Monday, February 3, 2014

Seventeen



"Why do they view their debt in terms of yield
when it only returns more of the same paper?
The only way to convert the return on this
American debt is by buying something real with it.
Only then do we have a “yield”. The Westerners use
“paper to price paper” and “more paper to price more paper”
in an endless quest to add value where value only exists
in the minds of men. To this end they say we have lost value
holding gold, but our families and children cannot go broke.
No one owes us and we owe no one, and we do not “convert paper
to something real” to create “yield”. We already own
our “yield”, no conversion needed!

Now they have created the illusion of gold in
great supply to lower its value in currency terms,
and the Americans accept this. They do not question that this
illusion was done using paper contracts, that do not hold gold
but are priced in currencies that offer a yield valued only
in human emotion terms. It is in this fashion that the
greatest folly of Western thinking will bring an end
to an era of unvalued money. In the near future
a real value will be exchanged for gold and those
that hold paper gold will bid much higher to obtain
what they thought they already had!"

If you're just laying eyes on this Freegold thing for the first time, you are in luck! As of today, if you have, say, $55,000 in surplus currency reserves sitting around, you can still exchange it for 43 ounces of real physical gold! That's almost 3 lbs. of 24-karat gold! And did you know that there's less than 1 ounce per person in the world, so 43 ounces for one person, especially a Westerner, is actually pretty remarkable.

Salience: the state or quality of an item that stands out relative to neighboring items

"Gold is so old. Such a rich history. An educated western mind cannot begin to understand it! We live in a time of closed thought and controlled perception. How could we have known that two thirds of humanity would still think of gold as wealth. It’s not that they are right or wrong to think this way, it’s that we want them to work for us! That is the problem! And when they worked for us we paid them!

And who in the hell would have thought that they would have used so much of that pay to buy gold! Some bought in tiny amounts and some bought in large amounts. This started with the new world trading order that came into being about six years ago. By now that gold is so spread out it would take 20 years and 5 small armies to get it back, I think."
–Another


Someone recently proclaimed to one of my readers that "gold is not exceptional!" He was comparing gold to the charts and returns of other investments. My reader simply replied, "Gold doesn't need to be more exceptional than anything else in order to be more salient, just as Grand Central Station doesn't need to be more exceptional than anywhere else in order to be the most salient place of encounter in New York City."

I wrote about this three years ago in Focal Point – Gold:

In game theory, a focal point (also called Schelling point) is a solution that people will tend to use in the absence of communication, because it seems natural, special or relevant to them. The concept was introduced by the Nobel Prize winning American economist Thomas Schelling in his book The Strategy of Conflict (1960). In this book (at p. 57), Schelling describes "focal point[s] for each person’s expectation of what the other expects him to expect to be expected to do." This type of focal point later was named after Schelling.

Consider a simple example: two people unable to communicate with each other are each shown a panel of four squares and asked to select one; if and only if they both select the same one, they will each receive a prize. Three of the squares are blue and one is red. Assuming they each know nothing about the other player, but that they each do want to win the prize, then they will, reasonably, both choose the red square. Of course, the red square is not in a sense a better square; they could win by both choosing any square. And it is the "right" square to select only if a player can be sure that the other player has selected it; but by hypothesis neither can. It is the most salient, the most notable square, though, and lacking any other one most people will choose it, and this will in fact (often) work.

Schelling himself illustrated this concept with the following problem: Tomorrow you have to meet a stranger in NYC. Where and when do you meet them? This is a Coordination game, where any place in time in the city could be an equilibrium solution. Schelling asked a group of students this question, and found the most common answer was "noon at (the information booth at) Grand Central Station." There is nothing that makes "Grand Central Station" a location with a higher payoff (you could just as easily meet someone at a bar, or the public library reading room), but its tradition as a meeting place raises its salience, and therefore makes it a natural "focal point."

Gold's salience as the focal point store of value par excellence is not a prediction or future projection. It is a backward-looking observation. There are some 5½ billion ounces in this world of 7 billion people, and every last ounce is equitably owned by someone. During the last 17 years, 1.3 billion people were added to this planet, and also 1.3 billion ounces of gold were added to the above-ground supply. And again, every last ounce was purchased by someone.

This may seem like a silly point, but gold does not pile up on overstock.com shelves like last year's iPhone accessories waiting for frugal buyers. It sells out every year. Normally you'd think this means that supply and demand met, price was the result, and therefore the price of gold represents its fair value. But with gold, it's not quite that simple.

When I talk about gold's salience as the focal point wealth reserve, I'm not talking about gold mining shares, gold futures, gold certificates, gold-denominated trading accounts like XAUUSD, or even gold ETFs. I'm talking only about physical gold in hand, meaning discrete physical pieces of gold in the most unambiguous form of ownership you can arrange as a shrimp. I'm talking about this:


I'm sure my comment will, as always, kick off a discussion in the comments about whether this or that "gold and silver" custodial service is a viable alternative to possession, but that will be missing the point. I'm talking about gold's salience as the focal point object of wealth as it already exists among the Giants and "third world nobodies" who already own most of the gold in the world. Look at how they buy and hold gold.

Of course gold's shiny allure does reflect its salient glow upon other gold-ish investments in the mind of the Western investor. The Western mindset sees this focal point salience, is aware of it, but then uses these "alternatives to possession" to place bets on how its allure to Giants and "third world nobodies" will affect its price. As FOA wrote in Chapter 1, "This, my friends, is the very nature of western trading of gold." And Another:
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."



A riddle wrapped in a mystery inside an enigma

Something happened 17 years ago last week. I would characterize it as "the opening of the door" for Another and FOA to explain publicly, albeit anonymously, what we today call Freegold. "A riddle wrapped in a mystery inside an enigma" was the way one writer at the time, The Red Baron, described the London gold market. That's because it had been one of the most opaque and secretive markets (for obvious reason) for hundreds of years.

Then, 17 years ago last Thursday, the LBMA released, for the first time ever, its average daily clearing volume, through an article in the London Financial Times titled "Extent of global gold market revealed". Today (and ever since that day) the LBMA releases this volume every month, so it may seem like no big deal. But in 1997, the sheer magnitude of the reported volume was a real head-scratcher for some who had been following the gold market for years. Before I explain, let's take a quick look at how the City of London grew into the world's central hub for trading gold.

According to the official Gold Fixing website, the emergence of London as a gold trading center can be traced back to around 1671, with the arrival of a young merchant named Moses Mocatta. Then, in the early 1800s, Nathan Mayer Rothschild arrived in London and soon became England's official gold broker.

Nathan moved from Germany to England in 1798, and by 1805 he was a successful banker in London. His bank, N.M. Rothschild & Sons Limited, was founded in 1811, and by 1815 he was buying gold on behalf of the British Treasury to fund the Battle of Waterloo. Ten years later, he helped the Bank of England out of a liquidity crisis by providing it with gold coins.

The British army, paid with gold acquired by N.M. Rothschild, narrowly defeated Napoleon's French army in 1815, which makes it a fun fact that the London-based global banking empire of N.M. Rothschild & Sons is now wholly owned by the French branch of the Rothschild family. That happened after Sir Evelyn de Rothschild retired in 2004, and N.M. Rothschild & Sons was then merged with France's Rothschild & Cie Banque through Paris Orléans SA, now headed by David de Rothschild, eldest son of Baron Guy de Rothschild, the head of the French branch who passed away in 2007.

If I've gotten anything wrong there, I apologize. I'm certainly not a Rothschild historian, but they did play a big role in the history of the London gold market. Following WWI, an agreement was struck between London and South Africa such that newly-mined South African gold would be shipped to London for refining, after which it would be sold to the world through N.M. Rothschild for the highest price that could possibly be attained on the market at that time. Thus began the London fix.

"On 12th September 1919 at 11.00 a.m., the first gold fixing took place… The bids were made by telephone for the first few days, but it was then decided to hold a formal meeting at the Rothschild offices… Although the London fix continued to be in sterling for almost another 50 years, what really counted was the dollar price of gold, as the dollar gradually replaced sterling as the world’s favourite reserve currency." goldfixing.com

London gold fixings ceased in 1939 with the outbreak of WWII, and then resumed 15 years later in 1954. The way the fix worked was that five members of the London gold market, the five fixers, would meet once a day in the Rothschild offices with a direct phone line to each of their trading rooms. The trading rooms would be talking to their clients on both the buy and sell sides, and each fixing member would report the net buy or sell orders from their clients. The five fixers would net out the orders from the five banks and if there were more purchase than sell orders, for example, the price would be raised and each bank's trading room would relay the new price to its clients and the orders would be adjusted and reported back to the fix.

Once the buy and sell orders were all matched, the price would be declared "fixed" and the orders would be filled. This happened once a day until 1968 when they added a second "PM" fix to coincide with the opening of the US markets. But as early as 1961, the Bank of England started noticing that it was having to sell from its own reserves to keep the price down to $35 per ounce. This led to the creation of the London Gold Pool, a pool of gold reserves from eight different countries that would be used to keep the fix fixed at $35 per ounce. Within the pool, the Bank of England only had to cover 9% of whatever was needed while the US ponied up the lion's share, 50% of the pool.

In 1968, the London Gold Pool collapsed as buy orders overwhelmed the reserves. According to goldfixing.com, the pool lost 3,000 tonnes trying to hold the price at $35 per ounce. On orders from the US, which was supplying 50% of the pool, the London gold market was closed for two weeks. When it reopened, the second fix was added and they no longer tried to control the price, which quickly rose to $44 per ounce.

But something else happened during those two weeks that the London gold market was closed. London lost its South African supply line to Switzerland, which was a big hit to the London gold market at the time, about 1,000 tonnes a year. And then in 1975, the COMEX futures market opened in the US, taking even more market share away from London. London responded by giving birth to the bullion bank (a term that, in the early 80s, referred only to mine finance) and opening its gold market up to foreign banks who wanted bullion trading rooms in London.

The first of the foreigners in were Morgan Guaranty, Credit Suisse and Nova Scotia, and by the mid-80s this new "open door policy" had attracted more than 50 new "associate members of the London Gold Market". Coordination, like in the good old days of the fix, was getting more complicated. Also in the mid-80s, London opened, and then closed three years later, its own version of the COMEX, the London Gold Futures Market (LGFM). And in 1984, the pioneer of modern bullion banking, Johnson Matthey Bankers, also one of the fixers, collapsed.

It was a mess that had to be cleaned up by the Bank of England itself, and in the aftermath, the BOE assumed the supervisory role over the London bullion market and demanded that the participants create a formal body to represent them as a group. A little more than a year later, in Dec. 1987, the LBMA was born.

The first chairman of the LBMA was also the chairman of the Fix from '74-'93, and a director of N.M. Rothschild & Sons named Robert Guy. Robert Guy was also the first to push for more transparency in the LBMA in the form of turnover volume statistics as early as 1992:

London Bullion Market
By Kenneth Gooding
FT June 22, 1992, Monday

There is a need for greater transparency in the gold market, suggests Mr Robert Guy, a director of N. M. Rothschild, the bullion house which hosts London's daily gold fixing session. 'I find it very difficult when people ask me the turnover of the market not to be able to tell them.'

Mr Guy was the first chairman of the London Bullion Market Association when it was set up in 1987 to represent the interests of participants in the wholesale bullion market. He has only just stepped down after four strenuous years. Freed from the necessity for diplomatic neutrality, Mr Guy is able to nail his colours firmly to the mast. He suggests that the association went one step in the right direction towards more transparency in July, 1990, when it started to publish details of gold lending rates.

'I believe this attracted more business to the market, not only from mining companies, but also from central banks,' he says. Now he has stimulated a debate about turnover transparency. He is very much in favour of the London gold market providing turnover details, not on a daily basis but regular historic statistics. Many other markets do this - Mr Guy points to the London stock exchange as an example of a market where turnover statistics apparently help to lift trade.

'Investors today demand more transparency than they used to. I believe gold market activity would be enhanced if we had greater transparency”

Mr Guy suggests that the management of those companies participating in the market would benefit from publication of turnover statistics. They would have some benchmark figures against which to measure their own statistics. Not every member of the association agrees with him. Mr Guy thinks that most of the LBMA's market making members are in favour but 'as we believe in consensus, unless everyone agrees, it won't happen'.

And that's my brief history of the "riddle wrapped in a mystery inside an enigma" that was the London gold market for the last 300 years, bringing us up to the point in time I want to talk about, 17 years ago last week. On Jan. 22, 1997, the LBMA announced its intention to release its clearing volume in a Financial Times article titled "Dealers end gold trading secrets":

Dealers end gold trading secrets
By Kenneth Gooding
FT January 22, 1997, Wednesday

Bullion dealers, backed by the Bank of England, have agreed to overturn years of tradition and secrecy by publishing details about turnover on the London gold market.

But some analysts warned that the move, designed to increase transparency on international exchanges, might drive business away from London because of clients' desire for anonymity.

The London Bullion Market Association intends to make public international settlement and London market turnover figures every month, starting next week.

Mr Alan Baker, the association's chairman, said it hoped to "walk carefully along a narrow line between the calls for more transparency on one side and the secrecy demanded by our clients on the other".

But one analyst, who asked not to be named, said the move was "terrible". "When did a market need transparency to grow? People won't be attracted to a market showing its underwear in public."

Mr Tony Warwick-Ching, gold specialist at the CRU International consultancy, suggested the move might put London at a disadvantage to the Swiss who were unlikely to reveal any gold statistics.

"The gold market has always thrived on opacity and obscurity," he said.

Mr Baker said the data would reflect global gold dealing activity by revealing the figures for the "loco London" market, or those international deals settled in London.

Ms Rhona O'Connell, analyst at specialist mining stock-broker T. Hoare & Co, suggested the statistics would provide a clear indication of the depth of the gold market.

"It should bolster confidence if people see it is a deep market and not liable to manipulation," she said.

Then, on Jan. 30, 1997, they followed through with the article I mentioned earlier:

Extent of global gold market revealed:
London clears 930 tonnes of bullion each day

By Kenneth Gooding
FT January 30, 1997, Thursday USA EDITION 1

Deals involving about 30m troy ounces, or 930 tonnes, of gold valued at more than $ 10bn are cleared every working day in London, the international settlement centre for gold bullion.

This is the first authoritative indication of the size of the global gold market, and was revealed yesterday by the London Bullion Market Association.

With the blessing of the Bank of England, the association overturned years of tradition and secrecy to provide statistics illustrating the size and depth of the London market.

The volume of gold cleared every day in London represented nearly twice the production from South African mines in a year, Mr Alan Baker, chairman of the association, pointed out.

It was also equivalent to the amount of gold held in the reserves of European Union central banks.

The size of the gold market will surprise many observers, but traders insisted the association's statistics were only part of the picture because matched orders are cleared without appearing in the statistics. Mr Jeffrey Rhodes, of Standard Bank, London, said the 30m ounces should be "multiplied by three, and possibly five, to give the full scope of the global market".

Mr Baker said the association would produce average daily clearance figures every month. "They will provide a useful benchmark for comparison and analysis of trends in the volume of the global bullion business," he predicted.

He denied suggestions that the move might drive business away from London by upsetting clients who preferred secrecy. "These figures do not in any way affect the confidentiality of the market. While discretion and integrity will always be bywords in the London bullion market, the LBMA is nevertheless conscious of the general call for greater transparency in markets.

"The statistics demonstrate the prominence of London in the world of bullion, something we have long been aware of but which until now has been difficult to demonstrate with statistics."

LBMA members were divided over the move. One said he was puzzled. "What will people make of it?" Another said the exercise was "futile" because it did not give a complete picture of bullion market activity.

But Standard Bank's Mr Rhodes suggested the statistics would "become the key indicator in the world of gold, providing the numbers by which the market can be monitored".

Mr Martin Stokes, vice-chairman of the association, said: "This shows we have a serious market with a lot of depth and deserving of more attention." The statistics showed, for example, that the 300 tonnes of gold sold recently by the Dutch central bank - a disposal that badly affected bullion market sentiment - was not a large amount by the market's standards. The association was "making a bid to attract investors' interest".

The association also gave details yesterday about the silver market. Roughly 250m ounces of silver valued at more than $ 1bn are cleared daily in London.

It also published the results of a Bank of England survey of turnover that the 14 market-making members of the LBMA in the London bullion market conducted in May last year. This showed about 7m ounces of gold, worth nearly $ 3bn, was traded daily by these market-makers.

VOLUME

I want to draw your attention to that last paragraph. It says that the BOE's survey of 14 LMBA market makers in May of 1996 showed a "daily turnover" of 7M ounces worth $3B. Doesn't that seem low compared to the 30M ounces worth over $10B reported as "daily clearing volume" in a survey of the 8 LBMA clearing members just seven months later? Just on the face of it, that's a 4 to 1 jump in daily volume. Did something change between May and December in 1996? Did the gold trading volume explode, or is there some difference in the reporting standards of the two surveys? After all, the BOE's survey called it "daily turnover" and the LBMA survey was the "daily clearing volume".

In fact, the LBMA surveyed its 8 clearing members starting in October '96, and that month the average daily clearing volume was 27.5M ounces. So if there was a dramatic jump in the volume, it must have occurred during June through September. Or was the BOE's May '96 result a fluke, i.e., an abnormally low month? Well, as it turns out, it was not a fluke. The BOE conducted the same survey four times since 1990, with similar results since at least 1991. About 6½ million ounces in '91, 7½ in '94, and 7 in '96.

