Thursday, December 17, 2009

Open Forum


DiverCity said...

Another interesting Moldbug rumination:

costata said...


I dropped in here after reading that Moldbug post.

Do you get the feeling that another crisis is close at hand?

If so, what do you think will be the next shoe to drop?

SatyaPranava said...

costata @ diver, it's funny, because that Sethi dude, doesn't look very african-american at all :)

re: the next shoe to drop, if the recent tea leaves (and Jim willie) are correct, it seems that the weaker economies in the EU might be the next shoe to drop, though at the very least, it should be very interesting come tax-season time, but i think way too much will happen before then.

anyway, i digress. i was working on this when i guess this forum popped up. but basically, it's as follows:

I think it’s important that FOFOA has been more open to tools other than gold, despite his preference for keeping this blog very narrow. There are many other tools that are necessary for survival, and very different scenarios in each country throughout the globe. I am also in that 40-60 on freegold, at least in the next 10 years. As someone who at times wears the historian hat, change can take quite a long time. Even for those whose vision is dominated by Machiavellian and Hegelian dynamics. Parenthetically, I don’t much care for the term “conspiracy” as those who use it—and mean it--show their lack of understanding of historical power, of social stratification, and often, the moral turpitude to confront such a reality.

But all of us have limited vision, the reason why coming to a group such as this is so important. Ideas are powerful, visceral, and evoke reflection, changes in attitude, and often in behavior. So keep asking these tough questions, even if FOFOA is either too unconcerned with the gravity of them for this forum. Ultimately, they are reflections of our own fears.

I mentioned time above. For I quite agree that most everything that FOFOA here delineates is very true. Even if it comes to a global dictatorship, it will necessarily fall, as all empires do, of their own, weight, greed, lack of foresight, and lack of courage to set things more sustainable. When that happens, it will likely be those who adapt to a more sustainable lifestyle (think of all the cultures who brought humanity into the last 10,000 years). Gold may, in that future be the storage of wealth, par excellence. Then again, so may something else, depending on how factors change (salt, cooking oil, stone, metals, wood, etc). But for now, in this realm, it is gold.

In considering this post, it made me reflect on the words of German historian Hannah Arendt, and with her I’ll close:

"Before they seize power and establish a world according to their doctrines, totalitarian movements conjure up a lying world of consistency which is more adequate to the needs of the human mind than reality itself; in which, through sheer imagination, uprooted masses can feel at home and are spared the never-ending shocks which real life and real experiences deal to human beings and their expectations. The force possessed by totalitarian propaganda--before the movements have the power to drop iron curtains to prevent anyone's disturbing, by the slightest reality, the gruesome quiet of an entirely imaginary world--lies in its ability to shut the masses off from the real world."

Best of luck everyone!


costata said...


Have you read Eric de Carbonnel's latest post?

If this impending food crisis is likely then that could be a true black swan.

I have not read anything about this on other sites that are normally good at spotting emerging trends.

This could set off widespread and massive civil unrest.

Link here for anyone who is not familiar with EDC:

SatyaPranava said...

ED has been documenting potential famine for a while now. it seems like it might very well be part of the perfect storm a coming. then again there are reasons i doubt it as well. but if i had to put money on it, i'd be betting many on earth will go quite hungry if they depend on the system to distribute food to them.

but no, i haven't read his most recent...but i can imagine what it looks like :) (dozens and dozens of snippets from journals all over the world and esp in the US showing what a disaster this year's crop is and that we have no stored grains anymore, and that food prices are rising dramatically while the value of a dollar is dropping precipitously. i'm going to go read, but is that about what he says?

bless him for staying so on top of this. hence the reason to have lots of food stored is quite important.


Martijn said...

Shoes to drop:
-Commercial real estate
-Credit card debt
-More bank failures
-Sovereign debt (although that will take some time)
-Food inflation
-Rising unemployment
-Municipal debts (!)
-And then some

Green shoots so far:
-Rising stock markets (for what it's worth)

This does not constitute a good outlook by far. I have been looking for positive economic news, but so far I have not been able to find much

Martijn said...

And one more shoe:

China faces crash scenario

It's from Mish, so do not feel obliged to click if you hate the guy.

Martijn said...

Nice graph on gold COT.

DiverCity said...


I agree with Martijn about the shoes. Another would be Greece and other so-called PIIGS countries of Europe:

And here's an interesting take on the purchase of US sovereign in the form of some comments by a (former?) BOChina official:

costata said...

Thanks Martijn,

So many shoes so many politicians with feet of clay.


EDC's article is along the lines that you described.


I don't have a problem with Mish. Although I don't agree with a lot of his conclusions I appreciate the volume of data he puts out and the wide range of subject matter he covers.

IMO he also focuses on the right issue - debt.

Re: China
I respect Jim Sinclair but some of his adulation of the Chinese is, word for word, what they said about the Japanese "miracle" in the 1980s eg. "they plan for decades/centuries while we in the West think in months/years" etc.

I can easily believe that a crash is possible (likely?) in China.

Ender said...

What is more important holding gold or holding the right to print the local currency? (The answer is fundamental in the Freegold system.)

Gody, After rereading a number of your posts, I do believe that we are seeing things in a similar light. The only real point of contention seems to be will the little guy benefit from the change in the system? If I’m reading your posts correctly, the little guy is not needed, thus those running the system will not ‘share in the spoils’ of the conversion.

