Wednesday, October 21, 2009

Gold is Money - Part 2

In our last discussion we distilled the pure concept of money down to the innate human ability to mentally associate relative values. Today we will expand this thought in order to apply it to some very different functions we associate with our modern, common understanding of money. Hopefully this exercise will help to reveal a deeper understanding of where we are heading.

Confusing the Human Instinct of Value Association

Taking the pure concept of money further, we can say that money is the range of numbers that we hold in our memory, or numbers that we write on paper in a bookkeeping account, for the purpose of value association.

Imagine an ancient barter system, where one cow trades for two goats. And one goat is worth five chickens. In our mental association of values we might use the chickens as the primary basis and attach a value of 1 to a chicken, to make trading a little easier. So a chicken is 1, a goat is 5, and a cow is 10. We now have a simple monetary system of 1 through 10 in which the numbers themselves are our money, and an object of wealth, the chicken, is our unit of account.

So if I have two cows, three goats, and 25 chickens to trade, I might calculate in my head that I have a total trading value of 60 monetary units with which to trade. That number 60 is my primitive concept of money. But I wouldn't say that my money account was only in chickens. I would have to say that I have a total value of 60, but my money account is in chickens, goats and cows.

Over time it was discovered by early man that gold was the most accepted tradable wealth of all, and soon almost everyone was accounting for their wealth using gold as the basis for the mental unit of account. Gold was better than chickens for many reasons, not the least of which that sometimes chickens died. Also, gold could be divided into smaller and smaller pieces. When you did this with chickens, again, they died. This was certainly acceptable at meal time, but not out on the road, traveling the trade routes.

So the pure concept of money was the account, the rating system for value, the worth association in your head. Physical gold became the main wealth object used in that bookkeeping practice. This is how it was for at least a thousand years. But as all things evolve, man eventually became accustomed to speaking of gold in the context of money accounting. Even as languages evolved the concept of money accounting and the physical wealth holding of gold became mingled as one and the same.

This transition was subtle and unnoticed, an evolution transcending generations and even civilizations. But it has led to what has become a major conflict in the money affairs of our modern world. As gold receipts took over as the concept of money accounting (the mental value association role), man became confused as he now had to value his cows and goats against chickens that were never there in the first place. Receipts for chickens that far exceeded the actual chicken count. And how to value real chickens in this case? One imaginary chicken receipt = 1 real chicken??

You see, man has not changed as much as we might think since his barter association days. We freely exercise our skill at the value associations of all real things. Real things must remain free to float up and down as the reality of supply and demand dictates in order for our innate skill to be most efficient. Our inherent need to constantly change valuations as we see fit is what is driving physical gold to break free from its modern monetary attachment.

We inherently want to use gold as a wealth item par excellence. We want to trade its changing value within the same universe of floating values that all other tangibles trade. But for the benefit of the bankers and the US Govt, in the pursuit of stable credit and debt values, we have tried to fix gold's value to our "pure concept of money" so that banks can lend THE MONEY CONCEPT ITSELF, in lieu of lending real things, or real gold. Gold cannot be rigidly fixed to any money concept that must constantly inflate in order to survive, as any lendable and borrowable fiat currency must do, because physical gold is in finite supply.

Lending a Mere Concept

Today's dollar is a purely symbolic currency. It is not officially attached to anything. Our modern money system, like those in the past (even ones attached to gold), is built upon the notion that a mere CONCEPT can be lent in lieu of actually having to lend (temporarily part with) something of real value. The banking system wants to lend us 'the number 10', and have us pay it back, with interest, in chickens, goats and cows. They literally want to have their cake and eat it too.

This system of lending a purely symbolic monetary CONCEPT instead of lending real wealth requires the perceived value of that CONCEPT to remain relatively stable or else the entire banking system will collapse. It is to this end that bankers, governments, politicians and economists always try to entangle (think: forced quantum entanglement) gold into the money system and control its value in order to keep their CIRCULATING DEBT CONCEPT viable and valuable.

This is the problem with the architecture of the dollar, versus how all non-reserve fiat currencies will work in a free gold environment. The dollar must cheat in order to retain any illusion of stability. There are other ways for a fiat to remain stable. Responsible currency management is one. And in a system where the value of all real things (including gold) float freely against the parallel universe of fiat currencies, this will be how they will work.

When the dollar became a mere concept in 1971, so did all fiat currencies in the world. Their only value lies in the tradable value associations we give them, based on what can be purchased in the parallel universe of real things. But because we have been encouraged to save these symbolic debt concept units in lieu of anything with real value, a mismatch has grown to epic proportions whereby not even a fraction of these debt units can be traded back into the real economy at anywhere near today's prices.

We have lent, borrowed, saved, sliced, diced, sold, resold and insured so many units of a mere CONCEPT while neglecting to pay attention to the comparative size of the real economy with which the CONCEPT must run in parallel.

Our political drive, our collective spirit, and our American lifestyle has encouraged the near-exponential growth of this system so that we could buy real goods from others without sending them real wealth in return. So that we could grow and expand our great nation on a CONCEPT alone! We have proclaimed a strong dollar for the past 15 years, promoted it to be "as good as gold" and not only a perfect substitute, but a much better substitute for real wealth holdings... "because you must earn a YIELD". The dollar is even held as a "hard money" wealth reserve behind other currencies!

And over this period of the last 38 years, while our dollar perfected its role as a medium of exchange, it also left in its wake a world chock full of worthless CONCEPT-denominated paper wealth that people and nations bought and held in lieu of anything real. Today we are in a transition that will take us out of this jumbled mess and, in the process, will destroy much of our wealth illusion as it appears to simply evaporate away. But the truth is that it was never there to begin with!

Saving the System - Not its Value

It was said, many years before Paulson, Bernanke and TARP, that the financial system will be saved at any cost! Apparently this statement has proven to be true. But at what cost?

You see they are now faced with a dilemma they will not discuss publicly. On one side is their product, the conceptual unit of credit account, their currency. And on the other side is their offspring, the financial system, Wall Street. What saves one will kill the other. They can save the present value of their product and kill their offspring through starvation. Or they can save their offspring by delivering what it desperately needs to survive... a constant expansion of credit (aka monetary inflation). But this will, of course, kill the value of their product, the currency.

