Tuesday, January 5, 2010

I can feel it coming...

To our Socialist money changers:

Well, if you told me you were drowning,
I would not lend a hand,
I've seen your face before, my friend,
but I don't know if you know who I am.

Well I was there and I saw what you did,
I saw it with my own two eyes.
So you can wipe off that grin, I know where you've been,
it's all been a pack of lies.

And I can feel it comin' in the air tonight, oh Lord,
I've been waiting for this moment all my life, oh Lord.
And I can feel it comin' in the air tonight, oh Lord,
and I've been waiting for this moment all my life, oh Lord,
Oh Lord...

Yeah, I saw what you did, Ben.
And you too, Tim.

Glenn Beck talks about the Sprott report on TV today!

Friend of Another

FOA (08/09/01): "Clearly, the coming drastic constriction in dollar financial trade will trigger a super "print press" response from the Fed. They will not be pushing on a string; rather picking up the ball of twine and throwing it! All the while using the old 1980s "monetary control act" that opens their use of monetizing almost anything and everything. They won't be adding reserves to the banking system in the future; rather buying any and all debts from anyone that needs fresh cash. Believe it!"

Costata: FOFOA, isn't this exactly what is happening now? I ask myself, should a simpleton like me bet against someone capable of extrapolating so insightfully?

FOFOA: Yes Costata, it is jaw-dropping to read some of the things he wrote a decade ago. From which mountain top was he viewing the world with such clarity?...

FOA (10/5/01; 10:55:19 MT - usagold.com msg#112)
Discussing the World with Michael Kosares

Hello MK

I wanted to come back to your last stop here on the GoldTrail to address your points and expose myself to the world. (smile)

I bet you and many hikers think I am tagging all Americans and gold thinkers with this "Hard Money Socialist" label. Ha,,,,, let me slowly turn around so everyone can take a good look what a HMS looks like. Yes, that's right,,,,, I fit the definition completely.

[Me: Hard Money Socialist was a term FOA used for those he viewed as typical Western "gold bugs". It referred to people who both promoted the return of gold into the transactional currency realm and also supported the status quo by investing in "leveraged" paper gold and mining stock.]

Most of my life I thought gold should be locked into any official currency system to act as a gauge and controlling factor against socialist tendencies in governments. I studied and in some cases talked to all the prominent thinkers on the subject.

In the late 60s, when Harry Browne was living in LA, his pre-book views took on quite a following. Me included! Oh, it all seemed so natural then; the eventual breakdown of our misguided economic policies had to, one day, kill the whole dollar printing game! We all thought that "the coming big failure" would drive every government back to using gold as money; or at least in some version of another gold exchange standard.

However, even then, I had some serious people pointing me in a different direction. You mentioned how people saw Harry's thoughts ----"considered him the lunatic fringe back then simply because most people never heard of such a thing"---! Ho ho, you should have seen my reaction to these other radical, foreign views I was hearing!

Truly, Harry's stuff seemed so much more real, so much more "The American Way", that it just had to work. Well, it did and we have whole libraries full of historical scrip and economic writer's papers to chronicle his correctness. But you know, I also looked back at these other guys explanation of things and they were every bit correct too,,,,, the effects were the same. Then as the 70s ended and the 80s ran on, their much more longer-term understanding really took hold and left all other gold / currency explanations in the dirt. True, all the rest of the hard money crowd gained a little with each gold cycle high, but were also shot down with each cycle drop. The trouble is that historic process is a time consuming affair (smile) and most of the younger boys and girls that come here don't have a full hands-on perspective of how we got here. Current dogma has a way of leaving out important turning points that are really needed to be factored in. Hell, a few decades of cycles became so regular in our mind-set that a whole industry was born, explaining why cycle investing works (smile). In time I came to understand that there really was a long term, singular move, evolving along as a political play at work here. The last decade only served to underscore it all.

The early 90s Gulf war spike in gold should have been the final revenge for us bugs. Can you imagine?,,,,,, war in the middle eastern oil fields,,,,,,, hundreds of oil wells burning and gold gets shot down?? I was already 80% in my associates camp of thinking by then and that spike down pulled my other 20% right in. I knew then that the whole story was changing on political grounds and was not going to follow the Mises path.

My typical hard money long-held belief, back then, was always:

----"Gold is the only official money of the world and will return to these roots one day"-------- and -----" some world wide financial dislocation will drive all governments back to this position"-----!!!!

It wasn't going to happen, no matter what, short of nuclear war. All we had to do was look around and see how people the world over were attached to using fiat currencies. The economic system itself was morphing into new ground as world trade learned to function very efficiently with fiat digital settlement. And that's something the 70s crowd said could never happen. That was how many years ago?

A lot of the Mises crowd tried to point out that ---- "hey, this is all very good but if you were on a gold system this economic game would be all the more better" ----! Ha, no one cared,,,,,, why risk what was already in process. Even the third world didn't want to hear it. They figured that any return to a hard money system would harken back to a time they remembered all too well. These guys suffered during the early century and no one was going to tell them that the gold standard wasn't to blame. The US is today, and was then, robbing them blind but the situation seemed, to them, that this new dollar standard was building them up. Looking at it all,,,,, we robbed the Japan life style standards the most. All to buy us an almost free standard of living, and they loved it!

When it came to using fiat money in our modern era, it made little difference what various inflation rates were in countries around the world; 50%, 100% 1,000%,,,,,, they went right on playing with the same pesos. There have been countless third world examples of this dynamic, if only we look around. Mike, look at what happened in Russia after they fell,,,, the Ruble stayed in use and function with 6,000% inflation. My god they still use it now.

No,,,,,,, my guys are dead-on-the-money with respect to the political dynamic that's playing out. The world is heading towards a huge financial/currency crack up, but it won't work out with gold coming back into the money game. This very long term transition is playing on a move away from dollar domination with Europe preparing to suffer less than us by pulling in as many other political trading blocks as they can.

When you look at who they are reaching out to; every one of these blocks wants gold moving higher to shelter their dollar trading losses. None of them expects to unload dollar reserves because our end time trade deficit won't permit it. They can't just send the dollars to each other, buying their own goods... that would never exhaust the external dollar float. Hell they now have their own money to do trade with, the Euro.

The game is to let the US economy suffer from its own bloated expansion by moving slowly away from supporting foreign dollar settlement with CB storage (of dollars). This is more than enough to end the dollars timeline as we are already stretched to the leverage limit. They know that Greenspan has but one policy to use and that will be super printing. He is doing it now, right on que!

The ensuing domestic price inflation will waste away all buying power of dollars overseas. This is where they must install a free market in gold that ends international confidence in the current gold fractional reserve game. This is the "what for" of Britain moving itself and its gold operation into the Euro arena. Once safely there, or there in initiative, the ECB and BIS could cash out England's gold liabilities without crashing London's banks.

Mind you, this is all happening while Western style "Hard Money Socialists" are defending their stance by saying the Euro is just another fiat. Ha! These are the same guys that, throughout the 90s, put every dime in expensive gold stocks and watched dollar currency inflation drive the Dow up a trillion points while political actions killed their leveraged gold plays. Now they will refuse to buy physical when political will is about to impact this sector and they will most likely stand by while a Euro-based dynamic starts another economic surge later.

Truly, reasoning and logic is all about your point below: "it is", Mike.

MK, you mentioned:

------ Europe will be no more aggressive than it needs to be. As a casual political observer, I believe that this policy is a mistake that forces Europe to play the inflation game along with the United States, and that is not the way I would have played the game given the opportunity. However, I'm not the one calling the shots in Europe. I am an American businessman and investor and in that capacity I am not so much interested in the world as "I'd like it to be" but as "it is." I'm sure my European counterparts feel the same way.

Right Mike, your last part is like Another said about the forest growing anyway. The fact that it worked with fiat is the way it happened,,,,, "it is"!

To address your point: well, they are awfully doggone aggressive now. Note that they didn't make any attempt to match our post crash rates with a larger drop of their own. That has placed them in a very pro-active dollar warring position now. I'm sure Greenspan is steaming over this break away. It's built a major carry proposition against the dollar and the Euro has to gain on this. Here is an item from your News feed:

Currency Europe
10/05 13:06 Dollar May Fall vs Euro, Yen; U.S. Unemployment Seen Rising
By Chris Gothard

London, Oct. 5 (Bloomberg) -- The dollar, little changed, may decline against the euro and the yen on expectations a report will show U.S. unemployment climbed to the highest level in more than four years, more evidence the nation is headed for a recession...

``We expect unemployment to rise,'' said Rod Davidson, who helps oversee about $1 billion as head of fixed-income securities at Murray Johnstone Asset Management in Glasgow. ``Everyone is watching for the slowdown in consumer spending.'' He expects the dollar to decline to 96 cents per
euro by year-end, and recently sold U.S. Treasury bonds in favor of European government debt...

Since Sept. 11, U.S. Treasuries maturing in one year and more returned 2.05 percent in local currency terms, according to Bloomberg indexes that take into account reinvested interest. For a European investor, those returns are reduced to 1.79 percent because of the dollar's drop against the euro in that period.

Add a,,,,,,, solid rate difference on top of these figures,,,,,,,,, factor in a "beggar thy neighbor" who is going to survive this economic war between Japan and US ,,,,,,,,; and europe's thrust is major! I fully well expect Europe to sell [gold] into any dollar gold market spikes,,,, now,,,,, so as to hold the level steady,,,,,,, in an effort to inflate paper and discredit our gold market. Eventually they will move to create a rift between physical dollar gold prices and dollar derivatives prices. The call will go out that American gold does not reflect what's happening to our Greenspan dollar policy,,,,, real US inflation,,,,,,, and is a fraud.

You know, the US wants and needs a higher gold asset price now and I bet they are confounded to find a way to achieve it. We are stuck in a situation where we will ship a good portion at cheap prices first. We spent a decade or so playing this gold game for better oil pricing and economic dominance; now a higher dollar price of gold would hand our banks a trillion dollar derivatives loss if gold rises. It just kills them because the Euro banking establishment would simply cash out all their dollar based gold derivatives into euro settlement and gain as gold spikes and builds an ever larger asset base for all the ECBMBs.

[Me: ECBMB refers to the member banks of the ECB. He is saying that as the paper gold market implodes, they would settle all paper gold with fiat currency... THEIR euro fiat currency even though it was previously priced in dollars. They could simply PRINT the currency to settle the contracts. This would, of course, send gold to the moon and in the process send each ECBMB's asset base to the moon. See: Your Own, Personal, Freegold]

I have to laugh at all these jokers that keep trying to understand the ECB gold policy as some sort of currency backing similar to years past. It just flies right past them that the ECB wants gold as a dollar replacing asset, not local money backing. For your European clients, they would be in the best of all worlds if they buy gold now. Their system is almost making rising gold a law so as to buffer domestic dollar exchange rate loses.

MK, you also wrote:

-------- Of course, this is precisely what happened in the 1970s. Harry Browne made the same argument back then -- that the $35 gold price was both an institutional fixture and institutional fiction. Europe took advantage of that situation by reclaiming a substantial gold reserve. When the London gold pool (both de jure and overt) broke down at the $35 price, the devaluation (both de jure and and overt) quickly followed. Additional formal gold sales proceeded from there from both the International Monetary Fund and the U.S. Treasury.

Since today the gold price is both an institutional fixture and institutional fiction much the same process is in motion at present -- only de facto and covert. Are you suggesting a similar result? And with the euro present and accounted for, will it lead to a new world order? -----------

The difference today is that the whole global financial, economic and currency structure evolved to service a much more fast-paced dynamic. Simply put, we cannot go back to not using digital settlement again. If we are to use our trading efficiencies we must embrace fiat currency use,,,,,,,,, and all its evils. This is what was recognized as we were placed on the road to high priced gold. Kind of like high priced oil has been factored into our equation,,,,,, so too will a rising gold price be seen as the price we pay for modern operation. Of course, just as those that don't have oil must pay to play, and gladly do so,,,,,, those that don't have real gold when the tables turn will have to pay to keep up.

Back when Harry wrote his early views, gold was largely a physical market. Let's see, were there futures in the late 60s? Nope, didn't think so (smile). Gold was largely a government transfer thing with private players outside the US moving a relatively tiny amount of gold around. The real story in the 70s was in how much gold the truly big operators couldn't get, even at those oh-so-high prices. The little American bought his Krugerrands, gold stocks and post-1975 futures and thought he was doing something big. In retrospect, gold was dead in the water compared to where it should have gone. The dollar faction never really stopped controlling it.

Today, it's not the government pricing policy that is in jeopardy, it's the very market itself and this change will break not only the price fiction but the institution also.

Ok, guess I went on enough here. I sure hope everyone can overlook my english mistakes in those last two posts? More so in all my posts? (smile) Talk later my friend


Sir Topaz of ye olde time-currency.blogspot.com

I'm not too clear whether THIS is the "last" year of the decade ('01 thru '10) ...or the "first" Year of the next one ('00 - '09)

What I AM unequivocally sure about is that 2010 will be the LAST Year "we the people" tolerate this unholy contrivance that is the monetary status-quo.

...either way ...Happy New Year!!

MY timeline on a strong Dollar would be (say) until the Ides of March.
One might declare then - 2010 - The WINTER of the Dollar. ...and in that manner being Right ...whatever transpires eh?
At least until March anyways!

