Wednesday, April 30, 2014

Eastbound and Down


"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


Much of the Western gold flowing eastbound to China and down to the Middle East and India passes through Switzerland on its journey. And just last week, Switzerland released its import-export numbers for the first quarter of this year (h/t Flore). More gold flows into Switzerland than out, probably because Switzerland is a good place to store gold, but most of it just flows through. Currently, according to the data, gold exports are about 80% of gold imports. Last year it was 90%, and the year before it was 70%. But what's most interesting is where the flow comes from and where it is going.

More than 50% of the flow, about 270 tonnes in the first 3 months of this year, or 90 tonnes per month, originated in the UK. Projected annually, that's about 2,150 tonnes per year flowing through Switzerland, of which half is coming out of London. For comparison, 2013 was a little higher with 2,777 tonnes flowing through Switzerland, and 2012 was a little lower with 1,570 tonnes, which was down from 2011's 1,819 tonnes.

I can't tell how much of the 2,777 tonnes came out of the UK last year because Switzerland only started including information on its trading partners in 2014, but if it was close to 50% like this year, that would be about 1,390 tonnes. Adding the first quarter of this year's 270 tonnes, that would be about 1,660 tonnes drained from London in 15 months. For comparison, GLD was drained of about 560 tonnes. If all of that gold drained from GLD made a stop in Switzerland to be recast as kilo bars, then one could imagine GLD accounting for roughly a third of the London drain.

Frank Knopers made this nice chart yesterday, for his Market Update site, of where the gold flow is coming from:


But what's more interesting than where it's coming from is where it's going. 438 of the 537 tonnes, or 82% of the gold that flowed through Switzerland in the last three months, went to Asia, India and the Middle East. 281 tonnes, or 52% of the flow, went to Hong Kong and mainland China alone.


Apparently Mr. Chang still likes his gold, very thank you. So not much has changed, except that structural support is now negative, for the dollar and for gold. By the way, did you know that the same year the CBs ended their 21-year gold selling spree, Saudi Arabia made the single largest one-off purchase of gold by a CB? I guess that whole "special-deal-to-buy-time-for-the-dying-$IMFS" thing is over. It's almost as if no one is trying to buy time anymore, so maybe something really big has changed. Meanwhile, the physical is loaded up and truckin', eastbound and down.

Sincerely,
FOFOA


778 comments:

«Oldest   ‹Older   601 – 778 of 778
michael3c2000 said...

http://www.bloomberg.com/news/2014-06-04/china-considers-offshore-yuan-gold-trade-in-shanghai-trade-zone.html
http://www.reuters.com/article/2014/06/04/us-banks-regulations-insight-idUSKBN0EF09U20140604?feedType=RSS&feedName=topNews&utm_source=dlvr.it&utm_medium=twitter&dlvrit=992637

Fed may shun global risk rules banks spent billions to meet
BY DAVID HENRY AND EMILY STEPHENSON
NEW YORK/WASHINGTON Wed Jun 4, 2014 1:54am EDT
Excerpt: "The European Central Bank, which will become the continent's bank supervisor before the end of the year, is also developing its own stress tests known as the asset quality review.

Banks including Citigroup Inc and Bank of America Corp have been embarrassed to have had capital plans rejected by the Fed. Their failures have encouraged others to be more cautious managing their capital, analysts said."
The long, monotonous, melodrama describing US banks angst and fears over the 2019 deadline is less of a farce when you seen the ECB being introduced into the discussion. The intercontinental contrast becomes evident, and then presented full farce in the quoted example.
"Oh and don't say we didn't warn you".

Anand Srivastava said...

Jojo: I hope you do realize that Gold is almost entirely inert. So its probably not going to cause any issues. Silver on the other hand is known to be toxic, but it is also not easily reactive so you need some catalysts for the toxicity.

Copper is beneficial if you are having a copper deficiency. Excess of copper can cause problems with Zinc utilization. The two are like yin and yang, if you increase consumption of one you have to do the same for the other, actual quantity is not as important as the ratio. Although the actual quantity may cause problem with some other nutrient.

In the present age the problem is of too much calories and too little nutrients, and also of very unbalanced intake of the nutrients.

ein anderer said...

Nice Glenn Greenwald-Interview:
https://www.youtube.com/user/Nfes2005
German version:
F.A.Z.

Tommy2Tone said...

Hi Anand,

Thank you. I do not ingest colloidal silver though. I forgot about that use.
I use it to subvert Mother Nature :)

Anonymous said...

M, Edwardo,
Frankly, I don't get Gustafson's analysis, I was hoping you did. My limited understanding is that when yields on 10yr Treasuries reach zero, the "system" by which "wealth" is stored / saved in Treasuries implodes because at zero the system is signalling that the system is no longer going to pay you to "store" your wealth, and the Treasuries "store of value" is in fact NO DIFFERENT than cash at that point but without the immediacy or full range of usability of cash. Any rational holder of Treasuries, on realizing they have a zero yield, should immediately seek to convert those things into tangible assets. Of course, why this should happen as the rate approaches zero rather than when it's at 2%,and inflation is at 3% so that the real yield is already negative, IDK, none of it makes sense to me. Options to "store" "wealth" are limited for people who have more money than God, not my particular predicament, so I guess they more or less have to leave them in Treasuries, running for the exits will just vaporize them. Unless Gustafson thinks that the zero bound for 10-years is some kind of psychological tipping point when everyone suddenly wakes up and runs en masse for the exits, I don't get why it isn't already happening.

M, I expect asset deflation in real terms and dollar hyperinflation, not asset inflation in real terms. There are far more financial claims ("wealth" (really claims to wealth) embodied or saved in financial products) to assets than there is the abilty to make a one for one correspondence should all those claims try to be converted into holdings of real world assets. The mismatch is epic, and the asset values are based on and supported by huge leverage claims that are/ will be unpayable. Asset prices will fall in real terms, even though nominal prices might increase in hyperinflated dollar terms as everyone "cashes out" and tries to convert the claims into the Real. The FG gold "price" is of course stated by FOFOA in terms of purchasing power, not nominal dollars, and even though asset prices collapse as debt implodes or is paid with hyperinflated worthless dollars and "all paper burns," the purchasing power of gold as a new focal point of stored value should increase RELATIVE to the falling asset prices of almost everything else. Whether it will increase to the approx $60k purchasing power in today's terms predicted by FOFOA is, as far as I am concerned, the great leap of faith in FG theory.

ein anderer said...

21 reasons to buy gold NOW (PDF).

Nothing very new for FOFOA’s readers—nevertheless great stuff!

Source: http://therealasset.co.uk/21-reasons-to-buy-gold

Edwardo said...

Sir Tagio,

What you've described sounds like OBA material. However, rest assured that since short term money can be kept away from the zero bound, the ten year will not even get a hint of a whiff of, ahem, zeroness. From where I sit, the secular low in rates is in as per the lows made almost two years ago in the summer of '12. Save for the occasional "correction" like the one that looks like it may have already run its course, rates are headed north for the duration with a U.S. Sovereign debt crisis/dollar debacle in the offing.

ein anderer said...

Nice reflections of SPIEGELonline in regard to the exspected ECB decisions today:

»What would it mean if the western model of economy, practiced since decades and buying lower and lower rates of growth with the help of higher and higher national debts has reached its final stage

»Was, wenn das seit Jahrzehnten praktizierte westliche Wirtschaftsmodell, sich immer niedrigere Wachstumsraten mit immer höheren Staatsschulden zu erkaufen, an seinem Schlusspunkt angelangt ist?«

Yes, dear SPIEGEL: It has reached it’s final stage—already years ago!

KnallGold said...

@ein anderer: yes, one astute observer called it the "Keynesian endpoint". I liked the term.

As for the zero yield thing, I'd say perception is important here, and now it's officially zilch.

Funny thing is that the carto(o)nPOG reacts so pathetical to the ECB decision today- is it dawning that even physical Gold bears a (relative) positive interest now?

Unknown said...

I am sure you have read the very recent new that the Chinese Port of Qingdao has stopped all shipments of aluminum and copper, while the government is investigating the paperwork – to ensure that all paper that states it is a certain quantity of metal, really has the metal to back it. It has caused concern among banks and trade houses financing the metals. I have not read any commentaries in the mainstream or alternative media on this matter – just the article.

To me this is a very big deal. One, which many so-called experts have not noticed. It is a major declaration on many levels! Here are my thoughts:

1. China has declared war on the re-hypothecation of metals. They are starting with copper and aluminum. If and when China declares that the paper contract stating a quantity of metal must be actually back by real metal, Watch Out! What will be the consequences (in the future) for all the 100x contract of gold and silver?

2. This sudden investigation is going to cause financial losses on the Contract Issuers, if re-hypothecation is proven. Who are these contract issuers? Are they western banks? This is a sudden Squeeze Play, by China against the western bankers.

3. This could also be a Hidden Declaration to the precious metals bullion bankers that PHYSICAL METALS are coming to pass. No more fraudulent paper contracts. All metals (in the coming days) are to be traded on physical basis only.

4. In order to force precious metals to become physical only – could this be the way for China to force it into existence? By starting with the base metals?

http://www.scmp.com/business/commodities/article/1524081/qingdao-port-stops-metal-shipments-due-probe


If I remember correctly – in the last few months, I read a short article posted by Yahoo, regarding gold. The gist of the matter is that in the USA, a survey showed that the POOR people are stating that they are saving in gold (rather than cash) and this worries the Financial Experts because to them – gold earns no interest, blah, blah, blah, etc. I chuckled when I read this article, as it tells me that both extremes (Very Rich and Very Poor) actually understand the truth about gold. No wonder those Rap Artists and Gang Lords are wearing a lot of gold on their body!