Ultimately, I would contend that the little guy is a key component and that the little guy doesn’t really benefit as much as you think he would.

The number one reason why bankers will not provide settlement themselves (using their own gold) is because they will never be able to buy it back. Once it is widely known (experienced) that currencies should not be held for any length of time, all will see the value of gold. That recognition will make gold dear to anyone holding it.

The idea of confiscation from the little guy in order to provide gold as settlement is also a logistical nightmare. Sure, some gold would be gathered, but what value does it hold for the world if there is no market to prove its value? Sure, there could be a governmental settlement price, but every time the government sets the price of gold the currency still fails in time.

The number one reason why the little guy is needed in the Freegold System is that there must be an Open Public Spot market that will set the price of gold in any given currency. The central banker cares about the currency and that his gold reserve is never lost. Its function is to give credibility to the currency (which is most important) and to function as an asset of last resort (upon utter failure). That central banker will not use his gold for the settlement of public debt. The public will have to settle its own debt.

If you look around the world, you will see locations that are moving closer to functioning this way. The taxes set on converting currency into gold is being reduced and even some banks are stepping up as a supply for gold in small quantities. The largest part of the gold held in the world is held by man – not central banks.

The second point FOFOA made in the “December 17, 2009 4:05 PM ” post hits on the key point. But to fully understand what is said there one has to see that central banks do not want gold as money. They want gold as a wealth reserve asset. The central bank’s job is price stability and high employment. Gold gets in the way of performing this function for the government if it is money.

I also agree that most of the little guys will not benefit from the transition into the Freegold system. The ones that are in debt will find the debt still exists and is just as hard to service. Those that have saved in gold, will appreciate the gain in value as ‘man’ rediscovers the wealth aspect of gold.

In the end, we will all have to deal with manmade currencies that are managed with different levels of success. And, if the CB doesn’t manage the currency well enough to empower a robust economy, all the little guys will end up poorer. Yet, the savers will find ever growing demand for their savings.

Unknown said...


I appreciate a honest person; and you have been honest.

Now that we do see each others point of contention, let us sit and watch how it plays out.

From my personal view, I believe that there is a one world spiritual and economic system coming. I had never quite seen how it would have been accomplished, yet spiritually I knew it was coming.

Since learning about freegold (thank you FOFOA, Ender and the rest), I can see the potential how (freegold), the system might be.

SatyaPranava said...

@Ender: i know it was a rhetorical question, but I think Greenspan a few months back answered that very question quite astutely:

"Rising prices of precious metals and other commodities are an indication of a very early stage of an endeavor to move away from paper currencies...What is fascinating is the extent to which gold still holds reign over the financial system as the ultimate source of payment."

-Alan Greenspan, 9 Sep 2009

Martijn said...


I need to some time for answering to your replies, but thanks anyway!

In the meantime: new Leap2020 new tipping point next spring.

Martijn said...

At the same time, the general context of the bankruptcy of an increasing number of states and other authorities (regions, provinces, federal states) will entail a double paradoxical event of increasing interest rates and the flight out of currencies towards gold.

In my opinion municipal debt might really surprise people. A house of cards needs only a bit of instability in order to collapse, and municipal debt do not come across as very stable to me.

We've seen it before: the market needs not much more than a few sparks of instability to turn from greed to fear.

I have recently added to my gold position again. As I see some risk in holding physical I do try to time the market a bit, albeit on the safe side. And as indicated before, I am under the impression that I will be able to beat a sufficient number of market participants in order to make it across in one piece.

I had been invested in gold mines since February and so far my average return of 70 percent would allow me to acquire more physical than a year ago.

Btw I am not claiming to have been smart or anything, some fool betting his shirt on red or black in a casino and coming out a winner might claim the same. These claims become of value only after participating and winning at least 10 years in a row, which I do not intend to to (as it would expose me to the risk of loosing as well).

I continue to look for convincing evidence that proves me (or us) wrong, and should I find any I will be the first to sell my gold, but as long as I do not find any I will continue my shift out of paper until I am 100 percent in gold.

So far I believe I have a sufficient percentage of my holdings in gold maintain my wealth and then some, should paper really collapse.

Martijn said...

For those that like a bit of philosophy in the approach of Christmas: here is a rather beautiful animation of our earth and its surroundings.

Martijn said...

Iraq, Iran in Standoff over Oil Well

This could be bigger than it seems...

Martijn said...

Nice going: Harvard Swaps Are So Toxic Even Summers Won’t Explain

Perhaps another increase in tuition fees can sort this problem out.

Would that be deflationary?


oldinvestor said...

I have been a commercial wheat farmer my whole life in north central Montana and come from many generations of farmers.

As far as the site by Eric at, there are no counties in Montana that have had crop failures or are designated disaster areas as he states. I think this site has zero credibility.

Look below to see a recent market report from a respected market analyst, one who is not connected with the government.

Wheat Inundated with Selling
December 18, 2009
 Name: Brian Henry
Company: Archer Financial Services
 Years Trading: 15

The pressure on the wheat market continues.  The overbearing burden on the wheat market is the massive global supply of wheat.

