Thursday, August 27, 2009

No Free Lunch

Modern fiat currencies are not going to disappear, no matter how hard Obama and Bernanke try to destroy them. They are simply too good of a medium of exchange. The ease with which labor is divided over the whole globe and capital exchanges are transacted across thousands of miles, instantaneously, is a planetary first! It is a marvel of the modern computer age!

Even in collapse, man has shown his resilience in using these modern fiat mediums. Just look at Mexico. Still using the peso, albeit in a slightly different form. Mexico is proof that in most cases there is a riverbed somewhere down the waterfall. Zimbabwe is proof that this is not always the case.

The electronic form of fiat digits occupies no physical space whatsoever. Think about this. And even the paper form can explode in face value and continue holding only the same amount of space. So as a medium of exchange, it does not really matter the value of each individual digit. I can do a good day's work for you and you may pay me $100 or $1,000,000,000, depending on the value of each digit. The value of the digit doesn't matter. The currency still functions fine as a medium of exchange.

Then of course there are adjustments to be made. Like "lopping off zeros" and printing colorful new bills. In the virtual world of electrons these adjustments a are minor task for a computer programmer. You see, managing a fiat currency is easy. Heck, even Gideon Gono and Ben Bernanke can do it!

Here is the problem though, kids. Most mature investors retain their life savings fully invested within the financial industry, denominated in dollars, and will not get off these tracks even when they see the train coming. They will stay there because it is impossible for them to believe they occupy the wrong position! Who can blame them or call them fools? They have been trained their whole life to believe in saving for the future inside of a monetary system that serves no purpose other than as a medium of exchange.

Worse, they perceive that all of their assets are correctly valued by this system that does not care about the value of a digit. How can they possibly be correctly valued in a system that only functions properly as a medium of exchange, not a store of value? How can assets meant to be stores of value be correctly valued when denominated in a unit whose value DOESN'T EVEN MATTER in the context of its primary function? They can't. They shouldn't. They aren't. And soon this FACT will be known by everyone.

This fantasy illusion that the dollar can be a store of value is built upon a foundation of raw sewage, that all people in the world using the dollar in its PRIMARY FUNCTION will continue to act NORMALLY no matter what happens. That homeowners will continue to make dollar payments on loans that are twice the size of their house. That retirees will continue to buy and hold crappy investments. That toxic financial instruments will continue to yield interest and trade at par even when the underlying cash flow has been declared DOA. That holders of physical gold will continue to surrender their precious at the rate of one ounce per 950 US dollars. That oil producers will continue to ship oil to the US military at the rate of one barrel per 70 US dollars, even when those dollars smell like fresh ink. That a nation of 1.3 billion will continue to work their hands to the bone in exchange for US dollars that stink of wet ink. And that the entire planet will continue to honor the US leadership with the amazing privilege of being the only entity in the entire solar system that gets a free lunch.

You see, the truth of the matter is that there is no free lunch. Yet the US federal government is now funding its fantastical folly at the rate of TRILLIONS per year through the Federal Reserve's printing press, nicknamed POMO. If the dollar doesn't collapse in purchasing power, this could go on FO-EVAH!! Free lunches for everyone (in the United States)!!! We can all work for the government!! Be a G-man! A nation of G-men!! How cool would that be? Look, they make more DOLLARS too...

There is only one way this madness stops. It is not going to stop by Ben Bernanke telling Obama "no more!" It is not going to stop by Congress suddenly slashing its pork-laden budget to sustainable levels. It is not going to stop by the real economy suddenly rising to the occasion. Yet it WILL stop soon. This insanity is sucking the very air out of the global economy like a pyromaniac's fire that extinguishes itself in an airtight space once the air is gone.

It is a truth about inflation and hyperinflation that only the VERY FIRST entity to use the newly created money profits from the exercise while everyone else suffers. This is because newly created money draws in real economic goods and services to the printer at the same rate as they were offered in the open market before that new money was created. And the printer receives this SUBSTANTIAL PORTION of the real economy at precisely ZERO cost when that new money comes via Ben's mouse named POMO. This 'first spender' effect can be seen both in the BOOM TOWN that Washington DC has become in the middle of a damn depression, and in the LAVISH lifestyles lived by Gideon Gono, Robert Mugabe and all of Mugabe's cronies and friends.