Sam said...

http://www.bbc.com/news/business-27717594

Sam said...

"Together, the measures will contribute to a return of inflation rates to levels closer to 2%"

-Mario Draghi

BaronSilverBaron said...

Just come back to check the number of comments.

What's the normal number before a new FOFOA posting?

byiamBYoung said...

BaronSilverBaron,

It's the number of days x the number of words in the last post / number of comments + month of the year.

Cheers

Anonymous said...

Daniel Yu,
To your point, Miles Franklin just called it. THIS IS IT!! THIS IS THE BIG ONE!! .http://blog.milesfranklin.com/now-we-have-an-answer
"Please understand that no matter what happens to the prices of copper, lead, beans, zinc or even gold, the bottom line is that this is a very fast growing seed that will grow into a credit contraction/implosion that will leap from China’s shores and engulf the entire credit based world."


Jeff said...

http://thegoldstandardnow.org/images/stories/PDF/V1a-II-Oct26-1981.pdf

Page 115 discussion of marking US gold to market

Page 118 "...the Treasury in fact owns all of its gold"

t au said...

bBY

lol

Ken_C said...

I am about 2/3 the way through Richard's book "The Death of Money" and I am not so sure that he is adamant about a fixed price for gold. He does talk about setting the exchange price at about $9000 in a few places but then on page 170 he says

"A fixed exchange rate is not essential for gold's role in a contract money system"

I am enjoying the read and will probably finish the book in the next couple days.

Agent98! said...

Daniel Yu,
http://www.theoildrum.com/node/7853 Grantham in 2011:
"If prices continue to run away, then my small position will be a solace and I would then try to focus on the more reasonably priced – “left behind” – commodities. If on the other hand, more likely, they come down a lot, perhaps a lot lot, then I will grit my teeth and triple or quadruple my stake and look to own them forever. So, that’s the story."

Sir Tagio,
Miles Franklin was the pseudonym of an Australian female author who did rather well.

Roacheforque said...

Knall,
A valuable perspective about the relative "interest rate" of gold. Perhaps it was always quite positive (relatively) in terms of inflation, but we live in a world of hypotheticals which clouds that matter, elevating expectations above results, such that the expectation is in fact the result. Good work if you can get it, and a happy world for Keynesians if you can sustain it. :)
D. Yu,
I do not see China as much declaring war on rehypothecation (yet) as marking an awareness that the global use of derivatives is so baked into the foundation of the current dollar system that yes, China is fully infected by this virus as well.
Whether or not media sources, or the "peoples party" recognize this or not may be debatable, but I think the relationships being strengthened with like minded trading partners are an obvious rejection of the "hypothetical" over "real world" supply and demand dynamics.
It seems that TIME is gradually doing the work Another often said it would, in terms of "proving all".

Happy Weekend Trails!
- R

Dante_Eu said...

@MichaeldV:

Yeah, something like that. :-) It means that you have to keep masses happy (and well-fed), even if they are doing (did) something wrong. Theirs strength is in their numbers. Even God understands that. :-)

Bright aurum said...

http://www.bloomberg.com/news/2014-06-02/ecuador-sends-gold-reserves-to-goldman-sachs-in-liquidity-hunt.html

M said...

I cant help but notice that everyone from Brazil to Russia to Canada to the US thinks that the oil market is immune to over supply. If you watch "The Prize", you will see that there was always an obvious business cycle in the oil market. When prices were up, oil companies would bring more supply to market and new oil companies would sprout up. Then, the market would become over-supplied and prices would would fall.

Everywhere you look, there is countries and companies discovering new oil and using capital intensive means to get at it. Everyone is becoming oil rich. Russia turned itself back into an empire overnight because of oil.

Everyone seems oblivious to the fact that oil is a commodity market like anything else and if it gets over-supplied, the price will have to come down. It always does. But ever since 2000, there hasn't been a state of over-supply in the market. I think we are way overdue for one. Who knows what form this oil bear market will take, with all the inflation in the world....Who knows how badly the inflation is screwing up the oil market.

Bright aurum said...

Pg. 13-14
http://www.usmint.gov/downloads/about/annual_report/2013AnnualReport.pdf

Bright aurum said...

For the China watchers:
Chinese Weekly Gold Demand Highest Since Late February, 787 MT YTD
link:
http://www.ingoldwetrust.ch/chinese-weekly-gold-demand-highest-since-late-february-787-mt-ytd

One Bad Adder said...

Sir Tagio, Edwardo: -
It's "TIME" that is the crutial element ...which (It seems) is discounted in the above discussion.
IF $IRX can be ad-infinitum kept at Zero+, then we must look to Another factor to determine WHEN the System implodes.
...nth day plus one (Chaos Theory) suggests a universal epiphany on the "plus 1" day ...and I'd suggest the Butterfly flapped it's wings (to get the ball rolling) on the day $TNX dipped (or was driven) below 4.15% (some 4odd years ago)
The one conclusion I can then make is that "The Clock is well-and-truly Ticking"
FWIW.

Sam said...

http://www.washingtonpost.com/news/post-nation/wp/2014/06/05/bill-gates-could-afford-to-buy-every-home-in-boston/

"Your wealth is not what your money says it is." If they took studies like this a few steps further they would figure out that there is way to much currency wealth in digital form siting around and not nearly enough stuff for it to buy at today's prices.

Anonymous said...

@OBA: Could you please explain what's so special about 4.15% yield on $TNX? (I would really like to know.

Btw, according to this:
http://tinyurl.com/nyxdzvs
that $TNX thing was under 4.15 even at around 2003.

One Bad Adder said...

@78Rubies: - You'll have to forgive me Sire - it's early here and I should've proof-read the post ;-(
Let's try again!
It was the $TYX I was referring to ...which was driven below the crucial 4.15% level in 2011 (August?) The same would apply to the 10 however it was the Thirty I was watching at the time.
At or above that Yield, it was feasable to effectively neuter risk via Puts and Calls.
All official effort since then (QE, swaps etc) has been focused on maintaining a semblance of normality in the curve, as without same, the Short-end (<$IRX) would have been driven sub-Zero whilst the Long-end would have gone no-bid.
Weird stuff eh? ...but if you can concieve that TIME is the crucial factor you'll get it.
Whatsmore, understanding the importance of TIME is also key to understanding what GOLD is. FWIW.

Archer said...

Question for the day:

What, might David Stockman be missing in his analysis?

Here's a key passage to consider:

But the only thing they can possibly succeed in doing is creating another run on the euro...

The they in the sentence above refers to the Euro monetary authorities, aka the ECB.

—a run which would cause the global gamblers to take flight and the price of sovereign debt throughout the euro periphery to collapse as fast as it rose.

Hmm, a run on the euro? In short, what Mr. Stockman and like minded individuals seem to be missing in their analysis is that should the euro face an existential threat its managers have the means to survive it. However, as part of that process they will simultaneously shift the deadly threat to the U.S. dollar which does not have the means to defend itself should Mr. Dragi (or his successor(s)) be forced to, as they say, break the glass and press the red, excuse me, golden button.

In the meantime, who would like to defend the idea that the fall in yields in the periphery is not destined to reverse? And who would like to defend the idea that, in order to avoid a surfeit of opprobrium, the euro managers will exhaust and and all other measures available to them before they resort to breaking the glass?

Alex in Montana said...

If by periphery you mean Japan, it's a situation that is untenable. They are certifiably crazy and the JGB and Yen are toast. Only a question of when.

It will be the first big bond market to go south.

Archer said...

No, Alex, I don't mean Japan.

M said...

@ Archer

Stockman is great. But like him, Zerohedge and everyone else, they don't delve into any details of the Euro vs the $ because they see them all as keynesian. In a way,they are right.

We don't have any proof that any politician or central banker in Europe even knows of the red button.

What options do you think that the ECB have before they consider the nuclear option ? Open ended QE ? Euro bonds ?

Michael dV said...

M
we have been told they want to have an intact system in place to function as a reserve if the dollar fails. I expect them to preserve the reputation of the Euro above all else. If they QE they damage the brand a bit but survival will come first now that they have made it to existence.
So far I don't see Draghi doing anything unusual from a FG POV. Have you?
Indeed the biggest criticism of the ECB is that it won't really do 'whatever it takes'. That seems to support a FG function of then Euro.
One final comment. I sense we are reaching peak pessimism in the contrarian community. It used to be that everyone was commenting 'the system is going to tank', now I'm hearing 'is this sucker ever going down?, Can they keep it alive forever.?" Obviously all of the important efforts to keep the system afloat are done in secret. I am still unable to see a future in which things just keep on going as they are.

michael3c2000 said...

http://www.wantchinatimes.com/news-subclass-cnt.aspx?id=20140608000050&cid=1203
Flush with gold: China comes in second behind South Africa
Staff Reporter 2014-06-08 10:50 (GMT+8)

michael3c2000 said...

http://www.wantchinatimes.com/news-subclass-cnt.aspx?id=20140608000050&cid=1203
Flush with gold: China comes in second behind South Africa
Staff Reporter 2014-06-08 10:50 (GMT+8)

M said...

