Sunday, December 15, 2013

An Eye for Gold

Real Things

"Investors and regular workers with a Western slant do not grasp what wealth is. Overwhelmingly they see their currency and paper investment portfolios on an equal footing in value with the same
"real things" that raise our living standards. Yet, in real life, they cannot be equal because these paper assets are only an exercise able future claim on our "real things in life".

The super wealthy pay way too much for some stuff, don't they? I mean, $490,000 for a used old card table? I can get a brand new card table for $40, but here's a much nicer one for $280.

I caught a few minutes of the Antiques Roadshow the other day. Mrs. FOFOA had it on and I was passing through the room, but somehow that show grabs you and you have to stay to find out what the item they're examining is worth. This one was an old, wooden card table, originally made in Pennsylvania, and long ago refinished. Some lady had brought it in to have it appraised on TV. It was pretty nice, mahogany wood, claw and ball feet, and it had a swing-out leg that supports a hinged extension of the table's surface. The appraiser told her it was worth $250,000 to $350,000, and if it hadn't unfortunately been refinished years ago, it could have been worth up to $500,000 today.

I tried to find that episode online while writing this, but I only found a similar one. It's another card table they appraised for $200,000 to $300,000 and, when it actually went to auction at Sotheby's, it sold for $490,000! You can see the original appraisal here and the actual auction here.

What makes a second-hand card table worth $490,000? It's certainly not the need for a surface on which to play cards. That need can be met for much less money. You know what it is? It's that the wealthy fill their lives with otherwise-common items that perpetually rise in value, while we do the same with similar items that lose half their value, never to be regained, the minute we take them out of the store.

Two tables. One is $280 and the other is $490,000. The difference between the two is that the price of the former comes from demand related only to the service it renders in its specific form, as a table, and the latter comes from demand related to two different services it renders, that of a table and also that of a store of value.

I have explored this concept in many posts. It's not a new concept in any way, shape or form. In fact, man was using real things as stores of value, often in preference over their other uses, long before any labels were applied to this specific utility or function.

Take the $490,000 card table for example. We could say that the buyer paid $280 for a table, a well-crafted and nice-looking flat surface with four legs, and another $489,720 for a store of value. When you look at it this way, it starts to make sense why the wealthy often buy such remarkable "real things" and then hide them away for decades, packed in unassuming wooden crates, in places like this—Über-warehouses for the ultra-rich—rather than "using" them in their homes.

Which would you say is a $490,000 table's primary function or utility? As a table, or as a store of value? Obviously it can function both ways, but if someone pays 1,750 times more for one function than for the other, I think it would be fair to say that is its primary function.

The high price of these items which function primarily as stores of value comes from the demand for that specific function. Such demand creates a market and, thereby, the high marketability of such items. This is the network effect. And the long history and past success of such markets engenders the confidence in those who possess (and seek) such unique items that, when needed, they will be able to find a buyer ready to pay the highest price which can possibly be attained. This is what I like to call the regression effect. And while past performance is certainly no guarantee of future performance, especially in unique, one-of-a-kind collectibles, our natural tendency to believe that what worked yesterday and still works today will work again tomorrow does create a very real effect with very real results.

I hear that Christie's is booming these days. Here are just a few of the auction-related articles I've collected over the past two months:

How many more $100 million 'pictures' can the art market absorb?

Digging Into Deep Pockets at Auction
The New York Times

The Man Who Sold the Art World
The New Yorker

Warhol paintings up for sale in New York could fetch $120 mn
France 24

Grisly Warhol Painting Fetches $104.5 Million, Auction High for Artist
The New York Times

On Equal Footing with Giants

"In this world we all need much; blessings from above,,,,, family,,,, home,,, friends and good health. But after all that, one must have currency and an enduring, tradable wealth asset that places our footing in life on equal ground with the giants around us,,,,,, gold!" -FOA

Here are a few snips from the article in The Economist which I mentioned above, titled Über-warehouses for the ultra-rich:

"The world’s rich are increasingly investing in expensive stuff, and “freeports” such as Luxembourg’s are becoming their repositories of choice…

Because of the confidentiality, the value of goods stashed in freeports is unknowable…

Collectibles have outperformed stocks over the past decade…

The goods they stash in the freeports range from paintings, fine wine and precious metals to tapestries and even classic cars…

These giant treasure chests were pioneered by the Swiss, who have half a dozen freeports, among them sites in Chiasso, Geneva and Zurich…

The wealthy are increasingly using freeports as a place where they can rub shoulders and trade fine objects with each other. It is not uncommon for a painting to be swapped for, say, a sculpture and some cases of wine, with all the goods remaining in the freeport after the deal and merely being shifted between the storage rooms of the buyer’s and seller’s handling agents…

Gold storage is part of Singapore’s strategy to become the Switzerland of the East… To spur this growth, it has removed a 7% sales tax on precious metals…

Switzerland remains the world’s leading gold repository. Its imports of the yellow metal have exceeded exports by some 13,000 tonnes…

Did you notice anything about the stuff the "ultra-rich" are stashing at those freeports? For one thing, most of that stuff is out of reach for the average saver. Most individual items that make their way to these storage facilities cost more than the average person makes in a year, and some cost more than he'll make in a lifetime.

Gold is the only "real thing" used by the wealthy, for this specific store-of-value function, that is also available to anyone. What's more, the gold of the everyman is the exact same quality gold that is held by the Giants. The same cannot be said about the paintings, sculptures, tapestries, cases of wine, classic cars or even the card tables held, and used, by people of average means.

I have everything on that list, except a classic car (although my car is 12 years old now, so I'm getting close). The difference is, I hold each of those items for the service it renders in its specific form only. My wine is for drinking and my art livens up my home. I have bought and sold an entire home-worth of expensive furniture, and I can tell you that, no matter how much I paid for each wonderful piece, in order to sell it when I needed to, I had to cut the price considerably.

Storage and moving expenses can greatly increase your cost basis in items that are only depreciating over time. This was why I decided to sell everything the second time I moved cross-country. It was a good decision, but what I learned was that, for the common man, household items, no matter how nice they are, are generally poor stores of value at our level.

That's not to say you can't do well with certain types of items, especially if you take your time selling them. I had a Dr. Who pinball machine which I sold for quite a bit more than I paid for it. But I took my time selling that item, and if I add the maintenance and expense of moving it cross-country to my cost basis, it was probably a wash, although I did get hours of enjoyment out of it. Then again, I didn't buy it as a store of value.

I do know a few people who buy fine wine by the case, numismatic coins, expensive paintings, pottery and even sculptures with the idea that these items will render the dual services of practical use and store-of-value. In some cases, a portion of their high price does indeed come from demand for the store-of-value function, but in most cases, at our level, the majority of the price comes simply from the demand for an exclusive level of quality. Exclusive items are sometimes called Veblen goods.

There's nothing wrong with enjoying an exclusive level of quality if you can afford it, but I want you to think about how these exclusive-quality items that may be within our reach actually compare to the ones used by the uber-wealthy. The difference really comes down to the magnitude of the proportion of their high price which was derived specifically from demand for the store-of-value function, as opposed to the item's practical use as a high-quality exclusive showpiece.

This store-of-value demand is the demand which creates a deep and liquid second-hand market for these "overpriced" items. Did you buy your collectibles from a store, or at an auction? If you bought at auction, how many others in the room also bid on your item? Is the maker of your precious item still alive? If you decided to sell your showpiece, how would you sell it? To a store? On consignment? On Craigslist or eBay? Is there a good auction house in your city? Do you have any idea how much commission auction houses charge? How long do you think it would take for you to find a buyer who would pay the highest price which can possibly be attained at any time? If you had to sell in a hurry, do you have confidence that you could attain the highest price?

These are all unique items we're talking about, so there is no standard that applies across the board. But over long stretches of time, some unique items climb a certain "store-of-value pyramid" while others don't. I like to call this the focal point effect. Take Andy Warhol for example. With one of his paintings selling for more than $100M, he has risen to become a kind of focal point among the various pop art painters of the 60s.

Does this mean that Warhols are in a bubble and a Rauschenberg at $10M would be a better investment? Perhaps, but I don't think so. And I'm sure that this view misses the point I'm trying to make. Since we're talking about unique, one-of-a-kind items, one can certainly pay too much for any single item. But in a proper auction setting, there will either be many bidders, or else you won't be bid up higher than you planned on paying. It is the focal point effect which adds the depth and liquidity to the highest-of-high-end auctions that gives the owners and seekers of such items the confidence that, if and when it comes time so sell their particular item, they will be able to attain the highest possible price at that time.

That focal-point-marketability is precisely what makes the very best-of-the-best stores of value. It is what drives some things to many multiples of the "intrinsic value" of their component parts, i.e., frame, canvas, paint and an aesthetically-pleasing image, while leaving others in their dust. So, in this case, a Warhol might be a marginally better store of value than a Rauschenberg, although you could have paid more for the latter in the 60s. In fact, you can still buy 60s pop art originals on eBay today for a few hundred bucks. Note that it's not the death of the artist that drives the focal point effect. There are plenty of dead artists. It's just that it takes time for the focal point effect to emerge and mature to this top level, usually longer than the normal human life span.

Surprisingly, however, that's not always the case. You might think that the anonymous telephone bidder who paid $58.4M for "Balloon Dog (Orange)" last month paid way too much, especially considering that, not only are there four more balloon dogs just like it, in arguably better colors than orange, but more importantly, the artist is still alive. And he's only 58 and still producing! But considering that there was a competing bidder willing to pay $57.3M ($51M + commission), how can anyone say he paid too much?

The seller of "Orange Dog" was Peter Brant, the 500-millionaire who is married to supermodel Stephanie Seymour. "Blue Dog" is owned by billionaire Eli Broad and is currently on display at the Los Angeles County Museum of Art.

"Magenta Dog" is owned by French billionaire François Pinault (but that's the artist Jeff Koons, not Pinault, in the photo):

"Red Dog" is owned by Greek billionaire Dakis Joannou:

And "Yellow Dog" (my favorite, although I would have called it "Gold Dog") belongs to billionaire hedge fund manager Steven A. Cohen:

Call it "Focal Point-Balloon Dog"! It doesn't have to make sense to you, it just "is". But does that mean that all of those balloon dogs are each worth $58.4M now? Of course not. With these kinds of items, we don't know their price until after they are sold at auction.

Here are some interesting statistics. According to Investopedia, experts estimate that only 0.5% of paintings bought are ever resold, and public auctions account for only a small portion of those resales, with private transactions accounting for the rest. At the high end, fine art auction houses are the best way to attain the highest possible price at any time, but they can cost you anywhere from 3% to 50% of the sale price in some cases. The commission on "Balloon Dog (Orange)" worked out to about 12.3%.

Tracking or indexing markets for unique, one-of-a-kind items, like art, is different from tracking stocks, bonds and commodities. It's more like residential real estate due to the infrequency of trades and the uniqueness of each item. To create a useful index comparable to stocks, bonds and commodities, you can't just track the average price of sales over a period of time, since each item sold is unique. Instead, you would want to create a database consisting only of repeat sales of the same exact objects.

Two New York University professors, Jianping Mei and Michael Moses, did just that. They created the Mei Moses Fine Art Index based on a database they built which now contains over 30,000 repeat sale pairs for approximately 20,000 individual works of art. They are constantly adding to the database using mainly the public results of auctions conducted by Sotheby's and Christie's from around the world.

What they found was that the compound annual return on fine art exceeded stock market returns on 5- and 10-year timelines, but that the stock market outperformed art over the last 25 years. However, for the last 50 years, the returns were very close, with fine art achieving a compound annual return of 9.23% compared with 9.73% for equities.

Now I should point out that the purpose of this index is to compare stores of value with investments to encourage investors to incorporate them into their investment portfolios. Such is the Western investor mindset. Like paper gold, there's even a kind of "paper art". According to Investopedia, fine art funds typically use leverage to buy art, have a minimum entry investment of $250,000, and for that you will receive a diversified portfolio of art, annual statements and appraisals for the artwork.

