"This brilliant, modern free trade system and all of its benefits cannot be implemented using the US dollar as a reserve currency. It shuts off commerce that in turn limits the use of commodities such as oil, metals, food and the like. Many hail the low price inflation in the US as a victory and ignore the intent other nations had in following "free trade". That being to promote a world economy, not just a US economy.
Understand that the increased use of commodities is a good thing. It's not just for the purpose of making rising chart pattern so speculators can sell their calls! Commodity usage creates real things and helps the lives of real people. When citizens gain real productive mechanisms, they hold real wealth. Some would have you believe that third world people are enriched by saving US treasury bonds, not true! The only way to increase world trade, with an eye on building new consumers in all countries, is to remove the overhang of "dollar settlement"."
FOA (3/14/99)
_________
Understand that the increased use of commodities is a good thing. It's not just for the purpose of making rising chart pattern so speculators can sell their calls! Commodity usage creates real things and helps the lives of real people. When citizens gain real productive mechanisms, they hold real wealth. Some would have you believe that third world people are enriched by saving US treasury bonds, not true! The only way to increase world trade, with an eye on building new consumers in all countries, is to remove the overhang of "dollar settlement"."
FOA (3/14/99)
_________
Dirty Float picked up in 1971 where Fiat 33 left off, and this post picks up in the present, where Dirty Float left off, where there is almost universal agreement among esteemed economists that, lately, the global economy (not to get too technical) sucks. Global stagnation, it is agreed, is the symptom of a mysterious economic disease that we, as a planet, picked up along the way; as for its causes and cures, there is little agreement. But before we dive into the problem ailing the present, let's take a little trip back in time... to 1938.
In 1938, nine years after the stock market crash of 1929, and during the final years of the Great Depression, an American economist named Alvin Hansen, sometimes called "the American Keynes", introduced an economic hypothesis called "secular stagnation". His idea was that fundamental economic forces might have been conspiring in a vicious cycle that prevented economic recovery resulting in permanent high unemployment and low growth.
The main forces in 1938, according to Hansen, were a declining birth rate and over-saving which was keeping people from spending (in Keynesian terms, an oversupply of savings in an aging population was suppressing aggregate demand). Shortly thereafter, however, WWII and the baby boom that followed discredited Hansen's theory, consigning it to little more than an economic footnote.
75 years later, on November 8, 2013, Hansen's secular stagnation hypothesis became popular once again when Larry Summers revived it during a speech at the IMF. [1] He followed that up with an article in the Financial Times:
"Is it possible that the US and other major global economies might not return to full employment and strong growth without the help of unconventional policy support? I raised that notion – the old idea of “secular stagnation” – recently in a talk hosted by the International Monetary Fund…" [2]
Summers' invocation of Hansen's "old idea" as a way to explain the current global stagnation brought comment and criticism from all corners of the Economics sphere. Those weighing in on the idea included names like Richard Koo, Barry Eichengreen, Paul Krugman and Alan Greenspan. The Economist called secular stagnation "a baggy concept, arguably too capacious for its own good." [3]
David Wessel, a prominent Economics journalist, suggested that "today's advocates of secular stagnation are as myopic [as Alvin Hansen was in 1938]," and that "we just have to be patient." [4] And Barry Eichengreen wrote, "Secular stagnation, we have learned, is an economist’s Rorchach Test. It means different things to different people." [5]
Paul Krugman loved the idea:
"I was very annoyed when Larry Summers made a big splash talking about secular stagnation at the IMF’s 2013 Annual Research Conference – annoyed not at Larry but at myself. You see, I had been groping toward more or less the same idea, and had blogged in that general direction (Krugman 2013) – but it wasn’t forceful, and Larry rightly gets credit for making the topic a front-burner issue… In what follows, I’ll lay out four reasons why secular stagnation deserves the buzz it’s now getting." [6]
I think the reason that Krugman finds it so exciting is because, as he writes in his chapter in an e-book titled Secular Stagnation: Facts, Causes and Cures, it may have some radical implications and therefore "requires a major rethinking of macroeconomic policy":
"Suppose that the economy really needs a 4% inflation target, but the central bank says: “That seems kind of radical, so let’s be more cautious and only target 2%”. This sounds prudent, but it may actually guarantee failure. In other words, the problem of getting effective monetary policy, always difficult at the zero lower bound, gets even harder if we have entered an era of secular stagnation.
What about fiscal policy? Here the standard argument is that deficit spending can serve as a bridge across a temporary problem, supporting demand while, for example, households pay down debt and restore the health of their balance sheets, at which point they begin spending normally again. Once that has happened, monetary policy can take over the job of sustaining demand while the government goes about restoring its own balance sheet. But what if a negative real natural rate isn’t a temporary phenomenon? Is there a fiscally sustainable way to keep supporting demand?
In this chapter I’ll leave these questions hanging. The crucial point, for now, is that the real possibility that we’ve entered an era of secular stagnation requires a major rethinking of macroeconomic policy." [6]
There are links down in the footnotes if you would like to study what secular stagnation means to 23 different economists. But for the purpose of this post, I'm going to focus mainly on what it means to Larry Summers, since he brought it up, and to Paul Krugman who largely agrees with Larry and is mostly concerned with today's low inflation.
One thing I should mention is that Larry Summers' "New Secular Stagnation Hypothesis" is a little different from its predecessor. Hansen's secular stagnation hypothesis in 1938 was essentially an observation of (what he thought was) permanent damage (or at least permanent changes) in the economy for which there was no cure. Hansen's "secular stagnation" was simply an explanation for why the economy had entered a state of permanent (or at least indefinitely long term, aka secular) stagnation.
Unlike Hansen's dismal outlook, Larry Summers wants you to know that his "New" secular stagnation (SecStag for short [5]) can be cured, by people like himself, by macroeconomists and public servants: "Today, secular stagnation should be viewed as a contingency to be insured against – not a fate to which we ought to be resigned." [2] "Finance is too important to leave entirely to financiers." [1]
Something we should always bear in mind, especially in complex discussions like this one, is the difference between cause, symptom and cure, and similarly, the difference between observation, prediction and prescription. Larry Summers reminds us of the important distinction between prescription and prediction with regard to financial bubbles: "Some have suggested that a belief in secular stagnation implies the desirability of bubbles to support demand. This idea confuses prediction with recommendation. It is, of course, better to support demand by supporting productive investment or highly valued consumption than by artificially inflating bubbles. On the other hand, it is only rational to recognise that low interest rates raise asset values and drive investors to take greater risks, making bubbles more likely." [2]
One of the criticisms of Summers' SecStag theory is that our economic model expectations are simply too high, that this is not stagnation we are experiencing right now, but rather a reversion to the long-term mean. Another criticism is that economic model growth measurement standards are simply outdated and not capable of properly counting Internet technology (IT) innovation as growth. Both make valid points about the shortcomings of economic models, but both also miss the big picture, in my view, which is that there really is a physical plane impairment that has been with us for a very long time, and has simply been masked by the same monetary plane phenomena that causes it.
Back in 1986, Larry Summers, along with Olivier Blanchard who is currently the chief economist at the IMF, noticed a certain ratcheting down in the employment numbers of prime-aged males in Europe starting in the 1970s. It was expected that, following a recession, employment would bounce back to previous levels, but in Europe they saw this "ratcheting down" starting in the 70s. In their 1986 paper titled "Hysteresis and the European Unemployment problem" [9], they coined the term "Eurosclerosis" because they thought it was only a European problem. That was in 1986, but current data shows that, from 1990-2012, that same "sclerosis" was happening in the US and China even more so than in Europe. [10]
The point is, what secular stagnation means to Larry Summers is a long-term economic impairment that extends all around the world. It doesn't necessarily mean zero or negative growth, but it does mean that real (physical plane) growth potential has declined substantially, and that this decline, this "ratcheting down" or "sclerosis" in real economic potential, is due to a monetary plane phenomenon. Summers makes it clear that this is more than just a hangover from the 2008 financial crisis, that it has been happening since at least the 1990s but that it was camouflaged by the stock market and housing bubbles. On this much, Larry and I are in full agreement.
The basis of Summers' hypothesis is that today we have a lack of demand (spending, consumption, capital investment and borrowing) facing a glut of savings (too much saved money flooding the system and driving down interest rates and lending standards as it faces a lack of demand from qualified borrowers). Summers believes that, in general, there is an equilibrium that is reached between savers and investors, and that the real interest rate (the nominal "safe" interest rate that can be earned without risk, minus the rate of inflation) is what shifts investor preferences at the margin from saving money (safety) to investing (risk-taking).
Furthermore, he believes that there is a theoretical real interest rate that corresponds with full employment, i.e., sufficient economic growth. He calls this theoretical rate the FERIR, which stands for the Full Employment Real Interest Rate. Others just call it the "natural" interest rate. Summers argues that this theoretical interest rate, which would be the target interest rate for a CB interested in economic growth and full employment, is now stuck well below zero. And because it is below zero, it cannot be practically reached by conventional monetary policy, including QE, and that's why we're stuck in the land of financial bubbles and secular stagnation. The bottom line is that "SecStag may force policymakers to choose between sluggish growth and bubbles." [5]
I'm sure that some of this sounds familiar to my readers. I have been writing for years about how a glut of passive savings crowds active money out of prudent activities thereby retarding the entire financial system. For years I have made the point that investing requires active specialization, and should therefore not be a passive activity. That naturally-passive, risk-averse savers are a large and distinct group, separate from investors, traders and speculators, and that only in the present dollar-based international monetary and financial system (the $IMFS) are they forced to swim with the sharks.
I have been writing for years about how the $IMFS has an unnecessary and terminal conflict built into its very DNA, like a congenital aneurysm just waiting to burst right when you least expect to die. How using the same medium (the dollar) as both the primary and secondary media of exchange (i.e., using the same unit—or fixed/pegged units—as both the tradable credit unit and the primary monetary reserve/savings asset) leads to friction, an inevitable conflict of interests between the real economy and the financial one.
Also, more than 15 years ago, FOA identified the dollar system itself as the cause of retarded economic growth. He said "the narrow margins it produces [in the real economy outside of the US/dollar-based financial one] shut down entire economies." He wrote, "This brilliant, modern free trade system and all of its benefits cannot be implemented using the US dollar as a reserve currency. It shuts off commerce…" See the quote at the top of this post! He also wrote that the $IMFS leaves "entire countries economically impaired in an effort to maintain the fictional valuations of 'US assets'."
"Shuts off commerce", "economically impaired"; does this sound like the economic stagnation we are experiencing? From the quote at the top: "Commodity usage creates real things and helps the lives of real people. When citizens gain real productive mechanisms, they hold real wealth." He's talking about productive businesses that generate income and create the "demand" for other goods and services that is lacking today when he says they hold real wealth. And the dollar reserve system, says FOA, prevents such "demand" from growing while maintaining "the fictional valuations of 'US assets'."
“Effective demand is dead in the water” and the effort to boost it via bond buying “has not worked,” said Mr. Greenspan. Boosting asset prices, however, has been “a terrific success.” [11]
That's from the Wall Street Journal reporting on an interview that Alan Greenspan gave at the CFR one month ago in which he was asked about Larry Summers' secular stagnation hypothesis. As I said at the top, there is wide agreement that "effective demand is dead in the water" right now. What there's not much agreement on is why, what to do about it, and whether or not it's a "secular" (long term) problem.
It's easy to believe that saving and investing are merely different ends of a preference continuum of "demand for safe assets" in which an overall shift toward investing spurs economic growth, while a shift toward saving or "safe assets" puts on the brakes. It's what virtually every economist believes. If that's what you believe, then the cause of this economic stagnation must be one of several explanations for the overall shift towards saving and deleveraging. And the cure, depending on whether you believe it to be a secular problem or not, can range from "we just have to be patient" to more government deficit spending and the official embrace of higher inflation rates to encourage spending, consumption and capital investment while discouraging saving.
If you can raise the inflation rate, then that makes the real rate of return on safe assets even more negative, which should cause savers to either spend or invest rather than sitting in "safe assets" that are losing value in real terms. That's the theory anyway, and here are Larry Summers' prescriptions:
What is to be done?
Broadly, to the extent that secular stagnation is a problem, there are two possible strategies for addressing its pernicious impacts.
• The first is to find ways to further reduce real interest rates.
These might include operating with a higher inflation rate target so that a zero nominal rate corresponds to a lower real rate. Or it might include finding ways such as quantitative easing that operate to reduce credit or term premiums. These strategies have the difficulty of course that even if they increase the level of output, they are also likely to increase financial stability risks, which in turn may have output consequences.
• The alternative is to raise demand by increasing investment and reducing saving.
This operates to raise the FERIR and so to promote financial stability as well as increased output and employment. How can this be accomplished? Appropriate strategies will vary from country to country and situation to situation. But they should include increased public investment, reductions in structural barriers to private investment and measures to promote business confidence, a commitment to maintain basic social protections so as to maintain spending power, and measures to reduce inequality and so redistribute income towards those with a higher propensity to spend. [8]
Some economists think that all we need is Summers' second prescription, primarily sufficient fiscal stimulus (i.e., much more government deficit spending), but Paul Krugman particularly likes the first one, the higher inflation rate target, so much so that he gave a presentation titled "Inflation Targets Reconsidered" on May 27, 2014 at an ECB Forum in Portugal. In the presentation, he argued for raising the inflation target from 2% to 4% or even higher. Here is the beginning of that presentation [brackets are mine]:
Inflation Targets Reconsidered
Over the course of the 1990s many of the world’s central banks converged on an inflation target of 2 percent. Why 2 percent, rather than 1 or 3? The target wasn’t arrived at via a particularly scientific process, but for a time 2 percent seemed to make both economic and political sense. On one side, it seemed high enough to render concerns about hitting the zero lower bound mostly moot; on the other, it was low enough to satisfy most of those worried about the distortionary effects of inflation. It was also low enough that those who wanted true price stability — zero inflation — could be deflected with the argument that official price statistics understated quality change, and that true inflation was in fact close to zero.
And as it was widely adopted, the 2 percent target also, of course, acquired the great advantage of conventionality: central bankers couldn’t easily be accused of acting irresponsibly when they had the same inflation target as everyone else.
More recently, however, the 2 percent target has come under much more scrutiny. The main reason is the experience of the global financial crisis and its aftermath, which strongly suggests that advanced economies are far more likely to hit the zero lower bound than previously believed, and that the economic costs of that constraint on conventional monetary policy are much larger than the pre-crisis conventional wisdom. In response, a number of respected macroeconomists, notably Blanchard (2010) and, much more forcefully, Ball (2013), have argued for a sharply higher target, say 4 percent.
But do even these critics go far enough? In this paper I will argue that they don’t — that the case for a higher inflation target is in fact even stronger than the critics have argued, for at least three reasons.
First, recent research and discussion of the possibilities of “secular stagnation” (Krugman 2013, Summers 2013) and/or secular downward trends in the natural real rate of interest (IMF 2014) suggests not just that the probability of zero-lower-bound episodes is higher than previously realized, but that it is growing; an inflation target that may have been defensible two decades ago is arguably much less defensible now.
Second, there are actually two zeroes that should be taken into account in setting an inflation target: downward nominal wage rigidity isn’t as hard a constraint as the interest rate ZLB, but there is now abundant evidence that cuts in nominal wages only take place under severe pressure, which means that real or relative wage adjustment becomes much harder at low inflation. Furthermore, we now have reason to believe that the need for large changes in relative wages occurs much more frequently than previously imagined, especially in an imperfectly integrated currency union like the euro area, and that such adjustments are much easier in a moderate-inflation environment than under deflation or low inflation.
Finally — and this is the main new element in this paper — there is growing evidence that economies entering a severe slump with low inflation can all too easily get stuck in an economic and political trap, in which there is a self-perpetuating feedback loop between economic weakness and low inflation. Escaping from this feedback loop appears to require more radical economic policies than are likely to be forthcoming. As a result, a relatively high inflation target in normal times can be regarded as a crucial form of insurance, a way of foreclosing the possibility of very bad outcomes.
This paper begins with a brief review of the standard arguments for a higher inflation target, then deals in turn with each of the further arguments I have just sketched out. I conclude with some speculation about the unwillingness of many central bankers to consider revising the inflation target despite dramatic changes in our information about how modern economies behave.
1. The two zeroes
If you polled the general public about what rate of inflation we should target, the answer would probably be zero — full price stability. Some economists and central bankers would agree: either they view any erosion of the purchasing power of money as illegitimate, in effect a form of expropriation, or they argue that even mild inflation degrades money’s role as a unit of account. There is even a case for persistent deflation: Milton Friedman’s optimal quantity of money paper famously argued that prices should fall at the rate of time preference, so that the private cost of holding cash to add liquidity matches its zero social cost.
In practice, however, the great majority of both economists and central bankers advocate modest positive inflation. Why? Because of the two zeroes.
The first zero is a hard one: nominal interest rates cannot fall below zero (except for trivial deviations involving transaction costs or the role of bills as collateral), because people always have the option of holding currency. This in turn sets a lower bound on the real interest rate, which can’t fall below [zero] minus the expected rate of inflation.
Meanwhile, central banks are trying to stabilize their economies, which means trying to set policy interest rates at the Wicksellian natural rate [Summers' FERIR], the rate consistent with more or less full employment. The problem is that the real natural rate of interest clearly fluctuates over time, rising during investment booms (whether these booms are well-grounded in fundamentals or reflect bubbles), falling when economies face adverse shocks. If expected inflation is low, this raises the possibility that there will be periods in which the central bank cannot cut rates to the natural rate, leading to output below potential and excess unemployment.
A positive expected rate of inflation reduces the size of this problem, because it allows real interest rates to go negative; and the easiest way to ensure that expected inflation is positive is to pursue a monetary policy that keeps inflation stable at a modestly positive rate. [12]
Notice that he mentioned the "Wicksellian natural rate" which I noted as being the same as Summers' FERIR. This theory of interest rates was Knut Wicksell's most influential contribution to Economics, published in 1898, and it comes from the Austrian School which theorized that an economic boom happened when the natural rate of interest was higher than the market (or monetary) rate of interest. [13] The inverse would be that an economic slump, or stagnation, would happen when the natural rate (or FERIR) was lower than the market rate of interest, which Larry Summers shows that it is today.
You might be wondering why I included such a long excerpt from Paul Krugman's paper. I did that on purpose, because I thought It was very good and provided some important insight into central banking. This being a gold blog, some of you probably assume that I think Paul Krugman is always wrong, perhaps even an idiot. But that assumption would be wrong. For example, on the subject of the gold standard and the unrighteousness of hard money (see here), and on whether or not normal inflation is akin to theft (see here), I'm basically in agreement with Paul, more so than with the hard money camp. [14]
Where we differ is in our perspectives on the big picture. Think of it like this: The $IMFS is like a fishbowl, and we are all like goldfish swimming around in that confined environment, wondering why our economy has stagnated and why there's no more room to grow. Krugman, Summers and everyone else are all trying to understand the cause in order to cure the problem within the confines of the fishbowl, while the fishbowl itself is the limiting factor.
It should be no surprise that a fish, immersed in water inside a fishbowl, would not identify the glass boundary as the problem and recommend breaking it in order to grow. Most would not even be aware of the bowl, and even if they were, breaking it would seem like a suicidal means of escape. So imagine that global stagnation is a real problem, but that all 23 economists and virtually everyone else discussing its possible causes and cures are all viewing it from an inside-the-fishbowl perspective, and that what I am offering you in this post is an out-of-the-fishbowl view, even though I'm stuck inside the fishbowl just like everyone else.
What if I told you that the fishbowl is only an illusion? That even though it confines us, we remain inside its boundary not because it really exists, but because we think it exists? And what if I told you that there's a big ocean out there, just waiting for us to break free from our self-imposed confinement? Does this analogy resonate with any of you?
Remember the scene in The Matrix where the little boy is teaching Neo how to bend a spoon like Uri Geller? The boy says, "Do not try and bend the spoon… that's impossible. Instead, only try to realize the truth." "What truth?" asks Neo, and the boy responds, "There is no spoon." Neo puzzles, "There is no spoon?" And the boy explains, "Then you'll see that it is not the spoon that bends, it is only yourself."
I used the Matrix analogy at least once before, back in 2010, in How Can We Possibly Calculate the Future Value of Gold? Here's a quote:
"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."
When the "virtual matrix" blinks off, which in this present analogy is a fishbowl, more than just the value of gold will be affected. $IMFS financial structures that support existing malinvestment while stifling competition will fail, uneconomical practices will face the harsh reality of the open sea, and economical ideas will have the space to grow and flourish. And lest any of you think this is a utopian dream I'm describing, I'll just add that it will be hell on wheels for many fish to adjust to the reality of the ocean.
My View
As I said, I agree with Krugman and Summers on the symptoms of global stagnation. Where I disagree is on the causes and cures. This is what my Freegold lens (my out-of-the-fishbowl perspective courtesy of FOA) reveals—a different cause and cure for today's global economic stagnation.
Okay, let's start with the low inflation problem. Remember that low inflation combined with a low or negative natural interest rate (the FERIR) leaves central banks stuck between a rock and a hard place, the rock being sluggish growth and the hard place being financial bubbles and instability. But with loose monetary policy and explosive growth in the money supply since the 1970s, what could possibly account for more than three decades of low inflation?
I'm talking about consumer price inflation here, which is where the rubber meets the road. Physical plane (the real world and the real economy) price inflation has been surprisingly low relative to growth in the monetary plane (the financial sector and the money supply). Here's how FOA described it:
FOA (10/3/01; 10:21:26MT - usagold.com msg#110)
"For decades, hard money thinkers have been looking for "price inflation" to show up at a level that accurately reflects the dollar's "printing inflation". But it never happened! Yes, we got our little 3, 4, 8 or 9% price inflation rates in nice little predictable cycles. We gasped in horror at these numbers, but these rates never came close to reflecting the total dollar expansion if at that moment it could actually be represented in total worldwide dollar debt. That creation of trillions and trillions of dollar equivalents should have, long ago, been reflected in a dollar goods "price inflation" that reached hyper status. But it didn't.
That "price inflation" never showed up because the world had to support its only money system until something could replace it. We as Americans came to think that our dollar, and its illusion of value, represented our special abilities; perhaps more pointedly our military and economic power. We conceived that this wonderful buying power, free of substantial goods price inflation, was our god given right; and the rest of the world could have this life too, if they could only be as good as us! Oh boy,,,,,, do we have some hard financial learning to do."
In a world with many different fiat currencies, the value of each one is a reflection of its economy. "Where the rubber meets the road" means where the monetary plane meets the physical plane, meaning that a currency is worth what its economy produces that can be bought with that currency. But price and value are not necessarily the same thing in the world of many different currencies.
In order to price something, you need a numéraire. So while the value of a currency is what its economy produces that can be purchased with that currency, the price of a currency is its exchange rate with other currencies from other economies. In a clean float with Freegold, I think that the price and value of each currency will be pretty close to equal, but that's not the case in the $IMFS.
The $IMFS is characterized by two things that work in tandem to not only misprice currencies relative to the physical plane, but to systemically cement the mispricing and make it cumulative over the long term rather than cyclical with periodic corrections. The two things are public- and private-sector capital flows between different currency zones. Capital flows between currency zones are monetary plane movements that cause physical plane imbalances, also known as current account or trade imbalances.
The public sector uses fiat currencies—primarily the US dollar—as international monetary system reserves, and the private sector uses fiat currencies—primarily the US dollar—as wealth items, collateral, financial reserves and savings. Private sector capital flows into the dollar and US-based dollar-denominated investments overprice the dollar relative to its physical plane value. This happens with other currencies as well, but the dollar is the one that the foreign public sector, by doing the dirty float, prevents from periodically correcting. The result is the perpetual US trade deficit that hasn't reversed in 40 years.
The perpetual US trade deficit is what reveals that the dollar is overvalued. This is caused by the foreign sector buying dollars as investments, savings and reserves. The foreign sector is divided into two subsectors, the foreign public sector and the foreign private sector. The foreign public sector is the foreign CBs, like the ECB and the PBOC. The foreign private sector is everyone else.
The foreign private sector loves all kinds of US investments, and it buys lots of dollars because of this love affair with Wall Street and the various US markets. This overvalues the dollar and causes the US trade deficit. But the foreign private sector isn't a constant source of dollar support because it acts only from the profit motive. Every once in a while, US markets come down and the foreign private sector flees out of the dollar. That's when the dollar exchange rate declines.
For the past 40+ years, certain foreign CBs have kept their currencies more or less pegged to the dollar. This meant buying dollars whenever the dollar's exchange rate declined. In effect, this acted as a "stop gap measure" for the dollar, and prevented its overvaluation from ever correcting. In effect, this exchange rate pegging with the dollar was the structural support that I write about. The foreign public sector bought dollars not with a profit motive, but for quite opposite reasons which translated into buying dollars whenever the rest of the foreign sector was fleeing from the dollar and its markets. This was structural support.
