Wednesday, July 7, 2010

The Debtors and the Savers

Ever hear the one about the little old lady living in an old but paid-off house, with a shoe box full of gold coins in the basement? Across the street lived a big guy, in a big McMansion. It had a special garage for the RV, and another four-car garage for the other four cars. He had a boat at the side and a trailer with two jet skis in front of the boat. Then one day little old lady noticed big guy was gone. The bank had taken back his house.

Most people thought big guy was rich and little old lady was poor. How wrong most people were.

Tiger's Tail

I watched a pretty forgettable movie the other night on TV. It was just so-so from a film-maker's perspective, but it had at least one redeeming quality from my blog-maker's perspective. It highlighted a point I had been thinking about.

The film is called "The Tiger's Tail", and the basic back story is identical twin brothers that were separated at birth when one was given up for adoption. The adopted brother is destitute when he discovers he has a twin who is a very public multi-millionaire businessman. So, filled with envy and anger over being given up as an infant, he hatches a plan to "steal" his brother's identity and life for just long enough to liquidate his assets and make off with the cash.

He is successful supplanting himself into his brother's life only to find that the vast wealth is built completely on debt. What filled him with envy on the surface is nothing but a giant, net-negative hole once he looks behind the curtain.

Here is an eight minute version of the movie that contains all the relevant scenes. We pick it up right at the point where the adopted twin first arrives at his brother's office, pretending to be him, ready to liquidate a few assets...

My apologies to John Boorman. I'm really looking forward to your remakes of The Wizard of Oz and Excalibur, and I loved Deliverance and Exorcist II: The Heretic. ;)

Marx Had It Backwards

Karl Marx predicted the breakdown of capitalism as a result of class struggle, followed by the establishment of a grand commune in which all the means of production would become publicly owned and used only for the public good. Sounds pretty nice, huh? "Imagine no possessions, I wonder if you can. No need for greed or hunger, A brotherhood of man. Imagine all the people, Sharing all the world..." ... and all that peace and harmony stuff.

Today we have many fine, intelligent and exacting analysts all looking at the same economic data and coming up with vastly different analyses of the present global financial crisis. What sets them all apart from each other is not intelligence, or math skills, or even popularity. What sets them apart is the foundational premises on which they operate.

And a false premise can skew a brilliant analysis 180 degrees in the wrong direction. Few analysts fully disclose their premises. But Karl Marx did, and in this we can find the one, key flaw that sent his analysis off in a disastrous direction.

Marx writes, "The history of all hitherto existing society is the history of class struggle." He got this part right! What he got wrong was his delineation of the classes.

Marx's classes were:

1. Labour (the proletariat or workers) - anyone who earns their livelihood by selling their labor and being paid a wage for their labor time. They have little choice but to work for capital, since they typically have no independent way to survive.

2. Capital (the bourgeoisie or capitalists) - anyone who gets their income not from labor as much as from the surplus value they appropriate from the workers who create wealth. The income of the capitalists, therefore, is based on their exploitation of the workers.

Simply put, Marx says it's the rich versus the poor. According to Marx the rich exploit the poor to get themselves a "labor-free income", which spawns a class struggle.

This is an attractive perspective because it requires only a cursory, superficial judgment to place someone into one of the two camps, the rich or the poor. If someone is driving a Bentley we immediately know which group they are in, right?

But within this simple, foundational premise lies an error so serious that within 130 years of Marx's death it caused somewhere between 85 million and 150 million deaths, depending on how you count them. That's an oddly large number of dead people for a commun-ity in which class struggle had been eliminated, isn't it? Peace and harmony my ar$e.

Inscription reads: "Workers Of All Lands Unite"

As I said, Marx got one thing right. History does bear out the dramatic story of centuries of class struggle. But if we eliminate his one small flawed premise, we can see it all much more clearly.

The two classes are not the Labour and the Capital, the rich and the poor, the proletariat and the bourgeoisie, or the workers and the elite. The two classes are the Debtors and the Savers. "The easy money camp" and "the hard money camp". History reveals the story of these two groups, over and over and over again. Always one is in power, and always the other one desires the power.

1. Debtors - "The easy money camp" likes to spend (and redistribute) money it did not earn, either by borrowing it, taxing the savers for it, or printing it. They like easy money because it is always and everywhere constantly inflating, easing the repayment of their debts.

2. Savers - "The hard money camp" likes to live within their means and save any excess for the future. They prefer hard money (or in some cases "harder" money) because it protects their savings and forces the debtors to work off their debts.

1789, the French Revolution, "the hard money camp" had been in power since 1720 when John Law's easy money collapsed, and starting in 1789 "the easy money camp" killed "the hard money camp" and took back the power. This is the way "the easy money camp", the Debtors, usually take power... by revolting against the hard repayment of their spending habits.

Only nine years later, 1797, easy money collapsed once again (as it had just done in 1720) and a new French monetary system based upon gold was again reinstated. This is the way "the hard money camp", the Savers, almost always regain control: when the easy money collapses. On very rare occasions and only under highly favorable circumstances (like moving to a new continent!), "the hard money crowd" takes control by physically separating from "easy money" and declaring independence from the Debtors.

The American Revolution. Yes, the Constitution mandates hard money.

So just to repeat for clarity: Hard money regimes almost always end in bloodshed, when the easy money camp slaughters the hard money camp to avoid hard repayment terms. And easy money regimes almost always end in financial suffering when the easy money collapses. Here are a few more examples of "easy money collapses"...

Angola (1991-1999)
Argentina (1975-1991, 2001)
Austria (1921-1922)
Belarus (1994-2002)
Bolivia (1984-1986)
Brazil (1986-1994)
Bosnia-Herzegovina (1993)
Bulgaria (1991-1997)
Chile (1971-1973)
China (1939-1950)
Free City of Danzig (1923)
Ecuador (2000)
England (1560)
Greece (1944-1953)
Georgia (1995)
Germany (1923-1924, 1945-1948)
Greece (1944-1953)
Hungary (1922-1927, 1944-1946)
Israel (1979-1985)
Japan (1944-1948)
Krajina (1993)
Madagascar (2004)
Mexico (1993)
Mongolian Empire (13th and 14th Century AD)
Nicaragua (1987-1990)
Persian Empire (1294)
Peru (1984-1990)
Poland (1922-1924, 1990-1993)
Romania (2000-2005)
Ancient Rome (~270AD)
Russia (1921-1922, 1992-1994)
Taiwan (late-1940's)
Turkey (1990's)
Ukraine (1993-1995)
United States (1812-1814, 1861-1865)
Vietnam (1981-1988)
Yap (late 1800's)
Yugoslavia (1989-1994)
Zaire (1989-1996)
Zimbabwe (1999 - present)

You see, Marx had it almost completely backwards when he said the rich exploit the poor for free income. Once we shuffle and re deal the two camps correctly we see that it is actually "the easy money camp" (the Debtors) that always exploit "the hard money camp" (the Savers), taxing them, destroying their savings, destroying capital, borrowing money only to repay it on easier terms, and sometimes even killing them. So are "the Debtors" the rich and "the Savers" the poor? Of course not! Is this clear enough?

What does all this have to do with Freegold today? Well, with history, ANOTHER and FOA as our guides, we can see clearly what is coming. And with a correct view and a wide enough perspective, we can also see how some fine analysts operating under false premises are inducing the wrong conclusions.

Today we are living the end of the longest stretch of time in which "the easy money camp" has been in power both politically and monetarily. For a century now they have been easing our money more and more. And for those of you obsessed with the "emerging" NWO and One-World Currency... surprise! You've been living with it for 66 years now.

This latest push for central control and massive deficit spending by the "easy money camp" is simply the blow-off phase right before the long awaited collapse. And when easy money collapses, the transition is always financially painful but not necessarily bloody like the French Revolution, which was the end of the "hard money camp".