So, apparently, roughly 7M ounces in "daily turnover" was the status quo from '91 through '96, and then, in the summer of '96, something happened and the volume exploded, like punctuated equilibria, to a new status quo level which, generally, continues to this day. Or is there another explanation for the discrepancy between the BOE and the LBMA surveys? As I already mentioned, the BOE surveyed the LBMA "market makers" (14 of them) for their "daily turnover", and the LBMA surveyed its "clearing members" (which, at that time, were 8 of the 14 market makers surveyed by the BOE) for the "daily clearing volume".

What's the difference between "daily clearing" and "daily turnover", and how should we expect them to relate to one another? In other words, is there an expected ratio, like 4 to 1 or something? Actually there is! But there are many opinions on what it is, generally ranging from 3:1 to 10:1.

In 1997, from the article above, Jeffrey Rhodes of Standard Bank, an LBMA member, said the clearing volume should be "multiplied by three, and possibly five, to give the full scope of the global market."

In 2007, Stewart Murray, the recently-retired head of the LBMA, wrote that "Previous estimates of the daily volumes traded in the London market have suggested that the quantities are a positive multiple of the clearing volumes with a multiplier of between 5 and 9."

In 2009, Peter L. Smith of JP Morgan Chase, writing in the LBMA's own Alchemist, said that "the numbers are probably understated by as much as a factor of three times, or possibly even more during busy market periods."

And in 2011, in Liquidity in the Global Gold Market – Trading volume and turnover, the World Gold Council reported that "Many dealers estimate that actual daily turnover is an absolute minimum of three times the amount of transfers reported by the LBMA and could be upwards of ten times higher."

So there you have it, 3 to 5, 5 to 9, 3+ and 3 to 10. But the best indicator of the expected ratio of turnover to clearing comes from the LBMA's own 2011Q1 turnover survey, published just four months after the WGC report. In it, for the first time ever, they report both "daily turnover" and "daily clearing" side by side. These were statistics taken over three months, 63 trading days, and they revealed a ratio for turnover to clearing of 9.2 to 1. Definitely the higher end of the 3 to 10 spectrum! ;D

But perhaps you've already noticed something. Perhaps you already caught the catch. This empirical ratio of 9.2:1 does not reconcile or resolve the discrepancy between the May '96 BOE survey and the Oct. '96 LBMA one, it widens it. It makes it worse!

On the surface, that 7M to 27.5M ounce discrepancy looks like a 400% explosion in gold trading volume, over only five months. But if we apply the 9.2:1 ratio discovered in the LBMA's 2011 survey, then it looks more like a nuclear explosion of 3,600%. So, to avoid the impression of sensationalism, let's create a range with 3,600% at the high end. What should be the low, most conservative end of the spectrum, given what we know?

Well, in 2011, the LBMA surveyed 36 members, including all 11 of its "market-making members". In 1996, the BOE only surveyed the market making members, but there were 14 of them at that time. So we're comparing a survey of 14 trading rooms with one that surveyed 36, however the "market making members" should probably be given more weight. But let's not. To be sure we hit the conservative end of the spectrum, let's not discriminate between bullion banks. There is, after all, at least one analysis that concluded 23 or so bullion banks that were not surveyed in 1996 were at least as active as the 14 that were, which brings the total up to 37 bullion banks, pretty close to the 36 that were surveyed in 2011.

I'll keep this part to one paragraph so as not to bore those of you who are still with me. It is a fair assumption that the more banks polled, the higher the reported turnover would be, and therefore the higher the multiple compared to the clearing stats. 36 (members polled in 2011) divided by 14 (members polled in 1996) is 2.57. If we divide the multiple of 9.2 that came out of the 2011 survey by 2.57, we get an expected multiple of 3.6 for the 1996 survey. That is, we could expect the "turnover" to be 3.6 times larger than the "clearing volume", or said another way (because we don't know the clearing volume in May of 1996), we would expect the "clearing volume" to be the reported "turnover" divided by 3.6.

The implied increase in trading volume is about 1,400% in five months. And that gives us our range. Rather than a 400% jump in trading volume as it appears on the surface, it was probably somewhere between 1,400% and 3,600%, and I'm going to roll with the low end because it's more than dramatic enough for my purposes. Here's what it looks like putting the implied clearing volume for May '96 with the reported volumes for October through January. I converted millions of ounces into tonnes, because tonnes are the terms in which I generally think:


Now before you get lost in the details, there's a main point. And that point is that it looks like something changed in the gold market around the middle of 1996. That change, apparently, precipitated the appearance of Big Trader on the Kitco forum in December '96, the LBMA transparency decision in January, and the subsequent appearance of Another and FOA which, to me, seems to be more of an evolution of pseudonyms, from Big Trader to Another, than a string of different posters.

I just want to touch on this for a moment, because it's confusing. And I'm not suggesting that Big Trader and Another were the same person. I don't think they were. I just think that the same person (FOA) probably posted all or most of the comments on both of their behalfs, and that, between Dec. '96 and Oct. '97, the handle he used evolved from Big Trader to ANOTHER ( THOUGHTS! ). The evolution went something like this:

Big Trader
Big Trader ( the writer! )
The Writer
The Writer ( thoughts! )
BIG TRADER (THOUGHTS!)
BIG TRADER (LAST THOUGHTS!)
ANOTHER (thoughts not written anymore)
ANOTHER
ANOTHER ( THOUGHTS! )
Friend of Another
FOA

This only came to my attention less than two years ago, when Nick Laird published the old Kitco forum archives. It is my opinion, and it's only an opinion, that these early "thoughts" (the authentic ones, because there were also a few copycats) were all posted from FOA's computer, even though the thoughts originated with at least two other people, Another and Big Trader. Therefore I view them as coming from a "group" as it were. I realize it's a little ambiguous, but I think it's the best we can do with what we have to work with from those earliest comments. And with that out of the way, let's get back to the volume in 1996.

There appears to have been a dramatic jump in gold trading volume of at least 1,400% sometime in mid-1996. We could even call it a phase transition of sorts, because it appears that volume was stable at one level from '91-'96, and then it has been roughly stable at its new level for the last 17 years. Have you seen it discussed quite this way before? I haven't, and I think that's probably because the sheer magnitude of the jump only became deducible with the advent of the LBMA turnover survey in 2011.

Here it is again. This time I added the implied clearing volumes for '91 and '94 based on the turnover chart on page 40 of this BOE publication, as well as the latest volume released by the LBMA, to show where it is today. Does this make any sense?


What are we to make of this apparent jump in volume of more than a full order of magnitude? Did it really happen, or is there some other explanation for the discrepancy between the two surveys mentioned in Kenneth Gooding's article from Jan. 30, 1997? Most of the gold market followers on Kitco at the time seem to have taken the news as simply the revelation of previously-undisclosed volume, as opposed to the revelation of a sudden increase in volume. And the mainstream media that reported the two survey results seemed to ignore or not even notice the difference.

Here's another article from Gooding in May of '97. Notice the highlighted portion:

LBMA clears less gold during April
By Kenneth Gooding
Financial Times May 13, 1997, Tuesday LONDON EDITION 1

Another fall in the average daily clearing turnover for gold was reported by the London Bullion Market Association yesterday. Daily turnover was 32.1m troy ounces worth $ 11.1bn, well down on the 36.3m troy ounces worth $ 12.8bn cleared in March and the record 40.3m ounces worth $ 14bn reported in February.

The association also pointed out that April's volume total was 15 per cent below the average for the first quarter and 16.5 per cent down in value terms. "Underlying these trends was the levelling out of both gold and silver prices in April and consequently lower volatility which was naturally reflected in a generally declining level of activity and clearing turnover," said Mr Chris Elston, chief executive. Gold averaged $ 344.47 an ounce in April, compared with $ 351.80 in March.

The LBMA started reporting daily clearance statistics for London, the international settlement centre for gold bullion, only from October last year, so there are no comparative figures for April 1996.

The picture for silver in April was similar to that for gold, with 253m ounces worth $ 1.2bn cleared on average every day, down from 284m ounces worth $ 1.5bn in March. The average silver price in April fell to $ 4.77 an ounce from $ 5.20 in March.

That was his standard practice each month, to compare the monthly volume report to the prior year, and, therefore, to note that there was nothing to compare it to until October '97. But he never mentioned the May '96 BOE survey again for comparison. If he had, any comparison between the two would have raised some obvious questions, which is why I said he seemed to either ignore or not even notice the difference. To me, in hindsight, now with the advantage of the 2011 survey which gave us a concrete relationship between turnover and clearing, this seems to be the elephant in the room that nobody noticed.

Another and Big Trader on the other hand, and meanwhile, were going on and on about an explosion in the gold trading volume. Did they know something that no one else knew? Look at this comment from "Big Trader ( the writer! )" on February 27, 1997:

"Let me clear up a few things. I am not the “Big Trader”! He cannot speak or write english and does not/would not post here. He has a need to get “thoughts” to other people. I do not do well with english either. My relations with him are private and restrict me from posting my own thoughts… Those of you who are rich and “on the inside” of gold companies and gold traders, ask if anyone alive had ever seen gold trade in the present volumes that have not been seen in history. The shocking truth is that more gold has just been traded than is held in most of the central banks. So much so that even the 100+ year old london gold pool was forced to admit to trading it’s share! I should think that the big investors on comex would have known this was going to happen! No? It could only have been the people who were about to do this buying that would know ahead of time. Yes, only they would know that a “once in a lifetime” buying spree was about to take hold.

Will gold go back down in price? They don’t realy care! Only on kitco can a trader find such good info. I advise every gold trader in the world to access this site every day! There is only one person who knows me at this site. That person is the soul of discretion and integrity. Someday I will contact him again and he will learn my real name. May the force be with you, and keep your eye on london! thank you"

Notice the highlighted portion. The above was posted at the end of February '97, just about one month after the LBMA released its clearing volume for the first time on Jan. 30th. But Big Trader first showed up on Kitco on December 7, 1996, with this:

"Myself and a group are indeed placing open orders for Feb/97 gold on any breaks below $370.00 and will continue to buy each day under that price ( for weeks if allowed ). We can and will call most or all of these contracts if the market doesn’t rise enough for a rollover. Our cost and fees is such that it’s easier to buy paper here than physicals in asia…"

Again, that was Dec. 7, 1996 when Big Trader first showed up talking about himself and his "group", "in asia", buying paper gold for the purpose of converting it into physical. Then less than two months later, on Jan. 30, 1997, the LBMA released its clearing volume. Then one month later, either FOA or Another wrote "It could only have been the people who were about to do this buying that would know ahead of time. Yes, only they would know that a “once in a lifetime” buying spree was about to take hold."

In hindsight, February '97 had the highest volume, by a fair margin, during the entire first year of reporting. From the LBMA website:


About one year later, on February 4, 1998, Another wrote this:

"Most of the very large buyers completed much of their conversion all of last year. When we speak of these entities one must know that they purchase much larger amounts than Berkshire. Most cannot understand that it is difficult to take five or ten million oz./gold in physical in a month or less. Note that Mr. Buffett has taken six months and only purchased about half of his silver! Even here we speak of only $300m for the amount taken. At this time the market is very, very tight for large money to go into physical. Paper, yes! I could move five billion US into paper metal very fast, but not physical."

Most of this I'm giving you is to simply show that the narrative being explained by Big Trader, Another and FOA in those early days is, in fact, corroborated by data from official (BOE and LBMA) as well as mainstream (FT) sources at the same time, even if it was never explored in quite this same way before. And again, the magnitude of the apparently huge increase in volume only became less speculative and more concrete after August of 2011 when the LBMA released its survey.

To recap, Big Trader shows up in December talking about buying lots of February paper gold and converting it to physical. In January the LBMA starts releasing its clearing volume. In hindsight, February turns out to be a big month. And also in hindsight, 1997 turned out to be a big year for physical gold flowing out of London. Here's a chart of gold imports/exports for the UK that Victor the Cleaner put together. The data he used came from an old article by James Turk:


Notice almost 2,500 tonnes of physical gold in net exports for 1997. If we divide that amount by 12 months, it works out to about 6.7 million ounces per month. Pretty close to what Another said on Feb. 4, 1998: "Most cannot understand that it is difficult to take five or ten million oz./gold in physical in a month or less."

Remember also that Another was fond of saying "Time will prove all things." So was it just a coincidence that, time and again, Another said remarkable things that could only be corroborated years later in hindsight? Or could it be possible that he not only had access to insider intel, but also the "old money/Giant" perspective necessary to put it all together in a way that even most insiders couldn't have done with intel alone? It is this rare combination that, in my opinion, makes Another so unique, and probably also what drove him to share his insights.

This is the way I've always viewed Another, and over the years I have even developed a "profile" for him that I find most fitting. Some think he must have been a central banker, perhaps even one of the euro architects. But I have come to like the idea that he was European old money aristocracy, also having some connection to the various areas that he seemed to know so well.

Michael Kosares wrote in his intro to (THOUGHTS!): "ANOTHER demonstrates a feel for and understanding of the gold and oil markets that indicates connections at the highest echelons of international finance." I would add that he also probably had some connections making him privy to top level intel in central banking, the LBMA, Hong Kong, South Africa and Middle East oil.

In 2001, FOA wrote, paraphrasing Another, "we are not here to prove things, my friend, time will do that for us. It will also expose our standing in world of Thoughts." Please take note of how this posture differs from virtually everything else we read from other gold analysts and so-called "experts", be it reasoned speculation or statements of (supposed) fact. And it wasn't just their posture, but their entire view on the gold market that differed (and still does to this day) from virtually everyone else.

There is certainly nothing wrong with well-reasoned speculation by experts and discussions about apparent facts. But I propose to you that the logical consistency of what A/FOA shared, combined with everything else about it (their posturing, their exposing of what could only be insider intel if true, and the obvious old-money, old-world wisdom they exuded) warrants very serious consideration, especially because their view is so completely different from both the mainstream "expert" view and the majority gold bug view of the market.

So, with that in mind, let's take a quick look at some of the other things they wrote about this explosion in volume:

6/8/97: "So many off market forward gold deals were done without any gold changing hands! Big buyers got on the paper side of these things and thought that the CB’s were backing the dealer banks by written contract. If the mines couldn’t perform the banks would …….! But what if in some deals the mines were not involved at all ? Just off market option trades as backing? … And now whatever gold that was to back these deals is found to be “not there”? And everybody was looking at all this paper being sold and thought there must be one hell of a lot of gold being sold!"

Some of you may recognize the bolded part as an issue that was under debate here a while back. But how else can you explain such a huge expansion, over a short time frame, in the LBMA trading volume? If the expansion/explosion described above really happened, then it was either "one hell of a lot of [physical] gold being sold," i.e., dumped on the market, or it was a hell of a lot of paper gold being written to meet demand. And while the price of gold did decline during the summer of '96, it only dropped by about 2.5%, which, I think, obviously argues against the idea of a physical dump.

1/10/98: "What quantity of GOLD, paper or physical, has OIL traditionally purchased on an annual basis?

From 1991, appx. 20m/oz./yr., now it is more.

How much paper GOLD is out there ready to be squeezed?

Over 14,000 tons."


2/9/01: "Yes, they did introduce the gold carry trade then and the timing was no accident. I also have to point out that Another was the very first to mention a gold lending number anywhere near that level. He said it was around 14,000 many years ago or would soon approach that level. Everyone, except those that knew the game, said it was NUTS! Now, the 10,000 figure is on every desk in the world."

Trading volume, be it turnover or clearing, only tells us something about the flow. It tells us little about the stock. Here Another appears to know the stock of uncovered paper gold that was "written" (lent, borrowed and sold short) during the inflation. In currency terms, that would have been around $160B. At one point FOA infers, in no uncertain terms, that Another is, in fact, privy to this very secret information:

5/3/98 "Somehow, the BIS and the major private gold holders know the total claims, as does Another."

Many in the gold community believe that this high volume must have represented real gold changing hands. Some of it did, but most of it did not according to Another. Many believe that this much real gold could have only come out of the central bank vaults. To be sure, some did, but most of it did not according to Another.

10/12/97: "How DO they do it?

It's more complicated than this but here is a close explanation. In the beginning the CBs didn't sell their own gold. They ( thru third party ) found someone else who had bullion. That "party" sold to a broker who sold forward for a mine or speculator or government ) . In the end the 3rd party had the backing from the broker that he had backing from the CB to supply physical if needed to put out a fire. The CB held a very private note from the broker as insurance and was paid a small fee. This process mobilized free standing bullion outside the government stockpiles. The world currency gold price was kept down as large existing physical stockpiles were replaced by notes of future delivery from the merchant banks ( and anyone else who wanted to play ) .

This whole game was not lost on some very large buyers WHO WANTED GOLD BUT DIDN'T WANT IT'S MOVEMENT TO BE SEEN! Why not move a little closer to the action by offering cash directly to the broker/bank ( to be lent out ) in return for a future gold note that was indirectly backed by the CBs. That "paper gold" was just like gold in the bank. The CBs liked it because no one had to move gold and it took BIG buying power off the market that would have gunned the price! It also worked well as a vehicle to cycle oil wealth for gold as a complete paper deal.

Are you with me?

Well a funny thing happened right after the Gulf war ended. What looked like big money before turned out to be little money as some HK people, I'll call them "Big Trader" for short, moved in and started buying all the notes and physical the market offered. The rub was that they only bought low, and lower and cheaper. They never ran the price and they never ran out of money. Seeing this, some people ( middle east ) started to exchange their existing paper gold for the real stuff. From that time, early 1997 LBMA was running full speed just to stay in one spot! In other words paper volume had to increase to the physical volume on a worldwide scale, and that was going to be one hell of a jump. It could not be hidden from the news any longer.

This was not far from the time that "Big Trader" said that "if gold drops below $370 the world would see trading volume like never before seen". The rest is history. Now the CBs will have to sell 1/3 to 1/2 of their gold just to cover whats out there. To use the Queens English "it ain't gona happen dude"!"