FOA (03/20/99; 11:34:12MDT - Msg ID:3615)
"Entire countries are economically impaired in an effort to maintain the fictional valuations of "US assets"! … It was the longest "stop gap measure" I have ever known to exist! A tremendous success by any standard, to keep the dollar stable for such a time. Many think it was "good old American know how" that did it. Well, now we will see…"
I apologize for repeating myself, but I think this is important. In essence, the "dirty float" or unofficial pegs to the US dollar were structural support. Not that they were primarily responsible for the overvaluation of the dollar (the foreign private sector was), but they kept it from collapsing and correcting each time the private sector retreated, including in the 2008 financial crisis. To understand how this structural support is responsible for the low inflation rate "problem", at least in dollar terms, please read this quote from FOA, as many times as it takes until it sinks in:
Friend of Another (9/22/98; 18:01:45 Msg ID:96)
"Using an overvalued dollar makes one feel as there is no inflation, even though there has been massive dollar currency inflation over the last twenty years (the real cause of price increases is when the exchange rate is allowed to balance a negative trade deficit)."
Many things, of course, can cause price inflation. Physical plane prices are really just the relative values of different things expressed using a common numéraire, and those relative values change all the time for many different supply and demand-related reasons. But overall inflation is a monetary phenomenon, a change in the price of the numéraire itself, which, as I said above, requires another numéraire. We often think of it as a case of more money versus fewer goods and services resulting in price inflation, but that's not necessarily the case when the global monetary and financial system promotes the hoarding rather than the spending of money acquired as surplus revenue.
Think about a trade surplus country like China, which has now accumulated nearly $4 trillion in foreign currency reserves. We can think of that $4T as surplus revenue that has been accumulated over the past 15 years, but the truth is that it was accumulated merely as a consequence of the dirty float of the Chinese currency. The effect was that it kept the price (the exchange rate) of the dollar elevated when it would have otherwise declined. This kept US imports cheap in dollars when they would have otherwise become more expensive, in other words, it kept US price inflation lower than it would otherwise have been. This effect is the same whether it is the foreign CBs or the foreign private sector hoarding dollars, but together, in tandem, the two sectors have kept the dollar perpetually overvalued for decades.
Another way we tend to think about inflation is as a decrease in production (supply) relative to consumption (demand) that results in an overall shortage of goods and services and therefore an overall rise in prices. But that doesn't necessarily work either. The US is a good example of an economy in which consumption (demand) is greater than production (supply), even as the US is one of the largest producers in the world. This is evident in the US trade deficit. Each month we consume about $40B more goods and services than we produce. The extra supply comes from abroad, where the rest of the world (ROW) in aggregate is producing about $40B more goods and services than it consumes each month. The ROW (in aggregate) is also buying about $40B in dollars for investment purchases, savings or monetary reserves each month.
As long as those two numbers are pretty close to each other, the US capital inflow and the US trade deficit, the dollar's exchange rate will be pretty stable. If the dollar is rising, then either the ROW is buying more dollars (capital inflow is increasing), or else US consumption (demand) is declining relative to US production (supply). Likewise, if the dollar is declining, then either the ROW is buying fewer dollars (capital inflow is decreasing or even reversing), or else US consumption is rising relative to US production. But when we look at these two variables, changes in net consumption happen relatively slowly while capital flows can literally turn on a dime.
Now, imagine that the $40B per month capital inflow suddenly stopped. You can imagine any number of causes, but perhaps a dramatic stock market correction would suffice. It doesn't even need to reverse and become a capital outflow, so you can imagine the money that's "already inside the US" running to the "safety" of Treasuries while money that's not already in dollars finds greener pastures elsewhere. As I've laid it out for you here, it should be clear that the dollar's price (its exchange rate) would plunge toward its physical plane value. The dollar's current price is based on a constant monetary inflow each and every month, not a balance of trade, so if that inflow stops, the price of a dollar drops.
When that happens, even if no price tags are changed inside or outside of the US, the prices of imports from the ROW will appear to have risen from the perspective of the dollar holder. And if the price tag of a net-import like oil which is priced in dollars isn't changed, then it will appear to have declined from the perspective of the foreign oil producer, so it will have to be raised. I hope you can see the "relativistic" effect on the prices of imports and exports when currency prices (exchange rates) change. While US imports will appear more expensive from inside the US, US exports will appear cheaper from the perspective of the ROW, and this relativistic (relative to your frame of reference) effect is present without changing any local price tags.
I don't want to spend too much time on this point, but what it means is that, in an open system with many different fiat currencies, the two things which I said characterize the $IMFS subjugate, supersede and overpower local inflation drivers. Those two things, once again, are oversized private sector international capital flows and their structural counterpart, public sector capital flows known as the dirty float. As FOA said, "the real cause of price increases is when the exchange rate is allowed to balance a negative trade deficit." In the present case, the cause of price stability in the $IMFS is the dirty float, in which exchange rates are not allowed to balance trade.
In a clean float, you'd have more closely balanced trade, and therefore the local inflation drivers targeted by monetary policy would begin to reassert their influence. Private sector capital flows would still have an effect, but it would correct periodically. And because changes occur more slowly in the physical than in the monetary plane, imbalances driven by private sector financial drifts would not become structural, cumulative and therefore systemically dangerous. Furthermore, and I hope to get into this more later, the predicted transition implies a smaller financial sector, smaller international capital flows, and a shift from financial pyramids and volatility churning into real economic enterprises as the most profitable focus for "hot money".
People, especially economists, tend to think they understand the causes of inflation. What I am proposing to you here is that, inside the $IMFS fishbowl, most of them are wrong, or at least what they understand theoretically is subjugated globally by the $IMFS and the dirty float. Look no farther than the US to see this in action. Here's the official inflation rate in the US for the last 30 years, from 1984-2014:
During that time, the US population grew by 35% and household incomes grew by 100%, meaning they doubled nominally. But that low inflation rate compounds to about 130% total over 30 years, which means household incomes haven't changed in real terms in 30 years, at least by the official inflation rate. But even though our incomes merely doubled in nominal terms, we spent as if they skyrocketed as shown in the 1,200% growth of total US debt to almost $60T:
As a consequence of all of that deficit spending, our cumulative checking accounts (basically the money supply aggregate that should affect consumer prices) grew by 900%, and our monetary base grew by 2,000% while cumulative consumer price inflation was only 130%. If this seems to violate what you thought you understood about the causes of inflation, you are not alone.
In my view, where we are today is stuck in a physical plane (real economy) that is subjugated, superseded, overpowered by and therefore subservient to the monetary plane (oversized financial capital flows). We have actually achieved a remarkable level of price stability for most of the world and for a very long time, but at what cost? In my view, there are two big costs, persistent economic stagnation in a relatively stable price environment, and inevitable periodic currency collapse.
Price stability mandates are only a means to an end which is a healthy and sustainable real economy, and yet, almost ironically, today's price stability continues at the cost of global economic stagnation. But this economic rut that we're in is not the only cost. Price inflation has been within acceptable levels for a very long time, aside from the occasional currency collapse or hyperinflation. And that's the second cost: the occasional currency collapses and bouts of hyperinflation.
You see, structural imbalances leave our landscape of many currencies vulnerable to abrupt and devastating corrections. It's like the tectonic plates on which we all live. The immense pressure that builds up around the edges is belied by the stable ground we feel most of the time, but every once in a while those plates correct themselves with disastrous effects.
Even with a higher target inflation rate like Krugman and Summers both recommend, monetary policy would likely have little or no effect as it stands today. In fact, we can see with our own eyes that it has little effect, as central banks have printed trillions in new reserves, practically monetizing consumption directly in some cases, while lowering both short and long term key interest rates to unprecedented lows, and still no effect on inflation.
Some have suggested that, in the case of Europe, the monetization of a broader range of assets, including gold, might be appropriate for monetary policy easing [15]. But all that does is raise demand for the monetized assets, likely raising the price, and in the case of gold causing inflow from other currency zones thereby putting downward pressure on the price of the currency itself. These kinds of purchases do not raise consumption, demand or create new borrowers, but instead they simply transfer existing purchasing power from the economy to prior asset holders. (And in the case of gold, CB purchases beyond a prudent reserve level are just currency manipulations that punish the workers in the economy while actually incentivizing lower consumption as more people will elect to forego current expenditures in order to buy gold: "Gold has always been funny in that way. So many people worldwide think of it as money, it tends to dry up as the price rises." - Another).
Even if they could get inflation up, I doubt that it would have the intended effect on the real economy. A certain rate of price inflation may well accompany the kind of economic growth that economists and central planners desire, but I'm not sure causation works in the direction they hope it does. In other words, economic growth may cause inflation, but inflation does not cause real economic growth. Here is a concrete example of what I mean:
By 1933, the annual US inflation rate was below -10%. Prices had fallen 60%, industrial production was down by half, millions were homeless and a quarter of the workforce was unemployed. FDR's inauguration on March 4, 1933 marked the lowest point in the worst depression in history, and it also occurred in the middle of a bank run. By the end of that day, 32 of the 48 states had already closed their banks, and the very next day, the day after his inauguration, FDR declared a four-day national bank holiday while Congress worked out a change in the dollar monetary system.
That monetary change of rules stopped price deflation in its tracks. By May, the monthly rate of inflation hit an annualized rate of 10%, and it even hit 40% annualized in June. [16]
The positive inflation rate, however, did little for the real economy in which unemployment remained in double digits until WWII. Five years after FDR's inauguration, Alvin Hansen would propose his secular stagnation hypothesis, and only gearing up for war in 1941 would finally drag the US economy out of its rut, and unemployment back down to low single digits.
During the post-war years of 1946-1953, with the US economy roaring on its own, cranking out a trade surplus with Europe as evident in the gold inflow which peaked in 1952 (see Fiat 33), we saw some of the highest price inflation rates ever, reaching 20% in 1947 and 10% in 1951. The point, once again, is that even though inflation may well accompany periods of economic growth, it does not follow that higher inflation rates cause higher economic growth.
Money Hoarding
For that matter, neither does low inflation—also known as price stability—cause economic growth. In my view, today's price stability has the same cause as today's low interest rates, which is also the same cause as today's global stagnation. As I've said many times before, correlation does not imply causation, and the treating of symptoms rarely cures the disease.
The "cause" that I am referring to is massive, systemic and global money hoarding. Money, at its essence, is credit. It is the credibility of future production revenue made spendable in the present (see Moneyness 2: Money is Credit). That is how new money comes into being, and then it circulates right along with the rest of the money pool as a medium of exchange in the present.
The hoarding of such credits, however, overvalues the unit of account itself, as the credits that are not hoarded enjoy a present purchasing power that would otherwise be lower if all existing "fungible credibility" circulated, and such credits were only held as short term balances rather than as wealth reserves. Hoarding, by the way, includes re-lending the credits to someone else, which is the primary way money is hoarded.
The re-lending of credits earned as surplus revenue simulates the money creation process without actually creating any new money, again overvaluing the unit itself as the credits enjoy a present purchasing power that would otherwise be lower if new money had actually been created. Re-lending is fine and normal to a degree. That degree is where it is done professionally, with one's own surplus revenue.
Where it becomes hazardous is when it is done systemically and passively by savers who leave it up to someone else to determine the lending standards. All of this money circulates in the same pool, so using credits as the system's reserves and the passive savings of virtually everyone in the world crowds the banks and professional investors within the financial and monetary arena. This crowding pushes the banks and professional investors into riskier and more questionable activities in order to make a living.
The result is low interest rates (because there is too much money competing for a limited pool of credible borrowers), lower lending standards (because passive money is being managed by people who make an up-front percentage and then have no more skin in the game), low inflation (because the process itself systematically overvalues the currency on an ongoing and cumulative basis), and economic stagnation (once debt and malinvestment levels reach a certain point of saturation). That's where we are today, in my view, on a global scale.
Money hoarded as savings or foreign reserves must find a vehicle to be hoarded into. This creates a massively oversized and passively generic demand for debt and equity investment vehicles, which leads to bubbles, malinvestment, debt saturation, across-the-board unprofitability, and ultimately to persistent economic stagnation where uneconomic and unprofitable businesses continue operating at a loss just to service their debt, and in some cases where government stimulus is involved, just to keep people employed. We see this happening everywhere today, even in China.
It is a vicious feedback loop, and it only gets worse as the viability of new products becomes secondary to their corporate presence in the investment markets. One of the main criticisms of the secular stagnation hypothesis, which I mentioned earlier, is that innovation and growth in the IT sector is underappreciated by economists. But just consider how many of the new rising stars in the tech industry are more about the business of selling shares than creating real economic value.
In essence, global savings (because in the $IMFS "savings" is defined as money hoarding) has outstripped profitable investment opportunities. There are more "savings" in the world today than there are truly-economic opportunities to make a profit, therefore the very act of saving for the future today worsens imprudent lending standards, inflates valuation bubbles in overpriced (and therefore unprofitable) industries, and promotes the illusion of new rising stars of productivity like Pets.com and Candy Crush.
In supply and demand terms, there is too much savings relative to investment opportunities that are profitable due to real economic value creation. The return on "savings" (interest in the case of debt and dividends or profits in the case of equity) is low because there is too much supply (savings) relative to demand (profitable opportunities). These are exactly the conditions in which bubbles arise—when "savings" or investment capital are in overabundance.
If you think it's good for the economy or for society in general to loan your surplus revenue to someone else, or to buy a company's stock, or even to stuff it in your mattress for later, guess again. You are part of the problem. If you're willing to give it away and forget about it, that's fine, but if you're hoping to reclaim that purchasing power at some point in the future, you are only adding to the congestion that is bringing the global economy to a standstill.
FOA (3/14/99; 16:17:55MDT - Msg ID:3362)
"Ironically, the very prospect of free world trade, so fought for by the American Administration, is the condition that the IMF/dollar system cannot handle! The debt built up from all of the past, unfree, protectionist old world trade is killing the transition. The policy is to sell free trade and the narrow margins it produces as they shut down entire economies because the low profits cannot service the old debt. Do you follow the logic and the problem? This brilliant, modern free trade system and all of its benefits cannot be implemented using the US dollar as a reserve currency. It shuts off commerce that in turn limits the use of commodities such as oil, metals, food and the like. Many hail the low price inflation in the US as a victory and ignore the intent other nations had in following "free trade". That being to promote a world economy, not just a US economy.
Enter the Euro! Understand that the increased use of commodities is a good thing. It's not just for the purpose of making a rising chart pattern so speculators can sell their calls! Commodity usage creates real things and helps the lives of real people. When citizens gain real productive mechanisms, they hold real wealth. Some would have you believe that third world people are enriched by saving US treasury bonds, not true! The only way to increase world trade, with an eye on building new consumers in all countries, is to remove the overhang of "dollar settlement".
The US started the free trade movement but quickly backed away when it was realized that the US currency, backed by debt through the fractional reserve system, would suffer severe inflation in the transition. Government guarantees would require the treasury (and Fed) to print unbelievable amounts of new currency to cover the unserviceable debt that Free Trade would create!"
FOA (03/20/99; 11:34:12MDT - Msg ID:3615)
"It was understood some time ago that the $US would indeed become "debted out" as digital currencies go. It was the logical conclusion to the world reserve money being removed from the gold exchange standard… We arrive at the final result today, with the dollar so expanded that it is failing the "free trade conversion" the world so craves. Entire countries are economically impaired in an effort to maintain the fictional valuations of "US assets"! …
It was the longest "stop gap measure" I have ever known to exist! A tremendous success by any standard, to keep the dollar stable for such a time. Many think it was "good old American know how" that did it. Well, now we will see "who knows how" as the world unwinds all of this dollar debt! …
As it is, this is created through BIS manipulations of foreign exchange (dirty float) and official money flows out of all non reserve currencies … One might have expected that others (as in the markets) would already be deducing the "secret moves" and re-evaluating the value of the dollar accordingly… this is not a "New York day trade", but rather a world money transformation that will affect you "down to the shoes on your feet"… Also, history usually documents that the most earth moving events were obvious, all along, but no one believed them!"
The Cure
The cure for global stagnation, I think, is very simple. In fact, unlike Krugman and Summers, I don't have a prescription. What would be my recommendation is already happening, so I only have a prediction for how and why it will end.
There is a common misconception that the sale of foreign goods and services in exchange for US dollars is what overvalues the dollar—foreign oil priced in dollars being the prime example, but China has also been selling other goods in exchange for dollars for a long time. In other words, it is a misconception that the international use of dollars as a medium of exchange is what keeps the $IMFS going.
This misconception, sometimes called the petrodollar theory, is so common that it is ubiquitous, not just in the conspiratard community, but in the mainstream as well. So I'm going to explain briefly the truth of the matter. You will need to understand this if you would like to accurately understand how and why it will end.
There are two ways for the foreign sector to buy dollars. One is by trading goods and services for them, and the other is through the foreign currency exchange. So, as a foreigner, you can buy dollars either with goods and services or with another currency. I'm not even necessarily talking about trade directly with the US, because you can buy dollars from other foreigners in both of these ways as well.
The US trades more than $2.2T worth of goods and services with the rest of the world each year. We export $2.2T worth of goods and services, and in exchange for them we also import $2.2T worth of goods and services. Dollars are the medium of exchange for all of them so, as you can imagine, there is a large pool of dollars circulating internationally. Think of it like this: A foreign exporter buys dollars with his goods and services, and then he sells the dollars to a foreign importer (in exchange for the local currency) who then uses the dollars to buy goods and services from the US. This happens each year to the tune of more than $2.2T.
In my scenario, you have $2.2T in dollars being bought with goods and services, and another $2.2T being bought with foreign currency (by the foreign importers who buy goods and services from the US). That would be balanced trade if that was all that was happening, but it's not. At the foreign currency exchange, where dollars are bought with foreign currency (rather than goods and services), there is also another group of dollar buyers competing with the foreign importers.
For simplicity's sake, let's call this second group the foreign investors and central banks. On average for the last several years, this group has bought about $500B each year which it has used for purposes other than buying goods and services. In 2006, this group's dollar buying peaked at an all-time high of about $750B, but for the last six years it has averaged almost exactly $500B per year. Instead of buying goods and services, these dollars were purchased in order to be hoarded, i.e., to buy dollar-denominated financial assets, like US stocks, bonds, Treasuries, real estate and foreign direct investment (FDI) inside the US.
The easiest way to understand the effect I'm trying to explain is to picture this second group bidding against the first group. The first group is foreign importers who buy $2.2T each year to be used to buy US goods and services. The second group is foreign investors and CBs who buy $500B each year to be used to buy US financial investments (aka IOUs). Together, they represent a foreign sector demand for $2.7T in dollars per year, which overvalues the dollar and causes the physical plane imbalance more commonly called the US trade deficit.
As I said above, we (the US) export $2.2T and we import $2.2T worth of goods and services. But we also import an extra $500B worth of goods and services which meets that extra demand for dollars from the second group, the foreign investors and central banks. Those extra imports are our trade deficit, and the important point here is that our trade deficit is caused solely by that extra demand for dollars from the second group, the foreign investors and foreign CBs. It is not caused by the fact that so many goods worldwide can be purchased in dollars that most American importers aren't even aware that other currencies exist.
The fact that many goods and services worldwide—once again oil being the prime example—can be purchased with US dollars does play a supporting role, but it is not the cause of the dollar's overvaluation. And in order to accurately understand how and why the $IMFS, and therefore global stagnation, will end, you need to understand its true cause. Oil being priced in dollars supports the dollar's overvaluation only insofar as the foreign oil producers themselves choose to hoard the dollars they earn as surplus revenue.
Secondarily, it provides the central banks engaged in the dirty float a false pretense for their excessive purchases of US dollars. You'd be surprised at how many people actually believe that China bought trillions of dollars as a rainy-day reserve fund simply because oil, food and many other global necessities are priced in dollars.
The cause of the dollar's overvaluation is the exorbitant hoarding of dollars by foreigners, including both foreign investors (which, yes, includes some of the foreign oil producers, though not to a great extent) and foreign central banks doing the dirty float. And of those two (foreign investors and foreign CBs), it is the CBs that were the cause of the perpetuation which lasted many decades, because they were the ones who bought dollars when everyone else was not.
Eliminate that particular cause, and you don't immediately eliminate the overvaluation, but you do end its perpetuation. And that's where I think we are today.
There have been a number of articles lately, both in the conspiratard media and in the mainstream, like this, this and this, about how the plunging price of oil spells doom for the dollar. $45 oil didn't doom the system in 2009, nor did $26 oil in 2001 or $16 oil in 1998, and $68 oil isn't going to doom it today. Something else is. The oil narrative is predicated on the common misconception that I outlined above, and is therefore wrong. But that doesn't mean the system is not doomed, it only reveals an inaccurate understanding of how and why it will end.
According to the narrative in those articles I linked, the fat lady should have already sung, if not in 2008, then at least in 2012, 2013, or at the beginning of this year at the latest. Yet the dollar is stronger than it has been in four years, the stock market is soaring at all-time highs, our trade deficit is currently above its six-year average at $516B annualized, and official price inflation is holding steady at 1.7%. There must be a better narrative, and there is.
Here's a chart by the French bank BNP Paribas from the Reuters article above. It shows what it calls "petrodollar exports" which it says were negative this year for the first time in 18 years.
Like I said, if this were the whole picture, then the fat lady would have already sung, but it's not and she hasn't… yet. I think this chart is misleading in many ways. "Petrodollar exports" is supposed to mean dollars spent on foreign oil priced in dollars that were then "recycled" back into US financial markets and other dollar-denominated debt. But all it really shows is foreign private sector dollar investment from part of the ROW. Excluded from the chart are Japan, Europe and the foreign CBs.
Look at 2008 in the chart. The blue is Asia excluding Japan, and it's negative in 2008. Yet 2008 was the PBOC's second-largest dollar buying spree ever, with an accumulation of $250B in Treasuries that year. The PBOC surpassed 2008 two years later in 2010 by buying $265B that year, and notice that the entire "petrodollar exports" for 2010 in that chart don't even total $200B. I don't have the data for the chart, but it looks like about $185B for 2010. In 2010, our trade deficit was $499B. $265B was purchased by the PBOC, and about $185B from "petrodollar exports", for a total of $450B. Something must be missing, and it is. Europe's private sector!
Notice, also, that those two years, 2008 and 2010, contained big dips in the dollar's price. In 2008, the dollar hit its all-time low of 71.5, and in 2010, it plunged from 88 in June down to 76 in October, a 14% plunge reminiscent of 1978 (see "Q2 1978" in Dirty Float). Remember I said that CBs doing the dirty buy dollars when everyone else is running away? Well it appears that the PBOC did just that, and it's not in that petrodollar chart.
Here's another chart, this one by Frank Knopers of Marketupdate.nl. It doesn't entirely complete the picture, but it fills in a good portion of what's missing:
This chart is only Treasuries, and you'll notice it's quite large precisely where the "petrodollar exports" one was small, and small where the petrodollar one was large. In this chart, Asia is red, and you'll notice how it dominates in 2008-2011 while in the last chart, where Asia was blue, it was but a minor concern. Also look at 2006, and how it's actually the lowest point in the past decade in this chart while it was the highest point in the last one.
We're looking at an incomplete picture in both of these charts, and also if we take them together the picture is still incomplete. That's because the total capital flow includes sectors, markets and actors that are not accounted for on either one of these charts. But if we understand how the balance of payments works, then we know that the physical plane trade deficit is the sum total of the monetary plane (capital) flows, of which these two charts merely give us a partial view.
Now imagine that the monetary plane "capital inflow" into the US suddenly stopped, turned on a dime, panicked, or whatever… it just vanished—poof. It would look something like this:
Notice that the numbers no longer balance. Suddenly the US is trying to import $2.7T in goods and services while only exporting $2.2T in goods and services. This puts an extra $500B in dollars per year into the foreign sector for which there is no longer a demand. As I said above, the demand caused the flow in the first place and, because the foreign public and private sectors worked in tandem, perpetuated it for decades. But, remember I also said that changes in net consumption happen slowly while capital flows can literally turn on a dime. The inertial differential between the two planes is critical in this instance.
One way or another, however, those numbers will balance in short order. Perhaps the red numbers could drop from $2.7T to $2.2T, or the black numbers could increase to $2.7T. Think about what would have to happen in short order, in real terms, for either of those scenarios to work. To foresee how these two numbers will reconcile, you must think in real, physical plane terms. You must think about those numbers representing a real volume of goods and services flowing in either direction, and the inertia of the demand to keep that real volume unchanged.
What you'll find, if you play out this thought experiment honestly, is that the weakest link in the whole system, the one that will lose its grip and make those numbers meet, is where the rubber meets the road—the prices that connect the dollar to the physical plane of goods and services. First the price of a dollar (its exchange rate) will slip, because there is suddenly a $2.7T supply meeting a $2.2T demand. This will have two initial effects. 1. It will send more dollars back to the US bidding up the price of US goods and services (real price inflation). 2. It will make those US imports appear relatively more expensive from the frame of reference of the dollar holder (relativistic price inflation).
Normally, this would mean a quick devaluation of the dollar, say for simplicity of calculation, by 50% or something. If that happened, you'd see those numbers rising quickly, but with the black numbers rising faster than the red until they meet at $4.4T (a 50% devaluation of the dollar). In real terms, US exports would have remained the same, but US imports would have shrunk from what would have been $5.4T after the devaluation to only $4.4T, an 18.5% reduction in imports in real terms, and a 100% reduction in net consumption by the US as a whole.
