repopulate the earth with slaves to serve them. Now who's underestimating them? Not me!!!!

byiamBYoung said...

Sam,

Sounds plausible, except they couldn't nuke the zombies, because that isn't green.

They would instead establish a path to citizenship for the zombies, including broad subsidies for new clothing and dermatology treatments.

Each zombie would be given title to a now vacant home, and job training.

The zombies would in turn respond to the wealth effect by buying everything left inside the abandoned Ikea and Best Buy stores.

It might just be crazy enough to work.

Cheers

tEON said...

@S P

So how do you delay freegold longer? Simple. Push paper gold down

The inverse. 'They' (whoever, the heck, you consider 'they' to be) support the paper Gold price to delay FG. Support has disappeared - hence the price will continue to trend down - with occasional blips. Evidence? The paper Gold price this year. FG is the separation of paper and physical and the corresponding market reaction. This can only happen with the massive paper market going to zero. You can't get a little pregnant. Any part of it exists - it effects the physical market to some degree.

TPTB have been delaying freegold for what now? 32, 33 years?
After virtually everybody is out of gold, then implement freegold once all of it is in the hands of central banks.

Your comments smell like a conspiracy theory - as opposed to accepting what will transpire is the reaction of market forces. FG is not an 'implementation', there are no secret meetings of TPTB - elites, super-producers - whatever you want to call, them to set a date for FG. This is especially true with players like the Chinese (both Billionaires and CBs) involved. NO timing involved - the scarcity will appear at the top levels (I suggest this is happening now). The delay only announces the huge-ness of the paper market - and the higher price the higher the eventual revaluation - whatever massive number that may be.

Indenture said...

S P: So as more free money enters the system at zero percent interest, and with gold prices low, subsidized mines are going to fill the necessary flow of gold when right now GLD is being used to supplement the current flow of gold? I don’t see it. GLD is being drained so there is a maximum amount of time this system can continue and based on the above comments we might have less than imagined.

byiamBYoung said...

Speaking of GLD, it is continuing the now nearly year-long downward slide, now at a stunning 838.71 tonnes.

The trend is so clearly evident by now. The game is changing, right before our eyes.

Keep your arms and legs inside the ride at all times! We're gonna go f-a-s-t-e-r!

Cheers


Edwardo said...

They would instead establish a path to citizenship for the zombies, including broad subsidies for new clothing and dermatology treatments.

LOL!

Sam said...

A banned troll claimed my comment (which he called my hypothesis) was flawed because “I believed GLD’s drain of inventory is indicative of a run on physical.” He then pointed to a post that was part of a series of posts written by Kid Dynamite starting back in 2010. In the three part series KD explained how ETF’s work, challenging the thoughts of Andrew Bohan, a wall street journal writer, and “jesse.” KD’s posts seemed just fine to me, but they weren’t in any way addressed to the point of my comment.
I’m sure very few people saw this comment before it was deleted but McFly cried censorship because he is on here to also be a troll giving credence to any hairbrained idea that hints towards freegold being off base and doesn’t fit into his peak resources doomer borg thoughts.
My comment was just my attempt at looking at the physical plane through the freegold lens as I see it. Even without the freegold lens the supply/demand dynamics I am describing isn’t rocket science. Every transaction has a buyer and seller. The current physical gold market simply has buyers and sellers priced by a collapsing paper market. I’m only interested in the physical flow which to some degree is documented. The bulk of the physical supply being sold in 2013 is from miners, greatly reduced but some recycling, and ETF redemption sales of physical bullion on the market by ETF arbitrageurs clearing their positions (or what I call the draining of GLD). I don’t even need to go into who is buying. My guess at when physical supply will come up short to physical demand is 2014 because I don’t see demand for physical falling, I don’t see mine supply increasing, ETF supplies are limited and draining fast, and another bull run in gold would be an economy killer because of all the correlated assets.