@ MichealDV

I havn't seen anything per se. But everything Draghi does with the Euro is for the sake of the dollar. Jaw boning the Euro down and easing has not been done to help anything in Europe. It's been done to help the dollar.

So until Draghi signals that he cares about Europe first, I remain sceptical. It was very disappointing to see him appointed in the first place. People forget that Trichet never eased afte 2008. It was only till this Goldman scum took over that Euroland started easing.

MatrixSentry said...

MdV,

Yes, quite a bit of angst out there amongst the Contras. IMO it has quite a bit to do with this chart.

This chart pisses off quite a few in our community. Hell it pisses me off. This time period represents the time I have been a professional pilot and in a position to "invest". As you can see. Simply buying the Dow over this time frame has been a monster performer. All money (aggregate) invested has been made whole nominally and in the real. If I were a few years older, or if I became unable to work, I would be quite grumpy.

Back in 2008, I would have never dreamed we would be where we are today. I could not imagine a band aid sufficient to cover the festering and gangrenous pustule that the $IMFS had become. I considered a move into this index as contrarian play, but convinced myself it was a sucker hole. The pros laughed at me as I bought my gold, said I was hopelessly archaic and obviously had much to learn about the real world. They were right about that. They bought this shit with wild abandon and have long since cashed out those gains, likely for some gold of their own.

I look at this chart and wonder what happens next. From a technical perspective it is mostly game on for the stock bulls. There is some divergence developing, but nothing to really get excited about. The MACD histogram is showing divergence, where momentum is waning as higher highs are being made. Also, volume is falling on higher highs as well, meaning fewer trades are supporting this mess. I would like to see divergence in RSI, but sorry, no cigar.

This chart will not break gradually. Still little consolation for those who have watched this hot mess and were so certain that rational people would balk. I see the same things I saw in 2007, only amped up. Outrage after outrage, yet no outrage. Just blind acceptance.

It is lonely knowing the things we think we know. I console myself by knowing that support has been removed for the $IMFS. What happens if support mysteriously resumes? Could this thing stinking corpse walk on for another 5 years? 10 years? What about 14 years when my productive ability comes to an end? Scary shit right there.



Ken_C said...

Michael DV said "Obviously all of the important efforts to keep the system afloat are done in secret. I am still unable to see a future in which things just keep on going as they are"

The key thing here is "secret". So far they seem to always find a way to keep this zombie staggaring along when many thought it should have perished long ago. I wonder what other secret moves that they have.

I think most people listen to what the Draghi's say and not watch what really happens. It is really a CONfidence game. As long as most people believe the bogus statistics and propaganda put out the system can continue to staggar along. It is just not clear to me when the tipping point will come when enough people wake up to see that the system is really a walking dead man.

Archer said...

M asked:

What options do you think that the ECB have before they consider the nuclear option ? Open ended QE ? Euro bonds?

As MdV suggested, for more or less the same reason he put forth, I'm reasonably confident that Dgaghi and company would like to stay away from Fed style QE. Ditto Euro bonds. They may, of course, engage in these and other measures, however, almost by the week, but certainly by the month, it is becoming far from a matter of life and death regarding how, when, and where the rip chord is pulled because the key global producers and their clients are fast moving away from contracting in dollars.

It would be difficult to overestimate the importance of this ever accelerating trend, because it gives the ECB and/or The BIS much more leeway to take the next much anticipated monumental step. After all, with each passing "deal" the folks who are in the position to mobilize gold can look out and be assured that their prime directive-or at least what some of us here imagine is their prime directive, namely, to steward the planet into the next monetary system with as little turmoil as possible- is well within the realm of the possible.

As the "dollar world' becomes smaller and smaller there are fewer and fewer entities (entities who really matter) out there who will suffer the kind of discombobulation that could really throw a spanner in the works.

Michael dV said...

M
For me to worry about Draghi's abilities to save the dollar I'd have to be a believer in financial miracles. I feel Rob Kirby's comment that 'this lasts until China fails to get it's gold' is as close as anything you'll see to timing. Otherwise one would have to believe that all the PTB are in cahoots and the Chinese trust Americans to continue to run the show...and continue to give us a 50% discount on stuff, ditto for the Saudis.
No, I still believe in opposing powers and the desire of governments to at least look like they are trying to advance the cause of the people they govern. I cannot believe Putin and Obama have a grand plan to make Russia whole if only Putin lets the dollar control the world a bit longer. Any hesitation to act by other world powers must come from a sense of caution and with an eve on timing and the impact of dollar collapse on the country in question.
Draghi is working with other central bankers and I don't think that he can save the dollar out of loyalty to Goldman Sachs. If GS has not figured out what is happening....well they don't deserve to be Goldman Sachs.

Bright aurum said...

@MatrixSentry
http://www.zerohedge.com/news/2014-06-07/madness-crowds-and-great-insanity

Bright aurum said...

http://davidstockmanscontracorner.com/sorry-bubblevision-q1-earnings-didnt-beat-but-missed-by-15/

Bright aurum said...

http://www.gordontlong.com/Tipping_Points-2014-Q2/06-04-14-US-ANALYITCS-RISK-NYSE_Margin_Debt-2.png

Woland said...

I plan to keep singing this song until someone listens;

via Bloomberg, by Mark Gilbert;
"Europe's Bond Yields Aren'y Making Sense"

perhaps there is a lens whereby they (soon) may make sense

Edwardo said...

Woland, if you haven't seen it already, you may find this of interest.

Here's a key passage:

To sum up, the package will deliver for the real economy?

The core concern, following on the foot of the June meeting, is that new measures will simply act to stimulate financial markets valuations and sovereign debt prices without trickling down into the real economy – corporate capex [capital expenditire] and hiring. This concern is real. Since H2 2011, European Stoxx 600 index dynamics diverged from the underlying companies earnings per share (EPS) momentum as sustained gains in equities prices coincided with steady declines in EPS. At this stage, it is hard to imagine how reduced cost of new lending (as opposed to legacy debt burdens) can support EPS momentum reversals. At the same time, we can expect improved funding costs in the banking sector to stimulate leverage and demand side for equities. The stage is being set for a substantial bubble emerging in European equities valuations to parallel already established bubble in sovereign debt valuations.

Robert said...

Good essay today at NC about the time that will be required to build up the infrastructure for an alternative to dollar settlement:

http://www.nakedcapitalism.com/2014/06/russian-companies-plan-denominate-trade-renminbi.html

M said...

Ben Davies was on King world news. He got a 1 on 1 talk with x Greece Prime Minister G-Pap.

When asked if there was a framework to replace the dollar in the works, he said yes.

And when asked if gold was a part of it, he didn't say much other then something about a currency basket and the SDR. Basically saying the same thing as Jim Rickards.

M said...

@ Micheal DV

"Draghi is working with other central bankers and I don't think that he can save the dollar out of loyalty to Goldman Sachs. "

Im not saying its a grand scheme by Goldman. But Draghi was the worst one for the job if you are a European and the best one for the job if you are a American. We know that it will all end. But this "time to build another system" is getting way out of hand.

Roacheforque said...

The BRICS are developing a competing system, and the noted withdrawal of support is a key component of that. Want to accelerate change? Introduce competition.

Unknown said...

Gold and Fiat are MORTAL ENEMIES. They can never co exist.

The existence of the state REQUIRES that it be able to expropriate the savings of its citizens. Any guaranteed store of value will not be allowed to exist. See what Roosevelt did.

And the definition of fiat currency is as follows: a means for the state to expropriate the productive efforts of its citizens.

Gold is unlike the stock market or real estate or any other store of value. Gold is too powerful. Once it starts to challenge fiat, fiat is dead.

Freegold requires Anarchy. Freegold requires the death of the state.

Agent98! said...

China bitcoin and fiat

http://www.abc.net.au/news/2014-06-10/australian-tax-office-release-new-rules-on-bitcoin-transactions/5511624

Woland said...

Um, Nope. {;<)>>

Tommy2Tone said...

Nice try Paul but there have been way better attempts than yours over the years. You need to RRTFB :)

KnallGold said...

...because FreeGold is the wedding ring between the 2 camps!

Ken_C said...

Paul D Have you read any of the Freegold discussion? Especially the part that explains how Freegold requires Fiat.

Indenture said...

Paul D: Freegold requires currency. Gold will not challenge fiat, gold will define the value of fiat.

Michael dV said...

Chris Martensen has a new half hour show. It is an extension of his earlier Crash Course. Like Fofoa he sees a similar 'monetary plane' and 'real wealth'. It is worth the time.
https://www.youtube.com/watch?v=9jaQmcYEiME

Unknown said...

In the US electricity consumption has been flat to down for several years. http://www.tradingeconomics.com/united-states/electric-power-consumption-kwh-wb-data.html. Much of this improvement is continued advancements in energy efficiency. At the same time there is significant investments in wind and solar which is offsetting the decline in coal plants (though it is not good base load energy unfortunately, it is strongest at peak, hence the "Peaking duck chart" often cited on net load grids). Solar today is 0.17% of the global energy market, wind is 1%, nuclear is 4% and Oil is 33%. Focusing on aging nuclear infrastructure isn't going to yield much relative to the changing US or global energy landscape.

Michael dV said...

Some people are strong in opinion.

BaronSilverBaron said...

I come back now and then to see if you guys are still talking amongst yourselves.
652 comments. Is that a record?

ein anderer said...