Everyone knows that western minds don't like or want gold, but if they think you like it they will trade it up in price for the sake of "sticking it to you." Enter the world of "paper gold."Another

If you buy into one of these art funds, you won't actually have pieces of art. You will, instead, have a securitized fractional interest in a stash of real art, kind of like owning a fractional interest in a real Giant's store of value. Only it won't be managed like a Giant would manage his stash, buying focal point winners and selling the losers until all he has left are the winners. Instead, a fund manager will decide which pieces of art will be purchased and sold, and his only concern will be the short term gains made from selling the best pieces so that he can make his 2+20. Another called this "a western way," to "cut the winners and let the losers run."

The thing about this focal point effect I'm trying to explain is that the winners rise to the top and just keep on rising, well out of reach for all but the Giants. What makes something one of the "best-of-the-best" is not its superior quality or age, but simply the focal point effect, which essentially means that Giants have already voted for it in the only way that matters, with their pocketbooks.

True Giants are extremely strong hands when it comes to stores of value. They generally have no financial need to sell anything, so when they do, it is often because they are "trading up". In this way, the very best-of-the-best items tend to make their way into the strongest hands where they just "lie still" for generations. And, of course, we cannot know the price of such best-of-the-best items except on the very rare occasions when they are put up for auction.

If we could, somehow, hypothetically, come up with an objective way to identify the best-of-the-best as a class, and also track their progressive appreciation, I think we'd probably find a lower but much more dependable (less risky and more homogeneous or uniform, especially over the long run) rate of appreciation than the Mei Moses index would otherwise lead us to believe. Of course, this is impossible to know, because the best-of-the-best focal point winners I'm talking about are the ones that never go up for sale, kind of like the Mona Lisa, so we will never know their price. All we can do is guess.

Here's where it might get a little bit difficult to follow because you'll need to think like a Giant. While these "best-of-the-best" items are perpetually appreciating, hypothetically at a remarkably dependable rate, and while that seems very appealing to us shrimps, it has nothing to do with the reason the Giants buy these things. Giants buy these things simply because of the regression, network and focal point effects that engender the confidence that, when needed, they will be able to find a buyer ready to pay the highest price which can possibly be attained at that time, whenever it may be.

It is, quite simply, the inherently-strong hands of the Giants that instill such remarkable dependability in the "best-of-the-best" focal point stores of value. If Giants suddenly had weak hands, and all such items were to hit the market at once, this would obviously no longer be the case. But that clearly doesn't happen, precisely because such items are only within reach of true Giants, who, by definition, have inherently strong hands.

We know this is true by the simple fact that these items I'm calling "the best of the best" so rarely come to market. Once they make their way into the strongest hands, they just sit there, lying still for generations. And this is why, on the very rare occasion that one hits the market, we see other Giants falling all over themselves to get it, bidding that item up to well above all "rational" expectations and, without fail, setting a new record. It's quite literally something that's only available to Giants, and you almost have to be one to even understand it. And because these items I'm talking about always sell for more than can "rationally" be expected or explained, they will never end up in one of those art funds. Only a true Giant can understand the "rationale" behind "paying way too much" for something.

And then there's gold. But I'm not talking about today's (quote-unquote) "Gold". I'm talking about physical gold, the singular item in that Economist article above which is not only hoarded by Giants, but is also available to anyone and everyone. If you can wrap your head around the concepts—the effects—that instill such remarkable store-of-value functionality in the best-of-the-best real things as I have explained them, then I am here to tell you that physical gold is even better!
ANOTHER: The gold market is made up of a very broad spectrum of investors. At the very farthest ends of this spectrum lie the persons with the largest influence on the physical bullion. The super wealthy at one end and the "third world no ones" at the other. The middle is occupied, mostly, by the "investors with western thought". The far ends buy bullion. And they don't buy it as a gamble or a game! It is a way of life that has worked, through thick and thin, even before the West was "The West".

Now, on the other hand, this "modern day middle of the spectrum"! Well, they have read why we need gold, but they have never "Experienced" the need for gold! Until that day, when they gain "Experience", most of them will make "A Gamble That They Never Intended To Take". Yes, they do invest in all forms of paper and or leveraged gold and all the while, expounding from the roof tops the coming currency crashes and stock market declines. Even looking for bank closures and bank runs, as they cling dearly to comex options and gold stocks!

Anyone, from the outside looking in can clearly see that "westerners" do lack "experience".

There is a "flaw" in this modern market that many do not quite grasp. In time, they will! There have always been people and companies that make a living dealing in gold. It is an ages old business. Today, we see a phenomenon that is "as none before". It is mostly done by the investors at the middle of the spectrum. The "trading of gold" has grown to a level never seen in history! You read every day, that no one wants or needs gold! In a way those statements are very correct! No investor wants to hold gold, but everyone and his brother ( and sister ) wants to trade it! The volume of paper trading, worldwide, on and off market is beyond belief! It has created a type of "Parallel Paper Gold Universe", existing side by side with the physical. The major "flaw" in this system is found in the makeup of the "traders" of this "paper gold universe". Without fail, the majority is made up by those in the "middle of the spectrum", those without "loss of currency "Experience" ". Mostly, they are of "western thought".

I have tried to offer these thoughts as a way for many to understand why this modern gold market is not as before. Most of these letters apply to investors at the far two ends of the market ( see my last post ) . Many, from other places, do understand these "expressions" as given. For many here, I resist the replies to questions that offer results for "gold traders". The intents and reasons are for persons to "consider" and "see" this market in a true light for today. Not for paper trades that will lead to certain loss for the future. I now believe, that by way of other posters, these thoughts are "in grasp" by many traders of "western thought". One may not "accept" the conclusions, but they can, "mentally experience the outcome" of the future. For this end I will now offer real direction. That of Why, When and How Much! I do this for those of "Family and Country", and persons of Honor. Those that live to help, not take, in times of change! Some say this knowledge should not be in a "public way", but I say secrets are for fools.

We must grasp that all commerce is done, at least, in the US dollar concept of "valuations of real things". In this way, " the true value of the purchase of real money" is hidden from view! Persons will say in the future, "how could gold be $500 one day and $5,000 the next"? I tell you now, it is already past that level, as in "present reserve currency dealings" it is not seen! Consider, that in all that you do and think, your "western values" are of paper concepts. From your birth, real things are not used to cross value themselves! When the battle to keep gold from devaluing oil ( in direct gold for oil terms ) is lost, the dollar will find "no problem" with $30,000 gold, as it will be seen as a "benefit for all" and "why did noone see this sooner"?

Now when I say that physical gold is even better, I'm not talking about carrying it through the revaluation. I'm talking about after the revaluation. But to understand what I'm trying to say, I think you need to put your mind there, into the future, to "mentally experience the outcome" of the future, which is why I included that bit from Another. He lays it out quite clearly. Today's gold market consists of a "Parallel Paper Gold Universe" used by "investors with western thought," and real physical gold used by Giants and "third world no ones" for generations.

"Street Gold" and "Paper Gold" are going to part ways!FOA

Physical gold is the one real thing that puts Giants and "third world no ones" on equal footing. Third world no ones certainly don't buy $100M paintings, $50M balloon dogs, or spend half a million on small tables with their surplus income. But they do buy gold as a tradable wealth asset, that singular real thing (focal point effect) in which its perceived value comes from a very long history (regression effect) of broad demand (network effect) for its store-of-value function above and beyond any other services it renders as a shiny and malleable metal.

But what about those "investors with western thought"? If "Street Gold" and "Paper Gold" are going to part ways, does that mean gold will play no future role in the West? Of course not. The fact of the matter is that a large slice of today's "investors with western thought" are not true investors at all. They are conservative savers, which means they are inherently more like the Giants and "third world no ones" in terms of how they prefer to deploy their surplus income. Investor money is called "hot money" because it's always on the move, looking for the next great yield, which requires a certain amount of expertise and focus on the specific activity of investing. Saver money, on the other hand, is "cold money" as it lies very still, which requires a focal point store of value. Gold is for savers:

"[Another's] message and proposition was never for a trader's mindset or time frame. Indeed, his direction was for simple savers, like you and me… As I hold my gold for the money it is, traders will work all these markets as they must… most "physical gold" savers will find themselves "many steps" ahead of the "Western trading community" as this plays out… gold money was/is but a representation of the real tradable wealth you saved over a lifetime of work… This "long term gold accumulation" proposition was given some time ago, to induce conservative people to begin saving gold "now"… You see, there is a world of difference between saving real money as a "wealth of ages" and trying to trade this world's "paper derivatives"… These years be right for ones who save gold."FOA

FOA called this function or utility "wealth money", which denotes both the physicality of the item (wealth) such that it represents true settlement—an exit from the monetary plane—as well as the primary source of its demand, which is above and beyond any other physical services it renders (money). But gold doesn't quite fulfill this "equal footing" promise yet today, as anyone who first purchased gold in August or September of 2011 can attest. It will, but not until "Street Gold" and "Paper Gold" part ways.

Of course, the time preference of non-giant savers is higher (shorter) than it is for true Giants. So for gold to be on equal footing with the likes of "Balloon Dog (Orange)" and "Silver Car Crash (Double Disaster)", it will need to have a few differences that make it much more amenable to turnover on a shorter time frame. And it will. It already does!

For one thing, the transaction cost is, and will be, much smaller than the 12% to 25% commission that top auction houses charge for selling high-end items. For gold it's around 5% today, and will probably be much lower at a higher price. Low transaction costs are important because they must be overcome and recouped through appreciation within the minimum preferred time frame. Likewise, the cost of storage and security must be recouped through appreciation. It costs a lot more to securely store a 12 foot-tall balloon dog than it does to store 1,000 ounces of gold.

These costs, round-trip transaction cost plus secure storage, compared with gold's real appreciation (appreciation in real, not nominal, terms), will naturally match the time preference of savers for settling physical plane imbalances versus carrying a monetary plane balance. In other words, the cost of carrying a cash balance will be compared to the cost of buying "wealth money" over a short time frame.

How short of a time frame, you ask? I can only guess, but I can easily imagine a round-trip transaction cost of 2% and an annual insured storage cost of around 0.1%, with a real appreciation of 1%++ per year. So that would put the minimum time frame for settling a monetary plane surplus at about 2 years, which is a good time horizon for known and expected expenses for which you'd want to carry a cash balance.

It is remarkable that gold and the physical part of the market are already so well-suited for this role and function. Large volume gold dealers make millions today even with a margin as slim as 1% or less, and large volume insured storage can be attained for just a fraction of a percent per year, even with today's price of gold. At a higher gold price, those same margins will be profitable for smaller operations. But even more remarkable, when you think about it in the proper future context, is how gold is perfectly geared to appreciate at just the right rate. Let's call it the Goldilocks principle. Fast enough to give us "an enduring, tradable wealth asset that places our footing in life on equal ground with the giants around us,", but not too fast, so that it will never attract the "hot money" flow of the investors.

Perpetual Appreciation (The Focal Point Effect)

"Truly, as gold is once more used as "wealth money", this action will again impart an unlimited value for gold in use. The more we built and created, the greater the gold value must always be in the future. …In this context, its demand will remain, as always, infinite."FOA

Back in 2009, in Gold: The Ultimate Un-Bubble, I wrote that the price of gold is arbitrary:

"Furthermore, the price of gold is arbitrary. This means that gold can go as high as the people of Earth want to take it without EVER exceeding objective valuations by common metrics like earnings, interest or the sum value of its component elements... One of the most common criticisms of gold's use as an investment is that it cannot be valued the way stocks, bonds and real estate can… But if we invert this argument then gold can never be OVERvalued either, whilst those other things can..."