Anyway below meat of the “censored” thoughts of Kid Dynamite (which I don’t dispute by the way):

“Authorized participants buy and sell bullion in response to GLD flows to arbitrage differences between GLD and its net asset value (the value of the bars that the trust holds).
If “the market” is lacking GLD sellers, and the price of GLD rises so that it is in excess of it’s NAV (net asset value) there are arbitrageurs standing by ready to short you shares of GLD while they simultaneously buy gold bullion as a hedge. Since they are selling GLD “rich” to its fair value, they will make a profit when they eventually collapse their position. How do they collapse it? Well, they take their gold and “create” GLD by delivering the gold to the trust, receive newly created GLD and use that to cover their GLD short position. Voila – they’re now flat, and the GLD’s assets have increased, as have the shares outstanding. “

As GLD supply results in the shares trading slightly below their NAV, APs buy the shares, sell gold in other venues, then redeem their GLD shares (turn them in to the Trust in exchange for gold and use the gold to cover their short position.

Anonymous said...

S P> isn't it interesting that for some, "free markets" work on specific occasions, other times not at all, but that's supposedly ok. However, that's certainly not a conspiracy, we don't have them in this nice rational world. The Borgs killed in just open fashion to the tune of hundreds of millions last century, sometimes uped the ante during intermediate periods in horrific stunt schemes as you just alluded to, also transfered most of the wealth and power to themselves in that period too, yet somehow now in the highest hour are considered harmless puppies, caring about the peons not to get harmed in any way, when sheeples try to piggyback on the windfall of the big boys during reset. In summary, any historian on this planet just roll his eyes over such naivite or is it somethin else?

FOFOA said...

Hello minilarvae/mcmagicfly,

"?Gary's regular post not offensive in anyway with hyperlink about how ETFs are in fact not loosing phyz. was clearly deleted/censored a few minutes ago. Hm, bizzaro as it gets, given the vulgar free rageing here of groupies previous week (and before)."

That was a question, right? I mean with the question mark and all. I try to answer good questions, so here you go. Gary was banned last December, almost a year ago, which means his comments are deleted as soon as I see them, regardless of content. The way it works is this: Some people comment here simply for the thrill of being adversarial, because they enjoy derailing the otherwise polite and productive discussions here by redirecting them with conflict and opposition. I personally thrive on smart opposition, but I detest your kind of full-auto conspiritard poo splattering. So let's take it off full-auto, and switch to one fling per day.

Gary, AD and Grumps were the last three trolls I banned, and I can see that you have a lot in common with them. So here's the deal. I'll teach you how and why Gary's comment was deleted through first-hand experience. I'll give you the same offer I gave Grumps, AD and Art before they were banned. Limit your activity to one comment per day, starting now, and you can continue contributing to the permanent record on this blog as long as you want. Post more than one comment per day, and you will be banned just like them. That means I'll delete any and all comments from that point forward, regardless of content. Do you understand what "regardless of content" means?

And this deal encompasses both of your aliases, mcmagicfly and minilarvae, and any others you create in the future. Gary trolled this blog with many names, including (but not limited to) 60253 (FakeAnother), 90days, Brian, ManuelB, MadeItUpCentury, Poodlejim, Steven Feldman, Sugarlover and Time Proven. Today he's back as good ol' Gary, but he's still banned, just like you'll be if you post more than one comment per day. And just to be nice, that starts now. So you can have one more in the next 24 hours. Use it well! ;D

Sincerely,
FOFOA

tEON said...

Thanks FoFoA!

@minilarvae

yet somehow now in the highest hour are considered harmless puppies

Care to expand on where you got that, erroneous, idea? It's total irrelevance should be amusing.

Anonymous said...

Mr. FOFOA, thanks for your seemingly kind proposal, it's your blog, your land, act as you please. However, it's a bit of pitty, you didn't have the time, stamina, and arguments to address the real pressing questions (as in relation namely to never ending delays, crude, post reval societal dis-order etc.), since I started posting here, not mentioning the few other people sharing and voicing at least in part similar legitimate concerns of mine. My arrival helped to float some of these deeply hidden or shall we say buried questions up to the surface, I sincerely expected higher level of discussion on them, but this process at least helped formed better opinion on the material presented here and future probabilities, hopefully for some few others as well.

So, in a way I indeed waited for similar very shallow reaction of yours, especially so soon after you glazed over dozens of vulgar groupies anger outbreaks with known continuous zero contribution to the topic here. I can for sure stand and walk out on my own, now it finally makes the obvious sense.