Actually, for mine, el-Bucko is coming into 2010 in excellent shape.
All her guns that matter are firing in the right direction and she should keep this momentum going ...right until she runs off the Cliff ...(hopefully on or before mid-March)

Re: Bonds last year - I think the "reversal" ...and consequent run into the 140's, caught Mr Market off-guard to a large extent ...and they tended to accept it as a "normal" reaction.
It "wasn't" then ...and "isn't" NOW FOFOA...

The evidence is in, the Gun has been found ...and the Corpse IS Dead ...so why not call it as such ...eh?

I think if what we were discussing re: Negative Yield is to transpire, a BIG failure (maybe plural?) in the Banking sector will emerge EARLY in the New Year.
Not necessarily in the US either ...but sufficient to herd 'em into the short end of the curve ...at, or above PAR"...and comfortable about being there whatsmore!
The Long end is GONE for all money I think FOFOA!
This is NOT late '08 - early '09 I'm afraid.


Jr Deputy Accountant said...

Thanks FOFOA.

You f^&%ing rocked this one, I applaud you as always. :)


hope all is well. shoot me a note one of these days and check in eh? big things planned for 2010 ;)


George said...

Thank you for sharing your writings with us. Much appreciated. Happy New Year, and I look forward to more of your interesting posts.

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

FOFOA, your page is getting difficult to load, especially on mobile devices. It's too big! You might consider limiting the number of posts per page.

Fantastic Phil Collins performance. An anthem for a rising tide.

And Y said...

If the Fed were a public company traded on a regulated exchange, no one would buy its shares without taking a peek at its books. And yet, anyone who holds a dollar bill (a Federal Reserve Note) in fact owns stock in the Fed.

I'm way over-weighted in Fed shares. I think I'll get rid of some.

Unknown said...


Why march 2010?

Is this the expiration time of derivatives or just beginning of the raise of interest rates on hypotheques?

Placed also this question on time-currency.com

Thank you for explaining it if possible.


Unknown said...

Sure it's not the main reason but CONEX delivery contracts expire somewhere around March. Also maybe something about bond maturities when US must raise enormous amounts of $ in short period of time.
Would like to know the real reason as well :)

Ludwig von Mises said...

"Mind you, this is all happening while Western style "Hard Money Socialists" are defending their stance by saying the Euro is just another fiat. Ha! These are the same guys that, throughout the 90s, put every dime in expensive gold stocks and watched dollar currency inflation drive the Dow up a trillion points while political actions killed their leveraged gold plays. Now they will refuse to buy physical when political will is about to impact this sector and they will most likely stand by while a Euro-based dynamic starts another economic surge later."

I like this comment. I am a chartist besides a "fundamentalist" and i noticed in 2004 how long term charts for European shares - including the financial (services) indices! - looked bullish long term much to my surprice (back then).

Sorry to say that this is not the case for the US. There will be a day when going long european banks and insurance firms will make sence though.

Joshua Kane said...

Hey FOFOA! I continue to be amazed at your prolific blog output! Loved your 'year of the dollar' and 'I can feel it coming'. I too feel it coming, and was finally able to get an essay out, to be followed by another tomorrow. Today provides a basic 2010 market outlook, and tomorrow will connect that outlook to the developing situations in Iran, Af/Pak, and Yemen. I close for now with my wish for you and yours to stay nimble, informed, protected, and healthy throughout what will likely prove to be a tempestuous 2010.
Joshua Kane

costata said...


Another timely warning. Thank you.

FOA talked about two stages in the final gold revaluation process. Firstly a steep rise when the paper gold market fails. Secondly a massive rise in the USD price of gold when the hyperinflation kicks in. With, presumably, a rise in all other fiats in varying degrees.

I have been assuming that there would be a time lag between the two events. This simpleton now wonders if this assumption could be wrong.

FOFOA, do you think that the timing of these two events could overlap?

By way of clarification I am not suggesting that the two events are contingent on each other or inter-related. I am wondering if the attempts to forestall the inevitable adjustments in the system may have altered the "natural" timeline of events.

FOFOA said...

Hello Costata,

"FOFOA, do you think that the timing of these two events could overlap?"

Yes. In fact, I believe that the longer the inevitable is delayed, the farther the can is kicked down the road, the longer the truth is concealed through prestidigitation, the more likely this becomes and the worse the blowback will be. Reconcile that thought with the "age" of FOA's writings.

It also seems to me that the damage done at the very end of this timeline becomes exponentially worse, per dollar and per day. In other words "the real cost" of delaying destiny one more day grows exponentially at the very end. (US Avoids Technical Default By Three Days) As the Phantom said...

Pity comes too late,
Turn around and face your fate.
An eternity of THIS
Before your eyes!

...It's over now, the music of the night.

costata said...

ECB tells Greece "No Bailout"


From FOA (see full extract below)
"....Fiat Euro. This is the road ahead. A fiat no different from the dollar in function, yet a universe away in management."

FOFOA, could this showdown with Greece be the litmus test of the ECB's resolve to safeguard the integrity of the Euro?

If they hold their ground it would provide a stark contrast to the "management" of the USD, would it not?

"FOA (04/21/01; 21:12:52MT - usagold.com msg#66)
Of Money and Men"

"Still, over the last several decades, we now have come to expect an attempt at "political styling" our fiat money that benefits more than one nation block. Further, we expect a wealth asset to not so much stand behind the system but to measure it's speed of failure or success. Knowing full well we will accept and expect some loss of value as payment for this use convince of Fiat Euro.

This is the road ahead. A fiat no different from the dollar in function, yet a universe away in management. A wealth asset that also stands beside this money, yet has no modern label or official connection as money. In this way modern society can circle the earth, to once again begin where we started. Having learned that the concept of wealth money and man's money were never the same. We shall see."

FOFOA said...

"If they hold their ground it would provide a stark contrast to the "management" of the USD, would it not?"

Very astute observation, Costata. Perhaps you are not such a simpleton as you claim?! Are you following our "Belgian" friend's Thoughts as well? He made a very similar comment...

"Euro tumbles as Stark says EU will not bail out Greece (!?)

En dan gaan we naar FOFOA om effe naar Glenn Beck te luisteren (videoke-monetizing debts).

Weer komt dat fundamenteel verschil tussen ECB en FED policies op de proppen.

Daarbovenop komt lepe Bos nog eens met het IJsland geval : In EMU of niet ?

Maar niemand durft zich publiekelijk de vraag stellen hoe het komt dat zoveel gif op zo veel plaatsen kon binnen-sluipen !"

costata said...


Thank you for your kind words.

Not sure I understand the reference to the "Belgian" friend's thoughts.

costata said...

Does anyone have access to a Euro/USD chart for the period from the launch of the Euro to 2009?

Monthly close or longer intervals would be fine.

I have a little "research project" underway. If the "dots" connect I will happily share the results with you.

Thanking you in anticpation.

Joshua Kane said...

Oh, and btw FOFOA, about the underwear, it's pretty much like I already knew it was there, on page 67. Tomorrow's essay will be, shall we say, accordingly cataclysmic.
Joshua Kane

costata said...

Hi All,

Found the Euro vs USD charts I was looking for and a few other interesting things.


Re: My little "research project"

I know you closely follow the ECB's announcements. Do you also keep tabs on the BIS?

Q. Are you aware of any significant announcements, policy changes or initiatives between late 2005 to, say, late 2006 by either of these entities that could have prompted the USG to want/need to post some shiny, physical collateral with the ECB and/or BIS?

BTW as at January 2006, the Chairman of the BIS Committee on Payment and Settlement Systems was ... Timothy F Geithner.

Results of my "research" thus far:

1. From Another's letter to FOA:
"Especially if the Euro suddenly, without explanation, rises in value."


"Some of your American gold must come into play during this game of kings. It must, as the BIS will sanction a complete disposal of contract liabilities from metal into Euros unless some real US gold is given up."

Continued overleaf

costata said...


Larger extract from FOA archive here:
"FOA (6/9/01; 16:36:42MT - usagold.com msg#75)
A letter from Another to me.

Now these leaders full attention must focus on this money transition itself as Blair's next initiative (the Euro) will lead to a realignment of contract values of all kinds. Before the fact! The Maastricht Treaty allows that by Jan. 2002, all contracts will be converted into euros and new contracts must be denominated in euros. Because Blair has overseen the signing of both Amsterdam and Nice Treaties, his closest people understand the full impact Britons intentions will have on this world's paper gold market. As it be contractually expressed in dollars. The credibility of these to not only represent gold but to maintain loan collateral on books will lead to several high level agreements to address this loss.

Indeed, how does one transition a metal contract without moving the metal once again? Especially if the Euro suddenly, without explanation, rises in value. A rise that leaves only the door of metal fulfillment?

All eyes must now search for a way to transition this beast as it's use and function will fall away as the Euro further expands. Some of your American gold must come into play during this game of kings. It must, as the BIS will sanction a complete disposal of contract liabilities from metal into Euros unless some real US gold is given up.

Something your Bush will endorse but not without a price! As contract gold falls in price while expanding the physical price. I suspect it (official US gold) will be given up at the exchange rate of many thousands and even that will be the little drop of water that allows dollars to remain in this game."

2. Note the rapid rise of the Euro from January 2006 to mid 2008 in this chart.

(I have posted a comment on Topaz blog about this rise. Was the rise "sudden" and "without explanation"?)

After clicking on the link you need to go to "Date Range" and click on 10 years.


Continued overleaf

costata said...


3. Article by Rob Kirby entitled:

"U.S. Gold, Going or Completely Gone?
by Rob Kirby | May 29, 2009"


"The United States Geological Survey [USGS] publishes monthly Mineral Industry Surveys designed to provide a macro-import/export-overview of the U.S. precious metals [gold] industry."

"I took special note of how 2,920 metric tonnes of “Gold Compounds” had been exported from the U.S. in 2008."

I was told that, according to the U.S. Census Bureau .... gold compounds were typified by industrial type products containing low ........gold content..."

"....I then reasoned with the USGS person, if such were the case, why would U.S. exports have increased in 2008 to nearly 3,000 metric tonnes [when the Global Economy was slowing and the U.S. Dollar was strong] from 2007, when U.S. exports totaled approximately 2,000 metric tonnes"

Do you see the possibility of some connected dots FOFOA?

Also some recent news I stumbled across in my travels on this research project.

4. Euro circulation from Wikipedia

"As of October 2009, with more than €790 billion in circulation, the euro is the currency with the highest combined value of banknotes and coins in circulation in the world, having surpassed the U.S. dollar.[note 16]"


Unknown said...

On December 24, the Senate passed a vote by a razor thin margin (with not a vote to spare) to raise the Federal debt ceiling from $12,104 billion to $12,394 billion.

I was thinking why do they need to raise the limit by so 'little' and so often? Isn't it easier to increase by trillions, not billions and avoid unnecessary attention? Unless someday the ceiling won't be raised on purpose, very nice way to shake off the whole debt in one day.

Unknown said...


You're really surprising me!!!

How do you found this website (could you pls send also the link to check it.)? Could you also speak Dutch????????????

You're scary :o)


Unknown said...

Gopal Balakshrishan predicts that the future global economy will be a stationary state, a long-term stagnation akin to that which we experienced in the 1970s and 1980s. China will start slowing. The United States, EU, the Mideast and East Asia will all make up a low growth block, a slowly decaying imperium. India, together with parts of Africa and South America, will be on the rise. To be clear: the very worst thing that could happen is that we would see otherwise.

Anonymous said...

We got a Beagle X Puppy before Xmas and he's proving to be an exceptional "digger"...
...as deep holes in the front and back yard attest.
I'm thinking of renaming him "costata" .....;-)
Good digging Sire!

FOFOA said...


Follow "Gold-related Videos" to the forum. ;)

Martijn said...

The fed might be manufacturing another crash in order to sell bonds.

Martijn said...


Interesting material!

FOFOA said...

Keep digging Costata.

If I remember correctly FOA sat on that letter from Another for a couple weeks at least before posting it. That always struck me as strange. He "teased" it several times in the regular forum but didn't post it until much later.

What was the BIS and the ECB up to at that time? What were they concerned about? With a little digging it appears that publicly the BIS was concerned with a) systemically important payment systems (within the CB community) and b) capital ratios (reserves). The ECB seemed to be most concerned with the changes to the foreign exchange currency markets after the introduction of the euro. And they were both concerned with the derivatives market (private sector dollar-denominated traded contracts).




Reading between the lines I would say that they were both concerned with potential systemic weaknesses, especially relating to the euro switchover. Perhaps their "ace in the hole" was then, and still is today, their ability to make a legal ruling that says all private contracts denominated in dollars within the eurozone can be settled in euros.

This would be in case of some kind of dollar liquidity crisis (bond selloff?) as a result of the euro's introduction. Of course that specific threat has passed, but now we face a new one. That same "ace in the hole" could still be on the table. It would affect all derivatives (private sector contracts) denominated in dollars within the eurozone. This would include gold, their reserve asset replacement for US Treasury's. It would allow the member CBs to respond to a liquidity crisis (print euros) without relying on Ben Bernanke for dollars. And it would destroy the gold market. Best to have everyone's gold secure before dropping a neutron bomb like that.

Basel II was in 2004 and implementation was delayed year after year until 2009. That has to do with capital ratios ("posted reserves").

Just a few thoughts from your comment. :)


Martijn said...

Does anyone have an answer to Kewl's question: I was thinking why do they need to raise the limit by so 'little' and so often? Isn't it easier to increase by trillions, not billions and avoid unnecessary attention?