I want to discuss this concept a little more, because my use of the word "arbitrary" confused certain people. In this context, "arbitrary" does not mean random or irrational, but rather more like seemingly random or seemingly irrational, kind of like the price of "Balloon Dog (Orange)". It refers to the price being more subjective than objective, determined by individual preference and demand rather than by "rational metrics" or comparison to the price of other things.


1: depending on individual discretion (as of a judge) and not fixed by law

3a : based on or determined by individual preference or convenience rather than by necessity or the intrinsic nature of something

b : existing or coming about seemingly at random…

This is precisely what sets gold apart from the world of investments and puts it more in league with high-end collectibles as a store of value. All things other than gold (and other stores of value) have relative values which are tied to each other by common metrics which cannot be applied to gold. The price of gold is "arbitrary" relative to the common metrics which price everything else, therefore when gold's function changes in Freegold, its new price (priced in other goods and services) will shock and awe anyone who didn't understand the "arbitrary" nature of the price of gold.

The price of anything is actually its relative value compared to everything else. That's what price is. It is relative value. FOA wrote, "Money in its purest form is a mental association of values in trade… the value is in your association abilities." This is where gold is distinct, disconnected from everything else. Not today. Today gold trades as if it is a commodity like oil or other metals, with a price driven by that association. But this commodity association is only in the minds of Another's "modern day middle of the spectrum". When "Street Gold" and "Paper Gold" part ways, "the dollar will find "no problem" with $30,000 gold", and people will say "why did noone see this sooner"?

Well, you can see it sooner, and that's why I'm discussing the concept of "arbitrary" pricing, from a $490,000 card table to a $58,405,000 12-foot-tall metal balloon dog, to a $104,500,000 Andy Warhol painting. But what about after gold is revalued and functioning as a true store of value? Can we expect it to continue appreciating into perpetuity? Yes, of course we can!

Now, I need to briefly mention the concepts of marginal utility and substitution since I used the terms subjective and objective above. All prices (relative values) are essentially subjective in that they are derived from demand related to the primary utility of the item. Think buggy whips versus umbrellas. An umbrella still has a use, and therefore demand, while a buggy whip does not. But the prices of gold and other stores of value are more subjective than other things, and the prices of other things are more objective than stores of value. And this relative measure of "objectivity" (as I'm calling it) comes from the concepts of marginal utility and substitution.

Marginal utility means that, for things in which their primary utility is the service they render in their specific form, like a table, the value derived from demand for this utility declines at the margin. How many tables does one man need? At some point he will have enough tables, and at that point, his demand for another well-crafted and nice-looking flat surface with four legs will decline. In economics, this is called the law of diminishing marginal utility, and it applies nearly all utility functions except the store-of-value function. Shoes, in Imelda Marcos' case, might be an exception to the rule.

The substitution effect is the idea that as the price (relative value) of something rises, it will eventually be replaced by a less costly alternative that renders the same or similar service. These two concepts are essentially limiting factors in the relative values of everything other than the very best store-of-value collectibles.

I'm getting into some heavily-conceptual territory here, so please bear with me. I want you to think about the regression (historical effectiveness), network and focal point effects as they relate to the very best artworks in the world. Being one of the very "best of the best" is an emergent property, one that can only be identified in hindsight. In fact, picking unique individual pieces of art is indeed a bit of a gamble. Who's to say that "Balloon Dog (Orange)" (or any of the colors for that matter) will turn out to be a good store of value 40 years from now? Will it stand the test of time? I have no idea, but I wouldn't bet my own money on it!

What would it mean for "Balloon Dog (Orange)" to stand the test of time, or not? Is it about price appreciation? As I said above, you really have to think like a Giant to see that it is not about price appreciation. I realize this is a difficult concept for a Shrimp to even consider, but as I said, Giants seek and hold these kinds of items because of the confidence engendered by the regression, network and focal point effects that, when needed, they will be able to find a buyer ready to pay the highest price which can possibly be attained in the market at that time.

They don't hold it because it appreciates. It appreciates because they hold it. Cause and effect. Perpetual appreciation is the effect, not the cause. The cause can be traced to the regression, network and focal point effects.

Of course not every piece of artwork that sells for $10, $50 or $100 million will be able to be resold years later for a profit. Only the "best of the best" will, and we'll only know for sure which ones those are in hindsight, after the fact, after they go to auction. And yet, even though we can't know for sure, we can have a high degree of confidence about some of them. How much do you think the Mona Lisa is worth?

What do you think? Is low but steady perpetual appreciation in real terms even possible? Someone asked me recently: "FOFOA, I've heard many people say that interest is evil, and then they use the old "if you deposited $100 earning interest over the last 2000 years it would be enough money to buy the world. So to play devil's advocate if gold rises in purchasing power over time wouldn't it create a similar problem to compound interest. Theoretically 5000 years from now one ounce of gold could buy the whole world and whatnot?"

This is a good question, because for Westerners raised from birth to think of value in terms of nominal digits, compounding appreciation does seem to raise a red flag. But in digital terms, even theoretically, there's a difference between nominal interest and interest in real terms, or real interest. In order to "own the world" you'd have to earn a compounding interest rate in real terms, and what time has revealed is that such nominal appreciation is always offset by a depreciating denominator.

Imagine you had a 2% inflation rate and you also earned 2% in compounding interest giving you perfectly stable purchasing power. As your compounding interest turns exponential, so too does your denominator (the numéraire) lose purchasing power. You can try an exercise on a simple Excel spread sheet.

Start with $100 in two columns. In the first column, depreciate the base unit by 2% per year. So 100*0.98 and reiterate that for 100 years. That will show you the decline in purchasing power of the base unit. Then in the second column, give yourself 2% interest for 100 years. 100*1.02. This will show you the compounding principle. After 100 years, your base unit will only be worth 13.26% of what it was the first year, and your compound interest savings account will have $724.46 in it. You can run iterations to infinity if you want, but as your nominal balance approaches infinity, your base unit value will approach zero.

If you take away the depreciating denominator, then yes, your purchasing power will eventually approach infinity. This doesn't happen in the real world, but, amazingly, perpetual appreciation in real terms is still possible with a true focal point store of value.

The Mona Lisa is quite possibly the most valued painting in the world, even though it has never been on the market in the 500 years since it was painted, and probably never will be. (Notice I used the subjective word "valued" rather than the more objective word "valuable", because value is a subjective attribute, especially in items whose primary purpose is the retention of said subjective attribute over time. Which is kind of the whole point of this post, but I digress.) It is certainly the best known, most visited and most written about piece of art in the world, great focal point features. It is considered a national treasure in France, although in 1911 an Italian tried to steal it back for Italy. How much the Mona Lisa would fetch on the open market is impossible to know, but we can probably guess the bare minimum.

The most expensive painting ever sold was a Cézanne painted in 1893 which sold to the State of Qatar in 2011 for around $300 million. While the Mona Lisa has never been on the market, it did go on tour in 1962 at which time it was assessed for insurance purposes at $100 million. According to Wikipedia, $100M in 1962 would be $760M today, "making it, in practice, by far the most valued painting in the world."

In order to calculate its real rate of appreciation, compounded annually, we must guess at a starting value for the painting. As I have said, the focal point effect is an emergent property revealed over time. So while Leonardo da Vinci was very famous in his day, we shouldn't assume an overly-high initial valuation. The Mona Lisa is believed to have been a commissioned portrait which was never delivered, went unfinished for more than a decade, and remained in da Vinci's possession until his death in 1519.

If it had been worth millions (in today's dollars) on the art market of the time, you would think he might have sold it, or at least finished it earlier. An amount was supposedly paid for the painting by the King of France after da Vinci's death, but it is unclear what the modern equivalent of that payment would be. It might have been the equivalent of $100,000 or more. So let's err on the high side and say that the Mona Lisa might have sold for as much as $500,000 in modern terms had it been auctioned off upon completion. That's probably too high, but it will suffice for our purpose.

We can use a compound interest calculator to figure out the rate of appreciation for something that appreciated in value from $500,000 to $760,000,000 over 500 years, and that rate is 1.47% per year, compounded annually. That's real, not nominal, appreciation. And that's the low but steady perpetual appreciation in real terms that I'm talking about. It comes from the focal point effect. Obviously not everything can appreciate in that way, but the focal point can. (BTW, if we start the Mona Lisa at $50K and appreciate it up to $1B over 500 years, which is probably more realistic, that's still only 2% annual appreciation.)

Like I said, I'm deep in conceptual territory here, so, again, please bear with me. I want you to think about all of the gold in the world as a single unit or mass. And as God is to Leonardo da Vinci, so gold is to the Mona Lisa. Gold is God's "Mona Lisa". And as you'd expect, coming from God, gold has many features which make it almost infinitely better than the Mona Lisa.

To begin with, while the Mona Lisa has 500 years of emergent focal point effect under her belt, gold has at least 5,000 years. Gold is divisible without losing value. If we cut up the Mona Lisa into 760,000 pieces, do you think we could sell each piece for a thousand dollars? And even if we could, would they retain that value over the long run? Gold is much more durable than the Mona Lisa, and therefore much more economical to store and transport. The transaction cost of gold is also much more economical. If you could buy the Mona Lisa through Christie's today, their commission would be $91M, but you could buy $760M in gold for a transaction cost of less than $8M.

Get the point yet? Gold has better fundamentals for fulfilling demand related to the service it renders as a "real thing store of value" than anything else. Those fundamentals are the regression effect (a longer history than anything else), the network effect (more Giants and "third world no ones" than anything else) and the focal point effect (only real gold is "as good as gold"). That doesn't mean it should appreciate at a higher rate than the Mona Lisa, however, because remember that appreciation is an effect of these fundamentals, not the cause.

The cause is the confidence in those who possess (and seek) physical gold, confidence engendered by the fundamentals, that, when needed, they will be able to find a buyer ready to pay the highest price which can possibly be attained on the market at that time. That confidence is the cause, and perpetual appreciation is the effect. But I think you'll need to think like a Giant in order for that to really sink in.

Giants, who think this way, indeed, are the foundational base of gold's value. Like the very best-of-the-best works of art, Giants have every reason to accumulate more, keep what they already have, and no reason to ever sell. It is quite simply the divisibility of gold that will "place our footing in life on equal ground with the giants around us."

There are several simpler arguments for perpetual appreciation that I could have made much more easily, like FOA's quote at the top of this section: "The more we built and created, the greater the gold value must always be in the future." This is physical plane appreciation we're talking about. That's what "real" means: gold appreciating against other real things. I could have discussed the changes in gold mining that revaluation will induce, and how public sector gold actions, including mining, will essentially be monetary plane operations with minimal effect on physical plane appreciation.

I could have discussed growth rates, stock to flow ratio and how revaluation in real terms eliminates prior volatility in real terms because it increases relative "mass", and therefore inertia, in both currency and relative value terms. I could have discussed the wide variety of investment options that will keep "hot money" away from gold, delineating, once and for all, savers from investors, traders and speculators. But I wanted to tackle the most difficult argument I could think of—the "infinitely divisible God's Mona Lisa" concept. So how did I do? Does it work for you?

Even with all of the towel-throwing we've seen over the last two years since the bull run ended, it's important to remember that for every seller there must be a buyer. Every last piece of gold on this planet is equitably owned by someone, even if it feels like no one wants gold anymore.

"Do you think that value has been lost by holding physical gold all these years?

If the answer is yes, you are wrong! I tell you now, it's all in your perception of what is value and what is real. Gold has been increasing in value since the early 90s and doing it at a rate much higher than any other investment. Cannot see this? Hear me now, what the wealthy and powerful know: "real value does not have to always be stated or converted thruout time. It need only be priced once during the experience of life, that will be much more than enough!"

Revaluation is a one-off event. The reason for seeking and holding gold after the revaluation will not be the anticipation of another revaluation. For the very strongest hands which form the foundation of gold's high value, the reason won't even be perpetual appreciation. The fundamental reason for seeking and holding gold after the revaluation will be the confidence that, when needed, anyone anywhere will be able to find a buyer ready to pay the highest price that can possibly be attained on the market at that time. Of course, some people, who are today holding gold only for a revaluation windfall, will immediately cash in that lottery ticket. One such person just wrote this in the comments under the last post:

"To wake up one morning and find that I’m freegold multi-millionaire would be like a kid waking up Christmas morning, I can’t wait."