If you can imagine the real economy, the gross national product of everyone's efforts in the whole country for one year, as a bloody red flow animated on a map of the United States, then imagine that at least 20% of this lifeblood of the US (all goods AND services) are flowing right into Washington DC! No wonder 3 out of 10 people in this country work for the government! No wonder DC is the only place in the country that is THRIVING right now. It is receiving 20%+ of EVERYONE'S efforts at ZERO real cost. Is that freaking amazing or what??!!

Is anyone getting the feeling that something just isn't right here? I sure am. And I'm not here to talk about karma or some kind of magic universal justice. I am here to talk about the invisible hand of the planetary market organism. It is this giant invisible hand that is moments away from cutting off the power.

There are some clever deflationists that will tell you that the dollar is going to rise in value giving Ben, Tim, Barack and the entire DC gang a lengthy free lunch, all because of the giant debt overhang in the economy that backs the US dollar. The thinking goes something like this. The world is full of debt. The dollar is backed this debt, and is therefore balanced by it. As long as the debt remains, it must be serviced with dollars which drives up the demand for dollars, and therefore the value of dollars. If the service of the debt starts to fail then the dollar will start to fall making the service of the debt easier (with cheaper dollars) and the service will then resume, raising the dollar back up. I call this the see-saw theory. I see what you're saying, now let me saw it in half.

You see the biggest debtor of all is the very printer of the currency all that debt is denominated in. And this debtor is now picking up ALL of the slack left behind by everyone else. Only his debt service will never fail, because he can print that service with the click of a mouse. And since he doesn't have to seek dollars on the open market, his debt has the OPPOSITE effect of all other debt. Instead of driving up demand for the dollar, it drives it down (and drives up supply at the same time)!

Normal debt = dollar demand up, dollar supply down.
US Fed Gov't debt = dollar demand down, dollar supply way the f up!

As the dollar starts to fall in value, this has no effect whatsoever on the ability of the world's biggest debtor's ability to service it, and therefore has no see-saw-leverage effect that raises the value of the dollar back up. Instead, it has the exact OPPOSITE effect... once again. Because now this biggest debtor must print even MORE dollars to suck in the same SUBSTANTIAL AMOUNT of the real economy at ZERO cost. It is a brutal cycle, and it has just begun! Notice that I said substantial AMOUNT this time, and last time I said substantial PORTION. That's because as this cycle proceeds, the AMOUNT of the real economy that the government sucks in at ZERO cost actually grows in proportion to the real economy that is shrinking. If the deflationists are right, then someday we WILL all be G-men!!

Additionally, there are some misinformed hyperinflationists that believe hyperinflation will be our savior. That it will alleviate all the debt and free up the housing market to rise once again. In response to this view, some deflationists have argued that hyperinflation or currency collapse will never come in time to save the debtors. Very quickly, I would like to dispel this malformed (from both sides) argument. Hyperinflation, by its very nature, will come well before all of the debts are cleared. It will be "the cleaner" called in by the invisible hand to mop up the massacre. But it will not deliver a free lunch to the many debtors who have no real savings, and certainly none in REAL money. They will find out that even though their debts are now payable in much smaller dollars, that even those smaller dollars are hard to obtain in necessary quantities. They will wish they had hoarded some miniscule savings in physical gold before the crash with which to settle their debts. As hyperinflation or currency collapse takes hold, they will find that debt settlement requirements race just slightly ahead of the ability to pay through normal economic means. You see, hyperinflation is really just a deflationary collapse party with Gideon Gono or Ben Bernanke spinning the tracks we all dance to.

"So what are you saying FOFOA? Just spit it out already!" Okay. Here is what I see coming. I see the US dollar, a medium of exchange, devalued by the external world sometime soon and its CHARADE as a store of value exposed and brought to conclusion. This is the only way I think things can play out now based on what I have seen over the past year. Furthermore, I believe there will be a flood of "dollars" as the dam breaks, spilling from the make-believe $600Trillion+ financial paper economy into the $60Trillion global REAL economy. And I believe a highly disproportionate amount of this flood will be absorbed by gold! I believe this may actually be a primary plan for some very large physical gold holders in some very high places. In fact, I would bet on it!