And why was this such a tight vote? It's only a few bucks these days. Is this another form of window dressing trying to make it seem as if they truly do handle the national debt with care?

FOFOA said...

Remember that the BIS is not just another central bank. It is the central bank to the central banks. Whereas the CBs must watch the health of private banks, the BIS is concerned about central banks' ability to facilitate international settlements.

FOFOA said...


It's just politics. I think it's great they are being forced to do it like this in small increments. They are playing with fire and they know it, and they are not all in agreement.

costata said...


That beagle loves you. I suspect he digs your family, Sir.

From my small knowledge of furry animals, if you have kids he'll defend them to the limits of his canine view of the world eg. protect my pack.

As the song says 'Who could ask for anything more"

Martijn said...

They are playing with fire and they know it, and they are not all in agreement.

Do you give them any chances - even the smallest - to halt the train?

FOFOA said...

Not really, no. The damage is already done. They are already squeezed into the tightest of spots. Too much and everything goes to hell in a handbasket. Not enough to cover even the coupon payments, same thing happens. The best they can hope for is to gingerly kick the can down the road until it becomes someone else's problem next November. But don't count on it.

costata said...


I suspect, Topaz is right in saying "keep digging". Professor Fekete dates this "so called" GFC to February 2007. Due to a sudden widening of spreads on credit default swaps.

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

Shenandoa/John Gault had an interesting fantasy blurb:

“This is Radio Japan and now the news. The American government has refused to release any gold reserves for foreign governments stored in their New York City reserve bank vaults. As a result of this, all American assets within the territories of the government of Japan are now frozen. All container ships have been ordered back to port. All transactions with the United States are officially frozen until the United States Treasury elects to inform us when obligations will be met in full using either payments in gold, commodities, or a non-dollar denominated currency acceptable to the Japanese Government.

In other news from the region, the Mexican government was arrested by the new military junta which has declared a state of martial law and frozen all U.S. assets at all financial institutions and the Mexican military has been deployed along the U.S. border to prevent their migrant population from returning home and U.S. citizens from crossing. The Republic of South Africa has temporarily adopted a gold standard for the rand pegging the valuation of one hundred rand per ounce of gold, thus becoming the first nation to abandon a floating currency standard in the world. In Israel, the government has adopted the Euro and the Yuan as the only non-Shekel denominated currencies acceptable for trade in commerce outside of its borders. Lastly, the Indian government has terminated all business contracts with United States corporations and the U.S. government until guarantees of payment in a viable currency alternative to the dollar is presented by the American government.”

I find this scenario plausible: The foreign CB's demand debt repayment in gold, or their existing gold deposits in the case of Germany and Switzerland. The Fed refuses, and we have a complete breakdown in foreign trade....


raptor said...

It would allow the member CBs to respond to a liquidity crisis (print euros) without relying on Ben Bernanke for dollars. And it would destroy the gold market.

FOFOA can you elaborate on that ? Also how is possible for the ECB to fight dollar liquidity crisis in EuroZone, by printing euros ?


FOFOA said...


Over the past year and a half the Fed, Treasury and Congress have shown the resolve (which FOA already knew would come) to bail out anything and everything, by all means necessary, should a crisis erupt. They have done so overtly through TARP and QE and they have done so covertly through the Fed and the PPT.

The debt monster cannot be unwound without a complete deflationary collapse that would bankrupt all of Wall Street, most US companies and the USG itself. Short of that it can only be fed with the creation of new debt or new monetary base used to purchase toxic assets from zombie institutions.

This is what the Fed, Treasury and Congress are doing to keep the US zombie alive.

Europe is in a slightly different boat. It is not so much the physical dollars or the US Treasury's that threaten the system over there, but it is the contracts that are denominated in dollars, and under normal circumstances must be paid off, sold or serviced in dollars. The Fed/Treas/Congress has insured that a full-on deflationary collapse will not happen within the US or the US banks, but it has not guaranteed the whole globe. And Europe is facing ever-increasing pressure in this direction.

The US dollar is still the global reserve currency and it is used as the numeraire in most of the derivatives that supposedly "insure" the system. If a big crack-up occurs outside of the US/Fed jurisdiction and a panic ensues, then we will likely see another big round of "swaps" between the Fed and European CB's.

An alternative to this course of action is for the Eurozone to declare that dollar-denominated contracts (derivatives) can be settled, sold or serviced in euros. This is something that Another and FOA mentioned several times.

My guess is that it was discussed "over there" as a last resort should any "dollar dislocation" occur as a result of the introduction of the euro.

How will it affect the gold market? Well, obviously there is more paper out there than there is physical gold with which to settle. A similar problem to the dollar being used in overseas contracts. More contracts than there are dollars (or the ability to create dollars fast) to settle them in a timely manner during a panic.

So if all contracts are declared to be "euro contracts" in a crisis, this will relieve a lot of the systemically catastrophic pressure which has built up "over there", but has already been dissipated here thanks to Uncle Ben and Aunt Tim.

This wouldn't necessarily be a forced conversion, but an optional one. And it would give the ECBMB's the same "bail-out power" that only the Fed has right now (when it comes to the dollar's systemic tentacles).

Suddenly we would have a "technical default" on the "dollar system's paper gold market" as gold contracts are settled in euros. Paper gold would tank. Also, demand for dollars would collapse. So would the value of Treasury's held in reserve, but we know that they have already prepared to just write those off to "past mistakes".

Dollar collapses, paper gold to the dumps and physical to the moon, and the ECB prints to its hearts desire until the crisis passes. The higher gold rises the more the ECB's reserves rise in value. And as fast as the ECB falls in real value, it does not fall as fast as the dollar which is now done.

Of course this is all just speculation, but contract conversion was something that A/FOA talked about on several occasions.


raptor said...


The gold price does not reflect underlying earnings, but then again since approximately 1995 stock and bond prices have not reflected underlying earnings either, but rather monetary and economic policies intended to produce continuous asset price inflation in stocks, bonds, and real estate.

As to the third point, that the gold price is not determined by supply and demand fundamentals as are other commodities, this is also true. But if not industrial and other forms of so-called “fundamental” demand, what keeps gold prices above zero? Our conclusion in 2001, and the primary reason we bought gold then, is that the ownership of gold by central banks of more than 20% of all gold ever produced....

FOFOA said...

Here's a fun one...

ZH - Argentina Central Banker Fired Today

A surreal harbinger of what may well transpire in the US some day was today's firing of the president of Argentina's Central Bank Martin Redrado by president Cristina Fernandez de Kirchner. The action followed his refusal to release reserves to the government to be used for debt service payments, as well as his refusal to resign.

...the Argentine government has $13 billion in debt service payments due in 2010. One can imagine their jealously of the US, where such a situation would be met with merely a little more cash printing and a few more $40 billion 3 year auctions.

JR said...


In "the end of a currency" (http://fofoa.blogspot.com/2009/09/end-of-currency.html) you wrote the below in italics.

A question is where is the incentive to lend the 10 gold ounces to get 10 ounces back later if you can just hold them and get the same benefit (the increase in purchasing power) without the counter-party risk.

Modern econ might think of this as a tragedy of the commons sorta like problem - individual's incentive is to not risk gold and hoard, but this is not in society's interest.

The money pumpers argue this means hoarding, which is bad, so we need inflation to make people more willing to lend and not hoard. I have some ideas why the money pumpers may be in error, but was wondering if you could offer any insight. Thanks in advance!


"Imagine a hypothetical perfect gold standard. There is nothing but gold used as money, and its supply remains constant. As man labors and builds, the economy will grow, and gradually one piece of gold will equal more and more real goods and services. Over time, in this perfect gold standard, the value of that piece of gold will rise and the cost of goods and services will fall.

Now imagine a lender and borrower. The lender lends 10 ounces of gold to the borrower, who then trades it on the open market for the goods he needs to be productive, say, farm equipment.

Let's say the term is a 5 year loan and there is no interest in this perfect world. After 5 years, the borrower must return the 10 ounces of gold that he borrowed.

During those 5 years, the value of gold will rise and prices of goods will fall, what we currently think of as "deflation". So in 5 years when the farmer must reacquire gold on the open market, he will have to surrender more goods than he received for that same gold 5 years earlier. Likewise, the lender will receive his gold back with greater purchasing power than it had 5 years earlier.

In essence, the lender received "interest" and the borrower paid "interest", even though the money supply remained the same. All that changed was the economy against which the money is measured! The interest was the productivity that the borrower added to the economy. The lender profited from this economic growth and the borrower labored to meet his obligation.

So in this perfect world, the price of borrowing money means keeping up with the average productivity of everyone else in a growing economy."

FOFOA said...

Hello JR,

I don't have a particularly canned answer for this, but you are right. The need to lend out your money in order to be a good little citizen is another modern myths.

When you "hoard" (aka saving) you are accumulating capital. You are creating your own fully funded pension. You are taking responsibility for your own providence rather than relying on the collective to do it for you.

The most efficient productive uses of capital come from infrequent inspiration and from laborious research and a desire to excel beyond the norm. In a society where it is expected that everyone deploy their capital immediately into productive use, efficiency is never met. There is no incentive to be efficient.

Compare the state of borrowing today with that of non-usurious antiquity. Today we borrow for consumption with a fixed payment schedule. This is not only inefficient, it is unproductive in the extreme. It is the very destruction of capital. But under my perfect world scenario you would have hoarded your capital and had it available to you should you be struck with grand inspiration, like Thomas Edison or Nikola Tesla. Or if you were presented with the opportunity to participate as an equity owner in someone else's inspired project.

And the return of your capital would be based on the performance of the inspired project. Great minds would not be brought to bankruptcy simply because one idea failed and they couldn't make the fixed payment schedule. A grand competition for efficiency and ingenuity would emerge. The competition for capital!

This incentive spreads throughout the entire society and everyone ends up either providing for themselves or else being efficient producers with their capital, growing it through inspiration or through hard work and a desire to excel beyond the norm.

Hoarding is just another term for savings. But in today's world, if you save then the bank lends out your money. In the gold coin world, it was this bank lending activity that led to fractional reserve gold banking, which led ultimately to the destruction of capital through lending and the need to print money as a replacement to those who simply wanted to save... er hoard.

This train of thought really gets down to the difference between a pure capitalist society and the many variations of socialism that have been masquerading as capitalism for more than a century. Socialism causes malinvestment, another term for inefficient use of existing capital. Even the fractional reserve banking under a gold coin standard was a form of socialism at the expense of the savers. It is always at the expense of the savers!

This is a good explanation of FOA's term "Hard Money Socialist". By tying gold into the monetary system you are forcing real capital (savings) to be malinvested. Under Freegold, the savers will be able to opt out of this system, and control the deployment of their capital, or "hoard" (save) it, whichever they deem to be the most efficient use at that moment in time. (If there are no inspired opportunities presenting themselves, then hoarding for later deployment IS the most efficient use!)

Real capital is always in limited supply. This is not to say it doesn't expand, but it certainly cannot be printed. It is in limited supply, just like gold. So it is always in societies best interest that real capital be used in the most efficient and productive ways. And the best way for society to achieve this end is to decentralize the distribution of capital and to leave the determination of its best use in the hands of those who stand to lose or gain the most, its owners.


Anonymous said...

This is essentially where we're at NOW I feel gents. Good lines ...Bravo!
Apart from the "timeline" issues evident with the current arrangement, we (the people) appear to be quite "fed" up with having our "present" dictated by those who deem it their god-given right, via the various Paper "futures" Markets.
Market action "this past month" depicts the behind-the-scenes struggle afoot IMHO...
...and, rest assured, the "warnings" the Fed issued to Banks etal re: rising IR's, has far more to do with systemic meltdown as we transition through the Zero ...and on into the "unscripted" future, than any notion of "recovery", I feel.

SatyaPranava said...

topaz, i was just about to post a similar comment before reading yours. though mine is in the form of a question for you all.

isn't there freegold in essence now, just with a limited number of players? if so, does that in essence create the possibility in the future of a greater participation in freegold without the need for institutional (or statist) support, i.e. couldn't it still succeed without 100% global saturation?


FOFOA said...

Martijn and Kewl,

ZH - Whither Debt Limits?

...In essence, the debt ceiling is only meaningful insofar is it requires our elected representatives to go on record loudly to endorse measures that will eventually cave in the fiscal skull of the country...

Still, at the very least we have a nice list of those who permitted their personal and party agendas to motivate them to kick the can, just one more time, really (until March) down the road...

...we have named January official "National Debt Education" month here at Zero Hedge. We have a number of deep-dive analysis pieces in the works that will give Zero Hedge readers unprecedented insight into the massive gravitational well that is our national debt and the enigmatic morass that is the Department of the Treasury. In fact, we will chance the prediction that we might show you the national debt in a way never presented before. Stay tuned.

raptor said...

from the link i posted above :

Gold is insurance against inflation and currency depreciation, but it is more than that. It is a lens through which shifts in the political economy, as they affect sovereign default risk and currency values, can be viewed. Gold is trying to show us something. If we watch carefully and without bias, changes in the gold price reveal profound forces of structural change that started in 2001, and accelerated in 2004.

costata said...


Interesting take on the HSBC vacate order to their retail PM clients a few weeks ago.

Doug Hornig of Casey research suggests that it is being done to free up space for increased Comex warehousing commitments.