The sudden elimination of net consumption by the US as a whole is what FOA called "crashing our lifestyle," but he added in the very next sentence: "Something our currency management policy will confront with dollar printing to avert." A simple devaluation of the dollar would not only eliminate our trade deficit immediately, but in the case of the dollar because it is the global standard for savings and reserves totaling more than $60T, it would deliver a global haircut in real terms to the value of those savings and reserves. Nominally they would still be the same, but their real value would have been halved.
That, alone, would probably be enough to start a cascading avalanche of panic out of dollar holdings that would take the dollar much lower than the initial devaluation. But what FOA wrote—"Something our currency management policy will confront with dollar printing to avert"—is even more true today than when he wrote it and will, in my view, precede and amplify the avalanche, making the US dollar look more like the Zimbabwe dollar than the krona, peso or ruble in the end.
The reason I say it is more true today than when he wrote it is that, when he wrote it, the US private sector was the primary net consumer. But ever since the 2008 financial crisis, the US private sector is no longer a net consumer. We have, in essence, already "crashed our lifestyle." Yet the US as a whole, which in sectoral terms means the US private sector plus the US public sector (the USG), hasn't crashed its lifestyle at all.
Beginning in 2009, the net consumption of the US public sector, the US federal government, with net consumption defined as spending in excess of income, has been equal to or greater than the net consumption of the US public and private sectors combined. Stated simply, the USG's budget deficit has been equal to or greater than the US trade deficit for the last six years.
What this means, if you play out my thought experiment honestly, is that "the sudden elimination of net consumption" will be borne entirely, or at least almost entirely, by the one entity that can unilaterally, not unlike Mugabe, "confront with dollar printing to avert" (or at least attempt to avoid) bearing the brunt of that crash of lifestyle. That singular entity is the USG, and that's the basis for my view of how the US dollar will come to look more like the Zimbabwe dollar in the end.
FOA (3/17/2000; 9:16:57MT - usagold.com msg#13)
"We are only just now arriving at a time period that will bring about "The Currency Wars". Everything prior to this was only a preparation period to build an alternative currency. The years spent traveling this road were done to prepare the world for an escape medium when the dollar finally began its "price" hyper-inflation stage.
Few investors can "grasp" that in reality, our dollar has already been hyper inflated , but without the higher price effects. Years of deficit spending, over borrowing, debt expansion have created an illusion that the dollar was immune to price inflation. This illusion is evident in our massive trade deficit as it carries on with no negative effects on dollar exchange rates. Clearly other investors, outside the Central Banks were helping in the dollar support process without knowing they were buying into a dying currency system.
The only thing that kept this process from showing up in the prices of everyday goods was the support other Central Banks showed for our currency through exchange intervention. As I pointed out in my other writings, this support was convoluted at best and done over 15 to 20 years. Still, it's been done with a purpose all this time. That purpose was to maintain the dollar for world economic trade, without which we would all sink into depression…
The first signs that official dollar support is winding down is seen in real world pricing and official policy. The most obvious "first" price sensitive arena to reflect a "real coming inflation" is not gold as so many think, it's the stock markets. Their long term bull run, mostly starting around the early 80s completely reflected this official sanction of world dollar expansion without price inflation. It's only in the last year that we can see where equity markets are telegraphing a transition into dollar expansion "without world support". Better said, major price inflation is coming on a level equal to hyper status. Many stock markets have headed straight up in reflection of this."
Trail Guide (03/22/00; 07:53:28MDT - Msg ID:27266)
"The whole system is spiraling out of control now. We just call it the end of a currencies "timeline" and leave it at that. Most everyone else will eventually call it the beginning of dollar hyperinflation."
FOA (9/23/2000; 9:26:10MD - usagold.com msg#39)
"Again; it's the dollar that's caught in a vice because its exchange value is rising while its native buying power is somewhat the same. In order to balance the dollar's strength, native goods prices should be falling. By staying the same, its effects on our exchange rate process makes the local price of US goods ever more noncompetitive to sell to world markets…
Left on its own, such a process would expose the dollar structure to the bankrupt / hyper inflated position it has been in for many years. The US trade deficit would grow until the flow of dollars destroys our dollar reserve system. From where I swim in the ocean (in deep water), this is exactly the unending process we have embarked on. This time it will not reverse…
Truly, the ECB is not interested in "crashing" the system, rather let's "transition" the system into a more fair order. If intervention is needed, it's needed to keep the American economy from failing too fast from the coming hyperinflation of its currency. If the ECB is worried about the "exchange rate" being too far out of whack, it's a worry about its effect in generating a dollar system meltdown from deficit trade. Not a total failure of the Euro as so many report. When the time comes, and it will; the dollar will begin its fall away from its own past policy failure. Until that time, for the benefit of oil producers and many others, let's move as far down this Euro/gold trail as possible. Without a breakdown."
Trail Guide (10/07/00; 21:53:36MT - usagold.com msg#: 38526)
"I expect to see the Euro Zone taking off with some price inflation and a declining trade surplus heading toward deficit. All the while the US goes hyper with mountains of dollars coming home. And I don't mean coming home for investment. I mean coming home to exercise delivery against real US produced goods. I expect that before this is over, we (US) might be forced to use our gold card to help devalue the dollar. That would involve a forced restructuring of the gold markets so as to make gold rise. A few political heads would roll if this takes place. Believe it!"
Trail Guide (10/21/00; 08:50:07MT - usagold.com msg#: 39569)
"Once the ball starts rolling, it's good bye dollar overvaluation,,,,, and hello US hyper inflation. Especially if we want to keep our DOW and financial structure away from bookkeeping failure. Roaring prices for goods, yes, but bookkeeping failure, no! This is how a real inflation plays out!"
Trail Guide (10/24/00; 10:58:56MT - usagold.com msg#: 39784)
"Our currency will be lowered to non reserve status no matter what route we take. Just as in many other historic examples and present examples around the world, nation states always choose hyperinflation when no other way out is offered. No nation on earth has ever cascaded themselves into deflation once they are off the gold money system."
FOA (12/02/00; 11:40:02MD - usagold.com msg#49)
"Thoughts spoken with a background of coming hyperinflation—
It's almost impossible to compare our (FOA & Another) outcome of all this to other opinions because we have built our actions and testimony upon the one-way flow of this timeline transition.
We say "one way and one way only" and waver not! Own physical gold and position one's other interests with regards to a changing reserve currency dynamic.
Most every commentary written that is somewhat at odds with us, uses a foundation of a continued sound dollar financial structure as its base. Be it; deflation alone and/or deflation with some return to a gold exchange standard OR a total failure of other world bodies to reach for other acceptable alternative structures. Some say a little inflation will arrive and lift all boats within a "more of the same" dollar world. Indeed, their boats include a paper gold system and its ongoing use by the gold producing industry. All of these concepts are yesterday's outcomes and will be washed away in this great storm…
In our time and for the first time in the modern US dollar history, the US will embark into a classic hyperinflation for the sake of retaining its own lessened dollar for trade use. As destructive as that might be to players in this financial house, it is better than immediate total economic failure. It will evolve in a form much like the course of any other third world country, if its currency too was suddenly deprived of world reserve status. We will, like people the world over, learn to live with it and live in it. Truly, our dollar and economy will not go away, but its function, use and value will change dramatically."
Trail Guide (05/12/01; 09:57:47MT - usagold.com msg#: 53470)
"I know that far too many think the system is healthy enough to go on forever maintaining their lifestyle. It won't. Currency systems come and go with time and our dollar is being phased out. Eventually, as the next reserve system unfolds, our US inflation rate will spike into hyper status. Not because the dollar or our economy is suddenly nonfunctional, but because all the past "inflation tax deficits" that we built up over decades will come due. Then, not only the price of using our fiat system will be exposed,,,,, the price of all the political bailouts and American lifestyle enhancements will come due also. It will require a hugh devaluation of the dollar to cover this debt. It will appear to us as a sudden, hyperinflation, imposed on us by an unfair, European government,,,, out to get us."
FOA (06/12/01; 11:23:21MT - usagold.com msg#77)
"As the dollar tumbles on exchange markets, so too will our cost rise to produce anything (massive hyper price inflation). Rendering a net / net non gain in world trade advantage."
Trail Guide (06/12/01; 19:26:58MT - usagold.com msg#: 55977)
"Do you know how many national currencies in the world today experience an average of over 20% inflation rates? Do you know how many of those nations also experience almost hyper rates? More than a few, my friend. The point is that even in super inflation dynamics, modern people still use the fiat. Even as the governments lop off zeros weekly. Sure everyone has gold and hard dollars,,,,, but they don't spend them as much as they do their currency notes.
My point is that we will all be doing just as in Mexico; spending pesos while holding dollars and gold. Only in America we will be saving gold, putting aside Euros and spending inflating dollars. When the dollar goes completely hyper, we will resort to Euros, not gold or silver. The times have changed, my friend, you are fighting a war that will not begin. The world will use only one hard metal as wealth, gold! Because as Randy puts it: "we don't need a redundant wealth asset to hold in reserve". Silver is a good commodity but has no future in either the Euro System asset structure or my private wealth. Gold is the place to be and the events to follow will show this to be true."
FOA (07/27/01; 15:20:44MT - usagold.com msg#85)
"Make no mistake, we are not calling for price inflation to end the dollar's reserve reign! We are calling for "inflationary policy" to dethrone it while said hyperinflation follows…
The very changes needed in our money universe, today, would kill dollar demand by devaluing all dollar assets in super higher gold prices. The debts and the dollars would remain; only 90% of their current illusion of value would vanish. Hyperinflation in prices of all wealth objects will be the workout result of this process. As such, opposing dollar political motive will force the US to give the markets what is needed; both gold and gold prices beyond imagination."
FOA (11/2/01; 12:35:27MT - usagold.com msg#128)
"The evolution of Political will is now driving the dollar into an end time hyper inflation from where we will not return. That is our call. Bet your wealth on the other theorist's call if you want more of their last 30 years of hard money success."
This hyperinflationary picture I paint (and if you'd like to read more about it, I'd recommend these three posts as a good place to start) may seem extreme and inconceivable, but I don't think it is. Nor do I think it is all that bad. As there are usually two sides to everything, there's a good side to dollar hyperinflation as well! ;D
Yes, it will destroy probably close to $100T in savings and monetary reserves worldwide (not counting all the fancy derivatives), but it will also destroy the debt those savings and reserves are built upon. And in so doing, it will destroy the virtual fishbowl that today confines the global economy, holding it in a state of secular stagnation. Yes, this is the cure, and like I said, I don't have a prescription for making it happen because what would be my recommendation is already happening.
As to whether or not it will happen, my view is unequivocally that it is absolutely and positively inevitable. As for when, my view that it could happen at any moment is more than just a feeling and a realization that it's decades overdue. It is, in fact, informed by two simple but important things.
First, all of the US markets are "already badly overpriced", while the foreign markets "are less so". So says Jeremy Grantham in his latest "Bubble Watch Update" newsletter. Grantham's firm has more than $112B in assets under management, and he has built his reputation on correctly identifying bubbles as they were happening. [17] Yet all signs are that the foreign private sector is still piling into the dollar short-bus as if it's the only ride in town. The miraculous dollar and its many markets are doing quite well, even as a correction like we haven't seen in at least six years appears to be on the horizon. That would be one of those times when, over the last several decades at least, the foreign public sector stepped in and bought precisely what everyone else was running away from… the dollar. But will it happen this time?
I don't think so, and that's the second thing. All signs are that the dirty float is finished. The ECB has made it quite clear that it will not be interfering with exchange rates anymore, and so have many other central banks. Even in the face of epic weakness, Russia's central bank has, over the past three months, repeatedly reaffirmed its new policy of a "free floating" ruble, here, here, here, here and even here back on Sept. 2nd.
Since publishing Dirty Float on August 3rd, I have also seen free floating exchange rate articles pertaining to Canada, Myanmar, Brazil and Hong Kong. Clean float, as a concept, almost seems to be trending! ;D
The PBOC has reportedly stepped back from its daily interventions in the [currency] market, and well it should stop. Exchange rate manipulation is anathema to its 28 bilateral currency swap agreements, three of which (Sri Lanka, Qatar and Canada) are new since Dirty Float was published. Also new since then are RMB trading centers in Paris, Luxembourg, Toronto and Doha, Qatar. China's currency is finally ready to float, and what do you know, its Treasury holdings are the same today as they were in 2011. The dirty float is dead. Long live the clean float.
Then again, there's still the chance that the drying-up of the subterranean stream (the flow of physical gold through London) will precede the monetary plane's inevitable time bomb, so who knows which one will happen first. A couple of recent statements on this front were Jeremy East's comment at the LBMA conference last June: "We are seeing gold flows circumventing the London market when, historically, gold would typically find its way to London and then out again. So we are seeing a bypass of the London market…" And this comment from a gold refiner via FT.com just last month: "I have to fly gold from Zurich to London, because there just is not enough gold on offer in London. You never used to have to do that."
My recommendation is to be prepared now, because that's the best way to avoid stress and regrets, which, IMO, are two things that are well worth avoiding. Either way it ends, I can't imagine how it could take too much longer.
FOA (2/28/2000; 10:18:13MT - usagold.com msg#8)
"Central banks gorged themselves with worthless dollar reserves and prevented a hyperinflation of the dollar in the process. They did this, because they knew that gold had the ability to completely replace any and all loss of dollar reserve value once a new system was in operation."
FOA (03/02/00; 20:15:21MT - usagold.com msg#9)
"Soon, bullion will return to doing what it did centuries ago. Representing the value of the world's assets and productive wealth. Only, with the world having far more in the way of modern things than ever before in its history, "Freegold" trading as a "reserve asset" will be valued as never before."
Trail Guide (03/04/00; 17:50:29MDT - Msg ID:26375)
"At first dollar hyper inflation will not be reflected in a rising price of gold on the current dollar paper gold market. It will be reflected in a corresponding lack of real gold relative to outstanding contracts! A physical gold shortage will happen "first", as the contract price system slowly defaults in an ever lower price. Next the paper markets will totally fail from non availability. That means a super low (discounted) bid price for contract gold. That's the same price the stock market players currently value your gold shares with.
Once the dollar gold contract system fails (and this will be happening during a full blown "hidden" price inflation), a physical gold market will develop,,,, whether officially (Euroland) or black market style.
The point is that during this dollar inflation, physical gold will be in almost no supply and its price will be 10X the paper price. No body, and I mean NO BODY is going to be cashing out of gold shares or any form of paper gold and doing an even swap! Every gold mine that operates using the dollar gold market to sell into,,,, does its financing with and is hedged leveraged with dollar based Bullion Banks ,,,,,, is going to see their stock ride the paper gold market to its end."
FOA (4/19/01; 17:50:29MT - usagold.com msg#65)
"The dollar is toast because most of the world doesn't like the management policy. They didn't like it in 71, but tolerated it because gold was supposed to keep flowing in repatriation payments. And if they didn't like it back then, they god awful hate it now!
We like to think that the dollar is what it is because we are so good. (smile) But, the truth is that for over a two decade period +, none of our economic policy, our trade financing policy, our defense policy or our internal lifestyle policy has pleased anyone outside these borders. We managed the dollar for us (U.S.) and the rest could just follow along.
Our fiat currency has survived all these years because others have supported our dollar flow in a way that kept it from crashing its exchange rate. We talk and think like we are winning the tug-of-war when, in fact, they just aren't pulling too hard. Waiting for their own system to form up."
Looking Forward
As I wrote earlier, my predicted transition implies a smaller financial sector, smaller international capital flows, and a shift from financial pyramids and volatility churning into real economic enterprises as the most profitable focus for "hot money". I know that many of my readers find this "glimpsing the hereafter" stuff challenging. I mean, everyone's into stocks and bonds today, right? So won't they run back into the warm embrace of paper IOUs right away?
Well, remember the Roaring 20s when everybody including the shoeshine boy was in the markets? After that crash, the average saver did not want to touch the stuff for four or five decades, and that was without hyperinflation wiping out his or her "savings" to 0.01% of their previous purchasing power. This time, I think it will be quite obvious that the only things "left standing" will be "real things".
Even among real things, the degree of purchasing power retention in real terms will vary greatly. This should lead to the usual mentality of risk reduction and channel future savings to a different focal point than today. And it's not just about the focal point which is for truly surplus (i.e., not needed anytime soon) revenue, but all forms of real wealth that enhance one's standard of living through their presence and use will gain widespread appreciation. Like nice, heirloom-quality household goods and furniture, instead of the cheap crap we buy today with the virtually-unlimited credit from an overvalued currency.
Ensuring that you own your home free and clear by retirement is another thing we should see post $IMFS, because it reduces risk. And no, I'm not talking about anything like the housing market speculation of today. All this "glimpsing the hereafter" stuff is based on common sense flowing from the elimination of money hoarding which will have proven so disastrous through the reset. This is what FOA explained so brilliantly, how our very human nature leads our behavior, especially through change.
One other thing I mentioned earlier that I want to expand upon in this final section is that any central bank purchases of gold, or any foreign currency for that matter, beyond a level that is prudent for normal international banking liquidity needs and emergencies (a level which I might add that all major CBs already have in reserve), are just currency manipulations that punish the workers in their own economy by reducing the purchasing power of their wages and transferring that purchasing power to someone else. Such transfers do not increase aggregate demand (i.e., purchasing power), they only transfer it from one person to another.
You may have seen the term "GOMO" used recently, which means Gold Open Market Operations or a CB buying or selling gold on the open market. While this idea has been associated with Freegold, I will tell you now that I don't agree that it is part of Freegold, a good idea, or even that we should expect to see it tried by the incompetent. Don't count on GOMO, because it's not what you are probably thinking it is.
I see a lot of people falling into the trap of thinking that "physical gold purchases can only be good no matter who's doing it", because they are thinking of their own holdings and projecting that personal feeling onto a CB that represents an entire economy made up of both debtors and savers. If you thought it was hard to think like a giant, it's even harder to think like a CB. A giant can underconsume and save just like us, but if a CB tries to do the same thing, it's not really saving. It is merely preventing the exchange rate from balancing trade via the relative prices of goods and services, and thereby mispricing its currency and unnecessarily punishing its own labor force.
Look at China. Over the past 15 years the PBOC has accumulated $4T in foreign currency reserves. To do that, it printed $4T-worth of yuan base money. Such printing should have been massively inflationary in China, but it wasn't. Look at China's inflation rate over the past 15 years:
Pretty mild for having printed $4T in new base money, right? The PBOC didn't stimulate demand in its economy with all that printing, instead it suppressed it locally and transferred it to someone else… to us in the US! :D That's all the PBOC did by manipulating its currency. It punished its own workers in its own economy by lowering the purchasing power of their wages below where it would have been otherwise, and it transferred that purchasing power to us.
Now, if a CB buys gold instead, it will be punishing the workers in its own economy in the same way, by lowering the purchasing power of their wages below where it would have been if it hadn't bought gold, and it will be transferring that purchasing power to… you guessed it… anyone who has gold! Sounds good, right? Well don't count on it, because it doesn't increase aggregate demand or consumption, it only transfers it. Gold is not a form of monetary policy, even if someone at the ECB inappropriately mentioned it along with debt and other market assets.
Gold falls under reserves, and not monetary policy, by the ECB's own definitions. It's on every single ECB weekly statement:
Items not related to monetary policy operations (includes gold, foreign currencies and foreign debt)
Items related to monetary policy operations (includes things like lending facilities, refinancing facilities, deposit facilities, LTROs, securities market programs, etc…, many different things, but not gold)
Monetary policy will be the same in Freegold as it is today… raising and lowering interest rates or other ways of easing and tightening, and buying debt if rates get too low. The difference is that they'll only do it within their own currency zone, because the dirty float will be finished.
The ECB's own statements make it clear, every week: Monetary policy, by definition, is stuff you do at home; Reserves—gold and foreign currency/foreign debt—and operations pertaining to reserves, are not part of monetary policy. They are exchange rate manipulations, and the ECB has made it clear that they aren't doing the dirty anymore. Monetary policy won't change. If you hate this system because of CB monetary policy, then you'll probably hate the next one as well.
What will change is that exchange rates will no longer be manipulated, therefore foreign currency, foreign debt and gold will just sit there, unchanged, on the CB balance sheets. Simple as that. The CBs will still mess with interest rates, reserve requirements, and buy debt and other stuff within their own currency zones, because that's what has at least a little effect on aggregate demand.
_________
In Fiat 33, Dirty Float and now Global Stagnation, I have traced the evolution of the global exchange rate regime, from the fixed exchange rates of Bretton Woods, to the "exchange rate anarchy" of the 1970s, to the dirty float of 1979-2013, and now to the clean float that will take us well into the future. At the beginning of Fiat 33 back in June, I made a statement which bothered some of you:
I know that some of you are skeptical about what I am saying. You're probably thinking that Freegold relies somehow on gold and whether or not it is embraced by the masses. But here's another thing that will probably surprise you in the end. Gold has little to do with "Freegold the monetary system"!
I knew what I had in mind would take several posts to explain. I knew what I was writing at the beginning would be confusing and maybe even a little controversial, but I hoped that it would eventually make sense after I finally got out what I had in mind. So now my question to you is whether or not the beginning of Fiat 33 finally makes sense to you. I hope it does. I'll end with the part I'm referring to, so please let me know if it now makes sense, or if I've still got more work to do. ;D
From Fiat 33:
I know I haven't written a post in a while, but my plan right now is to write a series of posts, this being the first, that will hopefully paint a nice big picture for you of what Freegold is all about. I've had the idea for a while now to write a post about what, precisely, constitutes the overvaluation of the dollar today, as that relates directly to the deflation versus currency collapse/hyperinflation debate.
In order to see how the dollar can collapse against the physical plane of real goods and services, you must understand how and why it is overvalued today, not just in the monetary plane with its monumental overhang of "financial savings", but also in the very real physical plane of production and trade. In the end, you might be surprised to discover how the dollar would still collapse in value even if we could hypothetically erase, block or sterilize the massive overhang of dollars and "financial wealth" that has accumulated in the monetary plane from rushing out into the physical plane.
As it turned out, this topic was much bigger in scope than I could possibly tackle in one post. In fact, I believe it encompasses virtually everything required for understanding what Freegold is truly about. And again, in the end, I think you may be surprised to discover how simple it really is, but it's going to take me a little while to get there.
I don't know how long or how many posts it will take me to explain what I have in mind. I'm not working off an outline. But here's a bit of a spoiler for those of you who are impatient, don't like to read, or don't care about understanding it deeply and would rather just have an abstract that can be easily dismissed so you can get back to tradable technical analysis.
Freegold is all about gradual, natural and automatic adjustment mechanisms in the modern world of fiat currencies. An adjustment mechanism is quite simply anything that periodically corrects physical plane imbalances. In economics, the term adjustment mechanism is often used to describe the flow of gold between different countries back when gold was used as base money in those countries. But this is not at all what Freegold is about, so I am using the term in a much broader context that applies at any scale, from the global scale on down to the individual.
Whenever you buy a gold coin, or even a coffee at Starbucks for that matter, that's a simple example of an adjustment mechanism at the individual level. Monetary plane balances (like "financial wealth", the "idea of long term debt being held as a money asset", or even cash in your wallet) represent physical plane imbalances. Whenever monetary balances are reduced, real world imbalances are reduced. Likewise, when monetary balances are accumulated, physical plane imbalances increase. It's a simple concept and a simple view.
The flow of money within a common currency zone, like the United States for example, is the most basic and automatic adjustment mechanism. Other adjustment mechanisms include changes in wages and in the prices of various goods and services in general and in different locales, and the movement of people and capital from one location to another.
Wherever multiple currencies interact, like on planet Earth for example, changes in the exchange rate between them are the primary adjustment mechanism. Fixing, pegging or otherwise manipulating the exchange rate of different currencies does, in fact, preclude other adjustment mechanisms and causes imbalances to accumulate, often to the point that abrupt adjustment becomes unavoidable, economically disruptive and financially destructive, in other words, painful.
Currency collapse and hyperinflation are natural but not gradual adjustment mechanisms. Floating exchange rates are a more gradual adjustment mechanism between different currency zones.
These adjustment mechanisms have always been with us, so the real change in Freegold is the "gradual, natural and automatic" part. Gradual (or ongoing) is self-explanatory, but what I mean by "natural and automatic" is that these ongoing adjustments will be allowed to happen or made by choice, not forced or induced by a central bank, because such ongoing adjustments will be in the self-interest of anyone in a position to choose, on any scale.
I know that some of you are skeptical about what I am saying. You're probably thinking that Freegold relies somehow on gold and whether or not it is embraced by the masses. But here's another thing that will probably surprise you in the end. Gold has little to do with "Freegold the monetary system"! Gold is not a key part of the monetary adjustment mechanisms in Freegold. The price and physical movements of gold won't even matter to the monetary system. Any movements of gold in price, ownership or location will be irrelevant to the monetary system of the future.
Freegold is the true unshackling of gold from the monetary system. In Freegold, a properly functioning monetary system requires nothing of gold. In Freegold, the international monetary system won't require gold to change price or location in order for it (the new IMFS) to function. That's why it's called Freegold. Gold is finally and truly set free from its shackles to the monetary system.