Furthermore, I believe that if you are not already positioned in the safety of real physical gold when this happens, you will not be able to get there until after the flood recedes. I believe that things could get ugly and life could get real hard if and when this all goes down. But I also believe that having some gold will make life easier on you, by quite a lot. Of course there are some other obvious preparations that everyone should make, like stocking up on food and water, the necessities of life. But it is very expensive and difficult to prepare in a survivalist kind of way for every possible scenario. Some can do it and that is a great thing. But for the rest of us, gold is a good substitute for the unknown. A substitute with tremendous upside potential at this particular time in history!

I have made a few 'survivalist' purchases myself, that go beyond metal and beyond the norm. I have a specific thought and use that goes with each one. In most cases they are items that could a) become very useful in a lifesaving way under certain scenarios, and b) become valuable for barter because they will be scarce. I do not recommend these items for everyone because we all have our own unique situation. But this list should at least give you some food for thought, and I'm sure some of you all can add more things in the comments. Anyway, here is my short 'beyond gold' list:

Guns, including large home protection and small concealable
Ammunition stockpile
A concealable bulletproof vest
A generator
Gasoline storage
Plastic water storage
Water purification tablets
A portable ceramic water filter
Freeze dried food
N95 masks
Camping gear

There are some other low cost, low probability, high impact items that I like. These include IOSAT tablets and surgical kits. They say it is easier to find a doctor than it is to find a doctor and an OR! Others, like my gasoline will definitely be used in one way or another. The generator is still in the box, so it could be a barter item or a necessity at some point. Who knows? But I doubt it will lose value like the dollar will.

So there you have it. No Free Lunch! For ANYONE! Do what you can to take care of your family. And if you think the government will carry you through this on its own Free Lunch program, guess again! The power is about to be extinguished by a giant hand.


PS. Here are some online vendors that I have used successfully. These are not recommendations nor are they paid advertisements. They are simply where I bought my sh-t.


Nelson said...

Thank you, FOFOA. I agree with everything you say, qualitatively. I especially like that you've selected bulletproofme as your vendor of choice for ballistic garments.
Here are my only two quibbles:

1) The word "soon" in paragraph six. It seems to imply that the next step will not be in the same direction as last year's recession/deflation/flight-to-safety, but rather 180° opposed. I'm not so sure.

2) Your later use of "perpetual" to describe the $USD free lunch that some others see as persisting for awhile yet. It's a strawman, and beneath your considerable powers of argument. No one is remotely suggesting that the dollar won't go the way of the $ZWD ultimately, but what matters right now is forecasting the direction of the next leg down.

The Great Unwind has been forestalled by "stimulus" injection, but it's still underway in earnest as we speak.
No one needs to tell you of all people the infectious nature of a deflationary spiral. Just as no one would dispute that, eventually, the massive QE will sink the fiat currencies - all of them.

The question is, what happens in Q409-Q410, and I tend to believe that the Death of the Consumer will trump all in the near term, as the velocity of money - even newly minted, worthless money - falls to zero. And I say this as a holder of bullion coin. It's a scary way to bet, but debt default seems so overwhelming and inescapable at this point, that I can't see interest rates ballooning for at least another year.

Thank you again for your clear and concise insights; I look forward to your responses.
- nelsone

FOFOA said...

Hello Nelson,

Thank you for your very impressive comment!

You are a sharp man. You probably wouldn't believe me if I told you that I considered my words just as carefully as you have.

So instead I will simply retract #2 on the strawman grounds you state (replacing it with "lengthy") and stick with #1 as is.

I believe external forces will overpower internal ones, sooner rather than later.


Shanti said...

Brilliant piece again FOFOA !

FOFOA said;
"I believe this may actually be a primary plan for some very large physical gold holders in some very high places. In fact, I would bet on it!"

Walking on the edge! If such a plan could work it would be brilliant, but imvho i think we have passed the point of no return already even for any plan makers.

How would you manage a force of 1:10?

How it will evoluate, i have no idea but as you and ANOTHER mentioned, GOLD will play its role as a store of value. (especially in times of transition!)

Anonymous said...