The strengthening of the dollar, which limited fund buying initially, has resulted in fund selling.  Each push higher in the dollar triggers additional fund selling.  Until today, the March contract in Chicago had been supported by the 100 day moving average of 527.  That level was breeched today, which resulted in pretty heavy selling.  My initial low level mark of 515 was also breeched today.  The new objective is most likely 500.  The trade will likely see some follow through selling going into Friday’s trade.  If follow through selling does not materialize, the market may see a modest short covering correction.

The lower futures prices for wheat are being offset by the higher dollar.  As a result, lower futures prices have done little to increase the competitiveness of US wheat on the global market.  Soft wheat sales remain very slow as EU and Black Sea wheat is considerably cheaper.  The hard wheat classes continue to do some business, but sales are at a slow pace.  Generally, the hard wheat trade is going to routine Pacific Rim customers.  The USDA should be able to reduce export expectations, and increase the carry out, unless the pace of exports increases considerably.  Increased exports will require lower prices.

Regardless of the market you are positioned in, focus on the March contract in Chicago.  I would give this market a chance to test the $5.00 level.  On Friday, I am going to take a look at taking profits on the puts and put spreads that my customers own.  We may be a little early, but it never hurts to take profits.  I will be more aggressive taking profits on short calls or short futures positions.  I am not a wheat bull by any stretch, but I am inclined to take profits on this break.  A sharp short covering rally, dollar driven or not could be very detrimental to our positions as we move towards the first of the year.  

If you would like more information on grain futures trading or have any questions about this article, please contact Brian Henry at or call him at 1.877.377.7965.

costata said...


The excerpt from the December 16, Leap2020 piece was interesting for several reasons.

Did you note their comments about the impact of sovereign credit risk in Eastern Europe etc on the EU and the Euro? They assert that it will be far less than claimed by the Anglo-American media.

If they are correct in this it would seem that the economic warfare is proceeding to a new level.

FWIW I tend to think of Freegold as a project of European "Giants" versus Anglo-American "Giants". Of course, things are rarely so clear cut but it would explain some of the events that are unfolding IMO.

JR said...


Does anyone have any input on what is reflected when one looks at gold futures:(

Why or why not would these be predictive as to future prices?

I have read FOFOA here:, any other links on understanding hat the gold futures market, in particular storage costs, lease rates and what the market "normally" looks or has looked like?

Thanks for any comments

SatyaPranava said...

richard T. thanks for the contrarian perspective. always appreciated. i'm not expert enough in those fields to pass to strong a judgment..but contained in there is contradiction, which is my favorite kind of conundrum :) (if i may be alliterative!).


costata said...

Richart T,

Thank you for sharing your firsthand knowledge.

If Eric de Carbonnel is so far off-base I wonder what motivates him. Hysteria? Ideology? Does he profit in some way from spreading false information?


I note that Harvey Organ (see link in right side bar) is claiming that there is a run on the bullion banks by allocated gold customers.


"Why or why not would these be predictive as to future prices?"

Organisations such as GATA and many individual market analysts believe that the bullion banks and commercial traders manipulate the gold futures market by naked short selling gold.

Until recently most traders did not demand delivery on these contracts ie. they were only interested in currency settlement. If true, this manipulation would produce false price signals that did not reflect physical supply and demand.

Does that answer your question?

PS If the report from Harvey Organ is true we may soon know who is "swimming without their shorts on" as Warren Buffet once remarked.

Anonymous said...

Hi JR:-
Futures prices are derivatives based on the Spot price of Gold ...which is in itself largely a derivative of the "active month Contract price" or minus a monetary consideration based on the LIBOR/GOFO/Lease Rate continuum ;-)
Now ...wouldn't it be a lot easier if we just went up to the counter and said "I'll have that 100 Oz's right NOW! ...and here's my loot.

In essence, that is the difference between the current set of circumstances ...and what might be in store with FreeGold. IMHO.

Anonymous said...

Whatsmore JR:- you appear to be alluding to the "Backwardation" Gold is flirting with at present?
A similar pronounced set of circumstances presented themselves last year about this time.
Gold is largely a hostage to the Global Paper Circus JR ...and when we get a tendency for IR's to go negative, this is reflected in the various "futures" prices of Au ...particularly in the Cash/Front Month equation.
Again ...IMHO.

costata said...


I was just at your blog reading some of your recent posts.

Are you thinking that silver is about to make a run ahead of gold before falling over at month end?

Or do you see the ratio holding in the 50s?

Anonymous said...

costata -
Past delivery month price performances suggest Au runs out of puff circa 25th ...whereas Ag goes the full distance. I'm not sure why.
As we're in a dual DM ...we might expect to see Au struggle against Ag until months-end.
The Ratio will identify whether this occurs ...this month irrespective of individual $-prices.
I'm way overweight Ag I might add, so it may have a bit to do with wishful thinking C. ;-)

Unknown said...

US pensions go bust, gold crashes, China flops, Bunds soar, predicts Saxo, By Ambrose Evans-Pritchard

DiverCity said...

To me it's scary for the UN to issue a "public option world savings currency," even if it's gold.

FOFOA, do you have any thoughts on this? Does this favor freegold? It would seem to me that it does given the notion that it's a "savings currency."