They can save one or the other, but not both. And it was always known, but has now been proven, that the system will be saved at ANY cost. (Unfortunately for them, they did not think it through far enough to realized that the cost of saving their offspring will also kill it and a whole lot more. But that line of Thought is straying a little too far from the topic of this post.)

In order to survive, the system, the financial industry, Wall Street NEEDS a constantly increasing supply of CREDIT! If the population won't give their own blood to save this dying Frankenstein monster, then the CB's and governments WILL! It is happening now. Right under our noses. For more than a year now!

This is why it is SO important that we hold only physical gold in our own personal possession in order to escape this tangled mess. Only touchable, graspable physical gold metal under full ownership conveys ALL of the properties that have come to be attributed to this kingly wealth asset. By contrast, financial contracts denominated in gold as facilitated by bullion banks, gold derivatives, gold loans, gold depositories, gold pool accounts, gold ETF's, or known by any other name, are all at their core pure and simple... (wait for it)... CREDIT. And what feeds the monster?? All together now... CREDIT EXPANSION!!

And because the underlying potential for depositors to exercise their claim on the gold metal within the system poses a constant threat (to pull the rug out from under the confidence in this particular variety of credit) which grows as the credit expands, a limit is eventually reached where the participants will tolerate no further expansion. And guess what? We may have just reached that limit!

The bottom line is that the banking system will be "saved" at the expense of sacrificing the market value of every last credit instrument they have created. Anyone and everyone with their savings inside the system will take a serious purchasing power haircut. The only people that will enjoy the full value of their wealth (and more) are the ones who hold it outside of the imploding system. Inside the system, credit of any color, green OR yellow, is only credit.

Long versus Short

Today's paper currencies are not just a medium of exchange, but they are still a pretty good store of value in the short term. The greater the rate of price inflation, the shorter the term that you will want to be holding the actual currency. Wealth assets, on the other hand, are the store of value for the long term. This differentiation is understood by almost everyone today. And it is so close to the concept of Freegold that it will not be "a giant leap for mankind" to get there.

The only difference is that right now, most of the public has come to believe that wealth is simply paper ownership of wealth producing industries and paper claims on real assets that can never be recovered at today's values. This is true for most all items, not just gold. And as we hold these paper documents for the long term, understanding them to be better than holding the actual currency because they provide a "yield", the recoverability of the underlying real asset is being constantly eroded away. In other words, we are unknowingly losing principle at the same time as we think we are gaining a yield!

From 1980 to 2001, the expansion of the financial industry far beyond the means of its parallel real world counterpart was a signal that our human instinct to buy things, or assets (even if only paper debt assets), rather than to hold the actual currency, was still intact. But the fact of the matter was that the dollar currency itself was expanding during this time period at a furious pace to meet its global usage demand WITHOUT causing the price inflation that should have accompanied such an expansion.

This strange "pseudo-deflationary" signal (versus gold) during a time of high currency inflation might have told the people that it was okay to hold the currency itself during this period. That something odd was afoot. As the currency was expanding with such ease, but at the same time gaining purchasing power especially against gold and oil. But the people only spent their currency, which demonstrated their natural inclination. To spend currency, and to buy real wealth assets for the long term (even if those assets were little more than a value illusion).

But today a totally different signal is being broadcast loud and clear, and being equally ignored. That gold is now about to resume its historic role and value as a wealth asset, long suppressed by its troubled association with inflating transactional currencies.

Ever since our dollar became a mere concept in 1971 it has required the illusion of a stable gold price in order to remain viable in its various roles. And a stable gold price it has had! Yes, even with the spike in 1980 and the quadrupling in price of the last 8 years, gold has remained relatively stable and locked into its confusing association with inflating currencies, mainly with the help of the inflating paper gold market, but also through anti-gold propaganda.

If gold had truly abandoned its currency role in the 1970's, and taken on the unfettered role of wealth reserve par excellence, we would have seen prices in the many thousands even before the 1980 price spike. The dollar and its insidious wealth-derivative offspring had multiplied that much even before the official link with gold was finally broken.

Half versus Whole

Our ancient instincts have not gone away. We have not "advanced" as much as we think. Our use of "the pure concept of money" has not changed since the days when we engaged in direct barter trade. We still want to accumulate wealth item along side and separate from our transactional "pure concept of money" which is really just a number in our mind, or marked down on paper. We know that this "number" is not something to be saved, except perhaps for as long as it takes to arrive at the next transaction. (See: Fekete's A ‘fairy’ tale)

You see our modern money concept has been surreptitiously eroded into only one half of our ancient barter understanding of the money concept, and one half does not equal a whole. Most of today's money, other than the monetary base, is borrowed into existence. It represents a debt, and a debt is an incomplete transaction. It is only one half of what our instincts require as a wealth reserve, which is a fully completed transaction resulting in an accumulation of hard value. And yet we still buy these "wealth assets" denominated in only "half a concept", half of the monetary concept that our mind intuitively understands.

This is a flaw! It is a big one, especially now as "the other half" is waving the white flag of surrender and default. Some very smart analysts see this as deflationary. They truly believe that the waving of the white flag will make this "half a concept" actually rise in value against its parallel real world economic counterpart. But that is not what will happen.

Paradigm Shift

What will happen is a paradigm shift. The paradigm shift will be the sudden planetary recognition that the global debt(concept)-based paper investment pyramid is collapsing from its own weight and size. And that the best safe haven retreat is physical possession of the one and only hard asset that is globally recognized as an official monetary wealth reserve, an officially recognized hard collateral asset, a true national treasure, and an historic denominator of wealth with a history longer than recorded history itself!

As I see it, we are running out of time... fast! All it takes is for one event to destroy global confidence. One event. Maybe the current rumors will turn out to be just that, rumors. I hope so, because the dominoes that would fall will stretch all the way to empty shelves at your local grocery store. But even if the current rumors are a dud, how many other explosive probabilities are lurking in the murky swamp of banking, finance, money, and paper gold?