Argentinian experience:

Anonymous said...

Another excellent piece!

For those currently unable to position themselves with physical Gold but with Silver, how do feel Silver's role will play out as a store of value?

Anonymous said...

I have silver for a usage medium, gold for long term store. If gold shoots up, its divisibility becomes an issue, no?

Anonymous said...

From Axel Merk:
The conclusion we draw from the Fed’s talk about exit strategies and focus on inflation is mostly just that: talk. While we understand why the Fed is talking – to manage inflationary expectations – we believe the Fed may be playing with fire at our expense.

Indeed, following Bernanke’s textbook, our interpretation is that the Fed may want to have inflation; and to get there, he may want a cheaper dollar, a substantially cheaper dollar. Bernanke has repeatedly stressed how going off the gold standard during the Great Depression jump started economic activity by allowing the price level to rise (read inflation). Fast-forward to today and think about all those homeowners “underwater” with their mortgages. We could allow those who cannot afford their homes to downsize, i.e. allowing market prices to clear by allowing foreclosures and bankruptcies, amongst others; however, that option seems to be political suicide. An alternative is to induce inflation, allowing the price level to rise; the Fed may not be able to control what prices will rise, but seems to be betting on home price inflation.

Looking at what at the Fed does, rather than what the Fed says, we believe it is actively working on a weaker dollar. In discussing the Fed’s programs, the media seems to focus on the low mortgage rates and government bond yields that lower the cost of borrowing. The flip side of such activities, however, is that the securities the Fed buys, be they Treasury Bonds, Mortgage Backed Securities, or others, are intentionally overvalued as a result of the Fed’s interventions. Why would a rational buyer be interested in these securities? We believe many of the Fed’s programs replace, rather than encourage, private sector activity. It doesn’t take a rocket scientist to make the connection to the dollar: foreigners may not be attracted to U.S. securities if they are not properly compensated for the risk they are taking. Indeed, it is not just foreigners we should be concerned about: from what we hear, U.S. institutions are increasingly hedging their U.S. dollar risk, something unheard of in a developed country in years past.

Anonymous said...

That CATO chart you put up seems cooked as far as "average" salary. The fatcats in DC would have to earn fantastic sums to overcome the inertia in the paychart linked here, because away from DC it just isn't that top heavy. Then you have to factor in the Fed blue collar (wage grade) workers:

Your state and local Gov exceed Fed in both pay and benefits on a comparable job basis.

Pack ice said...

The meaning of the word "soon" discussed above - will imvho be decided upon by your nations creditors, mainly the Chinese concert with Middle East.

When China has secured enough of its usd holdings in tangibles around the world, they will start a rush to the usd exits hoping to minimize their losses. But probably in a concerted effort with other creditors, whom China wants to have on their side in the future.


Anonymous said...

The latest from Fekete and the gold basis:

Anonymous said...

also from Fekete, vis a vis inflation vs. deflation:

I feel strongly that this aspect of research on the denouement of the fiat money era has been lost in the endless debates on the barren question whether it will be in the form of deflation or hyperinflation. Chances are that it will be neither, rather, it will be both, simultaneously. There is a little-noticed and little-studied continental drift beween the money supply of electronic dollars and that of FR notes. (Continental drift of the geological variety is invisible and can only be detected with the aid of high-precision instruments.) The tectonic plate of electronic dollars will keep inflating at a furious pace, while that of FR notes and T-bills will deflate because of hoarding by financial institutions and the people themselves. The Federal Reserve will be unable to convert electronic dollars into FR notes. Apart from lack of collateral, present denominations cannot be printed fast enough, physically, in times of crisis. If the Federal Reserve comes out with new denominations by adding lot more zero's to the face value of the FR notes, Zimbabwe-style, then the market will treat the new notes the same way as it treats electronic dollars: with contempt.

Anonymous said...

If you anticipate needing to use your generator, then a transfer switch is a good investment.

Anonymous said...

Don't forget to add fuel stabilizer to stored gas.

Anonymous said...

OC-17 (Cap-Stun) from EBay. Kershaw "Ken Onion" legal speedknife from Amazon.

Anonymous said...

