Friday, May 15, 2009

Taking Delivery of Physical

Image: Several thousand 28lb bars of 24-carat gold stored in the Bank of England's massive underground vault.

It is said that if everyone would just take delivery on the gold contracts they buy, then the price of gold would shoot the moon. This is because there is not enough gold in the warehouse to cover all the outstanding contracts.

And the reason there are more contracts than gold is because the banks like to sell contracts "short", meaning they will sell you a contract for some gold they do not have because they know you will not take delivery.

They do have some gold for the small percentage of people that take delivery. And they will gladly tell you all about this gold to prove to you that your contract is backed by the real thing. But this is still very much like "fractional reserve banking".

In fact, fractional reserve banking began with gold. The banks realized that they could issue receipts for the gold they stored and those receipts would circulate just like money... just like gold!

One of the things that Another first brought to our attention was that in today's gold market, there are perhaps 100 times as many receipts trading as there is real gold available for delivery. This was an incredible revelation. This is from the introduction to Another's (Thoughts!)...
When the once highly secretive London Bullion Market Association (LBMA) -- its venerable membership comprising the world's largest gold dealers -- published its daily clearing volume for the first time in January 1997, it rocked the tight-knit world of international gold traders and analysts...

Now this first LBMA report forced analysts, investors, and brokers to reassess their understandings of the gold market. While some reveled in the glow of the large LBMA numbers, others began to raise some very important and rather unsettling questions. First, Why was this much gold on the move? Second, Where was all this gold going? And third, Where was all this gold coming from?

Then, in October of 1997 at the internet's only gold discussion forum of the day (hosted by Kitco), a series of remarkable postings began appearing under the pseudonym "ANOTHER", offering plausible answers to those questions. What followed in a seemingly incongruous stream of thought over many months was, in the fullness of time, seen to blend into a logical whole by many astute readers following the complete text.

What Another revealed was a "deal". A deal between the dollar faction (Washington and London) and a few MidEast oil producers. This deal was meant to keep the dollar strong in the absence of a gold standard by "backing it with oil". In other words, all oil in the world would be priced in dollars, and the dollar would remain strong through usage demand.

In exchange, the dollar faction would keep the price of gold low so that these oil producers could exchange their dollars for gold, kind of like before Nixon closed the gold window. Here is more from the intro...
If ANOTHER's claims are true -- that a consortium of oil states has cornered the gold market (and given the impressive circumstantial evidence, this could very well be the case) -- these "footsteps of giants" become the most salient and persuasive case for gold ownership I have seen in the past decade, if not the full twenty-eight years I have been in the gold business.

Now the way you would "corner the gold market" in a deal like this is to take delivery of your gold while the rest of the world is caught up in a game of paper gold. A game that is meant to give YOU a good price on physical gold in exchange for cheap oil.

There are a couple ways to "take delivery". One way is to bring your gold home. The other is to insist on delivery of physical, but to allow the bank to hold it for you. So the gold never actually moves, physically.

One other thing to consider is that not all the MidEast oil producers were in on the deal. This is to say that they were not privy to the valuable knowledge of the intentional suppression of the price of physical gold through the issuing of abundant paper gold.

What happened in the mid-to-late-90's that caused this "deal" to start to fall apart was that a "Big Trader" in Hong Kong found out about the deal, and began to partake to the same extent as the original parties to the deal. This put a certain stress on the system which first forced the LBMA to admit (albeit not quite a full admission) to evidence of the shenanigans. Secondly, it eventually caused the price of gold and oil to start to rise, putting downward pressure on the dollar.

According to Another, we were very close to a full collapse of the system right around the turn of the century. This collapse may have been delayed by several years because of the massive support the US received following 9/11, and then by the subsequent blowing up of bubbles until the pin prick of 2007.

Today the whole dollar system is more fragile and unstable than it has ever been. Even more than in the late 90's. Today there is no room for a rescue of the dollar by another disaster or through quantitative easing or anything else they may try. Today we come full circle back to 1999. Only this time Y2K is real!

Gulf Nations to take back their Gold from London

A few days ago this story hit the wires out of Dubai:
Gulf ETFs, nations may take their gold back from London

Much of the region's gold that has so far been held in London may soon return...

Prominent gold dealers in Dubai say that it's "only natural" for the central banks in the region to store their gold in DMCC instead of London, where they have typically held their bullion reserves so far...

Almost immediately, Michael Kosares (MK, who wrote the above intro to Another) posted this on his website:
Over the coming weeks and months the Dubai story may turn out to be bigger than it appears on the surface.

Aleksandar also made several astute observations:
1. "What has been holding us back is the difference in gold specification between London and Dubai"
I wonder what gold specification means.

2. "While the gold allocated to DGS is kept at HSBC's vaults in London, the gold reserves held by the Gulf Cooperation Council's central banks are held by various other vaults in London, market sources said."
Reading between-the-lines, this story is REALLY about the GCC and the Arab Central Bank reserves! Not some silly ETF.

3. Have these banks [holding the Gulf's gold] been practicing the "gold carry trade"? [If so, they may owe gold to the western Central Banks as well as the Arabs] This call from the Arabs is effectively asking for delivery of the physical. Scary stuff.

[Alek had a couple more, but I paraphrased and edited his Thoughts for the purpose of this post]

So what does this mean? The MidEast oil producers have decided to form their own currency union, their own central bank, and their own reserve currency for pricing oil. And now they want their gold!

Every couple months the gold writers get all worked up over "taking delivery" from the Comex. But is it possible that "oil" is about to take delivery of 30 YEAR'S WORTH OF GOLD PURCHASES?

Do you think the shorts will have to cover? Will there even be enough physical gold to cover? And what if the CB's have to cover for the banks [like the ECB recently did for DB], will they? Another said they would not:
"The US$ has risen on a flight of fear. That will now end as the LBMA shorts are given to wolves. If this fire burns too hot, gold will turn and it's trading halted. The price of oil will explode as gold becomes the "world oil currency"! Even now oil has locked the IMFs gold, Asia will bid against them no more. We come to extreme times.

Risk not your wealth in paper, we enter a period of truth."

Either way, whether they take all the gold or if they are denied delivery, we are very close to what Another was trying to say!



Anonymous said...

Thank You very much for the insight. I'd read of the plans for the Gulf States to form a Central Bank/currency, but the OTHER part of the story was something I was unaware of.

Of course if what you laid out is true and comes to past, it will ignite significant changes in the economy (coming at a time that it is in such distress).

Now I understand how predictions such as LEAP2020s call of a dollar default this summer might have validity.

While I don't believe everything I read on the Internet, your story does tie parts together and seems plausible.

Once again, thanks FOFOA

S said...

A few comments:
(1) The US policy to engage Iran is intriguing for many reasons. First some belive the uS went into Iraq as Iran was threatening to price oil in euro. Not consistent with claims by this article. Why reverse course now after blood sweat and tears.

2. isreal is reported by debka (?) to have engaged saudi and egypt in building an axis against Iran. The CIA head was repotedly in region warning the israelis not to attack the iranians.

3. if the US were to break with the saudis and welcome a bigger role in iraq might they be making a bet on the P&P reserves in Iran vs. a peak scenario in Saudi? Major implications for the shia axis. One has to believe the iranians are not stupid enough to throw in with the US fully, and would have a major hedge in the form of Russia, France and China.

4. The iranians also have mounds of nat gas to exploit and a pipeline from and through the caspian bothe east and west would be something more than strategic.

5. Much of the analysis I have read (I am new to your sight but very interesting /illuminating posts) makes all the normal arguments in favor of gold ect. what you don;t see is a gaming of how the US may try to act in concert with a "coalition of the willing" to forestall a worst case?

6. The US will obviously print away and use a stable currency to buy real things as your flow down analysis says. That is the obvious trade print worthless depreciating assets and buy appreciating assets to exploit the arbitrage - some would say this was what motivated Rubin's entire outlook in terms of engineering the stock bubble / 'strong dollar" etc..

7. So what would the US do? if the western would lost control of the defacto standard or knew they were on the brink - what would they do? Seems to me they strike a bargain which averts catastrophein the form of a pooled approach (IMF SDRs) which essentially buys them time and gives them a defacto veto over the system by virtue of some diltuion to their voting rights at the organization, ut not control (as stand alone or voting block).

8. The other option is the allow the market to pile into gold and then come to market with a pooled approach with gold as a smaller component of the mix. Seems to me the entire Amero rumors are all about the pooling of resources as a compeitive block. The US would obviously angle for hgiher weightings in tose resources where it had a strong hand - copper, coal, other. Add in mexico and Canada and you ahve nat gas and oil as well. If anything makes it a compeitive alternative.

9. Notwithstanding being a massive gold bull, my problem with the armageddon trade is that there are simply too many interested parties to not come to some agreement. FOr sure the US will be conceding absolute control. That is a done deal. But the US will have a seat at the table and in keeping with the time a say in the cooperative.

10. The other alternative is some wild black swan geopolitically whcih precipitates a crisis or a coming together. probabilityvery low at this point.

11. Seems to me this is a process of the US being forced to the negotiating table by their hair. The US still thinks hat somehow goldman sachs and the self diagnosed geniuses on wall street will figure out the alchemy to engineer the US out of this crisis,. Call me skeptical. Information flows too freely and the world is awash in talent trained at your's truly. yet another example of the US giving away its competitive advanatge and uniliaterally disarming.

12. So what are your thoughts not on why gold is going up (I agree) but what you think the guys who live this are thinking. Seems to me the only way out is a honerable surrender in the name of recognition of the new global community of states. Thoughts on structures etc?


FOFOA said...

Hello S,

I would like to offer responses to some or all of your points because I can tell that a dialogue with you will be interesting and enlightening. Pardon me if my answers are simplistic. I am not an expert in your area and I do think in rather simplistic terms. If some of my answers seem way off, it is possible that I did not understand your point. I am not sure I understand a few of them...

1. Iran was never part of the oil-gold-dollar deal. It has always been an "outsider" to the system. Recently Iran converted a large amount of paper into gold which would seem to signify a new understanding of "what's up". So far, this seems consistent with Another's message. When you use the term "engage", I am not sure if you mean engage militarily or engage in conversation. It seems the current US gov't may be open to either/or. And I'm not sure what reverse course of action you mean. In this game, there are many that produce what the world needs, "oil". There is only one that produces dollars. Does the world still need dollars?

2. I am unsure of your point here. But I imagine that the US makes plenty of strategic moves without considering the affects on the dollar. The US has grown rather complacent about the dollar. It feels impervious. It is wrong.

3. Are you suggesting that Iran has more oil than Arabia at this point? Again, I am unsure of your point here. But yes, any number of countries with a military can stand in defense of the oil fields. If this buys a country the right to print the world's reserve currency, it is quite an honor and a valuable thing to have. Why would the Saudi's and the US part ways?

4. I don't understand the implications to the dollar or gold here.

5. My thoughts on this are that the US is already acting in concert with a coalition of the willing. Its course of action is already clear, and it is in the wrong direction to save the dollar. Also notable is that the coalition of the willing houses about 25% of the world's population. The other coalition houses the remaining 75%, and also produces more than just paper. This is really what it is all about. It is about the 75% receiving fair compensation for their resources. As it turns out, paper and financial products are not fair compensation.

6. This is a good point. And I see it as a likely scenario we will see as the endgame exit strategy of "the dollar masters". It will be a very selfish game for those at the top, and I believe it is ongoing right now.