But I wonder how many weak-handed Western shrimps with this mindset will actually be among the strong-handed Giants and "third world no ones" that constitute the vast majority of equitable owners when the time comes. I know a lot of people who have already thrown in the towel, so I suppose it depends on when it happens, at $1,000, at $800, or at $250. I suspect there could be a lot fewer than we might think.

What we see right now is the last bits of physical gold gradually working their way into stronger and stronger hands as the price declines, just like the best-of-the-best artworks which, once they reach the strongest hands, never hit the market again. Just something to think about as you hear more and more Western investors throwing in the towel on physical gold. Wow, what timing!


"Yet, through it all, the revaluation must come as gold will return as money to represent all of this wealth many times over. For truly, all modern wealth will be directly or indirectly denominated in gold as our dollar reserve fails. To this end, the physical gold holder will stand "one step in wealth" ahead of every worldly paper trader."FOA

"The removal of the political "world dollar settlement" price of gold will revalue this asset in terms that noone of "western thinking" can understand."ANOTHER

"A poster on Kitco (I think his handle was AllenUSA) once did a superb job of explaining the dynamics of oil pricing during a currency collapse and gold revaluation."FOA

"Both gold and currencies are traded with perceived future value in mind. Especially gold that is known to be revalued later."FOA

"Later, gold will be revalued upward..."FOA

"I fully well expect my wealth holdings to not grow one bit over the next twenty years!!!!!! But, I do expect the world markets to evolve and revalue my assets, showing their true worth. No, not near gold, not almost gold, not poor man's gold, not gold in the ground or other paper gold,,,,,,,,,,,, just plain old gold in the hand. An asset that will out perform every other holding in the times to come.

--------- The wealth of ages; a lifetime of work kept in a savings from our past. --------"

"Yet few considered the true ramifications if countries suddenly revalue gold not as money, but as a world reserve asset! We approach this dynamic today as world dollar debt has reached its limit. Exciting times for those that "walk in the footsteps of giants", awful times for those that have invested in the gold industry. It's not too late to change course and sail with the wind. With the direction of someone that understands, I have done just that! With the wind...........we are on the road now!!!"FOA

"From this stance we can understand why many have viewed gold as a riskless holding that will be revalued. If it was part of your mix, the transition would always make up for any return lost from not holding other assets. Indeed, it is the very ultimate in a super leveraged investment. No other currency today could expect a 1,000% to 10,000% rise in value against the dollar, none."FOA

"The current "paper gold market" is not a physical gold trading arena, as many here have observed and discussed. Truly, in every sense, it is a "currency market" as contracts are settled in the prevailing "currency values" of gold. It is through this process, that gold is purchased "as a stated value in currency terms", not in physical terms. It is known, that a switch to trading of gold to "physical terms" of the same volume as today, would not only bring a huge revaluation in price, it would also destroy the market."ANOTHER

"If all the gold held by earth were placed in the hands as money, it would be used to revalue every "real thing" at a fair price. A tiny fraction of gold would buy much production of goods and services, on a basis equal for all men, not as a debt for later settlement, as currencies are now!"ANOTHER

"Once fully understood, I think most would then agree with its inevitable outcome. Indeed, a "free gold market", based only on physical holdings would impact the world economic system unlike anything seen before it. And Yes, it's impact on the relative value of gold will make that metal the monetary wealth investment for the next thousand years!"FOA

An Eye for Gold

FOA (12/2/99; 18:06:06 #20082)
An eye for gold!

After all these days,,, did Another "time" the gold market correctly? No, not for traders he didn't! But, then again, his whole message and proposition was never for a trader's mindset or time frame. Indeed, his direction was for simple savers, like you and me. As a conservative group, our holdings represent the most long lasting, stable assets that presently exist. Such assets collected over a lifetime should not be lost to a world gone mad! Truly, Another's thoughts represent the values held in the old world. For many these are in competition for our hearts against the current façade of economic reality.

We now understand how short-lived the current misconception of money must be. Other fast paced modern investors have accepted that "money was never wealth" and paper currencies need not be real things to represent their savings. Lost on these "educated of the Western world" is the knowledge that "wealth in the form of real things" was the first thing humans traded. It was only later that someone labelled these things as money. As a people, we once knew the special value of gold and held it beside our other tradable property. We held this gold more dearly because it made the best form of "tradable" wealth. In this context, its demand will remain, as always, infinite. It mattered not if one had one ounce or one million ounces, as gold money was/is but a representation of the real tradable wealth you saved over a lifetime of work. How far must modern gold now climb as it is reintroduced to the world as a new "tradable money wealth"? As far as the unlimited efforts of humanity!

Truly, as gold is once more used as "wealth money", this action will again impart an unlimited value for gold in use. The more we built and created, the greater the gold value must always be in the future. Neither time or new ideas have changed human nature as it seeks to run from the modern uses and valuations of "IOU" wealth. A wealth that was never as great as the dollar said it was. As a system it could never represent a lasting "wealth of nations" as held in the account of "common man". Gold will come pouring in to fill this void.

This coming new level of value for gold is the "proposition" Another presents. A concept that is now being embraced as "something new" for a failing economic system now based upon an over leveraged world reserve currency! Truly, the old ways will not fail those that see through our modern money fog. Another once put it somewhat this way; Nothing has changed our need for real things as tradable items. And this earth is still round my friends. As I hold my gold for the money it is, traders will work all these markets as they must. With the speed of light they now circle the earth, only to find their future as but one step behind me!

Yes, Another once said that. Differently of course, but an incredible bit of insight it remains. I also accept that most "physical gold" savers will find themselves "many steps" ahead of the "Western trading community" as this plays out. This "long term gold accumulation" proposition was given some time ago, to induce conservative people to begin saving gold "now". At any dollar price, be it $600 or $10! Such direction was given in the face of unprecedented choices from where someone could make fortunes using our modern vehicles. Yet, through it all, the revaluation must come as gold will return as money to represent all of this wealth many times over. For truly, all modern wealth will be directly or indirectly denominated in gold as our dollar reserve fails. To this end, the physical gold holder will stand "one step in wealth" ahead of every worldly paper trader. Whether they trade paper gold stocks or dow stocks, real estate deeds or CDs, in the end their paper winnings will compete with the spoils of all others of "Western thought". These "non physical owners" will seek to buy what gold they can at a price many will refuse to understand. If one made a million by paper investing, he will buy no more than a million in gold. Still, for every new buyer that wishes to escape the old paper world there will be the lowly physical buyer from the past who will already possess two million in gold.

You see, there is a world of difference between saving real money as a "wealth of ages" and trying to trade this world's "paper derivatives". The lasting wealth of physical gold does not have to be "converted" into real things prior to a currencies destruction. It already represents the new holding everyone will want. The coming "Western" economic dislocation will devastate all forms of assets that are held in "contract ownership". Be they stocks (most gold stocks included), bonds, businesses or savings accounts, etc.; the loss of a major currency will consume most of the equity these paper items represent. It has happened with every currency ever created and will happen again with our dollars.

So, the next time you read that someone lost their "bet on gold", remember, they lost because they made the wrong bet. Only a "bet" of "buying physical" over time represents the FOA/A true position.

Another recently said:

"The time? These years be right for ones who save gold. One good ear knows meaning of wind in trees. The leaves come down as seasons change. Fools see falling price of gold as "death of tree", they chase its price as leaves on the ground. Know you all, it is the season that has died.

Time will prove all things. Ones of simple thought, such as I will save the wood, not the leaf as they buy the gold, not the price! Thank You Another

I will be posting and replying this weekend.



What is coming isn't merely a simple correction of imbalances that may, on the surface, appear to be the result of perceived monetary "sins" of the last hundred years, like the creation of the Fed in 1913, the 1922 Genoa Conference, FDR's 1933 gold confiscation and the 1971 Nixon shock. No, it's much deeper, much more mind-blowing, and totally inevitable.

Freegold is the emergence of a new monetary paradigm that has no precedent, certainly not in modernity, and probably not in all of recorded monetary history. It's a brand new idea, ironically with its roots in ancient history, whose time has simply come.

So, while it is true, as gold bugs would have it, that gold never really left the monetary realm, despite its official change in status, one needs to understand that physical gold's role going forward will, in effect, be the result of a shift in consciousness that, without engaging in hyperbole, might be likened to the evolution in understanding about what the universe consisted of that transpired after Einstein introduced the world to The Theory of Relativity. Money's functions will, like the atom, be split, and the world will not be the same afterwards. (Hat tip Edwardo ;)

Seasons Change, Leaves Die… and so do Systems

"These years be right for ones who save gold. One good ear knows meaning of wind in trees. The leaves come down as seasons change. Fools see falling price of gold as "death of tree", they chase its price as leaves on the ground. Know you all, it is the season that has died."

Merry Christmas!



«Oldest   ‹Older   201 – 308 of 308
Knotty Pine said...

Chill out and relax, Grumps, it's Christmas!

Knotty Pine said...

whatever-fits said : "I am curious if there is any thought on the consequences of Fed default on returning Germany's Bundesbank's gold as a result of liabilities resulting from German Bank derivatives."

Do you have a source for this? My understanding was that the Bundesbank intends to repatriate roughly half of it's gold by the year 2020. This includes 300 T from the US and 374 T from France. The details of these gold movements would necessarily be somewhat covert.

Have you read this post?

Sam said...


To assume European CB's don't have gold is to assume they are fools. The BIS eats, drinks, and bleeds gold. Why launch the euro project and mark gold to market each quarter? No, they have known the end game for decades now. They won't be found lacking the chips needed to play at the big table when the old game folds and the new game begins.

One Bad Adder said...

@GLaB: (nearly GEAB;-) It gets interesting "again" from hereon on as THIS is indicating. (hope the link sticks)
We've been in "maintenance" mode these last few years and who knows where a return to "normal" will take us.
The potential for an almighty thrust into "the present" is STILL hanging over the Market so I guess we'll just have to wait and see.

One Bad Adder said...

Previously mentioned Chart: -[user]=134654126&filters[recent]=1&sort=1&o=0.

Victory said...

Sure does look like 'BIG TRADER' is back on the scene, na' mean!

anand srivastava said...

First action by RBI on Bitcoins in India. I guess there will be more to come.

whatever-fits said...


Thanks for the glib retort. I am not sure that having gold in some other bank's possession constitutes the same as having it in your own vaults on your own sovereign soil. I am surprised no one here at least takes me to task for the math. At any rate the notion that that Central Bankers are fools are not is not the point of my inquiry. Does anyone here think that the counter party risk of the monumental derivative accumulation represents part of the equation behind the slow return of physical gold to the Bundesbank?

Roacheforque said...

I have entertained the notion that Bunde's notoriously undercapitalized derivative positions could have a consequential global IMF$ impact, a la Jim Willie's (for example) cryptic meanderings into this area.

But I do not know what their positions are.

Perhaps the larger question is that if and when debt fails, how will that failure be defined and what role will derivatives (not just Bundes) play in that failure?

Though I have pondered several outcomes here, the general sense is that gold will fulfill a Means of Exchange (MOE) settlement function that derivatives (FIAT) will no longer be able perform. But this non-performance is essentially a direct result of of "non-acceptance". A somewhat subjectve call?

Which brings me back to the original assumption of "notoriously undercapitalized". When debt is redefined it is either written off or settled in a new (old) form of capital which performs said settlement function, but which both parties necessarily agree performs that function.

So that said, doesn't the "slow return of physical gold to Bunde" represent a partial and gradual failure of the full faith and credit (debt) behind the promise to (re)pay?

And that said ... is the repatriation "derivative" (promise to repay) not failing in that regard as we speak?