Make sense yet? ;D
Sincerely,
FOFOA
[1] Larry Summers appeared on a panel with Ben Bernanke, Stan Fischer and Ken Rogoff at the 14th Annual IMF Economic Forum on Friday, November 8, 2013. The panel, Policy Responses to Crises, included a discussion of optimal policy responses to mitigate the adverse effects of crises. http://youtu.be/KYpVzBbQIX0?t=2m11s
[2] Why stagnation might prove to be the new normal By Lawrence Summers, Financial Times, Dec 15 2013
[3] Secular Stagnation – Fad or Fact? The Economist, Aug 16th 2014
[4] Is The Economy Suffering From Secular Stagnation? NPR, Sept. 9 2014
[5] Secular Stagnation:
Facts, Causes and Cures A VoxEU.org eBook by the Centre for Economic Policy Research (CEPR), Chapter 2, "Secular stagnation: A review of the issues" by Barry Eichengreen
[6] Ibid., Chapter 4, "Four observations on secular stagnation" by Paul Krugman
[7] U.S. Economic Prospects: Secular Stagnation, Hysteresis, and the Zero Lower Bound by Larry Summers, Business Economics 2014
[8] Ibid. [5], Chapter 1, "Reflections on the 'New Secular Stagnation Hypothesis'" by Larry Summers
[9] Hysteresis and the European Unemployment problem Blanchard and Summers (1986)
[10] Ibid. [5], Introduction, Figures 1, 2 & 3, Source: World Bank online database
[11] Former Fed Chief Greenspan Worried About Future of Monetary Policy The Wall Street Journal, Oct. 29 2014
[12] Inflation targets reconsidered Paper presented by Paul Krugman on May 27, 2014 at the ECB Forum on Central Banking: Monetary policy in a changing financial landscape
[13] http://en.wikipedia.org/wiki/Knut_Wicksell#Theoretical_contributions
[14] Gold is like distilled, pure physical wealth, and in that sense it is "monetary wealth" in that it is kind of like the ambassador representing the physical plane while residing in the monetary plane and acting as its most liquid physical reserve asset. Other than that, any entanglement between money (economic credit) and gold (pure physical wealth) is unrighteous at best, and deadly at worst. True wealth is hard, but true money is "easy" by definition. Hard money is practically an oxymoron if you really consider the money concept. Therefore if normal inflation is theft, then so is the value you lose when you buy a brand new car and drive it off the lot. Misusing something as a wealth reserve is user error, not malfunction.
[15] http://www.ecb.europa.eu/press/key/date/2014/html/sp141117.de.html Google translated from German: "The Board of Governors has unanimously advocated, where appropriate, to take further unconventional measures to counteract a lengthy period to lower inflation. Theoretically, this also includes the purchase of government bonds or other assets such as gold, shares, Exchange Traded Funds (ETF) etc.." Yves Mersch, Nov. 17 2014
[16] Source: Puncturing Deflation Myths, Part 1- Inflation During The Great Depression by Daniel R. Amerman, CFA. Feb. 12, 2009
[17] Jeremy Grantham: http://en.wikipedia.org/wiki/Jeremy_Grantham#Views_on_market_bubbles_and_the_2007-2008_credit_crisis Quote source: http://www.businessinsider.com/grantham-guesses-stocks-work-20-30-higher-2013-11
691 comments:
«Oldest ‹Older 401 – 600 of 691 Newer› Newest»sorry "poopy" but the problem is with you, no me. I do agree with the framework of this blog, I've been reading/donating/supporting freegold long before your first post here, and as I mentioned, feel free to email FOFOA to verify. But there are also things about the case for freegold presented here that I don't think pass the smell test, especially in light of my own experiences. It's your own search for a boogeyman that has you assuming otherwise.
And even that aside, your inability to be civil and engage in honest discussion, which I clearly attempted is your shortcoming, not mine. I wont apologize for continually searching for holes in freegold. I certainly have enough wealth pledged toward the thesis that its in my best interest to do so.
If you want to be a dick, go ahead and be a dick. I promise I'll manage to cope even though someone named "poopyjim" is a big meanie on my favorite freegold blog.
It's my belief that this blog benefits from a healthy debate. and all it would take to shut me up would be a simple request from FOFOA, and he has my email (and phone number) should he choose to do so. I don't he will, because I believe he, unlike you, would be invigorated and not threatened by debate.
Where has the coat check theory of GLD been debunked?
#StupidForeigners=#StupidForeigners-5;
RE https://twitter.com/fteconomics/status/547448008179470336
@blake Bron had a few compelling posts on it a while back but in my opinion the most damning is the tracking of bars in and out of GLD by screwtape. A sufficient amount of those bars that leave keep coming back into inventory. This doesn't exactly support the theory that once the gold is gone from GLD it is "gone"
But ask yourself these questions..
Does GLD not being used a sa coat check room mean freegold is false? I say no.
Does the absence of a two tier market debunk the whole theory? I would also say no, it does not.
Does physical gold being available in at least some "size" at least a few years ago and to some degree today (given public import data) mean freegold couldn't be triggered by owners simply removing their metal from sale because of some future crisis? I would also say no.
In all honesty, I'm not intellectually capable of debunking freegold, but I am smart enough to ask obvious questions when conflicting data is staring me in the face. And I am smart enough to watch as people smarter than me take those questions and run with them.
It seems to me that some contributors are so emotionally invested in freegold that they wont even question it, or attack anyone who does. I don't think that good for everyone else who has really bought into freegold to just ASSUME these things are so with conflicting data staring us in the face.
I think FOFOA has a lot of it figured out, but I don't think anyone has it all figured out. thats why I'm bringing up contrary points and asking questions..it's how I learn. So far I've learned Matrix Sentry is a lunatic who equates honest questions with spitting in someones face. No wonder outsiders call this blog cultish. You eat your own unless there is 100% acceptance. Nothing has raised my skepticism toward freegold than some of the responses by the regulars on this board in all honesty. It's borderline neurotic by some.
Stans comment about being a consultant to a very large wealthy fund reminds me of this....
H.E. Pennypacker - a wealthy industrialist: http://youtu.be/Ji4dBBTvBqk
Not sure if that worked
I think the more critical point is not that these bars come and go only to return, but rather, that total GLD inventory continues to drain at a material clip...
OK Blake, but pretend that you never heard of freegold and all you had to judge with was the price action and western sentiment toward gold investing. Could not the drop in inventory be easily explained, frankly, more simply and logically than the coat check theory? And if the gold was leaving for the reasons outlined in coat check, why is a huge part of it coming right back weeks or months later? I'm open, but if the simplest explanation is usually the correct one, I find it hard to accept coact check as the simplest explanation.
Oh no!! I'm a trojan horse designed to separate you from your physical!!
Good grief.
Does someone have a link to brons coat check theory?
Please and thank you
IMO FOFOA has bitchslapped and punished Bron/kid dyn. and the other "arbitrage"-fanboys so much in the GLD inventory discussion that it almost got boring to watch in the end. Please pay attention cranky Stuwie!
https://www.youtube.com/watch?v=q6nGTvWJh7g
Stu -
I appreciate the debate and welcome yours and others bona fide questions or criticisms about all things Free gold. I, for one, find it healthy.
To your question, I suppose what vexes me is that GLD inventory is draining DESPITE western sentiment and price action. Indeed, we do not see the same anomaly in SLV and as far as I'm aware, the inventory in SLV keeps growing.
What is your Occam's razor for why GLD inventory is draining despite the negative factors you cite?
Stu,
You're not fooling anyone with your claims of victimhood. What's really at stake here is your failure to engage in rational discourse. Your posts in this thread are emotive tirades that consist of a steady stream of logical fallacies. Let's review a few:
Appeal to authority
You repeatedly appeal to your own authority with regard to your own (unremarkable) experience and pious claims of being a long-time reader/donor. Both are irrelevant.
Argumentum ad hominem
There's this gem:
You and matrix should meet behind homeroom and share your comic book scribblings and race for the sticky cookie. I like your odds.
Then of course there's the repeated, non-stop accusations of cultishness:
The reaction some here have to even the slightest challenge to their orthodoxy is like a textbook illustration of groupthink.
Appeal to emotion
See your repeated claims of victimhood, e.g.:
Oh, and since I'm becoming quite unintentionally the board villain...
Begging the question
It's my belief that this blog benefits from a healthy debate.
This presumes of course that there is some kind of opposition to healthy debate, whereby you frame yourself as some kind of warrior for logic and reason against a tide of unreason. However, as is plain to see by the emotive and illogical nature of your stream-of-consciousness rants, the truth is the opposite.
@Stu Ungar
Hi Stu. Try to look at things from the standpoint of some of the regulars here that have answered and re-answered queries into FG with substantial depth over the years. Also seen here many times are some sneaky Trolls - that you do not sound totally dissimilar to. You arrive here out of the blue - posting extensively - you should also expect to have a somewhat thick skin in your initial interaction when you are so 'challenging'. The 2-tier theory is one aspect of many - and can require the most suspension of previously held beliefs that you deem logical. I appreciate the discussion and still endorse the 2 tiers as probable. Another spoke with many indirect meanings and FoFoA has been so impressive at dissecting and interpreting. It is so difficult to imagine what it would be like to live without regard for currency - where it is virtually limitless - even for your dynastic generational requirements. Numbers are the hardest thing for average people to comprehend. That there are some large physical Gold transactions at, or around, SPOT is not proof that true Giants don't deal in multiples and prefer the discretion to the visible arbitrage potential. Can you imagine? Vital Gold and anonymity being more valuable than something you have trillions of?
+1 poopy
+1 tEON
@teon I appreciate your sincere comments and I do understand the skepticism. Thank you. I also know it appears I've come in out of the blue, but I suppose from my perspective being here for over six years now I never saw myself that way, but your point is fairly taken. I think if you look at the chronology of my posts though, you will see that I tired to have an honest interaction a couple of the replies were way over the top without any attempt at civilized conversation. I think this sort of violent reaction to an "outsider" is instructive of a certain, unhealthy mindset. But thats just my opinion.
You are also right, my anecdotal data point, even if one believes it, doesn't prove anything. In my opinion there are sufficient public and private anecdotes that at the very least, make two tier pricing quite far from a fait accmopli as some here seem to believe. We can all see the flow, whether from SGE, central banks and import data that gold continues to move IN SIZE. I also find it illogical that any giant would ever be in such a position to buy so quickly that paying many multiples above spot would be preferable to just taking their time.
So in that sense I find two tier pricing to be illogical. We are talking about less than 10-15 giants on earth capable of such a purchase, and by all evidence they have absolutely no need to buy gold in size with any sort of time constraint. I can't prove anything and either can you...all this is is conversation while I wait for my wife and kids to get home so we can make some cookies.
All while my gold lies very still, collecting dust.
Stu: "We can all see the flow, whether from SGE, central banks and import data that gold continues to move IN SIZE. I also find it illogical that any giant would ever be in such a position to buy so quickly that paying many multiples above spot would be preferable to just taking their time."
The one aspect of being a Giant you have left out is, once again, anonymity. During the previous discussions of The Rothschilds it was clear to me that anonymity was worth paying for. History is replete with examples of wealth being confiscated from the wealthy. How much is secrecy worth to a Giant? How many multiples over spot is discretion valued at?
You talk as if all gold transactions are for the public's eyes.
Think Like A Giant 1, 2, and 3 are worth reading again.
Stu: For someone who has been here, reading and donating to FOOFA for years I find it strange you never commented before December 21, 2014.
Did you use a different name in the past?
Just trying to understand...
Random Man
Seriously dude?
This can change any time yes, but you are running out of time. If something doesn't happen soon then many at this blog have alot to reconsider.
Running out of what time?
I keep up with this blog and I have not come across your implied wringing of hands and nashing of teeth by the "many at this blog" that comment here.
@indenture I believe I may have posted under a different handle years ago but I honestly don't remember what it was, and it was very sporadically. I was silent while I did the bulk of my learning. And if I had a question, I just emailed the man himself. But I've been around since pretty much the beginning.
@indenture Also, there are plenty of ways to buy gold and remain anonymous without having to resort to paying multiples of spot. I can think of a few offshore techniques I've seen used, its not that hard.
I listen to FOFOA posts while I drive to and from work. That's how I RRTFB.
Always, something I hear is relevant to a current discussion.
Today, I listened to the words of Another, in "Two", the post on the second anniversary of FOFOA's blog.
It reminded me that we are
-Westerners
-Shrimp
-Living inside the fish bowl
and that maybe we should be humble and acknowledge that there are things we cannot even begin to understand in the other world out there, to which we do not belong.
I love listening to these glimpses into a world I will never see any other way.
Here's what I heard Another say today. I did cut a bit here and there to try and keep it relevant to the current disucssions.
" I have tried to offer these thoughts as a way for many to understand why this modern gold market is not as before...
One may not "accept" the conclusions, but they can, "mentally experience the outcome" of the future.
For this end I will now offer real direction. That of Why, When and How Much! I do this for those of "Family and Country", and persons of Honor. Those that live to help, not take, in times of change!
Some say this knowledge should not be in a "public way", but I say secrets are for fools.
We must grasp that all commerce is done, at least, in the US dollar concept of "valuations of real things". In this way, " the true value of the purchase of real money" is hidden from view! Persons will say in the future, "how could gold be $500 one day and $5,000 the next"? I tell you now, it is already past that level, as in "present reserve currency dealings" it is not seen!
Consider, that in all that you do and think, your "western values" are of paper concepts. From your birth, real things are not used to cross value themselves! When the battle to keep gold from devaluing oil ( in direct gold for oil terms ) is lost, the dollar will find "no problem" with $30,000 gold, as it will be seen as a "benefit for all" and "why did noone see this sooner"?
This question from you, it proves for my eyes what I have said. Indeed, if I viewed as a western person, gold money as $30,000 paper dollar credits, my thoughts would also show "this cannot be"! But, from another world, I view this US$ and say "how can it be of such value to all and have numbers as the stars in heaven"?
For many, the years have passed and this noble metal has not revealed the value it hides."
My (Lisa's) holiday wish to all of you today, is for peace and good will to all that read this blog. It has been a place to learn, not fight, and I for one hope it remains that way.
I have a question that has been puzzling me for awhile.
If I were a giant and I wanted a steady supply of gold why would I not want to own a mine. I am not talking about trying to own one of the majors like Barrick but there are lots of mid tier mines that produce a fair amount of gold. People talk about some mines having to close because cost of production is less than spot. If I am giant with more paper money than I know what to do with why would I care if the mine's cost of production is 1200 per ounce when spot is 1100? It looks to me like it would be a good way for a giant to get gold without effecting much of the market. Simply continue to run the mine at what appears to be a loss while stockpiling the output. Why not?
Just cause some new gold changes hands (did it move?) au masse, does not prove old gold is changing the same way.
For curiosities sake what happend to this 90+ tons? Are they still there? Was this the only gold belonging to this very large whealth fund? If not, how much gold is there? Is this fund sometimes selling gold or only buying?
https://www.youtube.com/watch?v=yEc_cb6y0yA#t=339
"Gold, at its current indicated price, is too small for Big Money to hide in. These low prices can only be taken advantage of by small investors."
It seems that different contributors here have different ideas about the purpose of the comments.
Someone brought up the issue of philosophy and different ways we think about truth and reality. In the history of Western thought one category of knowledge was revelation -- knowledge about the world and reality revealed by God himself. From there the question became whether one can have real knowledge based on what one perceives from the senses, memory and experience. Initially this was not supposed to replace knowledge from revelation, but to ask whether it could be supplemented. And from there the question became whether real knowledge can be dervied from reasoning from those observations and extrapolating. And then whether pure reason can be sparated from those observations, and whether it has any value at all. The whole exercise in the end cast doubt on all possible categories. So what is one to do? Wander through life as though there is no reality, no truth?
Some people seem to need a system that provides all the answers, and they see it as an all or nothing system. Fundamentalist religion works like this. It put the primacy on revelation, and then insists that there is no room to question even one iota of the revelation.
Eastern thought is a it more forgiving because there is more room for mystery. One can say "I believe in revealed knowledge, and I believe the big picture I get from it, but when I focus on the details not everyting can be reconciled -- but that's okay." There is no need for a perfect "system" that reconciles all the details because God is ultimately knowable and bigger than any system. To express doubt about details is not to question the system itself, but to say that the system cannot be fully apprehended by that approach.
As with philosophy, so it is with education. For some, the role of the teacher is to teach, and the role of the student is to be on the receiving end of the lessons. This is probably the dominant model of education int he world, but the weakness is that it results in a lot of conformist thinking and regurgitation.
Another model of education put the student at the center and encourages the student to ask questions. The teacher acts as a guide. Plato's dialogues are the perfect example.
I think those kinds of (sometimes unconscious) choices we have made about the way we see the world and the way we learn also affect what we expect from the comments section here. For some, freegold is like revelation. Another/FOA's writing form part of a system, and the key to everythjing is grasping that system. Some get very defenseive when anyone questions any of the details.
Our host has been exactly the opposite, and has said before that he feels the need to come back and test everything. In this sense freegold is more of a lens. Once you think of it that way, it is not necessary that Another/FOA were right about everything.
Individually I don't think any of us will change our fundamental approach. But I think that's okay. What the board needs a healthy balance between both viewpoints. Enforcement of a rigid orthodoxy is not a healthy thing IMHO.
Test
Stu, I like you have been following/donating for some time, don't like to chat much but you hit a button. As you can tell there is a lot of noise but also a lot of thought. So let's move your theory of the absence of a two tier system forward because I tend to agree with you. Some more anecdotal evidence for you, again take this for what it is...Internet chit chat...I did a lot of flying, and in my travels I would stop at local coin shops just for shits and giggles. I got to know one in particular very well. He is a third generation bullion dealer. This is important because his brick and mortar shop only dealt in bullion not rare coins like most shops. During 2010-2011 as gold was hot and heavy and the vocal gold bug forecaster morons where spewing limited supply, it was easy to get in size over the counter the day of from this "bullion" dealer. By in size I mean less than 2 million but more could be had with a weeks notice. Not the quantities that giants buy in but some food for thought. Let's say your right, 10-15 giants world wide would be the only ones to benefit from such a system. My only thoughts, this was important while gold was trading for oil and gold was kept artificially low. Gold in"size" could have been harder to find let's say pre 2000 before it started to rise. Fast forward to today now that oil is 56.69 (IMHO here to stay) and gold production is up. Would it be hard to imagine that some of these giants Ie. The Saudis could start to bleed gold? The circumstances have changed. This two tier system Another spoke of was his "opinion" of how freegold would come about and very possible pre 2000. This is the topic that I find most interesting, the trigger for freegold. I find myself leaning more towards sovereign defaults in the peripheral economy than the core economy, in other words outside the United States first than the USA. Perhaps a defaults in the bond market locally or now that the repeal of the dod-frank law just passed another bank crisis or perhaps a total collapse in confidence in USA government. So let's say in an effort to expand our brains forward in today's market what in your opinion would tigger freegold?
Michael DV:
The Gold was delivered, but due to logistical issues it was delivered over the span of several weeks. I was present for the first few deliveries. After that my contract expired and I left for a new job. I can’t tell you of 100% of the gold was ultimately delivered.
Canadarob:
Are you still working at White Castle in Paterson, NJ?
My ant imagination has always had a few questions about the two-tiered system as well, but it has never bothered me much because well I'm an ant and know I cannot know the unknowable and thought the extrapolation trail extremely well thought out. But, since we are deep diving the issue I'll pose my questions:
- can we define the vague term "in size" to a range? If in size is way larger than Stu's quantity then it renders his anecdotal tale moot.
- The Sauds are always mentioned, is it possible to compile a list of other probable Giants?
- Here is my real question that bothers me: why would any true Giant or Super-producer ever sell gold at any price, $55000 or otherwise? I imagine Giants having all sorts of more short term valuables like T-bills, castles, whatever, to dishoard before letting go intergenerational wealth like gold. Last to go in my mind when the need arises to raise currency for some endeavor.
The only thing I'm absolutely sure about Giants, they must be getting a lot of strange ( ala Eyes Wide Shut ) lol.
You will not see 80% or more of gold deals.
Pat:
Its like this. Lets say you have a NEED for drug X. It costs in the market 10$. but for you it is good for 1000$. The only catch is that every buy is monitored and it is rationed. such that one unit per year is the most you are allowed. would you pay a 100$ if you could get it off the records?
This is the situation gold is in. You could buy it for X, but in extremely small limits without raising dire warnings. But you know that its worth 100X. If you saw that another party is making a distress sale at 10X, wouldn't you take it?
If Another spoke of a 2 tier system and was a potential Rothchild like I think he was, I'll side with this THOUGHTS. Those people know when and who the winner of World War 4 will be. Merry Xmas y'all. Don't forget to donate.
Everyone is employing their "think like a shrimp" hat well.
As a shrimp, I'm interesting in compiling lists of these Giants. Who, what, and most especially, how much gold do they have? (they better fully disclose or else).(western phenom....nahhhh, not at all)
I also hang around bullion shops looking for Giants and their deals....guess what? They don't exist cause I saw NONE. Heard NONE.
And no, it's not that someone so incredibly wealthy would want to keep their stuff private- who does that???
2 Price levels??? Come on! ME, my friends, all my co workers at teh super cool gold business I work for- NONE have ever paid or seen different price levels so guess what????? Doesn't exist!!!
Plus Bron!
There is no bigger size nor market for it than the Perth Mint!!!!!!!!!!!!!11
They are in the middle of the market and see it all!!!!
And why would any TRUE GIANT choose a bidet over a straight up toilet? That's a private choice you say?? Hah, no way. Me, my friends, and everyone I know has a toilet. So, ldo, no "giant" would do otherwise. No human would do otherwise.
I hope fofoa can confirm my awesomeness cause I have been here since the beginning, donating the whole way. By the way, I am at the All Inn and love free gold. There's just a couple things that need tweaking. Oil, for gold??? Come on. Wherez teh proofs?
BTW, Fofoa is awesome!
Man, I sure am glad we get to hash this freegold thing out now and get it right.
I'm also pretty sure it was supposed to be An Other- not Another but that's a minor issue I have. Maybe we vote on it?
Merry Christmas everyone. Let's all buy gold this year and crash $IMF!
and even though I posted here since the beginning... I don't remember the names I posted under!!!
Silly me, I use aliases all the time and never write them down.
Much like the existence of dark matter is inferred by the stellar velocities in a galaxy, wouldn't the presence of such an upper tier gold market have an effect on other markets?
What would we look for as a clue?
@jojo all very entertaining, but not really a substantive rebuttal. More childish nonsense. I had assumed you would do better given your posting history here. Weak sauce.
@indenture Sorry that I may have created a blogspot account 4-5 years ago and never used it again. If I posted 5 times it would have been a lot, and even then I think they were just minor clarifying questions If you find that difficult to fathom I'm sorry, but the idea that I'd make that up knowing our host reads this and could easily expose me as a liar (and yet hasn't) is kind of dumb.
@jojo How many entities or "Giants" would have the ability to execute multi billion dollar gold purchases? I mean, the list is small. Very small. And once you get out of the ME it's likely close to the 10-15 number I guesstimated. Of those, it shouldn't be too hard to imagine why any one of them, unless a new "giant" would ever have the need to buy gold "In size" in such a short timeframe to make paying many multiples of the current price. I'm sure honest minds can disagree, and clearly do, but this is not some crazy hypothesis I'm pulling out of my ass.
And I am really confused why you find it necessary to play up my description of my "insider" status when I've gone out of my way to play it down in a very really effort to avoid presenting myself as something I am not. You're sure slaying strawmen, but I'm still waiting for an honest, respectful interaction. Early hitting the christmas wine perhaps?
@chandra Can you think of a rational reason a "Giant" would "Need" gold in size in a short enough timeframe to justify paying 20x the spot price? Put your imagination hat on. I'm a multigenerational giant having acquired massive wealth and presumably gold reserves over many generations. Yet all the sudden I would need so much gold so quickly I am going to pay 20x spot to get it? why? Other than the expectation of an imminent crisis I'd really like to hear some honest logic. And if they are presumably buying from another "giant" why would they sell it if they also knew it's true worth? How often do you imagine these transactions going on? It's not like giants whip around billions on a whim, and presumably the only seller would be another "giant." where are all these "giant" sellers coming from? Is it really all that logical? The more I chat about this and see the frankly insane responses I feel like I've really stumbled upon a nerve.
I wish I could just tell the whole story right here, I suspect one or two of you would be gracious enough to apologize.
I'll say this, I WILL be at the next FOFOA dinner, and I'd love to meet some of you in person and match the internet bravado when confronted with the real deal.
Oh my Stu really? That last comment was as juvenile as you it comes, not-so-subtly insinuating to the "internet bullies" that they had better watch out if y'all even meet up in person because by Crom there will be a by-god reckoning, confronted by 'THE REAL MUTHAFUGGIN DEAL." Yassir yassir y'all better pack a lunch.
Sheesh- and you want to be my latex salesman.