@Paul D
Protest, your Excellemcy. Gold and fiat ALWAYS existed together: one as a means of storage, the other as a means of exchange.
Free(d) gold is the symptom of the emergence of a sustainable global finance system.
Anarchy is a backslide into barbarism, where silliness and violence are reigning. Iraq, Afghanistan, Nigeria (Boko Haram) and, yes, Eastern Ukraine are best examples.

Tommy2Tone said...

What else are we to do while we wait for your return BSB?

All Hail BSB! All Hail BSB!

byiamBYoung said...

Well, thank God BaronSilverBaron has returned. I can now quit repeatedly hitting the refresh button.

A thousand thank you's, BSB.

M said...

@ Baron

No its normal and I doubt 650 is a record. And we are not talking about Martin Armstrong.

@ Andrew Strom

" Much of this improvement is continued advancements in energy efficiency."

I cant believe people actually believe that. US gas consumption is at decade lows because people aren't driving to work because they don't have a job. Lower power usage probably has something to do with the fact that the economy is in the gutter too unless you can prove otherwise.

Is electricity consumption down in Singapore or Germany by the same rate ?

Do you believe that the weather caused all these bad economic numbers in the US too ?

Michael dV said...

bsb
back when we had troll infestations the counts went even higher.
Now every comment is a slice of fried gold, pure meaning...read 'em all and see.

Bright aurum said...

@Michael dV
Thank you for the previous link. I e-mailed it to some friends. Hope it becomes an avalanche.

Bright aurum said...

OOps
http://stockcharts.com/h-sc/ui?s=$TYX:$IRX&p=W&b=5&g=0&id=p83482723640

Edwardo said...

It appears the untaper may be coming into view.

Unknown said...

@ Michael

Yes, German energy consumption is down, having peaked in 2008. Economies move on the margin and if you don't think products are more efficient you're out of your mind. Do I think it's some magic panacea? No. I meet with enough semiconductor companies to see how things have changed in power management and I respect marginal change. LED lights make material improvements in energy usage and are increasingly prevalent in hotels, parking lots, restaurants, etc... Dish washers, dryers, etc... are far more efficient. Always on the margin. Also, how do we calculate fed in renewable energy consumption? I.e. Solar City helps finance solar panels on your home which feed you directly. There's no more monitoring, so do we count that in the energy consumption statistics? How about Microsoft's data center in Utah using its own solar farm to help power it? No. It's a small small part, but again on the margin this is an increasing reality.

I find it ironic that the negative view is that everyone puts their head in the sand and ignores the big problems of debt and such, but economies also progress and change, albeit every so slowly. Don't put your head in the sand because you don't like the answer.

As for the winter, no, I don't think it is just weather. Too many companies have far greater problems than a distortion and I've read all of ZH's analysis on warm weather areas also doing poorly.

Unknown said...

And I didn't bother looking up Singapore.

One Bad Adder said...

@BA: - nothing to see there (currently) mate - we may however be on the verge of Another assault on the Zero ($IRX) ...time will tell eh?
This Chart - http://stockcharts.com/h-sc/ui?s=$SPX&p=W&b=5&g=0&id=p80614993109 - shows how driving $TYX below the crucial 4.15% (in approx July '11, giving rise to the "new-normal" - as alluded to in my above post) has facilitated the current SM "party". It would appear this trend may continue for the time being, given benign S 'n P Volumes...or maybe NOT!

One Bad Adder said...

@BA: - I can see (via $IRX - daily) what got you excited - they're very quick to "cover" these moves but when the avalanche starts, all will be revealed (as naked as the day they were born)
Might be seen through the weekly Auctions - one of these Tuesdays ;-)

vizeet srivastava said...

Paul D,
In India the black market uses gold/land as SoV, cash as MoE and INR as UoA. India is world's biggest democracy. Freegold is going to work because it is more natural way of saving and spending. You need freedom for FG to work. It was brainwashing that helped Fiat. For FG to work you need to bring back wisdom. Next crises will do that.

Dim said...

Man I love reading FOA...


Notwithstanding Iraq's move as a convenient trial balloon, the mass of this transition will not begin until the US has clearly embarked on a slowdown. And that slowdown, energy induced as it is, will, this time, force the fed to fight it with a super inflationary buyout of anything and everything that defaults. Right down to your shoe laces. This, my friends is the inflation dynamic unleashed once a currency is removed from reserve status.

Roacheforque said...

Indeed Dim, with foreign support removed, the Fed is the final debt salvation of last resort.

They may continue "staging" a taper for as long as credibility holds, but when that snaps, grab your hockey sticks.

M said...

@ Roacheforque

"They may continue "staging" a taper for as long as credibility holds, "

If you include the Belgium purchases, there is no net taper at all.

And if other central banks are printing currency just to arbitrarily buy, that is the same as outright QE from the Fed. The printer is just in another location.

Motley Fool said...

Shhh, be vewy vewy quiet. I'm hunting wabits.

Midnight Gardener said...

Where is Beer Holiday when you need him? Blue Eagle Alchemy converts 1 ton of beer bottles to 400 oz of gold. ;-)

http://peswiki.com/index.php/Directory:Blue_Eagle_Alchemy_Project

Jeff said...

china gold demand:

http://www.reuters.com/article/2014/06/11/china-gold-shanghai-idUSL4N0OQ0HP20140611

Unknown said...

if donald sterling requested his money be converted to gold would that break the paper gold market, i find the story outrageous and 2 billion for the Clippers more than the Redskins

Edwardo said...

It would be just a tad ironic if a man with the last name Sterling managed to break the paper gold market. But jumbo shrimp's like the embattled Clipper's owner are in no position to do so.

ein anderer said...

"We get the government we want. It already represents the people quit well, with disastrous results."
Yes.
That’s why we must see that people change.
Bet: If there would be a means by which the mind of the many could be changed—nobody would like to here about. The simple reason: Such a means—let’s call it »technology«, otherwise it would not work—would necessarily be a something unknown before. And who cares about complete new things?
Besides this: Which system ever would allow to be put in danger? The law of self-assurance …
Therefore the only means for changing the trend of time can only be that operation which is unseen, at least unbelieved. Everything else would be defeated long before going live.
Therefore, whenever you stumble upon something which you do not believe, be aware: It could be exactly that which has the potential for a system change. And may be that change is already on one's way—silently, because nobody believes and nobody cares …

Dante_Eu said...

Recently on ZH: Why We Underestimate Change Until It Is Right On Top Of Us

From some Harvard professor:
“Human beings are works in progress that mistakenly think they’re finished”.

Same could be said for everything. Families. Nations. Monetary systems. Even continents are shifting!

Or to put it in another way: Change is the only constant. Now where did I heard that? ;-)

Ken_C said...

Dante - Is change really constant? It seems as though change is accelerating.

michael3c2000 said...

Yellow dragon gets a lift
The body subtle, the head lift
Standard fine, easy defined
The bottom line is fully refined
As breath begins to shift
(Like a warm breath of fresh air)
http://ceo.ca/wp-content/uploads/2014/06/Gold_Daily_6.13.2014.png

BaronSilverBaron said...

Are the number of comments after the original FOFOA article like FIAT currency?
The more that are printed means they steadily lose their value when based on the original article?
When a new article appears (The Reset) then comments become valuable again?

Unknown said...

snark

michael3c2000 said...

The cure for the silver-tongued and the mother of invention:
http://www.mining.com/worlds-most-expensive-baby-bottle-made-of-gold-and-diamonds-44414/

Sam said...

@Phil

The idea that change is constant is not measuring the rate of change but rather the idea that things are constantly changing (at various rates). However, when it comes to human affairs, I like an idea that FOA likened to a blocked stream. More and more flow gathers at the blockage adding more and more pressure. Then the stream finally overwhelms the blockage and huge gushes of water flow forward wiping the blockage away like it was never there

M said...

From Zerohedge

"Cluster Of Central Banks" Have Secretly Invested $29 Trillion In The Stock Market. (Aren't the value of all stocks in the world about 60 trillion ?)

"To summarize, the global equity market is now one massive Ponzi scheme in which the dumb money are central banks themselves, the same banks who inject the liquidity to begin with."

Fonz had a good comment.

"The scenario I envision, and I am not sure how far we are from it. Is when retail and hedge funds etc never actually sell. They just keep accumulating until they run out of capital. Then the stock market ends up like the JGB market. No trades happening for days on end. Just a total stoppage of activity because there are no sellers."

I agree with Fonz. This could be where we are going in all financial markets. US govt bonds, European Bonds and stocks the world over. At that point, the only action that will change anything is when things stop working in the physical plane somehow. Somehow some day, the physical plane won't work anymore.

MatrixSentry said...

Interesting. People amassing paper assets will likely do OK until the day they don't. Who would have thunk that?

Unknown said...

Further disconnect between the phyisical and financial planes.
No longer will you need 'exact change'. Ha, ha. So many puns are possible.
http://finance.yahoo.com/news/paper-currency-gold-004346371.html
I guess this article makes sense in a paper asset world. Old world folk will get a good laugh out of it.

Edwardo said...

There a few things to consider regarding this reported run into shares by CBs and the prospect for the market to infinitely levitate as a result. Should the divide between the price of shares continue to widen further and further from reasonable valuations, all while trading volume shrinks, which it is systematically doing, the potential for massive and sudden volatility will rise despite the longstanding muted condition of VIX.( I hasten to add that VIX as an indicator is now probably as broken as LIbor.)