7. In order to strike a bargain you have to have something of value to offer. The US certainly has things of value, including military might, but it is far too myopically focused on the dollar and the financial system to make a smart move... in my opinion. I have said before that I think IMF SDR's are hopeless as far as being any kind of a solution. I agree with others who say the dollar's opposition is only requesting SDR's as a sort of straw man to later knock down. Other than SDR's, I think this point #7 is a very valuable question to think about. What else could they possibly try? Once the dollar really starts dying. I don't think there is anything effective they can really do. But they always seem to surprise, don't they?

8. I have seen many such currency schemes mentioned recently. I believe that the G20 or whoever could never agree on something fast enough to stave off the inevitable, which is Freegold. And once it happens, they will see that it is not so bad. It is not "the enemy" that they think it is. If the US tries to pull of some sort of an Amero scheme, I believe it will fail in that attempt. And even if pulled off, the Amero would fail in trying to become the world's reserve currency like the dollar was. I don't see any hope for the dollar faction taking this route. We are still left with the default of Freegold.

9. What I describe may be armageddon to some, but I don't see it that way. I have great hope for the future. What I see is that the political actions all over the world are doomed to fail. They are all clinging to wrong ideas when it comes to money, wealth and value. The world is on a course to sanity. This will be a new beginning, not unlike the founding fathers, only this time it will be an opportunity for the entire world. Those who recognize soon enough what is happening will do very well for themselves. Both on a national scale and a personal one. You say there are too many interested parties to not come to some agreement. I say there are too many self-interested parties to come to any agreement that will work. The only thing that will work on this scale will be provided by mother nature as a default to fill the void left by a failed system.

10. Black Swans are lurking everywhere these days. But I cannot think of one that would be good for the dollar, nor one that would be bad for gold.

11. Basically, the US still believes in the magic of paper. That paper is the Holy Grail. Unfortunately for the US, the Holy Grail was made of gold.

12. Gold is going up, WAY UP, because it is the only "pinch hitter" out there in the big wide world that can step into the role of a globally accepted reserve, once all else fails. As I said, the world wants to be compensated fairly for its resources. Paper is not working. SDR's are paper. There are many fancy ideas on the table. But once the dollar goes down before the whole world agrees on one of the fancy idea, the simplest idea of all will step up to the plate and hit a home run.

As for a structure of the New World Order... I think we are headed toward more localized power structures rather than a more centralized one. This may not be obvious yet or even counter-intuitive, but I believe it is inevitable. And these localities will have to compete on the world stage by producing real value. No longer will paper financial products rule the world. No longer will 75% of the world's "wealth" reside among 25% of its people. This is not a socialist thing. It is simply the end of a scheme that ran its course. The water sloshed to one side of the pool, now it is sloshing back.

13. This last one is in response to all of your points combined. Part of the theme of this blog engages Chaos Theory and the emergence of fractal patterns in long, medium and short wave cycles. Much like "the butterfly effect", when systems are set in motion, their final outcome is mostly predetermined. The little twists and turns along the way appear very chaotic, and only from a very wide view can we hope to glimpse the emerging patterns. This is why I think in very broad and simple terms. If we focus too much on the relatively small machinations of the small minds in our government, we will miss the big picture. A good example of this is the housing bubble. House prices went up and now they must come down. Yet the government refuses to see this and is literally willing to burn down the house in order to try and block mother nature from doing what she does best. They don't have a prayer. And neither does the dollar.


Dick said...

good points
The gold price is so.."fixed"
that it is mind boggling
How do they DO it..?
Buy selling EVER more paper to keep a lid on it
BUT it can not last forever
Silver & gold is so over sold in paper, that Hunt soon will return
with a Vengence & his 4 billion
paper Dollars...
It is VERY Obvios, that the Bank - s that are SHORT are...Toast
Good luck JP & liar Paulson Suchs
If thee were just 1 HONEST Central Bank on this planet, they would trash Paper and return to a REAL monetary system,as in Gold oil or Coconuts
I often wonder, where all the Mafia cash has gone...
if that is going to gold, then they just might OUTLAW gold
as a Terrorist attack on the " free World" Bankers
don't Worry
After Obama, we will get
Don Corleone....back

Anonymous said...

The $-digit remained globally *functional* for 2 reasons :
1/ US is world economy & military force N°1.
2/ Oil for dollar.

Please read Sinclair's 5 lines :

“Hyperinflation is national bankruptcy for restructuring under a new political system. Sounds like a plan to me.


Many would have said that the banking system could not go broke, that motors could not go broke and that insurance companies could not go broke, but they all did, are being hyper-inflated to look functional, and reorganized into a different system.

If this is the case, then why not the government as well?

Now do you see why the Chinese want guarantees?

>>> Today, the $-system rushes to its bancruptcy. It are the (systemically increasing)astronomical $-debts that make the $-system become dysfunctional.
Increasing $-debts were needed to keep that $-system functional in the first place. To remain the N°1 global force & economy and keeping oil in dollar.

It is this system that I name the $-hologram (Leap2020-The Matrix).

The main confusion today is the answer on the question : Is the US-$ system really bancrupt (defaulting) ...and becoming dysfunctional !?

I think the Chinese seem to be pretty certain about the $-bancruptcy...and time has come for global restructuring.

Is there anything that might change their opinion/conviction ?

Will the $-system succesfully rise out of its chapter-11 status ?

What will replace the $-digit as a global reserve and store of wealth unit for producing mercantilists and wealth owners ?

Can a freegold regime ever go bancrupt ?

FOFOA said...

Hello Anon,

First of all, I would say that freegold is not a regime. It is the lack of a regime. Can a non-regime go bankrupt? Can a non-entity go bankrupt? Can something that simply holds real value go bankrupt? Bankruptcy requires unpayable debt.

I read the new Leap2020, now out in English. It was good. I agree with the Matrix analogy. If we are entering Matrix Reloaded, when do we reach Matrix Revolutions?

I read Jim Sinclair as well. I agree with him. But this is more complicated than a bankruptcy. The government is not insolvent because it can solve its debts with the printing press. But that is diluting the stock. So if you dilute the stock ad infinitum to pay off your debts, what is that? It is theft. It is stealing from the shareholders to pay the debt. It is criminal. Bankruptcy is only civil.

Can you see the difference? In bankruptcy creditors lose. In hyperinflation everyone loses.

The US is not bankrupt. It has many assets. Its leaders are simply addicted to the dollar heroin. Just like junkies. Reality will set it straight within a generation or two.


Anonymous said...

I agree that we will continue to struggle with the right definition of the words (the notions) bankrupt (banca rotta)...regime...system...etc.

Even the notion of "freegold" has many interpretations.

And how many different borderlines can one draw between functional and dysfunctional...theft...corruption...etc.

If everything was so simple and straithforward,...freegold would (could) never have been "marginalized".

Why is it that you, me and a few others seek refuge in the goldmetal,...and the majority isn't ? Is it because there are so many different interpretations possible about bankruptcy, etc ?

Ask 1.000 people what "wealth" means to them. How many will associate gold with wealth (conservation)?

My humble conclusion is that the general confusion will have to stop and things will have to be sorted out in order to being able moving on.

What do you reckon ?

FOFOA said...

I think it has to do with 38 years of everything; the media, the schools, Wall Street, the government, literally everything and everyone vilifying gold. I have conversed with some very smart people in the financial world and I am always amazed at their outright disdain for gold. It is irrational. It is a product of a generational brainwashing. And it will cost them everything they have as well as the pain of realizing the opportunity they missed once the dollar finally buys the farm.

The transition to freegold only requires maybe 10%. Once we are there, the other 90% will see clearly.

S said...

As if on Q, iraq yesterday said it has more P&P reserves than saudi as per its surveying etc.

Also, it was reported a week or so back that the US sent a delegation to Saudi (of course who know if this is true) to woo investment as the US has internally acknowledged that its projections are far too rosy. We see this is the tax receipt numbers (Which the euro think tank is focused on). The tax receipts are down 30% on federal level and 50% or so in the states Like Cali. more importantly look at Obamas budget and the projected receipts. yes you guessed it rising through 2013.

One question that nagged at me in the later days of bush into the oil spike was why were they so eager to fill the SPR into the biting teeth of a spike? Having combed through the CPI data something dawned on me. If the Fed determined that they had to begin the process of monotizing and they needed an early pretext, one that could be sold, why not engineer a massive spike in oil and set yourself up for horrible comps which bolstered your case. Many have speculated it was GS that was the conduit but it just seems too convenient that at the exact time the Fed is setting up for a printing regime oil spikes to build the case for sever deflation on the headline - which is what everyone was clamoring for to be look at over core. Bit of speculation/conspiracy for sure. But the price spike in oil never made sense give the massive inventories and no demand. it was a pure squeeze but one that inured to the Fed from a policy perspective. Too convenient for me way too convenient.

As for the Saudi axis what is also interesting is that Jordan, Egypt and Saudi and even Qatar are exploring peaceful nuke programs. Turkey is breaking away from the US and Israel as well. The whole region is in play. might the US be thinking that they have played the Saudi hand and that detente with Iran is the only way to get some peace dividend in the form of continuing the dollar regime at some level. Seems so stretched but it is the small minds in DC.

On the topic of iran they own a chunk of the Caspian reserves off their coast. Many have speculated that a pipeline through Iran to the coast or into and through afghan - see Unical/haliburt - was a pretext for the afghan moves. A stretch but it has been talked about. A thawing with iran broadly is dollar supportive one would think, though as a producer the one lesson to be learned from China and reserves is that it is never a good bet to throw your lot in full throttle with someone. it becomes an albatross.

what does seem apparent is that the dollar is dying on the vine. As to why the gov't will not let up on housing it is simple: the banks. The govt does;t give a hoot about housing they care about propping up the asset values to insulate th banks from actually going bust (runs) as opposed to being insolvent and functioning which is what the retards say is fine and happened wall through the s&L crisis (and Mexico crisis - read Citi again). The fed is pursuing diametrical ends: the prop asset prices to keep the debt backed money system floating (themselves first, then the banks then the insurance companies,then the pension system etc..) while the telling Americans and the world more broadly [as the Pavlovian (sans Weber) bite hook line and sinker] that they are doing this to preserve the wealth of their citizens.

To your point the gov't is attempting to steal wealth. I would end with this final point. You make the point that the gov't will fail as it simply doesn;t have the gold to back fiat. Or the banks will be thrown to the wolves and the theft will have been pulled off. The one thing the countries do have going for them is that a dtrong military would overtake the gold mines or they would be nationalized quickly in the pulic interest of course. The idea that the gov't wouldnt do this in the interest of the masses to the exclusion of the few who saw the the endgame long ago is simply wishful thinking. FDR did it and this admin is playing from his script. Who knows if we get there but make no mistake what they can;t steal on the sly they will simply take under executive order and national security. They don;t have an option.

This plays into Putin comments this week that you could see wars over resources coming. Why not history rhymes of course.

I agree gold remains tantalizing but all these other factors must be considered in the context of thinking about what the gov't will do. The fed will never sit by and watch GS and the primary dealers fail as that is simply how they fund themselves. Not an option to let the system that places their debt fail. they will protect themselves first and call it in the interest of the masses. it is not. The US gov't will use its last competitive advantage which is the military here or abroad to ensure some continuation of the system - at least one that preserves those at the tip of the spear. Or they will die (or have others die) trying. History is clear on this matter. Lastly there is a large contingent of people who think the current system is good - its the American dream. Too bad the American century is over. But that epiphany hasn't dawned on a lot of people and many are too entrenched financially. Even the less sophisticated and hence prone to jingoism find solace in the system. (I have read the matrix piece) but I can envision the script. As they say America isnt a place it is an idea. I agree the idea is broken, but there are still a lot of believers in the now perversion. In short the gov't still has constituencies abroad in the form of sycophantic empire suckers and at home in the aforementioned.