Roacheforque said...

Sam,
Well said, however the demand in China appears to be (I hate to use the word, but) tapering.
But I think it bears mentioning in our global IMF$ that the dollar is no longer a U$ centric playing chip.

Yes, some wise and quite honorable wealth holders did see the beauty of freegold in the construct of the Euro, but the entire world uses these dollar playing chips in the wealth accrual schemes of financialization, so the "conspiratorial delay" is nothing more than good ole' human nature serving its best interests.

Yes, China (and Russia, India, Japan, etc..) has reasons to both LOVE and HATE the dollar. As in any "marriage of convenience" these love / hate realtionships do endure, and as for human nature, I cannot predict the intentions of China's gold accumulation as one to inure to the benefit of freeegold, or to the benefit of their own version of an exhorbitant privilege of sorts (if they can manage some version, in some fashion).

I hope that's a fitting compliment (not meant to be a counter-argument) to your recent comment, as I also tire of the adversarial sparring. It serves no useful purpose beyond ego fluffing.

tEON said...

@minilarvae McFly

And this, your last post (if we are to believe you), is typical of everything you have promoted here since your arrival. Even with your 'scrambled egg' vocabulary it should be obvious to any regular reader here that your intent was not to encourage discussion or the opening of minds, but dissension - sidetracking to your own agenda - stubbornly dismissing relevant arguments and data with callous disregard and petty abuse to those who don't give your, stream-of-consciousness, dialogue credence. Your ego may tell you that you have brought salient points here to this blog but your willful ignorance of the content located here in 5 years of archives, and obliviousness to the entire theory and concept of FG - that you adamantly refuse to address - mark you for what you truly are. I assume, you were given more of a reprieval because of your erratic dialectic - blamed on poor English. But that too has become desperately transparent to your prime intent by haphazardly throwing around, frustration-inducing, terms to curry favor. As one example - it became so obvious that your acknowledged agreement of other posters had nothing to do with their content, but only the expression of dissatisfaction with FG not conforming to their, personal, lens. So you immediately support them! How pitiful. No one can know what is in the heart of a troll - what his true motivations are - and this is the only question you leave us. What did you get out of this? If your intent was to confuse - I'm sorry - it maybe have had merit in your beginnings here but eventually has been an abject failure.

Jeff said...

Reminds me of a time FOA tuned up a conspiracy-minded troll.

FOA: Any time one large official faction (Dollar/IMF group) has it's money power replaced by a new official faction (Euro / BIS), it's never peaceful and not without significant loss of wealth by some of the players. I add that both little and big players get hurt when these events happen. Usually, it's the little "uninformed" players that lose the most. Your observation that people are "sheeple" comes as they step in front of a train with no breaks. Then you tell the world that "someone" is out to get them. My experience is that the average investor is much more intelligent than that and they can do a good job of "moving" off the tracks if it's pointed out to them that a train is coming. The dollar is giving up it's reign as a reserve currency, not "only" because it has so much debt. It's being replaced because it's inflation (total money supply, dollar derivatives supply, dollar debt supply and the official liabilities foreign nations hold as reserves supply) has discounted so much future real US production, at a constant exchange rate, that it is losing the ability to function as a reserve currency. Every currency on earth has one day come to this end. We call it a "fiat money's timeline". At this point the users of this money begin to either "deflate it's supply" through debt and payment default, or the they devalue it by bidding up the value of real goods (price inflation). Once either of these begin, the money function of that reserve currency declines. Further, one will find that deflation is only a choice if no other official world currency is available to run to. World citizens vote with their feet at this point and greatly discount unpayable debt thus causing said deflation.
Inflation is the choice when people can "refinance" into another currency media. Leaving the old to contend with an ever increasing velocity of the useless money supply. This is the fate that waits the dollar.

Is this some structure brought about by a New World Order? If you want to see it this way, then remember the world has been doing this from creation. I only add, why bother to put the "New" on it? Let's just call it "Next World Order"! Besides, it's only one peoples as a nation group (EURO/BIS) trying to protect their wealth because another nation group of peoples (Dollar/IMF) borrowed more that they could ever pay back! Still, I read this New World Order faction (NWOF) as loudly declaring the Euro as a fraud, yet they (NWOF) are hip deep the dollar assets of a country that "defaulted on it's gold delivery. Twice! Then they (NWOF) yell because no one is creating a new gold or gold backed currency. Why do that? So we can be defaulted again by the "NEXT World Order"?