11/16/97: "In todays time the CBs do not sell physical gold with a purpose to drive the price down. They sell to cover open orders to buy what cannot be filled from existing stocks. Look to the US treasury sales in the late 70s. They sold 1 million a month using open bid proposals with much fanfare. If the CBs wanted physical sales to drive the price they would sell in the same way.

The sales today are done quietly with purpose. The gold must go to the correct location. That is why these sales do not impact price as they occur, there is a waiting buyer on the other side. As all of these transactions are done thru certain merchant banks, not direct CB contact, the buy side does hold hedges.

When actual delivery takes place, months later ( and usually at the same time as the CB sale statement ) these hedges come off and affect the market price.

It is important to understand that none of these CB sales of physical need to go to the open market at all! The BIS could take it all. …

Banks do lend gold with a reason to control price. If gold rises above its commodity price it loses value in discount trade. They admit now to lending much where they would admit nothing before! They do this now because of the trouble ahead. Does a CB have collateral to lend its gold? Understand, they only lend their good name on paper, not the gold itself. The gold that is put on the market in these deals belongs to someone else! The question is not "Are the CBs worried for the return of gold?" but, "Has our paper been lent to the wrong people?".

The BIS will not allow the distribution of all gold to settle claims."


Confused? Let me briefly explain it as I understand it. In the first of the two comments, he said, "In the beginning…" That relates to the period from roughly 1990 through 1996, prior to the arrival of "Big Trader" and the jump in volume. Up at the top of the post, in another quote, he said, "And who in the hell would have thought that they would have used so much of that pay to buy gold! Some bought in tiny amounts and some bought in large amounts. This started with the new world trading order that came into being about six years ago." That quote was from April '97, so "about six years ago" probably meant around late 1990 to early 1991.

So "in the beginning", the CBs (not directly mind you, but through the LBMA gold dealers) found others with gold who would be willing to sell—to go short—their gold, with the implied promise that it could be repurchased at any time because the broker—the LBMA gold dealer—assured the seller that he had an assurance from the CBs that the CBs would supply physical "if needed to put out a fire." What's a fire? A fire is what the seller of the gold (the short) doesn't want—an explosion in the price while he doesn't have his gold.

"The CB held a very private note from the broker as insurance and was paid a small fee." The private note was a loan note, a promissory note, and the small fee was the gold interest rate, which the LBMA dealer paid the CB even though no real gold changed hands. This was a gold loan from the CB to the bullion bank, but the gold never left the CB vault. It was actually a cash loan at a very low interest rate, ~1%, but the promissory note held by the CB was denominated in gold ounces. It could be retired in cash at the price of gold which was expected to decline since the CBs promised to step in to put out a fire, or with actual ounces of physical received from the mines who hedged, if the price ever rose. Plus the CBs promised to roll the loan (not call it in upon maturity) if the price of gold rose. So, to the bullion banks, the cash was essentially free money that could be used to churn an income.

[5/15/99: "In addition, the CBs said they could roll it forward for ten years +/-, if the price of gold rose!"]

The borrowed cash was used to purchase the real gold from the party who was willing to sell his gold with the assurance that he'd be able to buy it back cheaper in the future. Then the purchased gold was sold to those who wanted only real physical gold, which was, in those days, the swing producer in the oil market, The House of Saud. It was then, and still is today, all about managing the subterranean flow of physical gold which is much tighter than the paper gold market makes it appear.

Those of you who are sharp gold market historians may remember the 90s as "the decade of gold sales". Throughout the decade, the price consistently declined, from $400 down to $250. And every time there was a big drop, there was a news story about another big sale. First it was the Saudis in 1990 who were reportedly selling their gold, driving down the price. Then it was Duisenberg and the DNB in 1993. Then the Belgians, and finally the BOE.

That was the mainstream narrative explaining the gold market in the '90s, but it is very different from what Another explained. And for those of you that remember the story, I wanted to mention the mysteriously large (~90 tonne) Saudi gold sale that was blamed for a sudden $23 drop in the price, and was also denied by the Saudis even though London bullion dealers (LBMA members) insisted it was them.

If it was not a short sale, which no one claimed it was, then it was the sale of a "gold" position that had been previously purchased. In other words, it was the unwinding of a long position. Now think about something Another said: "As all of these transactions are done thru certain merchant banks, not direct CB contact, the buy side does hold hedges…" That would be a long position hedge, to lock in the purchase price until an actual physical order could be filled. "…When actual delivery takes place, months later… these hedges come off and affect the market price."

Could the Saudi sale have been a long position hedge (to lock in a purchase price while waiting for physical to become available) that was unwound (sold) at the moment they received (actually purchased) the physical? This not only makes really good sense, it also explains both the dealer insistence that it was a Saudi "sale", and the Saudi denial, because the Saudis would have actually been buying physical and selling paper, which caused the market price to fall. Elegant solution to the mystery, right? This is kind of like what A/FOA's insights do for the whole macro "riddle wrapped in a mystery inside an enigma." They solve it… elegantly.


Okay, back to my "brief" explanation. Enter Big Trader: "This whole game was not lost on some very large buyers WHO WANTED GOLD BUT DIDN'T WANT IT'S MOVEMENT TO BE SEEN! Why not move a little closer to the action by offering cash directly to the broker/bank ( to be lent out ) in return for a future gold note that was indirectly backed by the CBs. That "paper gold" was just like gold in the bank. The CBs liked it because … it took BIG buying power off the market that would have gunned the price!"

…What looked like big money before turned out to be little money as some HK people, I'll call them "Big Trader" for short, moved in and started buying all the notes and physical the market offered. The rub was that they only bought low, and lower and cheaper. They never ran the price and they never ran out of money. Seeing this, some people ( middle east ) started to exchange their existing paper gold for the real stuff. From that time, early 1997 LBMA was running full speed just to stay in one spot! In other words paper volume had to increase to the physical volume on a worldwide scale, and that was going to be one hell of a jump. It could not be hidden from the news any longer."


So the Asians (in Hong Kong) found out that this cheap paper gold was implicitly backed by the CBs, therefore it was as good as the real thing because it could eventually be converted into physical, or so they thought. So they gave the LBMA gold dealers cash, and lots of it (as I said above, the paper gold "inflation" worked out to about $160B at the time), in exchange for a future gold note (a gold mine forward hedge note) that they thought would be backed by CB gold if the mines couldn't produce enough.

The LBMA gold dealers took this Asian cash and lent it to the miners in exchange for the gold-ounce-denominated promissory note. The bullion bank held the note on the miner and the Asians had a note from the bullion bank. But global mining output was only about 2,290 tonnes per year at that time, and $160B could have hedged 14,000 tonnes of future production, so not all of that money was lent to gold mines.

Enter the hedge funds and the gold carry trade. Gold loans (which were actually dollar loans with the promissory note denominated in ounces) were really cheap at the time, plus the price of gold was declining, making them even better than cheap! They were virtually free money that could be invested almost anywhere to churn an income. Everyone who was anyone wanted in on the deal. And the LBMA gold dealers were the middlemen, taking a percentage from every transaction.

The LBMA could get virtually free money, first from the CBs and later from the Asians, and lend it to, as Another put it, "mines, speculator or governments." Mines were the actual forward hedges, and the speculators and governments were the hedge funds and anyone else who wanted to short the barbarous relic that was seemingly in perpetual decline, and borrow virtually free money at the same time. Money was flowing, in large amounts, and the only catch was that the promissory notes were all denominated in ounces rather than dollars.

There's no problem with this setup for the borrowers (the gold shorts, primarily hedge funds and miners) as long as the price of gold is reliably declining and the gold interest rate is low. There's no problem for the CBs as long as the LBMA can manage the subterranean flow of physical to those buyers who only care about getting the real thing. There's no problem for the paper longs that don't care about physical as long as those that do can convert their paper to physical. There's no problem for the longs that eventually want to convert their paper to physical as long as they confidently can. And there's no problem for the LBMA bullion banks as long as they have the central banks' tacit agreement "to supply physical if needed to put out a fire."

There is, however, a big problem with this setup. But it only becomes apparent to someone who can see it as a unified whole. Another was apparently in a position to see the big picture early, as was Big Trader. The CBs eventually saw it, and were forced to sell a little gold while also retracting their tacit agreement "to supply physical if needed to put out a fire" on Sept. 26, 1999, which spiked the gold lease rate up to 10% and sent the price up 20% over seven days. The hedge funds and mines got out of the carry trade after the gold price started rising, but the paper gold longs are still oblivious to even the slightest problem with this setup. Even after 17 years.

I want to mention something now. I really don't want to make a big deal out of it because it's only speculation, but I think it goes well with this post. It was an afterthought, something that came out of my efforts while writing this post. And I think it may give a few people pause, or at least something to think about and consider its implications. I know a lot of people have their own idea about who Another is, was, or might have been. And I want to state for the record that I don't know who Another was, nor do I think it matters much because his words speak for themselves. But, while working on this post, I came across the best candidate for Another that I have ever laid eyes on.

Those earliest comments by Big Trader, Another and FOA, the ones prior to the USAGOLD archive, only became available to me less than two years ago. Before that, the earliest post from Another was this one which appeared in the Red Baron's LBMA series (my emphasis):

Date: Sun Sep 14 1997 21:12
ANOTHER (an answer?)

This could be an answer directed to the "Red Baron"?

The CBs are becoming "primary suppliers" to
the gold market. Understand that they are not
doing this because they want to, they have to.
The words are spoken to show a need to raise
capital but we knew that was a screen from
long ago. You will find the answer to the LBMA
problem if you follow a route that connects
South Africa, The middle east, India and then
into Asia!


Remember this; the western world uses paper
as a real value, but oil and gold will never
flow in the same direction.
Big Trader

Another referenced that comment two months later:

Date: Sat Nov 22 1997 23:13
ANOTHER (THOUGHTS!) ID#60253:

This was written: "To find the answer to the LBMA , "Follow the connection from London, to South Africa, to the Middle East, and on to Asia"

Mr. Markus Angelicus,
I read the gold-eagle write. You have made the link between London ( LBMA ) and South Africa.

I read that comment while preparing this post, and I realized that now, with the old Kitco archives available, I could look up the Markus Angelicus comment to find out what it was that Another was confirming. It turns out that "Markus Angelicus" had written an article for Vronsky's Gold-Eagle site titled The Rothschilds, LBMA, and Gold, and Vronsky had posted a link to it on Kitco. That was what Another (or FOA) was responding to.

The only relevant reference to South Africa in the article was this: "Rothschild Freres, run by cousin Baron Guy Eduoard, was the largest private bank in France. The French House also controlled mining companies ( De Beers and gold mines in South Africa )…"

So, apparently, Another was confirming that the connection from the LBMA "to South Africa, to the Middle East, and on to Asia" was the House of Rothschild, or at least the link to South Africa.

I have had many people propose many candidates for Another to me over the years. But credit where credit is due, Mortymer proposed Guy de Rothschild as a candidate three years ago. And then FoNoah asked me to take a look at him as a candidate after I sent him the Markus Angelicus article while working on this post. I did, and, surprisingly, he fit my profile far better than anyone I've ever considered in the past. Admittedly, I didn't give Mortymer's proposal enough consideration at the time, but I also didn't have the additional information of Another's inference that Rothschild was a key connection.

I did look at other Rothschilds upon FoNoah's urging, but only Guy fit. And in case you're thinking that the French and English Houses of Rothschild are independent entities, as I mentioned earlier, today they are merged. In fact, the English side (N.M. Rothschild & Sons) is now wholly owned by the French side, and the whole shebang is controlled by Guy de Rothschild's eldest son David. Could he be SOA?

I always wondered if Another might have been directly (or indirectly) involved in the LBMA's decision to release its clearing volume 17 years ago. The Rothschilds certainly were! The Rothschilds not only headed the Fix for 85 years, but Mr. Robert Guy (I know, there's that name "Guy" again), a director at N.M. Rothschild, not only personally headed it from '74-'93, but he was also the first chairman of the LBMA, from '87-'91. And remember, from above, while still chairing the Fix and representing N. M. Rothschild's gold interests, but after retiring from the chairmanship of the LBMA, he was the first person pushing for transparency in the LBMA's turnover volume as early as 1992.

Here's a great article about the history of the LBMA, written by Robert Guy in 2012. And if you're thinking that you might now agree with me that Rothschild led the charge for more transparency in the LBMA, how about the charge to get the ECB to openly declare its intentions regarding gold, which it eventually did on Sept. 26, 1999? Well, check out the highlighted portion of this FT article, by none other than our old friend Kenneth Gooding, two years earlier in 1997:

Call for more gold reserve details
By Kenneth Gooding in Prague
Financial Times June 17, 1997, Tuesday LONDON EDITION 2

Central banks were yesterday urged to end the "fear factor" haunting the gold market by providing more information about what they intend to do with the gold in their official reserves.
Worries about central bank sales have helped to drive down the gold price this year, and there is particular concern about the policies of European banks ahead of the formation of a European Central Bank.

Mr Robert Guy, a director of N. M. Rothschild and Sons, told the Financial Times Gold Conference in Prague that there was a lack of information on sales.

"I hope those involved in the creation of the ECB will break their Trappist vows and share their views with the rest of us," he said. "In these days of transparency and accountability, I find it truly remarkable that we can still be given no clear picture about the role of gold in the event that European monetary union proceeds."

As I said at the top of this post, "if you're just laying eyes on this Freegold thing for the first time, you are in luck! As of today, if you have, say, $55,000 in surplus currency reserves sitting around, you can still exchange it for 43 ounces of real physical gold!" You can, if you want to, feel sorry for the poor souls that bought gold 17 years ago on Another's advice, but I know a few of them, and they don't feel sorry for themselves. They got 160 ounces or more for that same amount of money, and that's some serious wealth! I know a couple of them who got more like 200 ounces for that much currency, and they still have it today.

I'm not wrapping this up for lack of material. I could go on and on with A/FOA quotes explaining the big picture, thanks to the LBMA's revelation of its volume 17 year ago, which really opened the door for Another to speak out. I'm actually holding back a whole bunch of quotes that I pulled for this post, simply because it's already 22 pages long. They aren't really needed anyway, and I've already done it so many times in the past. Look at my blog. I do tend to go on and on, and it's all there—the big picture Freegold view as I learned it from Another—in the archives.

You might also be thinking, "gosh, 17 years. That's a long time. They must have been wrong… or something." Well, that's not how I see it. Again, it's all here in the archives, but it seems to me that what they explained actually makes more sense today, seems more inevitable and possibly even imminent, with the benefit of hindsight, than it did 17 years ago when it was written. At least it does to a shrimp like me. It takes a while to learn to think like a Rothschild. ;D

And if you're truly just seeing this for the first time, you are probably wondering, "What's the bottom line?" Well, again, it's all here in the archives on my blog. But sure, I'll cut to the chase, just for you. It's a necessary and inevitable revaluation of gold. That's not like a bull market run-up in the price. It's an overnight gap-up in the price, something the paper traders will have no say in, and something that won't happen to other "gold-ish" alternatives. Only the real stuff. And when it's done, in my opinion, you'll still be able to get a full ounce of real 24-karat gold for the same amount of austerity that it took you to save up that $55K you have today. That doesn't mean the money you have right now will still buy you a full ounce after revaluation, but if you saved it once, hey, you can do it again. Right?

17 years is indeed a long time. But with Another's very different perspective, we can see what happened during that time, and how things are looking right now. Over the last 17 years, every ounce of new gold was purchased, and the "old gold" worked its way into stronger and stronger hands. The LBMA volume today is almost the same as it was when they started collecting data in October of '96, at least in ounce-denominated terms. In currency terms, and number of transfers, it has tripled.

Hedge funds and mines got out of the gold carry trade, for the most part, once the price started rising. The CBs stopped selling and started buying gold in aggregate around 2010, with one of the largest single purchases by a CB being Saudi Arabia, who purchased 180 tonnes.

It has always been, and still is today, all about the flow of physical which underlies the paper gold market but has very little to do with its price. This is evident today, just as it was 17 years ago in 1997, but the conditions, players and incentives are very different today. The weak hands are empty, the CBs are no longer suppliers, scrap is down, mines are under pricing pressure, and "Big Trader" is apparently back in the hunt. My best advice is to get some insurance on the present value of your savings ASAP. 5% of your savings in physical gold should be a no-brainer. And then take a closer look at the big picture Another painted. You might decide, like me, to buy a little more. ;D

"Who am I? As I will not be around for long so I am noone. But, follow with me as all of this takes place in your time!" -Another

Sincerely,
FOFOA





If you appreciate this blog, please support it.
More support means more effort on my part.
You can encourage that by clicking the fragile edifice below. ;D





FOA (06/12/01; 11:23:21MT - usagold.com msg#77)

This was "part" of the price we paid for oil to flow in dollars this last decade as the Euro was born. This was the price we paid for an extension of dollar use in oil settlement. It will be moved when gold trades at a much,,,,, much higher price. It backs Another's point of long ago that oil was traded for gold in the thousands at that time,,,, we just had to wait for the real price to be shown. It will! This is the decades long game we are playing for, my friend. This is the big one we own gold for. This will be the defining moment in our time that changes perceptions about the value, reserve currencies and the wealth of ages. Watch with me now, as events prove all things!


546 comments:

1 – 200 of 546   Newer›   Newest»
Robert Mix said...

Patience will be the key to victory (riches, or survival!) in owning gold. Everything I had looked at in the financial world seemed to move very slowly, except for the brief 1987 stock market crash and the scary 2008/2009 crash.