Ignorance is bliss.

As for chaos theory, are you saying the gold is the stasis in that the chaos will settle into a la water crystallizing and aligning at the turn to ice?

Martijn said...


This is a site you might really want to check out. It contains quite some articles on precious metals you might find interesting. He has been following gold since $300 and has been rather correct so far.

Martijn said...

And it seems printing dollars is a must indeed...

Martijn said...

The @home crash is likely to hit China too. That might increase the pressure for them to stimulate the local economy, and hence buy less treasuries.

Martijn said...

Credit cards are coming.

They were long expected by among other Peter Schiff, no real surprise here.

Martijn said...

Btw, there is a funny annecdote on the Dutch central bank director (Nout Wellink). He is told to have repeatedly told his collegues: "remember, you can only lie about two things: intrest and gold".

myself said...

FOFOA, great writing. I'm looking at pressures outside of the usual. I read "The Coming Dark Age" by Roberto Vaca and I'm reading "The Collapse of Complex Societies". Both are old books.

The US just has too many non-producers, too many parasites, too much debt, and too much competition. After WW II, we had all the manufacturing capacity. This is no longer true. We spent the last 60 years inventing labor-saving devices and,, at the same time, tried to keep full employment. This didn't work, so we borrowed 80 % of the savings worldwide to give everyone a job.

It's a new world now. All the consumers are people and all the producers are machines. Capitalism works incessantly to reduce labor. Capitalism works constantly to diminish the pool of potential buyers of it's products. We continuously destroy job niches. Capitalism has never before had to come to an accommodation with automation.

These converging changes and pressures will demand solutions that are "outside" both Keynes and Marx.

Martijn said...


All the consumers are people and all the producers are machines. Capitalism works incessantly to reduce labor.

I beg to differ. Are you still riding a horse to your job (if you have one), or do you take the bus/car/metro? Did you just use a computer to type that post? Machines are everywere. All they do is extend the human reach, as is proved by the ones you use in your daily life. Thereby we are enabled work more efficient. And yes, some jobs are indeed taken over by machines. This allows the people who were doing those jobs to find a new way to use their capacity. A way that benefits society more.

You've probable not given enough attention to the fact that those books you mentioned are old, and therefore perhaps a bit biased against machines/computers/industrialization/digitization.

Martijn said...

This article provides an interesting perspective on the monetairy economy.

Martijn said...

From previous link:

However, you can see from the examples I have given that the creation of money has in many ways impoverished us all. Conversely, the destruction of money has the potential to enrich us. It offers the opportunity to reclaim parts of the lost commonwealth from the realm of money and property.

We actually see this happening every time there is an economic recession. People can no longer pay for various goods and services, and so have to rely on friends and neighbors instead. Where there is no money to facilitate transactions, gift economies reemerge and new kinds of money are created

Martijn said...

On a personal level, the deepest possible revolution we can enact is a revolution in our sense of self, in our identity. The discrete and separate self of Descartes and Adam Smith has run its course and is becoming obsolete. We are realizing our own inseparateness, from each other and from the totality of all life. Interest belies this union, for it seeks growth of the separate self at the expense of something external, something other.

FOFOA said...

Hello Martijn and "Myself" (this is a funny name to say hi to :),

On the subject of machines destroying jobs...

"The term "Luddite fallacy" has become a concept in neoclassical economics reflecting the belief that labour-saving technologies (i.e., technologies that increase output-per-worker) increase unemployment by reducing demand for labour. The fallacy lies in assuming that employers will seek to keep production constant by employing a smaller, more productive workforce instead of allowing production to grow while keeping workforce size constant."

This is from the Wikipedia page about the Luddites, a social movement in the early 1800's that protested against the Industrial Revolution.

"In his work on English history, The Making of the English Working Class, E. P. Thompson presented an alternative view of Luddite history. He argues that Luddites were not opposed to new technology in itself, but rather to the abolition of set prices and therefore also to the introduction of the free market.

This sounds reasonable. That the Luddites were early "Marxists".

But then if we go to the "Neo-Luddite" page, we see a description of modern Luddites:

"Neo-Luddites come from a variety of political backgrounds, ranging from anarchists (such as anarcho-primitivists) to political conservatives (such as eco-fascists)."

Of course Wikipedia is often a biased source, but it seems to be pointing to the Libertarians on the right and the Environmentalists on the left as the modern Luddites...

"Neo-Luddites claim that there are a wide range of problems with the development of technology including:

Increases in government/ corporate control over individual lives, which might lead to a totalitarian state

loss of personal privacy due to development of surveillance technologies


alienation, depression, and other mental disorders

environmental degradation

increased division of labor

Health problems caused by industrialization, such as cancers, heart disease, and birth defects

social decay

the possibility of nuclear war

cruelty to animals

the destruction of tribal and nature-based ways of life

Some neo-Luddites, such as those in the anarcho-primitivist or green anarchist movements advance explicitly anti-technology arguments, viewing technology as a fundamental form of oppression, destruction, and alienation."

Interesting stuff. I would venture a guess that the biased stereotyping editors of Wikipedia would say that we, "physical gold advocates" are actually Neo-Luddites. I would heartily disagree.


Martijn said...

I see all the problems that wikipedia ascribes to the modern ludditic view. They are real, but the reason for them is not technology. It's the perverted system we've installed.

I guess I'm both an anarchist and an eco-facist. And the world stands the best chance of survival in the long run if everyone becomes one. That's probably the part those brainwashed wikipedia editors missed.

Martijn said...


What is your perspective on social capital?

The current financial system may by rather perverted, but all the trust and knowledge we have build around it is quite some social capital.

Wouldn't freegold burn all that (intangible) wealth? And would it still provide the best net benefits to society given the aforementioned capital destruction?

FOFOA said...


I believe you are speaking of the highly centralized social capital. I believe this is a mirage for the most part. I believe we are headed for a more localized system, where the social capital will coalesce in the various localities. And then each locality will interact with other localities creating a worldwide network of "tribes" for lack of a better term.

I do not believe that the real social capital that exists today will burn. What will burn is the mirage, or facade of the centralized system. It has become too big and too corrupt to perform its duty. Imagine a celestial body, a sun. It is the central beacon of light. It gives off warmth and energy to everything around it. But at some point it becomes too big and it collapses in on itself. At this point it no longer gives. It only sucks. It sucks in warmth and energy from the surrounding environment until it ultimately becomes a sterile black hole of nothingness.

Our social contracts will survive. But they will no longer be serviced from such a central location. It is simply too big of a job for a central body of maybe 1,000 people to provide competent leadership to 300,000,000. That is 300,000 to 1. There is too much potential for corruption there. In the future it will be more like 10,000 to 1.

At this ratio of leadership, the social capital that we have built over the last century will flourish like never before. This is what I believe.


Martijn said...

You may be right. Perhaps we are off to see great times indeed.

FOFOA said...



And in this world of localized "tribes", gold will be the common link that enables the confidence necessary for a global network of trade.

Until now it has been the US dollar, but this is only paper and confidence in it is now failing.

Can you think of anything other than gold that could enable confidence between "tribes" necessary for global trade? SDR's perhaps? Maybe an RMB with Chinese characters you don't understand? How about some fancy new currency based on "hours of labor", or an Amero based on the vast quantities of credibility stored in North America? Or maybe a new Gulf currency with pictures of camels on the back? Sea shells from Aruba? How about a piece of paper redeemable in rice somewhere in Asia? Or how about a piece of paper issued by a whole group of tribes in Europe?

These all test the limits of human imagination. Gold does not.


Martijn said...

I know how the natural choice is gold, it's a clear point that already has been proven by the emergence of the gold standard in the 19th century as a reaction to increased international trade brought about by among others the steam engine on ships.

Another question: anyone ever heard of the Venus Project?

Martijn said...

The point that locally issued currencies do not work is also made in Money, Markets, and Sovereignty btw.

FOFOA said...

"...But an overreaching plan like the Venus project, which aims to "wipe out wealth", will simply be dead on arrival. To "wipe out wealth" means to make all resources, including all land, community property. And there are only two ways to do that. One is through a totalitarian government edict (through force), and the other is to get people to willfully give up all that they have for the good of the community... by their own free will.

Those people that have lots of "stuff" don't have to worry about the necessities of life. In fact, they have extra "stuff" to the degree that they spend more time thinking about the "wants" of life.

So you would have to get them to give up those wants, completely, to take care of the needs of everyone else. It will never happen. Not even with 200 years of social engineering and brainwashing.

That only leaves a totalitarian government edict. And that is the scary part about heading down this path.

Communism had similar goals, and a nasty, deadly outcome."


Martijn said...

You have a point there.

Seen this chart, btw?
World gold holdings.

FOFOA said...


This seems to be right up your alley.


Nice chart. Makes me wonder how accurate it is.


Unknown said...

Martijn, I came to read about the Venusians some time ago and was swept away by the messages they outed and the overlap with my personal views on technology and civilisation. I thought that I found something close to a religion for myself. But alas, it was not to be!

FOFOA criticizes it well from a perspective of a pragmatist. But I am more of an arm-chair thinker whose hobby is to.. well.. think about stuff out of my profession. A leyman intellectual if you will, no matter how contradictory that sounds.

There are a couple of things wrong or doubtfull about the Venusians.

1. A basic premmise of Venusian thought is that there is no "human nature" but only "human behaviour". This is the same, centuries old, "tabula rasa" or "nurture vs. nature" debate. It is far from over and the Venusians simply take the "nurture" side as the fundamental postulate of their philosophy. This makes the foundations of everything else they build shaky.

2. In a Venusian society, basically all dirty-work will be done by AI (artificial intelligence). They will make all decisions that politics now is charged with, they will clean the streets, they will make stuff. I rather think that it is not possible, both technically and from an entropy perspective, to get a free lunch like that.

I WANT to believe that they are correct about us humans, that we are not inherently corrupt and greedy and that it is only "the system" that makes us such. I WANT to believe that there are energy sources for free. I WANT to believe that AI is capable of ruling us and making decisions based on honest and incorruptible analysis. But that is all. Only a hope.

Until somebody convinces me that the above two issues are solvable, I will consider the Venus project a utopia.

Unknown said...

BTW, Zero Hedge has puiblished some Thoughts on monetary matters recently that are worth reading. Amazingly, he manages to sit both in the deflation and inflation camp at the same time. Seeing that deflation was the only talk some months ago, I consider this to be somewhat of an improvement.

FOFOA said...

Hi Alek,

Yes, I have read both of those pieces and all of the comments.

Did you see the comment on the first piece by (o_O)?


Martijn said...


Congrats. Quite a nice job being onto LEAP20/20s clippings!

Anonymous said...

$$$-Dammerung !?

Asia will author its own destruction if it triggers a crisis over US bonds
Japan beware, crashes have a habit of bringing regime change

By Ambrose Evans-Pritchard
Last Updated: 6:03PM BST 17 May 2009

>>> This systemic global unbalance between deficits & surplusses, is NOT going away before a dramatic structural change has taken place.
The creation of a level playing field with freegold as the wealth-reserve-consolidator.

This broken record mantra is the very essence of *the* problem.

Makes it very obvious what tribes are increasingly inclined to be pro or contra, freegold.

Ambrose keeps propagating the dogma that this globe MUST remain dollarized. His main arguments are getting "thinner". Wealth creation and consolidation cannot be build on $-quicksand (unproductive debt).

The purpose of more (tribal) monetary unions is to organize more balanced internal trade and less unbalanced exportism.

FOFOA said...


Thank you!




Anonymous said...

Let's have some fun !?

Rise up ! - Video

Or, it really as theatratical as Max is acting it !?