Tommy2Tone said...

Don't let the door hit you in the ass on your way out Mcdipshit!

Go play with your cats like a good cat lady.

Maybe Gary will play with you?

Knotty Pine said...

The only time I think of magic and fly together is when I throw these away.

Roacheforque said...

Jim Willie's latest is a doozie. He gets so many trees right but seems to miss the forest. He acknowledges the US debt holdings but doesn't quite see the logic of a reval in CB GOLD reserves that will offset those losses ...

Ken_C said...

Interesting commentary at Koos Jansen site.

Alex Stanczyk, Chief Market Strategist for the Anglo Far- East says that gold supply is very tight. I realize that he works for a company that sells gold but this is yet another reason to think that we may indeed be seeing supply shortage develop.


http://www.ingoldwetrust.ch/alex-stanczyk-physical-supply-never-been-tighter

"he said sometimes when they get gold in, it’s coming from the back corners of the vaults. He knew this because these were good delivery bars marked in the sixties."

Sam said...

@Roacheforque

Thank you, and I understand what your saying. From watching you post over the years I would venture to guess that you like the phrase “behind every great fortune is a great crime”? Perhaps it has been your personal experience. I don’t really think this way but that doesn’t mean we need to disagree.

Hopefully we can agree that all currencies have a life span of sorts. I believe from my reading here that keeping one alive past it’s natural death comes at great expense not great profit to the people with the power to keep it alive. This expense grows exponentially as time goes on. If the dollar had not been the world’s reserve currency, and had there been a new currency ready to replace it, I believe it would have been allowed to die.

So even taking your premise as correct, wouldn’t it be in the best interest of those using “the dollar playing chips for wealth accrual schemes of financialization” to get out in front of inevitable change and make preparations for themselves to profit off the new system’s “playing chips”. There is a strapping young currency ready to take the reign this time so logic tells us dumping great fortunes into keeping the dollar alive won’t be prudent this time around.

Secondly, what kind of exorbitant privilege would it be for China to accumulate a worthless barbaric relic like physical gold reserves if gold isn’t going to play a big role in the future. If they like things the way they are, if they are profiting nicely from this “marriage of convenience,” why build up gold reserves putting pressure on the system. Why taper treasury purchases?

Polly Metallic said...

Phil_O_Dendron,

I just got the newsletter article you mentioned and read it a little while ago. Reading it through the FOFOA lens, it makes so much sense. Alex describes the demand through Swiss refineries that are running three shifts and having trouble sourcing enough gold to keep up with orders, yet the price keeps falling. Sadly, such commentaries always end up with the misguided conclusion that very soon the price MUST go up! There will be a short squeeze, yada, yada, yada.

It really appears that 2014 will be the year of Global Changes. I don't see how the Giants can continue to source adequate amounts of gold with demand at this feverish pace. It seems to me it must be nearly Game Over.

Ken_C said...

Poly Metallic

It is hard to imagine that the paper market is going to keep functioning if things keep on the same trajectory. I wonder what other tricks people can come up with to keep this system staggering along as now. Let us hope that 2014 is going to be the year of the repricing of gold.

MatrixSentry said...

As the year comes to a close, The Year of the Window, we conclude that the window indeed opened and remains open.

The window is a metaphor for $IMFS support, really the lack thereof. The USD desperately needs a higher gold price. Higher gold price means support. We just do not see it today. We have not seen it all year.

Can we see another whole year of bullion bleeding in GLD? Can the mines continue to produce gold as the price of gold credit continues lower? Who will save the day for the $IMFS?

2014, The year of ____________?

Michael dV said...

I will find that Jim Willie and do my treadmill work out to the sounds of his dulcet voice...thanks for the heads up Roche..

Sam said...

2014, the year of settlement

Roacheforque said...