We again beg the question of whether a tumbling domino can be classified as a cause, or an effect? Whereas the bigger question may be, are the domino's falling?

That one I can answer. Yes, they are.

I don't mean to be evasive, but it's all I can offer. I'm not sure anyone can offer more to my satisfaction in the present system of precarious checks and balances on reality.

Roacheforque said...

Furthermore, as I have said before, the principle measure used to sustain debt is a redfinition of the terms, in some cases a certain degree of forgiveness, an extension of time, a broader repayment facility, etc...

Do these forms of renegotiation represent failure, complete or partial? or merely an attempt to save what must eventually fail by continuously repackaging it with more "favorable terms" until its original intent has lost its conterparty value?

All very subjective, and as long as all parties are at the table, life goes on.

When negotiations fail and acts of aggression appear imminent, international settlement requires an arbiter to prevent such waste, its namesake the BIS.

t au said...

Re: grumps

Good grief, I hate it when after a tooth is pulled, the discomfort can still linger.

Dr. Boer said...

"Whatever-fits" brings up a concern that lingered in my mind some years ago: an uneasiness about metal storage of the EU member states. Much of EU metal is stored on US soil. My uneasiness was fed by a remark of Jim Rickards that, in case of an emergency, one of the options of the USA could be to confiscate all metal on their soil (paying those foreigners fully and honestly out in crispy fiat dollar) and tell them "don't worry, you can earn your metal back by selling us your products cheap". Cheap in metals terms, after the revaluation. Much like Whatever-fits wants, I would love to read reactions that put this concern, this uneasiness to rest.

Silex Crow said...

you might start here, or higher up in the coments

November 20, 2011 at 7:45 PM
FOFOA said...


If the coming dollar collapse takes the first waterfall route and hits the riverbed, how would an insane and illogical confiscation play out? Well, if the US dropped out of the BIS to secure sovereignty over its confiscated gold, the BIS would halt all international dollar traffic and probably try to use those dollars to buy gold on the international free market. The dollar would be instantly dead.

Jeff said...

Michael dV said...

Ego inflation will always be bigger than monetary inflation. Some egos simply cannot tolerate the fact that the opinions to which the ego is attached are not wanted. Some ego oozes into crevices but some gets on the nice furniture and has to be regularly cleansed. Such is the case with our blog. We have ego ooze and it is icky and discolored and has no known use. It does seem to have no ability to control it's own flow.
fortunately it does clean up with 'Vanish-Banish' and Fofoa seems to have a lot in stock.

Woland said...

a year end "brain" teaser: When was the last time a central
bank sold 1500 tons of gold in a single year? ( and for extra
credit, who were they, and why did they do it? ) Greetz, et
sayonara. {;<)>>

Marco Polo said...


Banque de France, June 68 to June 69.

Why? Gold was seen as a 'zero yield asset'. Whether that is the truth........

Victory said...

1 of 2


I thought it was Switzerland but I was wrong. You're question did however lead me to this gem published by Philip Hildebrand, governing member of the SNB at the BIS' website (2005)

Here's a sample:

'The Washington Agreement now set the parameters for the SNB’s selling program. The practical details were negotiated in the months following the signature of the agreement. Annual quotas were assigned for each period going from October to the following September. As you can see in Figure 4, the SNB was allowed to sell 120 tonnes of gold between October 1999 and September 2000, 200 tonnes for the next 12 months, 283 tonnes between October 2001 and September 2002, 283 tonnes again between October 2002 and September 2003, 284 tonnes between October 2003 and September 2004 and 130 tonnes after September 2004. The participating central banks agreed to eliminate the possibility of hedging the gold price risk for the entire five year period. However, flexibility was maintained in hedging the gold price risk for the selling quota within each current 12-month sub-period. In other words, forward sales or option programs were possible for the annual allocations only. On the other hand, there were no limitations on hedging currency risk. The SNB was therefore free to hedge the expected USD proceeds from the sales against the Swiss franc.
At the outset, the SNB decided to use the BIS as its selling agent. Between May 2000 and March 2001, the BIS sold 220 tonnes on behalf of the SNB. For the first 120 tonnes, the SNB paid the BIS a fixed commission while the performance risk resided with the SNB. For the next 100 tonnes, the BIS agreed to pay the average price of the AM and PM London gold fixing plus a small fixed premium.


Victory said...

2 of 2

'...In April 2001, the Governing Board decided that there was no reason to continue to sell through the BIS. The SNB now had the necessary professionals, know-how, trading resources and contacts to the international gold market to trade directly. Two types of selling operations were subsequently pursued: spot sales in the market and sales programs with price caps.

Over the next three and a half years, 730 tonnes were sold directly in the spot market. For these sales, the SNB used 25 counterparties in four different continents. In an effort to receive consistently competitive pricing, the Governing Board allowed the SNB traders to become two-way participants in the market. In other words, traders were allowed to buy gold on an intra-day basis up to two thirds of the daily allocated sales volume. Overall, the sales had to be conducted within a clearly defined corridor which was structured around daily sales volumes of approximately one tonne (Figure 5). Typically, the Bank of England was used for the physical settlement of these operations. Apart from spot operations, 350 tonnes were sold through option programs. In a typical program, the buyer committed to buy 50 tonnes of gold spread evenly over several months and to pay the daily average AM and PM London Fixing plus a premium. In order to increase this premium, the SNB accepted to fix a cap to the maximum selling price. In other words, the programs were based on the idea of selling gold on a spot basis and writing out-of-the-money call options. In an effort to obtain competitive premiums, each program was allotted in an auction between three major dealers. Considering the high variance of the bids we received, this auction procedure proved suitable. The realized premium varied between USD 1.4 and USD 3.5 per ounce. These modest premiums reflected the SNB’s prudence in choosing the caps. At the time of the relevant auctions, these were far above the market price. This explains why, despite an overall bullish market, the strike levels were only attained on two occasions, namely in February 2003.'

Another said that the Swiss controlled the BIS, I can't help but be a little disappointed after reading this not that I was expecting to read that they really sold the gold at some inter-bank/semi-revaluation price but the general tone of the paper made it seem like the SNB was doing all they could to keep the gold price from moving against them as they sold into the market.

FOFAO had you read this, any thoughts?

link here:


Woland said...

BDF, C'est correcte! Pourqois? Les événements politiques
de 1968 - 69 en France. Cherchez l'histoire de l'anee 1969,
et vous allez voir les circonstances économiques qui faisait
nécessaire cette vente. Greetz, et Bonne Annee!

mike williams said...

Hello, I am new here but post on SGT Report as Frank Zak.
Gold will bottom the week before the Fed Meeting, or the week
of the Fed meeting. It could be at a higher price than now,
but this is the major cycle bottom.

I expect a 1982 bounce of 83% off that bottom this March.

In Weimar Germany gold went up 1 million times in value.

A study of Argentina, etc., shows gold skyrockets, than
goes flat, so no need to worry when to sell.

Silver is grossly overproduced, but makes twice as much profit
as gold between $22 to $44. Silver is not money, only
gold is money. It is an industrial metal that could actually crash down in a collaspe.

So, I only buy gold. Silver is a trading vehicle, not a long
term investment.

There are so many silver shysters out there, sociopaths.

I only buy .999 Gold American Buffaloes. That's what China likes, .999. Also, in confiscation, they are easily melted without
trace elements to show it has been melted into jewelry.

Luke said...

Mike, you will find people on here do not expect gold to make an "83% run" or anything like that. We actually expect gold to continue to fall in the current state.

I agree with you on silver. Don't need it any more than I need copper at the moment.

michael3c2000 said...

China like .9999
China fine
We like mu

anand srivastava said...


You are thinking value of gold in terms of inflation. We are thinking in terms of real value and a whole lot more than just 83%.

But to get that you have to pass through fire. The fire of very very low prices. The fire of a major world wide financial crisis. The fire of hyperinflation in some countries. The fire of being jobless.

Prepare for that fire before you invest into gold.

FOFOA said...

Welcome Latvia!

The ECB has released its 2014 Snapshot day schedule, and it is not what I expected, probably because Latvia joins the Eurosystem on January 1. Earlier this month I wrote, "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."

Apparently I was wrong! (OMG!! ;) The ECB will be preparing three (3) financial statements which will all be released on Wednesday, January 8. The three statements will be the "quarterly", the "opening" (for Latvia) and the "weekly". The quarterly snapshot will be on December 31, prior to the inclusion of Latvia's gold, and the "weekly" statement snapshot will be on January 3, "to be compared to the Eurosystem opening financial statement" which will include "figures for Latvia and adjustments due to capital key change." In other words, Latvia's gold won't have to be revalued two days after joining!

Confused? Don't be! Just know that Snapshot day is next Tuesday, and welcome Latvia and her 7.7 tonnes of gold into the Eurosystem on Wednesday!


S P said...

Has anybody at this blog ever commented on how much of the Eurosystem's gold is actually there vs. hidden in vaults in New York City or recasted and sent to the Middle East and China?

Nobody at this blog knows how much gold the Eurozone actually has. Not one person.

If you do know, then prove it.

Roacheforque said...

Ahhh, a twist on "If only one entity wants it, and everyone else wants nothing to do with it at all, it is worthless".
But it does seem that all trade surplus countries accumulate it, and deficit countries vomit it up.
Funny how gold has a mind of its own despite the thoughts of men.

mike williams said...

Hello Luke and Michael,

I like residential real estate and gold.

"Buy land ... they ain't makin' any more of it."
Will Rogers

Peak gold has been hit. They can only realistically
mine 33% more in the future than has been mined
in all of history. Look at the huge production drop
in South Africa.

Gold will become like fine art and land.

Only very wealthy people will be able to own gold
and central banks.

The public has no idea gold is actually going extinct.
Silver is 75% a byproduct metal of copper, lead, zinc
and is mined at $11 an oz. It will be mined for many more
hundreds of years, despite what silver gurus tell us. $21
cost for primary miners to mine silver.

Silver is overproduced 201 million oz a year and mining
supplies are rapidly increasing. This after all coinage demand.
Horrible fundamentals.

Production for gold will collaspe at an incredible rate.
China knows this. Russia knows this.

The central banks, including the Swiss, sold off their
gold years ago and leased out the rest.

The private banks that own the Fed now have to get
this gold back.

The Chinese are buying 2200 tons a year, all
the mining production in the world by themselves.

They could and would buy all the gold in GLD, Comex
and LBMA in 5 minutes if allowed.

They are short selling Comex paper gold via J P Morgan
and squeezing the physical onto the market.

They will not break the Comex and GLD until they get about
40,000 tonnes of gold. They have 15,000 tonnes now.

If the bankers can't get back their gold, it will bankrupt
the Fed.

Remember it was a Chinaman who wrote
The Art of War.

Victory said...

From Philop Heldebrand speech published at the BIS website that I posted above.

Here is something else I didn’t understand. The Swiss National Bank (SNB) sold 730 tonnes over a three year period (2001-2005) using 25 counter-parties in four different continents. Initially they used the BIS but after the first year they decided to do it themselves, directly with their own trading desk. So they are choosing not to go through the LBMA, is my understanding correct?

Further, ‘In an effort to receive consistently competitive pricing, the Governing Board allowed the SNB traders to become two-way participants in the market. In other words, traders were allowed to buy gold on an intra-day basis up to two thirds of the daily allocated sales volume. Overall, the sales had to be conducted within a clearly defined corridor which was structured around daily sales volumes of approximately one tonne (Figure 5). Typically, the Bank of England was used for the physical settlement of these operations.’

So the SNB allowed their traders to become a two-way participant, that’s interesting why? The implication is they did so in order to be on the buy side since they were initially selling gold. I imagine was done to avoid getting a low bid from any of the apparently numerous parties they were selling to. It’s like that old line ‘I called up my broker and asked how much XYZ was trading for and my broker replied well are you buying or selling? I said what’s the difference just quote me a price. Now my broker has to give me a two-way quote since he doesn’t know if I’m buying or selling and all I have to do is make sure his bid/ask spread is reasonable to know that I’ve kept him honest. Thus his bid can’t be two low nor his ask to high.'