Now, what happens during ALL periods in history, whether "the hard money camp" is in charge or "the easy money camp" are running things... is a transfer of wealth. This is important! Because when the easy money guys are in power the transfer of wealth happens slowly and gradually, and wealth flows from the Savers to the Debtors. But when "easy money" collapses - and it ALWAYS collapses - there is a very RAPID transfer of wealth in the other direction, from the Debtors back to the Savers.

And this is where you need to take some action today. Because we have been living in a "easy money regime" for so long now, the delineation of the two camps is somewhat obscured. There are many many people who consider themselves Savers who are still sitting in the wrong camp, and will be on the WRONG side of the coming
- extremely rapid - transfer of wealth.

Today you need to be proactive if you want to get on the receiving end of this "blow back" transfer of wealth. You need to actively choose which camp you are in. And to do that, you need to recognize the two camps, or classes. Remember, this is a "class struggle".

So let's put a few modern groups and people into these two camps. I think it is fairly obvious that almost all modern "socialistic" governments and their politicians addicted to sovereign debt and deficit spending are in the debtor class. These are the easy money guys. And the bankers as a class are generally there too. As I said in a recent post:

The banker makes his largest profits during times in history when the liberal easy money crowd is in power both politically and monetarily. And he makes his most absurd profits when the debtor class allows its debt to go too far... to the very mathematical limit. But don't worry. This unstoppable avalanche will reduce banking and central banking to what it should be; a utility for the public good.

And this is because easy money debt must flow THROUGH the banking class as it is passed between the savers and the debtors.

But as individuals, not "banks", but individual bankers, we could say that some of them are Debtors while others are Savers. For example, would you agree that the Rothschild family, as a family unit, is in the "saver class" while their industry or profession (banking) as a whole falls in the "debtor class"? Or perhaps we could say that the banking institutions, as the hollow corporate shells that they are, are closely aligned with the debtor class.

But on the other side of the coin, we can broadly say that most of the young "hot shot bankers" and investment bankers probably fall firmly in the "debtor class". When you look at the lavish lifestyle of a lot of these young guys, you don't see the debt it is built upon. Just like our character, Liam O'Leary, in The Tiger's Tail. You could watch a Rothschild and a Goldman VP pull up to an event in identical Bentleys, not seeing that one is leased while the other is owned outright. Are you catching my drift?

You can tell who the "easy money guys" are because they will always argue that a currency devaluation is preferable to forced austerity. They will say, "the euro got it wrong because it doesn't allow for Greece to devalue." And in saying this, they put themselves firmly in the Debtor camp. They are saying that the "Argentine/Brazilian
/Soviet/Zimbabwe workout" is preferable to what is happening in Greece today.

How about that Soviet "easy money collapse" in 1992? Who came out ahead? Most average people that thought they were savers lost everything. So did the Russian banks take over Russia? Or did a handful of "Oligarchs" emerge as multi-billionaires through the process and buy up anything in sight for pennies on the dollar? And which camp do you think these Oligarchs were in? The Debtors or the Savers? Curiously, one of them just bought the New Jersey Nets.

Russian Oligarch Mikhail Prokhorov
(Age: 45 - Born: Poor - Starting Industry: Precious Metals)

As I said earlier, almost all modern governments are in camp with the Debtors. And this includes the Russian government. So are the Oligarchs in the opposing camp as their beloved comrades in the corrupt government? Here is an interesting article:
Here's The Real Reason The Russian Oligarchs Are Buying Up Professional Sports Teams
By Henry Blodget
Business Insider

...we hear that some Russian oligarchs feel that, if they become highly visible owners of beloved sports franchises, the Kremlin will be less likely to take them out.

Yes, as in that kind of out.

Remember Alexander Litvinenko, the ex-Russian spy who got poisoned in London...

Russian Oligarch Roman Abramovich
(Age: 43 - Born: Poor - Starting Industry: Entrepreneur)

So here's the important thing in today's dangerous world. We must each understand the difference between choices and inevitabilities. What is coming at us is inevitable. It is unavoidable. How we personally prepare for it is a choice we each must actively make.

The coming "blow back" hyper-rapid transfer of wealth is not something that necessarily requires moral judgments of good and evil. It is simply a fact of life today. Pick which side you want to be on in THIS particular transfer of wealth. By selling your debt-financed paper savings and buying physical gold today you are making the conscious CHOICE to join the camp of the true Savers.

Many people that consider themselves "savers" are precariously positioned right now. These people need to take active measures to get on the receiving end of this transfer of wealth to survive. Many, many, many average citizens amazingly still have this option, yet they don't even realize it. They need to get up and move over into the same camp as the Rothschilds and the Russian Oligarchs, and prepare to own the future. It's not a matter of good versus evil at this point, it is a matter of survival!

The easy money camp has had a really, really long run in the sun this time. There's no need to feel bad for them. And all the last-ditch central control efforts we see today are simply the culmination of that run. But their influential position is completely dependent on the power afforded by the easy money debt machine that is now crumbling. Their "power generator" is out of gas. And it's not the kind of gas you can legislate or print.

But don't take my word for it. And certainly don't take financial advice from me! For that matter, don't take financial advice from ANYONE. Think it through yourself, quietly. Use your own head. This is the only path to peace of mind. You and only you will lose your wealth if you take the wrong advice. And this time, it doesn't take an MBA and a JD to understand the choices.

It is easy to watch the dollar losing its reserve privilege today. And it is also easy to see who will come out ahead when it happens. All else is noise. Choose your camp wisely.


Imagine there's no Heaven
It's easy if you try
No hell below us
Above us only sky
Imagine all the people
Living for today

Imagine there's no countries
It isn't hard to do
Nothing to kill or die for
And no religion too
Imagine all the people
Living life in peace

You may say that I'm a dreamer
But I'm not the only one
I hope someday you'll join us
And the world will be as one

(Imagine no possessions
I wonder if you can
No need for greed or hunger
A brotherhood of man) [1]
Imagine all the people
Sharing all the world

You may say that I'm a dreamer
But I'm not the only one
I hope someday you'll join us
And the world will live as one

[1] Why didn't Elton sing these lyrics?


FOFOA said...

Eurosystem gold reserves climb by 65.4 billion euros
Jul 7th, 2010 13:30 by RS

In the consolidated financial statement of the Eurosystem released today by the ECB for the week ended Friday July 2nd, the numbers therein capture the latest mark-to-market quarterly revaluation of assets.

With no material transactions by Euro-member central banks during the week, the 65.4 billion euro growth in gold reserves was solely delivered on account of the Eurosystem’s MTM architecture, bringing their total gold reserves to a new record high at €352.092 billion, up from €266.9 billion at the start of the year.

By comparison, the Eurosystem’s net position in foreign currency for the quarter grew by only 18.2 billion euro, of which 18bln was from MTM effects and 0.2bln from CB transactions. Foreign currency reserves now stand at €190.9 billion.

Consequently, the proportion of gold reserves in Eurosystem coffers have grown over the course of the past 6 months from 62% of total reserves to 65%.

Regarding the previous post, don’t think for a second that China is not already keenly aware and tactfully desirous of the counter-cyclical strength, stability and flexibility available in this gold-centric reserve architecture.

For more background on this new paradigm in the reserve management of the international monetary system, see my Jan 8th post.


Anonymous said...

Another excellent article. I thought the clip from Tiger's Tail was a perfect illustration.

There is an obscure documentary on Netflix called "Iron City Blues" that tells the true story of a Tennessee town whose economy collapsed. The town devolved into lawlessness and their police department has been abandoned for the last 20 years because nobody will take the job!

Keep up the great work!

Wendy said...

I am hoping that "oldinvestor" is still around. He/She only posted a couple of times; the last time in March (I think). He/She said

"oldinvestor said...
Date: Fri Jan 23 1998 19:01

No CB holds any currency! They hold the bonds of that currency...