Clear anecdotal and circumstantial evidence is emerging that some sort of a squeeze is underway against institutions that might be short gold. A PR battle royale is also underway in the media to counter the effects. It is amazing to me that we can still walk into our local coin dealer and buy gold at a small premium to the paper price. But this, too, is probably part of the confidence battle that is being waged. Someone may be going to great lengths to ensure that the shortage at the top is not visible at the bottom.

The mint has already canceled certain gold coins because of too high of a demand. We have gold hitting all time record highs. Yet the mainstream media think it is most important that you understand the solid fundamentals behind each down-tick in gold.

I hope you can see what is happening. The giants are battling it out like Greek Titans while the masses are being subjected to an anti-gold propaganda machine of unthinkable proportions. All I can say is don't delay if you are still planning to move your savings out of the Frankenstein feeding tube and into the safety of gold. If you are waiting for a dip or a correction, you may just miss the greatest transfer of wealth the world has ever seen. Any price within $2,000 of today's gold price is a steal. Forget about corrections, even if they come. It is only a matter of time until physical gold runs dry, the paper markets suffer "an event", and the value of physical gaps up higher than ANY of the analysts have predicted. Don't miss this one time event!


THOUGHT, concept and some writing credit goes out to Randy (@ The Tower) circa 2001, and of course to my Trail Guide! Thank you for your priceless guidance!


Anonymous said...




Martijn said...

And that the only safe haven retreat is physical possession of the one and only hard asset that is globally recognized as an official monetary wealth reserve, an officially recognized hard collateral asset, a true national treasure, and an historic denominator of wealth with a history longer than recorded history itself!

I am not a paperbug and I would even advise owning some gold, but its not the very only safe haven. In general owning physical stuff would be a good advise, and owning gold perhaps a better one.

FOFOA said...

Good catch Martijn. Replaced "only" with "best".

Anonymous said...

So you think Goldstocks will fall too?
/ The Confused Man

FOFOA said...

Hello Confused Man (great name! :),

The problem with gold mining shares is that people get into them for the same reason they buy lesser commodity metals, to gain "leverage" on the coming move in physical gold. But most of these "leverage seekers" don't understand the true scale of this coming move.

This "leverage concept" they are after entails exiting the position at the peak (if that peak ever comes). The problem is, when the time comes to exit you will only be able to exit into inflating paper. You won't be able to exit to physical gold.

FOA explains that he personally holds a specific gold stock only for its DIVIDENDS... after we get to Freegold! He clearly states that the real leverage this time around is in the physical metal. The leverage argument for the mining stocks comes from the experience of the 1970's, which is a flawed analogy. Remember that stocks, even gold stocks, are only a paper promise of things to come. Gold is wealth paid in full, in your hands! Please do your own due diligence of course...

Trail Guide (06/27/01; 20:19:58MT - msg#: 57019)

Hello Leigh, Tree in the Forest,

GoldFields (gold) be taken out like HM?

I don't think so. However, to place my view in context; I own some goldfields as a small percentage of total physical gold wealth. I also own it with little consideration of it's trading value now. If the shares went to $100 or $.10 I would not consider selling it. They remain a lifetime holding,,,,, (burned for my duration).

The logic in my allocation is to gain the eventual value it would carry after physical gold has been revalued by market forces. A free market, outside and unattached to the banking, money, credit world. That would take the metal far beyond anything we consider normal,,,,, and keep it there for decades. After South African places considerable new taxes on this gain, Goldfield's operation would still turn out a very good long term dividend over the life of its reserves. But nothing close to the projections many gold Bugs would place on these shares if they thought such prices could materialize.

My reasoning employs a return on this risk that is unacceptable to most,,,,, if they understood the dynamics of the process. You see, those shares may not show any market value in the heat of our paper gold market being torn apart. Indeed, they may not trade for a year or so. Only to trade once again after physical gold trading is fully reestablished at a hugely higher level. You see, there may not be a point to cheaply reenter after the fact. This is the main reason why I picked a company so richly endowed.

On this political ground I base my reasoning. South Africa will not allow GoldField's production to be taken over to support the bankers behind Anglo (or any other). If Anglo (like Barrick) is forced to deliver $10,000++ / oz gold into a $300+ hedge book, they would mostly fail and pay little taxes. Considering that inflation, in general will force production cost above $1,000/oz, the clean gold reserves of GoldField makes it a political keepsake. The only owners that will benefit from the mine share game are the ones that can own the company thru thick and thin,,,,, and even then own it solely for the dividends it will produce. Such is the "New Gold Market Dynamics" we face.

Still, for one with understanding, the most risk free and most profitable wealth to own today is pure bullion or coins. Rare and near rare coins will seldom trade in the future and if they do at all at a tremendous premium.

We shall see (smile)


Anonymous said...

Another impressive and intelligent article describing the long held secrets of Gold, I suspect that the noble metal has many more secrets awaiting to be rediscovered once more.

maff said...

You can't trade a concept. You can trade a conceptual or non-physical entity but not a concept.

Unless you want me to trade you my concept of greek philosophy for your concept of the rules of cricket?

Anonymous said...

Anonymous said...

Maybe you can't trade a concept, but you can certainly miss an important concept while you are busy parsing english prose to make your own irrelevant point.

Shanti said...

What to say FOFOA, suche great writings, congrats !

What will happen to the value of MONA LISA when the paradigma shift starts....

MichaelB said...

FOFOA, Excellent! Thank you.
Trail Guide seems to contradict himself in this quote:

"Still, for one with understanding, the most risk free and most profitable wealth to own today is pure bullion or coins. Rare and near rare coins will seldom trade in the future and if they do at all at a tremendous premium."