Please note the graph showing huge growth in the volume of gold being held. If true:

Q. Whose gold is being held? ETFs?

Q. Where does the Comex expect the anticipated influx of gold to come from?

FOA (08/06/01; 09:37:25MT - usagold.com msg#91)
Gold Mobilization

"To date, these gold shipments have been ongoing but have not, yet, involved original US political owned gold. The bullion involved has been metal subjugated from foreign third world countries through dollar for gold swaps; executed thru US currency protocols."

"Mr. Kosares is correct in observing how foreign gold is drained from these nation in trade for debt relief and crisis support. In classic form, we will be the next in line to be "swapped out" also!"

BTW my little research project has foundered on the rocks of insufficient, erratic and inconclusive data.

FWIW I will say that I am reasonably satisfied that the upsurge in exports of "gold compounds" is not the "smoking gun" that Rob Kirby suspects for US political gold sales.

IMHO the data is too inconclusive to reach any firm conclusions.

FOFOA said...

"FWIW I will say that I am reasonably satisfied that the upsurge in exports of "gold compounds" is not the "smoking gun" that Rob Kirby suspects for US political gold sales.

IMHO the data is too inconclusive to reach any firm conclusions."

That was my take too. And FWIW, my initial thought was that your line of inquiry would be best served by a closer look at what was going on surrounding that June '01 letter.

FOFOA said...

...which was actually written in May '01. And apparently the ECB and BIS were busy doing something in April '01.

raptor said...

A comment from the same link I sent (why would it be good for china to promote gold) :
thousandmilemargin :
There is something to be said for having a dual currency domestic system, where your population borrows and transacts in yuan, but saves in gold. One currency is your store of value, the other your medium of exchange. If an expectation is created that gold will appreciate relative to the yuan over time, this encourages both borrowing ( in yuan) for productive activities, and the stockpiling of gold as a form of saving and inflation hedge.

It suggests though that the pool of yuan savings available for lending will dwindle as savers switch to gold. But the government can fill this gap by printing more yuan to lend. As they indeed are already doing.

This has the smell of a perpetual motion machine - all the smart people can borrow in yuan to invest, knowing deflation will reduce what they need to pay back, while preserving the value of their "rainy day" funds in gold. The benefits of endless money printing and endless (controlled) inflation without destroying the nest eggs of savers.

Doubtless, like all perpetual motion machines, there is a flaw there somewhere, but I think the temptation to try something like this would be very strong.

more and more I see comments of ppl distinguishing between medium of exchange and store of value ...

Martijn said...

@FOFOA, Kewl,

More window dressing indeed. 2010 will be the year of dressing windows. At some point reverse repo's will be the confirmation of the recovery, while in reality everything will be guaranteed. 2010 will be the year where all there risks are shifted towards the government, but they will try to do it as secretly as possible.

Timing remains difficult. I think they will make this year. Those government sleeves may be larger then many think, and lots of tricks can be pulled out of them.

I'm not sure that they've ever had to go to the bottom of those sleeves recently. Now they will.

Time.. is on our side..

Anonymous said...

Just to press home the point about FreeGold Capital - the Road to Freegold is quite well lit imo when the implications of Zero(and negative) IR's and the Cash-is-King mentality is embraced.
In a Gold Standard or any Specie system, the "CASH" referred to was a defined amount of Gold and/or Silver.
Nowadays however the ultimate Cash is the $US/Oil construct.
(this is the tricky bit!!)
What "in the past" sent them scurrying into Cash ...it certainly wasn't the quality of the Paper component ...Oh No! ...it was the almost eternal resilience of that which supported it!
Oil ...by definition isn't resilient ...and as such, the "Cash" they will "initially" crave ...in the grand scheme of things, is actually a "Past".
Now ...let's travel a little further forward in Time ...and consider how the World might embrace Gold (FreeGold that is) in light of FOFOA's Capital allocation scenario above.
...and THIS is where the notion of $50 - 80,000 /Oz gets REAL credible IMHO!

costata said...


IMHO I think the piece you quote suffers from a logical inconsistency. Here:

".....all the smart people can borrow in yuan to invest, knowing deflation will reduce what they need to pay back, while preserving the value of their "rainy day" funds in gold. The benefits of endless money printing and endless (controlled) inflation...."

Do you see the conflict? Deflation reduces the debt while inflation reduces the debt but increases the value of the gold. Deflation and inflation are opposing forces not synchronous.

However, he may be right for the wrong reason. If the State is selling the gold for yuan it gives them an additional lever with which to control the money supply ie. to manage inflation. Selling gold extracts yuan from circulation.

Through their simultaneous control of the banking system the State could also influence the supply of credit (a money equivalent). This also assists them to manage inflation.

If they want deflation then the purchasing power of the yuan rises and gold should be stable. If they inflate (expand the yuan or credit supply) savers in gold are protected by a compensating rise in the yuan price of gold.

Perhaps best of all, no one hoards (saves) things required for consumption. The yuan would operate as a true "medium of exchange" and not a "store of value".

That last part sounds vaguely familiar. FOFOA, does that ring any bells for you?

costata said...


"Do you see the conflict? Deflation reduces the debt while inflation reduces the debt but increases the value of the gold. Deflation and inflation are opposing forces not synchronous."

Should have read:

"Do you see the conflict? Deflation reduces the debt while inflation INCREASES the debt but increases the value of the gold. Deflation and inflation are opposing forces not synchronous."

Jeff said...

jim rickards discusses gold at about the 19:00 mark.


Ludwig von Mises said...

You people may appreciate this one, people are working on the "other money". You know, the kind that wont be used to store value.

Quantum Money:


S said...


sorry to mix posts, but going back to your ECB discussion I thought one of the more interesting things to watch was the speculation about the ECB meetngs right after the fed cut to zero. the various voives outside the Greek called for no move to follow the US into the gutter. indeed the US can always rely on the BOE to underscore the lowest common denominator but the resistance on the part of Trichet and the German voices spoke volumes (though still diminished admitedly by the large degree to which the ECB still followed the Us lead. Ensuring people follow thier lead is indeed the locus of the fed policy itself.

so what will it take for the the ECB to simply repudiate the Fed altogether which is tantamount to crashing system? the story about MS settling with the chinese over derivatives was large as was the GS news. the comments by sarkozy recently about the end of dollar coupled with the news months ago that france was activily working with the GCC and russia among others to create a dollar alternative speak volumes.

For what it is worth my instinct says the Fed/Us will try and spark a domino crisis around the periphery of the EC as a play/threat on the Euro / Euro banks (perceived to be behind the curve on credit crisis). Instinct says this in combo with iran is how the US hopes to keep the ECB in line with dollar bloc. kind of a neo MAD.

Barring threat to try and take down euro banks what's left? If the fed thinks gthe ECB will declare a mo ve on derivatives would they not try and work out a deal via the BIS to forestall such a move. enter the article in the FT this week that BIS calls meeting of central bankers and heads to discuss risk taking renewed..

Would be interested in your thoughts here. Seems to me the US has limited options here. The only option is pre emptive attack to weaken competitors as more and more people look to move away from dollar. I doubt any covert actions by the US would have the intended effect for more than a few months at best, but what are the other alternatives?

FOFOA said...


Thanks for the heads-up on Rickards. Good interview. Here's the link to the MP3.


Very interesting. Maybe they'll find a way to turn the CERN LHC into a giant printing press.


"Now ...let's travel a little further forward in Time ...and consider how the World might embrace Gold (FreeGold that is) in light of FOFOA's Capital allocation scenario above.
...and THIS is where the notion of $50 - 80,000 /Oz gets REAL credible IMHO!"

Just wanted to re-quote that for effect. QFT But that is kind of like what Jim Rickards is saying in the above interview, only he takes it to transactional currency ("money range" @ 22:45 in the interview) and comes up with $4K - $11K. I think it is unlikely it goes to "money range", and instead directly to "wealth range" when the dollar collapses and/or "the gold market". Rickards also fails somewhat to account for the loaded spring effect in addition to all other factors.


First, did you see Ender's question addressed to you?

Second, I am a little confused as to what you are asking in your comment above. Certainly Trichet is a much different character than Duisenberg was. And one who is much more likely to follow the Fed. But that does not necessarily reflect the core political stylings of the euro as an entity. As a political entity, the euro consists of many powers with differing ideas, like the Germans, yet none which can benefit directly as the USG does from the Fed's monetization.

"so what will it take for the the ECB to simply repudiate the Fed altogether which is tantamount to crashing system?"

Well, if we believe A/FOA then the ECB is simply assisting the Fed (cooperating) as the Fed is busy digging the dollar's grave itself. Knowing all along that the euro is positioned to survive as a viable entity due to its gold reserves and political stylings: separated from the nation-state and from gold, its reserve asset replacement for the dollar.

The ECB certainly doesn't want to be seen as the one who brought down the dollar. They want to be seen helping the dollar, because they know it is only digging its own grave.

But if a bad enough banking crisis were to emerge in Europe, I'm sure they have contingency plans. Perhaps including some way to solve the derivative issue through contract conversion to euros?


FOFOA said...

The European Central Bank earlier this week published the results of its latest quarterly (year-end) revaluation of reserves. I will herein review those illuminating numbers, but first a bit of background for those who are new to this policy procedure.
When the ECB sprang into being back on January 1st 1999 as the central banking hub of the eleven-nation Eurosystem, it also signaled the beginning of a shift in the architecture of the international monetary system, a revolution in the realm of central banking reserve assets that has been gaining steam with each passing year.

At that time, the Eurosystem set forth its remarkable new policy by which it would begin carrying all components of reserve assets on its books on the basis of actual market value — which were then to be reassessed quarterly. Keeping our focus on gold, this was revolutionary because prior to that time the central banks of the world had traditionally carried their gold reserves at values that typically reflected their price at the time of acquisition or by legislative decree. Either way, these various CB book valuations were by and large typically static prices frozen in the time of a bygone era which had long since lost touch with the present reality of the free gold market. To cite a significant example, at the time of the Eurosystem’s cheeky demonstration that it had a pulse (AND a brain), the free market price of gold was around $290/oz; meanwhile, the 8,000 tonnes of U.S. gold reserves were a lifeless corpse on the books of the Treasury and Federal Reserve at $42.22/oz — a value set by Congress by legislative act in Autumn 1973 and which still remains in effect to this very day.

Thus breaking new ground, in January 1999, the consolidated financial statement of the Eurosystem effectively acknowledged the actual market value of its gold reserves ($290/oz = €246/oz) and accordingly reported the value of their 404 million ounces (12,576 tonnes) at €99.6 billion. Additionally, it held a net position in foreign currency at €227.4 billion. Gold thereby constituted 30 percent of the Eurosystem’s total reserve assets (€327 billion) at that time — a simple mathematical expression derived from the combined Quantity (holdings) and Quality (market valuation) of their gold reserves as a proportion of the total Quantity and Quality of total reserves, inclusive of foreign currency.

Rolling the clock forward to this most recent mark-to-market revaluation of reserves…

As of January 2010, there has been a modest shift in the overall quantity of gold reserves. Over the past decade the assets of the eleven original national members of the Eurosystem have been joined with the nearly insignificant assets five small additional members (Greece, Slovenia, Cyprus, Malta, and Slovakia) while, more significantly, a net decrease in holdings has occurred through regular program of international gold sales and reallocations that have been successively implemented under the self-strictured Central Bank Gold Agreements of 1999, 2004 and 2009. All told, the quantity of Eurosystem gold holdings since 1999 has been trimmed by a net amount of 56 million ounces, leaving a present total of 348 million ounces (10,833 tonnes).


FOFOA said...


Despite that decline in quantity, it has been more than compensated by an increase in quality — that is, by an increase in the free market value of the remaining ounces. According to the improved perceptions of the current state of collective wisdom among the participants in the global gold market, the valuation per ounce of gold at the end of the year was up to $1,104 — or rather, €766.35 per ounce when translated into the appropriate domestic currency for Eurosystem bookkeeping. Taking these factors together, the smaller gold reserves still held by the Eurosystem have nonetheless grown to provide a solid book value of €266.9 billion.

By comparison, the net position in foreign currency has been allowed to dwindle over this same timespan to just €162.7 billion at the present time.

So, whereas back in 1999 gold had provided just 30 percent (€99.6 billion) of the Eurosystem’s €327 billion in total reserves, today, owing primarily to the simple yet honest revolutionary decision to recognize the mere reality of changing market values among gold and the papery counterparts held within central bank reserve assets, the gold portion of reserves held by the Eurosystem now constitute a rock solid >>62 percent<< (€266.9 billion) of its present €429.6 billion in total reserves.

As you can see, not only has the all-important reserve component of the balance sheet grown somewhat in size, but it has been significantly strengthened and effectively immunized against foreign financial contagion thanks to this subtle accounting and reserve allocation process that continues to put the right emphasis in the right place — gold. It should come as no surprise that even China, despite all its emphasis on State secrecy in monetary matters, is more or less openly accumulating gold and following this same Trail. And India. And Russia. And…

And meanwhile, the Federal Reserve is busy contemplating how many more billions it wants to expand its own balance sheet by buying more of our economy’s own junky mortgage-backed securities. Folks, it’s time to leave the theatre ’cause I already know how this dollar-story is gonna end. Smoke and flames.

Randy Strauss, USAGold, Jan. 8, 2010

FOFOA said...