If I am a bullion bank, I of course always keep some slither of physical gold reserves on hand, but not a whole lot since I'm more in the business of churning financial paper assets - including selling many many claims on the gold reserves that I do choose to keep on hand; claims that I know from experience are very rarely exercised by the vast majority of my customers. I am in the business of making dollars for me and my shareholders.
But, every once in a while, I need to keep one of my customers happy because they are today, for some out of character reason, ordering, I dunno let's say 150t of gold for delivery in 30 days time or something like that. On these occasions, I am happy to pay well over the spot price to secure access to this gold quickly and reliably, from someone who I happen to know does have it on hand, and knows as well as I do what it is really worth to myself and my bullion banking buddies when we need it in a hurry.
Happy, because paying a large premium for a few tons of gold every once in a while like this, maintains the illusion that I have unlimited gold reserves available to me that I can use to satisfy any demand for physical gold at close to the public market price. This illusion enables me to continue selling many many claims on the gold reserves that I do normally keep on hand, which as I say, I know very well are only very rarely exercised because everyone knows that I have the gold whenever they might want it. This arrangement makes me and my shareholders rather a lot of dollars.
My bullion hoarding friends are quite happy to sell me this "overpriced" gold when I need it from time to time, while they are confident they can patiently replace it over time at much closer to the spot market price. Without stressing the system, like my less patient and understanding customers.
Everyone's a winner.
Wishes for a prosperous 2015 to all.
@DP thats a fascinating conspiracy theory, but thats all it is.
So true, DP. Long time readers recall the BB situation.
FOFOA: And what is it that banks do with unallocated accounts? They make loans to generate income for the bank, and they use fractional reserve accounting to juggle the deposits and (hopefully) keep everyone happy. And in the rare situation where they come up short on reserves, the Central Bank stands ready to backstop their fractional reserves with a loan of extra reserves.
Even today, a few of the biggest banks still have bullion departments where they can take deposits in physical gold. These banks are what we now call the Bullion Banks. This bullion banking practice seems very foreign to us shrimps with a little gold in the family safe. But yes, just like the billions of ounces that existed during the gold standard era, this practice of bullion banking still exists.
And today the bullion banks still operate with fractionally reserved unallocated gold. Some reports put the remaining amount of unallocated gold being juggled within the banking system at about half a billion ounces, or 15,000 tonnes. But so far, this is apparently enough to support the meager delivery demands on the spot gold trade as well as the allocation needs of the bullion bank-operated ETFs.
And long time readers recall how FOFOA defined Giants:
FOFOA: ANOTHER: "I ask you, how many of your bars in tonne? This is the small purchase size."
Good question. How many 100 ounce bars are in a tonne? The answer is 321 and a half. Or 32,150 ounces. And this is a "small" giant! 4 billion ounces in private hands. Let's take just half of that and wonder how many of these "small giants" there might be in the world. 2 billion divided by 32,150 = 62,208. So I'm going to go out on a limb and say, conservatively, that there are probably "tens of thousands" of these so-called "giants" in the world. That 4 billion ounces is out there somewhere, in private hands, and that kind of family wealth doesn't necessarily show up on things like the Forbes list.
And why would long time supporters threaten you with their physical presence or call the beliefs they support with their donations conspiracy theory? Who knows? Not me.
Wishing all long time supporters and all you other jerks, a very epic Christmas.
https://www.youtube.com/watch?v=lzYPQfAfq0U
If it comes to buying gold in large quantities, it is NEVER a question of buying a specific amount of gold. It is ALWAYS a question of transforming a specific amount of currency—into something which is not currency.
Now. When your partners on the other side of the table tell you, “yes, we can take your currency, and you will receive X tonnes of gold”, and when the tonnage of such transfers is not changing very much for the given amount of currency:
Where would be ANY reason for criticize these deals? The discrepance to the price of some kilograms? Or, to be more realistic, the discrepance to the price of ongoing paper deals?
I think we have to look at the story just from the other side of realitiy. Relevant are not the small deals of the many. Relevant are the big deals of the few.
Knowing these big deals, and knowing the (very small) amount of gold, flowing free for being sold and bought, not any huge currency price for gold is astonishing, but the almost unbelievable shrimp (and paper) market price of only 1200 USD.
Now. Someone came and told his readers 17 years ago, “Think that I a fool, because I trade gold for thousands US an oz.?” What you can do with such a statement?
(a) You can say, this man is ridiculous in saying such idiotic things. Fine! That’s your thesis #1.
(b) You can say: “Wait a minute. Thousands USD an oz? Let’s see if there is any logic behind this. I take it for true, as thesis #2.”
FOFOA decided (thanks for that) to look into thesis #2. And found a lot of hints and signs which made this thesis plausible. And he published these hints and signs in a blog.
Many thanks for this too.
Now, Stu. If you disagree with this thesis (#2), it is NOT allowed [in a discussion using logic] to ignore all these six years of given “hints and signs” and yet to say “this thesis [of a 2-tier market] is bullshit”.
EITHER you must (!) present an argument which falsifies the underlying thesis.
OR you must (!) present a framework which explains all these “hints and signs” from another perspective, other than this “2-tier market”.
Building up such an alternative framework could be a highly interesting task. I hope we agree that the comment section of a blog which follows thesis #2 can NEVER be a place where such an endavour could have any chance of success: purely out of organisational and technical reasons.
You need your own structure of posts, you need your own sequence of logic, you need your own possiblity to open the room for discussion, and so on.
So please: Let us know one day or the other the URL of your blog. I am sure quite a lot of us would be willing to investigate into your logic there.
@einanderer No, I prefer to post here thanks.
I believe I laid out some very simple logic as to why a two tier market might not make sense, and judging by the replies, it seems quite a few others share the skepticism. You clearly believe in it wholeheartedly. No problem, just presenting an alternate experience and viewpoint that I believe makes more sense.
I would reply to you point by point, but the problem is you are interjecting your opinions as presupposed facts. It's a bit of a difficult task when someone proposes the unknowable as fact and goes from there.
Again, COULD your reality be true? Perhaps. Although as i said I believe it would only be so during brief periods of crisis. And based on my own experience (and I realize and understand why that would be so questionable to the regular posters here, I dont take it personally) I believe your assumptions on the availability of gold in size are false.
I appreciate you inviting me to take my opinion to another blog, but fortunately for me I guess, thats not your invitation to make.
@answer,
This two tier system Another spoke of was his "opinion" of how freegold would come about and very possible pre 2000. .
Really? The 2-tier system as a step onto Freegold?
I understand the 2-tier system just the other way ’round:
Freegold is the last step for uncovering that a 2-tier system existed in all these decades.
The Freegold system is not dependent of a 2-tier system before. It would emerge also without. But if the 2-tier market exists, to uncover it Freegold is needed.
You see the difference?
Great comment ea,
Made me think, this whole theory of a two-tier market for physical gold is really just an instance/a corner case of the more general Freegold concept that gold prices currency, not the other way around. When the giant comes into the office and loads millions of $'s onto the table in a bid for gold, it's not really not bid for gold, it's an ask for his (too many) dollars...
Honest question. Do you also have issues (besides the 3 we've already recorded) with the "gold prices currencies" concept, Stu?
Also, do you believe that the dollar is overvalued in the current IMFS?
Frohe Weihnachten, Merry Christmas!
Jeff, in spirit of Christmas, thanks for the ref. to "rich young ruler" story.
@Stu,
(…) but fortunately for me I guess, thats not your invitation to make
Well, let’s wait and see.
Those commenters of relevance (= being knowledgeable about background, content and goal of this blog) will ignore you, finally.
This will give you a lot of room to dominate the comment section—or to keep more or less silent after having presented your thesis already.
The outcome, believe me or not, will be the same. —
Have a nice holiday, all.
Hi BF,
Since you are the only one who took interest, one of the most important aspects of the rich young ruler story is that when he walked away, Jesus didn't chase after him or attempt to convince him to change his mind. That's the way truth works; you are free to accept it or not but no one will argue you into the kingdom.
Topical, and timely.
I agree Jeff!
Another topical feature of the story is that it forces us to contemplate what really keeps us away from the full truth. Do we "go away in sorrow" once we find out the message might hurt our feelings towards our dollar-denominated paper assets?
@anderer I have no interest in dominating the comments blog, and frankly this is the only topic I can find about freegold I think worthy of much debate, because in my opinion it has the most contrary evidence. I'll fade away from this subject because I don't want to be a nuisance. But I wont be dissuaded by 3 or 4 regulars who can't even maintain a modicum of civility. I enjoy a good internet knife fight from time to time.
But for the record, the best rebuttal I've seen so far is...well ANOTHER said so.
@Stu Ungar
A few years ago I read the book on you (well, your pseudonym) - quite the interesting human... and interesting choice of 'names' for yourself. What a gambler...
I've read everything you have said - and kept an open mind. But something tells me that you are full of it (just my instincts). But regardless - either way, I am still buying into the strong possibility of a two-tier system. You claim to believe in FG yet can't stop trying to refute this one point. Odd, IMO. In the past week or so, you are by far the most oft-poster here (by a wide margin), for someone who was content to lurk for so long. Odd again. And you can't recall those pesky pseudonyms - were they also poker-related? I guess it doesn't matter, does it. Personally, I also find that a little odd though. But even if I find you suspicious, and maintain an open-mindedness to believe your story (and the other leather lung) - we have all continuously told you that it doesn't prove that there isn't a two-tier system for Giants (because you almost put together a large AU deal.) Pretty amusing if you think about it. It is unfortunate that you can't imagine an entity or entities, who have access to more continuous currency than fathomable, who want to purchase XX tonnes of Gold a month - without publicity - meaning without the desire or necessity for arbitrage profits. It seems very plausible to me. And it can be done because it seems so implausible to shrimps like you.
I wont be dissuaded by 3 or 4 regulars who can't even maintain a modicum of civility
You really need to get over this and move on... snarky comments back are only further weakening your credibility, IMO. It's on very shaky ground right now. Best to move on maintaining the knowledge that you are right... about something absolutely unprovable. Congrats and Merry Christmas to all and to all a good night...
Stan, is Paterson, New Jersey, USA, in Canada? To answer your question more seriously, no, I don't travel 12,000 km to work
Hello Stu and Merry Christmas!
Since you seem to want me to authenticate your bona fides, I need to correct something which I think is misleading. You said:
"I wish I could just tell the whole story right here, I suspect one or two of you would be gracious enough to apologize."
Well, I think there is at least one element of the story that can be revealed without upsetting anyone. Who was the client interested in possibly purchasing 150t? Was it A) an individual Giant who wanted the gold for himself and would take it off the market, B) an aggregated "Giant" like a SWF or a CB, or C) a company more or less in the gold business that had plans to resell the gold to shrimps?
I think this makes a difference, and I didn't know the answer until you told me last night.
Before you told me who the client was, I figured your potential buyer was likely a gold industry distributor of some kind, and not an individual Giant. You didn't say so, but if it had been an individual Giant, I think you would have said so. When we're talking about Another's two-tier market, we are not talking about companies buying and selling. We are talking about individual Giants who are buying, not to resell, but to remove that gold from the flow altogether. If your 150t deal was, in fact, gold industry companies on both sides of the deal, then it would have simply been a rerouting of the flow through the buying company rather than a removal of 150 tonnes from the subterranean stream.
Now that I know who the potential buyer was, I am shocked that you draw the conclusions you do from your own experience. I think we can safely tell everyone that the client was, in fact, C) a company more or less in the gold business that had a plan to resell the gold to shrimps. And not only that, being an LBMA market maker and clearing member, it's a company so central to the gold business that it should have been able to answer the sourcing question in-house rather than having a third party make inquiries at Swiss refineries.
So thank you for sharing with me the details of your story, because I found it not only consistent with and supportive of, but practically proof of coat-check, two-tier and LBMA tightness. Funny how two people can look at the same evidence and come to opposite conclusions, huh?
Sincerely,
FOFOA
@tEon I don't know I'm right. I'm just coming to a logical conclusion from the data.
@fofoa check your email Homie, I think you may have misunderstood because of my brief explanation, but that gold actually could NOT have been resold, so it was not for distribution to little shrimp. But that aside, would you mind elaborating a bit on how who the buyer is would matter? How would it work to confirm the idea of a two tier market? tonnage is tonnage, no? I'm open, but I'm not seeing the relevance. My point was and is only that gold was available in size and acquisition was not a problem. Anyway, Merry Christmas my man, I am very open to your challenge and would love nothing more to be proven wrong, but I'm having trouble seeing how you;re coming to your conclusion based on what I told you. And please, for confidences sake....keep it vague as possible publicly.
Gracias.
Hello Stu,
"that gold actually could NOT have been resold, so it was not for distribution to little shrimp."
Keeping it as vague as possible, the whole point was to resell it! I think what you mean is that the gold could not have been physically moved once this 150t purchase was made, but the whole point was to resell its ownership. The client wasn't buying the gold for itself.
Sincerely,
FOFOA
Merry Christmas fellow brainwashed cultists! May 2015 be a golden year and may we all RRTFB!!
lets say that even if the system can be stressed by huge buying pressure by those who have giant purchase power:
1) individuals: nope, one who has quite a bit can lose alot. ie banker suicides; not worth it.
2) corporations: well some important individuals still have to make that decision back to 1)
3) established SWF,CB: break their own system?
4) minor SWF, CB: um not sure if thats good idea, look what happens to ukraine, iraq, libya, you name it.
in other words even if it is possible to break the physical market, what is the motive?
Stu:
Can you think of a rational reason a "Giant" would "Need" gold in size in a short enough timeframe to justify paying 20x the spot price?
Its not a question of timeframe at all. It is the question of whether to buy the gold or throw the money away.
If you read the Giant series and understand it. The Giants are not buying gold to have more gold, they are buying gold, because they have nothing else that can hold the wealth.
Unfortunately for the truly large giants there is not enough gold at the current prices that they can convert the money they are making into wealth. This is why the prices of art work and extremely rare stones is going through the roof. They don't have enough assets in the world to buy.
You would also understand from the series that Land and other similar stuff require maintenance, and as such is not really conducive for storing wealth. Also they generate more wealth to be stored away.
This is why the Giants, if they found any gold hoard that has come to the market DISCRETELY would be willing to pay several times the current price. Because that gold would otherwise go to the open market where they cannot buy much easily, without opening themselves up for scrutiny.
Freegold theory does not need Two Tier market, but its a natural consequence of it. If you believe in Freegold, then you have to believe that Two Tier market would exist. And by definition you cannot know that such a market exists unless you are one of the handful of the Giants. Because these gold hoards never would come to the market. And I would think there may not be such a transfer every year. It would be extremely rare, because the Giant that owns that hoard would sell it only as a last resort. Probably because the owner died and the children do not understand gold. A very rare event indeed.
Merry Christmas to everyone.
Merry Christmas all.
Fwiw I still find the current discussion with personal attacks distasteful.
For the record I want to state that I am not a fan of the coat check room theory either. I grant that it may be true, but it is also possible that it is not.
I did a quick search to see my public comments thereon and couldn't find much. I will not be sharing my private objections.
Did find this : http://fofoa.blogspot.com/2013/06/snapshot-day.html?showComment=1373994832082#c7776552390022770313
As for the two tier market. I consider it logically consistent with the freegold view, but only on a much smaller scale than held here.
On this point I found a bit more of my earlier objections :
http://fofoa.blogspot.com/2014/02/think-like-giant-3.html?showComment=1393758222692#c2133074168265833595
http://fofoa.blogspot.com/2014/02/think-like-giant-3.html?showComment=1396311678467#c2788075911092377911
http://fofoa.blogspot.com/2014/02/think-like-giant-3.html?showComment=1396354410295#c2419356630628392763
http://fofoa.blogspot.com/2014/02/think-like-giant-3.html?showComment=1396364357745#c7064040576599990407
http://fofoa.blogspot.com/2014/02/think-like-giant-3.html?showComment=1396379878104#c1268918651014055746
http://fofoa.blogspot.com/2014/02/think-like-giant-3.html?showComment=1396390454597#c1902874834649318737
(not sure all these links will work since some comments are on other pages)
I generally agree with the FG thesis, but neither the two tier market at proposes scale nor the coat check room theory I consider necessary for the general thesis.
Anyways. I guess that makes me a troll or something too huh?
TF
Hi TF.
If a comment is on say page #2, you can adress it via inserting after the question mark
commentPage=2&
Example:
http://fofoa.blogspot.com/2014/08/six.html?showComment=1413114855506#c5450569248636085097
=>
http://fofoa.blogspot.com/2014/08/six.html?commentPage=2&showComment=1413114855506#c5450569248636085097
@MF:
No, that makes you a heretic. ;-)
Merry Christmas everyone!
Wow, this just gets better and better...
We now know that this 150t deal wasn't a giant taking physical gold off the table. It was a LBMA market maker and clearing member (one of: Barclays, Deutsche, HSBC, JPMorgan, Scotiabank and UBS, in other words: a top-brass bullion bank). And this BB was trying to lure more gold into the system and then sell paper certificates for the stack. And this deal never materialized, right? So a fail for bullion banking, right?
No new paper gold product for "investors" backed by 150 tonnes of "newly added" physical gold in 2011.
Since then quite the opposite has happened for the bullion banks. In fact, since 2011 540t has flowed out of GLD. So now they only have 713t on display...
This datapoint reeks of LBMA thightness. It is consistent with a two-tier market and fits perfectly with coat-check room theory of GLD.
I hope more details will come forward. It is surely getting more and more interesting.
Thanks for Freegold-lens FOFOA, you're awesome!
Stu, I too have difficulties with understanding how you've come to reach the conclusions you have from that experience.
An advice: Try turning those Freegold-binoculars around 180 degrees. I think you're looking through the wrong end of the optical device...
@burningfiat You;re making several incorrect assumptions and misrepresenting the transaction. FOFOAS description of it based on what I emailed him actually has me confused as well.
You're interpretation that this somehow represents TIGHTNESS is hysterical. It's so far off from reality I'm afraid I can;t help you. Talk about seeing what you want to see. If anything it was lack of demand.
If you'll excuse me, I'll allow myself to interpret FOFOA's retelling of your story as the real deal, thank you. #credibility
"Lack of demand"? Yeah, for paper gold. GLD outflow is undeniable proof that demand for physical gold hasn't gone down!
You can interpret it any way you choose, but for my own edification, can SOMEONE please explain to me how the correct interpretation is one of LBMA tightness? I'd really love to hear it. Please, I beg you.
@fofoa except a request by a shrimp for delivery. Then it could have moved...just to clarify.
@FOFOA "Keeping it as vague as possible, the whole point was to resell it!"
This is actually backwards, as I explained. Nothing would have been resold, the commitment to buy it would have been made before any purchase was made. Can you explain what you mean by re-sell?
burningfiat,
I will follow your lead and choose FOFOA's interpretation of the real deal. FOFOA has 6 years of cred built up and Stu had about 10 minutes worth that he has long since cashed in.
I think we can settle the question as to whether Stu has anything material to add to the blog.
I suppose all I can say at this point is thank goodness for posters like Motley Fool. He may not agree with me, but at least he doesn't have his head up his ass to avoid seeing anything but what he wants to see. The spin here is scary. Scary enough that I want to go sell some of my gold. Maybe I WAS a brainwashed cult member.
Think like a Wise Man:
Gold......the poor man's Myrrh.........{;<)>>
clarat baranadu nictu
Excellent! There is always someone somewhere who could use your gold. In fact, I will be looking to close a trade after the new year, I'll be looking to be paid. I would love to trade you some dollars for 20 ounces. Interested? I think perhaps I would frame and display them in my Man Cave. You know, a trophy thing.
Let me know if you can hang.
"This is actually backwards, as I explained. Nothing would have been resold, the commitment to buy it would have been made before any purchase was made."
What I think you are trying to say here, Stu, is that the ownership of the gold would have been presold (rather than resold) on paper and then the amount physically purchased (150t or whatever) would equal the amount that had been presold. Maybe someone else can explain to me how this invalidates my statement that the whole purpose of the "150t" sourcing was to resell it because the company was not buying the gold for itself.
"except a request by a shrimp for delivery. Then it could have moved...just to clarify."
This statement tells me two things. The gold could in fact be resold (perhaps by whoever it was presold to)… and to a shrimp no less. Because somehow a bank purchases 150t of gold and somewhere down the road a shrimp requests delivery and then some shrimp portion of the gold is moved.
Let's look at Stu's comment yesterday:
"I think you may have misunderstood because of my brief explanation, but that gold actually could NOT have been resold, so it was not for distribution to little shrimp."
Today we have learned that it "could NOT have been resold" [by the bank] because it was actually being presold [but then, of course, it could be resold by whoever bought it], and that, in fact, distribution to little shrimp would have been possible as long as said shrimp requests delivery…just to clarify. I rest my case. ;D
Merry Christmas everyone!
FOFOA
Figured it out yet Stu?
Bless you FOFOA. This evil gold hoarding, jerk, time misallocating brainwashed cult member appreciates your clarification.
Matrix: That is going to be one hell of a man cave.
Indenture,
It's Christmas. I'm feeling the love. The Man Cave is beckoning. Perhaps it's time for another FOFCON. Maybe Stu can come with some gold and we can do it up in style? Best martini bar in the state of Georgia.
Merry Christmas to all of you cultists!
@Pat,
"- The Sauds are always mentioned, is it possible to compile a list of other probable Giants?
- Here is my real question that bothers me: why would any true Giant or Super-producer ever sell gold at any price, $55000 or otherwise? I imagine Giants having all sorts of more short term valuables like T-bills, castles, whatever, to dishoard before letting go intergenerational wealth like gold."
I think the giants are CBs and a very few families wit a lot of old money and collections. They probably have to pay the gold in term of favors rather than cash.
Occasionally, a small giant gets the gold by doing the right thing.
MH17 was shot down by air to air missiles
http://bit.ly/1v3LlTB
The Dutch government has refused to reveal details of Joint Investigation Team examining the downed Flight MH17. If the participants, including Ukraine, don’t want information to be released, it will be kept secret.
http://bit.ly/1v3LlmA
122 Tonnes of Gold Secretly Repatriated to Netherlands
http://bit.ly/1v3LlTI
I think Germany can't get their gold even if they were willing to pay $2000/oz. and I suspect China is getting theirs because the real price of their gold is the continuance support of the dollar.
The hole in my theory is that India got a lot of gold and I don't think they did us any favor.
tau:
Last time I checked the mortality rate for every single one of us is 100%.
So unless you are in freegold for your children, yes, you are running out of time. 17 years and no revaluation. Another and FOA are long gone, never to be heard from again. This is no longer a trivial piece of time for a human lifespan. Many here and elsewhere have lost out on other opportunities because of their dedication to freegold.
Even as you laid low, bought your gold coins and bars and thought yourself wise and in-the-know, millions have speculated in the market and maid huge currency gains, which they have used to make big purchases, and, if they want, purchase more gold than you will accumulate in all of your years.
And they did so at 1300 dollars an ounce. 1200 dollars an ounce. Not 50,000.
As it is right now, all you have is a very uncertain inheritance for your progeny. And no hyperinflation of the dollar in sight.
Do you see my point. 17 years is enough to declare that freegolders have lost out. 5-10? Probably not. And I'm a freegolder myself, but I have enough guts for self examination.
So I challenge anybody here to put themselves on the line and offer up a timeframe.
Judie Toy:
The problem with your theory is that you are not able to distinguish the shrimp buying from Giant buying. Shrimp buying cannot be curtailed. It will break the fix. The buying in India and China is Shrimp buying. If they cannot get the gold, the fix is toast. The CBs are a different matter. China is not disclosing how much it is getting. Russia is. The difference is that Russia is in an open war, although it would not break the system directly (by purchasing it in the open), but it can show that it is buying gold. And any CB can get the gold that is destined for Shrimps in their country. Once the gold is in their country, no one can stop the CB from getting at it. Whether they choose to show it or not is upto them, on how openly they want to spite the USD.
Random Man:
A trader will never be welcome here.
We here are not interested in making paper profit. Gold is the majority of the wealth we want to have. So how does it matter when the crash happens.
Yes it does matter to people who want to prepare for the chaos during the crisis. This is more for the people that are going to be in zones that go hyperinflation. I was very concerned about it. But now that Oil has gone down, and suspect that it will stay down till the crisis, I do not expect an HI event in India now. A big stress agent has gone :-). Now I do not care when it happens.
Why can't you just put everything in gold and sleep easy? Why must you want to make more paper profits? Want to be too big too fast?
By the way are all the mines closed yet. Wake me up when it happens. Till then don't talk about timing. I suspect gold will have to be much cheaper and for much longer till that happens.
@Random Man
So unless you are in freegold for your children...
Can't speak for anyone else but I am.
And no hyperinflation of the dollar in sight.
Yeah - everything is hunky-dory for the dollar, right now - best it's been in decades.
Do you see my point. 17 years is enough to declare that freegolders have lost out
on what? accumulating dollars?
And I'm a freegolder myself
No, I don't think you are. You are a trader who wants a high price for his gold to sell it for lotsa dollars, and then wants to buy shit.
So I challenge anybody here to put themselves on the line and offer up a timeframe
"gold transcends human valuations thru time and life."
We, and I, as physical gold advocates, don't need timing for this position! Timing is for poor, paper traders. We are neither and our solid, long term, one call over several years to hold physical gold will confirm our reasoning. There is no stress for me to own this ancient asset as it is in a good proportion to all my other wealth.