How is it that something which has a known mintage of 200,000 for example, trades at less than a quarter of a coin with 120,000 known, not counting 'rarity' either gains from melting?
Where will the 'value perception' arise when TSHTF that will sustain even a fraction of this premium?
Then this same coin can suddenly become worth 10 times more if it is slabbed by a major grading service with MS62 or higher label, say for example.
In every case, you could have bought huge numbers of near-melt priced bullion such as sovereigns or bullion coins or bars. And you'd have to have astronomical increases in 'semi-numismatic and numismatic coins to compensate for their lack of metal just to prevent them from lagging bullion.
So let's assume gold goes to $32,000, an eventual, possible, even conservative estimate of a stable price, just to illustrate that you get less with 'rarities' vs bullion or even one million dollar coin vs a comparable stash of gold bullion or bullion related foreign and US classic coins.
The premium on the 'rarities', to keep up with the gains made in gold bullion, would be multimillions per coin and obviously, absurdly valued.

You said:

"Today's paper currencies are not just a medium of exchange, but they are still a pretty good store of value in the short term."
True even with 'rarities' and 'collectibles'.

Further, think collectibles here as in the same class of perception as paper 'promises to pay' currency:

"The greater the rate of price inflation, the shorter the term that you will want to be holding the actual currency. Wealth assets, on the other hand, are the store of value for the long term. This differentiation is understood by almost everyone today. And it is so close to the concept of Freegold that it will not be "a giant leap for mankind" to get there.

The only difference is that right now, most of the public has come to believe that wealth is simply paper ownership of wealth producing industries and paper claims on real assets that can never be recovered at today's values..."

Finally, in this, interchange numismatic industry with "financial industry" for more insight on this dichotomy:

"From 1980 to 2001, the expansion of the financial industry far beyond the means of its parallel real world counterpart was a signal that our human instinct to buy things, or assets (even if only paper debt assets), rather than to hold the actual currency, was still intact. But the fact of the matter was that the dollar currency itself was expanding during this time period at a furious pace to meet its global usage demand WITHOUT causing the price inflation that should have accompanied such an expansion."

In the same way, speculation driven by pseudo-wealth dollar inflation, historical emotion, numismatic dogma and well-meaning investment promotions should be viewed in the larger, long-term context of the return to more normal and acceptable wealth associations and transfers.

Thank you.

Anonymous said...

"Rare and near rare coins will seldom trade in the future and if they do at all at a tremendous premium."

Do I recognize the lion by his paw?

Richy said...


I have been following your blog quite some time and I came to a lot of the same conclusions.

you said:
"Even as languages evolved the concept of money accounting and the physical wealth holding of gold became mingled as one and the same."

I am from Germany and I cound not agee more - the german word for money is "Geld"! :)) That is very close to "Gold". And our approach is much more sensible to the "store of value" proprty of Geld. (a lot for historic reasons - see Weimar hyperinflation)

btw do you have any intelligence where the gold of the Bundesbank is? I heard a lot of roumors that they are trying to get it back from the U.S. Obviously there is no official comment on this, since this news going public (Germany withdraws ist gold from the FED) would kill the international finacial system overnight....

Keep up the good work!


FOFOA said...

Hello Michael,

I agree with you on the issue of numismatic premiums. Always have. No way the premium portion of the value will keep pace with the metal during a transition like we are discussing. But I suspect that FOA knows this as well. He always did show a certain fondness for rare coins, as he did for history itself, aside from his macro analysis.

My guess is that when he says "tremendous premium" he means nominally tremendous within the new paradigm. But not necessarily having risen the same or more than the metal itself during the transition to Freegold. FOA is a smart guy. It's the same with Gold Fields. He is not expecting the value of the stock to rise commensurate, but he does realize the stock will be prohibitively expensive later for those who wish to own it for the dividends. Same thing with rare coins. If you like them, best get them now while you can!

Rare coins will he held as works of art are held, especially after Freegold. They will trade rarely as works of art trade rarely. And they will carry a heavy premium over the price of the gold itself, without a doubt.

But for someone who is trying to usher his savings from here to there, the metal itself will deliver the highest return. The premium portion of any gold investment will deliver a disappointing return relative to the mind boggling move the metal itself will make.


Anonymous said...

Again if we think about the money-pyramid every layer is shorting the layer below it, right ? So in this case defaults (extinguishing of amounts) in one layer will cause increase of the "value" of the layer below, my point is at the moment imploding of derivates causes increases of the "value" of the layer below it... but some of the derivates are converted directly to large-bank-deposits,cash..etc. (i.e. M0, M1 and M2).
The problem is that the base of the pyramid M0 is probably the strongest because it is protected very well by the bank interests and that will cause the effects the deflationists expect.

I think up to this layer the reasons for collapse are mostly technical. For the currency layer to collapse we need psychological reason.

So now up to my question again ;")
I agree with your conclusion... but all of the evidence is circumstantial. That is what worries me.. I also think it is out of their control already, but still they succeed to stop this process in 1934,1971 and from what I read 1987-99 ..and also except that we are now in more dire circumstances what make you think that BIS/ECB didn't change their mind.. a year ago they were saved by the FED with those 500B $ swap lines. ?!
Worse conditions don't mean they wont try to prolong it even more.
I get into account that China now is pushing too, but they can postpone the danger if they give her the 400 tonnes IMF gold.
Causing drop in the price of gold, shaking the weak hands...and save themselves another 4-5 years.

Let me be clear that I agree with your explanation and conclusions close to 99% ;)
The reason I'm playing devils advocate is that you seems to have the gift to articulate your thoughts, ideas and patterns you find in a simple easy to understand way.
The way can't explain it to myself ;)
I have read quick explanations of what money is many times, but when I read your articles it was my AHA!! moment ;).

I just wanted to be clear from what standpoint I'm asking the questions.

Probably the biggest conceptual problem is that ppl don't see the money the way they are and that is why we are living in inflated currency system.

Why you think we did not learned for so many centuries experiments with paper money ?

Anonymous said...


there is no news about eh German gold. Nothing except rumours up to now. You might go to Munich 0n 6.7.Nov. to "Edelmetallmesse". some people from GATA are to come.
By the way, I'm almost sure that the next step of the elites will be to get on with the swine flu - some kind of numerous deadly cases, a fall out of the markets, food shortages and then next year a massive devaluation/monetary reform. When did it ever happen before that they/G20 meet three times a year???

FOFOA said...

Survival of the Fittest!

"For the currency layer to collapse we need psychological reason."

How about SURVIVAL?