Martijn said...

Ambrose is a funny man; his western, pro-dollar, pro-UK perspective is overly present. However, I would not argue that he is unintelligent.

In the article Anon linked, Ambrose puts forwards some rather sloppy arguments.

Backed by Washington after the war as a rural counterweight to the urban left, the LDP has held an almost unbroken grip on power since 1955.
True perhaps, but the US has been controlling Japan quite firmly after WOII. So I would argue that the LDP was installed rather than backed by the US (comparable to Saddam in Irak in the 1980s).

which suspects that Washington is engineering a stealth default on America's debt by the trickery of quantitative easing
Absolutely correct.

Who ultimately holds a gun to the head of whom?
Good question. The answer is however likely to be that loads of people holding guns to each other's heads, creating somewhat of a remise situation.

If Asia's leaders give free rein to frustrations and crater the US bond market, they will ensure their own political destruction.
Perhaps so, but continuing to produce goods for Americans who can only consume them and provide no real value in return will certainly lead to the same outcome or worse.

Could it survive the wrath of jobless graduates and rural migrants if it provokes America into erecting trade barriers, killing the globalisation goose that lays the golden egg?
Here Ambrose is seing something that many others do not see: the golden egg from American consumption. It would truly be a new fenomenon to find that a nation that only consumes and produces nothing actually turns out to produce the golden egg...

American can if necessary retreat into its vast home market and rebuild its industrial base, well-armed with 12 aircraft carrier battle groups.
Correct. And China can ramp up internal consumption. I believe that turning to consuming is a lot easier than turning to producing, so I wonder who holds the best cards here.

The last 12 months should be lesson enough that Asia cannot yet stand on its own two feet. Its mercantilist export model remains a "high-beta" play on the West, to use trader parlance.
On the contrairy the US have convincingly proven to be able to stand on their two feet? This is were Ambrose's humorous touch kicks in. Laughing is allowed.

Japan's industrial output has fallen 34pc. China's exports are down 23pc.
And what size the American export, apart from the toilet paper business?

Ray Maurer, from Qatar's QNB Capital, said China may be too busy closing factories it should never have built to challenge US primacy over coming yearsLuckily GM has loads of productive capacity that can continue to run full throttle.

China's holdings of US bonds are a consequence of its own policy of holding down the yuan to boost exports.
True indeed. However in while doing so China was able to steal most of the US productive power.

The world economy has long been running on fumes. The debt appetite of the Anglo-sphere and Club Med kept demand afloat, concealing excess capacity. The deformed interplay of Asia's Confucian model and Western consumption ran unchecked, until the imbalances blew up.
Correct again.

Yet it is easier to blame Uncle Sam, subprime, and friendless bankers. A folk tale has captured political discourse everywhere, from Beijing, to Tokyo, Moscow, and Berlin. If they are foolish enough to act on this self-serving illusion, they will pay the higher priceIt's a shame that Ambrose has not put any money were his mouth is. He deserves to loose it.

Anonymous said...

From Ambrose country...(snip)

May 18 (Bloomberg) -- The 220 billion pound ($334 billion) hole in U.K. corporate pensions may push companies to cut dividends, damping the recovery in Europe’s largest stock market.

>>> Not that the UK Crisis-situation is unique ! Tells other EU states (tribes) in advance where w're heading.

All are watching (staring at) the balancing dominos...and hoping again that the $-dynamism will pull us all out of the quicksand.

In the mean time the gigantic frozen pig + lipstick hangs high into the sky.

Only ONE reliable insurance left : PHYSICAL GOLDMETAL IN POSSESSION/100% property !

Regardless of any temporary/artificial revival of finances & economies.

Anonymous said...

The "-green-" shoots !?

The industrialists and their politicians are condemned to rely on MUCH more debt-driven political economy (state subsidies/guarantees) for making the recovery eventually happen !?

More ice on the debtberg...For how long can the titanic remain on the surface...?

Anonymous said...

Total Control !?

The gigantic financial waves that the $-FI artificially creates are absolutely nefast from any point of view (Growth and Stability).

The most blatant example was a sub $10 oilprice in no time to $140 ...and back down !

The same goes for exchange rates, interest rates and all the bubbles (boom/busts).

These actions result in total legal control by the organizers of this dynamic.

The goldprice and the status of gold are playing a MAJOR role in this scheme. It would all be impossible with freegold. And as F. Lips stated : Less wars with more freegold.

Martijn said...

Maybe so: China Gold Reserves May Back Yuan Internationalization.

China's gold reserves may serve as backing for the yuan as Beijing promotes its use overseas, said Zheng Lianghao, managing director of the World Gold Council's Far East division, the Shanghai Securities News reported Monday.

Martijn said...


You've posted this article. I beg to differ.

The article argues that: "When the financial system creates bubbles it drives up the cost of assets far beyond their true value in producing or storing wealth. When the bubbles burst the value of the assets plummets. Those with ready cash then buy them up on the cheap. When the dust settles more wealth has been concentrated in fewer hands. The rich get richer, and ordinary people are left in a deeper condition of indebtedness, poverty, and pressure to perform to the liking of the financial masters". And although we all know that, we are said to miss an important aspect of this system: "what we fail to acknowledge is that the system itself is totalitarian. This means that it is designed to exert total control over the lives of individuals".

This is nonsense.

Bubble creation is not limited to fiat-currency systems; even under a strict gold standard bubble creation is possible. Although in the latter case those bubbles will be created at the expense of another sector, they really can emerge.
Bubbles however are not a problem when given the possibility to correct. And yes, those who understand the market and avoid being in bubbles (for too long) tend to amass more wealth. The point is that this has massive societal benefits; by allowing the "smart guys" to amass more wealth, their influence on the economy grows. In the end this leads to intelligent people running the economy, instead of the butcracks that were cheering the bubbles until their collapse. I see nothing wrong in that; I even believe that the economy will be in a much better shape with intelligent people running it over of guys with manour for brains being in control.

Martijn said...

For anyone interested: the IMF is criminal.

CAPE TOWN - The International Monetary Fund (IMF) is attempting to reinvent itself with the global financial crisis, in the process using the opportunity to promote policies that exacerbate the recession by shrinking rather than growing economies...

...Before the economic crisis struck, the IMF was on the brink of becoming redundant as lending dropped to its lowest level in 25 years...

...The whole point of the IMF coming into those countries is to help them not collapse, but they are forcing them to adopt policies that make the recession worse...

...As an example, Latvia’s economy is due to contract by 12% because the IMF has forced it to adopt contractionary policies. Such negative growth will translate in hundreds of thousands of job losses. When Latvia deviated from the imposed policies, the IMF denied it the second tranche of bail-out money...

Martijn said...

And did you see how gold got hammered today at approximately 10:00 NY time?

Quite bizar...

Anonymous said...

@ Martijn :

Intelligent governance of finance & economy means growth + stability.
No disturbing bubbles.

The gold-standard was NOT freegold !
A fixed goldprice + redeemability was also a scam. That's why that particular gold-window had to be closed in 1971.

Modern "Bubbles", are an anglo-american invention (dynamic). The Euroland polder-model has much more merits as to organize a level playing field where stable growth and wealth creation can develop harmoniously.

We always have that particular bubble that is one bridge too far and destroys the hologram.

The nearby future will teach us who's having it right :)))

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

I agree that the gold redeemability was a scam.

The gold standard however emerged rather naturally.

And if you do not believe that bubbles cannot emerge under freegold you are wrong. A bubble is created as soon as people "irrationaly" drive up the price of some sort of product. Should they do so under a tight monetary regime there will simply by less money to buy other products - and these will get hammered - but bubbles can still emerge.

Anonymous said...

The purpose of freegold is to sever the link between fiat currency units and the goldprice.

Meaning : Currency is NOT "backed" by gold and gold is NOT a currency (but a wealth reserve/consolidator)

"Bubbles" are created with the availability of plenty cheap digits. With freegold, you have a cheap money competitor...where the mismanaged (abused) cheap currency goes close to zero (devalued by freegold).

Only a proper managed/governed fiat system can function as a book-keeping unit for trade settlements.

A financial industry has to serve the stable growing economy and is not an instrument to gamble recklessly on the economy.

FOFOA said...

Good morning,

Martijn and Anon, thanks for the links. I've got four of your articles lined up on the bottom of my screen to read. Martijn, the 10AM gold hammer is quite normal. I wonder what it means today.

Ivo Cerckel has a very nice post here.

And if anyone is interested, Martin Armstrong has a new piece that I just started reading...

Understanding The Real Economy

SNIP taken from

"Currency = Shares in the political state

Bonds = Issued by Government are nothing more than a derivative option

Shares = In the corporate world are a hedge against domestic inflation

Gold = Is the hedge against Government instability

Currency is an instrument that represents the total wealth of a nation. It is nothing more than a individual common stock share whose value will rise and fall dependent upon how the world believes and trusts in the management.

So bonds are simply an option on the currency and you hope that the interest paid offset the depreciation in the value of the bond/currency for the duration it was held. Of course, buying government debt is the one bet you can make that is a guaranteed loss. It is only a question of how much capital you lose.

Shares/stocks of private corporations reflect a hedge against inflation. Most stocks will only keep pace with inflation that is real, not manipulated statistics.

Gold is just starting to come into its own. Its role is obviously not the hedge against inflation as is stocks, but the hedge against the instability of government. For when all else fails, gold becomes the only store of wealth.

FOFOA said...

Martijn and Anon,

I think you are both right. Martin Armstrong may have his shortcomings when it comes to monetary theory, but one thing he understands very well is the way capital flows work. And capital flows have driven the global economic landscape for thousands of years, through fiat as well as hard money systems.

The difference is that in the modern system the capital flows have been solely driven by the leverage afforded by the system, which just happens to favor non-productive players like Goldman Sachs and less-productive players like the US and the UK.

Under Freegold, capital flows will be far more rational. Capital will flow toward real value, and also to where it (capital) is safest thanks to the rule of law. This will still create great inequalities in the world. Or at least perceived inequalities. Call them bubbles if you will. But this is actually what drives innovation and progress. It is a good thing when it is rational.

When it is irrational it is a very dangerous thing. The leverage-induced housing bubble is a perfect example. The derivative mountain is another. Under the current system real, physical value like gold and oil is suppressed to support the fantasy that paper financial products are the ticket to early retirement. This is destructive to innovation and progress. It only drives innovation in the production of paper financial products which add no real meaning to life on this planet.

By the way, I have not yet read the Cook article which started this debate. Perhaps that will change my view?


Martijn said...

Well, it's not that lengthy an article and it makes some interesting observation, although I do not agree with all of it. You could certainly give it a try I suppose.

FOFOA said...

Martijn and Anon,

Regarding the Richard C. Cook piece...

I actually agree with this statement:

"When the financial system creates bubbles it drives up the cost of assets far beyond their true value in producing or storing wealth. When the bubbles burst the value of the assets plummets. Those with ready cash then buy them up on the cheap. When the dust settles more wealth has been concentrated in fewer hands. The rich get richer, and ordinary people are left in a deeper condition of indebtedness, poverty, and pressure to perform to the liking of the financial masters."

This is how the current system is "gamed". I do not say that it is good or bad, just that it is. I DO, however, say that the system is badly flawed and that this is one of the results. Under freegold, things will not play out this way.

Cook ends his piece with this statement:

"None of this is accidental. As The Report from Iron Mountain made clear four decades ago, it’s what has been planned all along."

I do not agree with this statement. We cannot state this as a fact. We can only state it as a possibility. And using Occam's razor, it is the less likely possibility.

Cook backs his statement with the evidence of The Report from Iron Mountain. But to be fair, he should have acknowledged that it is "generally believed to be a hoax" [Wikipedia].