The conditions that gave rise to the flash crash in May 2010 were never addressed, let alone reigned in, but they will, as part of the systematic volume diminution, at some unspecified and inconvenient point, create yet another perfect storm which will spawn yet another (and, next time, perhaps, not so) flash (in the pan) crash.

Woland said...

Hi M;

The quote is wrong. It refers to "global public investors", of
which Central Banks are one (relatively small) component,
along with sovereign wealth funds and public pension funds.
It is true that certain central banks, ( Israel, under Stan Fischer
as well as Switzerland, Denmark and others HAVE committed
some percentage of CB assets to equities). The OMFIF
article states that "global public investors have increased
investments in publicly quoted equities by at least a trillion in
recent years", as the yield on government bonds were forced
lower by those same central banks. That is a far cry from 29
trillion, though it is certainly a large number. And the risk of
loss is certainly different in nature with equities than with a bond.

Phat Repat said...

Back from Asia but missing it already; a trip to Whole Foods, interaction with a 'neighbor', confirmed that. Little people, little minds. Will the US ever recover? Perhaps, but not in my lifetime. If I were fluent in Mandarin I would likely make Singapore my home given its close proximity to my business needs. Hmmm...

Anywho... It's strange reading this site of late as it appears even our 'lifers' have become demoralized. I like it; and just what I predicted from the outset. Personally, I am grateful for the opportunity to continue accumulating the physical as there really is no alternative; not stocks, bonds, real estate, art, etc...

As I've seen it stated before, "the things you own will go down in price while the things you need will go (way) up."

M said...

@ Matrix

This is a little different. Dont you think ? 10 years ago, we used to have a business cycle in paper assets. Speculators could make money with volatility. There would still be some rationality. Winners and losers. With no volatility , no volume and no upside in anything, people amassing paper assets are not doing ok. They are doing rather mediocre. Not good enough to support the financial industrial complex.

With this low volatility, it will be rather easy for the banking interests to control the paper gold market. Great.

Lisa said...

Tom R

Interesting article.

I do notice when I pay cash that I am in the very small minority. I routinely see shoppers put small purchases (some under a dollar) on a debit or credit card. And most cashiers have absolutely no idea how to make change. You can really confuse a cashier by giving them cash and the appropriate amount of change, to get back only paper currency.

One Bad Adder said...

As Creditors come to terms with this Debt-saturated world. this - http://stockcharts.com/h-sc/ui?s=$IRX&p=W&b=5&g=0&id=p37307781598 - would seem to indicate we're on the verge of a "snap-resolution" IMHO.

Dim said...
This comment has been removed by the author.
Sam said...

@ Dim

I think the instincts of your wish was valid. There was a tremendous commodity bull market from the 1999-2008. Median income in 1998 was $38,127. Median income today is around $50,000. If you do the math you could buy a lot more gold with your income in 1998 than today. You could also buy a whole lot more oil, silver, copper, platinum, ect.

Unknown said...

Phat,
It's really the pervasiveness of the morality crisis that a manipulated Ponzi system imposes which "demoralizes" me attitudinally at times. But it doesn't challenge ny resolve in gold, only further affirms it.

And I know it's not fashionable here to loathe the 1%, but much of what is done to create the imbalance of fiat wealth "flow" is really getting old lately,

Sometimes I wonder if the world has changed, or does the information age allow me to see it more clearly? I hope it's the latter, but suspect it's the former - all signs of the end of a decaying system's timeline.

Demoralized by what I see all around me, but seeing hope for a better future in gold.

Phat Repat said...

@Wil
"The pervasiveness of the morality crisis..."

Yes, but we have the "rule of law"! Yeah, just typing those words made me nauseous. You are absolutely correct; we have an issue and one that won't begin to be resolved until there is an extreme crisis. And, though FG will likely protect us from complete financial ruin, one has to wonder how the immoral among us will behave. Or does one?

I'm surprised at the lifers who know the 'game', know that it will not end without every last stop being pulled, and yet express disdain at the pace of transition. So, are you an FG'er or aren't ya? Time tells all...

Steve said...

As it looks now I will have an opportunity, at an informal social event, to meet the Dutch finance minister and Eurogroup president Jeroen Dijsselbloem. Possibly I could pop him a (subtle) question on a certain topic. Anyone any suggestions? BTW has Elvis left the building?

Dim said...

Hi Sam - I find that very interesting and thank you for responding.

I deleted my comment soon after posting as I got confused..and guess I still am a bit confused.

In 1999 you had to hand over 24 barrels of oil for an ounce of gold, but today you only have to hand over 12 barrels. But according to your figures (average wages) we are getting a "worse deal" on gold than in 1999. The only way this could happen is if oil price increased relative to gold price and with both increasing relative to wages (which it appears to have, since 1999 oil is up 6x, gold is up 4x, and wages up only 1.2x). Is this correct?

P.S. Thankyou again for your response, I was second guessing myself there for a while but your answer has helped set me straight I think.

Edwardo said...

Hello Steve,

Regarding subtlety, here is a cautionary tale in the form of an anecdote. It seems that one day when the late, great, actor, Walter Matthau, was working with the late, great, film director, Billy Wilder, Wilder stopped Matthau in the middle of a take to ask him what he was doing. "I'm trying to be subtle", said Matthau. To that Wilder responded, "Well, just make sure that we can see it."



Eric C said...

I have just finished reading shoeshine boy and focal point: gold. I do not understand how the utility argument is significantly different for gold vs the other precious metals. I also do not understand the idea that currency flows through everything except gold. If you hold a physical item as a wealth reserve, doesn't it work the same for gold vs the other precious metals if purchased purely to hold as a wealth reserve?

I think the answer has something to do with the fact that the other precious metals are used in industry way more than gold. Can someone help clarify my understanding?

Sam said...

@Dim

Most of us earn currency at either a job or by running a business. We then can trade that currency into whatever we choose. Unless you own an oil well the oil to gold ratio shouldn't come into play when talking about how much gold you could buy in 1999 vs 2014. Gold is actually cheaper vs oil but it is also cheaper vs apple shares

Dim said...

@ Sam, got it!

@ beopenminded - I think it's because of gold's very high stock:flow ratio, which as you suggest, is because it's not used very much in industry or consumed. It lies very still! It is the knowledge that gold is widely possessed (and not consumed like fruit, fish or silver) that gives gold its great store of value ability. Things like fruit, fish, silver and stocks have economic forces pushing them to fair market value (e.g. stocks with p/e ratios, and silver industrial demand/supply). But because gold is "useless" except for a store of value, it's price is arbitrary (meaning no economic forces pushing it to a "fair" value). Happy to be corrected!

Robert said...

beopenminded, gold is the only precious metal that is purely a monetary metal. It's the only one that has no competing industrial application. And because there will be no need for circulating precious metals coinage in the freegold age, it only becomes necessary that one of the precious metals be revalued. That metal will be gold, the only pm that central banks already have on their balance sheets.

michael3c2000 said...

http://qz.com/222408/smugglers-use-bizarre-ways-to-get-around-indias-obstacle-course-of-gold-imports/

By Sunil B.S. @sunilbs_tweets 2 hours ago

The Indian government has raised import taxes on gold three times over the last year; it’s now at a double-digit 10%. It’s also now mandatory for importers of gold to eventually export 20% of what they have imported, a measure designed to narrow down the yawning current-account deficit.
Though the curbs did help the government to bring down the deficit, it has yet to make a dent in consumption.
Further, to get around tariffs, Indians continued to import gold illegally..."

Agent98! said...

Kwasi Kwarteng - author, British Tory MP on the rise, financial analyst, PhD in Economic History, interviewed on the topic of his latest book:

War and Gold: A Five-Hundred-Year History of Empires, Adventures, and Debt

"How the powerful relationship between war and gold has shaped the world as we know it...":

http://www.abc.net.au/radionational/programs/latenightlive/war-and-gold/5512138

"After nearly 20 long months of conflict, many Syrians are now digging deep into their pockets, with many having to sell their jewellery -- including family heirlooms -- just to survive" - webpage image caption

googled:

http://www.amazon.com/Kwasi-Kwarteng/e/B006JUTZRO

http://en.wikipedia.org/wiki/Kwasi_Kwarteng

http://www.theguardian.com/theobserver/2011/jul/31/observer-profile-kwasi-kwarteng







Agent98! said...

An excerpt from War and Gold:

http://www.scribd.com/read/224636343/War-and-Gold-A-Five-Hundred-Year-History-of-Empires-Adventures-and-Debt

Notes from that intro, and a question:

1818 British nominal debt 843million pounds
1914 706million pounds
1818 debt approx 250% of GDP
1914 debt barely 25%
"Substantial achievement" "unequalled"
"Built on gold currency (gold standard) and balanced budgets" and "common sense, or prudence"

Ok. In claiming it's the gold standard what did it, during those near one hundred odd years does he not wilfully miss the true factors at play of Britain consolidating the first ripoff everything/everyone/everywhere through being the imperial/colonial/financial global superpower, and the new exponential economic growth in the first century of the industrial revolution?

FT review:
http://www.ft.com/intl/cms/s/2/a159b4e4-cedf-11e3-8e62-00144feabdc0.html#slide0

"








The Daily Ticker






Sponsored by


.

Want to balance the budget? Go back to the gold standard: Kwasi Kwarteng

.


By Nicole Goodkind
May 30, 2014 9:20 AM

Daily Ticker













.


.





..
.
.