Chavez orders currency devaluation by 50% in Venezuela

"CARACAS, Jan 9 (Reuters) - Venezuelans rushed to the shops on Saturday, fearful of price rises after a currency devaluation that will let President Hugo Chavez boost government spending ahead of an election but feeds opposition charges of economic mismanagement...

The socialist Chavez believes the state should have a weighty role in managing the economy. During his 11 years in office he has nationalized most heavy industry, and business and finance are tightly regulated.

The devaluation is politically risky but means every dollar of oil revenue puts more bolivars in government coffers. That allows Chavez to lavish cash on social projects and fund salary increases ahead of parliamentary elections in September...

He announced the devaluation on Friday night during an important baseball game...

"Venezuela's decision to devalue the Bolivar culminates an event that the market has been anticipating for a long time," said Walter Molano, an analyst at BCP Securities. "It helps alleviate the country's fiscal woes and puts it on a sounder macroeconomic footing."

...The new two-tiered exchange system offers the 2.6/dollar rate for goods deemed essential including food, medicine and industrial machinery. Other products, including cars and telephones, will be imported at the higher 4.3 rate.

...Economist Pavel Gomez of the IESA economic school said the new system will increase opportunities for graft in a country that already is corruption-ridden.

"Multiple exchange schemes are incentives for corruption, more so if they are applied in the Venezuela way," he said. "Those who have good contacts can buy at 2.6 and sell at 4.3."

Chavez, whose popularity usually rises in correlation with public spending, also said on Friday that the Central Bank had transferred $7 billion of foreign reserves to a development fund used to finance investment projects."

S said...

As per Enders comment (did not see)

I would only respond that one worlder refers to the contingent believing we are headed to a global currency. A free gold system is in many ways a shadow of this, no? While leaving fiat in existance, does it not in a way cast a strong shadow over the actions of the sovereign fiscal and monetary policy? That is all I was trying to say about the very real danger letting gold float poses to the CBs. Even if you think you are in a strong position today (ECB) there is nothing so certain as to say things evolve. And so, it seems no CB wants to be lave its flank wide open by having the ultimate store of value be something beyond decree.

I am not at all clear on what the banks have to do with what I was alluding too - other than as a conduit for supressing gold price and arbitraging their informational advanatage as far as asset liability positioning. You say banks back their lending with physical assets - would that be housing, LBO debt, CDOs, commercial Real Estate? My point is they lend based on present perceived value which is very different from intrinsic value - hence the big debate over appraiser being too cautious. Isn't reflation of those real assets the whole point of QE? And yes banks care deeply about what those values are - their ability to lend money into existence depends exclusivily on what the values ascribed to those assets are (and their risk weighting from a capital perspective). So in short I think you are wrong about the value of assets not mattering. They do or the Fed would not have an alphabet soup of programs to support them (along with suspending M2M accounting)

S said...


You are giving the banks way too much credit. Their toll is risk adjusted rate which if mispriced creates negative value - hence equity dilution for the banks.

I am missing what you are saying on banks not caring about the value as they skim off the top. Well if you mean they earn on the debt over time, they only don't care if they have sufficiently earned out by the time the debt sours or is repudiated. You are right that bankers skim off the top, but if the booky is playing with bad odds or using the wrong distribution curve, he loses like the bankers lost. Of course they care what the value of the asset is - that is the entire mandate of the Fed (inflation).

Why the banks need to worry about freegold is that JPM is one of the largest shorts in paper gold. Basically throw in the major bullions for that matter. Pull up the CFTC reports. As for banks broadly I haven;t though through the ramifications of 5 steps out, but one would think deposits would flow out of banks (NIM compression), demand for bonds would diminish (lower capital market activity), lower demand for equities (capital market compression), etc.. and if not lower demand then lower prices at least. Lower fees for transactions, etc... Perhaps FOFOA can elaborate on what the impat of Freegold would be to the banks. Perhaps they build up a bul;lion buisness of roll out gold ATMs like the Germans and make up for the lost interest income in more fees for disposal.

I don't have a good reason for why the banks should care other than they have dollar denominated assets that in a freegold standard would almost certainly see continuing deflation (while gold inflates as the wealth chases a store of value as opposed to the Fed and its debasement mandate). Any cross norder liabilities or derviatives are also time bombs in any devaluation scenario - one would have to know the specifics of the interest rate derivatives and the rest to kow the exact impact.

The question of what freegold would do to the interest rate complex is a good one and I have no idea if FOFOA has addressed it or perhaps Another/FOA? Would the price of debt go up? how would rates reflect the offshoring of store of value to gold? Implications?

I would say I am not sold on the idea that the ECB or any other CB is so anxious to throw in with the idea of a defacto standard. Surely the see the dollar heading to the graveyard and freegold is bridge to the future. They may hate the dollar but they too are inflationary vehicles in large part. All is relative I suppose, but no matter how you cut it, freegold is a standard. If it were benign gov't wouldn't be so stridently opposed to the "relic."

FOFOA said as much in Bondage vs. Freegold back in July 2009 ---

"This simplification of global trade would eliminate the journey the dollar makes back to the Washington DC spending machine. Each currency would only circulate between the public within its own zone, importers and exporters, the banks and the currency exchanges. And the exchange rate of all currencies would match the purchasing power parity (PPP) between countries based on the balance of trade! If the PPP got out of whack, then arbitrage would automatically step in to equal it out. How? Through the free trade of GOLD within each currency zone!

You see, with no global reserve currency in play, no single currency zone will have the wherewithal to manage the price of gold. It will float FREELY against all currencies within their own zones! And the only entities that will NOT benefit from this transition are the US Federal Reserve and the US Treasury! Yes, all other "evil powers that be" will benefit along with J6P! This is why there will not be resistance once the dollar goes!"

Museice said...

I also suggest listening to The Jim Rickard's Interview.

"There is the Fear Vector, the Inflation Vector and The Normal Supply & Demand Vector. These give us a price of $2000. When you start thinking about gold as money that is a completely different analysis. This is where I get to $4000-$11,000 an ounce.

Total Amount of Gold / Total Amount of Money = Price of Gold

It makes a difference how you count the gold and how you count the money but that is the range."

costata said...


Have you seen or heard any report of the Chinese issuing "six official warnings" on any matter in the space of a single week?

Jim Sinclair has said a few times that the Chinese are, at least partially if not fully, hedged on their USD exposure.

There are so many potential Black Swans.

via Global Research
"RIA Novosti

BEIJING- China urged the United States on Saturday to reverse its decision to sell arms to Taiwan, Xinhua reported.

The U.S. arms sales to Taiwan undermine China's national security as well as the peace and stability across the Taiwan Strait, Vice Foreign Minister He Yafei told the agency, stressing Beijing's "resolute opposition" to the sales.

This was China's sixth official warning over the issue in a week, as government officials denounced the U.S. move.

He Yafei said China had strongly protested the U.S. government's recent decision to allow Raytheon Company and Lockheed Martin Corp. to sell weapons to Taiwan.

The sales plan was part of an arms package announced in October 2008 by the Bush administration, which included weapons and equipment such as Patriot III anti-missile systems.

He said the Taiwan issue was "the most important and sensitive issue at the core of Sino-U.S. relations."

costata said...


"One more thing, Big trader left HK some time ago and is now in a waiting game."

Date: Fri Oct 31 1997 16:09
ANOTHER ( thoughts ) ID#256321:

Just prior to the handover of Hong Kong, Jardine Matheson & Co established a new holding company in Bermuda.

In confirming that I noticed This:

"In February 2010, HSBC Group CEO Office will be permanently based in Hong Kong, its birthplace."

Apparently it was a condition of the takeover of Midland Bank that they moved their headquarters to London around 1992.

The wheel comes full circle.

raptor said...


you would like this :) (after 3:22)
Didn't knew the fact about Lidia and the ability to detect gold by scratching on a touch stone.

Doesn't help with tungsten in the core, but still ;)

FOFOA said...

Hi Muse,

Jim Rickards said something interesting at the very end of the interview. He said that Bernanke "as a student of the great depression" not only thinks that tight monetary policy caused the depression to go on so long, but also the gold standard, which is why he thinks he needs to ignore (or control?) gold.

Rickards says that the problem with the gold standard at the time was simply that they had the price of gold set too low relative to the currency. He says that this low price (~$20/oz) likely was deflationary (as funds would want to flow into gold rather than into productive use. He says that after all the high inflation during WWI, they should have raised gold to maybe $50/oz in 1924 rather than going back to the pre-WWI price of $20.

This is interesting to me because I was working on a post a couple months ago which I ended up discarding in which I was going to explore a similar topic. What would have been "the right thing" or "the best thing" that both FDR could have done in 1933 as well as Nixon in 1971 (instead of what they actually did)? The problem they faced was the capital flow into gold, or the depletion of official reserves. The correct solution, or optimal strategy would have been to raise the price to a level that would just barely reverse the flow, so that people/nations would start selling back their gold.

This is where Moldbug's game theory comes into play. You have two players in a "toy game" scenario, the central banker and the market participant. The strategy choices of the market participant are 1) exchange paper for physical gold, 2) exchange physical gold for paper, or 3) no action. The strategy choices of the bank are 1) to raise the price of gold or 2) to print money and use it to buy incoming gold or, in the case of the market participant electing #3, then the bank also takes no action.

In game theory the Central Bank would be the "super-opponent" or the "nemesis". The nemesis always reacts to your strategy changes and automatically plays the "maximally exploitive strategy" against you.

So if you, as the market participant, switch to strategy #1, then so does the bank. If you switch to strategy #2, so does the bank. Same for #3. An optimal strategy pair (the two players both playing optimally) consists of mutually maximally exploitative strategies.

In game theory when neither player can increase his expected return by changing strategy unilaterally, the condition is called a Nash equilibrium. Remember this term? "John Law" said, "The fact is that the spontaneous remonetization of the precious metals is a Nash equilibrium."

But in 1933 we had a fixed exchange system for gold. So if a Nash equilibrium were achieved it would only be short lived. This is why the optimal strategy for the Central Bank would have been to raise the price of gold slightly above the point of equilibrium. There may have been some trial and error involved. Perhaps in 1933 that would have been between $50 and $100. In 1971 it was probably around $500-$750.

If they raised it too high in 1971 then France would have been selling its gold back to the Treasury until the Nash equilibrium was reached. An imperfect solution, but it would have certainly been better than what was actually done.

In the past I have speculated that if the Fed announced today that it was buying gold at, say, $10K/oz. and that it would print money to buy any and all offers of physical gold, that it would at least buy itself a little time. How much time? Unknown. How high would the price go after that? Probably to freegold levels within a few years. But at least it would buy itself some time AND some gold. But that is not going to happen so we will instead go to straight to Freegold, bypassing what could have been an interesting few years.


Unknown said...

U.S. Slaps Tariff on China; Gold Price Jumps

Quite intereseting point, gold started strong today.

costata said...


"Date: Sat Oct 25 1997 17:16

"Is the ECU coming to the rescue, or do you agree with George Soros?

JTF,...... Also, George is not a big player. He is being worked over along with a few others."

In Martin Armstrong's latest piece he claims that George Soros dropped $2 billion on the Russian debt crisis that led to the LTCM bailout. What year was that again?

MA's piece can be found here:

FOFOA said...


Russian Debt Crisis - 8/17/98

LTCM bailout - 9/23/98

Martijn said...


But at least it would buy itself some time AND some gold. But that is not going to happen

Would that really buy it some time? Wouldn't it destroy the dollar right away, triggering market panic worldwide resulting in a drastic increase in the gold price?

Unknown said...

Get your physical gold out the vaults of HSBC

It seems that everyone these days wants gold. Real, physical gold coins that they can hold in their hands, or bars that they’re assured are resting safely in a well-guarded vault. HSBC’s New York vault, for example, buried deep below its 5th Avenue tower, where it has stored people’s gold since it inherited the facility from Republic Bank a decade ago.

But no more.

HSBC has served notice to its retail customers – many of whom are simply middle-men and custodial services which store gold with HSBC on behalf of hundreds of their own account holders – that all their gold must be out of its facility by July 2010. Otherwise, folks, prepare for an unwelcome knock at your door. HSBC’s letter says that, in the absence of directions to the contrary, clients’ metal “will be returned to the address of record… at your expense.”

Unknown said...

“Commodity Super Cycle” Ready to Rumble in 2010, by Gary Dorsch

The colossal V-shaped recovery of the global stock markets in 2009 was indeed, the most remarkable feat, ever engineered by the “Plunge Protection Team,” (PPT). Step by step, the Federal Reserve, the US Treasury, and its key allies in the “Group-of-20” nations,rescued the world’s top financiers from their own greedy mistakes. The staggering size of the G-20’s rescue package, totaling about $12-trillion, was equal to a fifth of the entire world’s annual economic output.

The G-20 bailout included capital injections pumped into banks in order to rescue them from collapse, the cost of soaking up so-called toxic assets, guarantees over debt, and liquidity support from central banks.Tossing aside all arguments of “moral hazard,” the PPT utilized all the weapons in its arsenal, to prevent another “Great Depression,” including accounting gimmickry, and the “nuclear option” of central banking – “Quantitative Easing,” (QE), to rescue the global economy.

Unknown said...

Glencore May Expand to Rival BHP, says Nathaniel Rothschild

Rothschild, 38, is a member of the Rothschild banking family and is co-chairman of hedge fund firm Attara Capital LP, the successor investment manager to the Atticus European Fund, which was previously managed by New York-based Atticus Capital LLC. Atticus, where Rothschild was also co-chairman, took stakes in commodity companies including Xstrata.