Nevertheless, the idea of the UN inserting itself into wealth savings with its one-worldish and globalist framework is disconcerting.

DiverCity said...

Interesting predictions, Jimmy. The headline by AEP is a little misleading with respect to gold. Saxo predicts gold at $870 in 2010 but up to $1,500 within three years. I'd like to see it at $870 so I could buy more.

@mortymer001 said...

Ender, once you were wandering what India can offer what others do not have. Isn´t it many natives who could G4C to cover the transfer of physical (all or part of it) from IMF to Comex/LBMA?
/Just speculation but a nice one./

Unknown said...

@ Richard T;

"I have been a commercial wheat farmer my whole life in north central Montana and come from many generations of farmers.

As far as the site by Eric at, there are no counties in Montana that have had crop failures or are designated disaster areas as he states. I think this site has zero credibility."

Well Richard T., your assertions trouble me because they are flatly contradicted by the USDA website (cited by EDC) here;

This USDA site lists numerous counties in MT that have been designated as "primary natural disaster areas" due to drought and/or pest infestation etc. Many are in North Central MT, the area you claim to know so well.

The MT counties designated as disaster areas include Toole, valley, garfield, lake, sanders, etc. See USDA site for complete list. They are also represented on the map posted by EDC.

I lack your much vaunted expertise and rich agricultural geneaology, but have found it simple to suggest that it is in fact you who have "zero credibility!"

Indenture said...

@Richard T:

I agree with 'idi' (although I don't know if you have "zero credibility". Perhaps a Two or Three). I also did the research and found Eric to be correct.

Could you call some of your friends in other parts of Montana to see how they are faring?

and "The Next Shoe To Drop"... There are so many to choose from but Food is so vitally important I can see this simple imbalance between supply and demand crippling the world and causing the cascade of all the other 'black swan' events. Governments can print money to solve todays problems but no one can magically make nourishment appear. If there was a food shortage Eric describes a nasty cycle of effects.

I can see Freegold becoming almost necessary in this scenario.

Tdfxman said...

A couple of questions for the group.

1) Can someone tell me specifically who the "factions are"?
No one seems to want to agree that there is one global group in control. So instead of simply disagreeing, please tell us who is matching up against each other. And if there are more than one side, please tell the board what each side wants. Does one want freegold and the other does not?

2) What is more likely? A formal currency devaluation or hyper-inflation here in the US. What are the guesses on when?

I seem to think after Copenhagen that this might take longer to play out than I might have thought.

costata said...


Thanks for the feedback. We have a foot in both camps with an emphasis on the yellow metal. Though we are happy to buy silver when the ratio looks favourable.

Anonymous said...

costata: -
If Ag can leave Dec with the Ratio at 5 "anything" I'll be as happy as a lark.

Unknown said...

@Richard T:

In august, I went to Argentina and I saw many drought zones there. It's really disaster. Even the best place (Tucuman) in Argentina is going to be a disaster zone...

Only Uruguay looks okay, because it has lot of water in his area (for feedcattles, etc.)...

Now my fear is oversupply of foodstamps in periods of foodshortage. It's paper, backed by food... (like paper gold)

Midnight in the food-stamp economy

And Eric got lots of credibility... His research is one of the best I've ever seen...


Martijn said...


Did you note their comments about the impact of sovereign credit risk in Eastern Europe etc on the EU and the Euro? They assert that it will be far less than claimed by the Anglo-American media.

If they are correct in this it would seem that the economic warfare is proceeding to a new level.

Not really a new level I guess, but more of the same:

Coming now to Greece, we find a theme similar to what our team showed up in the GEAB N°33 in March 2009, when the press gave widespread publicity to the idea that Eastern Europe was going to lead the European banking system and the Euro into a major crisis. We have explained that this « news » was not based on anything credible and that it was only « a deliberate attempt on the part of Wall Street and the City to create the belief of a crack in the EU and instill the idea of « deadly » risk weighing on the Eurozone, in continually publishing false stories on the « banking risk from Eastern Europe » and trying to stigmatise a Eurozone cowardness compared to American or British « willful » measures. One of the objectives is also to try and turn international attention away from the increasing financial problems in New York and London, all with the purpose of weakening the European position on the eve of the G20 summit »...

...But with a country producing 2.5% of the Eurozone’s GDP (and 1.9% of the EU’s) we are far from a dangerous situation weighing on the single European currency and the Eurozone. By way of example, the California’s default (12% of US GDP) entails far more risks of destablisation of the Dollar and the American economy.

According to GEAB, the US have been trying to shift attention from their problems since the beginning of this crisis.

The real problem is the dollar I guess, as Sinclair seems to have correctly identified despite his timing being off.

Martijn said...

Off course one shouldn't forget that Leap2020 is based in Europe, but I do believe that in the end the core future problems will be the US (and, to a lesser extend, the UK).

So far I have still not been able to find much clues as to why gold would decline, so I'm still guessing it won't.

Martijn said...

Another deflationary message?

G-20 officials vow to continue stimulus input.

Unknown said...

Top 10 predictions 2010, by National Inflation Association An easy read for dummies... (Watch out, they also predict foodshortages...)

And what I predicted few months ago, they does also predict it! (Not to be proud on the same prediction, only I hope I would be REALLY wrong... But our human history reveals it: War, plundering, protests, rapes, killing for fun,... during hyperinflation... Be aware...)