Good call on the fuel stabilizer. I just went with diesel instead. The FOREX trades $ 3 trillion a day. Will we see an abandonment of the dollar in the FOREX or in Chinese bond vigilantes? Israel has just terminated their $ 100 million a day dollar purchases. Is that significant or not? Will the small saver dump $ or will it be big investors?
If FRNs are the accepted medium of exchange, will there be any credit instruments that will survive?

Anonymous said...

In FOREX, there are different types of FX transactions: spot (or cash) transactions, forwards, futures, swaps, and options. Spot transactions are an immediate trade, while forwards, futures, swaps, and options allow traders to manage risk or to profit from speculation over an extended time period.

If a U.S. bank trades with another bank, a FX broker may be used as an intermediary. The broker arranges the transaction, matching the buyer and seller without ever taking a position and charges a commission to both the buyer and seller. About 1/3 of transactions are arranged in this way.

Spot (Cash) Transactions

This type of transaction accounts for almost 1/3 of all FX market transactions. Two parties agree on an exchange rate and trade currencies at that rate.

Example — Spot Transaction

1. A trader calls another trader and asks for a price of a currency, say British pounds. This expresses only a potential interest in a deal, without the caller saying whether he wants to buy or sell. Otherwise, the other trader may skew her price in her favor if she knew specifically what the other wanted.

2. The second trader provides the first trader with prices for both buying and selling (2-way price).

3. When the traders agree to do business, one will send pounds and the other will send dollars.

By convention the payment is actually made 2 days later, but next day settlements are used as well, especially for the Canadian and U.S. dollar pair.

Jim Willie: "The August Hat Trick Letter report on gold & currency is to be posted this weekend. It contains some very surprising information on the cash intermediary currency market. A deep USDollar devaluation comes!!!"

1/3rd of 1/3rd = 1/9th. 1/9th of $3T/day = $333B/day, or $7.3T/month passing through the "cash intermediary currency market".

Anonymous said...

Enjoyed your article. I'm still thinking we need another deflationary impulse to show the world how screwed our economy and system are before people really start to jump ship in earnest. What's another 6-12 months in the big scheme of things?

Having said that, I don't agree that the Gold price has to break down hard and if it does, just like last fall, it will rise right back to it's all-time highs when priced in FRNs - the correction will be over within weeks as soon as all the momo traders and short-covering banksters are done fighting each other (with the banksters winning over the traders, of course).

In the end, I don't give a shit because I'm loaded to the gills with physical Gold. I'm just hoping for another killer opportunity to buy Gold miners cheap with my gambling money (like last fall) and a little more physical Gold with my "play it safe" funds.

Museice said...

I've been reading you for awhile now and this is the first time, that I can remember, where you talk about basic survival equipment. Have things changed so dramatically that you felt you needed to mention, suggest, a more complete protection strategy?
Reading about Gold and it's true nature is one thing but when I read generator and bullet proof vest I had a sudden feeling of urgency from you.

It just seems like a different voice.

Anonymous said...

Thanks all for the info. So, FOREX trades futures. Any guesses on how fast the $ would morph,,, how much warning the FOREX would give? I'd guess that it would be fair warning if the FOREX was "locked down" :)
What a menu we have.
Will we see an abandonment first or "force Majeure"? FDIC had to go to Spain to find a buyer for a bank. 500---1,000 more to go. The banks need $ <175> trillion in the next 2+ years. There are more than $ 600 trillion in derivatives left to "cancel out"
We'll leave the stage with quite a splash.
Salbuchi is a very well-spoken Argentine who has great interviews on youtube. The Argentinians have plenty of experience with collapse. He posits 2 currencies...1 for internal,, 1 for external.
The people from Bosnia said that, at times, toilet paper was worth more than gold. dan

FOFOA said...

Hello Muse,

I think you win some sort of prize for your sharp observation. Yes, that was intentional, and yes I was wondering if anyone would notice.

Read what you want into it. It is not based on anything specific, just a gut feeling. The general complacency this summer compared to last summer seems very suspicious to me. Most all of my preps were made last year. But this summer, I feel there are even more dangers lurking in the bushes. Remember that surprises, by definition, surprise.