Sam,
I much more agree than disagree with your first comment, as I said, but to answer your second... really I don't think that way at all, but behind many a great fortunre does lie a great crime, not that it matters, and certainly not all.

I hope you are correct that keeping a fiat alive past its natural death brings harm to those who could expedite it's graceful euthanasia. It certainly brings great harm to the little people, and yet here we remain. And those playing chips affect everything, not just the monetary plane, but the physical as well.

So you make my point, if they are not getting in front of this change, they may not yet see the timing as imminent, and may be caught short, by a complicated set of interconnected dominos.

Your final comment is priceless though. Of course China is preparing for the change by accumulating physical. One always has a well positioned replacement before firing the help.

I thought I had made it clear by saying "well said" and "I hope that's a fitting compliment (not meant to be a counter-argument)" to actually mean that, but the sparring here is so much the usual I suspect you took it as a sideways smirk.

No, I merely wanted to make two points.
1) China is nearing its target gold reserve accumulation and is confident enough to begin tapering (according to one of several dozen charts I've glanced at lately) and ...
2) the dollar is sticky

But I have always agreed that freegold is a foregone conclusion. As far as when? Well, if China thinks it will implement Free FIAT based on it's long history of various gold standards, they could slow it down further. There is this thing called human nature, and after so many years of being a servant to an exhorbitant privilege, let us hope their power culture can be as "democratic" as freegold.

I do not see them necessarily embracing the Euro, although it's quite possible, though they might want to replace it, despite a long stretch to be equivalent.

Roacheforque said...

Or, said another way ... You KNOW you need to kick that bitch to the curb, but it's guaranteed pussy ,,, vs the uncertainty of "strange".

Sorry to be so crass, but these "marriages of convenience" do for some tend to linger in this fashion.

;0)

Pat said...

Appropos of nothing other than hilarity the last comment reminds me of one of my favorite Richard Pryor lines. Seems he and his current wife were having quite the set-to loudly do much that the neighbors were even listening in. Richie had had enough arguing ang yelling so he grabbed his coat slammed the screen door and pronounced " I'm going to go find me some new pussy". His wife immediately retorted back" If you had three more inches of dick you could find some new pussy right here!!"

Michael dV said...

I just don't see China being willing or able to step up to the plate currency-wise. If they get too strong they loose exports (yeah yeah, I know, someday they'll increase local consumption. If they duplicate the Euro with gold on the balance sheet they could become a major currency, but the Euro was there first and is ready to serve.
China would have to do a whole lot of economic reform before rational actors would trust them with anything like reserve status.
I suppose there could be plans for a roll out of all3 big guys at once, the Euro, the gold backed Yuan and the plucky newcomer, the new US dollah...

Michael dV said...

Matrix
The Year of Ka Boom!

byiamBYoung said...

Roacheforque,

In the endeavor to enlighten, the flower of understanding can bestow some seedy epiphanies now and again, eh?

Cheers

Roacheforque said...

Paaaaaa Ha haa. I'll have to remember that one Pat.

Roacheforque said...

Bimby,
Especially when paired with cheap wine ...

MdV,
A long stretch, but ... remember the great divide. That was one of my favorites. As long as there's competition, there can still be freegold, as it was meant to be, not some other big mistake.

FOFOA sees it as inevitable, an unstoppable train, but there's always that tendency to build a nasty heap of burning railroad ties stacked in front of it.

Nasty ahead ... more coal to the engines !!

Sam said...

@Roacheforque

I didn't take your comments as a sideways smirk, just enjoying the new atmosphere of Polite discussion.

As for the "next reserve currency" to replace the dollar I agree with Michael. This isn't about China vs Europe , although if it was I would trust the Europeans before the Chinese. To me the cream that will rise to the top will be the option that has severed it's link to the nation state and stopped trying to be "good as gold.". This means, even if the Chinese were economically trustworthy and financially sound, the yuan is out...even if they backed it with gold. The world will not go backwards monetarily. We want a fiat currency that solves the flaws of the dollar, and there is only one waiting patiently in the batters box

Indenture said...

Also, because the ECB has a mandate of 2% inflation the Euro currency has a stability no other currency can offer.

FOFOA said...

A new post is up!

Public Service Announcement

Sincerely,
FOFOA

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