Here are some snippets from Wikipedia:

"In 1996, Jon Elliston wrote that the book is generally believed to be a hoax authored by one man, Leonard Lewin, and the book was listed in the Guinness Book of World Records as the "Most Successful Literary Hoax."

Consistent with the belief that the book is the result of a hoax, the idea for the Report came from Victor Navasky. In 1966, Navasky, then editor of the satiric Monocle magazine, read an article in the New York Times about a stock market downturn due to a "peace scare". This gave him an idea for a report that would get people thinking about a peacetime economy and the futility of the arms race. With these aims in mind, Lewin wrote the book."

"The Report" may or may not be real. But a fair article should at least reveal the controversy. As evidence, a controversial report becomes "an assumption" under Occam's razor and changes Cook's conclusion from more than likely to less than likely. Cook gets around this problem by referring to "The Report" as an historical fact. This draws his credibility into question.

Here is Richard C. Cook's plan to solve the crisis. Judge for yourself.


S said...


Thanks liked that click on the geopolitical stuff. What exactly was the thrust of the Leap Matrix argument?


Anonymous said...

Interesting posts !

The one who attract my special attention was certainly the speeche of {Zheng, who was speaking at a forum over the weekend, said increasing gold holdings would provide China with a useful dollar hedge}

So approx 2 trillion of $ reserves against approx 1000 tons of GOLD.
Do we need a picture here....?

Shanti from Skiathos

FOFOA said...

Hello S,

The LEAP article is that in trying to save the current system, governments have literally manipulated every financial indicator there is.

"In practical terms, this means that the indicators that everyone is accustomed to use for investment decisions, profitability, location, partnership, etc ... have become obsolete and that it is now necessary to find new relevant indicators to avoid making disastrous decisions."

So in a way, we are living inside "The Matrix" now...

"Our team advises them to go see (or see again) the movie Matrix (5) and to think about the consequences of manipulating the sensors and indicators of one’s perception of given environment. Indeed, as we will examine in detail in our special summer 2009 GEAB (N°36), the coming months could be entitled « Crisis Reloaded » (6). "

"(5) In the Matrix series of movies, reality perceived by humans is created by computers. They think they live a comfortable life when in fact they live in squalor, but all their senses (sight, hearing, taste, touch, smell) are manipulated.

(6)The title of the second in this series of movies: « Matrix reloaded »."

I note that the final Matrix was titled Matrix Revolutions!


FOFOA said...

Hello Shanti from Skiathos,

Is this your anniversary vacation? Are you reading that book?

Well have a wonderful time. It looks beautiful!

Indeed, I believe that even 1% is a hedge against dollar collapse! So does Chris Laird, who is not really a goldbug. I think that everyone should follow in the footsteps of China! Of course, more than 1% should prove to be a windfall! And I believe China has done more than they admit in this regard.


Anonymous said...



The place here is amazing, i would certainly sugest this place, especial this hotel and the local people, we are treated here as never before.

Yes interesting book with lots of accademic background information but no new aspects who are interesting in the context of your blog.

Will read Laird later when a bit more time


Martijn said...


A while back I posted this lecture on naked short selling that you watched. In the end it was shown that wikipedia was rather thouroughly manipulated. Therefore I would argue that wikipedia offers absolutely no credibility on topics that cross political forces.

Martijn said...

Previous post was in reaction to your reference to wikipedia regarding the Iron Report

Ender said...


I might be taking your writing a little out of context, but I figured I'd try to squeeze in a word/question amongst all the traffic and see if I could catch your thoughts.

@ 9:46 above, you wrote:

"Under Freegold, capital flows will be far more rational. Capital will flow toward real value, and also to where it (capital) is safest thanks to the rule of law. This will still create great inequalities in the world. Or at least perceived inequalities. Call them bubbles if you will. But this is actually what drives innovation and progress. It is a good thing when it is rational."

Do you really mean to say 'rational'? And is it 'capital flows' that you're really referencing or ... people?

I have a hard time seeing how things will be more rational, but I do see a means to settlement. There will still be governments that will be printing currency like there is no tomorrow. Socialistic projects will still be driven. Taxes will still be collected. The only real difference is that these activities - will be accepted - as part of the fiat process of the interaction between governments and their central banks.

The price of gold, if the Freegold concepts are upheld, will reasonably allow for the pricing of a local currency amongst all the others and allowing for settlement of imbalances.

With regards to being rational, people could actually do that today - if they so choose. You see, gold is still available for settlement. Those that want to step outside the bounds of taxation through inflation would simply take some of their currency and convert it into real assets. People, individuals like you and me, can make rational decisions and choose to no hold currency long term. That simple act tends to give a sense of independence and freedom that does not happen when your 'assets' are in the hands of others.

Political desires and motivation will always color the rational actions of government. Freegold, in one sense, is the businessman's way of telling the political establishment to balance your budget or I will do business elsewhere. Get rational or it doesn't make sense for me to invest in any actions in your country because the eventual outcome will put me out of business.


Enjoying the conversations here. Hope it's allowed to continue for a while.

Martijn said...

Off course China has bought much more gold than they admid.
1) They did even not notice the world of buying what was admitted now
2) If they admid too much, it would be a guaranteed end of the dollar and the game would be over. This is not in their interest now.

Anyone who believes China has bought only as much as they admit should think again.

FOFOA said...


I agree about Wikipedia. That is why I always take it "with a grain of salt". But in this case Wikipedia does present both sides of the hoax controversy. Something Cook did not do.

And just because Wikipedia may be hopelessly biased is not a reason to ignore it. As in all things in life we must exercise our power of discrimination and weed out the truth from the garbage.


Martijn said...

this chart does not look good at all.

Martijn said...

As in all things in life we must exercise our power of discrimination and weed out the truth from the garbage.

That is totally true.

FOFOA said...

Hello Ender,

As usual I have no real disagreement with what you say.

In my thoughts I try to unfold all the complexities that will accompany freegold. And they are very complex. Just like everything in the "study" of economics.

The basic premise is that the dollar will not be able to govern the price of gold (and oil) without the support of the world. So when this ends, "the underwater beach ball effect" will reveal all manner of truths that have been hidden for a long time.

One of these truths is that investing your wealth in someone else's debt is not the only way to protect against inflation. In fact, it will be revealed that this type of investing does not even come close to what it purports.

So, gone will be easy credit.

The irrational capital flows are driven by easy credit and routed [in our current system] to financial products. This too will be revealed for what it really is.

You ask if I meant to say people instead of capital. Well, I believe that people will generally be physically closer to their capital [localized not centralized economies], so I guess there will be people flow along with capital flow to some extent.

Governments will be closer to the people, and therefore held more accountable. There will not be the option for "big government bailouts" like there is today. This will force rational investment.

Imbalances will not be settled with worthless paper, this will force rational trade arrangements.

Political motivation will be to encourage the production of real wealth, or else die a political death. Printing paper currency will be exposed for the scheme that it is.

The "inflation tax" is really just the misdirection and theft of real capital in the here and now. Under freegold this "tax" will be suppressed in a big way. Printing will not be a very profitable enterprise for government. In fact, governments will quickly reach the point of diminishing returns on their printing and ultimately negative returns.

Capital flows will be rational because real capital will not flow into flimsy paper financial products. Capital will flow to where real value is produced, not to the debt of someone who only produces paper financial products. This shift SHOULD spur great innovation in new REAL industries.

Think of how many brilliant minds have been led into advanced college degrees in Investment Banking. How many careers have been directed to Wall Street. To me, this is irrational flow of human capital.

I am starting to ramble, but please feel free to comment on these thoughts.


Martijn said...

Time for bed here. I'll try to read into the discussions some more tomorrow.

FOFOA, you will certainly enjoy this article!

Martijn said...

Euros overtake dollars in Russia's reserves

FOFOA said...

Good morning Martijn,

You know me well. Indeed, I did enjoy that article!


Anonymous said...

Lets think back a bit...

How did the Euro come to life? Well one day they just said xDM= 1EU, yFF = 1 EU

So when push comes to shove what will prevent them from creating the MONDO (world in Italian) and say 2U$S = 1 M and 1.5EU = 1 M, etc for all the currencies?

The suckers in the whole world will fall for this as they have been falling for Fiat Money for ages. It is easy, don't bother me with reality... I want to keep spending.... How nice our leaders came up with this great idea which will save humanity.

So now they, the ruling elite, created chaos, and come up with what they always wanted in order to run the show. We are again at the mercy of "the masters".

The second step will be to digitalize the MONDO to make sure that all transactions go thru their banks and government control and tax at will...

They will then forget about gold which will go to the sky or not... who cares? They have us by the balls and that is what counts.

Any bets?

Change so that there will be no Change?

Please show me this can not happen so that I may stop holding my breath.


FOFOA said...

Hello Paradigm,

You ask, "So when push comes to shove what will prevent them from creating the MONDO?"

The answer is the 75% of the world that is not part of the dollar faction. They are the producers of the stuff we need. And they control the judgement of value for what we offer them in exchange.

We don't have any control over the judgement of value of the money we print. By "we", I mean the West. Our central banks and governments have no say over the value of the money we tender. We, "the suckers" as you say, have no say over the value. That judgement is reserved for those who we offer it to.

This is what will prevent the Mondo. Please see my posts The Judgement of Value and Why All Paper Will Burn (In plain English) for more.


FOFOA said...

Covert Ops watch...

From Zero Hedge

Video transcript: "Something strange happened during the last 7 or 8 weeks. Doreen you probably can concur on this -- there was a power underneath the market that kept holding it up and trading the futures. I watch the futures every day and every tick, and a tremendous amount of volume came in at several points during the last few weeks, when the market was just about ready to break and shot right up again. Usually toward the end of the day – it happened a week ago Friday, at 7 minutes to 4 o’clock, almost 100,000 S&P futures contracts were traded, and then in the last 5 minutes, up to 4 o’clock, another 100,000 contracts were traded, and lifted the Dow from being down 18 to up over 44 or 50 points in 7 minutes. That is 10 to 20 billion dollars to be able to move the market in such a way. Who has that kind of money to move this market?

On top of that, the market has rallied up during the stress test uncertainty and moved the bank stocks up, and the bank stocks issues secondary – they issues stock – they raised capital into this rally. It was perfect text book setup of controlling the markets – now that the stock has been issued…"

Video Link (The transcript part starts at 2:30 in)

Advice from Jesse

"The notion of trading in markets against market makers and insiders trading for their own trading profits heavily equipped with zero cost government funds and advantageous information would be almost laughable if it was not such a tragic abuse of productive capitalism and free markets...

Everyone's situation is different, but overal this looks like an especially treacherous bear market, made doubly difficult by the actions of the Treasury and the Fed in bankrolling malinvestment, imbalances and corrupted price discovery...

...don't step in front of a market operation to run prices up or down. Wait for the longer term trends to assert themselves..."

Anonymous said...

Thanks for the reply FOFOA

I agree with all you say if the MONDO would be a Western currency.

However that is not what I envision, exactly because those who receive this Western currency will see that it will be "Change for no Change" leaving them out.

It will necessarily be a world currency in which the 75% will readily substcribe, simply because it will be a solution that will keep their customers alive, just like a bankruptcy is maneuvered into a new resurrection with the emission of the "new Bonds" which everybody readily subscribes to.

This happens every time a third world nation crashes. It will probably happen when the world crashes dragged down by the US.

We will change the Paradigm in order to continue with the usual Paradigm.

To think otherwise may be to think that this is the time for once and for all when we will become "civilized"...

