Costata has been working on a few detailed responses to some of the comments in the last thread. But with the comments going over 600 in four days, and then Blogger swallowing about 140 of them on Thursday, I thought it would be a good idea to start a fresh open forum for Costata's replies and for all of you to continue the discussion.
Sincerely,
FOFOA
807 comments:
«Oldest ‹Older 201 – 400 of 807 Newer› Newest»Hello Gary,
You are in no danger of being banished from this blog. But removing Art was completely justified, he earned it just like the other two (count 'em, only two) people I have banned in two years of blogging. Obviously I'm not afraid of Art's arguments, I let him spam this blog for weeks. And I have never shied away from a worthy debate. The key word there is worthy.
But Gary, you have misjudged the purpose of this blog. I am not here to debate Freegold versus whatever. I am here to explore as many different angles from which to view Freegold as I can find. Pests like Art become a major distraction to my primary focus. Here, read this paragraph from Freegold in the Proper Perspective:
"Freegold, in my opinion, is not a competing monetary theory. Nor is it a competing financial system. It is much more than these subjects of frequent debate. In my world, Freegold is a way to view unfolding events as they happen. It is a view of the valley below, as seen from a high vantage. It is a cipher for understanding what we see. It is not a description of what should be. Instead, it is framework, different from almost everything else you are reading, in which you can interpret unfolding events in a different light."
Letting people decide for themselves is exactly what this blog is about. And I am happy to take on the occasional worthy debate. But that starts getting difficult when 20% of the comments are from one hate-spammer. So far I have deleted 47 of Art's comments from this thread. That's was a 20% run rate for this thread alone. How many other people are responsible for 20% of the comments? Art is highly offensive and completely deserving of banishment. Believe it or not, banning Art actually IMPROVES the credibility of this blog. Maybe it doesn't for you, but the vast majority that follow this blog quietly and understand its true purpose are cheering right now.
You can tell the commenters that just can't get it. They are constantly trying to drag this blog down into a debate about Freegold versus their favorite whatever. There are generally three fronts of attack. Deflationists, silver bugs and Hard Money Socialists. As I said, I entertain the most worthy debates and ignore all others. I have made this clear time and again. Every few months I have to write a comment that says something like, "if I don't respond to you, please assume that I was unimpressed with your argument."
I am not here to convince you, Gary, or anyone else for that matter, of Freegold. I am here for the benefit of those that already get it. That's why I don't usually write in a 'Freegold 101' context. Freegold is simple, and it is also very difficult for the Western mind set to grasp. That's why people that show up and find this blog striking often complain that there's so much catching up to do. There is! That's why the few that get it are constantly encouraging the newbies to go read the archives. That's why I'm here, as DP said, "to move the conversation to the next level." Not to have it dragged back down into pre-school day after day. That gets tiresome after three weeks of hate-spamming. So now Art is gone and, hopefully, we can get back to the purpose of this blog.
If you would like to have more of a 'Freegold 101' discussion, there are several other blogs willing to entertain that class. Blondie, DP, Motley Fool and Gold Subject all have related blogs.
Gary, which big blockbuster post brought you in here? You seem fairly new, and I am well aware that we have lots of new readers now. Have you gone through and read the whole blog yet? Many (and I do mean many) like DP, Blondie and Motley Fool have. And they look forward a more elevated conversation, as do I.
Sincerely,
FOFOA
@Pete
I hear you - I'll keep adding to my physical Gold position, but probably continue to buy more Silver Maples too... I'm going for 75-25 - although right now am about 50-50. I am hoping 'it' is a long way away. You are right in that the timing can be the stresser - no need to put myself through that. I'll just stack, cross my fingers and wait... This morning I was ready to get into some juniors but two sources I contacted (one I am sure you know or are aware of) disuaded me... with your same stance. I'm not sold on FreeGold but still feel my prep will be useful. 'May we live in interesting times'...
Thanks for responding, FoFoa. Yes - you are correct that I am fairly new. In January I collapsed by RRSP (IRA/401K I think it is called in US?) and bought physical Gold. I then found one neighbour, friend of a friend, who pointed me to you. He has helped me quite a lot. We now refer to each other as 'CIGA'.
Gary, which big blockbuster post brought you in here? You seem fairly new, and I am well aware that we have lots of new readers now. Have you gone through and read the whole blog yet?