Yes, they hold 100 : 1 to currency, and yes, they hold 100: 1 to gold. But the Actual currency holders also hold a 100 : 1 to the actual currency. So actual currency ( real currency in actual dollars, rather than electronic markers ) also is a 100 : 1 leverage.

So holding actual real currency is similar to holding actual real gold.

March 31, 2010 9:05 PM

and Ishkabibble responded:

Ishkabibble said...
"So holding actual real currency is similar to holding actual real gold."

Don't think you can make that statement. One is fiat, produced by a printer with no intrensic value. The other is factual, produced through labor and entirely intrensic value. More than 5000 years have shown that fiat fails while gold holds true. I would not consider them similar, not at all.

March 31, 2010 9:14 PM

We never again heard from oldinvestor. I neither support nor deny his/her position, but I would very much appreciate if oldinvestor would expand and support his/her positon.........


costata said...


Thanks for another timely post. One of the reasons I liked this post is that you have highlighted the political dimension in this transition. It's disappointing to see how discouraged and powerless people feel faced with the corruption and cronyism of governments and markets.

Does it need to be this way?

Again you point out the transition is inevitable. As Professor Michael Hudson puts it “Debts that can’t be repaid, won’t be repaid”.

You are pointing the way to personal empowerment!

Without changing a government or reforming the system the INDIVIDUAL can effect profound change for themselves and their families.

Simply by acquiring some physical gold they can safeguard their wealth/savings, position themselves on the right side of history and let inevitability do the rest.

That's empowerment that most of us can attain.

If you are addicted to the old consumer paradigm, don't think of it as subverting the system or investing. Think of it as shopping, a little "retail therapy".

Michael H said...


This is a great post, and I'm glad to see Marx discussed rationally and given credit for his insight (while admitting his faults), instead of simply crucifying him as is so common.

I do have one quibble with your 'debtor / saver' dichotomy, however. As I see it, the opposite of a debtor is a creditor, and the opposite of a saver is a borrower.

The debtor / creditor separation is an accumulation: over a span of time a person amasses a total amount of debt or loans out a total amount of credit.

The saver / borrower separation is a real-time process. The saver funds his or her lifestyle through current income from producing real wealth and even having surplus real wealth to convert into savings and investment for generating future wealth. The borrower funds his or her lifestyle by supplementing income by borrowing the surplus real wealth of others.

The difference might be that, when the soft money blows up, accumulated debts and credits will both be wiped out in a jubilee. But going forward, in a hard money world it may not be possible to continue to live through borrowing.

The main reason it matters is that, in a hyperinflation or default, the creditors get stiffed, they don't inherit the world.

ebikeguru said...

Good to see that now you are a professional paid media type, your quality of writing has not slipped! haha

Everytime I get a paycheck now, I am praying it is not the last I can buy gold with as I don't have enough yet...

I have paid off all my debts (car leasing and CC cards) over the last 12 months (converting from a softie to a hardie!!) and this month I bought 0.5 kilo of silver bullion and 36 grams of gold....

Can anyone lend me $50,000 cash to buy some gold with haha - Hmmmm maybe worth asking UBS about actually...surely it's got to be a better investment (for me) than a $50,000 loan for a car??!!

Return to Resistance said...

Speaking of Savers and Debtors anybody out there have a comment on the recently disclosed BIS gold swap?

Is it much ado about nothing or a bid deal as some of the bloggers seem to suggest? Harvey Organ thinks if the BIS had to step in on gold swap then they probably had to cover for a european CB who couldn't come up with the gold themselves.

His comments are towards the bottom of his daily post.

Jeff said...

Nice one FOFOA.

I find your writing in 'plain english' highly readable, putting you head and shoulders above the Jim Sinclairs who engage in foolish jargon. Don't change a thing.

IMO the flap over SDRs and gold swaps are just the latest attempts to keep the paper game going a bit longer. They seem doomed to failure.

erik said...

Another good post. Impressive how you always seem to keep focused and find ways of giving direction. I do find the idea of a 'Class struggle'.. true but this struggle leaving out the real error of persons like Marx... it's not a class struggle as much as an individual struggle where the individual finds they have much in common with others, there is no such thing as brotherhood only a common fate. The error in person's like Marx is the ideas of class , Marx was simply a clever manipulator of the individuals common fate.

Unknown said...

FOFOA, what do you think are the best ways for established savers to protect/advantage themselves in the coming correction? Gold/silver are the obvious avenues, but do you see other actions that savers might take to their benefit?

answer2me said...

FOFOA or Someone else,

"With no material transactions by Euro-member central banks during the week, the 65.4 billion euro growth in gold reserves was solely delivered on account of the Eurosystem’s MTM architecture, bringing their total gold reserves to a new record high at €352.092 billion, up from €266.9 billion at the start of the year."

This may be a simple question but is this 65.4b euro addition physical metal? If so, where did it come from or who sold it to them?

JR said...

The 65.4 came from their MTM (mark to market) policy as gold appreciated as compared to the last MTM revalution in Janaury:

"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).

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."

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

@ answer2me

The MTM in your question stands for "Mark to Market". The gold held by the Euro-member central banks is MTM based on cash/spot price of gold. Therefore the increase of 65.4 Billion euro is based on the increased value of gold in this most recent period verses previous accounting period. Euro-member central banks use MTM accounting verses the Yankee Gubermint valuing it's gold at $42.00 per troy ounce to infinity or until FreeGold revalues it for them.

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

Another opinion on gold price consolidation.

Submitted by Tyler Durden on 07/08/2010 15:27 -0500

Paulson Hit With $2 Billion In Redemption Requests, Likely Source Of Recent Gold Market Liquidations

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

Sound advice in this article.

Guest Post: The Rats Are Cornered

For those that care about real freedom, genuine progressive reforms and this Republic in general there are all sorts of things you can do and they are being done all over the place...

Get your finances in order with gold and silver and other real assets but also get mentally and emotionally prepared. This is because if you are not in a position to help your neighbors then you are no good to anyone. This will not be about hunkering down in a bunker and emerging rich once the dust settles. It is about staying intact financially and emotionally so that you can help rebuild a better nation when the current world paradigm comes to an end which should happen swiftly within the next 1-2 years.

1.618 said...

@ Michael H,

You have a good point regarding 'debtor/saver' vs 'saver/borrower'.
IMHO, though, this post of FOFOA's is simply a jump off point into a new perspective from which to consider the world, and as such should not be considered a perfected hypothesis.

FOFOA has done us a great service by publishing this epiphany, this new angle from which to see, and it is now up to us as much as him to refine this angle. You have made an excellent start. Your comment has given me pause to consider other ways in which these two camps, 'soft vs hard money' may be defined. This definition may yet prove to be more fundamental than it appears at first glance.

Michael H said:

"The borrower funds his or her lifestyle by supplementing income by borrowing the surplus real wealth of others."

I think the word 'real' is misplaced in this statement? (by being placed in it at all?)
The borrower funds his or her lifestyle by supplementing inadequate income with the borrowing of abstract wealth.
Fractionally reserved money is borrowed into existence. It does not represent the past productive efforts of anyone/thing, but rather future, theoretical (abstract) productive efforts.

Hard vs Soft may be also defined as Real vs Abstract.

Gold, being the ultimate extinguisher of debt, the real payment in full, is, and has been for many generations in many cases, regularly extracted from the equation, whether hard or soft, by those who know how the world really works in this regard, the "old money", the blue blooded elite (eg. Rothschilds, JPMorgan ("gold is the only true money"), European royal families, etc etc), and recently joined by insightful people such as Aristotle, Bill Bonner, Costata, Dragonfly, Ender, FOFOA, GG, Goldsubject, you, me, most readers of FOFOA, and everybody at the 'All Inn', amongst others.

Ender said:

"Gold is an asset based currency, thus it represents payment in full, where as fiat currency is a debt based currency that represents a claim in the system. In this light, the ‘preservation of wealth’ simply means - he who holds gold has already been paid."