No no, it will not be. Unles it is over the dead body of the super elite Banksters who are nowhere near giving up and will come out of this alive and kicking

Too pessimistic ? maybe... Realistic? also maybe.


Martijn said...

That zero hedge video, although truth, is not real news. Markets have been visibly manipulated since the end of last year.
It has been played on technical analysis, on all technical patterns and resistances extra contracts were bought. But it's correct that the manipulation has increased recently.

On the other hand, perhaps it is indeed news that it is finally being picked op on a larger scale.

Martijn said...

As for the manipulation, today or tomorrow the (head and shoulders) patern that they have been working on for the last months will be finally completed. In a normal market this pattern would be a very strong sign of trend reversal.
Wonder whether the market will buy it this time.

FOFOA said...

Hi Paradigm,

As I often do, I will give you an applicable quote from Another who's opinion carries weight with me, even though...... even more so because it was 11 years ago:

"Date: Sat Feb 14 1998 20:00
WetGold ( to: ANOTHER ) ID#243180:
This appears to be a monumental world crisis much worse than the depression of the early 20th century. Could U expand further ?

Mr. WetGold,
In the past, nations and states have lost all as "the world changed" and these entities lost the ability to trade, at a profit. It is as history, and happened many times. Today, it is not the same. The "wealth of nations" are held as "thoughts of value" not real value! And even these thoughts are "in debt" as they are owed to other nations. As it has always been, time moves the minds of people to change, and with this, the thoughts of value also change. In this day, as not in the past, the loss of paper value as a concept will destroy the very foundation of wealth that this economic system is built on. This drama has started and is well underway!

There are nations that will try to "resource a new currency" as the old financial system implodes. Oil or gold or both may be used. If it is done at the correct time, much will be gained by all! Fail this Attempt, and gold will never trade on an open exchange again, in our lifetime! We will see this end in our time.

thank you."

It is my opinion that, while I do not rule out a new reserve currency surfacing, that the many interested parties (the G20?) will never get their act together in time. They will never agree to something as complex as a new reserve currency before the old one fails. It took more than 25 years of planning to make the Euro happen. I just don't think it is possible.

I understand the fear that the almighty "powers that be", or even the "Eastern" powers that be, will jam something new down our throats. I just don't see how it can happen.

We are on a certain trajectory right now, and where I see it heading is the end of the dollar as a reserve currency and new wave of protectionism all over the world that will result in a "freegold system". This means a variety of regional and national currencies competing, like the Euro, the Yuan, the Ruble, the dollar and the new Khaleeji. Baskets of currencies like the SDR might be tried, but they will not catch on because they will never be judged fair enough by the commodity producing countries.

These countries and regions will price their own goods in their own currencies, forcing foreigners to buy their currencies in order to buy products. This will force trade imbalances to be settled in something outside of the currency market... gold.

Think if you are the US. You want oil price in Khaleeji and Chinese goods price in Yuan. As you buy those currencies you drive down the price of your own currency. If you do this by printing your own currency, you doubly drive down the price. This will be unacceptable as you will get less and less for each dollar. The only way around it for the US to start producing and exporting more real goods (balanced trade), or to settle the difference (trade imbalance) in gold.

As this system develops (naturally), currency markets will become priced against gold, not against "baskets" of other currencies like they are now. This will be forced (naturally) by the imbalances that will be amplified and accentuated through the lack of a reserve currency (the dollar). This will all be a natural evolutionary process.

What will set it off will be the failure of the dollar to perform as a global reserve currency and the subsequent failure of the global community (G20) to agree on something as complex as a new reserve currency (that would have the credibility to carry the confidence of the whole world). Only one thing has the credibility to carry the day... gold.


Martijn said...

To add even another comment, the market is playing it all or nothing. People are now jumping on on the back of this artificial rally believing the worst is over. If the manipulators can't hold, it will decline rather fast, shaking off everyone that just got on. If that happens people are going to be hurt too much to return. That would truly kill the market.


FOFOA said...


I personally believe the market manipulation story is the biggest, most important story of the century. Almost no one else sees it this way because we have been desensitized to it.

But I will tell you this; the manipulations that are happening right now in the New York stock markets are going to be a direct, proximate cause of "all paper burning".

No one, especially not Bernanke and Geithner, understand that playing with dollars in this way literally devalues them to the point of worthlessness. This is like a poker tournament that secretly adds new chips to its favorite players, constantly and consistently. Very soon, no one will play this tournament. They cannot win and their chips are being devalued by the minute.

All that is missing now is for the manipulation to be positively exposed. It is still a "fringe conspiracy theory". But the players are getting so bold it is only a matter of time. Markets like the NYSE will be dead for at least a generation. It is THAT serous in my opinion.

So you are right. This is not news. It has been happening for a while now. But the continued desensitizing to it is what is news. The more this happens, the more likely it is that GS, the Fed or the Treasury will slip up and let it be known what they have been doing. They may think this will be an acceptable admission. They may even look for praise. But they will kill the markets... DEAD.

This is my humble opinion.


FOFOA said...


Here is an applicable post by Doug Gnazzo on his forum...

On Reserve Currency

Just my opinion:

A reserve currency becomes a reserve currency because the issuing nation makes an offer that cannot be refused. It is not just about money, but enforcing the deal as well. As such only ones very good at force can tell everyone else in the world what they are to use as money.

Point in hand: the euro is a prototype of a one world currency, although it is a regional currency it covers many nation states. These nations gave up their own national sovereignty to join. It's all spelled out in black and white in the Maastrict Treaty.

But England didn't go along. Why not?

1) England is not stupid at playing the game - they once had the world's reserve currency
2) Who can tell England what to do except the U.S. - and who can tell the two of them what to do if they are united?
3) So, England was not about to give up its National Sovereignty as they plan to be part of the New World Order, not under it.

Personally, I hope the freaks try for a one world currency soon, as it will be their demise. I see their power waning. They are way overextended. A chain is only as strong as its weakest link and they got some sick puppies in there as links. The common man is learning how screwed up and weak and literally in shambles the system is because of its handlers. You can smell change in the air.

ANY paper form of money is junk and will not work - I don't care what name you give it or what country issues it - junk is junk - debt is debt.


I totally agree with Doug. The point is that the US and UK will not agree to a new currency they cannot control. And the rest of the world will not agree to a new one that they STILL control. Therefore there can be no agreement.

They have already shown that they are willing to burn down the house in a last ditch effort. This will continue until every last timber is gone.


Anonymous said...

About the vision behind the "mondo" idea :

The governors of the fiat-system CANNOT, cheat-lie-steal-enforce, for ever and on a global scale as is crescendo happening.

Have a close look at what happened with the evolving *gold-pricing* during the past 8 decades !

From a 100% fixed goldprice to a gradual more free-er gold-pricing.

You suggest that the fiat-system is invinceble and therefore forever. Goldpricing evolution is contradicting this vision .

CBs haven't discarded their gold-reserves...after all these years of inflating fiat-regime.

The newest CB (ECB-EMU) kept gold again as an asset together with the euro-mondo (€).

The Chinese planeconomy liberalized gold.

>>> See how the creditcrisis is shaking confidence and deflates the global economy.

Any mondo-currency will have to earn confidence. And general confidence cannot be printed electronically. There is no such thing as helicopter confidence.

The globe's 2% Major wealth owners (80%) know this very well. The general public can always be bought with digit rains-floods. But you can't fool the wealthy giants with this trick.

Problem is that we will never know WHO exactly is holding the goldmetal wealth (100.000 tonnes out of the 160.000 tonnes in total).

Have a look at the 40 years goldprice in Indian rupee. A continent with 1,2 billion people and an estimate of 12.000 tonnes of gold between its borders. Do the same for Saudi Arabia (ryal) with an estimate of 10.000 + tonnes of gold under its desertsand. They don't print their wealth...

Anonymous said...

@ FOFOA I do 100% agree with your conclusion about " MANIPULATION ".

I played (24/7), what I always thought were "-the markets-", for exactly 30 years now.

I stopped this "playing" after having studied A/FOA, thoroughly (since 1999)!!!

Would like to let you know that I'm very happy with your initiative to pay a tribute to these people. Their (wealth) ideas/visions have opened a complete new world for me. For the time being, the results of this intensive study are very satisfactory : All my paper-friends unfortunately halved their buying power while I doubled the buying power of my goldmetal wealth (90% of total savings)

FOFOA said...


Manipulations of all kinds are rampant in our "markets". But the PPT in 1987 by Reagan was a terrible idea. And it has now grown into a full-sized Frankenstein monster. A casino that cheats will not last long. The end comes "when somebody reveals that the game wasn’t really ‘friendly’ and then attempts to collect on his stupid ‘chips’."

Congratulations on your wise change of "investment strategy". I must admit a bit of envy that you discovered this message so early! But as they say, "better late than never". This is why I am here. And actually, it is not late at all. The time right now is PERFECT to make a change!


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

Eric is also talking about the gold in China.

The writer he quotes made me laugh. Talking on the US bonds in China's reserve he argues: The simpletons in the press and financial world don't have a clue. What are these sleuths looking for? A $500 billion sell order posted with a New York broker on some rainy Monday morning? Have they never heard of a decoy?

Correct indeed. China is not as direct as we are. Appearantly most western people have a hard time understanding that cultural difference.

FOFOA said...


Regarding those other comments...

I think the last paragraph says all you need to know. And this sentence... "listen to his words. He says nothing, just as Bill Clinton said nothing, and if you aren't really paying attention, it sounds good."


Martijn said...

Ah, he quotes from GATA, so I guess you've already read it, haven't you FOFOA?

Martijn said...


I deleted those comments as I was not sure they were too relevant.

I tend to agree with this article.
Looks like Obama is rather good puppet-material, and perhaps that is indeed why he is on stage (or should I really say "in power").

On the other hand it should be clear that even a good guy getting the presidency would have a hard time battling all the corrupt forces that have taken power around him.

Therefore although tending to agree with the linked article, I also tend to hold back in forming an opinion yet. Besides I'm not so sure whether Obama really matters that much in what is coming

Martijn said...

And yes, I do tend to agree with that last paragraph: These are the new creatures in our world of image driven, cognitively void, emotionally marinated political life. "Slick Willie" has given birth to "Slick Barry" and "Slick John," men who simply do not grasp the sin of dishonesty, the purpose of convictions, or value of sacrifice. They are caricatures of real men, and now, they are our leaders.

FOFOA said...


Yes, I saw that GATA story a couple days ago. Eric's conclusions are pretty much right on. But check your link. Cool pictures. At least it's not porn. That could be embarrassing. ;)


Martijn said...

What link?

The one to American Thinker?

Martijn said...

Porn would be funny indeed though..

Martijn said...

Ah I see...
That was unintended indeed...

Those are pictures of East-Germany that were recently found.

Back to the future??

Martijn said...

Come to speak of it: this article on Middle-East peace is relevant to the Obama "discussion".

And here is a little more on gold.

Martijn said...


Would you agree that China is already the new world power?

Through the depressen yuan China's economy looks small, but in reality it is not.

Their growth has been rather real, in comparison with the inflation and monetization of services that shaped most of the US growth. Besides not all economic activity is registered in China, while in the US literally everything is recorded.

Besides that China has many trumps; they can sink the dollar and the euro if the want to, they have crucial production facilities within their territory etc.

The only thing the US has is military power. However, they will need oil to fuel that power, and should the dollar become worthless they might run into trouble.

Undervalued pretty much sums it, I guess.

FOFOA said...


I think the jury is still out on China. China has some major struggles ahead with its large population of migrant workers. Civil unrest is still a big concern for the Chinese. China has had remarkable growth and its city populations are well off. But it also has a very large rural population. China is even more centralized than the US. Remember I mentioned the 1:300,000 ratio of leadership? In China it is even worse. This leaves even more room for corruption. And China's leadership is very corrupt.