There is no trading an economic system whose currency is ending its timeline. Smart, quick talking players will joke at our expense until fast markets and locked down paper gold positions block their "trading even" move into physical at any relative cheap price. Mine owners will see any near term profits evaporate into a government induced pricing contango that constrains stock equity with forced selling at paper gold prices.
My personal view
They will, one day in the future, helplessly watch their investments fall far behind a world free market price for physical gold. Further into the future, one day, mines will make money on the last thousand per ounce price for gold; only the first $XX,000.00 of price will not be available to them.
Random Man:
“17 years and no revaluation”. I fully agree with you. Freegolders refuse to acknowledge that our monetary system has matured beyond Gold. The US Dollar is not just a currency, it is a franchise, a monetary internet, a way of life. Societies and monetary systems progress and move forward. Gold is like your grandfather’s Oldsmobile – an old, but nice design that has little utilitarian value in today’s modern world.
In the Middle ages it was quite common that monarchs/aristocrats bolstered amassing large dowries when marrying off their daughters. Some time, gradually, before the French revolution that changed. WHY?
The first world war happened despite the wish of the old rulers. After the wars of Louis XIV it become known to them that they lost power in each and every war that followed instead of gaining some. Still the calamity happened. Many died. Did those that bled the most gained the most. No! WHY were they fooled in paying up in blood?
WHAT is the value of political power? Do those that „ have such a large volume of currency coming in every month“ use it beyond measure for political gains and purposes.
DO black money and secret wealth equal taxed income for all to c. Do all taxable / easily expropriatable items, businesses, large swaths of land, properties of wealth and value (e.g castles) have a two tiered market in opposition to art work or collectibles. So that those who own them do not pay a higher ‚price‘ to societies for the privilege of owning them.
It is a headache.
Cheers.
Random Man and his buddy Stan
Noisy blowflies from a shit can
One and the same
Their trolling is lame
I hope our Stu's not part of that clan
Pretty lonely Christmas Stan? It must be for a "wealthy industrialist" like yourself to be s...trolling around these forums. Either read a little (like bare minimum one post) of this blog or be on your way.
does revaluation require announcement by BIS or some transnational organization? or is it one of those market price will take care of itself type of things? just trying to clarify...
Stan:
Thanks for revealing that you are nothing but another dollar stooge. You are a trader, as Random Man. And you don't care about the teachings on this blog. You are just looking for some ideas to make the next trade. You don't belong here.
Hello Bright Aurum,
The biggest giant of all is the collective; we the people. There is a quote, probably apocryphal, from Joe Kennedy: 'I would gladly give up half my wealth to keep the other half'.
That is one reason gold is worth so much more to a truly wealthy person than anything else like land or political power. You should ask a Russian czar, yes?
Okay Stanrandomsamman, time to cough up the $400 and talk about your latest stock trade idea over at trader Dan's new pay site. It doesn't look like anything here for you.
@Stu Ungar
I agree with your comments. This is why I don't care for the posts regarding GLD and all that BS.
Freegold is all big picture stuff. Its not about monthly or even yearly predictions. If a rerun of the credit cycle from the 60's to the 80's is mathematically impossible 10 times over, then where do we go from here ? That answer can be found on this blog.
"The US Dollar is not just a currency, it is a franchise, a monetary internet, a way of life. Societies and monetary systems progress and move forward. Gold is like your grandfather’s Oldsmobile – an old, but nice design that has little utilitarian value in today’s modern world."
Now THAT is gold!
We watch.
@anand srivastva,
"The buying in India and China is Shrimp buying. If they cannot get the gold, the fix is toast."
I understand that the flow to the shrimps cannot be stopped but obstacles must be installed to minimize flow to unwanted shrimps. In the west, paper gold instruments did a pretty good job on diverting physical flow to unwanted shrimps. However, in India, gold import tax has not been very successful to stem the tide. I can't see the big boys here didn't try harder to stop the flow to India. And if they can't, maybe they are not all that powerful to stop other things from falling apart.
Btw, the lower oil price could be the black swan that will blow up the banking industries and the stock markets. The dollar global reserve status is supported by both foreign private investments/hot money and public governments support. In the past, foreign governments support would step in when the hot money fled the U.S. markets to maintain global economic stability. However, these public supports may not be there in the next crash since they have already given us 4 years to prepare - 2010 IMF Quota and Governance Reforms.
http://philosophyofmetrics.com/
@ Random man
"So I challenge anybody here to put themselves on the line and offer up a timeframe. "
First of all, most ppl are incurring currency losses as time goes on. Not gains. Secondly, not everyone is American. How do you think the Russian freegolders are feeling as 2014 closes ?
Jim Grant answered your question recently. Read "How money dies" I am almost done it. The money printing route is the most politically viable in the short term for a reason. Because it takes longer then anyone expects it to and there is endless room for propaganda. Since this involves the hyperinflation of the reserve currency, it will take that much longer.
I thought it was going to happen sooner too. But I am happy that my gold purchasing is done. I have enough for protection and enough to satisfy even if all we get is what Jim Rickards is prognosticating. An SDR concoction and gold around 5 to $7000 an oz.
If you meet your target, then stop buying. And speculate in all the Chinese solars, 3D printing stocks and social media stocks or whatever ppl are getting rich on these days. Ah but you will say "If i only bought US blue chips".
Read the aforementioned book. That is exactly what happened to German blue chips as they waltzed head on into hyperinflation.
150 tons at 20X spot is around 120 Billion. Why wouldn't one get the same 150 tons over time for only 6B, the other 114B can be put in res/comm real estate, farmland, private businesses, secured senior debt, preferred shares, and general equities from which a yield could be used to get more gold at shrimp prices. This way one ends up with way more than 150 tons.
But nooo that wouldn't make me a "saver". Some of you bring to mind the apes in 2001 jumping around all frantic and flustered around the monolith. Unlike the movie this crowd doesn't have a Moonwatcher smart enough to understand the power of compounded returns. Ask yourselves how does a shrimp become a giant or merely a jumbo shrimp if he only saves in gold? It ain't going to happen I tells ya.
Stu
"Freegolders refuse to acknowledge that our monetary system has matured beyond Gold."
This makes me doubt your understanding of the things discussed here, despite your prior claims.
"Freegolders refuse to acknowledge that our monetary system has matured beyond Gold."
Might I suggest:
http://fofoa.blogspot.com/2010/12/focal-point-gold.html
Making money out of equities and then buying gold?
Well, here's mine personal story. I got fleeced in 2000-2001 IT boom. I got fleeced in 2008. In between I was long time supporter and a stock owner of Digital Illusions (oh the irony! :-) or better known as DICE, creators of Battlefield franchise. Just before they released Battlefield 2, Electronic Arts (bastards! :-)) came in and bought the whole company for pennies on the dollar. 10% of stock owners didn't want to sell but after a year EA did compulsory share purchase. So, as I little guy, I learned you get screwed either way. That was before today where 70% of stock trading is algotrading or High Frequency Trading. Or, in other words:
"Too small pond, too many crocodiles."
I can't afford fancy real estate. Or fine art. I know nothing of classic cars nor do I have the room for storing. I am too stupid for trading stocks. Or, more importantly, I came to realize I'm no investor but a saver. And of all the things to save, in the physical plane, physical gold is the best and most convenient. In fact, that's the only thing I can afford out there that also big guys are buying.
So, for me personally, physical gold is a no-brainer. And have been since early 2010. :-)
@MF
"Stan" made that profound comment, not "Stu". After reading Stan's comment again I am afraid you inadvertently might have lobbed the most insulting personal attack of all at Stu.
Stu simply suffers from being too close to the side show gold market to believe that the big show happens behind closed doors. He's not the first to claim no tightness in physical and no two tier because they don't see it, and they believe they see the whole gold market. I keep looking through the old writings by Another to find the part where he says, "gold trades at higher values than the published market prices in front of many gold industry employees. Check with them to verify".
For those of you following this two-tier argument and you happened to skip this February's "think like a Giant 3" post, go check it out.
Buy an index fund. REITS. Mutual funds.
What if that 114B only yielded 2%? 10Y treasuries yield 2.25% That would be 2.25B per annum. Roughly another 50 tons of gold at shrimp prices today.
Why would anyone want to pay a 20X premium? The opportunity costs are tremendous.
Good comment Dante_eu.
Good thing there is gold, eh Dante?
"In this world we all need much; blessings from above,,,,, family,,,, home,,, friends and good health. But after all that, one must have currency and an enduring, tradable wealth asset that places our footing in life on equal ground with the giants around us,,,,,, gold!" -FOA
Apparently the holiday time travels can be very confusing and result with some folks making wrong turns or taking the wrong exits and then ending up in a place not at all where they intended.
The US Dollar is not just a currency, it is a franchise, a monetary internet, a way of life. Societies and monetary systems progress and move forward.
Buy an index fund. REITS. Mutual funds.
https://www.youtube.com/watch?v=6ZUpfqTUgyQ
Agree jojo - we watch.
Somebody wanted a date. Look how much has to roll over with 5 years.
http://av.r.ftdata.co.uk/files/2012/06/Maturity-Structure-of-Treasury-marketable-debt-outstanding.png
Well.., a lot of talk about the two-tier market and links to TLAG3 so lets dissect some..,
That post started off with some reference to a tv-series and a movie. I'll disregard that for now.
FOFOA - Another wrote about a two-tier gold market, where Giants were trading gold *IN SIZE* (for objections further down the road I'll also state that IN SIZE =>1ton, my remark) at a price that was multiples of the open market price. He wrote, "Think that I a fool, because I trade gold for thousands US an oz.? You will think much on this in the future."
ME - This, to me makes sence. Another was talking abut the two-tier market that existed with gold to Saudis..,
FOFOA - There is disagreement, even within the ranks of evil gold hoarders and time misallocators, as to whether those statements should be taken literally. To make the ever-present religious analogy, it reminds me of the age-old disagreement, even among scholars, as to whether the Bible should be taken literally or figuratively.
ME - The reality that Another lived in. About the Bible.., not the point..,
FOFOA - My extrapolation—you can call it a hypothesis if you'd rather—is that what Another was revealing was not only 100% literal,
ME - Yes
FOFOA - but that it has been happening for centuries, not just in the 90s with an inevitable revaluation on the horizon.
ME - NO!! To believe that some people, that have riches (and thus have the means to educate themselves), would willingly be paying multiples of anything for centuries, without the secret being revealed to anybody outside or somebody taking advatage of it sounds, to put it bluntly, slightly uninformed about the human nature. My take is that this had to (according to the scripts) started around Volcker-time.
FOFOA - If you think about this idea for a moment, you'll see, then, that the much higher price at the giant level was not about an expected market revaluation; it was about something else entirely—gold's true value.
ME - Market revaluation to golds true value is one and the same. Harshly put - paper is worth paper when thinking like a giant that wants to leave something to the next generation. Goods for goods is all that paper facilitates.
FOFOA - What got me thinking about it this way, as a hidden phenomenon possibly stretching back to the Middle Ages, was the "Barron" comment that was discussed recently: "This is not the relm of any public “wall street”. At one time it belonged mostly to the Barron. Now it is large with the BIS and super rich."
ME - If the Wall street had found out the whole two-tier market would have vanished faster than we can blink. The Barron (old money, European CBs) supported this from the start so that € could be develloped. Is it not common knowledge on this blog that Volcker was approached by other influential people and that he thereafter raised rates and $ survived? Also, others did find out (According to Another Big Trader did and effectively put a stop to it! If my memory doesn't fail me.). The BIS would IMO of course c the necessity to support $ until another currency could replace $ and super rich would also worry about how to pass wealth down the generations. Being super rich would IMO make u ask yourself questions about wealth shrimp normally wouldn't.
This is not an attack on Another, FOA, freegold or FOFOA. This is just my humble opinion.
I would think some don't agree but then again - If u came here to hear about how it's all going to unfold.., take your kids and run.., or something like that.
Let's continue (yes, I did jump a paragrapf):
FOFOA - Another said, "At one time it belonged mostly to the Barron. Now it is large with the BIS and super rich." I think the "now" period (Now it is large with the BIS) refers to the 80s and 90s, perhaps even stretching back to 1971, but probably not before.
ME - I think the "now" refers to late 90-ies. I also think that "At one time it belonged mostly to the Barron." refers to late 70-ies to early 80-ies.
FOFOA - And notice that he differentiates "the Barron" from the "super rich". Perhaps we could take that to mean the difference between "old money" and "new money", with "the Barron" representing old money.
ME - YES. ALSO(!!) ever heard of "the old world" and "the new world"?
FOFOA - There is a difference. Think about the difference between income and wealth. "New money" would be buying gold with new income as it is being earned in the present, while "old money" would be trading one asset for another, wealth representing money that was accumulated generations earlier.
ME - YES
FOFOA - Of course old money Giants earn income as well, and they even acquire new assets with some of that income in the present. For that income portion, I imagine they would go to the open market to acquire assets just like everyone else. Remember that Another also said, "Think now, if you are a person of "great worth" is it not better to acquire gold over years, at better prices?"
ME - YES
FOFOA - This slow accumulation "over years, at better prices" would be done at the same price as everyone else.
ME - Giants accumulating at shrimp prices.
FOFOA - But once you had built up a stash consisting of, say, hundreds of tonnes, which probably took generations to accumulate, it would suddenly have a much greater value than the market price said it was worth. It would kind of be the inverse of this: "It is to say " your wealth isn't as great as your currency says it is"!" In this case, it would be to say "your wealth is far greater than your currency says it is."
ME - YES, depending on availability price changes. I c Chinese accumulation (is it only shrimp or is there a giant also accumulating? As I read comments here, a giant can not be part of this..,) Regarding "your wealth is far greater than your currency says it is." I think any giant or any shrimp would value their most valuable possession more than the market.., as do I.
I cuold go on but the kids want to to play Monopoly so I'll just bluntly ask, as I did MS, something like - What would be the point of a two-tier market now, today? Now that the € has arrived and even Yan can fill the gap for short term parking.
@ Flat Shoe Lance,
"Why would anyone want to pay a 20X premium? The opportunity costs are tremendous."
I'm no giant but probably a jumbo shrimp. I think after the first 2 to 3 millions which takes care of daily expenses, investment gains/losses are mere ledger account numbers. As long as I don't aspire to travel in private jet and yacht, I have more than I can ever spend and opportunity cost means nothing to jumbo shrimp like myself. I infer opportunity cost means even less to giants.
I went all in back in 2009 because I had no idea when the other shoe is going to drop. I gave up whatever digital gain I could have gotten to ensure at least a quarter of my wealth can survive the transition.
@ JJ,
"What would be the point of a two-tier market now, today? Now that the € has arrived and even Yan can fill the gap for short term parking."
I think the point of a two-tier market is for the giants to accumulate massive amount of gold, not ounces but in terms of tons, without causing public alarm. Nobody cares if the shrimps parked in € or even yuan but nobody and I mean nobody wants the shrimps to park in physical gold.
But even at these low yields on UST debt, giants can accumulate major tonnage at these shrimp prices. There's 6T in external US debt. Run through the math with even a figure of sub 2% yield. This translates into a lot of gold w/o dumping treasuries. Maybe that's what we've seen with China the last few years. Slow accumulation.
"What would be the point of a two-tier market now, today?"
I just thought of a better example of the point of a two-tier system - the U.S. Lobbying industry.
Companies spend probably 20 dollars to get a dollar into the hands of the targeted politicians. 100ozs of gold means $120,000 but 100 tons of gold means influence.
@ judie toy
I don't think the point of a two-tier market is for the giants to accumulate massive amount of gold, If there was a two-tier market giants would trade in it, not accumulate in it.., as a first point. A giant that buys/sells does that in 1000kg+ according to Another. That could easily be achieved, without causing public alarm, by hiding among shrimp in the Chinese market.., don't u agree?
Ahh, Stan not stu. My mistake.
@Judie again
Companies spending 20 etc.
Not realistic when u can hand over 1-20 without anyone raising an eyebrow. Ever checked the incomes of past politicians? Anybody being indicted?
Oh, I see.
When gold revalues against the physical plane, you will continue to just accumulate and let it sit there? You will not spend gold on anything, ever?
BS. People here are waiting for something. Something to happen during their lifetime. Not 20, 50, or 100 years from now. And you hope to benefit. There is no "idealism" here regarding gold which you in fact admit to. You want a hoard and you want it to be revalued. If this wasn't the case then you would find something else to do with your currency and your time.
It's like winning the lottery when you are 65. Ok, great, you enjoy your retirement but what about your whole darned life before then?
I personally will benefit from freegold but I think it's too late for humanity.
Everybody here is a techno-utopian. Freegold, peace, love, let's hold hands and sing kumbaya. And I've thrown cold light on these beliefs, I and many others have told you the lengths to which those in power will maintain this system, and the nature of humanity (war, aggression, competition for resources) and you hate me for it, because it implies that you are waiting for godot. Do you understand? Freegold is not going to "save" anything much less global civilization.
Like I said I'm fairly confident I will benefit, but you are mistaken if you think this outcome is going to be good.
I agree. I've always found the idea that one doesn't care if gold ever gains purchasing power during their lifetime to be a bit absurd. I invest to grow my PP over the course of my lifetime.
Of course I want to spend it, I've had my eye on a ranch in southwestern Colorado I wouldn't mind picking up should freegold come to fruition in the next 10-15 years before I retire. A bunch of yellow rocks are just a means to end for me, not an end in of itself.
The idea that you don't "understand" gold if you want to grow you pp through this revaluation is sanctimonious nonsense.
In the long run, I'm dead. Anyone who doesn't invest to maximize their purchasing power (other than a giant) over their lifetime is a fool. even if they have more than they plan to spend.
If this transition never materializes, the opportunity cost and lost purchasing power of owning gold would be a disaster depending on the portion you have allocated. Trying to pretend to be above that is just bravado.
Try to look at it the other way around. Gold has a "real value" to people with large hoards and then a discount trade market exists where small amounts of physical gold are traded at around the cost of production. The unwashed masses only know about 1 price for gold (the discount trade) and so in their ignorance they don't take advantage of its severe discount. Giants on the other hand are aware and some can and do accumulate small amounts from the discount market over time but when they trade their large hoards amongst each other they do so at the real value. Many are so wealthy that they are not looking to accumulate more wealth but rather to maintain it without being noticed or causing economic disturbances. Stressing or breaking the discount market would be one of these disturbances. If the real price is revealed it is the discount market that will cease to exist. That is to say we won't have a revaluation but rather a revelation.
So why do we have a discount market? Oil was so valuable that only a huge hoard of gold would be acceptable in trade. The only way to get the vast quantity of gold that was deserved in exchange for the vast quantity of oil they traded for it was very slowly over time. Future Oil currently in the ground was traded for future gold currently in the ground. The discount trade insured we get it out of the ground and sell it for right around the cost of production. If oil wasn't able to get it slowly over time the west would not get to have their life style and production boosting cheap oil.
Will we have the discount market forever? No. It was designed to collapse under its own weight when it's usefulness had been extinguished.
Ein Anderer was also killing it earlier. Reminded me how great it is to be a shrimp with the opportunity to follow in the footsteps of giants:
FOFOA: "Gold’s value really comes from intergenerational Giants who have no need to ever sell it. They really just net-produce and net-produce and they do it willingly for more and more gold, and then just sit on that gold until they die and pass it on to the next generation. And they will keep doing this no matter what the $PoG does. They're not buying it for its weight, but for proven long run currency exchange value! But if there’s no flow for them to get some, then they have to buy things like extra castles and cars and stuff that drives up prices and drives down everyone else’s purchasing power."
Pretty cool. I can get a revaluation to improve my lifestyle, and giants already have the perfect purchasing power preservation vehicle right now, today, because they already know the real value of gold, because of that two-tier market thingy. And after the revaluation, they won't actually gain anything because, again, their gold is already valued correctly, while the gold I can buy is just so, so undervalued. So everybody wins! When gold's value is revealed, I get a step up, and they get to go on doing what they do without worrying about competing with ants.
"How do you think the Russian freegolders are feeling as 2014 closes?"
Probably quite drunk thanks to Vlad's price controls on them tater squeezins:
http://www.bbc.com/news/world-europe-30599341
Random Man: "Everybody here is a techno-utopian. Freegold, peace, love, let's hold hands and sing kumbaya. And I've thrown cold light on these beliefs... waiting for godot"
Congratulations for your self assured condescension.
Would you like a cookie?
Perhaps some warm milk?
Stu said:
"I invest"
Coulda, maybe shoulda, stopped right there.
After reading this blog for 6 years, you still haven't learned what you don't know.
@jojo didn't realize this blog was only for folks who put 100% of their savings in gold.
I'm not arrogant enough to I have it all figured out. And I have college to pay for and bills to pay. Gold is for my savings (though thus far its done a piss poor job at it) but of course I invest.
Even a little in stocks!! Oh no! I must be a mortal foe of freegold and understand NOTHING of this blog!
@ Random man
I think you are over exaggerating the opportunity cost.
Lets hear all the opportunities that your gold holdings is holding you back from. Do you really want to join the blind masses searching the galaxy for the last nominal gain generator or ponzi scheme ?
Jojo, I see nothing wrong with the statement "I invest." Giants invest too, which is why they have something to save in gold. It is heresy to say that Another/FOA/FOFOA's message is that a person should hold gold, only gold, and nothing but gold regardless of their financial circumstances. Is there even a single Giant out there who holds a portfolio of 100% gold? I doubt it. The message here is that gold is the vehicle for people who have "plenty" and who need not be concerned about paying living expenses now or at any point in the foreseeable future. For those of us who are not quite at the "plenty" stage, making "investments" makes a lot of sense. If you haven't already covered all of your income needs from now until the day you die, and if there is a chance that you may need to sell some gold to pay those expenses, then even holding physical gold involves an element of speculation.
"Try to imagine a bizarro world where we simultaneously encourage everyone to consume as much as possible through debt (because, ldo, consumption is the engine of the American economy) and also to save that same debt through ERISA and 401(k)s. What you end up with is a whole society of people deferring consumption (saving) on the one hand, and pulling into the present that very same future consumption they saved on the other. You end up with underwater homeowners with negative net-worths and hundreds of thousands sitting in their 401(k) or IRA.
With everyone chasing a yield, be it through interest rates on currency investments or dividends from equities, you eventually drive all those yields to zero. Luckily for the Warren Buffets of the world, most of that "savings" knows no better than to float around in Warren's world, where Warren not only gets his management cut, but he can also make amazing capital gains as those "savings" slosh around mispricing one thing after another.
Now think about that person, let's call him Bob, with $201K in debt and also a $200K pension or IRA through work. In essence, he could be almost debt-free were it not for his "savings". But then if that were the case, Warren wouldn't have that $200K sloshing around in Warren's world. This is, of course, only a mental exercise in how inane (or should I say insane?) the Western financial system really is.
Which camp do you think Bob is in? The Debtors or the Savers? And what would be the state of Warren's company valuations were it not for all this additional "savings" sloshing around? How about the yields available for real savers? Perhaps there would be some yields to be found were it not for Bob and his "savings"?
The point is that companies are not de facto good investments just because they make things. They can become overvalued when chased by too much money and that's when Warren sells. Warren talks a good talk about compounding dividends, but what he's really after is your money. Either you're with him (investing in BRKA) and he takes his cut while using your financial weight as his own, or you're against him out there on your own. And then he's looking for areas where you've mispriced something so that he can buy it from you or sell it to you. "
http://fofoa.blogspot.com/2012/02/yo-warren-b-you-are-so-og.html
Stu:
@jojo didn't realize this blog was only for folks who put 100% of their savings in gold.
What else do you save in?
Bank Accounts. No that is a loan to the bank.
Stocks. No that is an investment in a company.
Govt Bonds. No, that is a loan to the govt.
Real Estate. No, that is a business.
Have you really learnt anything on this blog? When the first thing it tells you that Assets that are good for nothing else are the only things that can be used to save. And they by definition do not provide any earning. They are kept for decades, generations if possible, until that day comes when you have to sell it to recreate what you lost due to a crisis.
That is why we Indians buy gold. There is no other reason. Every father used to dream of giving more gold to his next generation than he received from his father. It was not to make his life better, but to make his children's life better.
But I guess the world today is very materialistic. You make money you spend it. What is sharing with wife/children/relatives? That is why women have to work, to have something that they call their own.
Yeah savings are the last part of your income. First comes food and necessities, then comes investment/business, next is comfort and savings. You split what you would spend in comfort with savings. You spend in investments/business what you feel you need. Not for making money for the future, but for your present, to grow your business for the future. The current investment craze is a bit too over the top. Imagine people taking loans for investment :-).
Random Man and Stu have valid points. Points that are so relevant they are eliciting a commensurate response. Their points go to the very heart of individual philosophy on the meaning of life. Not just investment or economics.
Are we here for a brief time and that is it? Or is there a deeper, eternal meaning to our existence? Do we want to consume now, or leave a legacy for future generations to remember us?
RandomMan:
When gold revalues against the physical plane, you will continue to just accumulate and let it sit there? You will not spend gold on anything, ever?