The Daily Ticker says:

"In War and Gold, British Member of Parliament Kwasi Kwarteng traces the history of debt from 16th century Spain all the way to our post-2008 economy and concludes that tying currency to gold is the best policy ...

...Gold prices are currently at a 16-week low but Kwarteng says long-term he would always bet on gold. “I think in a world of paper money, in a world of increasing debt on a national level and big credit splurges, gold is a reliable asset.”
https://finance.yahoo.com/blogs/daily-ticker/want-to-balance-the-budget--go-back-to-the-gold-standard--kwasi-kwarteng-124616670.html







Sam said...

@beopenminded

Great questions. The concept of "currency flowing through everything except gold" is a deep one. It sounds like you have been reading so hopefully you get the concept that currency passes through assets not into them. So why is gold different? Don't get caught up on the words and try to think about a deeper concept. Currency is simply a medium of exchange. It's value is just an idea in our collective minds. What we all really want to do is trade things of value with each other and not have to match up the perfect barter with each transaction. Currency makes trading things of relative value convenient and efficient. As human beings we all have an uncanny ability to associate values to a whole number of goods and services. As we trade these things we establish values as our currencies pass through them. Now think about an apple for a moment. If I told you an apple was worth one orange you may see that as reasonable. If I said it was worth 100 oranges you would probably disagree. If I said it was worth 1,000,000 oranges you would strongly disagree. You don't have to be an expert in fruit values to do a general value association. Now try it with gold. You may think it is reasonable to think 1 ounce of gold is worth 1250 apples but it really isn't reasonable at all. Not is the way 1 apple for 1 orange is reasonable. If 1 apple was worth 1 ounce of gold it would make just as much sense . Same goes for 100,000 apples an ounce. Gold is reasonably worth zero apples and or an infinite amount of apples at the same time. This means apples can't truly pass through gold and create a value for it helping us humans associate it's value with all other things. Now substitute currency for apples. Gold sits outside the realm of goods and services with associated values traded for their utility. Its value is established in a totally different way than everything else. It's function is necessary because of the existence of time, debt, and savings. We don't live in a world where all trades are settled instantly and equally. We live in a world of savers and debtors. A debtor/saver world creates three things. Debt (value established in our mind), savings (value established by savers wishing to store value), and every other good and service(value established by its utility)

Unknown said...

An interesting interpretation Sam, I think I like it!

Woland said...

Hi Steve;

Just a thought. Ask him if he has read "Gold as the Monetary
Cosmos Sun" by the late Jelle Zjilstra. ( I'm sure he will know
who that is ) A good follow up would be, "Do you agree with
his viewpoint?" Greetz! {;<)>>

Lisa said...

Beopenminded

Have you read Think Like a Giant?

There is a lot of good discussion about "It is gold that denominates Currency" in both the main post and the comments.

Hope it helps answer your question.

Eric C said...

This is Beopenminded. Thank you for the responses. I do not fully understand what it means to say that currency does not flow through gold. I understand that the relationship of gold to any other item is basically arbitrary. But when I buy gold the currency does flow through the gold to the other party.

Are we saying that the value of gold is being adjusted (relative to currency) by transactions where gold is purchased and that gold can hold basically any amount of value? I don't think what I am saying here is fully correct but am I close?

Tommy2Tone said...

@BEOM

You should read this one as well:
http://fofoa.blogspot.com/2010/12/value-of-gold.html

Side note regarding that one: The debut of the Fool occurs in the comments there :) Fun times!

ein anderer said...

Hi Folks,
nice numbers, drawn from a German movie about an banking insider. that’s how it goes:
20 years ago the average stock holding period was 4 years. Today: 22 seconds. 22 seconds!

Source:
ARTE,
Der Banker – Master of the Universe

Delusional Investing said...

Hi Eric,

My take on the "currency does not flow through gold" phrase is as follows (with the caveat that I am often wrong on these matters).

In most trades, money is swapped for goods. The money is said to move though the good, as the money flows from the buyer to the seller, and the good often stands still (think stocks, real estate, etc).

In this situation, it is the money that prices the good. That is we think of buying goods with money, and not buying money with goods.

Now, with gold the view is different. We (or at least the giants) DO think about buying currency with gold. With this view gold is not price is dollars per ounce, but, dollars are priced in ounces per dollar.

Within this view, gold is the money, and dollars are the goods. Therefore, gold flows through currency rather than than currency flowing through gold (like other goods).

I hope this helps (as I hope my understanding is correct!).



Dim said...

I don't think "gold flows through currency" applies to a non-freegold (or non-gold standard) world, which is why BEOM's coin shop example seems contradictory. As I understand, "gold flows through currency" will only apply when we get to the transition and gold is acting as a floating reserve.

Sam said...

@Eric

You are correct that literally speaking currency does flow through gold from the buyer to the seller. That was why I said don't get hung up on the words. The deeper concept is what matters. Further complicating things is gold currently isn't functioning properly so sometimes you have to clarify if we are talking about current events or expected future events.

ein anderer said...

Chart #8: Official Gold Reserves in Tonnes – Developed vs Emerging Countries

http://www.gold-eagle.com/sites/default/files/popescu061814-9.png

Anand Srivastava said...

Delusional Investing: I like your explanation.

Michael dV said...

DI
that is the best explanation I've heard.

Testing said...

Lack of support?

http://finance.yahoo.com/news/china-start-direct-yuan-trade-british-pound-163948500.html

J said...

Haven't posted in ages but the ISIS situation in Iraq has me contemplating if freegold is set to arrive.

ISIS = Sunni. S.A warns against U.S and G.B meddling in Iraq. S.A Sunni. Qatar and Kawaiti Royals = Sunni.

U.S holding talks with Iran..Shiite.

Escalation may lead to the Gulf ditching the USD = freegold

Dr, Boer said...

President Charles de Gaulle of France asked for settlement of USA paper (bills, treasurys) in gold, which triggered the USA to default on its obligations to convert dollar bills into gold (the 1971 Nixon shock). This is widely known. What I was unable to find is: Did or didn't the USA pay out France in gold? Any help is appreciated.

burningfiat said...

The way I see the "gold flows through currency" meme it is all about what happens at the margin (the extreme).
If the velocity of currency through some asset falls to zero we normally say that the asset has become worthless. Think scenario:

*) Dollars are no more exchanged for Enron stock. Is dollars now worthless or are Enron stock worthless? Answer: Enron stock is now worthless.

This is true for all assets and commodities except gold! Scenario:

*) Dollars for physical gold velocity falls to zero. Gold and dollars are no longer exchanged. Which is worthless?

You know the answer...
Currency needs gold to bid for it, to flow through it, otherwise it is worth nothing.
Why is this so? It's all about superproducers. If for instance you're sitting on a desert filled with oil, why even pull it out of the ground for dollars if you can't even exchange a percentage of those dollars (aka the surplus) for gold _at any price_?
If your producing the best cars in world, why exchange them for dollars if you can't exchange dollars for gold? Where to store your long term surplus?

Who cares what happens at the coin shop. This is about intergenerational wealth at the highest levels...
$IMFS or no $IMFS, gold flows through currency in the extreme. Always. And we're about to hit that extreme.

/BF

Roacheforque said...

Interesting interpretations of one of the more interesting thoughts of Another. Though my brief interpretation might also be wrong, I actually made reference to this elsewhere, just this past April:

"Simply put, when gold was used as money it completed the trade. Today, when paper or digital currencies are used to acquire assets these extend the trade out into the future (of debt performance). This is the short answer to Anothers reference of "into" versus "through", an important concept to be sure, but what is meant by, "valued in the light of a single issuing country"?
Two months later I'm not sure I fully agree with the entire post, but this has been my understanding of the perplexing "into" vs. "through" thought.

Canadarob said...

Ah ha! Holy shit DI. The whole "currency moves through" idea finally clicked for me. Dollars aren't the end of the line. Gold is. Thanks

ein anderer said...

Dr, Boer,
they paid.

Franco said...

And speaking of Enron, that reminds me that I have some shares of Enron stock in my IRA which that most esteemed institution gifted me back when I used to work there. Anyway, the funny part is that the shares have a value of exactly zero, and therefore cannot be sold. So they are just sitting there in the brokerage account. I wonder if I could call up the custodian and asked that the share certificates be mailed to me...

Indenture said...

Eric C: If you have any other questions please feel free to ask.

BaronSilverBaron said...

After 735 comments.

Still "Waiting for Godot" as Samuel Beckett would say.

byiamBYoung said...

BS....B,

That's GOLDot, sir.

Cheers

t au said...

@ B S B
As Radar O'Reilly would say

"Wait for it."

Eric C said...

I appreciate the responses. I am seeing it a lot clearer although not to the point I feel I could teach it to someone else. So would the statement gold bids for dollars while dollars bid for everything else be accurate in terms of a Freegold understanding? If what I am saying is correct, is it accurate to say this is because dollars were created (in a broad sense) to facilitate transactions and that holders of gold bid for the dollars to expedite their transaction goals?

Totara said...

Eric,

For me, the light-bulb moment about gold bidding for dollars came with this comment by Dr Octagon.

It took me a while to really "get" the "gold values currencies" thing.

The easiest way for me to think about it is to frame it in terms of some other good. For example, a gallon of milk. At the grocery store, I see a gallon of milk, priced in dollars. When I buy the milk, I exchange dollars for milk, but there's someone of the other side of that transaction too. The grocery store buys my dollars with their gallon of milk. So can you make the argument that "milk bids for dollars" or "milk values dollars" as well as "dollars value milk"?