Yes, I would say that China is "undervalued".

Anonymous made an important comment earlier...

"Problem is that we will never know WHO exactly is holding the goldmetal wealth (100.000 tonnes out of the 160.000 tonnes in total)."

In the dollar system, wealth is "on the record". Under Freegold, wealth will be "stealth". Gold is physical, it is not a digital unit that can be counted. So we will only know who is truly wealthy as they choose to display their wealth.

In the West, gross displays of wealth are commonplace. I think this will change in the future. Perhaps there won't be ONE new world power. Perhaps there will be many. Perhaps we will not know all of their names. Why did China wait 6 years to announce their new gold? And why so little?


The Mad Scientist said...

To everyone on this board, if you have not already, please read this.

FOFOA said...


There are a lot of misconceptions about hyperinflation circulating on the internet. A big one right now is that a countries' debt must be denominated in a foreign currency in order for hyperinflation to happen. This is based on a study of Weimar. It is simply wrong. Zimbabwe hyperinflated just to keep the government functioning and the elites rolling in dough. They didn't even pretend to care about the average people. Washington DC does. This adds another layer of danger [pension bailouts].

Because of these misconceptions, the general tenor is that hyperinflation will not happen. Or it is a very small possibility. So, many writers simply talk about the danger of "the massive inflation" coming so as not to sound like alarmists [like the article you linked].

The problem with this approach is that "inflation" is no longer a dirty word. Today it means "recovery". I heard a report today on an MSM news broadcast where the guy was saying that when the "big inflation" comes it will be great, because it will very quickly bring all the "underwater" homeowners back up to the air.

Sure it will, as long as they have a fixed-rate loan. But it will destroy anyone who has saved for the last 40 years.

I have long said that hyperinflation is already "baked into the cake". Let me be clear; Hyperinflation is inevitable. It is unavoidable. It is our destiny. There is no way around it. Get ready cuz here it comes.

The world has never seen a reserve currency hyperinflate. I suspect it will have the unexpected effect of spreading its deadly disease over the whole planet.

Hyperinflation is far worse than a deflationary depression like the 30's. Many more people will die. People that would not have died in a "normal" depression. People like your rich uncle with a nice trust fund invested in bonds.

This is where "they" are taking us. Your article totally confirms what I already know. The course is set... full speed ahead. I will stay up here in the "crows nest" as long as I can. Titanic onward!


Anonymous said...

A goldmetal ATM !!! - ???

A brilliant idea ! A wonderfull concept !

One gram goldwaffers out of the to the paper ATM.

Martijn said...


I do indeed believe that we shall see "worldpower" come to an end. As our dollar system, total power is simply not an endurable constallation. So I do indeed believe that China will not be a total power.

I guess I did not describe it accurately in my question, but you've picked it up indeed: China is way undervalued, and the US is far from being a world power. That's the basic line.

Martijn said...

I recently came across a Bloomberg article where some guy was actually arguing for a lasting inflation of 6%!

Can you believe that?

Martijn said...

Haha, found the article.

I guess this shows that some guys feel sorry about chosing the wrong profession and still try to do what their hart wants them to do; in this case we're dealing with the heart of a clown.

Good for a laugh anyway.

FOFOA said...

By the way, I want to add this to my last comment...

This equation is false:
Hyperinflation = FreeGold

This is the correct equation:
Goldprice = FreeGold + Hyperinflation

FOFOA said...


This guy Mankiw might be who I heard on the news today. This is the same guy that thought it was a good idea to eliminate 10% of the dollars in circulation! Outright theft. And now he is advocating theft through inflation!

I refer you back to my post The Collapse to see why sustained 6% inflation is IMPOSSIBLE at this point. The only two options are deflationary collapse and hyperinflationary collapse. [hint: one has about a 97% probability]


Martijn said...

Haha, I see I've managed to post the same article as Mad....

Well anyway, it should be clear that this is a deliberate campaign aimed at making inflation acceptable to the public at last.

Bernanke, 55, said the risk of deflation was receding and that the Fed was ready to reverse course when needed to maintain stable prices and prevent an outbreak of undesired inflation.

Reversing course would truly be a stunt I'd applause.

Given the Fed’s inability to cut rates further, Mankiw says the central bank should pledge to produce “significant” inflation.
Comes pretty close to the "wiping out of all debt" as is common in many religions... Off course this will be at the costs of savers.

In advocating that the Fed commit itself to generating some inflation, Mankiw, 51, likens such a step to the U.S. decision to abandon the gold standard in 1933, which freed policy makers to fight the Depression.
Haha, fight the depression they've managed to create within two decades after they were installed.

Faster inflation might be preferable to increased unemployment, or to further budget stimulus packages that push up the national debt, says Mankiw, who was chairman of the Council of Economic Advisors under President George W. Bush.
Haha I can't believe this actually makes it to a bloomberg article - or that Bloomberg presents itself as quality...

It’s a question of how do you achieve the deleveraging. Do you go through a long period of slow growth, high savings and many legal problems or do you accept higher inflation?
Indeed, just accept it and all the trouble will be gone!

Laurence Ball, a professor at Johns Hopkins University in Baltimore, says it’s risky to try to engineer a temporary surge in inflation because it might spark a spiral of rising prices.
I would deem this highly unlikely. Does this guy understand inflation at all? How in the world could a healthy dose of inflation lead to higher prices?

To battle recession, the Fed had to cut interest rates to 1 percent in 2003 and zero in the current period. That implies its inflation target has been too low because it’s left the Fed running up against the zero bound on nominal interest rates.
Can't they just try negative interest? There still are lots of uncharted waters if you are willing to search for them...

“The basic advantage of pushing inflation a little higher is that it would make it less likely that we run into the problem of the interest rate hitting zero and the Fed not being able to stimulate the economy if necessary,” Ball says.

Well, perhaps this is a bit of China tacticts. This guy is implicitly arguing for freegold. I guess people are starting to see the light!

Anonymous said...

Fact :

Greenback's status challenged for trade as well as financial transactions.

CHINA ISN'T JUST TALKING ABOUT supplanting the dollar as the center of the international monetary system. It is taking concrete steps away from the greenback for both finance and trade.

The Financial Times reports China and Brazil have discussed using their own currencies for trade, a marked shift away from the use of dollars, the norm for the conduct of international trade.

Martijn said...


China is putting on the pressure indeed, as they have been doing behind the screens for a while.

China has a much broader time horizon than the West. Hongkong is a good example for that: China "rented" it out to the British for 150 years. After that period the Chinese pulled out the contract and waved it in their face. The British were long forgotten it by then, but had to give in.
Good for the Chinese that those British arses managed to grow it into a rather prosperous region.

Martijn said...

On the stock market manipulation: looks they might really make it to put the reversal pattern in the market.

Wonder what happens next. Either the people will buy it and inflation will hit the stock market, or we are in for a massive crash. I don't see them letting the latter happen.

FOFOA said...


Your comments on the Bloomberg article are simply masterful!


Martijn said...

Thank FOFOA.

Although I feel that the American public at large should be making those comments. Understanding economics is really not that difficult. It's not that hard to ask yourself a question now and then. But I guess lots of people can't be bothered. Hopefully the ones that do grow strong enough to convince the others to choose the right path.

Anonymous said...

@ Martijn > About $-interest rates :

Since 1980 (!!!) the $-system maneuvered IRs constantly down from double digit record highs.

An almost 3 decades of organized manipulative intervention !

This easy-cheap money (digits) flood during 3 decades (!!!) is the organization (systemic) behind the Crisis.


30 Years of constant IR decline (defla) together with crescendo $-expansion (infla) !?

Is this a free-market fenomenon ?

No, is the finale of the Big Catch-22 :

Martijn said...


It is.
Still Dr. Helicopter, the PPT and their confederates are currently uniting their efforts in order to prevent hardcore inflation from hitting the van. As long as they can divert it into the stock market they pretty much hold the fort and buy some time.

So far they seem to have managed to kill bad economic news as an agitator. Guess we'll need a bigger shock in order to take the next step on the trail.

Anonymous said...

Yes, indeed Martijn. The whole purpose is to "sterilize" the astronomical excess of fiat debt digits into paper tigers running in the FI (virtual) jungle...where the privileged can shoot those tigers once they are fattened.

Currency digits are not allowed to seek refuge in goldmetal in possession. You can't shoot (confiscate) a goldtiger...only
put him into a cage (goldprice freezing - Unfree gold).

As if the absolute majority is happy with modern (confortable) slavery.

Martijn said...

The funny thing is that the less intellectually developed/schooled people often tend to have a better understanding of the fact that something is "wrong"; they can feel that. The "schooled" people on the contrary tend to only produce lots of Kenyan crap and lead themselves into believing they are smart and everything is right.

Martijn said...


How about peak oil?

No peak-oil (sufficient oil in Alaska or sufficient alternative energy sources) / no oil imports / no dollars to middle-east / no international dollar?

Off course the middle-east does not really wants dollars, it takes gold, but no peak-oil would still hurt the dollar as the dollar is what is traded on the surface.

Anonymous said...

@ Martijn - Schooled/unschooled :

Again, 100% agree with the observation of this bizar fenomenon.

Explanation : The so called schooled are getting everything for almost nothing. The meritocracy piramid upside down...thanks to the Kenyan crap.

>>> Peak * CHEAP * oil for cheaper $ buying units (international purchasing power).
The $-system losing its oil-pricing control/power. War on the *other* oil-pricers (non $-loyalists = terrorists).

Martijn said...

Plus: the schooled guys have gotten loads of crap pumped into their heads (in the name of schooling). This bends and drags them away from their natural intuition of things. Unschooled people don't have that problem.

FOFOA said...


I don't understand your question or point about Peak Oil? Are you saying that Peak Oil is good for the dollar and will help it remain? I don't understand what you are getting at.

Also, what is meant by the phrase "Kenyan crap"? I haven't heard that one before.


Martijn said...

Kenyan crap refers to Keynes, only I'm afraid to be infected by the Keynes flu that has already struck massively, and therefore I try to avoid spelling his name.

FOFOA said...


I read your comments on Mad's blog and I think I understand your point a little more.

While I remain an agnostic on the peak oil movement and peak oil in general (I simply don't know enough to judge it one way or the other), I agree with Mad's response.

On today's timeline, oil becomes a moot point relating to the dollar.


Martijn said...

As for peak oil I wasn't sure.

What I'm saying is that the petro dollar is quite relevant to the US.

Should peak oil turn out to be unrelevant - because e.g. Alaska does have heaps of oil or some sort of alternative energy source is discovered - their would be no need for the US (and other countries) to import oil, and hence the (petro-) dollar would be gone.

FOFOA said...

Okay, so Kenyan crap doesn't have anything to do with Obama's Kenyan heritage. ;)

Martijn said...


Perhaps you've just identified the root of all evil...

Martijn said...

I hold absolutely nothing agains Kenya or Kenyans, only against Keynes and people who follow his delusions btw.

FOFOA said...

SBC made a nice repost of this article today.

Martijn said...

Quite nice FOFOA!!

Congrats again. Good to see people picking up on your thoughts - and perhaps those of another.

FOFOA said...

Thanks Martijn. The Thoughts of Another are spreading. This was my goal since I started this blog. And also to have conversations with people like yourself, Anonymous, Shanti, Alek, Mad and Ender. Thank you.

So far, the above article has been read by at least 3,000 people from 65 different countries, including UAE, Kuwait, Qatar, Syria and China.