Not really. But then I am just a shrimp, who does dream a lot of bigger things :-). Still the trick is to understand how much you are happy with, then spend the rest to live the life. I do not understand the markets, and I don't care to invest in companies. I might after the reval, but I don't know. I have to know the company and believe in it to do that, and be able to invest a good amount to actually own a share in the company, not those speculation only stocks. Currently I am a very small shrimp, so that is not possible.
I will be buying some RE to collect rent, and a good house with some land for myself.
Still I would leave a large part of the gold safe, for the future. It will be my saving to my children.
Buying gold now seems a good option. RE is way too overvalued in my area. Its actually cheaper to rent :-). I don't have a business to grow or think anything else is a good investment. For me Freegold is the natural solution for my prior predicament of what to do with my excess money. I have a saver mentality, so most of it was in fixed bonds. Which I knew were a loss when I considered the inflation rate + income tax on them, but had no other solution.
If Gold was steadily rising in this current environment (as predicted by almost all of the Gold pundit community), I'm sure we wouldn't heard from the Stus and Stans on this blog. If Gold was $5,000/oz I wouldn't be reading comments like Stu and Stan's in my INBox. Those who have bothered to read FoFoA - in only the past 3 years - accept this decline in the paper gold price - as part of the FG process. The paper gold market must essentially 'break' and revalue not 'turn' midstream and climb steadily to higher USD denominated prices. There are many comments, by readers here, that it was anticipated to hear from these dismissive individuals and others who will, probably, exchange their gold at the exact wrong time. Those who understand FG are very cognoscente of the current state of the markets - and the potential of accumulating dollars from, so-called, 'investments' - and that too will probably continue until a paradigm shift. Being a FG physical gold advocate doesn't mean looking daily, weekly, yearly or generationally at the paper market - seeking the very best time to get out - exchange for the maximum amount of $s - to then hoard paper or invest back into the dysfunctional system. Buying anything, outside of Gold - now more than ever - from Silver to Apple Shares is a gamble to try to make more $s. Gold is your protection from those $s. Gold = security, not Maseratis and mansions. And Giants accumulate for their legacy and to maintain their wealth - not for short-term profit. So, for some, 17 years is just too long, and others maybe 2 years is too long, to hold gold without a consistent yield - without dollar profit. Many have never accepted that dollars orbit Gold - not the other way around. As shrimps we may partially dishoard at some stage - but FGer's know they should always hold gold - traders don't. Traders see everything in $ terms - how confusing the future will be for them. Adopting this philosophy is as difficult (ie impossible) as the two-tier system acknowledgment. I suspect the Stus and Stans come here seeking support for their frustration of a declining Gold price - while true FGers cheer each drop in the paper price as another step towards the anticipated shift. With the current deflation (precursor to escalating inflation) it is true that we are closer than ever - but if you are looking for a time and date - you have come to the wrong blog. I suggest seeking out KWN where date predictions (albeit consistently inaccurate) are the standard byline to assuage your 'investment' in gold for a $ return.
randomshamman said: "Everybody here is a techno-utopian. Freegold, peace, love, let's hold hands and sing kumbaya. And I've thrown cold light on these beliefs, I and many others have told you the lengths to which those in power will maintain this system, and the nature of humanity (war, aggression, competition for resources) and you hate me for it, because it implies that you are waiting for godot. Do you understand? Freegold is not going to "save" anything much less global civilization."
Another in a long line of genuises who come here to explain how unrealistic the freegold lens is. The portion of your comment I posted above is one of the most amusing things I have read here in some time. Thanks for the laughs!
@teon It's easy to dismiss other people as not UNDERSTANDING to confirm your own world view, but it is false. Of course I understand paper price dropping is likely necessary to break the bond from paper to physical. But my point is if I knew today that this transition would happen after my lifetime and god was going to languish for the next 50 years, I would sell ever ounce. I suspect you would be happy to see your purchasing power languish for decades so you can leave a stack of yellow rocks to your heirs? Talk about a wasted life!!
Now, do I expect gold to languish for 50 years? No, I do not. Which is why I have so much physical gold. But to you, it seems, gold is the end, not a means to living a more comfortable, vibrant, adventurous life. You see this as evidence I don;t understand freegold. OK. I see the acquisition of yellow rocks as a means to an end, you see it as an end in of itself. I think thats depressing. I don't see everything in dollar terms, thats your hubris. I see everything in purchasing power terms.
In the long run, I'm dead. Rather than leave my kids with a bigger stack of yellow rocks I'd prefer to leave them a lifetime of comfort, education, wonderful memories and a variety of experiences. I'm sure on your deathbed, you'll thrilled you have 150 more ounces of rocks.
I'll have dishoarded the bulk of my stash I suspect, but I'll leave a legacy of a worldly family and a lifetime of rich experiences to treasure.
But you just be like Golum as an old man, hoarding the precious.
Different strokes I suppose, but how we all individually prefer to live after transition has no bearing on our understanding of freegold. Thats a silly assertion.
I'd prefer to leave them a lifetime of comfort, education, wonderful memories and a variety of experiences.
I will leave my children that, Stu... with or without FG. The yellow rocks are only for saving/security not to buy the above. Only a gambler would risk those virtues to make more profit... if you need to gamble your children's future for immediate profit - I think you misunderstanding the message here. No offense.
@teon You don't think buying gold and waiting for freegold is a gamble? I've got news for you buddy, it's all a gamble. Waking up and walking across the street is a gamble. Hoping your purchasing power wont be destroyed if gold gets held down for another 20 years is a gamble. If the paper system stays in tact, you will have gambled wrong, and all gold investors will pay dearly for it.
I'd like to know how you think me owning half my wealth in physical gold since 2008 and patiently waiting is "gambling my childrens future for immediate profit" but I suspect you don't have a cogent answer.
We all place our chips and take our chances, thats life. If you don;t think hoping waiting for freegold is a gamble, then you're delusional.
And congratulations for having enough wealth to travel the world, pay their educations, retire comfortably and spend your life doing what you want to do. Thats great. Not everyone is there. And if freegold happens, thats how I'm putting my yellow rocks to use, you do whatever makes you happy, but thats what will make me happy.
@Stu
We all place our chips and take our chances, thats life. If you don;t think hoping waiting for freegold is a gamble, then you're delusional..
I understand you now, Stu. You see gold as your lottery ticket. Another mistake. You are timing. Yes, getting out of bed is a gamble but there are degrees of risk. If you don't see the difference between buying gold or buying equities (hey, both are gambling, right?) - maybe you should hold equities? A lot of dollar profit to be made there in the coming months. Just can't tell you how long for... BTW, I am not tapping-my-fingers waiting for FG - you are.
owning half my wealth in physical gold since 2008 and patiently waiting
Yes, you sound very patient (/sarc) Maybe you shouldn't hold half your wealth in gold? We all realize it is going down in $ value - you read that in the blog, right? You also read that you should only hold as much gold as you understand, too - right?
I'll have dishoarded the bulk of my stash I suspect, but I'll leave a legacy of a worldly family and a lifetime of rich experiences to treasure.
As prophesied in the blog! Of course you will - at the exact wrong time! You sound so desperate as if you have overextended yourself to buy Gold and are now disappointed that FG hasn't come to fruition yet to yield your lottery win - so then your family can have comfort, education, wonderful memories and a variety of experiences. . My goodness Stu, you didn't gamble your children's education for immediate profit in gold, did you? You realize Gold is for savings, right? Sounds like you gambled your savings and are now disappointed that the gamble has not yet paid off yet.
Lastly...
... my lifetime and god was going to languish for the next 50 years,
I'm not a religious man so I can't say whether God is languishing for you, buddy... or how long. Sorry.
Best of luck with that, though.
Cheers,
tEon Lot of assumptions there buddy, pretty much all of them wrong.
I would correct you, but it's not really important, or interesting.
One question, how would dishoarding my gold gradually after transition to supplement my families lifetime experiences be selling AT THE EXACT WRONG TIME? In BOLD no less.
Very powerful.
Some folks don't know what they have until it is gone.
In the long run, I'm dead. Rather than leave my kids with a bigger stack of yellow rocks I'd prefer to leave them a lifetime of comfort, education, wonderful memories and a variety of experiences. I'm sure on your deathbed, you'll thrilled you have 150 more ounces of rocks.
Gold is not a rock. Gold is a pure element, the chemical symbol of Au, or, in the eyes of the geologist or miner, it is a mineral.
Pay ATTENTION damn it!
@teon One more thing. Gold is for savings AFTER transition. Right now, it's a speculative asset, just like stocks. And you're owning it SPECULATING that it will transition to it's highest function, a pure SAVINGS asset. Even you, surely could admit that it is not functioning as a SoV right now. And you're SPECULATING that gold will step into that function in your lifetime, otherwise you wouldnt own it.
You can't say gold is for savings when it's lost half its purchasing power in three years. Clearly it's not yet functioning as a SoV. So you're talking post transition? Yes, then it would function as a savings vehicle, but until then, you're gambling. Just like me.
@Stu
tEon Lot of assumptions there buddy, pretty much all of them wrong.
Simply using your own quotes, man. They're your words - not mine. I was asking questions. My last post had 6 questions marks - not surprisingly - you answered none of them.
One question, how would dishoarding my gold gradually after transition
Ohh, no - you won't wait for transition, Stu - see how desperate and frustrated you are now... what will you do when Gold is half the paper price it is today in 2015 (or whenever) - and you have to pay for your children's education (you know the savings that you gambled)
You can't say gold is for savings when it's lost half its purchasing power in three years.
It's only lost half its purchasing power - if you sell it (which is all that is on your mind). Not unlike your home or a Picasso. (there's a thought, Stu!).
Gold is just like stocks
Yeah, that cuts it - you really are on the wrong blog... LOL.
@ Stu
@Marco
@Random Man
What are your thoughts on gold price manipulation ?
@teon Like I said, lots of assumptions there, none correct. And clearly I'm only going to answer so much about my personal situation, but it's quite comfy thank you.
Yes, only if you sell it. Do you think EVERYONE on this blog is in a position to never have to sell their gold? And if they are not, they somehow don't deserve to believe in freegold? Do you realize how crazy that sounds?
I actually speculated with my kids college in stocks, so thats taken care of.
I could quite comfortably ride my gold down to zero, and I would. I'm in a better situation than most, I suppose.
But would I be disappointed in gold went down to $500 an ounce and languished there for years and years? Yes. Would it hurt my future plans, yes. You know who that wouldn't hurt on this blog?
Liars.
Again, you're making assumptions to fit the picture painted here of ANYONE who questions ANYTHING about freegold, and I'm sure in some weird way it comforts you to do that. So by all means, carry on.
Stu,
At $500.00 an ounce, who in the world would be providing the mining supply to the market?
tEON: The desperation in Stu's voice is palatable. Nice job making him talk more so we could see just how big of a hole he has dug for himself. No one who has read, and understands the Freegold Lens would ever say "gold is just like stocks"
And for anyone following the conversation who is new to the blog please read:
http://fofoa.blogspot.com/2010/07/debtors-and-savers.html
@Stu
But would I be disappointed in gold went down to $500 an ounce and languished there for years and years?
I wouldn't. But I doubt it will be for years and years.
Would it hurt my future plans, yes
Okay, so like some form of psychoanalysis we are getting to the crux of your problem; expectation (which really relates to timing). My advice would be don't view your gold as being dishorded in your lifetime. It's tough, I understand. But I believe that you can do it. Think of it as protecting your children and your children's children. Think of it as handing down the family's Picasso through generations or the ancestral home in The Hamptons. Think of it as part of your legacy or a safety net. And by all means continue to 'live your life - perhaps Another's most important quote for you... let's remember what this blog is about.
byiamBYoung They wouldnt be. I suppose every mine would be shuttered and freegold would be triggered. Thats why I've constructed my financial life to be able to ride gold all the way down. But I'm not going to lie and say that I could ride gold down to any price and ride it our forever. Maybe I could, because I'm a net saver but I don't want to be forever. I was simply illustrating a point.
To answer your question directly, I suppose oil would have to be at 10 bucks a barrel. What circumstance would make that possible I'm not really sure. I''m just pulling something out of my ass for the sake of conversation.
@teon Yes, I've made it very clear that I would be disappointed if freegold didn't happen in my lifetime. I think I've made that very clear. If I knew that was going to be the case I would sell every ounce. For the record I dont expect that to be the case, but I am clearly SPECULATING that it will happen in my lifetime. I also EXPECT it to happen much sooner.
I have no interest in leaving my children much wealth. I live wealthy with them in the present. If I do, fine, but its not important to me. Legacy is for ego, life is for the living.
And thanks for the advice on how to live, but I am living like a lion. If freegold happens, I'll live like a thousand lions. I think I'd like to give that a whirl.
So enlightening Stu. A question I don't expect you to answer, why do you hang out here? I cannot discern a single fundamental of Freegold that you embrace in any way.
Buddy, you are walking in the footsteps of midgets. We have seen some interesting characters that presented exactly as you do. They all spiraled in, ended ingloriously as smoking holes. You see, a blog like this is maddening to frustrated bugs like you. You are angry and the people here are quite content seeing and experiencing all that drives you crazy. It truly must be our fault and not your own. We are the problem. Stu, know thyself.
See how this all works? You have made a tragic mistake buying gold. You violated our first and best rule, you have chosen to buy more than you understand. Which as it turns out is very little. Tragic really. That is of course if you possess any gold at all.
You are in the wrong place if you think you can make hay by instigating or fomenting unrest here at the FOFOA blog. You will be received as a curious little insect. Very little thought will expended to contemplate the conceptualization occurring within your very small mind. You will simply succeed in bringing more attention to how little you really are. Then we enter the final and most painful phase. Not for you but for us. We get to watch you embarrass yourself while you remain oblivious.
Finally, our generous host will save you and ban your silly ass. A mercy killing so to speak. Then you will be relegated to a small little club, all possessing small and antagonistic minds. The club will accept you with open arms and then you can haunt other blogs and educate others on the evils of Freegold and its cultish following.
Lets say you are right and that we agree with you, this is a cult. Why would you have anything to do with us or this blog? Please try to give us a logical argument as to what you are doing here. Surely you don't believe there are merely a few of us cultists here and that you are trying to "save" the blog from us. What about FOFOA? I think you would see him as cultist number one, the guru. How do you see FOFOA? Mistaken? Deluded? Perhaps intentionally manipulative?
Finally, do you get it yet? We haven't heard from you yet as to whether you understand what FOFOA is saying regarding your difference in interpretation of the potential deal. Was the potential deal for gold one within in the existing flow of gold or outside the flow? Or do you not accept that distinction?
@indenture Today, gold is just like stocks. It's a speculative asset that goes up and down. How could you say with a straight face that it is not? Unless you have access to the super secret two tier price, you're speculating. You're projecting your speculation on golds future role to the role it plays today. Thats divorced from our current reality.
As for the hole I've "dug for myself"
Well, it's a pretty nice hole.
@Stu
I have no interest in leaving my children much wealth
Not trying to take the high horse or anything but that is ALL I care about (leaving my children some form of security) - it was the reason I bought Gold in the first place. I don't know how old you are Stu, but I believe that one of the true steps in maturity is accepting how inconsequential your own life is... except for the children you have produced. As an example, you may not develop a cure for Cancer (let's be honest, you won't), but perhaps one of your grandchildren will or their grandchildren... it's all you can leave the world because eventually we will all be worm-food... even those who live like lions. (/wax philosophic)
@matrix I took my discussion right to our gracious host, and I am satisfied that we have reached detente. It was easier to get to the heart of the disagreement mano y mano.
Why do I hang out here? because I expect the exorbitant privilege of perpetual deficits to be denied to us in the near future, and because of that privilege and the resultant excess of dollars stored offshore, as they search for any form of rapidly declining utility I expect the dollar to burn.
Freegold is the most cogent explanation, to me for what happens next. But I am a curious creature, and I don't accept anything carte blanche. And my own experience and reasoning found a few holes around the edges, so I nibbled at them.
Thats about as much of an effort I'm going to give you in reply, because your opinion really doesnt matter to me beyond the extent you contort my positions to fit your world view.
In short, I want to discuss the question marks of freegold, not the shit everyone, including me agree on. I want to debate the parts of the theory that are not certain but seem to be presented as such, the things that require debate to get to the bottom of, to confirm or dismiss my own understanding.
What I'm not interested in is an internet circle jerk where everyone nods their heads as if things that are not clear are totally self evident. I suspect that approach gives the impression that I disagree with freegold more than I do.
Thats OK with me, I'm not here to make friends.
@tEon thats admirable, but I don't share your philosohpy. The wealth I share with my children is the education and emotional maturity to find their way in the world. They are already in a better position tan 99.99% of the rest of the world. They live in a comfortable affluent neighborhood, go to great schools, have all their needs provided before and will not be denied any education they are capable of acquiring. thats where I see my obligation to my children, the skills and resources to find their own way. Sure, they'll likely get some wealth when my wife and I pass, but personally, I consider that the LEAST important thing I'm going to leave my children. I'm not criticising your philosophy. It's admirable and with great intent, but it's not one I share.
Gotcha. Carry on.
@tEon One other thing. Security is an illusion. You can be set for generations and hen find a mass in your lungs. You can provide for your children, do your best to impart knowledge and see them fritter it away. even the best dedicated parents see that happen.
I subscribe to the quote below, in many ways it's the way I want my story written.
"Life is not a journey to the grave with the
intention of arriving safely in a pretty and well preserved body (portfolio),but rather to skid in broadside, thoroughly used up, totally worn out, and loudly proclaiming -- WOW-- What a Ride!"
'I'm not here to make friends.'
You came to the right place. :)
Moving on, the Hamptons weren't always a playground for the money changers; they used to be quiet fishing and farming villages.
The strengthening dollar is like the ocean pulling away from the beach. Unwary 'investors' will go down on the sand to pick up flopping fish; an easy win!
What do you think the Hamptons will be after the wave comes crashing back to shore? Where will the investors on the beach run for safety?
@Jeff I often wonder what NYC and the surrounding burbs will look like after transition. I can't imagine the wall street machine pumping out wealth the same way afterwards. As someone living 20 miles outside Manhattan I ponder that quite often.
It would be nice if the hamptons reverted back to quiet fishing and farming villages, though I expect coastal areas will continue to be enclaves of wealth for the foreseeable future, even after freegold.
I know this statement above is a metaphor, but people who really did that on December 26, 2004 were sorry. They did not know that the first pulse of a tsunami often arrives as a down wave. So you are saying that a rising dollar is the first pulse of a 'tsunami'?
Admission from an imperfect, lurking freegolder: I get frustrated when the $price of gold goes up. I am happy when I see it fall. I wish I could take the middle path and not be happy or sad at all.
@tEON: +55,000
Good 2015, y'all.
It would be interesting to hear this boards take on the discussion below concerning Special Drawing Rights (SDR); ie global currency.
http://philosophyofmetrics.com/category/sdrs-and-the-new-bretton-woods-2/
This series of articles makes a strong case that the world powers (US Congress not withstanding) are well into the final planning stages on replacing the dollar with SDRs. The question in my mind is will debt be a part of the SDR monetary system? Basically SDR bonds with interest payable in SDRs?
If SDRs just become a way of keeping score with a periodic settlement of physical gold at floating prices SDR/oz for trade imbalances for shrimps and giants alike, then I think this would be the greatest liberating event for net producers the world over in history.
If on the other hand only the ruling class can receive new SDRs created out of nothing while burdening a nation’s wealth producers with SDR debt, which requires capital gains taxes on all other forms of physical wealth, then it will be just a new nightmare.
Having re-read FOFOA take on SDRs I agree that it is irrelevant in a Freegold world but that is not the question. The question is, will the new boss (SDRs) be the same as the old boss (Dollars) from the perspective of net producers?
http://fofoa.blogspot.com/2013/10/special-drawing-rights.html#comment-form
Implicit in Freegold is that gold will indeed be free of direct control of the monetary system, and thus no longer by definition still trapped in a two tier system in which giant gold transactions and shrimp transactions are at two different prices and more importantly must adhere to two different taxing policies.
The central tenet of Freegold is that at some point in the future the currently combined monetary functions of medium of exchange (Dollars soon to be SDRs) and store of value (Physical Gold) will indeed be separated and uniformly treated before the law for both giant and shrimp alike.
I guess I just don’t see the ruling kleptocracy relinquishing the money power so easily even though they clearly realize that the dollar’s role in that maintaining that power coming to an end in the near future.
“By this means the government may secretly and unobserved, confiscate the wealth of the people, and not one man in a million will detect the theft.” – John Maynard Keynes
Interestingly gold might ‘back’ SDRs at 10% under some proposals, but that is based on shrimp prices. If gold does in fact flow between giants at 10x shrimp prices then SDRs are 100% gold backed among giants.
Meanwhile the next debt based ponzi scheme is begun anew which requires that no means of saving wealth outside of the system of taxation will be allowed. A situation that will likely prevail unless more that 1 in million of us figure out this scam and lockup the physical gold market and thus refuse to enable the next ponzi scheme.
https://www.youtube.com/watch?v=PTL7P3c3_Ag
For money to once again represent the free exchange of real value among men capital gains must be eliminated.
A recent debate in the UK parliament on this very issue is below;
https://www.youtube.com/watch?v=EBSlSUIT-KM
Stu hit the nail on the head with this comment:
“In short, I want to discuss the question marks of freegold, not the shit everyone, including me agree on. I want to debate the parts of the theory that are not certain but seem to be presented as such, the things that require debate to get to the bottom of, to confirm or dismiss my own understanding.”
I have read some of the freegold material. It is interesting. It is clear that this country has the most to lose should freegold become a reality. I can assure you that the United States and all its oligarchs will not let this happen without a fight (unless they are positioned to benefit from it). They’ll bring out the big artillery and blast any threat in the way. If the powers that be see freegold as inevitable should we not being seeing clues that they are positioning themselves to benefit from this transition? Surely you freegolders can apply you sharp analytical minds to such an endeavor.
@Stu
To summarize, I went through some of your statements, in an attempt to understand where you are coming from. I get why you don't believe in the two-tier system and how you use the dollar and your denominator.... even knowing that the MoE has had some fallible history - where gold is infinitely more stable. Anyway, here they are, with a few words by me.
I'm not going to continue to beat this point to death
20 or so of your own posts ago...
my anecdotal data point, even if one believes it, doesn't prove anything.
I have no interest in dominating the comments blog
I'll fade away from this subject because I don't want to be a nuisance.
I've always found the idea that one doesn't care if gold ever gains purchasing power during their lifetime to be a bit absurd. I invest to grow my PP over the course of my lifetime.
What I find arbitrary, or perhaps 'relative', is the term 'lifetime' and why you would consider that the benchmark for justification to be, or not to be, a PGA. Surely, you have come to the conclusion that this can't be 'timed' - no matter how much you want it to be time-able.
Of course I want to spend it, I've had my eye on a ranch in southwestern Colorado
Understandable - you want to buy stuff. The bigger the better, cowboy.
A bunch of yellow rocks are just a means to end for me
Yes, you want purchasing power.... to buy stuff, which may help fulfill your 'lion' lifestyle. I think I get that. Roar!
The idea that you don't "understand" gold if you want to grow you pp through this revaluation is sanctimonious nonsense.
In the long run, I'm dead. Anyone who doesn't invest to maximize their purchasing power (other than a giant) over their lifetime is a fool. even if they have more than they plan to spend.
I label you a trader - one who wants to trade his Gold and/or stocks for p-u-r-c-h-a-s-i-n-g p-o-w-e-r. Where others here see Gold as not only the last refuge of investment, the ultimate wealth asset, but as protection from what, financially, might occur in our futures.
Of course I understand paper price dropping is likely necessary to break the bond from paper to physical.
So as opposed to 'well, when is it going to happen?' shouldn't you be; "well, it seems to be happening!"
But my point is if I knew today that this transition would happen after my lifetime and go(l)d was going to languish for the next 50 years, I would sell ever ounce.
I understand "the-one-who-dies-with-the-most-toys-wins" attitude. It is very western-centric.
You don't think buying gold and waiting for freegold is a gamble?
No I don't. I think owning everything but Gold in expectation of profit is gambling. And we have been through the "Gold transcends time" quote, haven't we?
Gold is... just like stocks
Now this is your give-away since you are denominating both is USD. I learned a long time ago - not to. This is what separates us. You can consider it a philosophical viewpoint if you want, and you are not the first person here to adopt that stance. I'm not condemning or criticizing - just commenting. There is a great Another quote about this...
Would it hurt my future plans, yes.
Yes, plans to buy expensive shit. Gotcha.
I have no interest in leaving my children much wealth
How about I end with a hypothetical question? If Gold went to 10K next year but you, mystically, knew that a day after your death it would go to 100K would you still cash in all your gold and spend every penny before you die?
See, adhering to FG - is not simply owning Gold for a big payday before you die. It is saving your excess in Gold and believing in a revaluation with no time frame. I think you have only 2 of 3. As the soup-nazi might say "No FG for YOU!"
Stan,
By preparations, do you mean like the March 16,2012 National defense resources preparedness executive order?
http://fofoa.blogspot.com/2012/03/ball-of-twine-open-forum.html
@tEON I'll try here. A lot of your observations are true.