Now, I think there is another good bet: Cacao... Hot tip of me... Do your homework and buy enough chocolatebars for 2 years... :-) (buy also enough coffee, if you like it...)


Martijn said...

Good links Jimmy.

As I indicated above I tend to agree with LEAP2020 that the source of most trouble lies in the US (and UK).

Here we see Europe politically shifting away from the US and moving towards Russia.

The world really is reorienting, and financial reorientation might over time land in gold indeed.

Martijn said...

Here is some more showing that the US is losing influence.

Copenhagen showed us the new normal: the U.S. has lost influence, China plays spoiler, and tiny nations veto anything they don't like. Leslie H. Gelb says get used to it.

Unknown said...

Peru's gold rush sparks fears of ecological disaster, BBC News

Unknown said...

Thank you, Martijn, and I always read your posts/links... :-)

It makes my life easier to seek good informations... :-)

Unknown said...

And again some conspiracy, but this is good one:

The 1001 club

Unknown said...

Foodinflation India 20%, Youtube

Unknown said...

Now watch out: China says: World has not enough money more to buy US treasuries, Shanghai Daily

Unknown said...

more about foodshortage...

Martijn said...

I have said it before: municipal debt.

Sinclair is also noticing it I reckon.

Unknown said...

Genetic Modificated Wheat is on its way, Monsanto, Guardian

...and a survey released in February 2009 by the US national association of wheat growers found that more than three-quarters of US farmers wanted access to genetically engineered varieties with resistance to pests, disease, drought and frost. Such varieties are important as plant scientists and farmers continue to battle diseases such as leaf rust, the world's most common wheat disease, which can lead to yield loss of up to 20%. In Kansas, the heart of the US wheat belt, for example, leaf rust is the most significant pest, in 2007, it destroyed a shocking 14% of the wheat crop.

oldinvestor said...

I have been to the USDA web sit mentioned and you are absolutely right, there are a number of counties in Montana that have been recently designated natural disaster areas. That was certainly my mistake, as I was assessing the general crop year in Montana by the lack of reporting of crop problems in the local press, talking with farmers in areas I am familiar with, touring cropping areas, and general price movements. It is true that there has been a rash of designation of secretarial county disaster designations, much of them as recently as a few weeks or months ago, and I should have checked further.

But lets dig a little deeper into the real story. There were a total of 15 counties out of Montana’s 56 counties that were designated as primary disaster areas. Lets leave aside the fact that several of these were in the western third of the state that is mainly mountains and forests and have no significant agricultural production. However, there were a total of 25 additional counties that were so designated just because they were “contiguous” counties. In other words, just because a county touched a county that was a disaster county, it was also designated a disaster area. This makes the problem seem much worse than it is.

I have called several farmers that I know in some of these so-called “contiguous” counties. They uniformly report that they and the rest of their county had good crops. Next I turned to the counties that actually did request the primary disaster designation. This is a politically driven process the starts with a few producers calling their county commissioners and requesting access to the big new pot of money out there, low interest government loans of 3.7% or so. Then the Co. Commissioners request designation from the Governor, who requests it from the USDA. Any one crop with a reduction of 30% yield will qualify. Govt agencies are real anxious to shovel money out the door any way they can these days, as we all know.

I talked to Farm Service Administration personnel and County Commissioners from a number of the Primary designated counties. Most of them indicated that on the whole, most areas of their counties had a normal crop. There were enough of a reduction in one crop to qualify for the designation, so they went ahead and applied for it.

The state as a whole looks bad when all the total counties are shown on a map, but the reality is that there really is not that bad a situation out there, and I can only think that this situation applies to a great number of other states out there, though not all.

Folks, it is just the reality of farming that production is spotty. I am sure that all the horror stories on the site in question are all true. I have a number of times had very good crops, but 2 miles away, they had a crop failure. To all those stories posted about this , that or the other crop failure or shortage, I say, so what? You will find a vast number of these stories posed every year about local conditions.. That is just the nature of agriculture. It is the world production that is important.

What I want to do is not focus on the minutia, but the bigger picture. That picture is show best by general price movements. Go pull up some charts for corn, wheat or soybeans. They all show a steep price drop since the early fall. Rice is up recently, but it is way way down from its highs in 2007-8 These are world wide markets and reflect the trading of thousands of producers and consumers all over the world.

It is not my intention to get embroiled in the issue of whether one site is better or not. . What I am most interested in is the central problem we face of money creation and economic and investment strategies to deal with it.

I am not saying that it is not theoretically possible that at some point population growth will put a strain on food production, but we are a long way from that point now.

Folks can worry about running out of food if they wish. I do not intend to do so, as I see it as a non-problem. We have plenty of the real kind.

Ender said...

@ mortymer

Can you expand on your speculation, I’m not sure I’m following what you have to say.

raptor said...

Very good observation/clue (thanks jimmy):

"because the US's shrinking current-account gap is reducing supply of dollars overseas"

Can someone elaborate how exactly this happen I mean the mechanics ? thanx!

Now watch out: China says: World has not enough money more to buy US treasuries, Shanghai Daily

IT is getting harder for governments to buy United States Treasuries because the US's shrinking current-account gap is reducing supply of dollars overseas, a Chinese central bank official said yesterday.