Commodities are still a “huge area” of interest for Rothschild, he said. He’s interested in gold and silver and sees investment opportunities in so-called junior mining companies, which find and develop deposits.

Martijn said...

FOFOA, Guys,

Jim Sinclair’s Commentary

As long as the Fed makes noises scaring the hell out of the sitting administration with bi-term elections coming up in 2010, the Fed is under attack and may well succumb.

Bernanke, as with most professors, is totally lacking street (I do not mean Wall Street) sense.

Every time he or his minions chirp up with MOPE nonsense about controlling inflation through draining and rates, he digs a deeper grave for the Fed.

Do you agree to this perspective?

It won't happen overnight anyway, but should it, what would be the implications?

Perhaps a takeover by government could be spun in a such a way as to increase trust, but on the other hand the Fed is arguably involved in so many shadow operations that it would be impossible to have all their business taken over by the government, so it would presumably stop some of those occult businesses.

Who knows what we'll see then.

Anyway, I don't believe any of this will come in play over 2010.

raptor said...


Mind you this is from 2002.

The Manipulation Paradox
Contrary to the conclusions of the GATA, just because the gold market is manipulated this does not necessarily mean that the price of gold is destined to surge when, and if, the manipulation 'ends'. To be sure, if the manipulation in gold were to ever really end there would be no 'price' for gold. Rather, there would just be gold.

costata said...

If anyone has any lingering doubts about the quality of A/FOA's sources.....

"Date: Sat Mar 07 1998 23:16

Date: Sat Mar 07 1998 20:01
Neophyte ( Another - ECB gold holdings? ) ID#390249:
Do you know how much gold the ECB will hold as part of its reserves?

Mr. Neophyte,
I do not know. I have knowledge of some discussion for 15% with a individual country holding that is very high. If this is as a final outcome, many CBs will be forced to call in lent gold and buy. I have reason to find this to be as fact!"

So does this simpleton using the "power" of my 20/20 hindsight.

Museice said...

This is the kind of news I like to read to remind me what gold 'IS'.

Gold Resuming its Historical Monetary Role – as the Anti-Currency

"We know that the US must refinance at least two trillion dollars of debt in 2010. They can raise this money in one of three ways: through the sale of bonds, through increased taxation, or through monetization by the Federal Reserve. Foreign investors showed decreasing appetite for US treasuries in 2009. Rising unemployment along with an aging population makes increased taxation a poor option. Therefore, the US Fed will be forced to monetize the ballooning debt, further eroding confidence in the dollar as the world's reserve currency."
"Along with many others in the gold industry, we have noticed that fund managers are starting to buy gold as long-term insurance, which they intend to hold for several years. By one estimate, if the world’s pension funds and hedge funds moved only five percent of their assets into gold, which these days seems quite conservative, gold would trade above $5,000. With leading wealth managers such as David Einhorn, John Paulson and Paul Tudor Jones allocating significant amounts of their portfolios to gold, the process may have already begun."

costata said...

Link to the Herengracht Index–which shows the CPI-deflated value of housing along a wealthy canal in Amsterdam since 1628.

For the time deprived it is at a 380 year high. What could possibly go wrong?


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


I didn't know you had a link to the Dutch as well...

Martijn said...


Did you also check the "Herengrachtindex" in gold?

Martijn said...

Now compare this graph with the DNA of a bubble.

Quite a match, don't you think?

Seems like the US has had two consecutive bubbles in housing related to gold.

Unknown said...

Gold Casino Vietnam

Days after the Vietnam government announced the closure of some 20 gold exchanges operating in the country, investors have abandoned the gold trading floors and turnover in the bourses has plunged.

Vietnam has around 20 gold trading floors where investors could deposit a small fund and then trade 14 times the value of their initial investment.

Bullion trader Vo Thi Kim said that there is a sudden frenzy in the physical bullion market in Vietnam. "All those who used to trade in the gold trading floors have come to the physical market for gold selling and buying. Volumes of gold business have suddenly zoomed with several bullion traders," Kim said.

Unknown said...

So much dutch sites... Are here some boys who really speak dutch? Nice sites... :-)

Michal said...

Dollar has hit bottom, China says

An investment strategist at China's $300-billion (U.S.) wealth fund said the world's third-largest economy now had a say in the exchange rateof the U.S. dollar, which it expects to rise while the yen should fall further.

“I think the dollar is at its bottom now. There will be very limited space for the dollar to drop further.”

No Need for Gold

Mr. Peng was explicit in his view on gold: “China should have the right attitude about investing in gold. There is no urgent need for China to increase gold buying for now, because prices are high.”

Buying some more Mr. Peng, aren't we? ;-)

My sincerest greetings to all participants in this great forum/blog!

As a lurker of young age, I cannot stress enough how much wisdom and hope have the words of Another and his Friends brought to my little world.

My special thanks goes to you, FOFOA, as it was through your writings that I first accessed these Thoughts!

As time progresses, perhaps I could contribute with my share as well. After all, we watch this new gold market, together, yes?

SatyaPranava said...

michal. great point....china's talking its book!

Michal said...

Thank you, Satya.
Incidentally (and not surprisingly), Jim Sinclair seems to think the same.

Funny how easy China has it though. Well, at least as tens of dollars in PoG go...
But do tens of dollars really matter in the anything_but_ultra_short run, anyway?

And Y said...

Why does ANOTHER sometimes refer to "the writings of ANOTHER" as if they were not his own?

See Date: Sat Apr 18 1998 19:18

FOFOA said...


I believe MK addressed that question within two weeks after that post in April '98, when Another switched over to USAGold...

"I would like to deal with the question of ANOTHERs identity from the outset. At all costs, ANOTHER wishes to remain anonymous. His contact with me has been through a third party who describes himself as "the firewall that breaks the electronic connection from the source."

...I would like to clarify one other aspect of ANOTHER's postings at the USAGOLD web site. There will be two people posting on this page. The first will be ANOTHER himself. From time to time his associate will also be posting. He will be identified here as the Friend of ANOTHER. There was some confusion over this dual role in the earlier Kitco postings. This will hopefully clarify the matter."


So FOA did not have a separate "identity" at Kitco.

And Y said...

Thanks. I hadn't gotten that far yet. ;)

Anonymous said...

Ah Michal -
It all to rare that we get the opportunity to converse with one of tender years Sire/Ma'am, this patch is usually the domain of people with one foot in the grave!

Welcome to the opaque, little understood and wacky world of GoldBuggery!!
Might I suggest a first step to take on your personal quest is to mentally upend the denominator and numerator ie: rather than thinking in Dollars (Euro, whatever) per OZ, you also mentally attune to Grams per Dollar (etc). A subtle but necessary step for evaluation purposes imho ...if one is to stay atop the game, particularly as we creep forward into the future.

Now if I can just shake my foot loose from this damn hole someones dug ...;-)

FOFOA said...



"As a lurker of young age, I cannot stress enough how much wisdom and hope..."

It is rare that a person under a certain age can recognize such things! I would say that you have a rare advantage in life. Please do contribute your thoughts. We all watch together.


FOFOA said...

Hyperinflation History: La Terreur
by John Rubino

"A while back a reviewer dismissed the idea of a dollar collapse by asking “Collapse against what?” His argument was that the other major currencies are a mess too, so in relative terms the dollar will be fine. This of course misses the point..."

Michal said...

Thank you, Sire, you are absolutely right! This transition, this Shift in(to) Thinking you mention is, I dare say, the most important part of the change the world will experience. Indeed, I do (more-or-less successfully) try to think in this way for a very simple reason - for me, the real world has always worked in this way. However, often when in a discussion I fail miserably in paying sufficient homage to this Thought. It is all the more valuable for me to be able to enjoy the presence and wisdom of the more experienced ones like yourself, for I know they will always try to help me to keep my eyes open for the real beauty that can be seen on the trail.

On a more practical note, perhaps it would be wise to clarify that I am a man who now observes his little world with more concern for the EURO than for any other currency.

And don't you worry about the holes, Sire! I am certain we will watch this new landscape to open up before right in front of us - and your feet will be well above the ground the whole time. That's where the "jumping in the air with joy" phrase comes in ;-)

Thank you, FOFOA! The more I realise how much my own path owes to your Thoughts, the more I value your kind words. Thus it is not without pride when I add that, being the man of little wealth I am, my path is not just a one of intellect, but of actions and "taking positions" as well. Perhaps actions are truly needed from every one of us, no matter the "size" or the "age". After all - if nothing else - it is so much more fun to hike in a large and diverse group, isn't it? :)

FOFOA said...

ANOTHER (THOUGHTS!) (04/15/01; 18:58:39MT - usagold.com msg#: 51943)
Mr Gresham (04/14/01; 18:44:54MT - usagold.com msg#: 51889)
Welcome Mr. Gresham. We talk for a time, yes?

You write:

"We who read here generally buy the coins, one ounce and less. The "Giants" you speak of are usually buying the large bars (100 ounce?), yes?"

I ask you, how many of your bars in tonne? This is the small purchase size.

"Is there a limited supply for them to get, and only through the large brokers with their "private wealth management" programs?"

I would say the BIS is best broker, always. It best to sell dollars for gold when gold is offered.

"I am trying to understand why this knowledge you bring is not being acted upon by some others with "deep pockets", such that the markets would be moved, or shortages occur, even before the dollar is seen in weakness."

My friend, you see the gold with "Western eyes". In mind, it be always, "how much currency does my gold bring". In this world of much paper gold, it bring not much dollars yes. In such matter, your currency makers do make your wealth lay low. This dream of much dollar currency for gold is the illusion in the "Western Mind". Your men of "deep pockets" do probe for shortages, however, their wish for low supply is not to be found. Their pockets are full with "credit gold" and sad are they at currency price this brings. It is the fools game to corner paper gold printing press, no? Sir, I stand with no fools!

Days and nights do pass and one morning will bring a dollar price for gold you have never known. In that day, I will cast this currency down and walk with real wealth. In this day, the gold will trade in Euros and no bribe of credit gold will be needed to mark this new money.

Today, in my world it be how much gold does dollar currency bring. A difference in understanding from yours, I think. Today, amount of bullion available for dollars no longer the reflection of bullion dollar exchange, it be now the most terrible bribe for world dollar use. An acceptable deal in most of world, such is real world outside your laws, no?

But, it is here, in act of making extra credit gold, where the "shortage" you speak of, is measured my friend. A good man with one eye does see this time as of but few years and short days. Aside from our Euro political changes, history alone does show all great currencies end with this overselling of credit gold as last of era. This paper gold credit is always for the fools first and last. It value is later reduced to same as currency, along with holders of no gold.

It be our good fortune (and yours) that bullion is offered still. For the simple man, such as I, this wealth is that for kings but more so for his people. For all peoples, gold will be again the wealth of ages.

In this day, at end of dollar era, all do see real bullion sold for sake of market credibility, only. Perhaps too, bank credibility, I think. In this world, the lower this dollar paper price, the more bullion becomes available for credibility sake. It is the good thing for men of "small pockets" and the curse against traders and fools.

I bid you the good fortune of "small pockets" with much physical gold! We watch this new gold market together, yes?

Thank You

(By the way, Mr. Gresham is with us here today. I received a nice email from him just last week.)

Anonymous said...

Yes Michal,
Not wanting to put too finer point on it but, it (psychological Grams/Dollar viewpoint) will keep you slightly ahead of the pack going forward I believe.

Similar to how it is now I might add... (for us anyway, here in Oz) We watch the $US PoG as a reference ...and then, as a secondary mental note, convert it to $A PoG. However, the mental picture (PoG up or Down) is done in virtual $US's.
Essentially, in time, that entire process will have to be abandoned ...and, if we're mentally agile and prepared beforehand, it will be "individually" most beneficial.

Methinks anyway ;-)

Mr Gresham ...that handle conjures up some fond memories ...as I recall from the LI ...or the Hamptons p'raps FoFOA?

Unknown said...

Can we discern ANOTHER's nationality from the way he translates into English? I think Flemish...

FOFOA said...


I don't recall the geographical references you make. But it does seem that Another and FOA were both fond of Mr Gresham as well.

Museice said...
This comment has been removed by the author.
costata said...


I don't have a Dutch connection but the guy who linked that chart does.

Thanks for the index in gold. Even though I don't speak Dutch the charts were self explanatory.

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

I would really, really be surprised, if Another would be Etienne Davignon... (If Aleksandar is right with the nationality)

Ludwig von Mises said...

"FOFOA said...


Very interesting. Maybe they'll find a way to turn the CERN LHC into a giant printing press."

Gold is a currency. Unless you want to drag around bags of freegold to pay for airline tickets and the like, we'll need to know if the digits that arrive are for real.

CERN may come in handy for making energy - which is akin to porinting money.

Wish you all the best with your discussions.

costata said...


John Browne of Euro Pacific Capital unearths a major flaw in the Euro currency.......

"However, the structural problems that were so heavily debated at the birth of the EU remain unresolved. These uncertainties may undermine the euro as a viable dollar-alternative. Should recent economic strains continue unchecked, investors, institutions, and central banks may move heavily into gold as an ultimate "safe haven"."

Shame the Euro "architects" neglected that possibility (smile).

Classic example of "hearing the music but being unable to find the band".

Full article here:

FOFOA said...

Great comment Costata. Thanks!

FOFOA said...