I have read quite a few of the past FoFoA / FoA articles and, when in the right frame of mind, I do enjoy, but if this is religious then I am afraid I am not devout. The first piece I read may have been 'Who is Draining GLD?' I spend hours each day sifting through plenty of other info (it's a large Internet) - last night I printed out Jim Willie's May newsletter and poured over the entire 60-pages with highlighter. This is time consuming - as many can appreciate. My wife thinks I am crazy... or obsessed. As I pick up my two boys from school - I go early so I can sit and listen to burned CDs of Jim Willie, Sinclair, Sprott, Rule, Rickards, Janet Tavakoli and many more... I've even made about a dozen YouTube using the Xtranormal cartoon characters - trying to spread the word. I've bought and watched DVDs from GATA and Lira...
Excuse my butting into the discussion - but it often helps me learn. I believe I am close to understanding FreeGold (I was actually closer before Costata's post) but that doesn't necessarily mean I have faith that it will transpire as such. I am open to many possibilities of the future - and like, most here, anticipate that the collapse is imminent. I'd love to invest myself in that it will occur in one form but I don't know that it is prudent.
Before I drift into the lurking ether - I'd love if there was some discussion on coping with HI. Most here will be prepared. Friends, relatives - they don't want to know right now (normalcy bias) - but when TSHTF - we won't be able to help all our neighbours. People will suffer. This causes me the most sleepless nights. Maybe you can write a post recommending a shrink :)
Anyway, please keep up the good work.
Ash:
I have read the part I article at your site, and I found it impossible to understand your position without at least some reference to actual events that we might see (or something similar).
As with some of the other commenters above, I think it would be very useful if you were to translate some of your theory into the consequences that you see might arise - or to at least 'concretize' your position to an extent that renders it more easily examined.
I thought you made, in one of your posts, some really interesting points about how difficult it might be to predict what will unfold in such a complicated system, but it seems to me that you haven't gone further toward explaining how that's relevant for this discussion.
And on a specific point, I'd really like to hear more about what you mean when you say that Freegold might 'consume itself'. I can't get my head around how that could even be a valid thing to say about the emergence of Reference Point Gold, which might relate to my confusion about what you're saying, or my limited imagination, or possibly your understanding of what Freegold 'is' (to me, not so much a 'thing' or, as Art seems to see it, an event anyone is really agitating for, but rather a prediction about the way things will shake out). Hope that makes sense - I'm trying to say that your statement suggests to me that we might have different views about what Freegold actually is i.e. that we might be talking about different things.
J The Newer (still struggling with the sign-in, sorry...)
Gary,
We don't have to worry about HI in canada, also our banking system is sound and so far well regulated.
Hi Wendy,
I hope you are right but if the US has supply chain shortages (mostly due to the exhorbitant and escalating price of gas) I have the feeling we will too (yes that is not HI). Sinclair says that HI is not an economic event but a loss of confidence in the currency. I believe that all CBs are printing money. It is like a race to the bottom because of the economic advantage of have a low currency (excellent article at Mises about that). The Canuck dollar is fairly strong and we are touted along with Australia, Swiss franc as 'safer havens'. Gold horders know different. It would be more reassuring if some (one) of these anaylysts moved here (Willie in Costa Rica, Jim Rogers in Singapore, Faber in Thailand, even Keiser in Paris!... don't these guys like 9 months of winter? ) I have always suspected that Mr. FoFoA was a Canuck (hard to miss that King's English spelling sometimes, eh Bud?) but I doubt an admission is forthcoming.
The killer will be oil. In North America you can't really get anywhere without driving 30 minutes. This will shut down commerce on both sides of the 49th. I can have a garage full of firewood, a freezer filled with meat, 100's of canned goods, cases of bottled water, propane tanks by the dozen... but what about gas? I looked into multiple electric car options - not done, not ready, coming soon. I only require an advanced version of a golf cart - can't somebody make one? Maybe we know why. Hope for the best - prepare for the worst.
@Robert
"So can your conclusion be summarized as freegold is too simple, therefore it will not happen, but if it does, it will not last?"
No, not at all sure where you got that from. I said that the theoretical foundations underlying Freegold are flawed... nothing about being too simple.
costata,
I would really just recommend you read recent work by Dr. Steve Keen, as he comprehensively analyzed the advantages and flaws of almost every other economic school of thought.
The best source is probably Debunking Economics, a book he wrote awhile back that systemically covered the various flaws of mainstream economic theories. But I think you would have to pay for the e-book version via Amazon, though.
Alternatively, you could look at his free research papers from the following link - Dr. Keen's Research
Those cover a lot of different topics, but I recommend the papers listed under "Marx" and then the ones on Minsky's financial instability hypothesis. I am trying to incorporate some of these thoughts into part II without making them too drawn out. It's tough though, since there are just so many relevant concepts contained in that body of work.