FOFOA said...

Raptor, basically this flow has slowed to a crawl or stopped at the same time as USG's needs have accelerated.

(Chart from Bondage or Freegold?)

Current Account - Wiki

Unknown said...

@Richard T; appreciate your dogged followup. Nevertheless, your data is derived solely from personal anecdotes, experience and contacts and must therefore be weighted accordingly. No references, no verifiable and objective data... just heresay in the legal sense.

You admitted that you were unaware of the USDA data when you lambasted the EDC/market skeptics analysis. Not that I believe the USDA necessarily. EDC has demonstrated the multiple internal USDA contradictions. But I do trust EDC's inferences of these disparate threads. They conform to what I glean from other sound and reliable sites. Check and cross-check everything these days.

We live in a topsy turvy world of mis/disinformation. We must navigate these ever-changing and treacherous shoals of perception of markets/agriculture/sovereign debt loads etc etc.

I have found EDC/market skeptics analysis to be sound up to now. Particularly on the financial and PM's front. Therefore I, for one, will give him the benefit of the doubt on his catastrophic agricultural predictions until someone successfully/verifiably refutes his thesis.

Ditto for john williams/shadowstats who has had a solid track record up to now. This should all start to unfold early (Q1/2) in 2010. So not long now to ajudge the accuracy of these differing forecasts.

SatyaPranava said...

@richard T:

one thing I think it's important to note is these food shortages don't necessitate any type of population pressure directly. This is because famine is largely a problem of politics, not economics. the problem in essence is one of distribution, in addition to what is grown, how it's grown, and where it is to be grown, in addition to what subsidies help tip that balance one way or another (i'm looking at you corn, wheat, and soy, as well as you, USDA, not to mention the BS ethanol issue).

The fact that this problem is not a technical or agricultural has been pretty well documented by dozens of esteemed researchers (Amartya Sen of Harvard in the late 70s/early 80s I believe did a great study on it).

so the way i see it, the concern isn't that it will create a real problem, but that it will give those who exert preferential influence on the markets to use this opportunity to drive up price, profits, taxes, and the like, while perpetuating shortages for political and economic motives.

raptor said...

Good read. The the guy explains why the Fed wont/cant increase the interest rates as Volker did in 80's ahead of the inflation to fight it.

In short it will have to incur loses on his long term paper.. billions of dollars.
And may be even more on the MBS bough trough the alphabet soup of programs.

costata said...

RichardT, idi, jimmy et al

Spirited debate. Thank you for the insights and the links.

FWIW One of the largest grain handlers (Grain Corp) in Australia just reported its' latest estimates for the wheat crop. The drought affected areas are dismal but the State of Victoria is headed for its' best crop in 3 years. So they suggest overall volumes will be equal to or higher than last year.

BTW I just finished reading an essay that suggested that the online community was creating "learning networks" and that these networks would ultimately frustrate the aims of those seeking absolute control.

IMHO these networks are evolving and the food shortage debate above is an example of this happening. Change we can believe in (for a change)?

BTW great links jimmy, thanks.

SatyaPranava said...

costata, can you post the link to that learning-networks essay? i'd love to have something like that for some of my masters work.

networks are hugely important. one of the weaknesses of the collective of us being so anonymous. TPTB use networking for all kinds of things...i've long that it's something we all need to do as well.


costata said...


"A couple of questions for the group."

I can only give you my humble perspective on these matters.

On the first question:

1) Can someone tell me specifically who the "factions are"?

I don't believe anyone of us can. Those of us who don't believe in a single consortium seeking one agenda use terms like "Giants" to describe parties with sufficient clout to move markets and influence Govt and whole countries. Speaking of "factions" helps us to conceptualise the apparent existence of competing agendas among TPTB.

"No one seems to want to agree that there is one global group in control."

Some here and elsewhere do believe that we are witnessing a project of one group of interests eg. Bilderberg, Illuminati, Rothschild, Rockefeller et al.

"Does one want freegold and the other does not?"

(tdfxman, have you been through the archives of material by FOFOA, FOA and Another on what FOFOA has termed Freegold?)

FWIW here is my chain of reasoning:

1. One of the predictions put forward in the archive is that there will be a separation of the "store of value" and "medium of exchange" functions of fiat currency.

2. Gold will be the highest value asset and "store of value" while fiat currency will be used purely for transactions.

3. The exchange rates will be determined relative to gold ie. the cross rates fiat-gold will disclose the exchange rate fiat-fiat.

4. The USD will cease to be the sole international reserve currency and it will not be replaced with any one currency such as the Euro.

5. The Euro was designed for the emergence of points 1, 2, 3 and 4.

Since the Euro project came out of Europe it might be inferred that the sponsors are European "Giants" and they are a "faction" that oppose any Giants who want USD hegemony to continue. I, for one, tend to believe that this could be the case.

"2) What is more likely? A formal currency devaluation or hyper-inflation here in the US. What are the guesses on when?"

IMO I think Jim Sinclair is right in saying that "hyper-inflation is a currency event" and not a monetary event like normal garden variety inflation.

I think most people would dismiss the notion of the US doing a formal default on their debt. For precisely this reason some people wonder if it WILL happen. Perhaps as an act of economic warfare.