Even the mainstream financial advisers are OK with 5% of one's net assets in gold.I concur with FOFOA that 5% is a tad low as far as I am concerned. But 5% does put an American way ahead of most of his peers in holding safety and pure wealth. I am at over 5% in gold.

FOFOA's blog is of great value to all students of gold. I monetarily support his efforts, and I hope many of you will do so as well.

He has stated that gold being in many hands means it is more likely that prices will reach their natural levels sooner and that manipulation will be harder. This is but one idea I learned here.

Be your own Central Bank! Gold is your best (financial) friend if you do not already own physical, like I have to say that here. :)

***

On the other hand (and I acknowledge the risk of incoming fire..., smile anyway), NO ONE knows the future. I would not be at the All Inn as I am a great believer in diversification. That does nothing to detract from the, well, extremely value of this blog. I can think of no other person who has stimulated more clear and insightful thinking regarding gold.

Beer Holiday said...

"Time to die " gold market :-)

Seriously, this is such a great article.

Set gold free like Roy's dove!

Beer Holiday said...

Just rewatched that blade runner clip. Quite poignant given the topic at hand. I have some dust in my eye...


SC said...

Thanks FOFOA. There is so much resolution and consistency to the writings of Another that it never ceases to amaze.

Sam said...

Wow, just simply wow!

Nickelsaver said...

One of the things that I struggled to understand was, why would the CB's sell their gold if they were aware that gold was the salient portion of their reserves, and that the other portion was subject to massive credibility inflation.

In the case of the Euro (pre-launch), it makes sense they did it to meet demand so that the price wouldn't explode before they got their replacement currency going. Also, equivalent to supporting the $IMFS until the Euro was a reality.

But the more puzzling thing, if you look at it from a wider view, is why the ECB sold gold after the launch. Yes, we have seen FOFOA put up this chart which shows how that as the Euro marks its gold to market, the amount of gold required as a percentage of its reserves becomes less and less the higher the gold price goes.

And so, it stood to reason that they sold their gold holdings merely to maintain the proportion of gold holdings to foreign reserves at a place were their total reserves did not strengthen or weaken the currency too much.

This made some sense to me, especially considering how, in freegold, this will be the blueprint for the balancing of international trade.

But lately, I have been thinking that the selling was not necessitated by a need to demonstrate the play-book (something that it surely does), but more out of a need to get gold to the right persons. You see, it doesn't make much sense to get your own house in order and then run over to your neighbors house to gloat, when you have to continue to due business with your neighbors. You might be inclined to actually assist your neighbors in getting their houses together too, should you want to host dinner parties for each other.

The point is, once the Euro was launched, was there a pressing need to sell gold. Couldn't they have simply held onto it and just marked a lower percentage of their gold to market in order to balance their books? If they did, wouldn't that have killed the dollar in very short order as dollars became a very small portion of their known reserves as the price of gold rose? Wouldn't it have hastened FG?

Or was there yet a third incentive, to keep the price of oil down and in proportion to other goods and services, until such time that a revaluation of gold against all goods and services (including oil) would be assured.

And as for the desire to reveal the transparency of the gold market back in 1997, doesn't it stand to reason that it was done with this same idea in mind. Gold needs to revalued, but oil needs to stay correlated with the rest of the physical plane at the same monetary proportions.

It also stands to reason, that if you are going to use gold to settle international balances, your counterparty should have some gold to pass back to you to begin with.

Totara said...

Would that be a platinum wedding ring underneath those buffaloes?

Phat Repat said...

Thank goodness; the comments were starting to wear thin.

Things are looking better from an FG perspective. LEAP has been fairly accurate in predictions and I expect the rest of the year to be tumultuous, especially in the US. 2015 is still my choice for reset; yes, that'll work just fine...

MatrixSentry said...

White gold.

Roacheforque said...

As one holds gold over time, things do become more clear. My views have changed over time, as has my understanding. I could not have understood this article if I had not been a witness to these changes over time, and an understanding that comes from these writings and those changes.
In the end, do not wait to buy gold ... rather ... buy gold and wait. What little wealth the Roacheforeque has is stored in gold, antiques and a little silver for an added day to day hedge. I sometimes wonder that my timing to liquidate all remaining paper wealth into gold was less than optimal, as I could have had many more ounces if my understanding came earlier.

But then I reflect that had I never gained an understanding, as so many have not and never will ...like them, I would have no gold at all.
That Another is a Rothschild is as good a guess as I have ever heard. I do believe it is quite possible. The world of understanding at this level is quite small. We are most fortunate to be a part of it.
;0)

Franco said...

Wow, this blog entry by FOFOA has so much substance, but unfortunately a lot of this just flies over my head. In my simple life I just pay for something, and I get the thing; there are no hedges, gold notes, leases, central bank promises, etc. Anyhow, maybe if I read the post ten more times...

One thing that maybe FOFOA could explore further: if ANOTHER was indeed somebody deep in the mix of all those dealings, what was the point in him posting at the message board of a coin dealer? I think it was mentioned that he was passing a message, and once he completed the message he stepped back into the shadows? If so, then a message to whom?

All of this is fascinating fo' sho'.

RJPadavona said...

"I converted millions of ounces into tonnes, because tonnes are the terms in which I generally think"

It's ill-mannered to be a braggart.

Seriously though, there is no other place on the www where you can get this kind of quality perspective concerning matters of gold and monetary history. Thanks, FOFOA!

I hope you realize your haters who call you a banker shill will be out in full force now that you've went public with your thoughts on Another being a Rothschild. After all, how could someone as inherently evil as a Rothschild do something so noble as to warn everyone with an internet connection about the next monetary system? That may not have been Another's original motive for going public, but he had to have considered the broader impact of his words. Hmmm, maybe they're called nobility for a reason ;)

Higher Circles

Sam said...

A central banker is a highly educated insider privy to information others don't have access to. A Rothschild isn't someone that needs information, it's someone that provides it. This fits ANOTHER well. He wasn't someone that had information about gold and oil, he is someone that lived it.

burningfiat said...

An instant classic?

Who can explain the gold market (now and then) like FOFOA? Seriously, None! None above, none beside!
Thank you so much FOFOA for this depth and detail of thoughts and narrative. I've never seen this '96 discontinuity treated so deeply and consistently before! These thoughts could only arise from someone who takes A/FOA's thoughts with the seriousness they demonstrably deserve! Only you could do this FOFOA!

A Tribute to the Thoughts of Another and his Friend

FWIW I see Guy De Rothschild as a good Another candidate! Remember you can spell "Roth" from "Another"!

/BF

PS. Props to Mortymer for this suggestion years ago!

Brady said...

remarkable FOFOA, thank you.

Franco said...

I know that there are several German-speaking people on this blog, so...is Rothschild pronounced "Roth-child" or "Roth-shield"?

Lisa said...

Thanks FOFOA - with every new post the understanding grows.

RJP

FWIW, here are a few snippets from Page 2 of the The Trail (linked in the last post) where FOA states WHY Another was posting.

"...To date, his only point was for citizens to buy physical gold for a run of a lifetime..."

"..Again, the drive behind making these free offerings public was to point the largest number of average citizens to look in the right direction..."

"..This current phase of public writing and discussion (last 3 years or so) was implemented by Another so as to concentrate the average investor's thinking on certain aspects of these coming economic changes as they evolved. He always wanted people to see the actual flow of events as creating a background in their minds of the political evolution his directions were pointing to. In other words, use his map, place it over the events as they occur and consider (not accept) the direction. Over and over, he said that in this process, as your understanding grew (changed), events would prove his Thoughts. Events, not his words or mine!…"

FOA (09/16/00; 10:02:54MD - usagold.com msg#37)

Pretty awesome, if you ask me :)

FoNoah said...

Great Post FOFOA! I'm with Sam on this one.

I am one of those who instinctively prefers to observe, rather than try to convince or "sell to" others. But I might just break with tradition and encourage some very close friends and family to read/study this Post, only if they promise to read it from top to bottom.

Bookmark this one under FOFOA - Another Masterpiece.

gull_mann said...

FOFOA, great great great post. I think this might be one of your best yet. Definitely one of my favorites. Thank you.

Edwardo said...

Bravo! This is an excellent addition to the FOFOA oeuvre!

Agent98! said...

Wow! FOFOA that's just awesome.

Peter Costello, a useless time-serving federal treasurer who sold the Australian gold reserves at Brown's Bottom back then was yesterday made boss of the nation's sovereign wealth fund by his party now again in power. Ya gotta laugh! And no, he won't be buying sovereigns or any physical precious.

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

This fellow Sverdrup below may have invented a new science of "Systems Economics" based on systems theory. Anyway, mention of gold begins from 5:08min and 5:54min into:

"TEDxObraztsovaSt - Harald Sverdrup - Convergence and contraction at the end of the golden age"

http://www.youtube.com/watch?v=b2OzyNpPe5s

He brings it all back to gold past, present, and future by way of illustration with emphasis a number of times. The world needs to follow gold's example - and follow gold soon!

See his 5th Table at 20:35min - "Known or feared resource, wealth peaks, cost over wealth overshoots and civilisation collapses" - for various examples of death by debt, and, if business continues as usual, a predicted ineluctable American collapse in the window of 2010-2025.

So what replaces USD for the remaining 50 years or so after the dollar before complete global collapse? I think the reset is anytime soon, and I think there's a fair chance those giants were factoring these Hubbert Peak economy wreckers into their game plan some time ago.

byiamBYoung said...

Fills many, many holes in my understanding of gold through the last 50 years.

So clear in this light that gold never really left the monetary stage.

What an amazing time to be alive, and how wonderful it is to see the world through this freegold lens!

Can't wait to see where we are going!

InowB4 said...

@Franco

In german it's Rothschild, which is spelled "Rot-shilled", which means "Red shield".
They used to live in Frankfurt/Rhein in "Judengasse" and their houses were marked with colored shields, not numbers.
Therefore they lived in "the house with the red shield".

anand srivastava said...

Thanks FOFOA. This filled a lot of holes for me too.

S P said...

Another must have known that even though he was sharing his thoughts for all, they would only be taken in by a very few. Think about it. Since 1997 how the internet developed, and now we can hear everybody talk past each other about everything, but very few talk about gold and oil.

People will talk about and discuss anything...anything! before they even think to look into gold and oil. Given the importance of these to our lives, I submit to you that most people, > 50% of people currently alive, should know at least a little about these, be able to have an intelligent discussion about them, and follow the news about them.

However, as it stands <1% people give any thought whatsoever. Growing perhaps recently, maybe in the 2-5% range after the financial crisis, but back down now that Bernanke and Yellen have everything "solved" and we can go shopping and watch sports events forever.

See that's the point. It's like freeing people from the Matrix, Another and those that followed knew they were speaking to a very small number of people. Eventually it will grow to an avalanche, but during their time they knew their words would not change the overall equation. The same reason the LBMA went public.

People don't care for the message! It's incredible, but, it is what it is.

ein anderer said...

@InowB4
"Frankfurt/Main" ;)

Josh R said...

Thanks FOFOA! In this post's context, it makes complete sense of why we would be much closer to a FG world. For Giants like China and others they only need to acquire enough gold to balance (or gain some) from the loses in paper. Rather than being ALL in like some shrimps can be.

MatrixSentry said...

Another 2,8 tonnes leak away from Sprott's Physical Gold Trust (PHYS).. Interesting that GLD has seen some modest increases lately in bullion to stem the one way flow of bullion out of the ETF. The Comex bullion meanwhile has been plumbing new lows. Perhaps the focus on GLD was getting a little too much "focused". So bullion is still flowing out of these paper instruments, only there is, at least temporarily, a change in focus to the Comex and PHYS.

PHYS is puny in gold. That fund will not be able to sustain a whole lot more withdrawals. I warned many last year that PHYS is destined to fold tent and cash out ants for USD when a run occurs on its gold. The very thing that gave confidence to novice gold buyers, the ability to redeem, is actually the Trojan Horse that will kill this fund in the end. I think we are seeing the death dance begin for PHYS.

The gold chart looks weak to me. The move off of $1180 has been lame. I think there is little conviction in paper gold. The path of least resistance is lower IMO. If things get out of control again like 2008/9, I see a big collapse in the gold price unless the central banks come to the rescue and buy "gold". Without massive support, the price of gold will do what it did last time, except it will be worse this time. The credibility of "gold" is not what it was in 2008.

A plunge in "gold" will kill PHYS dead. It will resume the draining of GLD in earnest, and likely force the Comex into cash settlement.

In short, the Window is still open and perhaps is opening a bit wider. Fasten your seat belts ladies and gentlemen.

Thank you FOFOA for another gem. My donation is on the way. I encourage others to join us long time contributors and donate if you find this blog useful in any way. If you keep coming back here to read the content, I think it's the litmus test you're looking for to determine value. Toss some fiat into the kitty for our gracious host.

Michael H said...

Excellent post, FOFOA.

For the sake of completeness, when did the 90 tonne Saudi gold 'sale' occur?

Indenture said...

For those of you who might be new to “FOFOA: A Tribute to the Thoughts of Another and his Friend” a compendium of ‘need to read’ posts have been created. These are in .pdf form.

Indenture’s Reading List

JR’s Suggested RPG- Freegold Reading List

The first collection is designed to entice you to read the second.
Welcome.

spaul67 said...

How does physical flow get allocated at the giant level?

Unlike individual shrimps, most giants have more than enough currency to buy all the world’s gold (both above and below ground) many times over at current shrimp prices.

Let’s say two giants, Saudi Arabia and China, both attempted to ‘outbid’ each other for the available physical flow (mining + scrap + dishoarding) and thus drove the price higher and higher eventually collapsing the dollar along with it. This looks like what almost happened after the US officially disconnected the dollar from US gold reserves internationally. For a brief time, the shrimp price of gold covered all the outstanding US dollars using just official US reserves. A freegold peek a boo moment perhaps? In fact it got so crazy that even western shrimps were lined up around the block demanding physical for paper. For whatever reason, the world power brokers decided not to return to a freegold monetary system at that time? Maybe they thought that going back to a growth rate governed by the mining rate of gold wasn’t desirable? I think the video below might shed some light on the bigger forces at work.

http://www.youtube.com/watch?v=kIjUgjndKFo&list=PLRruihFm5Xp_df_NUZ_0Cfrd1vG52DwqS

So rather than return back to the lower growth rates inherent in any slow growing hard money system, some sort of implicit or even explicit secret agreement that your allocation of physical gold flow is based upon your net IOUs was established? Thus we could retain a monetary system with a growth rate capable of geometrically increasing in step with energy use, productivity and population (soft money) while also getting the flow of physical gold (hard money) to go where it needed to go?

Say we line up all the giants that want physical gold and each puts on the table the number of dollar IOUs they have. Perhaps a giant’s IOU percentage relative to all the other giants at the table is what is used to allocate the physical flow? The few dollars that exchange hands are just used to pay the miners and shrimp dis-hoarders. Perhaps this is why the flow of gold into China has increased significantly over the last decade? I doubt this would be the case if China had remained 100% Communist and disconnected from the world; no western IOUs = no western physical gold flow. Thus one could also establish the amount of IOUs required per oz of physical flow. Perhaps this is how we arrive at a two-tier gold price system. Another told us that gold flows among giants at much higher prices than what the shrimps’ pay. Perhaps this is why and how.

In short, the shrimp price is not how physical gold flow is managed among giants, the relative level of outstanding IOUs are? The key is taking pressure off of the physical flow by convincing most shrimps that paper and not gold is what they really want. Something that is harder and harder to do if the price climbs too fast and too high. It is well know that the entire global mining supply could be locked up by shrimps over night if they switched their preference from paper to gold, say just allocating 5% of all shrimp assets. Regardless, this reality will be exposed when the overhang of IOUs are liquidated via a significantly higher price in IOU terms of physical gold. The key question in my mind is what will gold’s relative value be to all other physical assets vs. now?

Anyway, the big picture suggests that given that the energy growth rate is now at a level that has governed mankind (except for a brief moment in time of the 20th century) our monetary system must return back to what we had in the past as well?

Sure looks like an epic monetary event is before us; one that draws from the monetary fundamentals of the past and yet is also unique and likely never to be repeated event. Just like the last 100 years in most things stands out clearly from the other 5,000 years of human history.

Daniel Yu said...

An excellent historical narrative, complete with a personal assessment by FOFOA! I, too, think that a Rothschild could possibly be Another, as this person was imparting their thoughts - to whoever would be willing to think, evaluate, accept, adn prepare themselves for the coming times. Indeed, TIME, does prove (or disprove) all things.

As for all Rothschild being evil, I do not agree. Each one of us, rich and poor, are wholly responsible for being good and/or evil actions.

We are now in The Endgame!

KnallGold said...

Something is brewing again ... and we have Thursday ahead :-)

BOA's(?) maginot line of 1270 appears to hold, they said above, all hell would brake loose, whatever that meant. Maybe its the ceiling of the option cube, if you remember Don_L.'s work at GE. $POG trades safely within currency bands, nothing's gonna change that, whatever some Grumps may say.

What can be said is that GLD, in January, still lost a couple of tons, mostly pausing though. When China is back from the holiday's, will the bleeding continue?

The QE taper never sounded convincing here, market seems already choking again, after a 2x10billion cut, well, a perceived cut, we'll see what the true numbers will reveal this time...its like the 5% IR's which killed the goose last time. And IR's are taboo this time, mind you.

The fed always hedged with a taper from taper, now that a more dovish head is in charge and Ben could leave with a saved face?! Is the way already paved? The EO gap has to be filled somehow, lets watch the coming debt discussions. It is getting very tight for the fed, VERY tight.