Keep it real.

Return to Resistance said...


I think at this point the borrowing that is occurring at this stage in the fiat game by many sovereign entities is far past what any "future, theoretical (abstract) productive efforts" can achieve.

We as a species would have to make a quantum leap in technology to achieve the productive efforts necessary to pay off the past debts with REAL wealth. Not likely to happen which is why I sit on the sidelines and look for the coming collapse with complete fascination.

1.618 said...

@Return to Resistance,

I did not say it was going to be repaid, did I?
That is exactly the point. It is abstract, not real.
It cannot, will not be repaid. It (money borrowed into existence) is not real, and does not constitute 'living in the real world'.

This is exactly what makes debt-based currency so useless, when the debt collapses. And exactly what makes physical gold so useful.
When you extinguish your debt for gold, you are 'cashing out' of the system, in the most real way possible. In exactly the same way selling your house after the 'price' has risen, and taking out all your new found equity before the 'price' drops can be seen as turning something 'abstract' (your equity) into something slightly less abstract (fiat paper). The 'smart money' takes it a large step further, out of any form of the abstract, and into reality. The reality of gold.

"To live beyond our means today is to live below them tomorrow." - Hans F. Sennholz

“Earth provides enough to satisfy every man's need, but not every man's greed." - Mohandas K. Ghandi

costata said...

Hi All,

A few links that might be of interest. Separate comments so they don't become a blur.

Stewart Thomson. There are some classic lines in his latest bulletin.

"Why would you buy now, when you “know” price is going lower? A number of reasons: First, if you are committed to gold as the ultimate asset, you know that over time, the current price gridline points, in terms of paper money, will be dwarfed."

"In time, you’ll find the price of gold in paper money starts to lose power and lose meaning for yourself. “So what if the price is up $30, or down $30”, you say. What matters is how you use that information to accumulate ounces. What matters is your ounces count, not your paper money count."

"This ETF (GLD) is far more liquid than the others, and trades early in the morning when the others have massive bid-ask spreads. It is the ultimate gold shorting vehicle with the kicker that it could be a fraud! I’m currently running a short GLD-n program with my pyramid generator, using about 15% of my long gold allocation. I would NOT trade GLD-n from the long side."

BTW I totally agree with him about food. There are some seismic shifts on the way.

costata said...

From Howard Katz, does this sound familiar?

"The answer to this problem is not hard to find. Buy gold."

"The good people, who are against something for nothing, will get rich, and the evil people, who seek something for nothing, will get poor."

costata said...


I responded to a comment you posted on the previous article by FOFOA.

You may find it of interest.

costata said...

Hi All,

For the China watchers.

July 7 (Bloomberg) -- "Gold demand in China, the world’s second-largest consumer, gained in the first half as government measures to cool the property market and falling equities spurred investment demand, the Shanghai Gold Exchange said."

costata said...

Last one, for now.

The great Jesse of Jesse's Cafe Americain fame looks at a formerly unthinkable outcome:

"Crunch time is coming, and it will not be pretty. A loss of confidence and a hoarding of funds in savings is a prelude to Gresham's Law, and the first whiff of what I would have never expected could occur: hyper-inflation. That is just how bad that the policy errors of Summers and Bernanke have been, and how badly the Congressional plutocrats have misunderstood the will of the people."

Paul I said...

Such a fascinating post.

To view the old left-right political struggle in terms of hard versus soft money feels quite liberating.

I would suggest that when either of these two systems has a monopoly on political and financial power, there will be conflict and misery.
As FOFOA describes so well, just as pure soft money (being the current the global/western paradigm) is causing savings destruction and terminal collapse,
sure pure hard money in the past resulted in under-classes, poverty and ultimately revolution.

Surely the end to this relentless cycling form hard to soft to hard, is an evolution to... TaDaaa, FREEGOLD.
Both hard and soft exist side by side, each tempering the other.
People should always be able to borrow soft money, but since there will be a stable wealth store alternative, lenders will hopefully start pricing risk properly again.
Personally I think the future of lending will evolve to more of an Islamic system, where risk is shared.
There does seem to be the beginnings of discussion about the imorality of usury in the MSM.

The liberating part for me is this rebalancing to hard/soft money is not just going on at the global level, but can be done at the personal level.
I have one large debt, (a mortgage) which I would dearly love to get rid of.
But I can now also confidently funnel my long term savings into Gold. (Thankyou so much FOFOA for giving me that confidence).
Hopefully my personal financial rebalance is not too far off!

OT slightly, FOFOA I just read one of your previous posts that where there was a discussion about the need for a fixed unit of measure in finances, like in engineering.
The gram of gold would join the meter, litre, newton etc.

Have you seen the gold marketplace, ?

Whats interesting about it is not only is it properly backed by physical, but that members make markets in 3 physical locations (NY, London, Zurich), using 3 currencies (US, Euro, GBP).
So there are 9 sets of buy/sell prices. Currently all 9 of these prices are pretty close to the the US$ paper price, adjusted using the floating X-rates, as you'd expect.
But I'm quite sure that eventually these 9 prices will start to diverge, reflecting local supply and demand. When that happens, how long before X-rates are not setting the local gold prices, but local gold prices and setting the X-rates?
1 gram becomes the universal measure of value.

Intutively I feel thats the point that things will go BOOOM.



Return to Resistance said...

@ Blondie

I think we both agree on how this will all end up. Never implied that's what you said. Just added to the discussion.

Keeping it REAL.

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

Costata said:
I would argue that there is a rising floor price under gold that will never be breached again. Another explained that it would bring the whole game undone."

@ Costata, thanks for responding. I am in full agreement with your entire response and especially the rising floor price of gold. I do not think we will ever see sub-one-thousand gold price in fiat dollars again in our lifetimes.

QE2, which should begin in the next few months will continue to raise the floor price on gold.
Thanks again for your thoughtful insights, Costata.

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

The Yankee Gubermint will always take the second alternative as cited below.

The threat to the US dollar is hyperinflation, not deflation
by James Turk, Founder of
Copyright © 2010 by James Turk. All rights reserved

...While crude oil prices have doubled and commodity prices have risen 46% since September 2008 as noted above, M1 and M2 during this period have increased only 16.9% and 8.5%. So the prices of goods and services are rising more rapidly than the increase in the quantity of dollars in circulation. The resulting “shortage of money” is being widely misinterpreted as deflation, which is exactly what happened in Weimar Germany shortly before the Reichsmark was swooped up in a hyperinflationary whirlwind. Let’s call it a ‘Havenstein moment’, named after the ill-fated president of the Reichsbank who presided over the destructive hyperinflation that devastated Weimar Germany.

With his usual brilliant insight, Rothbard explains what happens once the “Havenstein moment’ is reached. There are two alternatives. “If the government tightens its own belt and stops printing (or otherwise creating) new money, then inflationary expectations will eventually be reversed, and prices will fall once more – thus relieving the money shortage by lowering prices. But if government follows its own inherent inclination to counterfeit and appeases the clamor by printing more money so as to allow the public’s cash balances to ‘catch up’ to prices, then the country is off to the races. Money and prices will follow each other upward in an ever-accelerating spiral, until finally prices ‘run away’…[i.e., hyperinflate]” Weimar Germany took the second alternative.

Following the same path as the Weimar government, spending by the US federal government is out of control, causing it to borrow record amounts. The money to fund this growing mountain of debt must come from savings or ‘printing’, and the sad fact is that there is not enough accumulated savings in the known universe to satisfy the spending aspirations of Washington’s politicians...

Ivo Cerckel said...

For those who speak Spanish:

The Tiger's Tail
Deux vrais jumeaux ont été séparés à leur naissance. Liam est devenu riche dans la nouvelle Irelande. L'autre vit dans la rue, à Leeds. Il y a ceux qui ont et ceux qui n'ont pas. Mais le second découvre l'existence du premier, sa richesse et ses succès. Par une série de diaboliques manipumations, il tente de voler la vie ... et la femme de son frère. Et il y a arrive mais ne trouve que dettes et griefs. Et de son côté, Liam fait des découvertes sur sa propre vie qui le surprendront.