The piece linked below discusses a default scenario and why someone might view it as a smart move by the Anglo-American "faction" of the "Giants" to shaft the Asian faction(s).

The Royal Scam

As to when, I can only offer another question. How long can this fragile system be held together?

costata said...


"costata, can you post the link to that learning-networks essay?"

My pleasure.

JR said...

Missing Canadian gold

More than $3 million in government gold was unwittingly sold off at a fraction of its value as refinery slag, while $8 million more was miscounted and never left the Royal Canadian Mint, the Crown corporation revealed today in a full accounting of how it lost track of a fortune in gold for a year.

A series of miscalculations and blunders in its gold refinery dating back to 2005 were responsible for 17,500 troy ounces of gold going missing from the mint's Sussex Drive inventory count last October, the mint announced in a 12-page report. That’s the equivalent of almost 44, 400-ounce bars and worth more than $20 million in today's prices.

The mint said a 14-month hunt to find out what happened to the precious metal now “fully accounts” for the missing gold, though it admits almost 3,500 ounces unwittingly sold off in slag to U.S. re-refiners will never be recovered.

JR said...

Thanks costata and Topaz!

Martijn said...

There is more on that Canadian gold. I read that their explanation still does not make a lot of sense and I've posted on it before.

Can't find the link now though...

Martijn said...

From a source some people don't like:

Emails on ridiculous salaries in public sector

Although these are only incidental cases I was quite stunned reading about the height of those salaries.

Martijn said...

Total US debt @ 557% GDP?

Deficits do not matter anymore?

We'll leave that one to time...

costata said...


Have you noticed that you are not flamed if you use euphemisms when referring to Mish? Sign of the times perhaps?

Regarding the salary and benefit/entitlement figures.

Astounding (to me FWIW).

Unknown said...

There may be Free Gold one day but not continues to get whacked...when will it end. Not soon I'm afraid.

Martijn said...


I wouldn't want to go that far. I guess the discussion on linking to him has been over and done with. I have taken the criticism into account and warn people in advance now. I did however continue to link once in a while as some of the content is relevant for our discussions and general understanding on market movements.

As for gold being whacked: that was to be expected. So far the shift from risk from the banking system towards the dollar and treasuries seems to work, and it does buy time.

As I've argued before we are witnessing inflation and deflation at the same time. The upper layers of Exter's pyramid are being destroyed/devalued by markets, which some take as deflation, while the bottom layers seem to increase in value somewhat (commodities, gold and even the dollar).

So far we are propping up the collapsing layers by changing accounting rules and shifting them towards the balances of the FDIC and Federal Reserve, while swapping dollars instead. We are trying to stretch the dollar layer to the same size as the higher derrivative/debt layers.

It will take more time for markets to figure this out and respond accordingly. I doubt that 2010 will bring a collapse already.

Inertial mass is the mass of an object measured by its resistance to acceleration.

The same holds for mass psychology where the dollar value is concerned. Changing a world wide perspective takes a while, but changing it is.

Gold will see more swings the next year. The paradigm of those buying it needs to be cleaned, the speculators need to be shaken out.

Sorry for the long post, I will try to be more concise and to the point when I have more time to concentrate.

Unknown said...

Egon Von Greyerz (Goldswitzerland, Matterhornassetmanagement) on CNBC

Unknown said...

Mint reveals how it lost a fortune in gold, Ian MacLeod

Unknown said...

Here the proof that mainstream economists are trained to fuck the uninformed people...

Even, it's explained on wikipedia...

Mainstream Economics, Chapter 8. The Critique of Neoclassical Economics and its Influence on Policy Decisions

Even a mainstream book exists:

Mainstream economic methodology
author: Down, Sheila C.
Publisher: Academic Press Ltd.
Publication Name: Cambridge Journal of Economics
Subject: Economics
ISSN: 0309-166X
Year: 1997

other mainstraim books on

Unknown said...

More pain is coming: More prime mortgages default in 3rd quarter

US: 1 millions homes in foreclosure in Q3 2009. A new record, even though most potential foreclosures are being held by banks to prevent a realization of losses. Bye bye middle class...

Unknown said...

FBI Probes Hack at Citibank

Unknown said...

More social unrest in China is coming... Bye bye China... The next big collapse is coming...

Social unrest is on the rise in China, according to an analysis by a Chinese think-tank:

There has been more crime too - official figures for January to October 2009 show more than four million recorded criminal cases, an increase of about 15% above last year.

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

Video: Goldman and Morgan Stanley were this close to bankruptcy, by Andrew Sorkin

Unknown said...

Old article, but interesting: EU/IMF REVOLT:

raptor said...

Martijn said...
Total US debt @ 557% GDP?

So now the question is how do you pay 6-9 times your yearly gross salary DEBT (which have let say 5% interest per y).

Lets make a highly optimistic hypotetical scenario :
1. You pay 50% of the debt.. the rest you carry to infinity. 840% * 50% = 420%
2. You can save 25% of your salary : 25% of 1GDP (of 4.2GDP) per y => 16.8y
3. You will have job for the next 50y

So you will need 17y to pay this off and live miserable during this time.
... the rest 50% of the probably will be taken care of from the inflation ... avg 5% per y inflation.

Unknown said...