A Stick in the works , yeah FOFOA brought the memory back of that famous "Sting" article http://www.gold-eagle.com/article/sting...
Quite conspirational in that odd 1997.

Apropos Another: Was it Max De Niro who detected a french structure in Anothers's writings?

Woland said...

Guess who had a home on Lyford Cay?

Woland said...

"slow history" with The Smart Set
Suzy Knickerbocker, The Montreal Gazette, Feb 9, 1970

Indenture said...

“Although one never really knows what one's associates think of one deep down, I believe I was easy to work with, even though I have the reputation of being authoritative. Still, I've always delegated responsibility and authority to other; I've always listened to opposing views and suggestions with an open mind.”

“According to an old French motto, Noblesse oblige - one must live up to one's name. The Rothschilds' condition of life has imposed on them a second motto: Richesse oblige - one must live up to one's fortune.”

“Making money doesn't oblige people to forfeit their honor or their conscience.”

Baron Guy de Rothschild (1909-2007)
French Banker, Businessman

Lisa said...

Matrix - add this to the pile - not too much, but every tonne adds up

From Ed Steer's Gold and Silver Daily 2/5/14 issue:

Just after 4 a.m. this morning, I got an update on the gold and silver ETFs that are managed by Switzerland's Zürcher Kantonalbank. They are updated as of the close of trading on Friday, January 31. For the reporting week, their gold ETF showed a decline of 58,653 troy ounces

http://www.caseyresearch.com/gsd

toothpicker said...

"Another" in French is "Autre". Look at the to first letters :)

Max De Niro said...

KnallGold,

Max De Niro said...
JR,

Yes, I can see your point. Perhaps I approached this new information expecting too much to be served on a plate.

By the way, Another's phraseology and syntax is decidely French. If you were to transliterate (as opposed to translate), you would come up with Another's syntax.

He also uses many more idiosyncratic phrases, less broadly French, but more personal, as I have heard used by Trichet.
November 5, 2011 at 12:20 PM
Max De Niro said...
Wendy,

Another was anonymous, no one knows what nationality he was. He does, however, speak/write like a Frenchman.

A case in point from JR's last offerings:
"The downfall of the Russia, did allow for the Euro and all that it will build."
'the Russia' is not English syntax. This is French - la Russie.
"did allow" - this is a mistranslation of a past tense. French and English speakers use 'did' in a different way. For the French, it is solely a past tense, used by those who don't fully appreciate the nuances of past perfect, imperfect, pluperfect etc. For the English it can stress an affirmative too.

There are many other examples.

No native English speaker would write like this, unless of course, they were trying to appear French.

So maybe he was English but wanted to disguise this. That would seem a bit pointless to me, considering that he was anonymous. It would also add an obvious element of deception into his character, which would detract from his message, which is not the sense that I got from his writings.
November 5, 2011 at 1:05 PM

Max De Niro said...
Perhaps he was an Englishman whose first language was French.

His syntax is not that of an Englishman, is all I'm saying.
I have learnt many languages, and in doing so, have listened to many foreign people speaking English. He repeats the most common (honest ) errors that competent, but not totally fluent, French people make whilst speaking English. It would require an expert, who paid extraordinary attention to his writing in order to accomplish this deception.

Mr Occam would have had something to say about this.

I was not aware that FOA had given away any information on Another's identity.
November 5, 2011 at 1:32 PM

cont

Max De Niro said...

Max De Niro said...
"IMO it may be superior to understand the Thoughts primarily, and perhaps secondarily try to establish who they are/were as a matter of intrigue but not necessity."

Oh, I totally agree with you DP. I am talking purely out of interest here, as I have a lifetime love of languages.

From my experience with many Romance speakers learning English, I would say specifically French. The biggest giveaway is his use of past tenses. The French often get confused because of how they use the past perfect and the imperfect which don't really translate perfectly into English in all circumstances. It requires context and experience with idiosyncratic phraseology.

Of course, perhaps he did like to play with language, I do. I often mess around syntax, I like to imitate Brazilians, they are hilarious in how they use English.

This would mean that he would have to have significant experience with it though, which I suppose is not out of the question - having a high level position in finance would expose one to many different languages I would have thought.
November 5, 2011 at 2:02 PM

Max De Niro said...
Pay attention to Draghi and Trichet in how they use past tenses when speaking English, you will notice significant differences.
November 5, 2011 at 2:04 PM

Max De Niro said...

The above was from "Tweet This" an Oct 2011 post.

vizeet srivastava said...

This one is exceptional post among your excellent posts, FOFOA.
I remember two years back Indian Central Bank chief told that there will be financial storm in 2014. I am calmly waiting waiting for that storm.

Max De Niro said...

From above "Perhaps he was an Englishman whose first language was French." This is how Baron Guy De Rothschild describes himself.

Max De Niro said...

*described

tEON said...

Great eye-opening article FoFoA - many thanks!
***
Less-related, morning, humor - Antal Fekete cornered by irrational Karen Hudes, posted a few days ago, at an airport claiming US has an offer to accept 170,500 metric tonnes of Gold... and cure all world hunger and potential war. I set the video time where she gets heated...

KnallGold said...

Bravo Max! Great team here.

Elsewhere:

"..The BIS report said debt issuance in emerging markets has been so great that a “sudden stop” could overwhelm central banks and pose a risk to financial stability.

The BIS said quantitative easing by the US, UK and Japan - combined with surging foreign reserve accumulation by China and other emerging powers - held borrowing costs by around 250 basis points below historic levels, until the Fed lost control last year and long-term rates began to spike.

..The BIS said extremely complex forces are at work and nobody really knows how this will end. "

http://www.telegraph.co.uk/finance/financialcrisis/10618015/Emerging-markets-more-vulnerable-than-ever-to-Fed-tightening-warns-BIS.html

Although there are some ideas how it could end. If we only had at least ONE reference point...

Beer Holiday said...

Lol tEON. Imagine that, US gets a new 170,500 tonnes of gold, of the 8000 tonnes which is already the worlds largest gold reserves.

Nice work Smaug.... I mean the US. The citizens of middle earth should have abandoning gold immediately as smaug owned it - no longer a focal point for everyone.

That smaug and his ultratight monetary policy and owning all of the gold.

Woland said...

"I have been married ONLY ONCE, to the same wonderful
woman for several decades." FOA, the story of "new guy"

ein anderer said...

Thank you FOFOA for another gem. My donation is on the way. I encourage others to join us long time contributors and donate if you find this blog useful in any way. If you keep coming back here to read the content, I think it's the litmus test you're looking for to determine value. Toss some fiat into the kitty for our gracious host.

Can’t put it better than MatrixSentry.
Donation is on the way again.

Thank you, FOFOA.

And thank you, Indenture, for bringing back MatrixSentry’s overview links.

Indenture said...

Gold Supported At $1,200 - Below That Level “Serious Production Cutbacks”

”The World Gold Council has confirmed that the all-in production costs to produce one ounce of gold is around $1,200 an ounce. A drop below that level  for a sustained period of time would have a significant effect on miners' production, World Gold Council Director of Investment Research Juan Carlos Artigas said yesterday.
If gold dips below $1,200 per ounce for a “sustained” period, serious production cutbacks are likely.
About 30% of the gold mining industry becomes unprofitable if prices fall below that threshold, the council estimates.”


And Y said...

@tEON

That video is hilarity! She interrupts him every single time he tries to say anything. Awesome, thanks, what a nutball.

Indenture said...

ECB rejects deflation fears as it holds rates at 0.25%



ECB president Mario Draghi said: "We have to dispense with this idea of deflation. The question is - is there deflation? The answer is no."

Eurozone inflation slowed to 0.7% in January from 0.8% in December.

Motley Fool said...

tEON

Holy shit. I have not previously exposed myself to Karen Hudes. I am lost for words. Is she is perhaps a born Nigerian?

TF

Indenture said...

“We don’t need hunger. We don’t need starvation. All we need is for the American people to get what’s coming to them (170,500 metric tonnes of gold).” Karen Hudes

“The problem is you have to make people believe there is gold.” Fekete

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

Can someone please answer a question I have about the Saudi issue above? The Saudis' agreed on a future gold purchase with a supplier, hedged the purchase by going long, and unwound the hedge upon receipt of physical by taking a short that cancelled out the long. Why didn't they just contract for the sales price when the agreement was written, or gone long a future and went to delivery? Is it the SIZE of the transaction that made an agreement on price in advance something that couldn't be done?

Another question I have is the 5% allocation to gold being bantied about here on the forum. Really? Seems to me in this day and age of exponential fiat currency creation and ponzi scheme on orders of magnitude with no solution/wind down on the radar screen, one could argue that a 30% allocation to gold isn't enough!

Motley Fool said...

doug

If I offer a contract with you to buy bread at today's prices in five year's time, say a years' supply, I wouldn't mind if you sign the dotted line. Would you?

The 5% is just a suggested minimum for those new to the blog. One should buy as much gold as you feel comfortable with/understand. For many here the percentage is above 5%.

TF

Motley Fool said...

Actually ignore my first.

There are various ways to hedge. 90 tonnes is not an insignificant amount. It takes some time to take out of the ground, especially on such long contracts. Perhaps the fixed price, to hedge the risk of the price going up, that they were willing to agree too was higher than the futures option.

Kinda like variable and fixed rate bonds interest rates differing, to hedge for risk.

TF

Nickelsaver said...

Doug,

5% to preserve the purchasing power of your savings thru the transition from one monetary paradigm to another. More to profit from a once in a lifetime event.

athrone said...

FOFOA,

Just to be clear, are you suggesting Guy De Rothschild, Robert Guy, or someone else in the Rothschild family are likely candidates for Another?

Going back to re-read a portion of Another it strikes me that the writing actually does not seem to be penned from someone who is as formally proper or elegant as an older gentleman in an age old Aristocratic family might be.

Here is a 30 minute interview with Guy de Rothschild. In it, he talks pretty much exactly how I would expect a rich, ivy-league educated baron to talk. Reading excerpts from his autobiography, "Whims of fortune" the writing also seems distinctly different than Another's style (though it could be a ghost-writer).

http://www.youtube.com/watch?v=Yl5c6ZOHYH0

Here is a quite from Another: "Know this: "gold transcends human valuations thru time and life". . Take your time on this one!"

I can't imagine a pompous, elitist, 80 year-old barron writing in such an informal way as to abbreviate "through" with "thru."

Thinking about it carefully now that the impact of the message is already worn off, the actual writing of Another seems rather elementary -- more from someone that is less formal/less elegantly educated.

To me, Another almost sounds like a caricature, someone who couldn't possible exist. To me it sounds as if the author was trying to either 1. Fabricate a narrative or 2. Disguise their identity.

Aquilus said...

For those with a taste for slow history:

Note From the Deputy Assistant Secretary of State for International Finance and Development (Weintraub) to the Under Secretary of the Treasury for Monetary Affairs (Volcker) Washington, March 6, 1974.

Everything Another and FOA told us about FreeGold, oil and Europe's position is in there. From the horse's mouth including this gem:

"Despite these differences among member countries, the EC position has begun to coalesce around their desire to free gold for use in settling intra-EC debts—a problem raised by the present "immobilization" of gold which has resulted from the wide disparity between the official and free market gold prices."

These notes are for the negociations that eventually led to the Jamaica accord and the complete demonetization of gold.

How about another of many. many:
"These objectives are in apparent conflict with the EC desire to facilitate the use of gold in international transactions. There is a belief among certain Europeans that a higher price of gold for settlement purposes would facilitate financing of oil imports, although the argument depends on assumptions regarding producers' attitude towards gold as an asset which may not be valid. Adamant U.S. insistence on maintaining the present fixed official price is likely to create international conflict with the EC, and may also lead to unilateral EC arrangements which would defeat our aims for the system."

or:

"Pressures are building within the EC for settlement of intra-EC balances with gold valued at the market price (or some other price substantially higher than the current official price of $42.20 per troy ounce). Unilateral EC action in this direction would run directly counter to the stated United States position on international gold policy. The EC reportedly will try to avoid a direct conflict through pressing for rapid resolution of the problem within the framework of the multilateral monetary reform negotiations. Therefore, the U.S. position needs to be re-examined in light of present circumstances. This memorandum examines the foundations of this potential U.S.–EC conflict on the gold question, and considers which negotiating positions among various options would best serve U.S. interests."


Happy reading!

Aquilus

Aquilus said...

And one more:

From the US standpoint, the summary of the Jamaica accord

Here's a tasty morcel:

"Gold and Exchange Rates: The essence of the U.S.-French compromises on the two central elements of the monetary reform agreement—exchange rates and gold—is to allow the ultimate shape of the system to be determined by evolutionary forces. In each case, the provisions are consistent with a broad range of eventual outcomes. The French essentially gave up their efforts to give the legal framework of the system a strong tilt in favor of a particular exchange-rate system—a generalized structure of fixed par values. At the same time, the more stringent U.S. proposals for agreements limiting the use of gold as a means of settlement among central banks were successively abandoned. Thus the final compromise has a kind of symmetry in its permissiveness."

Aquilus

Sam said...

@Athrone

I think it is suggested that Another wrote in French, and the words were translated by FOA, who in turn translated it rather literally without making syntax corrections between the languages and wasn't the greatest grammar/speller.

athrone said...

Sam,

What evidence is there for that assertion?

At any rate, both of the people suggested above (Robert Guy and Guy de Rothschild) are very much fluent in English.

Furthermore, wouldn't any majorly wealthy barron or business owner, much less anyone on a political stage such as a central banker, be quite fluent in English?

Is there even a single western billionaire alive that cannot speak English?

Franco said...

This is just my opinion, but after watching a bit of the youtube link that athrone posted with the interview of Guy de Rothschild, I would remove his name from the list of candidates to be Another. He sounded like he had complete command of the English language. Besides, it just seems preposterous to think of an aristocrat old man sitting down to post on a message board...wait, what was my password again?...oh yeah, "fatcat1909"

Zebedee said...

Ironically Hudes is listed in the evil gold hoarders, jerks, time misallocators and brainwashed cult members here.

Who would have thought given Hudes claims.

Beer Holiday said...

@Sam

Agreed, in my opinion it's far to good of an idea to throw out based on a loose assumption of how his thoughts ended up on the internet.

IRRC there are quotes by FOA the indicate he is posting on behalf of Another.

It seems he published some interesting books, that are worth a look IMHO.

I find Karen Hudes' views interesting, but have always disagreed with anyone who thinks there is a significant (2X in this case) amount of unaccounted-for gold out there. I have my reasons for that stance, it's been well covered before, FOFOA even has a full post on it:

Black Gold? Massive hoards hidden for ages? Not!


PS Also just because someones spoken English is great, does not mean there unedited writing is any good. How long did they take to pen it. Were they intoxicated. This is not the reason for Anothers unusual grammar IMHO, but I'm just saying.

Look at most of the books published by news readers, even after extensive editing. Chris Moyles' "toilet book" springs to mind :-)



db said...

Thanks Aquilus!

A W E S O M E !!!

Nick said...

In the article FOFOA quotes Another writing: "What looked like big money before turned out to be little money as some HK people, I'll call them "Big Trader" for short, moved in and started buying all the notes and physical the market offered."

We also know from above that Another's postings began under the pseudonym 'Big Trader.'

Could Another have been a 'Big Trader' from HongKong, speaking of himself, among others? The broken English in his writings has always reminded me of a dialect of someone who speaks Chinese as their primary one.

If not... maybe Another is Yoda?

Wil Martindale said...

Interesting interview with Sir Guy.

He has an unusual English speaking accent that is almost 50/50 British / French.

People of that age, perhaps even moreso in 1985 than today, did write much differently than they spoke.

And even today, I receive emails from C-Level corporate types who speak quite eloquently, yet their writing is atrocious (and they are considerably younger).

I truly did not see anything in the interview that would cause me to obviously disqualify him as possibly being Another, and am somewhat puzzled that anyone else could.

IMHO

Sam said...

Doug said:
"The Saudis' agreed on a future gold purchase with a supplier, hedged the purchase by going long, and unwound the hedge upon receipt of physical by taking a short that cancelled out the long."

I think a clearer way to say the last part of your sentence is they simple sold their long position. This made it look like the Saudi's were dumping (because paper is very transparent) when in fact they were buying physical AND selling paper simultaneously. This was a wash for them and would have been good business. This is essentially what paper hedging markets are supposed to do. They take the up and down volitile price risk out of the equation for people that deal with the real stuff on transactions that take time to complete.

If you want to buy 90 tons of gold and you either want to do it slowly over time (so you don't effect the price) or need to do it slowly over time (maybe because you're buying more than the market has to sell) you run the risk of the price changing. If you are not a speculator this will not do. Enter the paper commodity markets.

To simplify: Those gathering gold sell it short in the paper market essentially locking in their entire sale, and the price, in advance. They then gather the gold over time with their profits locked in. When they finally sell the physical stuff they unwind their short position and it all washes out. Those buying the commodity over time buy long in the paper market essentially locking in their entire purchase, and the price, in advance. They can then wait until it is all gathered before taking delivery and not worry about the price of gold in the meantime. When they finally make their physical purchase they sell their long positions and it all washes out.

FOFOA said...

In the first two minutes of this interview, he discusses his French and English bilingualism. He says he can speak and read either language effortlessly, but if he has to write, he is better in French.

Sam said...

Good comment Will. I had written something similar but figured I would leave it alone. Max De Niro had some great points above. Its really all just more of a fun puzzle. His words and the wisdom behind them are what's important. However, I think it is important to note that writing and speaking skills are very different, and in 1997-2001, many people had much less occasion to write. I bet a couple of decades from now we get to witness a great writer or two that can't give much of a talk.