I honestly think I see things a little different than other people. When I read comments like "I think we need another deflationary pulse first", or "the great unwind has been stalled out by stimulus", I realize that most people think of this coming collapse of the dollar, collapse of the system, and release of gold as if we must climb Mt. Everest or something, and that we aren't quite up to it yet. I don't see it that way at all. I see the opposite.

Where we are going is where GRAVITY is taking us. It is those in POWER that are fighting against gravity. It is THEM that must climb Everest.

One more analogy. Think of a ski patrol who's job it is to make the mountain safe from avalanche. They have these cannons and they fire a shell high on the mountain and then let gravity do the job they want done. This is the BIS and freegold! Brilliant plans always incorporate the laws of nature so that when push comes to shove, God does all the heavy lifting!

So the ski patrol's job is to move 1000 tons of snow. And he does it with one single shot and then gravity takes over. Bernanke's job is to try and hold that snow up on the mountain! After the shot!!

Gold WANTS to explode. The dollar WANTS to collapse. Those that are doing everything in their power to forestall the inevitable are the ones who need a miracle just to make it through the summer. Like little dutchmen with a finger in the dike. Every day, week, and month that this crumbling monstrosity stays intact is a pure miracle. They aren't just dodging a bullet, they are at Gallipoli in 1915 running through a hail of gunfire.

I think Jim Willie correctly stated the chaos that is breaking down the system outside of the US. A system without a PPT and a printing press. It is all part of the global house of cards and the first card to fall, one little card, will likely bring the whole house down.

Nature is throwing everything it has at this failed paper system. Do you bet on nature, or on the unstable system that is under attack by mother nature herself?

When you look at it this way, you will find yourself amazed that we made it through another day.

This is why I have a bulletproof vest.


FOFOA said...

Or maybe it's this.

Jay Midnyte said...

On top of this gut feeling that this fall will be disastrous, the mainstream media will not stop trying to convince us we need mass vaccination to avoid half of the U.S. population being infected by swine flu...

Tekin said...


A Summary See the link for details.

Short Term: The essentials you need to survive for the short term are water and shelter. Everything else is really a luxury.

Food: Store food you like to eat when at all possible.

First Aid: A good supply of adhesive bandages, not just a few, a quantity of large gauze pads and a large roll of adhesive tape, a few rolled bandages and at least one elastic bandage will serve as a good start.

Tools: A decent quality knife is the most basic tool you'll need...selection of screwdrivers (wrenches) and pliers will come in handy. McGyver tools: here are few things that cannot be fixed with a little wire, rope and duct tape. Every basic kit should have plenty of all three, especially duct tape. Aluminum foil is also very versatile, make sure you get the heavy duty kind. (McGyver Tape: Wide transparent tape can also repair broken windows).

Flash lights and spare batteries

Communications:A battery operated AM/FM radio is a must in order to stay informed.

Miscellaneous: Toilet paper is always in short supply; make sure you have plenty. (This can also be a barter item)

Tekin said...

On Guns and Weapons

To have guns or not to have guns. I am not sure which option is safer. I feel evasion and practicing invisibility (don't attract attenttion, blend into environment) is a better option then guns.

Even uniformed soldiers have been known to falter with guns.

Skill in Use: (From January 1994 edition of Guns&Ammo by Jan Libourel) " incident in which two uniformed British soldiers unwisely decided to go sightseeing in Belfast and blundered into the midst of an IRA funeral. At once, their car was surrounded by angry IRA sympathizers. One of the officers produced a Browning Hi-Power. Instantly, the crowd fell back. However, the officer was carrying the pistol in condition three (chamber empty), and the magazine had become partially dislodged. As he ineffectually attempted to rack the slide, the crowd became emboldened. One Irishman smashed the car window, wrested the pistol from officer's grasp, executed a tap-rack-bang drill and killed both the officers. Now, these British officers were imprudent in a variety of respects, and the British major toting the Hi-Power was not obviously skilled in its use...Similarly, when Diane Fossey of "Gorillas in the Mist" fame was murdered, it is reported that she was trying to stuff a loaded magazine into one of her auto pistols at the moment she was cut down".

The moral: If you have guns you should practice, practice, practice.

Rules of Engagement: Have you already decided when you would feel it would be ethical shoot? Did you decide to think about it later during a gunfight?