Treasury Prices Fall; Benchmark Yield Curve Hits Record Wide

Unknown said...

In Ireland's deep budget cuts, an omen for a heavily indebted United States?,The Washinghton Post

Is this the ghost of America's future?

Unknown said...

Off topic, but interesting to watch out: The Bomb in the Brain...

Maybe papa Bush slapped his son George, when he was a little boy...

Unknown said...

Unemployment funds going ‘absolutely broke’, by Peter Whoriskey

Unknown said...

Yeah, here the proof: Don't trust a woman behind the steering wheel... ;o)

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

Other top 10 predictions... Believe or not believe, that's the billion dollar question...

Unknown said...

Wall Street's 10 Biggest Lies of 2009

Unknown said...

Good news for hyperinflationista's: Top hedge funds bet on big rise in yields

FOFOA said...

"The Household Sector" is the new Caribbean bank center! [1]

This is a must read...

Is it all just a Ponzi scheme?
By: Eric Sprott & David Franklin

So to answer the question - who is the Household Sector?
>>>They are a PHANTOM. They don’t exist<<<

Unknown said...

Wow strong story...

And a blogger on Zerohedge found the thief.

costata said...


Thanks for the link. Perhaps this explains why the 30 year bonds and other long bonds have been diverging from the shorter maturities.

FWIW Default doesn't seem so farfetched if the US Govt is going to these extremes.

costata said...


A veil of tears for the debt merchants.

"See how China has sharply reduced their short-term USTBill support (US S/T in brown), which fell off a cliff since summer 2009, when it was an annual outlay of almost $200 billion worth, but now is next to zero.... As of October 2009, their assembly of USTBills has been nil for a year!!"

A graph from RBS is included with the text in the JW article.

costata said...

Last one for today.

Listen to Jim Sinclair in this interview describe a Freegold system minus the name. Please listen carefully once they start discussing the role of the IMF about 2/3 of the way in.

Merry Christmas and a Happy New Year

Unknown said...

Merry Christmas!



FOFOA said...


I had written this response to your question of December 19, 2009 3:22 PM but then I forgot to post it as I got sidetracked by Christmas. I emailed it to myself and there it sat. You can probably see a similarity of Thoughts in my current post. I guess there was a subconscious influence there! ;) Anyway, here was your question...

"Does anyone have any input on what is reflected when one looks at gold futures:(

Why or why not would these be predictive as to future prices?"

And here is what I wrote but forgot to post...

All markets want the participants to believe they are all-knowing, efficient and stable. So the future price of gold is not really a bet on the future price of gold, but simply the premium charged for holding your gold until you need it at a specified date. In an all-knowing, efficient and stable market the price of gold should be the same a year from now as it is today. But the future price would still carry a premium today to cover storage and security.

If this premium, the "contango" gets too high, then the market will bring it down to size as arbitrage goes after the "risk-free profits". They will buy cash gold and sell future gold and rake in the oversized storage and security premium. If the "contango" is too low the same arbitrageurs will profit by selling their physical and buying futures contracts to let someone else store their gold for a ridiculously low storage and security fee.

In commodities, new supply is always being made and demand is constantly consuming the old supply, burning it up or eating it down. So the contango represents the expenses and profit for the middleman who acts as the buffer between supply and demand. Fekete's "grain elevator" that goes up and down as supply and demand fluctuate.

In gold there a relatively fixed supply, and demand does not destroy the product. It is simply shifted around like poker chips on the table, the middleman being the gold dealers on all scales. If the contango is high, we can expect that the dealers will have a plentiful stock of gold since they are being well paid to store it. If the contango is low then that means there is a big demand for the cash physical and we can assume the dealers will have a smaller stockpile behind the counter.

As contango approaches zero and then goes negative (backwardation), we can further assume there will be no supply behind the counter. The middleman will have to willingly LOSE money in order to stockpile supply. In commodities like grain and oil, backwardation means that there is currently NO profit in storing the commodity for future demand. Either future demand expectations have dropped off the cliff (bumper crop expected next year) or present cash demand has exploded beyond supply (present shortage).


FOFOA said...


In commodities that are consumed, backwardation can happen when consumption eats up the entire stockpile and then exceeds even production. All the eaters and burners are hungrier than the supply being harvested or pumped. Backwardation will persist until production can ramp up to meet supply.

But gold is not eaten or burned. It is only stored and secured. So there should ALWAYS be a profit in storing and securing someone else's gold. In gold, any demand which reduces the contango below the cost of storage and security will always raise the price until new supply comes on the market to meet demand. Gold should never go into backwardation since it is not needed to burn or eat, it is only needed to store.

When gold goes into backwardation there is a profit incentive for everyone in the world with any physical gold to sell it immediately and replace it with a cheaper futures contract. This is an immediate profit that can be made. So gold should never stay in backwardation unless there is a complete failure in confidence that the futures contracts will be honored.

This is why Fekete says that backwardation in the monetary metals means infinite demand has met zero supply. In any other commodity it simply means demand is exceeding supply because of a shortage or some other infrequent event. But it gold, which is just poker chips on the table, not needed for anything else, it is different.

So gold futures are no more predictive of future gold prices than the spot price is. They are simply a premium on the current price. But if that premium goes negative then I suppose you could say that gold futures become an contrary indicator.


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