Michael dV said...

Let us also remember that the Guy of 1997 was 88 years old. He was likely having trouble seeing, hearing and who knows if he retained all the mental clarity displayed in these videos.
I can imagine a younger FOA perhaps helping him recall some of the things they had discussed over the years and helping him define thoughts that 20 years earlier would have been delivered with force.

Victory said...

Sam,

I think your first comment makes a lot of sense and I never thought of it until I read your post.

'I think it is suggested that Another wrote in French, and the words were translated by FOA, who in turn translated it rather literally without making syntax corrections between the languages and wasn't the greatest grammar/speller. '

If Another was writing in French it could very well have been perfectly well-groomed and articulate French but if FOA was translating and he was not as fluent it could come out significantly different.

I went and copied a few interviews from some french websites and pasted them into google translate and the syntax was pretty strange for some of the sentences.

On another note, regarding that chart from VTC that FOFOA posted; I don't understand why the paper volume stayed elevated from that point forward. It appears the Big Trader/Another group's buying spree was only for a short period of time so wouldn't the paper volume have dropped off and gone back to the pre volume explosion levels?

Also if Guy was indeed Another then his cousin Evelyn's bank N.M. Rothschild & Sons was leading the fix back then right. Was he buying paper from Evelyn or was Evelyn one of the market makers that was not leveraging up
over their head. Another said the banks got crazy with it and now the game is all fucked up, so does that mean all the banks except N.M. Rothschild?

"Date: Wed Apr 09 1997 11:06
The Writer ( Thoughts! ) :

GFD: I have one mail. As a group, paper makers are very strong. But one has cut and run! He has come to town and wants to join us! What is this? I see other cowboys coming down the trail! For many years they had fun. Now a tiger chases them into town for help.

Can anyone allowed to read this? Strange talk, Yes?

people told them not to take it under 365. Well they did and
look at it! Now the fools want to unbolt the tables and chairs and sell them to save their skins. 15 bucks down and how many billions under the table. It's gona look like a giveaway or a sellout. Heads are going to roll in the alley when london unspins this."

Could Another be referring to N.M. Rothschild when he says 'But one has cut and run? He has come to town and wants to join us! What is this?'

BaronSilverBaron said...

Rothschild as ANOTHER? Can't see it myself.

On the one hand we are always being told the Rothschild's are the Devil's Spawn. Instigators of war and famine
On the other hand we have the kindly ANOTHER taking the time to explain to the plebs what's coming and how to protect themselves.

It doesn't jive.

DP said...

We are always being told quite a lot of twisted bullshit.

Bjorn said...

DP +1

Indenture said...

Baron: A man who's family name conjures images of pure evil has a reason to surreptitiously help the masses. As a rule he could not divulge secrets but as a human he might have felt required to teach.

Daniel Yu said...

We, humans, have always been a mess of contradictions. We want to tell others to do what we say, but we do not do as we say. We want to impose rules on others, but exclude us from these same rules. All of us contain impulses to do both good and bad ... and we often do both, in different degrees.

Just a point to consider - Isn't there a theseis that these evil doers should always make it know (to the public) what their plans are? How much more public can you go, as Another did? I am not implying that Another is one of the evil ones? My personal thoughts are that he is one of those at the top, but personally disagrees with their plans and treatment of the shrimps!

Woland said...

High Comedy
FOMC meets Keystone Cops!
Linkable Regular Forum, LAFISRAP 4/25/2001/2:08:04
MSG ID # 52509 (the ending is the killer)

athrone said...

Wil/FOFOA,

If you search on Google books, you can also read excerpts from Guy's autobiography -- presumably written by him but it could of course have been a ghost writer / heavily edited.

If it was his writing, however, it appears he writes as well as he speaks -- which is quite well.

But again, wouldn't any wealthy, aristocratic, barron, elitist person have a culture of being very well accomplished/versed in the primary language of business?

I can't find much online for Robert Guy, but looking at his picture in the article and reading some of his writing, that seems like more of a fit?

Just my 2cents, interesting to see what conclusions others come to based on the same data.

Aquilus said...

Just a reminder of why I love what FOA had to say. Where else do you have human nature described so well?

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

beesting (04/25/01; 13:33:39MT - usagold.com msg#: 52530)
How do We The People Arrive At a Fair Honest Price For Gold?


----- So, the question remains, how do we keep each other honest,----------

Good thoughts beesting. But aside the daily buying selling using cash (gold coins and gold receipts in your context), how do we default on our borrowed gold? How do we stop the voting public from demanding that our leaders demand of our bankers, that more borrowings be allowed. To cover what we could not pay now? Some extra fiat gold credits, perhaps? Just until we get back on our feet? Does it not always evolve this way? Even during the glory years of the old gold standard?

You see, credit and honesty do not mix well in humankind. Better let the fiat show go on while the average person retains his wealth in Free Gold, no?

TrailGuide

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

Aurora said...

Daniel Yu,

You are wise with your comments my friend. Your thoughts are accurate as they apply to human contradictions in general. I wish to believe that Another and FOA were, and remain to this day, kind and benevolent souls. Sharing is a wonderfully kind act, is it not? Their motivation and rationale for providing insight, knowledge and truth should be simply recognized for the gift that it is. Thankfully A/FOA provided (their) Free Gold perspective and vision for all to consider. Life is about choices. They chose to write, and we chose to listen.

Speculation of identity, albeit fun, seems unnecessary to me. Obviously Another desired anonymity, so respecting that wish seems reasonable to me. Obviously he is well positioned professionally and his identity is of little importance to the message. It does however make sense that from the top is where one would accurately describe ~ “The view”. Another’s unique perspective is what really matters here. His message of truth is the invaluable gift (the” lens”) to us all.

FOFOA does a great job as our host on this blog mining data and information while focusing the Free Gold “lens” to help us view the trail we share more clearly. This latest post was quite enjoyable and thought provoking. I tip my hat to him for a job well done. For all of this that we share here, I remain humbly and respectfully thankful for the important “gifts” of our friends.

Aurora

jojo said...

Woland decoded:
http://www.usagdfa.com/2001/04.html#52509

Michael dV said...

In my work I deal with many of the elderly. I want to emphasize again that there is much difference a 76 year old and an 88 year old man. I see many 76 year olds still in adult vigor. By age 86 there are simply almost none. This is due to partial loss of function across many organ systems even in the healthy. It is rare to meet anyone who has not also had to deal with a major health issue such as a fall, an accident or a health issue such as a heart attack or even pneumonia.
If Guy is our candidate, by the time he was writing as Another he would not have been the same person we see discussing his book on Youtube. In 40 years of medicine I can count the number of 86 year olds who were able to come to the office unassisted on one hand. Very few remain truly healthy past age 86. Perhaps he was one but the odds are heavily against that.
I picture a man of 88 needing a good bit of assistance in putting to paper the complicated Thoughts expressed by Another. I see FOA as doing much of the work as he helps an aging man recall the details of their many conversations over the years. Whether Guy was an able writer and multi-linguist at age 75 might not have helped a decade later.
Age is funny in that way. The more you get, the more expensive it becomes.

Phat Repat said...

@MdV
That is quite profound; thank you for sharing. Though it seems so far away, if one is lucky, it is amazing to hear how significant the changes are in just one decade. I guess I won't be playing Squash/Tennis at that age after all; pity. I do remain hopeful, however, as I believe there are many medical breakthroughs on the horizon that could alter the above scenario.

OTH,a favorite line of mine from the movie "Shawshank Redemption" pretty much sums it up: Get busy livin, or get busy dyin. No moss on this rock; back to HK and Shanghai in a couple of weeks, party on...

Now, for you techies/traders out there, what's going on with WTIC? Hmmm....

Wil Martindale said...

JoJo,
If that transcript is even 90% accurately transcribed, the big take away for me is that our "best of the best" in international monetary standards have so inextricably over-complicated matters that they really obviously don't have a clue as to what they're doing, and/or that someone who does is not a part of this group ...

Which causes me to "plus one" the foregone conclusion that the simplicity of reference point gold will have a rather clarifying influence in the next system (especially if said group holds rather substancial sums of it).

On the vast repositioning of large sums of actual physical stockpiles of (scarce) gold (a.k.a. GIANT volume premium over spot) ... wouldn't it matter to Giants if a notable amount of gold were to change possession in such a way that there is a geo-political-monetary "shift" liability (or advantage) in such a repositioning?

One that might take on a valuation that far exceeds the monetized comex price of paper gold, available in small amounts at all times "for show"??

With the severe undervaluation of paper gold, I have no problem accepting that real gold in size "matters" much more than the dollar price of the scattered sum of its parts,

Victory said...

Almost forgot, this post was MONEY$$$!!!!! Sherlock :-)

Phil_O_Dendron said...

Jojo - thanks for the link.
The part of the discussion that I enjoyed the most is:

CHAIRMAN GREENSPAN. Do you mean that we
can lower the debt to the public by moving the price of
gold up to the market price? That could cut the debt back by a not insignificant amount!

MR. JORDAN. I have been trying not to mention that publicly for fear that someone might want to do it.

CHAIRMAN GREENSPAN. It's probably too
late; we just mentioned it.

MR. JORDAN. It will become known five years from now!

MR. LINDSEY. Five years from now, it will be read in the
transcript for this meeting.

MR. BLINDER. By which time it already will have been done.

FOFOA said...

MR. JORDAN. The same thing
happened when we changed the price of an
ounce of gold from $35 to $38
and then to $42.22. The Treasury got a
windfall of about $1 billion
to $1.2 billion in both of those
so-called devaluations. …

CHAIRMAN GREENSPAN. Do you mean that we
can lower the debt
to the public by moving the price of
gold up to the market price?
That could cut the debt back by a not
insignificant amount!

MR. JORDAN. I have been trying not to
mention that publicly
for fear that someone might want to do
it.

From Open Letter to Ron Paul:

"The entire Treasury windfall was $2.8 billion and was the reason and the funding for the establishment of the ESF, the Exchange Stabilization Fund in 1934. So following the Gold Reserve Act of 1934 100 million ounces of gold were already automatically monetized. The rest of the US gold was eventually monetized through the Fed. The way this happens is the US Treasury issues fancy new non-negotiable, dollar-denominated gold certificates to the Fed and the Fed credits the Treasury account with dollars.

Today, all of the US gold has been "spent" in this way, but only at the price of $42.22 per ounce. That's 261,511,132 ounces of gold monetized at roughly $11 billion, money that was spent long ago.

So you see, the Fed cannot mark the US gold to market. It cannot even revalue the US gold. Only Congress can. And even if Congress DID revalue the gold, it would not change the Fed balance sheet by one penny. The Fed only holds dollar-denominated certificates worth $11 billion, payable in gold, but not really. It's kind of like Aramco in 1945 who owed the Saudis $3 million, payable in gold.

If Congress DID decide to mark the US stockpile of gold to market today it would find it had a new stream of revenue. At today's price of $1,328 per ounce, the US gold would be worth $347 billion. Subtract the $11 billion already on the Fed balance sheet and Congress could immediately ask the Fed to credit the US Treasury with $336 billion new dollars to be spent.

… if the US Treasury wanted to revalue its gold to the market price today, the proper yet antiquated process would be for the Fed to credit the Treasury's spending account with new dollars representing the difference in price. Today that would be about $355 billion fresh dollars for Congress to spend.


Cont…

FOFOA said...

2/2

… Rather than selling the gold, why don't you just value it like the rest of the world? Why not just mark it to the market price of gold on the Treasury books? If you, Congress, are going to insist on an honest accounting of America's liabilities, why not properly account for her ASSETS as well?

And then… the US Treasury, under the daft guidance of [Geithner], can issue new gold certificates to the Federal Reserve. As anyone with even a rudimentary understanding of double-entry bookkeeping knows, the balance sheet must balance. For every asset there is a liability, and vice versa. This is basic stuff. You don't need to be a banking "expert". And so far the Fed only carries $11 billion of the Treasury's gold on the asset side under the gold heading. Today we have room to add $370 billion more, and that means fresh Fed liabilities—also known as US dollars—accruing as fully paid-up credits to the Treasury account for the government to use however it deems appropriate.

Again, I realize this doesn't solve any of the big problems, but it does buy some time. And furthermore, it is not a bad or reckless thing to do. It is the right thing to do! America has an untapped asset. You can use it without selling it for gosh sake! And just like the old gold certificates, the new ones will NOT be redeemable by the Fed or any other banks in physical gold. They will simply be an accounting entry on the Fed balance sheet. In the future, that gold can be mobilized, if necessary, in defense of the US dollar. But only with the approval of Congress. The physical gold remains the property of the United States. It will simply be monetized by properly revaluing it as the monetary reserve asset that it is, and placing it—at its proper valuation, updated quarterly—on the asset side of the central bank's balance sheet, just like the ECB.

… This is simple logic, Dr. Paul. It doesn't take a room full of lawyers to figure out if it is feasible. It is plainly obvious, which is why it is so stunning to me that Tim Geithner is playing the ridiculous juggling game that he is today, essentially plundering retirement accounts ("disinvesting intragovernmental debt") by $66 billion to keep feeding the big government…

The Fed's "Fisher" was wrong [here] when he said, way back in 1997, that a revaluation of the gold would require selling off other assets to balance the Fed's books. Firstly, if Congress were to revalue Treasury's gold, that would not automatically revalue those "certificates". They have no market value because they are irredeemable, non-negotiable and obviously unmarketable! Secondly, even if it were to automatically affect the Fed balance sheet in some cartoon universe, selling off other assets is not the only way to balance a gold revaluation. The more logical way is for the Fed to issue new Fed liabilities, aka dollars, to the owner of that collateral that is rising in value.

… Maybe you could call this gold revaluation a GELOC to tide you DC spendaholics over until you can get your act together later this year. And that (soon to be) $400 billion "bridge loan" will not even be debt in the traditional sense, and it certainly won't be "debt subject to the debt limit" any more than Bernanke's QE is subject to limit.

Honestly, the Eurozone is so far ahead of you DC guys on this it's not even funny. They mark their official gold reserves to the market price every quarter…"

Sam said...

So what was Mr. Jordan afraid of?

Beer Holiday said...

Good question, Sam.

Maybe he's afraid that the USG would spend it on a monorail and waste instead of waiting for a real crisis to arrive and use it sensibly?

Nickelsaver said...

For the US to officially recognize their gold at market price would be to bring it in as a measuring stick for the dollar. Currently the dollar is a measuring stick for everything else.

Luke said...

Good point Nickel.

And did someone say monorail ?

Nickelsaver said...

Any country or in the case of the Euro, a currency block not tied to one specific nation state, that is worth talking about (other than the US) has reserves consisting of physical gold, dollars (sterilized of gold), and some other things that don't really matter that much (SDR's, other currencies).

Now other countries having both gold and dollars (not sterilized of gold), what do you think they would try to do with those dollars?

If the dollar recognized gold, what do you suppose would happen to the gold market. Does anyone think that dollars would try to bid up the price? And if US marked its gold to market, the value of the dollar, if it had gold as a reserve would see the higher price of gold strengthen it?

But then what of all the US debt? How does that debt get paid off? Does anyone think that gold will bid for dollars at a much higher price before all that debt has been sterilized?

I think that the moment the US officially recognizes their gold at market price, would be equal to a first domino in the unraveling of the gold market. And we would be looking at FG, the end of the petrodollar, the end of exorbitant privilege, And all that debt would sterilize on the backs of the savers of dollars as the dollar devalues like lightening. And USG would be wondering how are they going to maintain their lifestyle with out all that free stuff that came with being able to run a tab that they never had to pay.

Why ruin a good thing while you got it.

Edwardo said...

Why ruin a good thing while you got it.

That's right, Nickel. The U.S. will not pull the plug on itself. Perhaps they will be forced to do so, but in the absence of having no other choice, the U.S. can be expected to continue operations as they have and dare someone, anyone, to do something momentous about it.





tEON said...

GOLD AND THE MONETARY SYSTEM:POTENTIAL U.S.–EC CONFLICT from 69-76
http://history.state.gov/historicaldocuments/frus1969-76v31/d61

Agreement has been reached in the C–20 monetary reform negotiations that the SDR should take the place once held by gold at the center of the world monetary system. However, there is still substantial disagreement on what the exact future role of gold should be—whether it eventually ought to be phased out of the system (the U.S. view) or retain an important function as a reserve asset and means of international settlement (the position of some European countries).

It is the U.S. concern that any substantial increase now in the price at which official gold transactions are made would strengthen the position of gold in the system, and cripple the SDR. If international liquidity were injected via gold, there would be little likelihood of new SDR allocations. There also would be reduced incentive to sell gold on the private market even after an official price increase since central banks would cling to their gold in expectation of further official gold price increases. In addition, too large an increase in world liquidity might add to inflationary dangers. Finally, the distribution of the increase in world reserves would be highly inequitable, with eight wealthy countries getting three-fourths, while the developing countries would get less than 10 percent. Producing countries (the USSR and South Africa) would benefit from the implicit floor put under the free-market gold price.

Support for a continued role for gold in the system is based in large part on the belief that "paper gold"—the SDR—does not command sufficient confidence and acceptability to replace gold completely in the system. There is, in fact, still a considerable emotional attachment to gold as a monetary asset, and a basic distrust of bank or paper money not having intrinsic value.

The recent oil price increases have added a new dimension to the gold issue, and in the view of some European officials, relegated the intra-EC problem to a secondary position. Although mobilization of gold for intra-EC settlement would help in the financing of imbalances among EC countries, it would not, of itself, provide resources for the financing of the anticipated deficit with the oil producers.

there is a lot more....