Le jeudi 23 octobre 2008
The Tiger’s Tail : le tigre se mord la queue
Tout va bien pour lui... jusqu’à ce que plus rien n’aille. Il commence à voir double

oldinvestor said...

Hi Wendy,

Oldinvestor here.

I can see how my statement “"So holding actual real currency is similar to holding actual real gold." could be mis-interpereted.

We all understand that there is a vast difference between owning an actual ounce of gold in your possession and owning someone elses promise to pay you that ounce of gold. Everyone here quite gets that.

I was making the comparison that holding a real doller, such as a paper dollar or coinage is similarly a different thing than holding a promise to pay you a dollar (such as your bank promising to pay you the amount listed in your account)

Yes dollars are ultimately a debt somewhere in the system, but what matters to you is that actual cash, after the collapse of the system and the bankrupcy of most banks, will still be spendable if you actually hold the real currency. Dollars in the form of someone’s promise to pay them to you, such as in the form of your bank account, etc, are another thing.

Thus I feel that the pyramid that is talked about here, with gold at the bottom, then currency, and then notes etc, really should have two sub categories in the currency tier. One with actual dollar bills and coins, and another next level consisting of promises to pay you such dollar bills and coins. The former, the day after the collapse, will probably still be accepted for food and gas.( at what value is another matter). The latter, checks, cards, etc, who knows.

As for myself, I put my savings into two forms. One of course is gold. This is for the long term. But I keep a stash of actual dollars also. This will be the transaction currency as FOFOA says. We still will need dollars. But the availability of actual dollars will be very limited. In one earlier post I investigated the rate at which the Bureau of Engraving and Printing can print currency. It has remained fairly constant, but the interesting statistic is that the vast majority (I think over 90 %) must go just to replace worn out currency. When the great hording begins, and Gresham’s law kicks in, actual currency will be very scarce and command a premium over cyber money, just as actual gold will command a premium over promises to deliver actual gold.

costata said...


This article would seem to suggest that we are about to enter the formal part of the debt restructuring phase.

h/t Market Ticker

EU Stress Tests Will Cover 91 Banks, Assume Bond Value Drop (Ed. AKA Losses)

1.618 said...

@ RtR,

costata said...


Thank you for your kind words.

Dave Narby said...

Looks like Harvey Organ may have been right about hedge fund(s) selling gold recently.

costata said...


Fascinating comment on several levels.

"..... but since there will be a stable wealth store alternative, lenders will hopefully start pricing risk properly again."

At present the risk free rate of return is presumed to be the government bond rate in many countries. Clearly this is a rate that can be drastically wrong in its reflection of risk.

After the Freegold transition it would make sense that the inflation adjusted price of gold would become the new benchmark for a risk free rate of return IMHO.

"Have you seen the gold marketplace,"

This article, linked below, discusses the announcement that the WGC has taken a 12.5% stake in BullionVault JOINTLY with the Rothschilds. Bear in mind that the current CEO of the WGC, James E. Burton, was the guy who sponsored the launch of the ETFs so this could be the prelude to another scam OR a positive development.

In light of the above your later remarks could have special significance.

"FOFOA I just read one of your previous posts that where there was a discussion about the need for a fixed unit of measure in finances, like in engineering. The gram of gold would join the meter, litre, newton etc."

"1 gram becomes the universal measure of value."

Contrast the following statements from your comment:

"People should always be able to borrow soft money ... (and) Personally I think the future of lending will evolve to more of an Islamic system, where risk is shared."

If the store of wealth is stable and imparts some stability to the soft money then interest rates could be extremely low and risk sharing could be far more profitable for a banker.

Mike said...

this from harvey on the BIS story

looks like the ecb didn't want to give away any of its gold and also didn't bother going to the imf since they dont have any significant real amount.

Chris and Bill:
I am having great difficulty in believing the email from the Wall Street Journal.
The BIS does not do transactions with commercial banks, only central banks.
No commercial bank has gold of that size.
What is even stranger is that the operation of supplying gold to this unknown entity is still ongoing.
I may be wrong but it looks to me that a central bank got collared i.e. sold a gold call on gold it does not have.
The gold was leased years earlier and the entity that owned the call wanted physical and not cash.
The central bank in question was probably a captive bank of the ECB.
The ECB did not have the authority to lend gold to the captive bank to bail it out.

It was a metal crisis.

In the email it stated that the gold is held and not liquidated. Why then was the deal with a commercial bank and not a central bank, and then let that central bank deal with its problem child?
They are lying!
I must check, but this would be the first time that the BIS entered into an agreement by-passing a central bank authority.
Strange indeed.
all the best

and now the real story:

I have just finished talking with Reg Howe on the matter and he feels that I am close as to what actually happened.

It is his opinion that the bank in trouble is in reality a big commercial bank within a captive central bank's jurisdiction that got caught with a collar or a call on gold that gold contracted could not be delivered. The captive central bank did not wish to part with any of its gold so the commercial bank called on the BIS for help and they arranged this crazy bail out swaps.

The bailout may have been cash settled or maybe gold and cash together as there may have been some arm twisting to get this affair settled.

The BIS does not accept deposits of cash or gold from a commercial bank but lately, it can do gold loans to commercial entities. What probably happened here was a commercial bank

got in trouble and its central bank refused to help. The ECB also did not want to bail out this bank so the problem bank went to the BIS for help.

This is hugely positive because it was hidden from public view and the last thing that the world wants to hear is that a central authority did not want to help one of its commercial banks.

Reg thus believes that it was not a liquidity problem, it was a shortage of metal problem. and the problem was solved with swaps and the shifting of collateral to take sure that the BIS which is loaning money

is repaid. The collateral is the gold swapped. The amount of tonnage in this problem transaction was the entire 380 tonnes of gold.

I was close. I thought it was the captive central bank in trouble. In reality it was the commercial bank inside the captive bank's country that became the troubled zone and had to be bailed out.

Reg Howe is certainly the authority on the BIS.

In essence we got a run on a bank but the bank was a commercial entity and not a central bank. The central bank urged the BIS to make a statement less the world thinks that it is void of gold.

The central bank originally urged that the BIS keep this quiet so it was put as a footnote hoping nobody would see it. Somebody did and thus we have the story.

Paul I said...


Yes, I wonder what WGC and Rothschilds interest in BullionVault is.

The venture was started by the same guys who started the BetFair betting exchange. Betfair has revolutionised the bookmaking industy, by allowing members to both back and lay bets, effectively allowing anybody to be a bookmaker. It very quickly gained a massive share of the traditionaly closed betting market.

BullionVault does something similar in that it allows members to set their own spreads when buying and selling bullion, so it's a truly open marketplace.

Doesn't feel like a scam to me, independant daily audits, allocated gold etc.

I hope Rothschilds involvement is positive, a sign of "old money" sniffing the wind and deciding to venture forth out of the dusty vaults once more!


Wendy said...

Sir Oldinvestor,

thank you very much for clarifing your position, and taking the time to address my questions. In additon to physical gold and silver, I have paper dollars as well. When SHTF I know my debit or crited cards won't work, so I do what I can to cover my

you said:
In one earlier post I investigated the rate at which the Bureau of Engraving and Printing can print currency. It has remained fairly constant, but the interesting statistic is that the vast majority (I think over 90 %) must go just to replace worn out currency.

I remember that post, but I don't remember you as the poster?? an AKA perhaps?

Kindest Regards,Wendy

costata said...


I hear you. I think BullionVault is kosher. I was just being guarded because the ETFs were a solid idea i.e. allowing institutions to gain exposure to bullion. The WGC sponsored ETFs appear to have been warped into a tool of the market manipulators.