Did you see that Topaz made a bold call?

Michal said...

Yes, FOFOA, a call of the millennium indeed.

On a slightly different note, I have just read this piece by Martin Armstrong and I'm stunned how - besides the technical analysis he provides - he too sees no other alternative than a demonetization of gold (FreeGold!).
Although I could not really tell when he expects it to happen (with regard to the economic/gold cycles)...

Who knows, it might be in two days.

FOFOA said...

Hello Michal,

Have you also seen my May 9 post? I must admit I have not read that one yet, but I will.


costata said...


All of Martin Armstrong's recent articles are archived on this blog.

(see right hand side links)

In regard to your reference to "it might be in two days" I suggest you explore at least two links here - Harvey Organ and Topaz-Time Currency blogs.

(Thanks to FOFOA for introducing me to those blogs.)

For long cycles you could do worse than Armstrong. For short cycles you could do worse than the blogs mentioned above.

BTW Michal, welcome and well met.

Michal said...

no, I have not read it yet - thank you for the link. From what you wrote it seems the logic in both pieces is the same - in order for the word to continue, gold must be set free. Now I understand Martin's argument is simplified a bit sometimes (I do not think he considers the fact that today's gold transactions are mostly paper, etc. etc.) - but the principle remains the same. Perhaps I would say there's less philosophy (Thoughts!) and more pragmatic experimental economics behind his view.
Also, as you've already noted in you May 9th blog, the fundamental part of his argument is rather overshadowed by lots of technical analysis, which goes for the latest piece as well.

thank you for your welcome, Sir. I did make my reference precisely with regard to Topaz's latest blog which I follow closely. Thank you for the other links too, I will catch up with them ASAP!

BTW, if you are interested, perhaps ECB will have something interesting to say?

Martijn said...

Who knows, it might be in two days.

What exactly does "it" mean in that sentence?



Unknown said...


Welcome and all essays of Martin Armstrong could be found here on his own site ;-)

And what would happen in 2 days?


Unknown said...

This one quote encompasses everything that pours forth from the official organs of state and MSM (in my humble opinion). Join the dots from attacks and threats by distant enemies, to carbon tax and "climate change," to inflation being a necessary ebb and flow of the historic tides of monetary creation, to the unpredictability of financial bubble creation etc (reference was posted by Jim Sinclair today).

"Ask yourself why totalitarian dictatorships find it necessary to pour money and effort into propaganda for their own helpless, chained, gagged slaves, who have no means of protest or defense. The answer is that even the humblest peasant or the lowest savage would rise in blind rebellion were he to realize that he is being immolated, not to some incomprehensible ‘noble purpose’, but to plain, naked, human evil."
— Ayn Rand

Could the chink in this
curtain of propaganda be current revelations of GS/fed malfeasance. Do the "humblest peasants" now perceive them as being tantamount to "plain, naked, human evil?" Does "blind rebellion" then lie in wait over the horizon!

costata said...


Thanks for the link to the Martin Armstrong site. It seems to be more comprehensive than economicedge.

Indenture said...

Mathematically this all makes sense

"The U.S. dollar will be the next bubble to burst. The government’s fiscal position is unsustainable. America owes six times what it collects in tax revenues each year, and that ratio is projected to explode with the retirement of the baby boomers. On top of that, nearly 40 percent of U.S. debt must be refinanced each year, leaving the government highly vulnerable to rising interest rates. The Fed’s printing presses have been working overtime throughout the crisis, buying Treasuries and other securities to keep the economy afloat. This is a recipe for hyperinflation. Advice in one word: Gold."

The Next Meltdown

FOFOA said...

Hello Muse,

Regarding an earlier question...

While it is tempting to view the Giant Vampire Squid metaphor through the very limited window of a couple decades and one or two big banks, I think it probably yields the wrong conclusions.

Here is another "Vampire Squid" article from today that is closer to my view of the squid:

Goldman Sachs The Giant Vampire Squid’s Journey To The East
by Darryl Robert Schoon

In my view, the Giant Vampire Squid is the long-wave "Western Banking" usury trend that is a little over 300 years old now, and currently living its final days on Earth.

The squid hit its peak after 1971 in the form of the IMF, where it was able "to lend help" to entire countries in the form of purely symbolic currency, yet require at least some debt repayments in real physical gold.

Ever since Iceland's currency collapse in late 2008 I have believed it to be a fractal microcosm of what is coming. Here is a nice description of how Iceland is now repudiating the squid:

"It is now estimated that Landsbanki, the mother-corporation of Icesave has got indeed enough assets, which when they are sold slowly will return more than enough money to pay for the reimbursement of the saving-account depositors.

However, after printing themselves enough Pounds or Euros, the British and Dutch governments paid out the depositors of Icesave themselves – immediately, without waiting even until any preliminary numbers were in.

Then they called the whole thing “a loan” to Iceland.

And now the British and Dutch government is blackmailing the Icelandic government into paying back that “loan”, nobody asked them for, with interests and on a long term basis. And of course “repayment” will have to be in Pounds and Euros, which Iceland cannot just print."

"A historical moment occurred in Iceland on January 5th 2010 when the president chose to block a bill from the parliament to repay 3.6 billion pounds ($6.3bn) to the British and Dutch governments and passed the responsibility of accepting or rejecting the bill on to the people of Iceland...

A media and governmental spin of fear mongering is occurring every day now in order to coax the Icelandic people into passing a vote out of fear and thus accept this bill that would put the nation into debt slavery for the foreseeable future. The government insists that the nation will face isolation and boycott from the international community if they will not pass the bill.

However, this tiny nation of approx. 320,000 people has a good case for saying it won't pay and even better case for saying it can't."

In the squid world it is all about holding the debtors to their debts, making them pay in real terms even while debasing the currency. And the squid went "all-in" on the US dollar in 1971. Now it is only the strength of the US dollar (in real terms) that stands between life and death for the squid. The gold market is, and always has been, the squid's Achilles' heel.


costata said...


Reading another article emphasising no bailout for Greece (or anyone else). The author, Axel Merk, quotes Trichet of the ECB.

ECB - Greece No California

For the time deprived:
"Asked about bailing out Greece or other member states with severe fiscal challenges, Trichet called the ECB collateral framework crystal clear, applying erga omnes (equally) to every member state; no special treatment will be provided to any one member."

"In the euro zone, member states may receive funding from the ECB by posting collateral, but only if their debt is appropriately rated by the major credit rating agencies."

"Asked about any threat to the euro because of Greece's problems, Trichet pointed out that Greece's Gross Domestic Product (GDP) is a mere 2.5% - 3% of the euro zone GDP. In California, which has its own set of severe fiscal challenges, the magnitude of the problem is far larger (California's GDP is over 12% of U.S. GDP)."

FOFOA said...

"In the euro zone, member states may receive funding from the ECB by posting collateral, but only if their debt is appropriately rated by the major credit rating agencies."

collateral: 4 a : of, relating to, or being collateral used as security (as for payment of a debt or performance of a contract) b : secured by collateral... Assets pledged by a borrower to secure a loan or other credit, and subject to seizure in the event of default. also called security.

Hmm... Wonder if gold needs a Fitch rating in the euro zone. (shoulda consolidated that wealth into gold while it was still worth somethin', eh?)

costata said...


From the same Axel Merk article. In a similar vein to the earlier quote from John Browne of Euro Pacific Capital.

Axel Merk:
"While many are concerned about the rising spreads in sovereign debt in countries such as Greece ...spreads that had been too narrow for too long..."

"The market is finally correcting this key flaw in the design of the euro." (my emphasis)

With all due respect Axel, no, the flaw is not in the Euro. The flaw is in the manipulated market and the unsound monetary system.

Look for the return of the "regulator" from the exile suffered in 1971.

(Axel, a blogger by the name of FOFOA can provide the critical information.)

Also Axel, please listen carefully to Mr Trichet: "...funding from the ECB by posting collateral..."

Please review the books of the ECB (or read the blog of that FOFOA chap).

What asset does the ECB hold in the highest esteem? It is Gold, Axel.

Wouldn't it be logical that the ECB would in turn view Gold as the ultimate collateral?

costata said...


You were too quick for me. I only saw your comment after my last one went up.

FOFOA said...

Hehehe Costata. I have the advantage of a SYSOP.

Here is the "flaw" in the euro...

In a fixed exchange rate system (like the eurozone), Freegold will counterweight the trade imbalances that develop between regions. These imbalances will either have to be corrected through economic production and austerity or else the flow of physical gold will go to more productive regions.

All Trichet is saying is fix your economy or put up some treasure as collateral for a loan. Is this so wrong? (Well, it might have been under the IMF, but perhaps it is different within the EMU!!)

Once again I recommend reading ONE WORLD, ONE MONEY? for more insight on this subject: "Robert Mundell and Milton Friedman debate the virtues—or not—of fixed exchange rates, gold, and a world currency. May, 2001"

By the way, I do not argue for a fixed exchange rate system. I do not thing one will work. The larger the area, the less likely it is to work. This is why I believe a one world currency will never take hold. Perhaps the euro will survive as one of many currencies... perhaps not. But I would say that the euro has helped the eurozone "so far" through this crisis. Can you imagine the chaos in Europe over the last two years if we were dealing with a dozen different currencies? We'd have several "Icelands".

Unknown said...

I agree with FOFOA's comments, I believe in a worldwide hyperinflation. Only based on a simply reason: They've all printed so much new money...

This would certainly not be sustainable, but it would lead to a social armageddon to realise one new world currency (and NWO), because the people would ask for help to the government for security and stability in chaotic times and they could create a new big vampire squid (to replace the dying old squid and political circus for the Elite is assured for the next 300-500 years) with a new currency to enslave the people again from zero to next burst of the big one...

Unknown said...

So is FOFOA's comment right:

This is why I believe a one world currency will never take hold

There is no other currency to swap from the old one, which is not more sustainable...

The replacing the one (hyperinflated) new currency to other new world currency would create again a financial armageddon, maybe in the year 2525? (a funny imaginary date for the next doomsday, like 2012)

Unknown said...

Here some links to read:

From 700 billion to 12 trillion

Pension Crisis Threatens Financial Health of States

The report, published by the American Legislative Exchange Council (ALEC), the nation’s largest individual membership association of state legislators, shows that as of 2006, states have accumulated nearly $360 billion in unfunded pension obligations. However, the authors warn the problem is even worse, as investment losses from the recent economic downturn have not been fully realized in the official government statistics.

Sovereign Debt Crisis Coming As Recovery Stalls, says Mish

Sovereign default risks loom, Financial Times

Central Banks have been net purchasers of gold since the second quarter of 2009, mineweb

Martijn said...


The elite, enslave the people... I can see where you're coming from and to some extend I do agree, but don't forget to around in the real world. There literally are heaps of people with mindblowing shortsighted visions that basically ask for it. The really do want more anti-terror laws and all the like, not understanding that trading freedom for supposed security is not a good deal.

Based on their lack of insight and sometimes even outright stupidity I would almost take sides with "the elite".

Michal said...

I thought I posted here yesterday after the ECB press session but apparently I didn't, so I'll be quick:

Martijn and Jimmy,
Well, to quote, "the system goes belly-up". :-)
However, now it seems like it has "faith" despite yet another technical mess it just experienced.

I actually ran into that particular website when googling Martin. Close to the source, eh?

costata and FOFOA,
my post is largely obsolete now - you've mentioned all the important news I too wanted to share (smile).

Martijn said...

The system has been pronounced dead heaps of times.

...well, it'll be the call of the milleneum if the system goes belly-up in 2 days from this current stand-point.
It all hinges on the L-Bonds ability to stay above 115 on a daily basis - it appears.

Would be nice if it ever could depend on just one factor like that. However, I'm usually quite sceptical to claims that the end is near, and so far rightly so.

What does the above quote mean anyway? What would have happend if the L-Bonds would not have stayed above 115?

Either that blog is for really smart people that do not require much explanaition, or the author simply does not feel like explaining his calls of the millenium.

Martijn said...

There's an interesting article int the Asia Times on forward sales and other manipulation in commodity markets now and in the past.

Martijn said...


The only way to manipulate commodity prices is through the ability to secure supply. In the oil markets, funds, whether ETFs or hedge funds, are categorically unable to make or take delivery of the underlying commodity, and are therefore unable to manipulate the price. It is only "end user" producers and distributors, or the few traders with the capability to make and take delivery, who are in a position to manipulate oil prices, and in order to do so they require funding, or leverage.

raptor said...


Two good quotes from those two videos :

"2000-ier" (5:30) .. clasic ;)...


"A Depression is Recession that the government tries to fix..."

costata said...

Via Jim Sinclair's JSmineset:


The writer notes that the pre-Christmas change to Fannie and Freddie lending limits provided for unlimited Federal funding to them for 3 years.

Multiple trillions in exposure for the taxpayer to the final peak of the resets (2010-2012).

He also mentions the pre-approved US$4 trillion for further bank bailouts in H. R. 4173 currently working its way through Congress.

Unknown said...

@Martijn: Yet, I've readed 277 books in 2 years. There is so much information in my head that could lead to make mistakes in taking conclusions of all (+conspiracies) info's. I'm seeking for the real truth and it's very difficult with all conspiracystories versus real world.

On marketskeptics is a good analysis about conspiracies.