The SNB was planning to sell roughly 250-tonnes per year over a three-year period and they were doing so with a 1-tonne per day average volume. 1-tonne per day and they went through the trouble of establishing their own trading desk, again why? Seems rather silly since the LBMA was clearing 1,000-tonnes per day and trading 5 times that amount per day.

Silly unless the whole point was to make a physical market in gold independent of the LBMA, in which case it’s not so silly anymore. FOFOA? (on a side note I think the ECB's quarterly mark to market day is so important because one day we may find that the price they mark to is significantly different than the LBMA fix of the same day, FOFOA?)

2005 has long passed but the SNB did gain valuable operational experience in making a physical market and I suppose they distributed gold far and wide to important key players during that time. The work that Koos Jansen has been doing on the Shanghai Gold Exchange (SGE) I find quite interesting.

It seems like China is establishing itself as a physical player however it’s rather a one-way market - gold comes in, it’s not going out.


Gary (tEON) said...

@mike williams

Hi Mike,
Before responding to you I sought out, and read, some of your Frank Zak postings.

I believe you have been involved in Real Estate for 30+ years?

I expect you will find this blog and the forum posters opinions quite unique from standard 'Gold Bug' blogs.

I expect a 1982 bounce of 83% off that bottom this March

FG doesn't see any historically relevant repetition of cyclical paper Gold prices while looking at the long term. While there may be spikes, FoFoA logically - and, so far, very accurately - expressed the view that the SPOT price will decline - that its support has been removed. Certainly he differs from the entire Gold community in predicting this - and he has been absolutely correct. To have a true separation between paper (that which controls the price) and physical Gold (that which is, essentially, unaffected by the paper price) - the former should collapse prior to physical Gold achieving its realistic valuation (example: between 50 to 250X-plus the current paper representation). At some point in this decline obtaining physical Gold will be very difficult - and eventually impossible for most of us. This caveat should prevent those adhering to this theory from waiting for the price decline before buying. No one can say when the flow of Gold will halt, but 'as gold must flow' it will reach its market value price.

Regarding Hyperinflation - You may wish to view our own Edwardo's interview on RT's ' Prime Interest' where he states that while FG does not require HI - it is a very likely scenario given the current financial state of affairs of the USD. In essence, Gold does not require a hyperinflation of the USD to reach its significantly higher value.

Gold will be the means to purchase the most important commodity in the world; Oil. Countries, especially Western countries, devolve pretty quickly if there is not enough petroleum to facilitate commerce. Oil producing nations do not/will not want paper promises and eventually will only accept Gold as payment. So to get a lot of Oil (consider millions of barrels a day) for a small amount of Gold - you can imagine where the physical price must go.

Most here would support your opinion about Silver. The generally accepted Freegold theory does not see it as being part of any revaluation. Central Banks don't hold it and, obviously, don't like it. Its distorted supply/demand data is largely irrelevant.

Regarding Real Estate - seeing that the physical price of gold is so depressed due to the massive paper Gold market built over 40 years (if you believe this to be true) - then it would seem prudent to own AU ahead of any other asset - land, fine art, stocks, bonds, BTC or anything else. It is all speculation outside of Gold.

Peak gold has been hit.
I don't dispute this... and may help constrict the flow at the top levels, however I don't think it needs to be true for FG to transpire. It would be a positive sign for hastening FG, if true... as will miners closing and mine production being limited.

Only very wealthy people will be able to own gold and central banks.

Or rather the people (rich or poor) who own gold now - will become the very wealthy. :)

If you'd like to investigate Freegold further and enjoy watching videos you may wish to watch some of the 'Debriefings' and if your prefer reading you have 5 years worth right here at this blog.


Gary (tEON) said...

Ohhh... and please don't perceive this as an attack but:
Remember it was a Chinaman who wrote The Art of War.

Personally I am not offended but I giggled as I had not heard the term since watching an old episode of Kung Fu (David Carradine)!

From Wikipedia:
Chinaman is a contentious English language term that denotes a Chinese man or person, or as a Chinese national, or, in some cases, an indiscriminate term for a person native to geographical East Asia or of perceived East Asian race. Although the term has no negative connotations in older dictionaries, and the usage of such parallel compound terms as Englishman, Frenchman and Irishman remain unobjectionable, the term 'Chinaman' is noted as offensive by modern dictionaries. Its derogatory connotations evolved from its use in pejorative contexts regarding the Chinese and other Asians. While usage of the term Chinaman is nowadays strongly discouraged by Asian American organizations...

mike williams said...

Hi Gary,
I will see your recommendations. Thanks for great post.
Yes, I am Frank Zak and as you know predicted the top in gold
at $1920 within hours of it being hit. At that time I predicted
gold would drop to $1525. I showed the links on SGT, but have
lost them now. SGT can verify this as I know the owner. When gold hit $1700
I said gold had an 80% chance of hitting $1040.

I also predicted the exact bottom in residential real estate in Jan 2012.
I believe SGT took my advice as he sent emails finding out what to buy.
I was a major blogger on the coming real estate collaspe in 2006.

About 20-25 years ago I came across a scientic discovery. I broke the code
in cycles. When I informed the Foundation for the Study of Cycles in Irvine,
CA, they offered me the Vice Presidency, which I declined.

FOFA is correct about standard cycles. But, I use Interdimensional Cycles.
It was programmed and I sold it in full page adds in Futures Magazine
(which cost $8000 for each add and Stocks and Commodities Magazine.)

FOFA is right, standard cyclists are still in the dark ages. Real cycles
have no form. No waves. Price and time are entirely different animals.

I sold my rights to Interdimensional Cycles computer programs, but I prefer
to do them by hand, which is time consuming.

Gerald Celente wanted me to get the owner to give him one
and the owner refused. He makes too much money.

Cycles are so perfect they predict the event. The universe works with perfect
mathematical perfection.

Paraphrase Nietzsche,
The future has occured many times endlessly.

Einstein's theory infers both the past still exists and the future has already happenned.
We move through life seeing one frame on a film reel, of a movie that has already
been made.

P.S. Yes, I am a Broker, with a degree in acounting (USC)

nearlynapping said...

Just an observation. One of my favorite things about this board is the absence of self promoting narcissists.

Luke said...

Mike, you appear to be an interesting character.

farmersteveg said...

Layin on the couch, napping and halfway listening to "Big History" episode on gold.
Pretty sure they just said there's enough gold in earths core to cover surface of planet 12' deep.
Waiting for the episode on bit coin.
What to do, what to do?

mike williams said...

Hi Gary,
Reading some of FOFA's posts. Since I have collected ancient coins
for 40 years, ancient Greek and Roman, I will explain some of the false
notions silver people have.

The first gold coins were a mixture of silver and gold about 500 B.C.
They seemed to be about 20% gold.

Gold was incredibly rare. There were 1000 silver coins, for every
gold coin. Gold coins, from Alexander the Great, though the Romans,
were only used by the rich for large transactions. This ratio holds
in dig finds to this day.

Gold really came online with Cortez and the new world. This is when
gold coins really came online. Silver (and bronze) were mostly
the money till then.

Of course, silver is no longer money. Gold and oil are money now.
And, someday it will be only gold as oil fades to hydrogen and electricity.

So, we see silver and oil fade. Platinum is closest to gold as money,
not silver. Cold fusion is now admitted as real by the the USA gov recently
and palladium could become money.

When the system collaspes, only gold can be money. I don't believe anyone
will accept silver, unless they are naive. Whiskey and tabacco will be close.
Oil may drop for a time until civilation gets back online, along with
Platinum and palladium and silver. Industrial commodities. Just like 2009.

My studies find real estate works good in a collaspe. IE, your house.
And, real estate is recorded at the recorders office, with title insurance.
If computers blow up you are not in the system.

If hyperinflation hits, you can pay off your mortgage easily. In deflation,
mortgage rates drop and people buy more. A recession is good for real estate
if it is not too severe.

42% of all houses in California sell for all cash now. The 401'ks and pensions
from retiring baby boomers is dumping huge amounts of cash on the market.
They take it lump sum.
But, no one talks about this,as they are too busy selling high margin silver.

That's why I like this club. You guys like gold. Silver people are hyponotised.
Greed has got them.

I do not use a spellchecker, grin.

Gary (tEON) said...

I'd like to nominate Mike for the vice-presidency of the blog - any seconds?

Edwardo said...

I second you Gary (NTEO) because being VP of most things, including this blog isn't worth a bucket of warm piss.

mike williams said...

Hi Grumps,
Dow- gold ratio is a scam. Oil does have some

They tell us silver is mined at 10 to 1 gold and should be priced accordingly. That is a scam.

They tell us silver is going extinct.
That is a scam.

They tell us silver will sell for as much as gold,
or $500. This is a scam.

They say silver gold ratio was 16 to 1 throughout

They tell us silver is money.
This is a lie.

The greatest shysters of this generation are the Silver
Complete sociopaths.

This is a scam.

jojo said...

Mike Williams-

Hello :) What brings you by FOFA's place? Meaning, how did you finally stumble upon this place? (what took you so long? :) )
FWIW, if you never type the word silver on this blog's comments again, no one will miss or be upset by this turn of events.

Also, FOFOA has a very mild policy towards trolls and assholes. In over 5 years 2, maybe 3 people have crossed that line. One such goes by grumpslabastard. These trolls will have their comments deleted eventually. Responding to them in the comments results in gaps and inconsistencies so it's best not to respond to them. Ever.

So how'd you end up here?


mike williams said...

Hi Jo Jo,
Yes, I see the moles. But, when they ask questions about
silver it will backfire on them.

I am used to moles as I help people exit cults.
This is my website. I make no money informing
the public.

I found this gold website by accident.

anand srivastava said...


I wouldn't say this is a gold website. It is a savers website, and recommends saving in gold. All others are traders websites, and are looking for gains in the currency markets.

mike williams said...

Hi Anand,
All my assets are in real estate and gold and nothing
else. I closed my stocks and commodity accounts a few
years ago. Even my bank accounts have only enough
to pay bills.

Someone said FOFA said gold will be better than
real estate. This is perplexing for me too.

I like a win win situation. Both. I like Argentina instead
of Weimar to study. These people say gold and real
estate, but they don't elucidate the ratio !!!!!

Zimbabwe had people on the back of pickup trucks
paying people USA dollars for every microgram of gold
they could get out of streams panning. No one was there
buying silver anywhere.

Here, near Los Angeles, bums have gone into the mountains
at the top of the San Gabriel River in the mountains to pan for gold and get chased out by the police.

Until the 20th century 1 out of every 6 persons mining for gold
died in the persuit, or from lung diseases.

Gold is a common element on earth (like diamonds),
but it is microscopic. It is even in sea water.
But, it will be thousands of years before it can be
gathered profitably.

I recommed people buy gold now cost averaging down.
In March they can go all in.

1982 is about to happen again. The excitement has not
ended, it is just about to begin.

Go here and press all data button and look at 1982 and 1985.
Both 83% up moves.

This generation thinks gold may go flat for 20 years.
They are mistaken.

My cycles confirm another deja vu 1982 move up in gold
from March 2014.

I would not sell either gold or silver now. But, would exit silver
above $40 and switch to gold. Silver is Russian Roulette if
the system collaspes. Only gold is a sure thing.

My calculations show gold is worth $5500 right now and
silver less than mining cost at $9. Silver will always run
up, than crash, as long as it is overproduced.

Gary (tEON) said...

My cycles confirm another deja vu 1982 move up in gold
from March 2014

What data are your cycles based on? Only historical Gold prices?

I researched Foundation for the Study of Cycles and found this:

Foundation for the Study of Cycles: Gold to $2,000 By Late 2011, While Dollar and Stocks will Sink Not totally inaccurate, I suppose - were they using your 'InterDimensional Cycles"?