I hope the new investors in BullionVault are a positive influence. An open physical exchange that bypasses the Comex would be most welcome IMHO, especially in a Freegold market.

costata said...


I made the comment below on Harvey Organ's blog. If he replies I will post it here.

Hi Harvey,

Re: The BIS Gold Swap

Could this be simpler than it appears? This could be the "paperwork" emerging on the supposed sales by the IMF of 400 m/t of gold. Many suspected that the IMF was simply unwinding earlier deals in their "sales" to India etc.

These transfers of SDRs could be transactions on behalf of the IMF and their client Central Banks, neatly obscured by the BIS so no-one connects the dots.

miked said...

"thank you very much for clarifing your position, and taking the time to address my questions. In additon to physical gold and silver, I have paper dollars as well. When SHTF I know my debit or crited cards won't work, so I do what I can to cover my

Wendy, wouldn't it be a tragedy if you are forced to sell some gold on the day a bank holiday is declared? A few thousand in currency in the mattress is not a bad idea.

miked said...

"I hear you. I think BullionVault is kosher. I was just being guarded because the ETFs were a solid idea i.e. allowing institutions to gain exposure to bullion. The WGC sponsored ETFs appear to have been warped into a tool of the market manipulators."

Yes, Costata, note Bullionvault stores its gold in a secure area inside Via Mat's vault in Zurich. Nobody can ever go there and see his own gold, and he is are forced to rely on the accounting provided by Bullionvault.

Personally I would buy my own gold and get Via Mat to store it for me than trust an intermediary. This guarantees "allocation".

Anonymous said...

China says it won't dump treasuries or pile into gold

This is exactly what I say to my bullion dealer when he tries to get the best of me...

I say to him "I won't dump my Rupees in favour of your bullion if you quote this high!" haha

On the hard/soft money camp, I have a strong feeling that this transfer of wealth from the soft to hard camp may come with a lot of bloodshed.

This is because the soft money leaders in the past would just move from Country A to Country B then to Country C whenever they blew up big time.

The problem this time is that NOW they can't move anywhere except moon, so I do not think that they have a option except financing a lot of bloodshed to keep the status quo and themselves alive.

FOFOA any thoughts regarding the endgame of the soft camp ?

Unknown said...


Rhenus is also good alternative to Viamat. It's a big bunker near the Zürich Airport...

costata said...

miked, Jimmy,

At the end of the day all of these third-party PM options are about trust.

That is a personal decision. Physical gold under your direct control is clearly FOFOA's preferred option. This was true for A/FOA and is also true for many here.

Hopefully none of us get screwed regardless of the approach we adopt to owning physical metal.

I guess we have to be realistic and admit that none of our options are risk free.

Unknown said...

Some BIStoric goldswaps, Financial Times

Database of BIS history 1931-1996

Unknown said...


Yes, nothing is risk free, so diversify to minimize your possible 'confiscation-losses'...


1) Places to hold (Home, banks, vaults, countries,...)

2) Amounts in pieces (grams, ounces, kgs, tonnes,...)

3) Physical investments (coins, bars, jewels, teeth,...)

4) Different precious metals (gold, silver, palladium, platinum, rhodium, iridium, ruthenium, osmium or rare earth metals)

Of course related to your investment possibilities/capacities.

Unknown said...


And how more diversified in locations, how difficult it is to sell at one time...

Be careful with too many locations!

miked said...

Don't forget buried somewhere in the middle of nowhere Jimmy. I think that's the safes option of all :)

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

IMHO “GoldMoney,” per James Turk is more trustworthy than BullionVault for international storage. Choice of locations for GoldMoney storage is Switzerland, Honk Kong, and Britain. Of the three locations Switzerland via mat and Hong Kong seems the safest bet as Britain is America’s “lapdog” and if our Yankee Gubermint says “jump”, they will ask, “how high”. I would trust the Communist controlled Hong Kong location as well as Switzerland over Britain. Britain will suffer the same fate as America and as they have already sold most of their sovereign gold under Brown, they might have need/desire of any amounts under their jurisdiction. GoldMoney website is listed below.

Unknown said...


If you don't find it back anymore... Dude, where is my gold? :o)

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

Video well worth watching, on CNBC Europe. Not what the title implies.

Potential Gold Bubble Forming?

Michael H said...

Great discussion in this thread!

Michael H said:

"The borrower funds his or her lifestyle by supplementing income by borrowing the surplus real wealth of others."

I think the word 'real' is misplaced in this statement? (by being placed in it at all?)

The borrower funds his or her lifestyle by supplementing inadequate income with the borrowing of abstract wealth.
Fractionally reserved money is borrowed into existence. It does not represent the past productive efforts of anyone/thing, but rather future, theoretical (abstract) productive efforts.

Your point that FOFOA's analysis provides a new angle from which to view things, and its up to all of us to refine it, is spot on -- very much agree. I meant my comment more as a thought to bounce off of FOFOA and help tighten the language and definitions as opposed to a critique to discredit the basic argument.

With regards to my statement above, REAL has to be a very important part of it, though in retrospect I would rephrase it as

"The borrower funds his or her lifestyle by supplementing income by borrowing the surplus REAL SAVINGS of others."

Since I said the dichotomy should be 'borrower-saver' :) Both words, REAL and SAVINGS are important. REAL because, when all is said and done, what matters is actual goods and services in the economy, not numbers on a ledger. So the saver, in this case, thinks s/he is being virtuous by accumulating ledger entries, while the borrower gets punch-drunk converting those ledger entries into real goods and services in the current economy! Later on, when the saver tries to redeem ledger entries for real wealth in the future, our saver might find that his/her SAVINGS (ledger entries) are no longer worth as much real wealth as it took to build them up in the first place. Poof! The savings are gone, in real terms at least.

I very much agree that fractionally reserved money is abstract, but in a soft-money world, to use FOFOA's phrase, the abstract can be converted into the real, at least currently. It is the savers of soft money who will be the most punished, cheated out of current consumption by the soft-money dynamics of borrowing and cheated out of future consumption by the collapse of soft money!

So maybe another distinction to add to FOFOA's analysis is the difference between 'soft-money savers' and 'hard-money savers'. The former will lose everything when soft money burns, and the latter will benefit immensely.

Will 'soft-money borrowers' fare badly? They will no longer be able to fund future consumption by continued borrowing, but will they be absolved of their sins of over-consumption by the destruction of soft money?

Still reading the rest of the responses ...

Unknown said...

IMF tells Europe to inject more stimulus, Ambrose Evans-Pritchard

Yeah, more 'counterfeinter-party' is coming...

Unknown said...


Oops wrong link, now the right link:

Dude, where is my gold?


Michael H said...

@ Paul

"Surely the end to this relentless cycling form hard to soft to hard, is an evolution to... TaDaaa, FREEGOLD.
Both hard and soft exist side by side, each tempering the other."

Brilliant! I only hope that the two sides can balance each other, and we don't have one side finding a way to wipe the other out ... until the next revolution or collapse.

@ Ivo Cerckel

Spanish? I only see French! :)

@ oldinvestor

"As for myself, I put my savings into two forms. One of course is gold. This is for the long term. But I keep a stash of actual dollars also. This will be the transaction currency as FOFOA says. We still will need dollars. But the availability of actual dollars will be very limited. ... When the great hording begins, and Gresham’s law kicks in, actual currency will be very scarce and command a premium over cyber money, just as actual gold will command a premium over promises to deliver actual gold."

Very interesting. I have a small hoard of physical cash as well, more in case of a bank run or holiday affecting my particular institutions as opposed to a system-wide crisis. I never thought that physical cash might have a premium to ledger-money, but it does make sense.

@ samix

"On the hard/soft money camp, I have a strong feeling that this transfer of wealth from the soft to hard camp may come with a lot of bloodshed."