My conclusion: Evade, blend into environment, don't attract attention, become invisible. Don't go to IRA funerals in British uniform with your friend!

Anonymous said...

If you live in a US cold climate zone, put in a wood (not pellet) stove now. Pellet stoves require electricity to operate and are not radiant heat sources. In July the IRS signed off on most modern wood stoves as efficient enough to qualify for "green" tax rebate (dollar for dollar) of 30% all parts, including hearth and stack.

Anonymous said...

and hope your rebate is still worth something by next spring tax season :P

FOFOA said...


I would add that the excellent strategy of "Evade, blend into environment, don't attract attention, become invisible" is highly recommended for everyone, gun owner or not!


FOFOA said...

I would like to clarify a couple things. I do not expect a Mad Max scenario like some people have written (on other boards) since this latest post was published. I give a Mad Max scenario a very low probability. But there are varying degrees with which unexpected things can happen and for a few ounces of gold I can be somewhat prepared for the worst of it.

If you watched Chris Martenson's "Crash Course", you learned about the high-probability/low-impact and low-probability/high-impact continuum. This is an essential way to view the scenarios we face when assessing your own preparation requirements.

Obviously I put gold in the most practical category, high-probability/high-impact! My other preparations fall farther out on the low-probability/high-impact side. And the farther out I go on that side of the spectrum, the less money I spend. For example, the IOSAT tabs and the surgical kit were very inexpensive. But if God-forbid the time ever comes that they are needed, they will be impossible to get and absolutely priceless.

As for the bulletproof vest, I believe they are more vulnerable to government control than even guns, because there is no constitutional protection for body armor. And controlling its distribution to the public is a sure way to give the government a clear advantage in any civil unrest scenario. So for about $300 I got myself a brand new one. I got this one, only in tan. I hope I never have to use it! But even if I just hear something go bump in the night, I can slip that thing on just as fast as I can grab a gun to go see what made the noise. Peace of mind is the real value!


FOFOA said...

Good articles:

A Shocking Fall

"The autumn of 2009 will be full of shocking surprises in the banking sector, in financial markets and in the world economy. The events that we outlined in our previous newsletter, "The Dark Years Are Here" are going to start unfolding. There will also be shocking falls in stockmarkets, in the dollar and in bond markets.

...the autumn of 2009 will see a precipitous fall of the dollar. It will be relentless and greater than anyone can imagine. There is always a day of reckoning when the law of supply and demand is out of kilter and that day is now here. The move will be unexpected by many and this will mean that everyone will run for the exit and dump their dollars thus exacerbating the fall."

The Dancing Corpse

"Could the almighty U.S. implode almost overnight as the weight of reality overruns the ramparts of a fictional recovery in the economy – an economy that is hampered at every turn by an overextended, overreacting, and overreaching government?

History is clear and unequivocal on this point. Yes.

It has happened to every empire that has come before."

Anonymous said...

Is the problem the billions of dollars traded by computersystems or will humans panic ?

If one system breaks the downside in the dollar, all other trading systems WILL follow, this is how I see it ?

FOFOA said...

How China Will Handle the Yuan

Lance Lewis: You notice the extra chunky volume in the Chinese Yuan ETF (CYB) yesterday at the same time that the dollar reversed violently?

Ryan Krueger: I do now. And the cash markets in beans are way above the futes even with this ramp job. Hmmm...

Lance: I’m telling ya. Something is up with China and the yuan. It would explain a lot. What if it were close to revaluing against the dollar?


Lance: Exactly! That’s my point. It’s the only thing that fits. If so, the dollar would get smoked, literally, “overnight” and gold would explode. Bonds would probably get crushed, too.

Mantis said...