Raptor, I think your distinction between technically driven and psychologically driven moves in the swirling currents of capital flow is correct. Much of what we have seen up to this point has been technically driven. We now come to the point where the more dexterous and clever moves will prevail. Those driven by a careful recognition of reality.

Try to imagine each and every fortune that exists as a distinct animal. These "fortunes" can be held by individuals, organizations, by funds, or even by sovereign collectives. They can also be held in any number of vessels at this current time. For instance, the Saudis' fortune is largely held underground in oil deposits. Other fortunes are in paper financial products, like pension funds, and others are already in gold.

As we move forward, the law of nature, the survival of the fittest will come more and more to the forefront. The wholesale creation of new digits is one way that some of the more inbred fortunes are trying to survive. Will it work? Others, with a deeper gene pool, are fleeing to the safety of gold.

Imagine this world of TOO MANY "fortunes" vying for survival in the limited landscape of the real world which is actually too small for them all to survive. The fortunes that have moved entirely into physical gold have already staked out their claim to a specific volume of real estate that is needed to survive in this brutal world. They now own their own territory, a true slice of the real world pie, on which to live and thrive.

Those that are still trying to increase their claim size by inflating paper digits may miss out because the landscape of reality is quickly being bought up by the more clever and observant animals. Survival of the fittest! Those fortunes that make the right moves in these trying times will be the ones to survive and thrive. The rest will die.

These "fortunes" are the giants. Their titanic battle for survival in the limited real world is what will take us where we are going. They need to figure things out quickly if they want to survive. Natural selection will pick the winners and kill off the losers. Today this epic battle nears its climax.

Stake out your own claim and then sit back with some popcorn as the final scene unfolds.

Anonymous said...

"Rare and near rare coins will seldom trade in the future and if they do at all at a tremendous premium."

Personally I don't bother with numismatic coins but I do believe it may be smart to go for the rarer coins if you can get them near bullion prices. In my country you can sometimes get coins like the Vreneli and Napoleon for about the same price as a Krugerrand.

Martijn said...

Gary North on What Is Money?

Martijn said...

There is a story of a man who told his friend about the implications of Einstein's theory of relativity, as interpreted by people who do not understand algebra. "Space is curved." His skeptical friend replied, "Compared to what?"

This is the issue of economic imputation, too. To what unchanging ruler can economic changes be compared?

If this theory of economic value applies to all scarce resources, this must include gold. There is nothing unique economically about gold's value. It is valued by individual decision-makers in terms of the same subjectivistic process that applies to all scarce resources.

Geological stability is one of the two primary sources of gold's relative stability of value over time. The other is gold's relative stability of value over time. How can this be? Because historical continuity of gold's relative price offers evidence for future continuity of its relative price. That which has been will probably continue to be, generally, plus or minus, give or take.

When people speak of gold's intrinsic value, this reveals their realization of gold's historic value.

This is a good article. Recommended read!

Martijn said...

Gold has possessed stable value over long periods of time. Gold is sometimes said to be a store of value. This should be worded differently. Gold is a valuable thing to store.

Anonymous said...

The problem with gold stocks is not that there will not be a point of exit after the event. The shares will be just as valuable as the gold the properties associated with those shares will be producing. Yes, costs will skyrocket, but only in units that are being hyperinflated / devalued by global exit.

The main reason that you should not buy gold mine stock, is that when the event hits, those with power will cancel your ownership claims through whatever the means they will deem useful.

Unless you can literally and physically hold that mine under your ownership, against the desires of governments, nations, armies, gangs and surrounding population, you will find out the difference between possession and a claim.

If I was a "power that be" I would sell as many gold stock as I could now, because I would definitely know that I am selling air, that I will never actually surrender the possession of that gold mine.

Folks who buy gold stocks, counting on fairness of law. But, there is no such thing, the law is only a physical power, it doesn't have any fairness attribute to it. The more proper term for law would be enforcement. Because the enforcement will continue until there is a new body of law, while the law will cease to exist as soon as it doesn't satisfy the goals of the enforcement.

Martijn said...

The main reason that you should not buy gold mine stock, is that when the event hits, those with power will cancel your ownership claims through whatever the means they will deem useful

Correct. Gold is bought to prevent oneself from a collapse of the paper system. Gold mining shares are printed on the very paper we fear might collapse.

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

Yup. The same issue applies to all paper ownership claims. This is the problem with oil investments. Buy oil, but only if you can take possession of the entire underground oil field in an area not under any kind of sovereign or international control. Or if you own your own tanker free and clear, with a private naval militia to defend it.

Anonymous said...

I think this is very relevant to the current situation. Also read the comments.

Something's afoot.


Anonymous said...

Where does Obama-cash come from?
From Obama's stash, apparently.

FOFOA said...

Japan Airlines is worthless! Worse than that, it is underwater, an operational slave to its debt, by $8.8 billion.

This is where the debt regime has left us. With empty, hollow shells of corporate entities enslaved to produce revenue only to service their debt and pay executive bonuses. What if those executives decide to leave their vacuous corporate shell like a hermit crab abandoning his home, for greener pastures of equity? That debt, the $8.8 billion plus the value of all of JAL's "shell"... that is what we hold as wealth inside the financial system! It is gone, not there, if they walk away. At least $8.8 billion of it is gone. Just like an underwater homeowner walking away from his home. If the debt-slave quits, the value illusion is gone!

The entire financial industry is marked to model, myth, illusion, whatever... just not reality. Amazing that we even get a story like this, exposing a small portion of the gap between reality and "high finance".

At least we are getting some honesty with regard to the real value of JAL. How about the rest of the economy? How about the banks? Who's debt do YOU hold as wealth? How is THEIR balance sheet doing? Do you have any idea?

Gold is pure equity... no one's debt. No one to walk away. No one to default in bankruptcy. Nothing to liquidate in an attempt to recapture 10 cents on the dollar.

But don't worry. JAL won't quit. It is deemed too big to fail. That means the printing press will guarantee not only the debt-slave service, but the executive bonuses as well (to keep the slaves in the field).

Next up, the idiotic concept of too big to fail will bring down the currencies themselves. And once again, gold is not only immune, but highly levered in the OPPOSITE direction.