I share your apprehension. A collapse of this magnitude ... it's a race between how fast the financial system collapses and how fast the supply chains stop working. The best hope seems to be that, if fiat becomes worthless, then the armaments of the world will be useless without munitions and fuel to run them, and without wages and food for the soldiers. And if the electric grid goes down then the communications to coordinate forces might go dark as well. Not particularly cheerful, I admit.

@ miked

"Don't forget buried somewhere in the middle of nowhere Jimmy. I think that's the safes option of all :)"

Maybe "treasure-hunting" will become the growth industry of the future.

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

Another take on the BIS gold swap.

BIS 382 tonne Gold Swap - Good or Bad for Gold and Why?
By: Julian D. W. Phillips, Gold/Silver Forecaster - Global Watch -

What is significant about this or these transactions is that gold is being used in international settlements after so many decades of being sidelined in the monetary system! The transaction itself confirms that gold is being used in international settlements, which is a dynamic confirmation of gold's return to the monetary system…

costata said...

Michael H,

"@ Ivo Cerckel Spanish? I only see French! :)"

You lack imagination.

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

@ Michael H
Maybe "treasure-hunting" will become the growth industry of the future.

Greyfox said:
Perhaps we should do an IPO and sell shares to support “The Blog” in our new Treasure-Hunting Company Inc.
Being as it was your idea, you will retain 51% and I will get the remaining 49%.
First operation will be to dig-up Miked’s backyard searching for his PM’s, then we will visit oldinvestor and look under his mattress for his cash stash.

Michael H said...

One more observation on the saver-borrower dynamic:

While we have been talking mostly about this dynamic on an individual level, it is also playing out on the level of nations. China is the chief soft-money saver in this case. Even if their soft-money savings evaporate, they are left with the benefit that their real productive economy has grown enormously over the past few decades. When hard money takes over and it is time to live within the national means, they will do well.

The flip side of the coin is the US: the US has allowed their real productive economy to atrophy to the point where we can't support ourselves on what we produce.

This reminds me of the relation between Europe and the US prior to WWII. Europe was soft money and US was hard money. The world (US included) went through a depression, then war, then the US emerged as the superpower. Will we have a replay of world-wide depression (China included), followed by war, followed by China emerging as the superpower? China would then bask in its newfound wealth, only to waste it away as the US has done, and Britain before it.

Each cycle seems to turn quicker than then last.

@ Greyfox

Great! What do you think the ROI on a few shovels will be?

costata said...


"..we will visit oldinvestor and look under his mattress for his cash stash."

You will be disappointed. Old investors never tell you where their cash stashes are. They tell you where they are not.

S said...

it is all in the speech

Wendy said...

Samix said:

"On the hard/soft money camp, I have a strong feeling that this transfer of wealth from the soft to hard camp may come with a lot of bloodshed."

I very much share your concerns. I have taken many steps to protect myself, my family and support my community if/when SHTF.

More recently however, I have considered the idea that there may come a time when I no longer want to live in Canada. If the type of "policing" that took place in Toronto during the G20 summit is any indication of what the future of this country might look like "I'm outa here"!!

With that in mind I am spending a bit of time learning about areas I would consider relocating to, and focusing on Uruaguay. I consider this Plan F.

I wonder if others have considered a simular plan, and what their thoughts might be.

Unknown said...


Great, you're looking for Uruguay, it's not plan F, but plan AAA+...

I like the proud, gently, emotional and hardworking people. Don't look to the poverty at this moment, but to the many possibilities in this land...

Maybe could Argentina and Uruguay organise the World Championship Soccer in 2030...

Now, I'm looking to get second passport there...

Unknown said...


Maybe is this a good idea to expand your blog with these statistics.

So we could know which/how many countries (maybe choose 125 flags, with country codes and pageview counts) are watching your blog.

It would be great to know which parts of countries are following your blog...



Anonymous said...

I think everyone here would enjoy this screenshot of Bernankes desktop

costata said...


"I wonder if others have considered a simular plan, and what their thoughts might be."

I'm staying put. This time it is a global issue, not a local one. You may physically relocate but the PTB can reach out "digitally" to wherever you are.

If the type of "policing" that took place in Toronto during the G20 summit is any indication of what the future....

You could replace the word "Toronto" with the names of 20 other cities where meetings of "world leaders" have been held.

IMVHO sooner or later you have to make a stand. At the moment we are probably part of a tiny minority. Hopefully this will change as the parasites intensify their attacks on the savers and producers.

Anyway that's my 0.02

costata said...

Harvey Organ's response to my question about the BIS gold swap.


no: it has nothing to do with the imf gold.

the correct answer to this puzzle is that a large commercial bank got in trouble and could not deliver upon a call placed upon it. The bank went to its central bank who refused to give up any of its gold. The ECB also refused to give up any of its remaining gold.

so the commercial bank when to the Bank of International Settlements for a rescue.

The transaction was like a story
from Alice in Wonderland: the commercial bank leased gold from the central bank without removing the gold loci; the commercial bank forked over 14 billion dollars..then the commercial bank swapped this gold with the BIS whereby the BIS loaned the bank back its 14 billion and the BIS got its collateral gold;

then the BIS arm-twisted the call entities on the gold to cash settle or they bought some gold on the market and thus the settlement was part gold and part cash..the entire amt equated to 380 tonnes worth of gold.

this is how it went down as explained to me by the resident authority on the BIS Reg Howe.

Now everything makes sense.

all the best

July 9, 2010 3:51 AM

Mike said...

thanks costata

miked said...

>>I'm staying put. This time it is a global issue, not a local one. You may physically relocate but the PTB can reach out "digitally" to wherever you are.

I don't agree with this Costata. In fact I speak from 20 years of experience. Of course you cannot just go off the radar by hopping on a plane. It takes planning and some resources, and an element of risk if you wish to retain your rights to return home. But is it worth it? Oh yes it is.

I am not American and I know how overbearing the US tax office is, but they rule by fear, not omnipotence. If you leave the US for good and renounce US citizenship there are plenty of ways to protect your money with no risk at all, no matter how angry Uncle Sam gets.

Having said that, I admire anyone who stays home and fights for emancipation. He would be a better man than me.

costata said...


I appreciate your reply and kind words.

I have read a lot of material from the Sovereign Society and other sources. I understand the mechanics of the stategy you are hinting at. So, I fully agree that it can be done and I wouldn't criticise anyone for getting out.

In my country, I see an opportunity for systemic change as a result of this transition. For the first time in 60 years we may have a chance to effect some genuine reform.

Besides, LOL, I live in Australia, one of the countries often touted (along with NZ) as a "place to escape to".

erik said...

So why didn't Elton sing those lyrics?
Implies a grand stage, where all are victims.

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

James Turk interviewed by King World News. Compares U.S. to Weimar Germany.

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

Ben Davies interviewed by King World News.

Wendy said...


I don’t know that I’ll be going anywhere, but I will plan for the possibility. I agree that this is global, however I don’t expect the effects of a crisis will be felt equally everywhere. I expect that the citizens of countries that have aging populations combined with a life time of investment in paper products, and a reliance on plastic will suffer most during transition. Developed nations!!

More importantly my decision to leave or stay will likely be based on who will be “scape goated” the old divide and conquer trick that will cause fear and suspicion among us instead of unification.

Lets see, the puppets of the PTB have in the past handed us: evil communists, blacks, loser hippies, immigrants, feminists, homosexuals, terrorists, and most recently invisible, but evil speculators bent on destroying sovereign nations. Who knows, maybe it’ll be the WASP looking population that’s scape goated, in that case I’ll be staying.

SatyaPranava said...


don't forget about the JAPs and the Jews :)

I know i've looked at a few places around the world (and want one where they teach med school in english), but i saved this comment from somewhere on the web, which I found interesting. Also, I really looked into Ecuador about 3 years ago as well.