No. The reason, is because dollars value much more than milk. It's not correct to think that milk is the primary consumable good which currencies are measured against. You can measure the value of milk in terms of dollars, but not the other way around. If you want to go the other way, to measure the value of a dollar, you have to use a basket of consumable goods, not a single good like milk.

So the value of any one consumable good can be measured by currency, but currency can't be measured by a single consumable good, it takes a basket of consumable goods to do that. Since there's an infinite combination of different baskets of goods that one can use, it's not easy to measure in this direction.

In this scenario, you can move up a level, and replace consumable goods with currency, and replace currency with gold. Gold can value any single currency, but no single currency values gold. You could argue that gold can be valued by a broad basket of currencies, but you can't directly set a price in this direction, because of the multitude of valid currency baskets to choose. It's easier, and more correct, to think about gold valuing currency.

Gold bids for dollars, just as currency bids for milk. Not the other way around.

Blake said...

A much more pithy synopsis would be that gold will bid for dollars so long as they function as a viable medium of exchange, i.e,, effect transaction goals.

Anand Srivastava said...

Following is inspired by DI's comment.

Another said Currency moves through assets but moves into gold. It does not move through gold.

There is a difference between other assets and gold. We buy those assets to use them for some purpose. The only reason why we buy gold is to preserve wealth for the future, so that we can have the currency at some point in the future (in turn to buy other stuff). The only use of gold is to buy currency in the future.
So if you think why we have currency, its because we want to buy assets with it. While we have gold to buy currency in the future. You cannot buy (in most cases) anything except currency from gold.
So currency is to assets what gold is to currency.
So while currency denominates assets, gold denominates currency.
If there is no demand for an asset, which means nobody would pay for an asset, it is a dead asset. But if nobody will sell gold for a currency, that currency is a dead currency.

simpleminded said...

Best friends ever for now and longer: USSA & KSA
Fuck the "Giants"! KSA is supporting the IMF$ into eternity.

http://ireport.cnn.com/docs/DOC-1146358

The author is no conspirac theorist, he's a well documented academic.

Canadarob said...

I have a question. Im not sure where martin Armstrong fits into the free gold future but he seems to think the euro will die while as I understand it, another said the euro was created to facilitate the new monetary system. What am I missing here? Will the euro hyperinflate then a new euro system will be used? Anyone know which of fofoas posts cover this?

ein anderer said...

@anand:
»Another said Currency moves through assets but moves into gold. It does not move through gold.«
If something does not move THROUGH gold, it sticks to it, right?
This gives rise to the picture of Gold as a medium which sucks currencies, absorbes it. Can we say so?
I am looking for pictorial explanations. They help me to understand.

simpleminded said...

Bad boys must be punished. European lap dogs are bad boys and get what they deserve.


BNP Near Settlement With U.S. for Up to $9 Billion

"Over the course of the past year, officials involved in the probe gradually concluded BNP's misconduct dwarfed that of previous cases, and determined to raise the amount of their penalty.

"If there is a violation of a rule, it is normal to have a penalty, but the penalty must be proportional and reasonable," French Foreign Minister Laurent Fabius said earlier this month."
http://online.wsj.com/articles/bnp-near-settlement-with-u-s-for-up-to-9-billion-1403483369

simpleminded said...

Are you ready? This is not going to end well.

https://www.youtube.com/watch?v=nWT5HM_NMlI

They are not joking and everything he says has been debated before by many serious analysts, historians.

Anand Srivastava said...

Ein Anderer: Probably its better to think of Currency as a medium using which you exchange assets. While Gold is the medium using which you exchange currencies.

So if you are thinking of it as a medium, currency will absorb assets but gold will absorb currencies.

M said...

@ Canadarob

So Martin Armstrong is predicting Euro hyperinflation. That is the only way a currency dies. Show me a currency that died some other way. ?

That is a rather stupid proposition on MAs part considering the ECB has expanded their balance sheet 50 and 60% less then the Fed or BOJ since 2008.

Dim said...

Will a country be able to function immediately post transition without any gold as a reserve? If I understand freegold correctly, a surplus country will have lots of foreign currency in reserve meaning gold will be priced highly in that country's currency. Other countries will sell their gold to the surplus country.

What about country in debt who has zero gold? Gold price will continue to decline in this country's currency (which will weaken their currency as no one will want to hold it). This will make their exports cheaper- helping them to get back to surplus and then start buying gold.

Is this the general concept of freegold? If so, is it really a big issue if Germany does not get their gold back?

Dim said...

Wait,wouldn't a declining gold price make local people hold on to their currency in anticipation of a better deal?

Does a countries currency weaken because other countries are buying gold with it?

Confused...

Roacheforque said...

Very disturbing Simpleminded. I had strongly suspected the situation in Crimea to be the target of a larger Coup, but to hear the strategic analysis of Russia is quite chilling.

Also, the use of the word NAZI in the translation (which appears very good) needs to be clarified for those of us in the West. We truly do not understand here that the German initiative was a corporatist movement (initially) and it bears mentioning that very few in the West truly associate the NAZI party with an attempted corporatist regiime change on a regional scale - we are indoctrinated to associate the transformation through Hitler as solely a genocidal mania, and nothing more.

Perhaps history (in the making?) will convince us that this was merely a convenient cover for something equally diabolical (fascism a.k.a. corporatism) which had more to do with a massive transfer of wealth than a mad quest to exterminate the Hebrew culture.

Archer said...

M wrote:

So Martin Armstrong is predicting Euro hyperinflation.

I'm going too give you the benefit of the doubt that you forgot to put a question mark at the end of your sentence. I've seen nothing in the ex-con's scribbllings to suggest that hyper-inflation is how he thinks the Euro goes tits up, but, then, Mr. Armstrong is not always clear about how things are meant to travel from point A to point B. Rather, with Mr. Armstrong one is treated to a somewhat murky narrative along the lines of "Things" are just going to get so bad (with respect to economic collapse, social unrest, and political upheaval) that, somehow, The Euro is just going to....?

However, the "analyst" in question reveals that he knows not what he is talking about when he conflates the politics of the EZ with the currency used by EZ member states.

To wit:

They then used euro bonds of each member state as the RESERVE of the banking system.

Oh dear!

Memo to Martin:

When searching for the reserve of the Euro (and that's what counts, the reserve of the CB of Europe) see line one on the asset side of the ECB's Consolidated Financial Statement. Readers of FOFOA are familiar with his observation that an incorrect premise can skew an otherwise decent analysis 180 degrees. That said, in this case, from my vantage point, where Mr. Armstrong's view is concerned, we don't even have a decent analysis.

So let's just put our cards on the table, short of conspiratard arguments that amount to "The gold's not there." The Euro, what with 10,000 tons of physical as its reserve, is robustly constructed to absorb an existential threat. This stands in stark contrast to the dollar which is part of a system that, gasp, uses U.S. sovereign debt as the RESERVE of the banking system.

Anand Srivastava said...

Dim:

If the currency is weakening, price of gold will be rising. People will be having problems due to inflation, this will cause some to sell gold for survival, and others to sell gold for buying assets, which would be cheaper. Remember when economy is weak, prices of daily need stuff are rising while prices of assets are falling. So assets will be cheaper than what they would be in a stronger economy, so more gold will leave the country eventually, causing influx of foreign currency and increased liquidity. This will have a buoyant effect on the currency. This will help the country pull out of the weak economy.

Testing said...

But, just for the sake of the exercise, what if "the gold is not there"?
Or, in a more realistic scenario, what if:
- part of the gold of the EZ is in its own possession
- part of the gold is not there (soldm, leased, whatever)
- part of the gold is in the US, and the US refuses to let it go (ask Germany)

What happens to the Euro structure? (line one asset, etc,etc). No gold, no Euro, right?
What happens then? Al out "treasure hunt-war" for gold? EZ doesn´t stand a chance in that scenario.
Honestly, I think on paper and in concept the Euro looked fine in 1997/2000. But given the current state of affairs and what has happened since 1997 (gold storage locations, debt burden/insolvency of Euro members, mismanagement of fiscal budgets, chronic unemployment, etc) , which I don´t think Another or FOA could have thought of... I don´t think the Euro would be such a good bet in the long run. There are just too many variables that could get even worse and that would seriously damage the solidness of the Euro structure as a strong currency post-freegold.
In my opinion, many of you guys are relying too much on the concept of what the Euro was supposed to be, not what it is now, or what is more likely to become in the future (a standard and troubled currency).
I live in a country pretty used to economic/monetary shocks, and trust me, new plans ALWAYS look good beforehand.

BaronSilverBaron said...

My prediction is the Moses will not come down from the mountain until there are at least 1000 comments.
Keep talking.

JJ said...

http://www.gata.org/files/Incrementum-InGoldWeTrust-2014.pdf

I was surprised to see that FOFOA is quoted.., (on page 54).

Canadarob said...

Baronsilverbaron,
There is a lot about freegold that I do not understand. I am far from an economist. But I do know people. The fact that you still check in and post, speaks volumes.

Dim said...

Anand, thanks heaps for your reply. You wrote: If the currency is weakening, price of gold will be rising. 

I thought the price of gold in a country will be based on that country's foreign reserves. If that country has a lot of foreign reserves then it would be a "strong" currency, no? So many foreign reserves = price of gold rising. Or do I have this the wrong way around?

Dr, Boer said...