Woland said...

more comedy…..
usagdfa.com/2001/04.html#52606
why we never got the 5fold increase in gold production?
wrong technology! ( paragraph 2 )

Wil Martindale said...

FOFOA.
I do remember the open letter to Dr. Paul, and it does fit well in the present context of Jojo's link, eh?

But perhaps Another's contention that gold is only revalued once in a lifetime, and "that is enough", weighs in upon the TIMING of this event.

Seen as being Manipulator-In-Cheif by many across the globe, the USG along with its quasi-G and banking "arms" the US cannot be seen as the "determiner" of this new dollar price of gold.

Better (politically) to let its price discovery system die, and have the "free" price set in the East, and in such a way that we have the elegance what one truly desires seeming beyond one's control.

;0)

Much more democratic, and quite the capital idea, if I may say ... though I am merely paraphrasing what the flower channels, thriving as it does in the garden of Roacheforque.

Indenture said...

Wil: The constant use of the gardening metaphors by itself is a writing style that, while repetitively not improving the dialog, can be overlooked, and even though the use of the third person when describing yourself is awkward, when the two were just combined the unnecessary jumble forced your proceeding ideas to dissolve.

Please don't stop commenting just put a period at the end of your thought.

jojo said...

For the record, I'd take credit perhaps for an assist but full credit for those links belong to Professor Woland.

Fofoa locked him away in a dark room with an internet connection that makes RJ's look like broadband and he periodically communicates wisdom and nuggets of research.
It's up to us to figure it out.

tEON said...

@Indenture
+1.... tonne.

M said...

Just wanted to point out that for Canadian buyers, paper gold has been on the up. $1400 no problem

Phil S. said...
This comment has been removed by the author.
Roach Fork said...

I have returned. I see your seeds of wisdom are germinating and in the fullness of time shall emerge as fully grown flowers of freegold understandnig. The process is irreversible.

Many excellent comments have been posted in my absence, such as those by Aquilus, MatrixSentry, tEON and FOFOA. All are fully in agreement with the Roach and, indeed, were divinely inspired by his infinite wisdom. That's right, I just took credit for all of your insights.

NOW, I shall leave you with more wisdom from the heavens. When the ocean of fiat currentseas overwhelm the e(con)omy, when the gold and oil stop flowing, the skies will open and the rains will come!

Roach

Woland said...

would like some help in understanding the detailed mechanics
as expressed by Another in: The Gold Trail by FOA - 6/09/01
Msg ID: 75 (A letter from Another to me)

In particular, the specifics of paragraph 4, regarding
converting dollar contracts into euro contracts, and the risk
to the balance sheets of bullion banks of a sudden euro rise.
(does this mean that expiring dollar gold contracts MUST be rolled over into euro gold contracts, which neither US nor GB
can print, but must BUY for settlement?) Is that the risk of a
"sudden euro rise"? any help appreciated

Lisa said...

1/2

Here is the comment Woland wants help with - I thought if I posted it someone brighter than me could assist him :)

FOA (6/9/01; 16:36:42MT - usagold.com msg#75)
A letter from Another to me.

My friend, I must now walk your trail in closer step. Events are closing that bring the changes we have long seen and prepared for. The time grows short as these conclusions prepare to make appearance. The last of these Euro price ranges are in sight and even the Duisenberg hints his work is done for this new currency. A hard task was completed by him, his acknowledge to the French in May 98 was with a timeframe few could understand. Now his containment is done. With introduction of notes and coins, this money will become it's own director and his work will be well received. A good day, indeed!

All were present at the meeting. I think contractual conversion became topic of some urgency. This BIS must now consider the values these forms will hold in ours and their new futures. Values that will no longer be dictated in dollars, rather realigned in conversion and gold market failure. Truly, this failure of current gold will be reflected as anguish in these western goldbugs, both bankers and investors. All done as the saving wealth for your gold advocates and new reserve bankers finds it's new mark in our time. Your work, good man, has been as trying to reconcile the religions of this world. Telling both they are just while only one can be right in the end. So it is in this day of gold.

Some knew what was coming from the beginning. With the Hague Conference of Heads of State in 1969 sprang Copenhagen Report of 23rd July 1973. We pointed and all continued to turn away to follow where power was, not where it was going. With the Solemn Declaration in Stuttgart (1983) closely followed by the Single European Act (1987) even the BIS then understood the final goal. Margaret (Thatcher) soon expressed that signing that proposition (the Solemn Act) was her greatest mistake in office. While I do agree with her on a strategic political basis, such reflections by British leader only exposes the ignored, nearing failure of their shared singular currency dominance (both USA and England). Little is expressed of the wealth lost of our peoples and that of most Western economies as these government's efforts to preserve this failing system drains real wealth from our world.

Lisa said...

2/2

Now these leaders full attention must focus on this money transition itself as Blair's next initiative (the Euro) will lead to a realignment of contract values of all kinds. Before the fact! The Maastricht Treaty allows that by Jan. 2002, all contracts will be converted into euros and new contracts must be denominated in euros. Because Blair has overseen the signing of both Amsterdam and Nice Treaties, his closest people understand the full impact Britons intentions will have on this world's paper gold market. As it be contractually expressed in dollars. The credibility of these to not only represent gold but to maintain loan collateral on books will lead to several high level agreements to address this loss. Indeed, how does one transition a metal contract without moving the metal once again? Especially if the Euro suddenly, without explanation, rises in value. A rise that leaves only the door of metal fulfillment? All eyes must now search for a way to transition this beast as it's use and function will fall away as the Euro further expands. Some of your American gold must come into play during this game of kings. It must, as the BIS will sanction a complete disposal of contract liabilities from metal into Euros unless some real US gold is given up. Something your Bush will endorse but not without a price! As contract gold falls in price while expanding the physical price. I suspect it (official US gold) will be given up at the exchange rate of many thousands and even that will be the little drop of water that allows dollars to remain in this game. Our time arrives, my friend. Even as fools make effort to gain wealth in a gold market that will soon exist no more.

Tested now are the economies of both EuroZone and DollarZone with high crude values. The response of both is known. The ways of dollar wealth hasten their demise, even in the face of ECB restraint. Open and outright are they (FED) to discredit their position. This test is done and the verdict arrives soon. As with gold and oil, Dollars and Euros will neither any longer flow in the same direction.

Another

FoNoah said...

Hello Woland, do you and your Solitary Monk not both ask the same questions?

http://fofoa.blogspot.com.au/2013/04/euro-conversion.html

Woland said...

thanks, FoNoah, I'm checking thru it now.

Wil Martindale said...

Indenture, Phil,
Was there a question I can answer, or a point to be made concerning the actual content of my comment, which I can addess ... or merely a derogatory remark about the style of my delivery?

If we do not have the liberty to wax eccentric in the comments section of "evil gold hoarders, jerks", et al, then I fear I may have stumbled into the wrong corridor ...

Or perhaps have you?

Wil Martindale said...

Roach Fork,
Likewise, I see no substance in your comment other than to imitate me, with perhaps the singular difference that, again, there was no substance in the remark, therefore I take it that the intent of the imitation was to infer that Roacheforque's comments are equally vacuous.

Here again, should anyone wish to engage in further discussion as to why it might not be "politically feasible" for the USA to mark its gold reserves to market, I would encourage and welcome intelligent discussions along those lines.

Otherwise, I have more important things to attend to.

Roach Fork said...

@Wil Martindale

Roach Fork,
Likewise, I see no substance in your comment other than to imitate me, with perhaps the singular difference that, again, there was no substance in the remark, therefore I take it that the intent of the imitation was to infer that Roacheforque's comments are equally vacuous.


Vacuous?! All of the Roach's wisdom has been disbursed in a forthright and clear manner, in a way that is substantive and free of pretension! You, sir, should tend to your own garden before hurling accusations such as this. I have viewed your garden (the Roach can see all things); it is stricken with many weeds and dandelions, with soil that is polluted and poisoned. In such a garden the flower of understanding cannot blossom!

I have more important things to attend to.

You and I both! Good day sir!

tEON said...

Roquefort's not only a cheese
And at present seems mighty displeased
with importance to attend
funny bone that doesn't bend
With Freegold his, self-proclaimed, expertise

Indenture said...

Wil: My point, as politely as I can make it and with the same intent is please stop taking about pot. Don't stop commenting, just put a period at the end of your thought (right before you want to tell us about the garden).

I recently attended an event where a gentleman reminded the attendees he was intoxicated after each time he engaged in conversation. Most who attended agreed the behavior was in poor taste and even though they themselves would secretly admit to their own inebriation social requirements stipulate vocal discretion.



byiamBYoung said...

This is not news to most here, but this article made me laugh. It's a piece on the price of gold by some dopey local correspondent, who interviews another dopey local, and a jewelry shop owner.

He first drops the bombshell that prices are dropping after hitting the 2011 peak, then gets it wrong about the economy, using faulty wisdom from his fellow dopey local columnist.

Over production of gold, more than 3000 ounces in 2013, meeting less demand, is the cause of the price drop, the dopey columnist surmised (probably stroking his chin knowingly as he pontificated).

Then the jewelry shop guy is clearly telling a much different story, but the meaning is completely lost on the dopey local correspondent.

"...even though the price of gold is going down there are many more people wanting to invest in it."

“Sixty percent of my customers every day come in here looking for gold and silver bullions (coins),” he said. “Even though prices have dropped, less of it is available for sale."

Burhans said there are less physical ounces of gold and silver for sale then compared to buying it through the stock exchange, where you get a piece of paper saying “you own X amount of gold.”

“Most people want the physical – they actually want the gold, and that’s what’s becoming scarcer,” he said.

The coin dealer seems to want to focus on gold, but the dopey correspondent keeps hearing gold+silver.

In the end, the real story apparently goes right over the correspondent's head. With this kind of pointless/directionless reporting, no wonder so few people in the West understand gold.

t au said...

@ byiamBYoung

Thanks for the laugh.

"...even though the price of gold is going down there are many more people wanting to invest in it."

Reminds me of dear old Yogi Berra:

Nobody goes there anymore. It's too crowded.

Edwardo said...

They actually want the gold? Whatever for? What good is having physical possession? Just give me some numbers on a screen that tell me I have a claim on the real thing. That's much better.

tEON said...

Roach Fork, may I inquire? - like the cheese that is aged in the natural Combalou caves of your birthplace, will Freegold's maturing process eventually produce a tangy, crumbly and slightly moist taste sensation within the global financial system... akin to its homogeneously-evolved sharp tang? Will distinctive veins of green mold represent the ongoing global currency failures while the characteristic smoky odor be synonymous with the ripening stench of Hyperinflation? Will curds of the CBs flavor sensation also fade to a salty finish? or will the IMF$ Culture bacteria ripen via coagulated milk producing an unpalatable enzyme. Of this, I must know. Thank you for your, ongoing, wisdom.

victorthecleaner said...

Woland,

haven't found the time to check with old newspaper articles, but at that time, people around Blair floated the idea of Britain joining the Euro.

DP? You probably remember the details?

Well, it didn't happen.

Victor

byiamBYoung said...

tEON,

Poignant, yet timely. Here's to anticipating a flaverfull, crumby, sticky moist freegold revaluation, with appropriate emphasis upon the ever important tang.

Finger-lickin freegold for us all. I'm long napkins. Bon Appétit!

DP said...

Victor,

2001: Blair beating the drum.

2012: Cherie must be getting tired by now — Still going at it.

Woland said...

Nice! thanks, DP. I wonder who would hate a UK in euro
more - the City, or the US Treasury?

still looking for a blow by blow explanation of these lines:

"The Maastricht Treaty allows that by Jan.2002, all contracts
will be converted into euros, and new contracts must be
denominated in euros. Because Blair has overseen the
signing of both Amsterdam and Nice Treaties, his closest
people understand the full impact Britons intentions will have
on this new paper gold market. AS IT BE CONTRACTUALLY
EXPRESSED IN DOLLARS. (my caps) The credibility of
these to not only represent gold, but to maintain loan
collateral on books, will lead to several high-level agreements to address this loss." (paragraph 4 continues…….) "Some of
your American gold must come into play during this game of
kings. It must, as the BIS will sanction a "complete disposal
of contract liabilities" from metal into euros unless some real
US gold is given up."

Bueller, Bueller…….

DP said...

?

Lex monetae is a latin phrase which means that a sovereign state chooses which currency it will use. The concept has been identified as a potential problem if Britain joins the Eurozone, since non-euro-denominated debts may turn into debts owed in euros. Conversion would be at a rate determined by the EU, and no party to a contract or transaction will have the right to default on it.

KnallGold said...

That FRED chart over at http://www.usagold.com/cpmforum/ of Gold vs. monetary base is revealing quite a disconnect. Theoretically, it could reconnect either way, but not necessarily if one has a FG lens.

While $POG appears to cross the 1270 and wanna make a "bull is back" statement. Maybe it is and we were wrong. Although resistances work by appearing to fail. Is this the silence before the storm?! (well if you have ever seen the rain Russian Version, great voice ;-)

Woland said...

Hmm. If "Sovereign Debt" is not a "risk free" asset, Ms. Nouy, so that "capital" must be held against it, and given
the fact that the currency itself is but a zero interest form
of that sovereign debt, then:

WHAT THE HELL DO YOU HOLD AS CAPITAL? Castles?
Too bulky, non fungible. Someone help me here…………..

DP said...

Plastics.

M said...

@ Wil

Gold is off limits for discussion when it comes to the US. When is the last time a president, a fed governor or a treasury official has acknowledged the US's gold at all ?

I'd imagine it was mentioned in the top secret memo's that the president gets after inauguration though..

Maybe the US will convince other countries to sell their gold to buoy their currencies before they mobilize theirs. Circa South Korea 1997.. But then again, they don't need to do that when they have already convinced the world that a devalued currency is a good thing.

Who needs a strong currency when you can just buy treasuries ?

Edwardo said...

Plastics.

DP said...

BTW You were awesome in that movie, Bendwardo!

Edwardo said...

Thanks. Can you believe they offered it to Bob Redord before me? In the end my flexibility won them over.

Woland said...

That's It….. I'm outta here! Nobody takes me seweouswy.

Nickelsaver said...

Woland,

Gold sir!! Physical gold.

Blake said...

Anyone have any insight into the ridiculous dollar amount of reverse repos the Fed is conducting? Lately, its 100B+ on a daily basis!

Edwardo said...

Blake, the veritable flood tide of reverse repos are designed to keep short rates from going into the zero bound and beyond which they would do if things were left to their own. It''s just one more piece of evidence, were one needed, that looking to the monetary plane for signs of the imminent arrival of "the end" is a waste of time.

KnallGold said...

Should I be encouraged when the Forum is speachless!? Read what Plosser has to say:

"Federal Reserve Bank of Philadelphia President Charles Plosser, who votes on policy this year, said central bank officials should focus on communicating the conditions under which interest rates will rise.

“I’m worried that we’re going to be too late” to raise rates, Plosser told reporters after a speech at the University of Delaware in Newark. “I don’t want to chase the market, but we may have to end up having to do that” if investors act on anticipation of higher rates.

Long-term rates could start rising and the Fed would be “forced to chase them up” with its primary policy instrument, short-term rates, Plosser said, “and then we will really be behind.”

http://www.bloomberg.com/news/2014-02-11/plosser-says-i-m-worried-fed-may-be-too-late-in-raising-rates.html?cmpid=yhoo

Blake said...

Thanks, Edwardo --

Can you kindly explain the mechanics of how PDs and (others) effectively loaning reserves to the Fed in return for its SOMA book keeps short rates from going into the zero bound?

TIA

Edwardo said...

I hope this helps, Blake.

Here are some key quotes:

Under the reverse repo program, the Fed trades with a wide list of counterparties, including Wall Street banks and money market mutual funds. That gives it an opportunity to reach corners of the financial system beyond traditional banks.

The reverse repos are an ideal “backstop source of collateral” for the repo market, said Lou Crandall, chief economist with Wrightson ICAP. Even in a testing phase, the tool “has contributed to market functioning,” and that gives the Fed a good reason to maintain it for the foreseeable future, he said.

Blake said...

Thanks, Edwardo. As I suspected, the Fed is loaning out its SOMA portfolio for private credit creation via collateral chains... Nifty! Seems to fix (at least temporarily) the quality collateral drainage that is attendant with QE.

Indenture said...

This is Turd Ferguson writing about attending a recent Jim Sinclair conference.

”I stood in line to ask a question and naturally 2 of my questions were asked and answered while in line but Jim said something that I had not seen him definitively print before.  He was asked about the German gold and he bluntly said "it's gone".  He said (and I love the common sense and down to Earth analogy) "if I owe you $100 and you only pay me back $1.50, then you are either a deadbeat or you don't have it.  The German gold is gone".  Another question while standing in line was about his "crazy" (in his own words) speculation that gold could even go to $50,000 per ounce at some point.  He mentioned that a Goldman Sachs analyst (I did not catch the name) had also done a mathematical study and came up with the same number of $50,000 so he was no longer the "only crazy one out there" anymore.
  So I got to thinking and put these 2 together as I have written on this in the past.  To come up with a mathematical number for gold's price you must have 2 pieces (really 3) of information.  You must know exactly how much gold there is and how much money supply (and total debt) in order to do the math correctly.  In other words you need a numerator and denominator to put into your calculator (because we can no longer do math in our heads anymore) to come up with an answer.  The amount of total gold held is your numerator and that is divided by money supply/debt as your denominator...and presto you get a number. 
  So this is what I asked, "today is the very first time to my knowledge that you've said the German gold is gone, we have not had an audit since 1956 of the U.S. gold so that may also be gone (I kicked myself later because I did not ask him what he believed the U.S. gold holdings actually are).  How can you or anyone else mathematically come up with a dollar price of gold if in fact we don't have any left?  In order to come up with a true final number, we must have a real number as the numerator.  If the numerator is zero then the price of gold in dollars is actually infinity?".  Jim's answer to this was simply "you cannot, this is why I always say that gold may go to prices that amaze even me".”