Whenever and wherever mankind rises up from subsistence existence and barbarity to create civilization, he uses gold as a store of value. From the time when mankind first looked to heaven above and hell below and saw not something alien or distant, but instead saw himself gazing back, he has regarded gold as something not merely of the provenance of gods or kings, but as something he himself could also keep. Look for anyone on this earth that knows of gold but does not know the value it holds. Yet look for anyone on this earth that would use gold as a medium of exchange when paper money or other forms of currency would equally suffice and are available. Gresham did nothing but lend his name to a truism of scarcity. The past is long and replete with civilizations come and gone, but history is punctuated with few reigns of empire. Since the aforementioned humanization of gold, whenever and wherever mankind rises up from mere civilization to create empire, a criterion of which is vast treasury gold and thus newfound wealth and power, he inevitably elects to amend the coin of the realm from a humanized gold standard to a democratized gold standard. Irrespective of an empire's particular form of government and economy, its democratization of gold transcends the specific politics of the time period and reflects instead the overall arc of history, for it has nothing to do with mere democratic governance. From Rome to Byzantium to Britain to America, et al., all at their heights used gold coin as the coin of the realm. Gold in the hands of the people. Under any such empire that reflects the paragon of its people's efficiency and organization and productivity as manifest belief in themselves, gold functions, however briefly, as both a store of value and a medium of exchange. Such are the gifts of a free society and the spoils of war, pillage, and plunder. Such are the gifts of unbound liberty and undeterred tyranny under the auspices of a grand collective spirit. Gold in the hands of the people as a medium of exchange. Yet democratized gold is always an abberation. For, as surely as night follows day, the fall of empire coincides directly with the removal from circulation of the three coin metals: copper, silver, and gold. First gold, then silver, and finally copper. 1933, 1965, 1982. Like all empires. The aberrant use of gold as a medium of exchange comes to an end. To understand which cultures go down this road and why, one must turn to their respective gods. Does man see himself in the heavens, or does he see something greater than himself? That's a discussion for another time and another place, however. Returning to gold and the long arc of history, we find that the typical role of gold has been to function in conjunction or parallel with a temporal often fiat currency. From the bazaars of Delhi to the floating markets of Taling Chan, goods and services are exchanged using rupees or baht, not gold. But how do the merchants and customers hold their wealth over the passing of years and children and grandchildren? Gold. Such is the typical role of gold: as a store of value. Mark its purity, its provenance, its weight, and maybe fashion it to look pretty. Gold is typically a battery of value or wearable worth. Equally atypical is the function of paper money as a store of value. Mediums of exchange are as mutable and fleeting as gold is immutable and lasting.

Watch the gold basis, the renminbi, bond yields, and your own back.
The Gordian Knot of Debt must be cut.
Well you'd do to prepare on every level.
FOFOA's suggestions should be considered deeply.

Thank you again, FOFOA. You are doing a great service.

Mantis said...

FOFOA, I have a question for you.
Please email me at

Thank you.

PStryder said...

FOFOA, a couple of questions, and I apologize if this has been addressed.

1: I'm currently saving to purchase a house. Not as an investment, but as a place to live and store my crap. Should I rent instead, (marginally cheaper in my market, including ALL costs associated with both) buy physical gold, and give up the 'advantages' of a house? (I see these advantages as: more space to store/prepare survivables etc, increased fortification/security, freedom to renovate, control, land to grow/harvest on.)

2: Physical gold versus certificates/deposits, etc. My assumption is that when the zombies come, having a certificate saying I own x ounces of gold on deposit at Bank Q will be worth exactly as much as fiat currency. I consider having actual physical gold dangerous. First time you use it to pay for anything, or convert to cash (whatever form that takes) you are making yourself very vulnerable.

I almost want to say screw it, I'd rather spend the money on survivables than gold, since I live in an urban/suburban area, and if things collapse suddenly, it will be a very bad 6-18 months while the bulk of the population starves.

I am not wealthy. I have no investments. I can barely be said to be established, in that I make very little more than my expenses. What can I do to make life as good as possible for me and mine?

I see a lot of talk online and other places about what investors can do. I'm poor white trash...any advice for me?

And about that vest: Just like a firearm, PRACTICE, practice, practice 'slipping' it on and off. When the wolf is at the door, odds are you'll find it much harder than you think to put it on.

Anonymous said...

Cigarettes, booze (even cheap wine will keep for a couple of years), canned goods...these are for barter. Look at what is used for "money" in prison...smokes. If you have some land buy some fruit/nut trees and plant them NOW! Store up some canned food for yourself. Make sure to get several can openers! Think basic necessities. Go for an overnight camp out in your car without anything, and you'll get an idea of what you'll need real quick.

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