JAL faces $8.8 billion excess debt if liquidated: source

TOKYO (Reuters) - Liabilities at Japan Airlines Corp (Tokyo:9205.T - News) would exceed its assets by as much as $8.8 billion if Asia's largest airline by revenues were liquidated, a source with direct knowledge of the matter said on Friday.

The estimate of JAL's negative net worth, calculated by a government-led task force in charge of its restructuring, underscores the depth of the problems facing the airline as it seeks aid from banks and the state to avoid bankruptcy...

FOFOA said...

CNBC video --> Should we return to the gold standard?

Midas response by Bill H:

Holy Cow, CNBC talks of a Gold standard?!

To all; CNBC just did a 5+ minute back and forth piece on none other than "The American return to the Gold standard"! Say it isn't so! I am shocked beyond shocked that CNBC would even entertain a debate of this sort! Even more shocking is that neither guest was a "bullion bank shill" lying (pun intended} in the weeds to trash Gold. I didn't even see any tin foil hats! This tells me that "the powers that be" know just how close the "rig" is to collapsing. My thoughts are that these nefarious "dark forces" have over time accumulated physical metal and reversed their shorts from the algorithmic implosion of mining shares from last year. In other words, THEY ARE LONG GOLD AND THE MINERS.

Think about it, CNBC would never air anything this "controversial" without prior permission from their "bosses". It looks like "permission granted" to me! THIS is big stuff! Don't get me wrong, we have uncovered Central Bank sales, bullion bank hanky panky, COMEX and ETF shenanigans, naked shorting of the shares, etc., but THIS is the first "zephyr" of a tail wind! If I am correct that the cabal has quietly reversed it's position from short to long, the markup phase in the metals sector will be like nothing ever seen before.

This comes at the same time that Gold has broken out and above $1,000 and 4 figure Gold is becoming "comfortable" and "normal". The $700-$1,000 base took 3 years or so of "grinding". It was during this grinding period that I believe the shorts were reversed. What would stop the bullion banks from selling "paper Gold" under one corporation while accumulating physical in another? So once you are "fully loaded" on the long side, oops the short side just defaults and the corporate shell that was short just defaults and closes up shop. Pretty good game huh?

It will be interesting to see whether talk of a new "Gold standard" starts to spread and gain traction. I suspect it will at the behest of "the owners". The "owners" as they like to call themselves have been behind every and all important events for 300 years or more. Short squeezes, bubbles, market crashes, wars, etc., big and in the know money have been behind all of these for hundreds of years. If the media begins to "get behind" the metals, you will know that they do so with consent from the "owners".

As I have written about numerous times, THIS is for all the marbles. THIS is for ALL the global wealth and power! THIS will be the greatest transfer of wealth and become the greatest concentration of wealth in all of recorded history. I say "concentration" of wealth because compared to total "global liquidity", physical bullion is not even a pimple on an elephants ass. The mining sector is even far smaller. Once the short squeeze begins, good luck getting in on the long side! The old saying "bull markets try to buck off as many participants as possible" is very true. Can you figure out why? I believe the "markup phase" will occur while markets are closed. How better to allow "financial survival" to as few "paper refugees" as possible?

I know this piece sounds somewhat "conspiratorialist" or a bit "science fiction", but so was talk about the Dollar losing it's reserve status before it was fashionable. Heck I can even remember being laughed at for talking about $600 Gold. In retrospect, $600 Gold was laughable! Regards, Bill H.end

FOFOA said...

True or false?

"On a side issue: have you noticed that there is no word on the sale of the 403 tonnes of IMF gold. Do you know why? Because the Chinese were informed that the gold is gone or encumbered."

Anonymous said...

But our famous Dr. Roubini said: Big Crash Coming, Gold not Good:

Roubini: I don’t believe in gold. Gold can go up for only two reasons. [One is] inflation, and we are in a world where there are massive amounts of deflation because of a glut of capacity, and demand is weak, and there’s slack in the labor markets with unemployment peeking above 10 percent in all the advanced economies. So there’s no inflation, and there’s not going to be for the time being.

The only other case in which gold can go higher with deflation is if you have Armageddon, if you have another depression. But we’ve avoided that tail risk as well. So all the gold bugs who say gold is going to go to $1,500, $2,000, they’re just speaking nonsense. Without inflation, or without a depression, there’s nowhere for gold to go. Yeah, it can go above $1,000, but it can’t move up 20-30 percent unless we end up in a world of inflation or another depression. I don’t see either of those being likely for the time being. Maybe three or four years from now, yes. But not anytime soon.

Anonymous said...

So was it inflation or Armageddon that took gold from $250 to $1050 in 8 years? What annual inflation rate does that work out to?

Roubini is a tool. A Larry Summers puppet! Roubini is in charge of the Dept. of Doom-n-Gloom Perception Management.

Best not to give him any more airtime than he already has.

Anonymous said...

I often wonder where Roubini has his money....i find him arrogant and loving the fact people want to know what he thinks....

He just seems like too many uni professors to me...

FOFOA said...

Where's Roubini's money you ask?

Summers Was Paid $5.2 Million in Past Year by Hedge Fund; Owned "Asset" in Nouriel Roubini Firm

"Probably the most curious item on the disclosure form is that Summers appears to have owned stock in Nouriel Roubini's firm Roubini Global Economics. Summers shows that before he joined the White House, he sold an asset in Roubini Global Economics for a capital gain of between $15,000 and $50,000. This strongly suggests that Summers had an equity position in the firm. The form also shows that he was an advisor to the board of Nouriel's RGE Monitor and that he recieved advisory board compensation of $147,500 from Roubini Global Economics."

Are those puppet strings I see?

Anonymous said...

Roubini's a SHILL !

Martijn said...

If the debt-slave quits, the value illusion is gone!
That is a rather accurate analysis.

Anonymous said...

Pull all your money out of the banks this weekend, and buy gold! Lets get this collapse going already!

Pailu said...

Well I understand why it would be important to own physical bullion, but what is your opinion of services such as that physically store your gold, using independent audits for verification?