Phil_O_Dendron said...

Mike Williams Said "Here, near Los Angeles, bums have gone into the mountains at the top of the San Gabriel River in the mountains to pan for gold and get chased out by the police."

No Mike they do not get chased out of the San Gabriel Mountains for panning gold. I am familiar with that area because I have done it. If anyone is "chased out " it is not for panning gold.

You seem to make a lot of statements that do not have any support or merit.

Phil_O_Dendron said...

I was reading an article in Zerohedge at

and I came across this statement:

"From an anonymous source prior to the major lows in the gold price more than a decade ago.

“Someone once said, ‘no one wants gold, that’s why the US$ price keeps falling.’ Many thinking ones laugh at such foolish chatter. They know that the price of gold is dropping precisely because ‘too many people are buying it’! Think now, if you are a person of ‘great worth’ is it not better for you to acquire gold over years, at better prices? If you are one of ‘small worth’, can you not follow in the footsteps of giants? The real money is selling ALL FORMS of paper gold and buying physical! Why? Because any form of paper gold is losing value much, much faster than metal. Some paper will disappear all together in a fire of epic proportions! The massive trading continues at LBMA, but something is now missing...We have reached production costs...The great mistake by the BIS was in underestimating the Asians. Some big traders said they would buy it all below $365+/- and they did. That’s what forced LBMA to go on a spree of paper selling! Now, it’s a mess.”


The gold price is approaching production cost again."

Interesting that Another is being quoted here.

Terry said...

I appreciate the great economy lessons from FOFOA and all of the many other great posters here. But, you are not seeing the big picture. This planet is owned by someone else and we are their slaves. They control humanity, they created us. Unless Another was one of them, then he was just guessing. The owners are sucking the wealth off this world, and the average human has no idea that he is destined to forfeit most of his production. I believe in gold, and have for some time. I strongly believe we are not going to see the reset and our gold will suffer the same fate as paper wealth. The SDR will be our next currency, maybe with a small gold component that they will remove when they feel like taking it away. If you had researched the ancient clay tablet writings, you would understand that they came here for gold and they created man by mixing their genes with an existing hominid's genes to get that gold for them. They are still here and they are in control.

BaronSilverBaron said...

"the ancient clay tablet writings"
So this space travelling superior race thought the best system for our ancestors was clay tablets?

BaronSilverBaron said...

Quick everyone. Sell your Gold now!

This is a quote from the financial section of the UK Telegraph newspaper:-

“Sentiment is stacked against gold,” said Mark Bristow, chief executive of African-focused gold mining company, Randgold Resources. “Globally, economic policy has been driven by popular politics and not sound business sense.”
Mr Bristow said that not all of the downward pressure on gold prices is due to global economic forces. Over-production is now a major problem, especially among miners operating on low margins."

I think I must be inhabiting a parallel universe from Mark Bristow.

db said...

Oh dear! ....

Terry, you shdn't have told everybody, now we'll have to go door to door to "flash" every FOFOA reader using our Men in Black lamps, the truth is too hard for inferior beings to understand it, so shut up and keep digging that gold for us, the voice of our colleague Miley Cyrus shall be your payment.

burningfiat said...

Terry is right! You can't be a proper gold saver without also believing in the Anunnaki! Everyone knows that!

1982 about to happen again? Oh, goodie!

ein anderer said...

Obviously that’s one of Terry’s »sources« … beneath this funny SF movie, featuring Daniel Craig and Harrison Ford …
@Terry: Yes, there are more things in heaven and earth, Than are dreamt of in your philosophy (Hamlet). And we are free to believe everything what is told or written. But better to stick a bit to science too! You would be better off, IMHO.

mike williams said...

Hi Phil
They made a documentaries about the abuse of bums on the San Gabriel River
near L.A. This is one of them.

Documentary about Gold Prospecting on the East Fork of San Gabriel,LA area,
abuse of bums panning for gold documentary by police with guns out.

Hi Gary,

The Foundation for the Studies of Cycles do not use Interdimensional Cycles.
They do not own the rights to it.

Off the Subject
Robert Kiyosake owns six houses, He owns scores of apartments he rents.
He had a major scandal shown on You Tube with his shysters telling people
to take $100,000 out on their credit cards and buy silver.

Bill Murphy of GATA was barred by the CFTC from trading after he lost
21 million of his clients money trading copper. Some years ago, shows on
Mining Web site. Murphy was fined about $600,000 and paid it. Christian
ripped Murphy up one side and down the other at Kitco debates and made Murphy
a laughing stock. Murphy's claim American Barrick was short selling gold
for the gov was also debunked as false.

Andrew Maguire was destroyed by Jeffry Christian, when Maguire's wife blew
the whistle on him as a fake. His backround was fake. Another scandal broke
when Maguire reported $110,000 of profits on a single commodity and it was found
by the reports of his own 3 man company to be impossible. Maguire has never shown
an actual trading statement that he has every been able to make money trading,
as his ex wife said.

Bob Chapman was once wanted in 6 states for selling unregistered securities
of fled to Mexico.

mike williams said...

'Rich Dad Poor Dad' Robert Kiyosaki Exposed - Part 1 of 3

This is why Kiyosaki has not been often seen lately.
Mike Maloney wrote his book for him, as part of the series.
This was the scam of the decade in my opinion as it was
run on PBS stations for a long time.

Terry said...

A shortcut to the knowledge about the Anunnaki can be found in the book, "The Anunnaki and Nibiru" by Gerald Clark. Having spent years researching the Ancient Gods, I find Mr Clark's book to be a very insightful.

Indenture said...
This comment has been removed by the author.
Indenture said...
This comment has been removed by the author.
Dante_Eu said...

All I wanna know is who the heck is FOFA?

I am familiar with FOA and FOFOA but not FOFA. Is it a hybrid of some sort? :-)

Phil_O_Dendron said...

I certainly hope this blog does not turn into the pursuit of real estate empires by the Anuunnaki. Perhaps FOFA (whoever he/she is) will chime in on this.

spaul67 said...

@ Terry

All I can say is they must be really dumb aliens. There is more gold in some asteroids than can be mined from Earth’s crust. You would think that someone smart enough to travel light years would have figure this little fact out by now.

In fact there are likely 10,000x more gold near the center of the Earth than will ever be found in its crust. What we mine is just the wisp of gold that gets driven up from the core from time to time or from the impacts of those very same asteroids.

Still not enough?; well just find the nearest Neutron star collision and you’ll have more gold than entire mass of the Earth at your finger tips. Just use your tractor beam.

Now back to your regularly schedule programming.

Archer said...

I believe FOFA is a hybrid of Fuck off and Freaking Asshole so that it reads Fuck off Freaking Asshole. You Freaking Asshole's- Mike, Terry and the 'tard- (should) know who you freaking well are.

Luke said...

I am unsure how much Another and FOA really knew, but Terry and FOFA are legit!

Terry said...

spaul67 said...

The Anunnaki live on the tenth planet of THIS solar system. They have a 3600 year orbit and are due to pass within visual distance soon. Knowledge of this is being suppressed because their passage usually destroys civilization, as in Noah's flood. This info is becoming more widely known. The point is that humans have very little control of the economy because the Anunnaki have planned this outcome for over two thousand years. As much as I would like to believe gold will go to 50 or 60 thousand an ounce, I doubt that to become true.

Jeff said...

Aliens controlling the economy? Obviously. Gold revaluation? Whoa, that's a bit far fetched... Thanks for keeping the discussion grounded, Terry.

Franco said...

Damn you, FOFOA. Damn you to hell. All your writings, the thousands of hours that you must have spent reading Another's anf FOA's posts, and thinking about it all, and distilling this whole damn "freegold" foolishness for everyone else... And you overlooked the fucking Anunnaki (pardon the profanity, but I think it's warranted given that they are coming, and they are gonna take the gold). Soon they will pass so close that we would be able to wave at them, only we won't wave 'cos they gonna steal all the gold and we'll be pissed. 'Cos they are so advanced that they live on the tenth planet, which is utterly incapable of sustaining life of any kind, but THEY can live there 'cos they kick so much ass. I'm pretty pissed off about this whole Anunnaki bidness.

Phil_O_Dendron said...

Can we please dispense with the alien shit. It really is polluting the blog

Reality Show said...

Silly season. Cheers Terry, you're very funny. Mike, you might want to put down the transmitter and lift the receiver.

I wish everyone a profound 2014.

db said...

"The Anunnaki live on the tenth planet of THIS solar system. They have a 3600 year orbit and are due to pass within visual distance soon. Knowledge of this is being suppressed because their passage usually destroys civilization"

Terry, do everybody a favour and don't wait til the 10th planet is close enough to hang yourself, shoot your head, or whatever your illuminati crowd does.

I wish you were PJ, but I guess you're just another tard polluting the blog.

Last time I feed the troll

mike williams said...

By the end of 1923, thirty-three printing plants in Germany were printing a total 500 quadrillion marks every single day. During these times, you could purchase a full city block in downtown Berlin for only 25 oz of gold.

Indenture said...

So until the aliens come for the gold, and during the Interdimentional Cycle, we continue to walk this path?

mike: Do you have anything nice to say about anyone except yourself? (nearlynapping: welcome)

Indenture said...

Hive Question: At the end of the year when the ECB marks to market their gold will it just be some more of the same? Will it matter that is an 'end of the year' book keeping entry versus a quarterly entry? This year's decline must be straining the balance sheet.

Sam said...


I think the mark to market concept proved itself during the gold bull market. It showed the world that the eurozone not only doesn't mind a higher gold price, but actually welcomes it. This is the first time in a long time gold won't need to be politically suppressed and I'm sure many with great private wealth and a liking of gold took notice of this global commercial each quarter. These people recognize that the strength of the Euro isn't reflected in its current balance sheet but in it's design for a well capitalized future one.

Gary (tEON) said...

Hi Mike, Larry,

This blog is quite unique. It is entitled "A Tribute to the Thoughts of Another and his Friend"

While I'm sure you feel the information that you are importing may have value - it is not really related to the title of the blog. People here are going through the multiple stages of interpreting, understanding and being aware of the worlds of Another and FoA through FoFoA as our astute interpreter. The majority don't care to discuss the anninuki, factoids on Wiemar etc. and if you read the entire blog - I'm sure many would be helpful to you in acknowledging details of the valuable message therein. If you both think you are smarter than us - I challenge you to prove it by questioning - not lecturing. I'm certain their are other blogs where people will be grateful and appreciative of the messages you wish to impart. It is wasted and irrelevant here. Freegold is not something you can embrace overnight. It may take years - and we are here to help as others, and FoFoA, have helped (and continue to help) us... start with the PDFs of Another and then FoA - before reading the entire blog. I wish you positiveness.

Thanks for stopping by.

Roacheforque said...

Phil O,
There are actually several references to Another (one being conspicuously edited) in the full Monument Securities paper by Mylchreest.

It is interesting to note the references chosen and how he interprets them in the present context.

Quite a few observations of the current state of affairs mirror many of the topics I have brought up here, and so I found the paper very affirming (if not somewhat inconclusive).

As for the strange goings on of gold harvesting aliens ....

I think it's much more likely that NO CB, nor the BIS has an ounce of gold, and that all Western Giants have divested of every ton to the ounce, as it flows to China for the Eurasians to be "stuck with" as the US announces a major energy breakthrough (Cold Fusion) and moves to control the worlds supply of water.

mike williams said...

"being aware of the worlds of Another and FoA through
FoFoA as our astute interpreter." quote Gary

As I mentioned I am cult buster. I debunk Indian Gurus and masters
and my sites have over 2 million individual views. So, I am used to
dealing with "astute interpreters", no matter how complex the philosophy.

There is nothing complex about Freegold. I read and understand now
and do not disagree. I have seen their charts and so on.