The last big post, Worst Case Scenario Remix, was read by more than 6,000, but it did not focus on Another like this one. It only briefly mentioned freegold.

So it is extra special when ANOTHER post gets so much attention!

Martijn said...

And how does another feel about the petro-dollar?

Is oil trade a requirement for the dollar to remain an international reserve?

Anonymous said...


I found your article regarding physical gold delivery and was amazed by it. It immediately brought to my mind a few questions that I researched and wanted to pass along to you.

1) When did America know that they would reach peak oil?
2) What has been the rate of America’s oil consumption after the “gold window” closed?
3) When was the last gold audit done?

When you look at the answer to these questions in conjunction with what you presented one’s imagination could really run wild. Or just come to some rather logical conclusions. Sometimes the fantastic is really quite simple.

1) As far as when America knew they would reach peak oil, that’s debatable. However, we do know that M. King Hubbert theorized in the 1950’s while at Shell Oil that America would reach peak oil around 1970.

Further research reveals the following:

"The Impending Soviet Oil Crisis (ER 77-10147)," was issued in March 1977 by the Office of Economic Research and classified "Secret" until its public release in January 2001 in response to a Freedom of Information Act (FOIA) request. The 1977 CIA document shows clear and detailed awareness of oil issues, including depletion, extraction technologies, pipelines, areas of likely new discovery, the quality of existing reserves, and the dynamics of the global oil market. The CIA has obviously been studying oil very carefully for some time and must therefore understand the issue of global oil peak.

Additionally: The American oil peak signaled the end of an era: from that point on, the US would become increasingly dependent on imports—and this dependence would entail serious costs, as became apparent with the Arab OPEC oil embargo of 1973, which sent the US economy into a tailspin.

As a side note the Strategic Petroleum Reserve was created in ’73-74, after the oil embargo.

2) Regarding US oil consumption we also need to look at imports after peak and the gold window closing. A picture says a thousand words and my typers tire so I’m including this chart location:

Peculiar eh? Look at imports right after 1970.

3) The last known audit done on the gold in Fort Knox was done in the ‘50’s. I’m sure you are aware of that.

In any business situation when the reasons for conducting business change, you must change the way you conduct business. If the price of oil is bound to rise due to economic laws of supply and demand, as a Middle Eastern country you will get less gold for your dollars and have to give up MUCH more oil for an increasingly worthless dollar.



Martijn said...


I was thinking about that also... but did not put too much time in it yet..

Anonymous said...


Which aspect?

Unknown said...

Anony and Martijn,

Oil is everything. It is civilization, it is the guarantee for upkeep of law&order, it is the carrier of human rights, it is the invisible hand that keeps morals going.

Imposing an oil blockade to a country is a sure way to send it backwards economically and socially 1 year for each month of the blockade at the beginning and then accelerating to infinity. I have experienced this happening and that is exactly the result.

What is worse, if fuel is scarce and expensive, there is also no prospect for this type of civilization. All our technology, all of the wondreous economic growth post WW2, all advances in engineering, medicine and finances (yes, we have those too... occasionally) was thanks to oil and its derivatives offering "something for very little".

Up until now, every unit of currency spent on purchasing fuel brings many units of economic return. That may change, either temporaroly because we are going to (violently) transition to new types of currency or permanently because of "Peak Oil".

Only thing that can partially replace oil is nuclear and fusion energy. The former is not going to work on a grand scale because of safety, the latter we need a few decades more to master. Alternatives, let the Creativity Muse be with them, need investment. Oil needs it not.

There is therefore much to be said about oil and the wealth of nations. The connection between the oil crisis and the abandonment of the gold standard, the gold price management ever since, the imperialist wars in the ME, Russia vs. the West, Iran etc. is there for all to see unless blind.

Problems and tensions in the world existed forever. Today they take the same form: empire building and falling, except that the reason for that has changed from "looting their cities and raping their women" to "looting their oil". We have at least dropped the raping, to the benefit of all arab women (and.. ahem.. some men as well since homosexuality was widespread with the Greeks).

FOFOA said...


"Is oil trade a requirement for the dollar to remain an international reserve?"

Oil PRICED in dollars is the requirement. This is the way oil agreed to back the dollar in the absence of gold backing it. This deal started to fall apart in 1996.

FOFOA said...

"And how does another feel about the petro-dollar?"

More from the intro... "As explained by ANOTHER, an opportunistic arrangement for massive physical gold acquisition among important petroleum producing and exporting nations could be comfortably facilitated within these astronomical trading volumes now being publicly revealed via the LBMA. For the oil states this meant receiving real money (as opposed to government-sponsored paper) in payment for their depleting oil reserves. For the industrialized countries, this meant a continuing supply of cheap oil to fuel the economic boom already in progress. These transactions were to be cleared through the bustling London gold market. Up until late 1996, the volumes were a tightly kept secret so "the deal" proceeded without the knowledge of the general public.

When the LBMA went public with its figures, it raised the shroud off "the deal." But by then, according to ANOTHER, it no longer mattered. The oil states had already (almost inadvertently) cornered the gold market. As implied by ANOTHER's own words, his motivation for these postings was the discovery by "big traders" in the Far East of this opportune facility to buy gold at ever lower prices. Their subsequent heavy purchases of physical gold upset the delicate balance. Now there was no longer a reason to keep it secret, and hence, the revelation of this extraordinary tale."

FOFOA said...

You should also read Another's very first post...

Date: Sun Oct 05 1997 21:29

Everyone knows where we have been. Let's see where we are going!

It was once said that "gold and oil can never flow in the same direction". If the current price of oil doesn't change soon we will no doubt run out of gold.

This line of thinking is very real in the world today but it is never discussed openly. You see oil flow is the key to gold flow. It is the movement of gold in the hidden background that has kept oil at these low prices. Not military might, not a strong US dollar, not political pressure, no it was real gold. In very large amounts. Oil is the only commodity in the world that was large enough forgold to hide in. Noone could make the South African / Asian connection when the question was asked, "how could LBMA do so many gold deals and not impact the price". That's because oil is being partially used to pay for gold! We are going to find out that the price of gold, in terms of real money ( oil ) has gone thru the roof over these last few years. People wondered how the physical gold market could be "cornered" when it's currency price wasn't rising and no shortages were showing up? The CBs were becoming the primary suppliers by replacing openly held gold with CB certificates. This action has helped keep gold flowing during a time that trading would have locked up.

(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.) Westerners should not be too upset with the CBs actions, they are buying you time!

So why has this played out this way? In the real world some people know that gold is real wealth no matter what currency price is put on it. Around the world it is traded in huge volumes that never show up on bank statements, govt. stats., or trading graph paper.

The Western governments needed to keep the price of gold down so it could flow where they needed it to flow. The key to free up gold was simple. The Western public will not hold an asset that going nowhere, at least in currency terms. ( if one can only see value in paper currency terms then one cannot see value at all ) The problem for the CBs was that the third world has kept the gold market "bought up" by working thru South Africa! To avoid a spiking oil price the CBs first freed up the publics gold thru the issuance of various types of "paper future gold". As that selling dried up they did the only thing they could, become primary suppliers! And here we are today. In the early 1990s oil went to $30++ for reasons we all know. What isn't known is that it's price didn't drop that much. You see the trading medium changed. Oil went from $30++ to $19 + X amount of gold! Today it costs $19 + XXX amount of gold! Yes, gold has gone up and oil has stayed the same in most eyes.

Now all govts. don't get gold for oil, just a few. That's all it takes. For now! When everyone that has exchanged gold for paper finds out it's real price, in oil terms they will try to get it back. The great scramble that "Big Trader" understood may be very, very close.

Now my friends you know where we are at and with a little thought , where we are going.

Unknown said...

FOFOA, have you ever thought about binding the posts of Another and FOA in a book and publishing them?

They must be in chronological order, exactly as they are written.

Maybe group them also chronologically in separate chapters with with an appendix to each contributed by yourself or "guest" experts where current events are observed and placed in context.

I even have a title. You could of course name it "The golden trail" as the original authors christened their efforts. But I have a better title: "(Un)Even Flow". As in the even flow of gold for the flow in oil, the understanding of the uneven flow of wealth for everyone else when progressively reading the posts, the cycles of Armstrong repeating yet with never the same capital flow etc. (And yes, as in Perl Jam's song).

I dont know if a book can be published anonymously, but imagine it just as an extension of this blog, Caffe American, Zero Hedge and all other that can contribute anonymously to it. And distribute it through the corresponding websites. Of course, central to all is UsaGold.

The economics of this endevaour are rather challenging as a customer will need to pay for it (with a credit card!) and we cant have that sort of literature in bookstores now cant we?

Anonymous said...

@FOFOA & Martijn,

ANOTHER 24-03-98 20:46

Many have thought that oil is in short supply/reserve and someday we run out. In that time the price will rise due to shortage. This is not true for your lifetime. There is a great deal of energy/oil, for a very long time. The shortages will not come true, look even to the past important reports that say oil run out in 1989! As the crude oil will be fueling your economy for many years, one should look to the "market for oil" not the supply. It will be the "change of this century" as oil finds a new "medium of exchange".

-->> Just that last line !


FOFOA said...

Thank you Shanti!

Anonymous said...

Everything redounds to the Golden Rule - Freedom and free trade with free market chosen commodities of intermediate exchange ALLOW the most powerful adjunt of human existence - the divison of labor and comparative advantage.

We have not had freedom since socialist Lincoln's "progress" in aggrandizing the big business of the RR titans and bankers he'd previously lawyered for. We all know what a taxpayer ripoff the subsidized RR's were, just as ALL govt projects better performed by the private sector always are. Because of no less than the price function REAL people use everyday that govt spending of OPM is bereft of.

Lincoln's killing off of states rights was just tyranny's thin end of the wedge. Even then Morgans were traitors - they did even better in the WW's they agitated for.

The ICC with it's system of industry self "regulation" was the govt sop BigBiz sought to escape increasing competiton and to guarantee profits which actually are a tax on the masses.

The entire last qtr of the 19th C saw the falling prices and rises in living standards ONLY a market free of govt intervention gifts its people when left TF alone by Leviathan.

I didn't see anyone reference the Austrian School economist who all along have supported specie - for Mises saw first hand how fiat finances militarism and empire. They called the Great Depression and whatever this ONE turns out actually to be.

All along the Austrians have said the business cycle is manipulated soley as a function of central bank interventions - said banks promised they were the BC's cure.

Truth is all the financial panics of the 1800's were precisely by banker and UK fooling with monet supplies or issuing receipts in excess of speice on deposit. The same as Kings clipping or debasing the currency.

Fiat's first users like the GD Govt and pals get full purchasing power, while later users face prices already being bid up with the artificial demand the excess fiat creates.

There is NO doubt in my mind that the two party duopoly is run by its CFR tappers, groomers and then politically emplaced wher they are to powers best advantage.

See if any of these are helpful to anyone - I can't recommend them enough.

The Creature from Jelyll Island a Second Look at the Federal Reserve by Ed Griffin

Still Don't Believe In The New World Order?


Wall Street, Banks, and American Foreign Policy

Big Business and the Rise of American Statism

The Great Depression, World War II, and American Prosperity, Part I (video)

The Great Depression, World War II, and American Prosperity, Part II (video)

Despotism Loves Company: The Story of Roosevelt and Stalin by Soviet defector Yuri Maltsev

The Economics of the New Deal and World War II

Roosevelt's WWII Policies of Unconditional Surrender and the Morgenthau Plan

Six Months that Changed the World

The New Deal and the Displacement of the Morgans

Martijn said...


Thanks indeed, your answer is the substance I was trying to target with my question.

Post a Comment

Comments are set on moderate, so they may or may not get through.