And 2 must read books about the real world:

False Dawn: The Delusions of Global Capitalism by John Gray

Karen Ho: An Ethnography of Wall Street

Very interesting and it's changing my mind about conspiracies and the vision on the real world. It's allways what I've thought in the beginning, but was misleaded by all bad conspiracies... Now, I hope I'm in the right way to seek/find the real truth...



Martijn said...


That's quite some reading. Please make sure to save some time for the good things of life as well.

Thanks for those books, I'll have a look at them.

Unknown said...

@Martijn: Just back from good day with friends. Yes, the life is too short to work hard. One day not laughed, is a day not lived... ;-)

The book of John is the best and most complete book I've ever read. Soros likes also this book, because the author tells the naked truth about capitalism... You could also get it in Dutch: "Valse dageraad: Het illusie van de kapitalisme."

Have a nice weekend!


Thomas said...

Jimmy: Looks like interesting books, I'll check them out when I have some time. After reading your comment I noticed there's a big article about Karen Ho in the weekend edition of De Tijd (a Flemish newspaper) :)

Phat Repat said...

@Jimmy; MIT reviewer (Paul Krugman?) sure wasn't too kind to the first book you reference by John Gray. Ouch... Of course, this might be a good thing. ;-)

Michal said...

Jim Sinclair just posted some interesting links:

Martin Armstrong's latest piece. He starts off with quite a few pages concerning history of money (gold, fiat, floating exchange rate), concludes that the world needs a new reserve currency, with local fiats (read debt) co-existing alongside the reserve - all governed by the markets under the floating exchange rate (free!) ...
... only to fall into several pages of technical analysis. Uhh.

I mean, it probably couldn't be more obvious, could it? Why doesn't he say it out loud? Hm.

A whole new kind of fun starts when others decide to join the race, I s'pose.

New GEAB's on the way, too. Unfortunately, I cannot say more about this one since I do not have a subscription with them - but it seems well worth reading, as always.

Enjoy - and have nice weekend!

Michal said...

Have a nice weekend, of course.

BTW - is there any way to edit one's posts (like mine this time, for example :-) )?

Anonymous said...

The un-dead struggle onward ...

...and we live to die Another day.

The "future" it can be said, is only ever perceived in a linear sense ...however, without exception, it manifests as non-linear.
To the tens of thousands of Haitians whose futures were so abruptly terminated last Thursday, please accept my (our) most sincere condolences.


costata said...

Hi All,

IMHO the latest post on Harvey Organ's blog is a must read. He covers a lot of important unfolding events including the upcoming CFTC gold and silver position limits forum (a sham IMO).

One other example. I think he has nailed the situation with GLD and SLV. Apparently just before each of the recent raids by the bullion bank "boyz" there is a withdrawal from the ETFs.

I wonder if this dovetails with the analysis by Doug Hornig of Casey Research suggesting that HSBC booted out its retail clients to free up space for increased Comex warehousing commitments.

Re-linked here:

Perhaps there is an interim step before the events that FOA predicted in relation to the US "political gold".

Do you think they intend to clean out any physical metal in GLD and/or SLV next?

FOA (08/06/01; 09:37:25MT - usagold.com msg#91)
Gold Mobilization

"To date, these gold shipments have been ongoing but have not, yet, involved original US political owned gold. The bullion involved has been metal subjugated from foreign third world countries through dollar for gold swaps; executed thru US currency protocols."

Fits the MO, does it not?

FOFOA said...

Hello Costata,

It is well known that GLD and SLV are simply an investment in "the price of gold" (and silver), and not an investment in the actual metal itself. Any actual metal owned by the writers of those shares are simply a hedge for themselves against the paper dollars they will have to pay out in a liquidation. In their world, a leveraged paper position may work as an even better hedge than "unleveraged" physical. Since shares are not convertible, it doesn't really matter what they use to hedge their position liability. Any physical they have is simply window dressing, a marketing ploy.

A fiat manager like the Fed or Treasury could easily make them an offer they couldn't refuse for any physical they hold. All they care about is making the ETF perform along side the paper price of gold. The profits the ETF managers are making have nothing to do with Freegold.

So in that sense, you may be on to something.


Indenture said...

Costata- I agree. Everyone should read Harvey Organ's January 16 Commentary. I especially liked "Bill H. 'This Food Fight Needs A Hall Monitor'". He talks about Silver but he is talking about Gold also. "It is obvious to me that Silver is being manipulated worse than any child in the middle of a divorce but if people (investors) would just avoid COMEX and ETF's or buy only the spot month and demand delivery who would care what these cheating rocket scientists say Silver is worth 6 months from now? If people would just buy the real deal with no margin and have it delivered then the CFTC would not need to whitewash a crooked COMEX and Murphy, Butler, and Hommel would have their "true price discovery" that we all deserve!"

costata said...


"Any physical they have is simply window dressing, a marketing ploy."

I take your point and I realise that a lot of people think mother GLD's cupboard is bare. From the perspective of the holders of their paper gold I have no doubt that A/FOA and your good self are 100% right. It will be bare at some point but I was looking at this from a different angle.

If you were a bullion bank and you wanted to secretly acquire and stash some actual physical metal the GLD ETF would be an ideal vehicle.

Consider the advantages:

1. As anyone who has read the prospectus knows GLD don't have to cough up any physical gold BUT you can argue that it "belongs" to GLD. As a custodian you can grab it anytime you want.

2. You get a free carry on the cost of purchasing the gold courtesy of the fully paid ETF shares not to mention charging fees for storing it etc.

3. The ETF provides another component of the paper gold structure that you can manipulate.

FOFOA said...


I'm not arguing with you, but I'm not quite sure what you're saying. Are you saying they are using GLD to buy up physical (from the COMEX) with the foreknowledge that they will be able to keep it for themselves later and pay out only electrons to the shareholders?

Or are you saying they are using the physical already in the GLD warehouses to shore up the COMEX? (which Harvey seems to be saying) Perhaps using it for actual deliveries, or even just moving the window dressing around to whichever window currently has an audience?

Consider that if at least a portion of the GLD "golden stockpile" is actually a sophisticated paper hedging operation, then wouldn't they be shedding some leveraged long futures positions as it was falling in price? Could this show up on the ledger as "shedding another 2.13323 tonnes"? (Especially if they are counting paper gold the same as physical.) It's easier to click a mouse than to ship two tonnes of metal, even a few blocks down the street.


costata said...


I wasn't trying to identify their strategy. That is a task beyond this simpleton. I was raising the possibility that these guys could have been using GLD as part of both a paper and a physical strategy.

"..... using GLD to buy up physical (from the COMEX) with the foreknowledge that they will be able to keep it for themselves later and pay out only electrons to the shareholders?"

This is a possible option. As a custodian to the GLD vehicle they have enormous flexibility. I wasn't thinking necessarily of the COMEX alone.

Let's be realistic Barrick is one of JP Morgan's lapdogs. Where does their output of actual metal go? Is it pre-committed before it is refined and smelted? How many other mini-Barricks do they control through covenants on forward selling contracts AND debt instruments?

"Or are you saying they are using the physical already in the GLD warehouses to shore up the COMEX? (which Harvey seems to be saying) Perhaps using it for actual deliveries,.."

My gut says they are not letting go of any physical gold they control at this stage of the game. The miners still have to sell their output (in some cases regardless of price if Jim Sinclair is right about the standard terms of their contracts).

The banksters are the supreme experts at using other people's money (and gold?), are they not? The following seems more likely to me....

".... or even just moving the window dressing around to whichever window currently has an audience?"

Control of a large physical holding doesn't rule out...

"... a sophisticated paper hedging operation, then wouldn't they be shedding some leveraged long futures positions as it was falling in price? Could this show up on the ledger as "shedding another 2.13323 tonnes"?"

Not sure of the mechanics of this.

As a custodian for GLD along with a cartel of other like minded bullion banks the following would just be a "book entry" for them.

"It's easier to click a mouse than to ship two tonnes of metal, even a few blocks down the street."

Click metal in custodian vault space 9 belongs to GLD. Click paper replaces metal. Click metal replaces paper and so on.

That episode a few months ago where the GLD bar list went through wild gyrations in its stated size is also at the back of my mind. That would be consistent with the type of computer based "now you see it, now you don't games" we are discussing here. Maybe someone slipped up and issued an actual report and then they had to do some fast footwork to get the facade back in place.

FOFOA said...

Impressive analytics for a simpleton. ;)

Unknown said...

I can feel it coming...another post that is...

costata said...


Thank you once again for your kind words.

Martijn said...

Someone has found more tungsten...

Martijn said...

Didn't the A/FOA discussions also point to the Rothschilds?

From the article above: Interestingly, GATA’s Bill Murphy speculated about this back in 2004;
“Why is Rothschild leaving the gold business at this time my colleagues and I conjectured today? Just a guess on my part, but [I] suspect something is amiss. They know a big scandal is coming and they don’t want to be a part of it… [The] Rothschild wants out before the proverbial “S” hits the fan.” — BILL MURPHY, LEMETROPOLE, 4-18-2004

SatyaPranava said...

martijn, i'm not sure if they weren't simply attempting to rattle some physical from weak hands. i mean seriously, the rothschilds...getting out of gold? it just kind of makes me laugh to think about.

I'm wondering just what kind of real-world scenarios would bring that on. not many that i can think of (LHC being able to make gold cheaply and easily? and that's far fetched for me). they're still in gold, IMHO, even if they're just sitting tight on thousands of tons. something tells me they'll be ok when all is said and done :)

Martijn said...

i mean seriously, the rothschilds...getting out of gold

It says: "getting out of the gold business", which is a slightly different take in my book as owning gold while not actively trading would suffice.

Martijn said...

even if they're just sitting tight on thousands of tons. something tells me they'll be ok when all is said and done

The article never argued the won't be.

SatyaPranava said...

i was wondering why you were seriously considering that. thanks for clarifying.

CrackWhoreGold said...

The Rothschilds gave up their seat on the LBME in 2004. They didn't stop trading or investing in gold. Some here at FOFOA's have speculated that the reason they left was because they foresaw the looming crash when all the gold derivatives collapse...

Martijn said...

And as indicated in the article linked above perhaps they too foresaw some trouble with tungsten stuffing.

Martijn said...

Anyone else here recently tried to close a bank account?

S said...

FOFOA, Per an earlier point I made re what banks are doing to hedge themselves, this from Sinclair:

"All you need to do is to keep a weekly record of what China is spending on energy and materials to know dollar diversification is a simple business tactic for nations lacking debt.

Few have granted that the outlaw banksters have a large problem with their trillions of dollars. What you are forgetting is to be crooks of this magnitude they have to be damn smart. You can be sure that as a minimum they are already diversified in their dollar holdings and are at a minimum 50% non-dollar. You can also be sure they have 5-10% in gold and that percent will move higher. People that can rip off the world surely anticipate and care for themselves. To think otherwise is foolish.

Gold is going to $1224, onward past $1274-$1278 on its way to $1650 before it moves onward to Alf Fields and Martin Armstrong’s numbers."

FOFOA said...

Hello S,

Your comment is right on topic with a post I have been working on. I haven't had much time lately to work on it, but hopefully I'll have it up soon.


costata said...


I was reading the excerpt from the latest Leap2020 report. Very bullish on gold. Link below.

The piece includes a table showing how much gold has appreciated in terms of 17 currencies over the 10 year period from 2000 to 2009.

The first thing that struck me was how low the rise was in Euro terms compared to other currencies. Its' performance suggests that the Euro "doomers" should rethink their position.

Something about the figures intrigued me. I re-ordered the list showing the lowest to highest rise and added in Swiss Francs.

I can't help feeling there is a "message" here somewhere. What do the BEST performers have in common (if anything)? Likewise, what do the WORST performers have in common (if anything)? Any ideas?

Apologies for the crude layout.

Currency............Gold Decade Gain (%) 00/09
Canadian Dollar.........179
Australian Dollar.......182

Chinese Yuan............218

Swiss Franc.............240
Japanese Yen............249

Brazilian Real.........273

US Dollar...............292
UK Pound................298
South Korean Won.......299
Russian Rouble..........310
Indian Rupee............313

South African Rand......365

Mexican Peso............434


costata said...

"World Gold Council aims to push Indians out of real metal into paper"


"The WGC official said that the apex gold body has decided to launch the new paper gold in India as consumers have been saying that storing physical gold at their homes is becoming very inconvenient."

It's so 5,000 years ago.

"The paper gold instrument will help investors and customers in getting rid of (deleted -storing) their precious gold."


Greyfox "It's the Debt, Stupid" said...

"All Trichet is saying is fix your economy or put up some treasure as collateral for a loan."

World official gold holding (December 2009)


As concerns the possible bailout of Greece.
Greece has 71.5% of its national forex reserves in gold (112.4 tonnes). Compare that to the 3 or 4 grams California might have as collateral for a bailout.
FOFOA, Thanks for all the great posts.

Martijn said...


That is interesting indeed. Same goes for at least one of the other PIGS: Italy. They are sitting on a rather large pile of gold, if I'm not mistaken its the highest "per capita" holding in Europe.

Martijn said...

So that might even explain why they admitted Greece even though they news its balances were falsified.

After all it does seem like an easy way to rake up some physical.

Greyfox "It's the Debt, Stupid" said...

Italy has the world's 4th largest gold reserve. It has 63.4% of its Forex in gold (2451.8 tonnes) as of Dec. 2009.
Greece at 30th place doesn't amount to a pimple on Italy's butt.
However California, New York and the other 39 states that are in trouble have none.

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