When I got out of college I did the financial statements for the old Union Oil
Company and for Coca Cola. Untold billions. I am used to large numbers.
Have heard every financial theory under the stars.

(by the way, I debunk annunakis)

What I also know, is every accounting trick in the book. I have a very good idea
what they are going to do. Which I was just about to go into detail on
so you people will know and be prepared what they are actually going to do.
Everything they have been telling you is to misleed you including SDR's, etc.
All the speculation that has been spoon fed to people on purpose, so you
can't see it coming. Churning water does not make milk. You will
never figure out just how clever they are. Never.

So, you can have your astute inpreperters tell you. Right now, they
don't have a remote clue.

As far as joining a cult, not for me. I could have told you things you
could never have imagined.

"If you see the Buddha walking down the road... kill him"

So, I will say goodby. And, have a great fantasy.

Polly Metallic said...


There are no charts in Freegold and you clearly have done little reading here. I don't think you are capable of enlightening anyone here. It is apparent your ego caused your brain to implode quite some time ago. Good bye in the most literal sense of the words.

Nickelsaver said...

Is there any stronger argument than an appeal to one's own authority? Ah yes, an appeal to the authority of this blogs most notorious troll!

Gary (tEON) said...

There is nothing complex about Freegold. I read and understand now and do not disagree. I have seen their charts and so on. Their charts?

Tell me about it Mike... tells us about what you think Freegold is... and if/where it is inaccurate.

Beer Holiday said...


I can't resist asking, but when you say

(by the way, I debunk annunakis)

Do you mean you debunk theories that the annunaki aliens have? What are those theories?

That said, I agree this a freegold discussion blog, and I personally think it's best purpose is (surprise) the discussion of freegold.


nearlynapping said...

In my mind there is a rare combination of arrogance and irony in the misuse of this quote:

"If you see the Buddha walking down the road... kill him"

byiamBYoung said...

Aw Hell, Mike.

I was hoping you'd stick around and fart out some prolific clouds of wisdom that we could all dance in and tap our tambourines and within which bask in your eminence.

We will all be forever diminished for not grasping with white knuckles your prophetic, dynamic, truly wondrous gift of enlightenment.

Please visit the gift shop on your way out. And don't forget to take your aura with you. It's positively blinding.


Phil S. said...

"I could have told you things you could never have imagined."

Another did, FOA did, FOFOA did. But you wouldn't share your super-secret patent-pending future-predicting cosmic-cycles because, of course, you sold them already. Yeah you're nuts but I've run into your kind before ;D

BustinStones said...

Book 'em.... a brief stop to stretch the legs.

OK, Sun's up, time to move. Onward my friends. There is more trail ahead. Further on we walk into this New Year!

Roacheforque said...

When you live in an age of secrets, misdirection and deception ... a world where you can trust No One, least of all the government supposing to "serve" you, the revelations of an "insider who knows all" can be quite compelling.

Let us not forget, that for most of us, that is how we got here. And you have people like Mylchreest quoting such profound thoughts from 15 plus years ago, because among the many gurus and charletons, there is a very small handful that actually appeal to a higher intellect, and those few have immense staying power (A, FOA and in time FOFOA).

We will one day have the honor of having been somewhat closely associated with one of the three.

Until then, remember, we live in a world of followers (leadership is rare) and it is this condition (the desire to follow what we wish to be true) that gives hypnotic powers to the pied pipers of the era.

Whether we come to this through a belief we wish to be true (self bias) or one that we reason to be inescapable, only time will tell.

Roacheforque said...

John Hathaway presents a fairly concise synopsis of current events here:
The only thing missing is the transformation of the current "price fixing" mechanisms. It seems that even the most astute observers of the current gold market get murkey when the the topic of that "problem on your trading screens" begins to appear ...

byiamBYoung said...

GLD down again, to 798.22 tonnes.

Gary (tEON) said...

GLD on January 2nd, 2012 was 1349.92 tonnes
January 2012 AU high was $1740

At that time only readers of this blog would have believed that...
GLD would now be down to 798.22 tonnes - a loss of over 40%
and Spot would be hovering under $1200 - down over 31%.

FoFoA in his July 2012 interview "Where do I see the $PoG going over the next couple of years? Maybe to $500 or less, but you won’t be able to get any physical at that price."

Mining shares are not simply hurting - many have collapsed to unretreivable levels. They are dead in the water - waiting for the death process to, eventually, complete. The Freegold thesis does not endorse mining investment. 'Risk management' or not.

F.O.A. (1999?) "This wholesale acceptance of "fraudulent wealth" has lead an entire generation of "Western workers" into saving nothing and thinking it's something! Once any tiny part of this concept is broken, it will call into question the validity of the entire "paper asset" world. Break the gold market pricing system and you will break the dollar. Break the dollar and the complete dollar based business system is market to the market. A marking that brings currency pricing in line with "on the minute supply" of real things. Not the price of things I can get in six months. The resulting dollar inflation will wreck the ability of most businesses to function at a profit. “

Yet still, no matter how correct A/FoA/FoFoA have been (in all three areas) we have individuals coming here to ignore, gloat, continue their own failed prophecies, lecture instead of learn... leading me to believe that this is only going to, almost unbelievably, continue. New Year's is a time for resolutions. The absence of logic and the power of self-delusion - in the obvious face of impressive prescience - can test the boundaries of our acceptance. I resolve to cease wondering and worrying 'why' and simply ignore. Nothing we can say or do can help these types - probably because they don't want to be helped. So be it.

I hope everyone rings in a safe, and prosperous, 2014!

Edwardo said...

Nice post, Gary.

Marc said...

Gary, that is a nice post. I have read it a few times. Please note that there are some that come here to ignore, gloat ...etc. But, there are others like me that have been reading/studying in silent and learning much. I wish you and regular posters happy new, back to my silence.

Dante_Eu said...

I just saw an interview with Ms Merkel where she stated that the debtor crisis in Europe should be solved "once and for all".

Now, it may be just me, but isn't good old hyperinflation just that? All debt gone once and for all. Or am I missing something?

So, cheers for that, and Hyper New Year! :-)

Edwardo said...

Hyperinflation is one way, Dante, or, more precisely, hyper deflation of the MOE and all things denominated in the MOE against one asset on the (E)CB's balance sheet, physical gold.

Roacheforque said...

I concur, Gary, for sure one of your best comments.

I was just thinking that if the paper price came down slowly enough (and I think that is the key) the paper pricing mechanism could remain credible as long as other tumbling dominos don't break it.

But there sure are a growing number of rows of toppling dominos it appears to be in the path of.

It could take a year to reach $800, and who wants to wait another year, or two, or three?

I think that time wears on some, and they must come here to lament their "momentary perceived losses".

I suggest they forget about all that angst, as beer is still affordable, and one can still buy it on credit, and drink as much as it takes to be happy.

Dante_Eu said...


Let's not split hairs, all debt gone, in either case.

It's not called "ultimate extinguisher of debt" for nothing. ;-)

Franco said...

I'm hoping that somebody can help me find a FOFOA post in which he explains the dynamics of budget surplus/deficit and trade surplus/deficit. Thanks in advance.

MatrixSentry said...


There are many posts that reference surplus/deficit dynamics. A really good one IMO is Peak Exorbitant Privilege.

Edwardo said...

Okay, Dante no hair splitting or pickIng of nits except to
say that the only currency that really needs a full on collapse is the greenback not The Euro.

Gary (tEON) said...

Metals taking a hit this morning... AG has $18-handle, Gold $1187

t au said...

And scrolling on ….

Roacheforque said...

Interest rate derivatives appear up about 8 trillion among the big 5 US bailout Queens, ending 9/30/13 over last quarter, after having declined slightly each quarter for about the prior 6 or more (don't hold me to this, I haven't tracked it religiously).

I don't think these 5 have ever held more than 233 trillion, it could be a record, and I expect next quarter we might see their notional closing over 240.

Or, if interest rates continue to rise above the UST / ESF's desired mark, it could go much higher than that.

2014 might just be the year Rob Kirby is dragged out of the tinfoil closet and fully redeemed.

Happy NY

jojo said...

This one gets into it a bit as well:

Blake said...

This seems like kind of a big deal:

The Dow Theorist said...

Fofoa is being lauded by a blog called Freed Gold

spaul67 said...

I’d like to hear FOFOA’s take on how he would reconcile saving debt at all cost (Another’s position) with the serious prospects of a bail-in being used on most of the paper assets ranging from say 100K to more than a billion dollars in order to give the present kleptocratic paper ponzi system a little more life; perhaps decades.

Basically a global Cyprus event in which the kleptocrates are protected (BTW if you have to ask you are not one of them); the voting block of hand to mouth masses having little to steal from are largely left alone due to their political power; all the while the true net producers in the middle (say less than 10%) are taken to the cleaners in order to “save the system” run by and for the 0.01%.

Its hard to have a hyper-inflation without lots of cash don’t you think? I’m pretty sure a collapse in the quadrillion infinitely re-hypothecated blob that most mistakenly call a ‘market’ today will absorb all those excess dollars and claims on assets like a black hole. In fact so many dollars and claims to assets will be destroyed that the kleptocracy will ‘unfortunately’ need to be first in line to receive the newly dollars in order to backfill all those now destroyed dollars and make sure those unfortunately ‘orphaned’ physical assets have new owners. It’s to save the system don’t you know? What you don’t like it, why you must be some sort of criminal now. We don’t want riots in the streets just because you greedy 10% want to keep what you mistakenly believe is rightfully yours. It’s all legal after all and only criminals have a problem with the law. After all the masses cannot feed themselves without a restocked JPMorgan Chase-EBT card every month now can they.

In short I agree that under the laws the governed the world in Another’s time frame a hyper-inflationary demise of the dollar that leads to freegold would be a lock, Amen. I’m not so sure though given the theft that has effectively been legalized world wide at this point in time. Anyone not physically holding Euro notes will do no better BTW. Only physical Euro’s marked to market BTW will have any chance of being as good as physical gold; yet in ever lower physical amounts I would guess as the printing presses work over time to refill the money supply after the bond/credit collapse. Then again why not just cut out the middle man and hold physical gold now while you still can; why not get paid in full now as Another counseled us? All paper burns as far as I can determine, including the Euro.

I guess what I’m saying is that maybe freegold comes about because net producers finally stop trying to save their net production in the kleptocracies paper? Basically the world becomes a global version of India in which direct control is primary and physical gold is the SoV focal point of all physical assets? Maybe freegold won’t be an instant revaluation event; rather it’s a process that occurs over a decade or more as net producers the world over walk away in mass from the crooked casino?

Perhaps all things considered this is a less social disruptive path towards freegold? Given the nexus of the new Bail-in laws and the astronomical level of re-hypothecation this sure seems to be the path we are on?

An implosion followed by an explosion, sounds a lot like how higher forms of physical matter above hydrogen are made and ultimately released into the cosmos.

The moral of the story; Got Physical Gold?

Blake said...

To follow up on my previous zh post, these reverse repos seem important. Assuming it's not just end of the year window dressing, it seems that the shadow banking sector is getting margin calls to post more collateral against the declining market value of the floating side of interest rate swaps...

MatrixSentry said...

Jim Rickards is a believer in the Coat Check Closet called GLD. Says so here.

Blake said...


Read the blog, idiot. The threshold I.Q. for commenting here precludes your posting, troll.

Gary (tEON) said...

It is a serious mistake to assume that there are specific individuals controlling the implementation of Freegold (there are no "benign people" or "ruthless people" in control of this.) Freegold is a market reaction - not a conspiracy theory. No one should believe that it will "save the economic system of the world" but it will, inevitably, transpire as the momentum of market forces continue with the accelerating decline of this monetary system. Paradigms shifts don't occur simply because YOU are, impatiently, ready for them. The process is happening right before your eyes, as will be - more obviously - be pointed out to you, once it has transpired.

FOFOA said...

A new post is up…

Happy New Year!

And I mean it! ;D


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