Is it an insult to be excluded from your own idea or did Sinclair say FOFOA wasn’t crazy since he wasn’t include?

Jonas said...

BIG news! All the Saudi Gold is stolen by the US and the UK. All of the Saudi gold held on US and UK accounts is gone. The Saudis are really upset, but then again.. What are they going to do about it? I expect another stage to this and it will be the invasion of Saudi Arabia to physically take possession of their gold. US military was always about protecting US interests in the gulf. This is US gold, and the military was sent to watch it. The gold is American, something the Saudis seem to have forgotten, or misunderstood.

Motley Fool said...

Jonas

If you are going to make such a wild claim, the least you could do is provide your source(s).

TF

Indenture said...

Turd Furguson, "This is one of the reasons I'm focusing so much on gold, at present.

As gold continues to rise, it will eventually help silver be considered again as a monetary metal, not industrial or inflationary."

Jonas said...

Motley, you heard it from me. So let that be your source if you like.

sean said...

The Red Baron?

It's curious that his posts used accents on French words like expose, vis-a-vis, naive (http://ubercraftorg.ipage.com/redbaron/redbaron-1998-11-20.html), which are mis-converted to ASCII.

Edwardo said...

It has no doubt been said before, but, as per Indenture's quote, it's worth repeating, Turd Ferguson is appropriately named.

As for Jonas, well, his comments have the distinctly maladorous whiff of Jim Willie about them.

All the Saudi gold outside their nation will disappear. Most Saudi gold has already been stolen.


Edwardo said...

I'm sorry, make that loony, malodorous whiff.

Jonas said...

Motley, it's not the first time I state the gold is American. The troops down there were always on guard duty, making sure the American gold rests safely. (for America). This is a storage and physical possession story. There is no way "Saudi" gold will go anywhere, because it belongs to "America". So they let them have it for a while.. But don't you think they understood the military presence???

Jonas said...

Edwardo, It's ok. My comments are certainly tainted by Jim Willie, because it's where things are moving.. I don't see Obama leading the world in any way right now. Putin is now more or less being seen as the leader of the world. China has yet to take a position. But the Middle east is a no brainer, especially Saudi Arabia, those guys are dead in the water and the world will love the US as they shoot fish in a barrel!

Aaron said...

Lest we forget the brilliant insight Jonas has shared with us thus far.

"The politics of Europe is becoming the Achilles heel of this endevour. EUR needs a 9/11 attack, or something of that scale for people to see the light at this point."

or this gem...

What is it that makes you spend some of your life doing something? We are the real currency... Us, people of the world!

People are the real currency in our monetary system? Fascinating.

Phil_O_Dendron said...

Jonas said...
Motley, you heard it from me. So let that be your source if you like.

Jonas don't need no stinkin sources. Jonas has natural knowing and sees and hears all .... so be warned.

Too bad we have to have these fantastic claims that come from nowhere that just seem to pollute the forum.

Jonas said...

Aaron, yes. With the next "crisis" the EU will "default", and it will be about the "last man standing". It is of course already determined.

Phat Repat said...

So, it appears, interest rates are set to rise. That would seem to have some disruptive potential for FG (at least near-term). A break of 110 on the TLT would negate that picture, however. Hmmm... We sit, we watch, we let Wil enjoy the flower...

Jonas said...

If you have something that someone will pay for, let them pay. Another and FOA told us about payment. Not just in paper, but in real terms. Payment is about to stop. The Saudis are not going to be paid, the US military will make sure of it. The gold belongs to the US.

Jonas said...

If you have something that someone will pay for, let them pay. Another and FOA told us about payment. Not just in paper, but in real terms. Payment is about to stop. The Saudis are not going to be paid, the US military will make sure of it. The gold belongs to the US.

poopyjim said...

The Saudis are not going to be paid, the US military will make sure of it. The gold belongs to the US.

These colors do not run. B-)

vizeet srivastava said...
This comment has been removed by the author.
anand srivastava said...

Phat Repat:

I am actually looking for VISA/MasterCard increasing their charges as an indication that we are near to the Crisis. I don't think FED will ever raise interest rates. They will need to print a lot more to service the debt.

I don't see how you look at it as disruptive for the FG. I think the real on the street interest rates rising will be the first step towards hyperinflation. Yeah its possible that the banks may close down over a weekend before this happens.

One Bad Adder said...

FWIW: - We saw a sharp increase in the T-bills offered last week ...but the punters still grabbed 'em on a 4 point something Bid-to-cover ...albeit lifting Yields at the short end off the deck.

Let's watch tomorrows announcement to see if this trend, consistent with countering a Flight to the Here n' Now ...continues.

One Bad Adder said...

Knall: - The Fed have NOT been "in control" of short-term Rates since approx '07. They tried (then) to hike ...only to "chase the Market" back down again.

One Bad Adder said...

Knall: - The salient point in the linked info is that (basically) since 2000, the T-bill rate has been "lower than" the FFR ...putting the Credit-side of the Ledger in the Drivers-seat.
Everything else (Fed actions this last decade +) is / has been reactive.

Max De Niro said...

Bron on fractional reserve bullion banking and why most gold commentators are wrong:
http://goldchat.blogspot.com.au/2014/02/fractional-reserve-bullion-banking-and_12.html

Max De Niro said...

http://4.bp.blogspot.com/-BplS4WaaOaI/T1a-y17WOlI/AAAAAAAAAXU/_Ari5fdIPOM/s320/Blind.jpg

DP said...

Love the smell of Tard Fertilizer in the morning (naht!).

The amount of total gold held is your numerator and that is divided by money supply/debt as your denominator...and presto you get a number … that is total Monetarist bullturd!

It is not like pouring one pitcher into another.

OMG Tard, wherez teh emotions??

Phat Repat said...

anand srivastava
That's an interesting perspective (re credit cards) as that would be useful in a variety of contexts; thanks for reminding me as I had completely put that aside (I don't believe in use of personal credit except for real estate and then only after a minimum 50% down payment).

Though I do believe markets can be manipulated in the short term, I don't believe that holds for the longer term. In looking at various bonds, and since I mostly watch TLT, I see a continued move down (TLT to test support at around 90; view negated above 110). Of course the implications are huge (and just one of the reasons I remain bearish on real estate). Time tells all...

jojo said...

Thanks for that snippet Indenture.

It's painful to read that.
I liked this part especially: " the price of gold in dollars is actually infinity"

And yes, the major thing wrong is the monetarist assumption that you just pour from one pitcher to another.
Instantly reminding us of this post which is I believe DP's intent with that link:
Pitcher to pitcher? Ahhh...NO.


"This transfer of wealth that is coming is not a direct and equal transfer. It is not like pouring one pitcher into another. It is more like flipping a switch on the virtual matrix. Turning off the monetary plane that hovers over the physical plane and claims to tell you how much "stored purchasing power" everyone has. When you turn it off, all that purchasing power disappears in a flash. And then what lies beneath is exposed in daylight, the real physical world. No real capital is destroyed, only the myth is destroyed. But true capital is exposed and revalued. "

Woland said...

via Bloomberg: Jan 30, 2014
Raghuram Rajan - "International monetary cooperation has
broken down. ……..The U.S. should worry about the effects
of its policies on the rest of the world…… We would like to
live in a world where countries take into account the effect
of their policies on other countries and do what is right
broadly, rather than what is just right given the circumstances
of that country."

Feb 11, 2014, via Bloomberg:
"Janet Yellen to Emerging Markets: Good Luck"
by Matthew Klein

"During Janet Yellen's "interminable testimony today" before
congress, the Fed's new Chairman made it clear that the
turmoil in certain emerging markets wouldn't effect the
policy decisions of the U.S. Central Bank".

"She's right. Monetary policy is hard enough without having
to worry about the spillover effects to other countries that
should take care of themselves."

I couldn't help but think of substituting "nuclear regulation"
and "fallout" in that last sentence. So, we wait………..




Freegoldtube said...

A new video for your entertainment

Dust in the Wind

Phat Repat said...

"The U.S. should worry about the effects
of its policies on the rest of the world..."

Yes, whatever you do, don't impact the ROW's ex-priv.

The good news is that, at some point, we will see who is swimming without trunks. A scary thought for many (especially in the EM world).

Woland said...

thought this was funny,
via Marketwatch: "Fed's Bullard: Optimism not deterred by
weak data".
……well…..that's why it's called optimism, isn't it? It's a
state of mind, independent of data, just like pessimism, or
agnosticism. Me, I'm working on my Stoicism, but I'm not
too optimistic i will succeed.

Woland said...

Very Nice, FGT! ( But what happened to those wooden
dentures? GW forgot to put them in this AM.?) {;<)>>

Edwardo said...

Optimism not deterred by weak data

Attaboy, Bull (t)ard. Don't let that pesky, less than sanguine data get in the way.

Phat Repat said...

Interesting themes going on around the world right now; and especially in the West. A casting off of sorts that, after FG, will lead to prosperity for more than what the current 'system' can support. Ultimately beneficial for all, in the long run. Can one be stoically optimistic? Hmmm...

Woland said...

…..but wait……there's more. via Reuters: Asset bubbles
risk grows with better U.S. economy - Fed's Bullard

"The risks of asset bubbles are growing now that the U.S.
economy is improving, St. Louis Fed. President Bullard
said on Wednesday, adding he would not be opposed to
using monetary policy to head off any risks that might
develop." ( Quiz; can you think of any such policies that
don't have "untended spillover effects"?)

"As the economy improves….and we continue to have low
rates, that's a fertile environment for creation of asset
bubbles in the future," Bullard told reporters at the NYSE.
"So I would put more weight on that as a risk than I would
have last year or the year before."

feel free to join the piñata party…{;<)>>

Edwardo said...

That's a central banker that sounds for all the world like he does not have a clue why "asset bubbles" (is all that levitating paper really an asset?) crop up like dandelions on the lawn. An improving economy is not, I repeat, is not "the" fertile environment for bubbles. Were that the case, then the share market wouldn't have behaved as it did over the last few years when the economy was demonstrably not improving. Oh, no, sir, you had better look elsewhere for the culprit.

Woland said...

thought y'all might enjoy this EZ guide to OTC Forex;
"CLS Bank and the world of Forex Settlement", at:
forexmagnates.com/cls-bank-the -world-of-forex-settlement/

but,but Edwardo, the light is so much better beneath the
lamp post, non?

Edwardo said...

It seems that some of these street lamps shed more heat than light, mon ami. Titter titter.

Sam said...

The revaluation of gold will not replace failing currency. It's not the place where the world will pour all of its debt. Gold will find its value within the wealth of the world. It is unconsumed physical things or labor held by those that produce more real things and services than they consume. A debtor won't hold gold but more importantly a debtor won't pull down golds price through borrowing or political will. Because of this it creates the ultimate incentive for producers to produce because their vehicle for savings is sound. The greater the world super producers and shrimp savers create, the more their gold will be worth down the road. This is because all gold purchases/sales will be made between hoarding savers and dis-hoarding savers.

There is a whole lot of debt and debt based assets in this world and we tend to focus on them. However there is also a whole lot of wealth in this world, and when the flaws are removed from our global monetary system, I think their will be a whole lot more. So what's gold going to be worth post revaluation? Impossible to know unless you can quantify all the physical wealth in the world, put a value on all services, and then enter the cumulative minds of all savers. Safe to say it will be shockingly high, extremely stable, and everyone will see the benefit

Another: "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"?

Nickelsaver said...

Well said Sam,

Gold is not going to replace currency within the monetary plane. Gold, as an item in the physical plane, will be used to re-index the monetary plane. For the monetary plane is nothing more than an association of values.

The physical plane is made up of goods and services which find value in their utility or usefulness. These items can be further divided into two classes, 1) consumables, and 2) stores of value.

Gold will soon undergo a transformation of function. In the past it has served as a monetary item and also as a physical item used and viewed as both a consumable and a store of value.

But gold is not consumed, not in any statistically significant way. And when the "paper gold" market is entirely disconnected from the physical item it supposedly represents, gold's demonetization will be complete.

This is a difficult concept for many to grasp. The use of gold as a reserve asset is not monetization when there is no convertibility.

Gold as a "store of value" is unique in comparison to other stores of value. For what other store of value is there in the entire world that has the network dispersion of gold? There is none!

That makes gold, not just a reference point, but THE focal point store of value which shall re-index the monetary plane to the physical, as the current index (credit/debt) reveals its true value.

Edwardo said...

Nickel wrote:

or what other store of value is there in the entire world that has the network dispersion of gold? There is none!

Indeed, and from where I sit the reason it has earned such a fantastic network dispersion is because it possesses all the attributes. Where other assets only have some of the required attributes needed to act as the planet's premiere SOV, i.e. no counterparty risk, with a high stock to flow profile, fungibility, divisibility, portability, malleability, and (virtual) indestructibility, gold has each and every one. And, as you also mentioned, gold's economic utility is statistically insignificant. Finally, it doesn't hurt that gold, when refined and fabricated, is pleasing to the eye.





There's no there

KnallGold said...

So the US has no Gold? All rehypotecated. They couldn't deliver to Germany. Major Gold delivery failure. Default. End of system.

Maybe it is that easy...

Woland said...

perhaps someone ( and you know who you are ) should
suggest a change of avatar for @Frances_Coppola

www.paulklee.net/twittering-machine/jsp

Phat Repat said...

KG
By luck, fate, or however one might want to describe it, the US is one of the most resource rich nations on the planet. The USGS (pdf) estimates that there are 33 thousand tons of identified/undiscovered gold resources. And the USGS is one of the few organizations I would 'trust' (having studied in their midst). ;-)

DP said...

Like this?

https://twitter.com/darenpa72/status/434016782777843712

Phil_O_Dendron said...

Phat Repat said...

By luck, fate, or however one might want to describe it, the US is one of the most resource rich nations on the planet. The USGS (pdf) estimates that there are 33 thousand tons of identified/undiscovered gold resources.


Indeed the US has a great deal of gold still in the ground. The difficulty is getting it out because you can't get by all of the other alphabet soup regulatory agencies of Federal and State gov.

Woland said...

yup. a poem for you, guvna:

I cried, because I had no Facebook "likes"
until I met a man who had no "tweets"

Jonas said...

Kissinger to Bin Faisal: -Give me your oil and I'll give you my gold.
Bin Faisal: -OK, but only if you promise to protect us and do our bidding.
Kissinger: -Yeah... (like these camel boys would ever be a threat to us...).
Bandar: -We gave you our oil, it's almost gone now. Will you let us keep the gold and stick to our agreement of protection?
Obama: -Maybe...
Bandar: -What do you mean "maybe"?
Obama: -It depends..
Bandar: -We had an agreement!!!!
Obama: -Well, the Russians are now the biggest exporter of energy and you say you're running out..
Bandar: -An agreement is an agreement!!! *Raving Lunatic Fit follows*
Obama: -You mean, like our agreement with Pakistan as an ally against terrorism?? You've seen our drones, they fly over your airspace all the time.. What's the fuss?
Bandar: -But they're friendly drones, right?
Obama: -Depends..... Are you a "friend"?

Motley Fool said...

Jonas

I have to laugh. You think the guys who saw the value in that trade arrangement are so imbecilic as to have no strategic conception?

You might as well have gone with.

1 : Oblahblah : America, fuck yeah!
Bandar : uuuuuuuuuuuuuhhhhhh
Return to line 1

TF

Nickelsaver said...

TF,

Found Jonah's source:

fictionwritersreview.com

Jonas said...

Motley, yes.
We're back to line one.
This is a problem with middle east diplomacy vs the west, they believe in keeping your word. It was always like that in the middle east. In the west a word is just a word, yet another tool to get the job done!

poopyjim said...

Cool script Jonas! Is it for a pr0n maybe? What happens next? Does Obama whip out his shlongus and demand to be serviced by the sultan's harem?

Motley Fool said...

Sure...the gold they have taken delivery of is a good example of the perfect trust they have for the west. They live in blissful acceptance of their partners honour, and at no time have considered that they might be betrayed or that any precautions or strategic planning is needed. Pfft. Who needs strategic planning.

...

You, my friend, are in for a harsh awakening. America, fuck yeah, indeed.

Give me a break.

TF

Jonas said...

Motley, like another said:
-"time will prove all things".
Sit back and watch. The mudslinging is in full gear, now we're waiting for the brawl to start...
Black eyes and bruises... Then someone is caught cheating using a knuckle duster instead of bare fists.. The world opinion ponders and decides on who may be the worthy winner of our future.

Jonas said...

Poopy, NO! Obama's stimulus package is for Americans only! The man is a true patriot in that sense. He injects his stimulus package into the US economy, then wipes it off on the Saudi flag.

jojo said...

Jonas- you are a tool.

Woland said...

Like snails, our words leave a trail behind us. In the case of
the writer above, you could start with Dec. 20, 2012, 2:14 PM,
or earlier, or later, as your taste dictates. enjoy. {;<)>>

Jonas said...

Poopyjim.
BTW, according to Obama the only part of a human being that actually "produces" something is where he inserts his "stimulus".... Some have argued there is more to human beings than that, but Obama only knows what he sees, like the "teleprompter", and acts accordingly...

Jonas said...

Jojo, http://www.youtube.com/watch?v=RzgVWpa4fzU

«Oldest ‹Older   1 – 200 of 546   Newer› Newest»

Post a Comment