Don't worry, I wont dominate the comments for long, I just have too much time on my hands this time of year. That said, they were getting staid and a little echo chambery so even though a few people got bent out of shape, I don't think I'm killing any conversation, quite the contrary, I'm stimulating conversation.
While I don't think freegold can be "timed" I do think the idea that it's fine if it happens in 50 years would make this blog pretty useless. At some point one must be accountable for their predictions or they are just useless. I;m not suggesting this blog has reached that point, not by a long shot. But if we're here 5-10 years from now and gold languishes between 500-700 for a couple years, I think it would only be fair to assume some of the assumptions here were incorrect. Or is it your position that no matter what happens for any length of time Freegold is still on it's way? I think that crosses the line from a theory to a religion. I'm not saying we're there, but at some point it gets there.
I don;t see how wanting more purchasing power conflicts with any of the three other goals for owning gold. And you look at me wanting a revaluation to buy MOAR stuff, partially true. But what I really want to buy is TIME. I still have to work, I'd primarily use a revaluation to use my TIME as I see fit. I am not in much need of material possessions other than maybe some prime real estate in a more desirable location. But that aside, I don't see what my preferences on how to utilize my shiny after reval have anything to do with freegold. And I don't think constantly referencing it strengthens your argument at all.
Again, for someone that is not not of means to be self supported for life, the timing of freegold is important and is a gamble. I'm happy for your situation, but you should at least stipulate that not everyone is in it. And the idea that they shouldnt buy any gold because they cant wait it out forever...again leads me to religion as opposed to theory. I feel like you are dangerously straddling that line.
As for "well it seems to be happening"
I agree, it does seem to be happening. Faster and faster all the time, and many of FOFOA's playbook is playing out. But things like his predictions on QE not ending and perhaps rates rising would be a potential big question mark on the horizon, and if they get here and if things don't look as suggested, are their any posters here willing to turn a critical eye toward my own belief system?
I am. As a matter of fact in 2008 that's how I came to know freegold. because I was willing to turn my entire belief system on its head because I saw something was not right with the way the world was working. I still do that, and I am very willing to turn a critical eye toward freegold as well.
to answer your question, likely not. Even at 10k in PP I would likely have more money than I would ever spend. I have a good amount of gold.
But I'd live large. But at that level I wouldn't have to sacrifice much really anything to live the way I wanted with plenty of gold left over.
Answer your questions?
I am enjoying this argument as much as a new post.
Wow, great comment tEON, I really like your unrelenting insistence that saving in physical gold (guided by FG gnosis) is something entirely different than all other forms of "money-placement" (aka investment), and it should be done with entirely different motives (at least if you want to be "strong hands")...
And until this FG revaluation happens, "strong hands" is the only game in town that'll really work (even if your underlying motive is PP preservation). I pity the fools that'll part with their wealth just years before the $IMFS collapse.
Anand, as a frequent traveler to SE Asia I really liked this:
Have you really learnt anything on this blog? When the first thing it tells you that Assets that are good for nothing else are the only things that can be used to save. And they by definition do not provide any earning. They are kept for decades, generations if possible, until that day comes when you have to sell it to recreate what you lost due to a crisis.
That is why we Indians buy gold. There is no other reason. Every father used to dream of giving more gold to his next generation than he received from his father. It was not to make his life better, but to make his children's life better.
In Asia, saving in Gold is just the way it is. There are no Stus or Stans there. Only a conditioned Western (shrimp) could imagine up (and publicly display) so much anguish and doubt about saving in the best saving medium there has ever been: Physical gold.
Asians (I have firsthand experience with Thailand) would simply not understand what all the fuss is about? Why worry so much, when you have nice possessions and a good stack of gold on top of that?
Influenced by FOFOA and my Asian relatives, I feel the same way. Nothing can go truly wrong for our family. Our everyday needs are taken care of by our earnings, and we buy gold with the surplus after living a nice (but modest) life.
https://www.youtube.com/watch?v=_03uXQiz6eY
Anyway, just to chime in and say that I don't understand this particular culture of worrying when you're debt-free, already have a nice house, a nice car and physical gold as long-term savings.
I know of no other debt-free gold-owners who are that nervous! I'm more or less forced to the conclusion that these latest paper-fanboys showing up in this comment-section are over-leveraged Westerners. And, let me tell you: It's the debt that makes you nervous, not the gold. IMHO.
Thanks Stu, you answered everyones questions.
byiamBYoung:
Thank you for the info. I would also add that the large purchases of Gold by China and Russia in recent years could show preparation for freegold.
Stan,
It would seem so. At the very least, it appears to be evidence of Russia, China, and others bracing for the possibility of some form of currency turbulence.
Let me clarify one last time and leave it at that. I am very sensitive to the idea that just prolonging these exchanges doesn't lead anywhere, and it's not my intention to separate anybody here from their coins and bars.
It's just that I have a viewpoint, as a freegolder. Namely, I'm a pessimistic freegolder rather than an optimistic one. 95% of you are optimists and, I suppose it has to be that way.
But isn't it interesting...unbridled optimism is in fact an "American" phenomenon that has only really took hold once Americanism began to dominate the world, partly with the dollar of course. And people here are willing to entertain the thought that maybe, just maybe, the dollar is reaching the end of its lifetime, and we enter into a new age.
But....no worries...the world will do great in the end! Humans are noble! Politicians and businessmen will learn honesty and restraint!
The basic view here is this...we enter into a time of troubles, I will manage to escape it all and hold gold through this time of troubles, and on the other end the world will be better than ever and I will be modestly wealthy because I was smart enough to hold gold through it all. And on the other end cancer will be cured, we'll build fusion reactors and colonize Mars. Deus ex machina, the Hollywood ending.
A little bit too good to be true, right. Could it be that civilization is peaking, that all of the easy to use resources are burnt up, that we enter into a time of permanent (as in, that's it, game over, the fat lady has sung) shortages, revolutions, and wars? Could it be?
I think not only is this a possibility but all the evidence points to it. So, I of course, will have my gold hoard and will use it when the time comes, but I'm not really hoping anymore for some good outcome for the world, for humanity. That train left the station a long, long time ago.
And delaying freegold was in fact part of it, because freegold would have introduced some systemic restraint into the system and prevented all of this malinvestment. But it's too late, we've gone too far and there's no good outcome for anybody.
So that's my answer to the big question of opportunity cost. It's not an easy one, and will be denied by all. Namely, we'll never enjoy freegold because by the time freegold comes around, there won't be all that much left to enjoy.
@Stu Ungar said...
“While I don't think freegold can be "timed" I do think the idea that its fine if it happens in 50 years would make this blog pretty useless. At some point one must be accountable for their predictions or they are just useless.”
Like waiting for the great pumpkin perhaps?
https://www.youtube.com/watch?v=xiSIQzwIPzQ
I love the whole idea of freegold, and frankly having 10% of your assets in currency terms in the form of something that has never gone to zero is no brainer IMHO.
That is not my concern with freegold, the simplistic honest beauty of it all. My concern is that it sounds too good to be true especially once you understand how the existing monetary order enables the parasitic feeding off of true net producers; as defined by those that produce real good and services demanded by what is left of the free market. Not to be confused with those who become wealthy off of the very same graft and fraud enabled by the twin corruptions of money thus capital and democracy.
If this board has a blind spot its in regards to how the existing social-monetary order works for the few to maintain control by redistributing the wealth produced by the minority; first to themselves and then to the lower class parasites who in turn legitimized those in power and thus perpetuate the scam with their votes. As long as 50.1% benefit all is well even if it’s on the backs of the remaining 49.9%.
I just don’t see how we break free of this until the average net producer on this planet attempts to buy just 1oz of physical gold. I’m gladly doing more than my part with what I have but too many of the 49.9% still insist on putting their net production back into the casino where it’s gradually or even at times suddenly robbed from them. If just 10% of net producers attempted to cash out just 10% of their net wealth into physical gold this would be over tomorrow. Then again the kleptocracy would just make holding gold (or any other assets) illegal again or taxing it heavily now couldn’t they?
“But if you wish to remain slaves of the Bankers and pay for the cost of your own slavery, let them continue to create deposits." Sir Josiah Stamp, President of the Bank of England in the 1920s, the second richest man in Britain.
There is an entirely legitimate/positive role for banking but unbacked money creation is not one of them. To issue debt free currency is a key sovereign power the benefits of which accrue to the people if done in excess (lower taxes + more benefits) or not enough (lower prices + higher purchasing power). The currency is stabilized by eliminating capital gains tax thus giving net producers a means of holding wealth in whatever form they choose effectively outside of the day to day system of exchange. Taxes should be collected on all currency transactions not unlike how credit cards work today only the percentage would be much less than 0.1% given the volume; i.e. “Render onto Caesar”. Only in times of war should governments be allowed to go into debt and only for terms that don’t exceed a reasonable period for the generation that undertook those debts to pay them back. Banks can create loans currency but only if backed one to one by physical capital that becomes the savers property in a default. All losses and gains are 100% privatized.
But the more I learn about SDRs the less likely I see this possible freegold monetary order forming and thus the great pumpkin never arrives.
@Stan Eversham & @byiamBYoung
The distribution of China’s reserves looks like they preparing for SDRs not Freegold.
Regarding timing, a few observations:
(1) FOFOA himself acknowledged that Another and FOA were wrong about timing, which led him to question why. FOFOA identified the big change that they did not see coming as China's entry into the WTO and its appetite for US bonds for the next 15 years. Now that China has stopped increasing its USD reserves, let us see if the system comes under more stress.
(2) I believe it only makes sense to put a timeline on freegold onset after the next major global crash. Rather than allow everything to reset naturally in 2008 TPTB decided to try to reflate the bubble. Many thought they would fail. Others thought that the effort would destroy the currency. Others thought that QE once started would become unstoppable. And here we are 6+ years later. Is the system fixed? No way. Fraud has gone unpunished. The FASB rule changes make it impossible to know how unhealthy the banks are. The TBTF banks are larger than ever. The system is as corrupt as ever. Everyone knows that the stock markets are trading at all time highs only because of the bubble. The system is unstable. But how long will it remain unstable? I don't think the clock can start ticking on freegold until this corrupt mess starts to show itself for what it is.
(3) Even apart from the next major crisis, one must return to the question whether severing the USD from gold in 1971 put a timeline on the USD. To reject freegold because it didn't happen soon enough is like saying you believe that the USD will go on as the world's reserve currency holding its current value indefinitely. Is anyone ready to say that?
The responses in 2008 stabilized an unstable system. Now everyone is waiting for something bad to happen. I don't think we will see the freegold thesis tested until the world starts to unravel.
Stu and Stan, keep at it asking the tough questions. The fundamentalists on the board will keep trying to make it personal, keep telling you to reread, keep pretending they know more than they really do. Just go back to the archives from 3-4 years ago and you see that most of the most ardent defenders of freegold are long gone from this board. Those who stop asking themselves tough questions, who stop testing the thesis and thinking things through for themselves, will eventually wither and die off. At the same time, do yourselves a favor and cut back on the number of posts. Otherwise they will succeed in getting under your skin, and the next thing you know they will be calling on FOFOA to have you banned from the board.
SPaul67,
Or both.
Stu: I apologize. There is actually a question that has not been answered.
FOFOA began his comment by quoting you," This is actually backwards, as I explained. Nothing would have been resold, the commitment to buy it would have been made before any purchase was made."
What I think you are trying to say here, Stu, is that the ownership of the gold would have been presold (rather than resold) on paper and then the amount physically purchased (150t or whatever) would equal the amount that had been presold. Maybe someone else can explain to me how this invalidates my statement that the whole purpose of the "150t" sourcing was to resell it because the company was not buying the gold for itself.
"except a request by a shrimp for delivery. Then it could have moved...just to clarify."
This statement tells me two things. The gold could in fact be resold (perhaps by whoever it was presold to)… and to a shrimp no less. Because somehow a bank purchases 150t of gold and somewhere down the road a shrimp requests delivery and then some shrimp portion of the gold is moved.
Let's look at Stu's comment yesterday:
"I think you may have misunderstood because of my brief explanation, but that gold actually could NOT have been resold, so it was not for distribution to little shrimp."
Today we have learned that it "could NOT have been resold" [by the bank] because it was actually being presold [but then, of course, it could be resold by whoever bought it], and that, in fact, distribution to little shrimp would have been possible as long as said shrimp requests delivery…just to clarify. I rest my case. ;D
Merry Christmas everyone!
FOFOA
------------
You approached the Comment section of FOFOA Freegold with a question as to whether the two-tier gold market existed and you stated you had proof it did not because you handled a 150 ton purchase. FOFOA demonstrated what you witnessed was simply a purchase of gold for resale back into the market.
And yet you never had a word to say in rebuttal.
Do you now believe the gold sale you were a part of was for resale?
Well I am starting movie night with the kids so I'll get to this in the AM but I would like to correct one thing. I never said it was proof a two tier market doesn't exist. I made it clear that I'm skeptical and still very much am. I don't find the argument for it very compelling and I think its opposed to Giant thinking. that said, I'm not claiming I can prove anything, just presenting a data point that I believe is in conflict and diving into the discussion.
This is a quote from When Money Dies. Written about the German hyperinflation. Published in 1975. In the lead up to hyperinflation :
"Conditions are hopelessly unhealthy. And the public will continue to be swayed by rumors and to speculate either in goods or stocks and shares. As regards dealing in shares, all classes of the population have for months been speculating with a fine disregard for common sense. Shares have been freely bought in totally unknown concerns. Shares in respectable concerns, which had paid a 20% dividend, were pushed higher and higher till the final holders could not expect a return of even 1%"
^Just like Wall Street now. Trading on word clouds from the Fed. And those dividend returns....
Evidence of absence is not useful evidence, to say I didn't see
@stu
so lets say 2 tier market does not exist, does that automatically debunk freegold?
FOFOA suggested gold to oil ratio of 500 to be freegold territory, ever since 1900, gold has not traded for more than 40 barrels i believe. before bretton woods when gold was money we were looking at about 33-35 ish barrels, calling 500 barrels for an ounce seems like an extraordinary claim.
consider a spectrum, where as we have
gold to commodity goldoilratio 10-30
gold the money , currently paper notes occupy spot, goldoilratio 30-100?
gold the reserve, currently sovereign bonds occupy spot goldoilratio 100-500?
which brings a question
who wants the gold to take reserve role instead of money role?
would government settle for gold playing the money role as the least of 2 bad options, reserve vs money that is.
does something really bad have to happen for gold to no longer take the commodity role? according to whom? single country makes that call or a consortium like UN,BIS?
if gold became money atleast government can levy taxes, fees you name it on the medium, but if gold became reserve, theres alot less way to milk the cow. members of this forum treat gold as the reserve, what is it that stops the masses from treating the shiny metal as money instead of reserves?
Burning fiat,
"Its the debt that makes you nervous, not the gold"
Brilliant!
tEON's Dec 27 1:33 response to Stu was the equivalent of a drive-by -- but that's not why I object to it. I object because I believe it mischaracterizes the message of the blog. And so while most others will join in the frenzy to drive Stu off the board, I will take a moment to clarify what I take FOFOA's position to be.
First of all, there is nothing wrong with trying to preserve or maximize p u r c h a s i n g p o w e r (whether denominated in the Yen, the Peso, the USD, the Euro, the Florint, the Rial, or any other currency for that matter). This is not something that self styled "freegolders" reject. This is not something that can or should be equated with having a "trader's mentality". Contrary to what you may have been led to believe, "freegold" is not a philosophy, or a religion, or an attitude, or a cult, or a view on how one should live one's life, but a prediction about what will happen as an question of FACT when the first small giant runs out the front door of the bank proclaiming "the bank has no gold." Not all people who grasp the implications of that future scenario will organize the rest of their lives or finances in precisely the same way. Nor should they. The take home message is that if and when that happens it is good to be holding at least some of your wealth in physical gold outside the banking system. And a corollary is to have enough stuff stocked up at home to get through at least 6 months of financial chaos to still have the gold in hand when things settle down afterwards.
Second, someone who wants to preserve or maximize purchasing power does not necessarily want to "buy stuff", and even if people do choose to "buy stuff" now there is certainly nothing wrong with that. Gold is for the excess after one has finished buying all the stuff one wants. Gold is not the only wealth asset according to this blog. Balloon dogs and antique tables have also been noted. But gold is the best choice for the shrimps because of the potential for revaluation. Although gold is the best choice by far, unencumbered physical stuff in the physical plane will likely do better than pure financial assets when the revaluation comes. So the message her is that might be the second best choice you can make. Certainly better than leaving cash in a bank account.
Third, one of the main purposes of Another/FOA/FOFOA's message was to enable shrimps to "front run" the revaluation -- which means to potentially increase their stored p u r c h a s i n g p o w e r. The purpose was to enable shrimps to tangibly benefit from what's coming, regardless of whether they actually exchange their stored purchasing power after the revaluation. The whole point of storing up some wealth is to have more choices. Those with no wealth have few choices. In the world we live in the choices you have are in some ways measured by the purchasing power of your wealth. This does not mean assigning a dollar value (or any other currency value) to one's portfolio, but "looking through" the currency to see what a gram of gold might be exchanged for in the real world.
And now for something completely different:
http://finance.yahoo.com/news/saudis-naimi-says-opec-not-133459430.html?l=1
Saudi jawboning is getting even more aggressive.
"Whether it goes down to $20, $40, $50, $60, it is irrelevant," he said."
$20 oil is irrelevant? To whom?
Started catching up on comments here, suddenly 1.5 hours pass and it's 1.30am local time. Typical of this site.
Anyway to throw my two cents in...
I don't think Stu Ungar's anecdotal example of being able to source 150t quickly is evidence of/suggestive there's no two tier pricing, though I do share his skepticism of such occurring today.
Some here appear to be arguing as if it's necessary for the two tier market to be operating now in order for the Freegold revaluation to occur, is that the general consensus (and if so why)?
Some of tEON's comments are completely absurd. I think it's likely that quite a few who're looking through the FG lens see it as a lottery ticket and something they are hoping to time (take advantage of during their lifetime) rather than as a "family Picasso" to be passed through the generations. While FOFOA doesn't provide specific timing, there is certainly the implication that the transition will come soon, why else would you talk about 'Year of the Window' or even put a speculatively price on where it would be valued if you weren't the least bit interested in when it would happen? Why would there be all this discussion of GLD being drained and falling prices indicating the end of the current paradigm if it's all related to trying indicate timing?
Buying Gold to speculate on Freegold revaluation doesn't mean that you've encroached on your ability to live your life and pay for your children's education... I buy the occasional lottery ticket as a luxury when the jackpot is high enough, but don't give up on life's necessities to do so.
Being shrimps, if Gold is ever revalued massively relative to other assets, many FG'ers would cash in their chips selling some of their Gold in exchange for property, businesses or other assets which they couldn't otherwise have afforded. To suggest that all shrimps should treat their Gold like giants is to ignore our reality relative to theirs. They don't need to sell their Gold to live a much better life post revaluation, we do.
Buying Gold to speculate on Freegold revaluation doesn't mean that you've encroached on your ability to live your life and pay for your children's education
What a general statement. You can't know that some here have not taken their children's College Fund and gambled it on Gold - trying to time a revaluation. The was the point of that part of the discussion. It was highlighting the difference between patiently saving your excess in Gold or speculating (possibly even going into debt) and trying to time this event. My suggestion is that it is easier to "live your life" when you aren't anxiously potwatching for a FG revaluation around the corner - and coming into this blog, fed-up, and saying "If it hasn't happened yet - it won't happen - why hasn't it happened? - when is it going to happen??' in a big panic. It's these stressed speculators that most likely sell at the wrong time. The best comment on that was from burningfiat:
And until this FG revaluation happens, "strong hands" is the only game in town that'll really work
Only a conditioned Western (shrimp) could imagine up (and publicly display) so much anguish and doubt about saving in the best saving medium there has ever been: Physical gold.
I know of no other debt-free gold-owners who are that nervous! I'm more or less forced to the conclusion that these latest paper-fanboys showing up in this comment-section are over-leveraged Westerners. And, let me tell you: It's the debt that makes you nervous, not the gold.
FoA said: So there you have it. When you strive to master the all-important art of timing your investments, the most crucial time is every payday in which you are, in truth, selling yourself--selling your own time, labor, and productivity. Are you being paid-in-full on each payday, or are you accepting an empty paper promise of payment built upon the strength of and the continuation of the confidence of everyone in society. Are you worth payment-in-full? Have you ever received an ounce of honest money for a day in your life? You can perfect your investment timing by being paid in Gold--you would be paid-in-full at the very moment that you sold your productivity. But in an acknowledgement of the currency structure of the present realm, for your own convenience, take your dollar paycheck and first use it to pay your various bills to all of the others who have been duped into accepting dollars for the sale of their own products and services. Anything left over represents your excess production, and is almost suitable for saving. Since your employer probably paid you originally in dollars, it is up to your own discipline to convert this excess into Gold to effect your own immediate payment-in-full.
Hi all,
I find it amazing to see the vibrant discussions as whether a 2-tier market exists etc. Honestly, I find them trivial, even if freegold doesn't come into play, there might be an old style 'gold-exchange standard' price adjustment...worst case scenario nothing happens and more modern voodoo J-M Keynes tactics are applied beyond what we all think being possible. What's left?
Well one could look at the current track record of gold around the time Another and FOA started their posts, say from jan 2000 til now.
In january the POF was around $284, today around $1200. According to my calculations that's roughly 11% return per annum even with the drop from around $1900. Silver performed a bit less at 9% per annum. I find this to be pretty impressive, especially when compared to bank managed (2.5% start fee + 1.91% annual fee) savings where a basket of funds, bonds, equities etc. returned only 1.81% per annum over the same period.
My father for example is not seeking maximum return, he's happy if he can just retain his PP. I think it's also relevant to consider other advantages when saving in precious metals. See my mother passed away recently and my father had to pay quite a large sum just to inherit from his wife. Nowadays governments know almost instantly how much savings their citizens have. The following is speculation on my part but isn't that just very convenient for our government? After all if they judge that citizens have 'too much' savings they can squeeze them a little more. The fact that capital controls and bail-ins seem to become the norm doesn't help having your savings inside financial institutions.
When I explained the above to friends and family they realized quickly that precious metals could have some advantages. People don't know what their perception of money is untill they try to get it back. This is a lesson we learned here in Belgium during the last crisis.
@ runningloves
"calling 500 barrels for an ounce seems like an extraordinary claim. "
What is the nominal value of all US debt outstanding to oil ratio now compared to say 1960 ? Probably many factors more no ?
Or notional Fed balance sheet to oil ? Even in the last 5 years we know the Fed balance sheet went from 800 billion to 4 trillion. The Fed balance sheet went from 800m to 4t and oil stayed about the same.
The last time a small giant purchased gold in an open market was Nov. 2009. India paid $1,045/oz for 200 tons of gold from IMF, the highest spot price ever back then. How many shrimps took that as a cue and went all in?
I infer a two-tier system is necessary to prevent any impetuous buying frenzy from other giants in an open market.
@tEON I don't think quotation marks mean what you think they mean. Unless I missed those "quotes" you used.
You decided to make some uninformed assumptions about how people have structured their finances, meanwhile moving nothing forward in the conversation about the actual event of freegold. You are free to keep doing that, but you're trying to personalize the issue, for what reason I have no idea, while never touching the pertinent issues.
I was bored (finally!) and decided to look at what purchasing power there was in the 1900s, in my job category (I am not a young rising professional anymore, but I will cede the difference to calculating errors).
Please see table of the young rising professional: http://www.victorianweb.org/economics/wages2.html
So, savings is 50 pounds of 700, or 7.14%. Then, what is the 213 pounds left over for, amusement? or deep-storage?, that is 30% of the total...
Maybe the pension plan of the time? or the long-time wealth building each one of us should have in its own category, nowadays, and we don''t...?
Damn I miss the 19th century.
Or maybe not: http://io9.com/slum-life-in-new-york-city-during-the-nineteenth-centu-1584688488
Cheers.
@Stu
You decided to make some uninformed assumptions about how people have structured their finances
Well, I asked you questions... and you answered some of them. If it doesn't relate to you - well, you aren't the only one in the room, Stu.
moving nothing forward in the conversation about the actual event of freegold
I strongly disagree - and if not relevant to you - what makes you think it is not relevant to others reading here?
Stu: I asked you a question last night.
Would you care to respond?
@tEon You seem to like baseless assmuptions so you can justify you never getting to the point of the matter. No one is here to diuscuss their personal finances, and to be blunt, there has been no indication anyone here cares what you think about their spending habits or personal finances. But that seems tobe the field you want to play on. just let me know when you'd like to have a substantive conversation about any aspect of freegold.
"You can't know that some here have not taken their children's College Fund and gambled it on Gold - trying to time a revaluation."
"what makes you think it is not relevant to others reading here?"
I'll answer the last one. Because no one asked, or answered except to tell you your line of questioning is off base, and mildly insulting. Attempts to personalize the discussion are old and tired techniques to steer the conversation from the relevant issues. Carry on as the boards personal financial advisor, I don't care. But I prefer to discuss freegold.
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