@TESTING: In my corner of the EU, gold is not represented in any way in the mentality of the population. When selling scrap gold, people are pleasantly surprised how much they get (they don’t know that they receive generally 70 to 80% of the "purified" value).
This week, my newspaper had an article on a medieval treasure of gold coins recently unearthed. The article never ever mentioned the price.
Indoctrination is very effective, including inflation. Inflation is represented as unavoidable as the forces of nature with no-one behind the process, not even God himself.
Consequences are: gold repatriation attempts find no resonance at all; they go by unnoticed and—if noticed—are discarded without even thinking as queer and irrelevant. No political party will ever flag gold and sound money. Should the US refuse to return any EU gold (a possibility mentioned by Jim Rickards), the EU population will hardly react. Why should they? What’s the problem.
This attitude of the population is NOT changing any time soon. Despite the Hobbit and Smaug (and note that the true treasure was the Arkenstone that surpassed all gold).
I guess this is why I appreciate GATA so much. And others like J.S. Kim. (smartknowledgeu.com/blog). Their uphill battle, their determination, perseverance.

Unknown said...

Simpleminded,

I believe the US is militarizing the Ukraine's Nazi not to invade Russia but to force the Russian to continue supporting the dollar reserve status.

We did the same in Iraq to prevent the Iraqi government to sell their oil in euro, ruble and yuan. Obama is defending the dollar just as Bush did, the only difference between the two is that Bush used our own troops to defend the dollar, Obama is using the Al Qaeda.

Victory said...

BaronSilverBaron = Pressed

Michael dV said...

Dr.Boer
Most people are correct, gold means little now and those who hold it are 'queer and irrelevant.' The message is that this situation will change. The only way to gain is to recognize what the big guys think before there is a change. After these changes occur I'm willing to wager the folks around you will have a different view point.

kobajashi said...

From koos Jansen and the ingoldwetrust site:

http://www.ingoldwetrust.ch/lbma-forum-singapore-sge-chairman-confirms-chinese-gold-demand-in-2013-hit-2000-mt

A few snips:

Mr. Xu started his speech by referring to the official figure of demand for the Chinese gold market 1189 tons, as published by WGC, but mentioned twice that the figure for consumption is likely higher. Later in the speech Mr. Xu mentioned and I quote the official translation in the headphones “..as the Chinese consumption demand of gold hit 2000 tons in 2013”. There you have it. The chairman himself said it out straight.

And

Mr Zhou also interestingly mentioned that ICBC “can not meet the demand of the market” and that we will see “the price of derivatives delinking from the (physical) spot price”. He said that fluctuations will affect the pricing system in gold but that the market will retreat to the fundamental analysis of gold supply and demand to rebuild the current market structure (my comment: obviously hinting that the physical Chinese market will take over the current derivative markets flawed price setting mechanism). He was talking about the shift of trading distribution and price transmission mechanism in the light of this.

Grtz koba

Sam said...

@Dr Boer

Which is why I agree with FOFOA that we will see a top down transition not a bottom up transition. The average person will be the last to recognize the real value of gold, but make no mistake, the transition will happen, and it does not require any of us to give our consent and or participate by buying or even valuing gold

Unknown said...

Hey can you guys help point me to a particular FOFOA article. There was a point made that when Freegold happens, the dollar should actually rise first because everyone buys something then the dollar collapses as everyone tries to exit the currency. I don't remember how this event was thought out and am trying to think it through again myself. Any help greatly appreciated, thanks

Motley Fool said...

Hi Dim

"Will a country be able to function immediately post transition without any gold as a reserve?"

Yes. All that is required is that they open a two-way market in their own currency.

"If I understand freegold correctly, a surplus country will have lots of foreign currency in reserve meaning gold will be priced highly in that country's currency. Other countries will sell their gold to the surplus country."

Keep reading...and your understanding will improve. :)

"If so, is it really a big issue if Germany does not get their gold back?"

Well, they would survive it, but it would suck for them a bit.

TF

simpleminded said...

judie toy,

Obama plays with "special forces" whether in Ukraine or Iraq, etc. of course in order to defend the dollar through oil and other resources controlI . I only say south stream.
A weak Europe, Russia in turmoil, China restrained with less resources and strong trade partners, there you have your strong dollar. But with Putin, who knows, maybe his strategy won't work. Russia and Iran are not keen to start some wars for the MIC.
Europe by itself with its long corrupted structures (European Com.) is a basket case. Remains to see by the end of June how Draghi manages the euro - gold relation. Short term I am not very optimistic re. that.

Eric C said...

I found the article at zero hedge recently posted of interest related to FG called "Turkey's "200 Tons Of Secret Gold" Trade With Iran: The Biggest, Most Bizarre Money Laundering Scheme Ever?"

Basically (in my interpretation) zero hedge takes the position that Turkey has a big trade deficit and is trying, or is? filling it with gold exports. It states that food or other imports to Iran may be over priced or essentially non-existent. With the USD controlled by a system I do not fully understand, this seems like a fairly good way to overprice the physical gold.

Thoughts?

DASK said...

Hi Dim,

One trick is to simply imagine discrete events rather than 'balances'. It is simpler than you are making it; in short in a freegold world, settlement will be physical and not nearly so deferred as it is today. Gold will move against goods to balance trade flows.

A surplus country is one that has sold extra goods net, and thus has net received extra currency above its short term needs from its trade partners. This is only half the transaction. When settlement occurs, this 'extra currency' will be used in some way to purchase gold. Gold thus flows into surplus countries. Most correctly, the velocity of the 'extra currency' (e.g. a trade deficit nation) will increase, thus raising prices and slowing imports to correct the balance. The next cycle, the surplus zone will find it harder to net export and the deficit zone will find it harder to net import.

vizeet srivastava said...

Iran and Syria entered into Iraq, seems few countries now don't care to listen US. It is interesting that US does not supports federal structure in Ukraine but is pushing for federal structure in Iraq.
A powerful Shia means stronger Russia. Stronger Russia means weaker US. Wait and watch who gets the Iraq oil -- Russia or US.

Anand Srivastava said...

Dim:

I thought the price of gold in a country will be based on that country's foreign reserves. If that country has a lot of foreign reserves then it would be a "strong" currency, no? So many foreign reserves = price of gold rising. Or do I have this the wrong way around?

I don't think you want to think too much about Foreign Currency. In the present world they are very important, but post transition, gold will be the more important asset. So if you hold foreign currency, it would be because you have sold some stuff, but don't have to buy other people's stuff. Yes you would keep some international trade currencies (like Euro or Remnibi) for ease of foreign trade. But not build a big cache. If you have more than enough you would convert it into gold, increasing the price of gold in those currencies, that you used to buy gold. The govts should never sell their currency to buy gold, as that would amount to printing, and weakening your own currency. And trade partners will become wary of your currency.

The foreign reserve will be immaterial. The currencies will be measured in terms of gold (RPG). So if your currency is strong, Gold will be cheaper in your currency. If your currency is weak, gold will be more expensive.

The trade currencies who have very strong currencies will want to sell their currencies to buy gold, so as to increase (the required) liquidity in international trade. So the producers will benefit twice, first by selling lots of stuff, and then converting the received foreign currency, and then also buying stuff from their own currency. Just like US did, but now, there will be natural limits, as their currencies could be replaced very easily, in contrast to the dollar, if they spent too much.

Anand Srivastava said...

Vizeet:

US is not interested in Iraq Oil, as long as nobody gets it.

JC said...

Hi Andrew Storm,

Let me know how these go,

"You're looking for a crash in the USDX to indicate the imminent end, but I have always expected a spike in the dollar, and I think Another expected that as well. I have written in the past that we could even see the USDX spike (very quickly mind you, not a slow rise) to something like 150. "
http://fofoa.blogspot.com/2013/11/advance-warning.html

"Debt is the very essence of fiat. But as debt fails, the fiat currency can spike sharply in response. Expect the end game to look very different from what you have been told. The dollar as rated by the USDX, a flawed rating system, may rise briefly to something like 150, a level certainly not expected for a currency on the verge of a hyperinflationary collapse! . . . . . . . .

. . . . . . . . The USDX spike would be from the onset of the debt selloff until the swaps are in place, IMO. And at the same time we would see the Fed buying up debt like never before trying to support a price that is in freefall.

It is also possible that a liquidity crisis/debt collapse comes in waves, like a tsunami, drawing out the timeline."
http://fofoa.blogspot.com.au/2009/12/gold-ultimate-wealth-reserve.html

nearlynapping said...

There was an interesting article on gold buried deep in the WSJ several weeks ago. It was by Lawrence Parks.The part that surprised me is:

"With neither debate nor anyone voting for it, the dollar has been transmogrified into an ethereal concept of money without any tie to the physical world, created of nothing, and forced into circulation with legal tender laws. As Australian comedian Michael Connell so brilliantly put it, what we used to call money has been transformed into “the idea of money.” Mr. Connell’s metaphor is that its like playing musical chairs, but instead of chairs there is the idea of chairs.” It is absurd."

Dante_Eu said...

A well known person here, James Rickard, goes Hooly...I mean Youtube. :-)

Dim said...

Anand and DASK, Thankyou for your comments, I have had some lightbulb moments. It's more simple than I was thinking.

Thankyou too MF I am continuing to make my way through the entirety of the blog:)!

simpleminded said...

Who's employee is Merkel?
Are these sanctions really applied?

http://en.itar-tass.com/economy/738106

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