Anonymous said...

when buying gold, what types of gold are the best ones? gold bar or gold coin. i heard you could legally take the coins outside of the border. so i guess gold coins would be more favorable for holding? but they are usually 30 dollars more expensive per ounce than bars.

thanks for inputs.

Anonymous said...

Ah yes, the GoldMoney.

So, how is it different from a Gold Mine Stock? What do you think, Mr. Turk is going to do, when he sees US Army rolling up to his warehouse in Channel Islands, to show him the toilet paper stating that president Obama has declared all gold to be taken to the Fort Knox, in the interest of the survival of the nation? Is he going to shoot? Complain? To whom? The government of Channel Islands? Do they care?

Who is going to insist that some part of gold in Gold Money belongs to you, when big criminals come for it?

I prefer gold bars. I completely disagree with an opinion that gold coins are more familiar to people. Who are you kidding? People are more familiar with Judge Judy and Euro, then they are with gold coins or bars. I think the familiarity level will be equal after the event, between bars and coins. Moreover, nobody is going to care about "numismatic value". It's going to be just bullion, whether in coin shape, bars or in collections. What is going to matter is how much gold and of which purity do you have, not what shape it is. I am sure coin dealers are scam, but I give them that coins are harder to counterfeit.

Learn gold basics. Bars carry the least amount of premium today, meaning that they are going to appreciate the most. Coins will lose. Beauty be damned when you're hungry.

Besides, you are most likely to be smelting your coins soon, because you'd want to get out of the country. But, while you can do it now without smelting, you won't, such is the human nature. So, don't break your heart smelting beautiful coins, just get the value.

Anonymous said...

@Anonymous (October 24, 2009 9:54 AM): Why would you need to melt coins to get out of the country?

Anonymous said...

Is it just me or do others have a "beware the ides of march" feeling with all this chatter about 10/25-26. See sheila bair release on somethings up lads and lasses... its not as if we have not been warned. tungsten-alchemy, bullion audits, lights blinking red now.tighten shoulder starps now. look for first teetering domino with "event" in pak-iran monday morning. thats my bet.

Anonymous said...

Good article by Julian Phillips:
Why the Rise in the Gold Price is Different this Time

Anonymous said...

@Anonymous (October 24, 2009 2:16 PM):

Because, once it is clear that gold is the only game, then the government would want your gold. Now, weather they will confiscate gold or not from citizens is one thing, but they will certainly confiscate from those trying to skip the pain session by leaving. Capital controls do not bother majority because it is a very small minority that will even know about them.

So, you will melt your coins and bars, because you would want to change shape, say make bolts and nuts.

Again, you can take it out now, but people just don't act in anticipation. One has to be "totally out there" to act with such a decisiveness.


Anonymous said...


i store my gold in bank safety deposit box. in case of a bank run, is my gold still safe? can i assess them?

thanks for any info.

Anonymous said...

Emergeancy law ?????

Monday EVENT?

Any idea FOFOA?

Anonymous said...

Oct. 23 (Bloomberg) -- Forty years ago, the U.S. government said the $100 bill would be the highest-denomination note. With the Federal Reserve now trying to print its way out of the financial crisis, it may be time to revisit that decision...

Anonymous said...

@Anonymous October 24, 2009 4:25 PM:

Absolutely NOT safe.

In 1933, FDR closed banks for "the holiday". He sent out government officials to each and every bank. With bank managers as accomplices, these officials opened EVERY safe deposit box, took out gold, and replaced it with paper money at $20.62 dollars per ounce. Right after he was done stealing, FDR devalued dollar to $35 dollars per ounce.

So, a safe deposit box is safe, but only for as long as the government wants it to be safe. We know by experience that our government has absolutely no problem expropriating property of it's citizens.


Pailu said...

Um, yeah, but that was on US soil. So think again.

Anonymous said...

At what stage will people say -

Gold did not go to the Moon?

How will you know the Bullion Bet did not work out?

What if Gold stays range bound between $1000 and $1250 for twenty years?

Anonymous said...

Gold "Nuts and Bolts" Brilliant!

Anonymous said...

"What if Gold stays range bound between $1000 and $1250 for twenty years?"

You obviously dont understand how broken the system is at this point. Try reading,, FOFOA, Rob Kirby, Ty Andros, Jim Willie, and Chris Martenson for a few days and you will start to get a better idea of how close this system is to collapse. Its only the sheeple's "HOPE" for change thats holding the empire together now. And that hope is fading fast.


Anonymous said...

I bought 1/10 oz coins and one gram bars so I could eat them to move them from country to country easier if need be. But making nuts and bolts is way better!

Anonymous said...

Sinclair on Roubini:
Many in the gold family have their shorts in a knot concerning an article quoting Professor Roubini that unless we get extreme inflation or extreme deflation those like myself who say gold is going to $1224, $1650 and on to Alf’s numbers are wrong.

Professor Roubini admits that he has never favored gold which means he did not nor would he have owned it at any price.

Professor Roubini did not mention gold’s role as a currency nor its relationship to the US dollar.

Professor Roubini’s interview did not address the fact that extreme currency inflation has occurred in monetary history while debt was failing. That is the definition of hyperinflation, a currency event that will drive the gold price much higher than even I anticipate.

Museice said...

Gold Mining Company stocks still seems like a safe place for capital investment. Jim Sinclair thinks so. I like this from BullionBullsCanada "One question that should be asked is, if you invest in mining shares and there is a currency collapse, what would you sell them for? The answer may be gold, silver or the new multi country gold backed currency (Islamo? Slamo?) being proposed to replace the $US. At one point the mining shares may even pay dividends in gold & silver.

I can’t say I’m a Nostradamus fan because I find a lot of the predictions are vague and subject to interpretation. I find this one pretty clear though.

Century 8 28

The copies of gold and silver inflated, which after the theft were thrown into the lake, at the discovery that all is exhausted and dissipated by the debt. All scrips and bonds will be wiped out."

Going all in to physical leaves no wiggle room. The Dollar loses another 80-90% of it's value but it is still a Dollar. Unless we go to something like the 'Amero' stocks priced in Dollars would still represent the value of gold. Perhaps?