"On November 7th, 2008 ckpac says:
This is a legitimate topic for discussion, as we may actually begin to see more and more of our liberties vanish. We all have different circumstances, and are at different points in our lives. Those of you with families to school and support are going to take different things into consideration than would a single woman in her mid 50's with no family around, or a retired couple with health issues. As always, there is no one pat answer that fits all. Given what is happening, you can't blame people for considering the option of leaving. After all, those who saw the warning signs early and chose to leave Germany were the ones who survived. When it became obvious that there was a serious problem, it was too late for many of them to get out. So, to have a contingency plan is not unreasonable. I like the idea of a foot in two different countries. I love this country and leaving would only be a last resort.
Funny, a year ago July, I bought a book at the Boulder Bookstore in Colorado entitled "Getting Out, Your Guide to Leaving America", which was on the shelf of "Boulder's Top 10 Bestsellers". It is a book which lists details of most countries in the world, their visa requirements, government structure, job opportunities, climate, tax rate, etc. I'm sure that it was in the top 10 because the local liberals were frightened with regards to Bush and his "doctrine". Now, no doubt, they feel safe and secure and full of hope, while we realize that, rather than relax, we have additional reason to be alarmed. From reading the book, I zeroed in on Panama, Costa Rica, Croatia and Brazil, all for different reasons. This book may be helpful to you in finding the answers to what options fit you best. The author is Mark Ehrman.
As someone who grew up in the 50's/60's, when the U.S. seemed to be in its prime, with nothing but a rosy future and security ahead, it is almost unfathomable that I am sitting here considering these possibilities with you all. Sometimes I feel that I must be insane, for surely this cannot be my country. It is truly surreal.
I visit this site 3-4 times a day to touch base with what feels like my "real" family, otherwise I am afraid I'll have to go on Prozac! Thanks to you all for being here as a touchstone, all of the input is very much appreciated.
I'm not trying to knock you or Texas or anything but some very smart people already considered every state in the union and New Hampshire came out on top, (next to runner's up Alaska, Delaware, Idaho, Maine, Montana, North Dakota, South Dakota, Vermont, and Wyoming.)"

Finally, the article: 12 Places To Go If The World Goes To Hell, by Joe Weisenthal and John Carney was also interesting.

just keep old-world transportation in mind depending on how bad you think things may get.

@mortymer001 said...

380 tons is a lot of gold.

Such a loss in trading is no joke. IMHO its tectonics movements of giants shifting power.

In physical this could go to only very big players with very big negotiation skills, strong players.
This may not been an event of banks but state/block intersts on behalf of their CBs.

- BIS itself (?, some strange accounting, depends on ho they want to go down or up if it was that they had a choice, most likely not as they would keep this in secret)
- ECB (?, since they felt under attack this could be getting even, could be even gold from usa)
- US (they have motive, they need to prelenghten paper game)
- Saudis (very likely if they dont want to play the paper game anymore)
- China (likely if they were in the game)
- Russia (could be but less likely, they dont have such negotiation power)
Would BIS really bail-out a bank in such amount if it is not absolutely necessary?
-Japan (?, there is never any such news about them)

Was BIS in a position where it had a choice?

Was this event an attack on Euro system?

Was this just event a withdrowal of the paper game?

Where was this gold actually from?

Who was on receiving end of the deal (BIS itself, ECB, US, Saudis, China, Russia)?

Why this news surfaced in this stage with so many unclear parts?

How long took for the deal to be negotiated?

Could this amount be tracked in options in the market based on last few months?

Doesn´t this resemble a bit the case where was it Deutsche bank that lost shirt and was bailed out by ECB from some time ago?

What were the other conditions of the deal?

If it was normal bank who got the gold, who will get it at the very end and what will be the real price?

Is this gold gonna to end/reenter the open market?

Was the thin membrane FOFOA spoke about few posts ago broken???

Am I nuts to think that there is more in this news?

Wendy said...


Interesting read ..... thank you!

MetalStack said...

I haven't seen any discussion about this here and wanted to mention the change in 1099 rules that were attached to the health care bill. All transactions over $600 will require a 1099 including numismatic coins.

At least it is being fought by small businesses because of all the additional paperwork. Hopefully it will get repealed before 2012.

It is interesting to read what the government considers a numismatic coin.

The Gold Bullion Coin Act of 1985 (Public Law 99-185 of Dec. 17, 1985, 99 Statutes At Large 1177, 31 USC 5101, 5111, 5112) provided for minting the American Eagle ounce, half ounce, quarter ounce, and tenth ounce gold coins. Section 2(3) provides, "For purposes of section 5132(a)(1) of [Title 31], all coins minted under this subsection shall be considered to be numismatic items."

The Liberty Coin Act of July 9, 1985 (Public Law 99-61 of 7/9/85, 99 Stat. 115, 31 USC 5112) authorized the one ounce silver coin commonly called the Silver American Eagle. At section 202(g) it contains identical language.

By statutory definition then, the American Eagle gold coins and the silver American Eagles are "numismatic" coins. (31 USC Section 5132(a)(1) requires the Secretary of the Treasury to apply proceeds from selling "numismatic" items to cost of making them.)

costata said...


This might be of interest to anyone considering relocation.

The Biggest Tax Hikes In America's History Are Coming

Martijn said...

"In our modern world, we must remove gold from the official money system, place it in a free market, and people will use it as wealth money, not borrowing money. Then fiat can come and go as the wind."

It is about borrowing. We have always borrowed whatever kind of money we used, and always borrowed until payback was not possible anymore.

With gold outside the monetary realm, it will not be subject to our borrowing anymore.

Mike said...


wondering if you can write up one day what you mentioned below.

I believe FOA was aware of the relative scarcity of silver. He never made the rarity argument for gold, but instead he spent a lot of time explaining the historic precedence for why gold is so much more valuable than silver. He explained how ancient archeological finds backed up this idea. Some day I will write a post about the ancient history of gold and silver as told by FOA and Another. It is fascinating. But you can read it in the USAGold links if you would like.

William said...

Lately, over the last few months, I've noticed that gold and silver tend to go up on Sunday nights (Monday morning in Asia) and then get beaten down when the US markets take over at 10am EST. Now maybe this is just anecdotal, but it seems to confirm the idea that Asians are slowly accumulating gold and silver while the Western banks seek to suppress the metals in order to keep the paper ponzi going. Almost like clockwork, the best time of the week to buy metals is Monday afternoon or Tuesday morning. I will be watching the price action tonight and early Monday morning to see if my theory holds true.

Am I crazy or have others noticed this?

Wendy said...


A couple of weeks ago, I recall Trader Dan, on JSmineset mentioning exactly that phenomena. He said something like Fridays were becoming Mondays. I don't remember him offering an explanation however.

So to answer your question .... Nope, you don't sound "wacked" to me!!

1.618 said...


That was nicely put. Where was your quoted sourced?

Anonymous said...

@William you have noticed this, This is also a connotation of manipulation that FO/FO/A have been talking about...

I dunno when the west will wake up and smell the dead rat!

Vadim said...

FOFOA, i find your articles fascinating and extremely educational. One correction though -- you have referenced the Russian Oligarhs in this one and have been factually incorrect in the examples you used. NONE OF THEM have been Savers. They were entrepreneurs (on the positive side) and crooks (on the negative one). The scheme by which most of them got Russia's crown-jewels' assets was a so called "shares for debt" -- they "loaned" the Russian government money (which came from their banks into which the Russian Government deposited most of the Taxpayers money) -- so, these Government money was "loaned" back to the Government, but in exchange the Russian government had to "agree" to give shares back to their banks as collateral (of course they told the "President" at the time -- corrupt and drunk Yeltsin - to do that). Then the scheme worked in a simple way -- the Government officially defaulted on these "loans" (loans "to itself") and Oligarh's Banks got Oil and Gas companies for a song. So, as you can see, it had nothing to do with them being "Savers" -- they were simply smart and fast criminals -- not unlike the now-in-charge Goldman Sachs folks running the US Government. They are going to swindle US in a very similar fashion -- the process is well underway...

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