Anonymous said...

My feeling about Roubini is that he is a foolish math scholar. He accepts the axiom that something can be made from nothing. But when he spends a day or two in calculations, he sees a big problem. And yet, his sheepish acceptance of initial dogmas, will not allow him to realise that the axiom is wrong.

I have heard him saying that his best solution is "more government regulations". The man is a fool, as far as common sense goes.

Anonymous said...

"What if Gold stays range bound between $1000 and $1250 for twenty years?"

If this is your question, then you're in a wrong place. Why?

Because, your asking that shows that the price range is theoretically acceptable to you. This, in turn, means that you don't understand the reason we are all ended up here, amongst many other similar grouping points.

In the near future,you will have to make keystone decisions, without any help from internet. You're not ready. You will hurt yourself.

If you still want to be in this game, and not hurt your own self, then you'd try to grasp the idea of why the change. If you don't see it, then hey may-be you're right, and don't play with gold. No one can be absolutely certain, we can be just crazy, and it would fit well with the fact that there are so few of us.

The way I see it myself is that the fraud has been committed, and as it is being discovered, amends will have to be made. As simple as that.

The fraud? Total quantity of mined gold must be equal in purchasing power to the total quantity of wealth produced.

It isn't. So, it will be amended as soon as the fraud is clear. It will be amended by making the equation true. Because the current situation is that gold is only able to purchase a tiny portion of wealth produced, then to make the equation true, we will have to revalue gold up and/or wealth down. The ratio of inequality should suggest a forecast of how much revaluation must happen before the fraud is erased.

The fraudsters keep repeating an interesting point: There is noway near enough gold for the world to use it as money. There is a lot of wight in this admission, think about it.

FOFOA said...

Gold Price to reach $1,250/oz 'by the end of the year'
Sunday 25th October 2009
"The head of a New Jersey-based brokerage firm has suggested that Gold Prices could reach as high as $1,250 per ounce by the end of the year, Bloomberg reports."

Harry Schultz (HSL 673 Oct 25, 2009):
"I’m getting whispers from various sources hinting that buying physical gold may soon become almost impossible."

Museice said...


Gold becomes the 'Money'.
There will be a great demand for this 'Money' so who mines it? If capitalism still exists then mining companies will sell stocks and these stocks will rise in value. We won't stop mining for gold so if there are no stocks then what? Every mining company is state owned? All stocks in mining companies privately held just 'poof' away into nothingness? Every country in the world nationalizes every gold & silver mine?

FOFOA said...

Hello Muse,

If gold becomes important enough in the store of value function of our modern, common concept of money, then yes, gold mining will definitely get the close attention of the hungry collective. One of two things will likely happen. 1) The gold mines will be determined to be a national treasure, an underground store of wealth belonging to the collective. This may mean the nationalization of the mines. As GM became Government Motors, GG may be come Government Gold (so to speak). 2) The gold miners will remain privately owned and will be viewed by the collective as bringing "new wealth" into existence. As such, this "new wealth" will be taxed unlike anything else. Name your tax rate... 9[ ]%?

Mines are already regulated. You need permission from the government to mine, even today. This makes it only a small step to whatever the collective decides to do with the mines once the planet declares gold to be the most important wealth reserve. Mines are merely deeded land, and the collective has this fetish called "Eminent domain", when it deems something is "in the public interest".

"All stocks in mining companies privately held just 'poof' away into nothingness?"

Barrick is not the only miner that has gotten itself into a precarious position. When you own the stock, you own shares of the corporate shell. It is very possible that corporate shell has a NEGATIVE net value when you factor in the debt. You may find that you (as a shareholder) own the DEBT and that the mining company's creditors (banksters) will take possession of the land. Kind of like a mafia loan shark "busts out" a business. They loan your business "development money" and then when you can't pay, they take your assets and shut down the joint. "Busting out the Joint" The banksters may do this to "hedged" miners leaving the shareholders high and dry.

Another possibility is that when the gov't takes over the mining operation it "settles" with the shareholders. Kind of like they "settled" with the GM shareholders and bondholders. And you know that your end of the "settlement" will be in paper, not gold.

So yes, I guess 'poof' may turn out to be an appropriate word.

For these reasons I consider the miners to be speculative bets only.


Anonymous said...

Anon 12:05-

Anonymous said...

Look its this easy-

Take all your money out of your bank and buy gold, everyone is doing it. Do you really want to be the last one to this party?

Lets destroy the paper money fraudsters now!

Anonymous said...

A like this blog but everyone seems convinced Gold will go to $10,000 to $80,000 in a seems like a shill convention at times.

Anonymous said...

Anon 12:37- Im assuming youre not trolling so Im going to ask you some questions. What is an instant to you? And why wont it go to $100,000,000,000,000,000,000,000,000 in whatever you consider an instant? Do you not understand derivitives? Do you not understand the psychology of human panic?

Is 12 days an instant for you?

Anonymous said...

Anon 12:37 - You need to read more carefully. It's $10,000 to $100,000 in today's purchasing power... today's dollars! An increase somewhere between (in the middle of) 1 and 2 orders of magnitude from today's ridiculous "paper" price.

From there it's up to our aerial engineers, Helicopter Ben and his spending buddy Obama how far it goes!

Cheers! Hope your investments do well!

Anonymous said...

Most of my savings are in Gold and Silver bullion -

my question is what is the X factor in all of this?

whats gonna happen to stop this bullion moon launch?

The sceptic in me is always aroused when people start telling me - this is a sure thing - gonna happen without a doubt.....

Most short backed favourites with all the form horse racing only come in 1\3 of the time - if that!

even the thinnest pancake has two sides......

at least M Maloney says - 'Hey if i'm wrong i will still have bullion...always worth something'.

Anonymous said...

Anon 10:19

Yes, there will be surprises along the way. And the way maybe a bit longer than an instant. But that is the adventure of this! Live life moraly and for the adventure not for money.

There is nothing moral or adventurous about our paper money system. Unless one starts burning banks down to the ground, then I guess that would be moral and adventurous!

I hate when I contradict myself!

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