@Museice
It was analogous. The word religion is sometimes used interchangeably with faith or belief system. Faith or belief in FreeGold. It would have helped if you used the whole quote IF this is religious THEN I am not devout. If this is a balloon then I am not a Cumulonimbus ('What ! How dare you talk about clouds!")...
J,
"As with some of the other commenters above, I think it would be very useful if you were to translate some of your theory into the consequences that you see might arise"
Patience, buddy. Like I said before, I can't just start spouting off predictions about gold and monetary systems without first establishing the theoretical foundations that may give them any credibility. That's what Part I was about... strictly abstract theory and philosophy. Eventually, once the theoretical foundation is set, the more concrete predictions and examples can be discussed.
I'm not going to keep repeating what I mean by "consume itself". It just means that the global monetary system of Freegold will not last very long, before individual regions, nations and communities start defecting to protect their own financial and resource interests. It might provide for a limited re-leveraging process, but that will only make the collapse process even worse, since people will once again be invested in leveraged transactions via fiat currencies that will blow up in their faces. Gold as the wealth reserve asset of last resort will not save them from abject poverty.
@ gary
I think I understand the religious connotation. I have felt it too sometimes, that this place gets a bit 'cult-ish'.
However, it is not a product of a belief system, or anything even faintly relating to a cult. I think it is merely a product of the rich works that FOFOA hosts on this blog, and the fact that they are not easily understood. This then leads to commenters becoming defensive when newbies enter the fray and challenge foundations that have been tried and tested by many before them.
It gets frustrating, when some don't read the archives and then relatively simple foundations need to be explained over and over. These frustrations bring out interesting qualities in some of our longer-term commenters, which can certainly make it seem like Freegold is a 'belief' system. Comments like "you just don't get it" and patronising people or belittling them do nothing to avoid this cult-like phenomenon.
But as FOFOA responded to you, it's not about belief or convincing anyone about anything. It is about seeing things unfolding in a different way and a very likely destination (Freegold).
Glad to see more non-US readers onboard too. I'm Australian.
Hey guys, back from the peanut-gallery. I've enjoyed and profited from the intense discussions here and follow everybody's thought processes as best I can. I gave myself a birthday present and golded-out most of our silver at a GSR of 33. I rankled in the early days of FOA on the 50 cent thing and we're better off financially for that gut reaction but Costata's and FOFOA's arguments re:silver are clearly on-the-money. Gratzi amigos. I am slowly coming around to the idea that we need to prepare for what is coming and not for the world that we'd like to see. In that endeavor I still use a backdrop of the elitist nature of our existing system and try to interpret their moves from a different perspective than in prior years of resistance. Walking in the footsteps of giants as A/FOA said is an interesting metaphor.
I'll agree with the proposition that most of the anti-NWO crowd are whackjobs but if one peels back the onion far enough it might help to understand who might be really driving this coming transition. The second article at the link above is by Edward J Epstein in 1983 for Harpers Magazine. It's interesting in the context that we might not really be looking at a simple BIS vs IMF split at all but more like a necessary permutation of the existing relationship between these elite groups and others who have so many interconnected relationships. This might help folks like me who are always trying to fathom the question of who is really running this show and don't have the bandwidth for complicated economic theory.
I'm still not clear after reading everything on this blog whether the predominant opinion is that freegold will come about naturally, in the sense that it's the only option and will be driven by free-market forces, or will come about from a bid by the BIS at whatever level is determined necessary. I'm thinking it will be the latter sort of scenario. Perhaps when the shuffling of gold to the required locations is finished it will be a nation state that is tapped on the shoulder to trigger it. What seems obvious is that everyone on the planet will be in such a state of crisis that it won't really matter and might appear to be market-driven when it's actually not.
Either way, doesn't it seem likely that if the giants are planning so intensely for this endgame that silver might have a unique role? First off, it takes alot of investment pressure off of gold the closer we get. And maybe it will zoom in a big way just prior to the transition. The purpose for the zoom would be to crash it hard in order to scare the last remaing weak hands out of gold as well. Just a theory I read a long time ago from a poster called Endgame. It would be the last vacuum-cleaner sweep just prior to all the Cash-For-Gold shops shutting down - good riddance.
I noted recently that Jim Rickards is using an interesting number for his high-end on gold - $30,000. That one really rings a bell from the early A/FOA days. I'll be looking for when and if he transitions to a discussion of different types of roles for gold as opposed to his most recent interview with Eric King in which he just played out the variables of money supply divided by ounces to pick a range of possibilities. I sort of view him as a change-agent in a good sense in that he appears to have national survival on his agenda and is providing a bit of a panic-valve in terms of his timeline and highly rational world-view.
Well, thanks again for the discussion and if I post again I promise to be on my best behaviour.
... Ex-Sophist
@ Ash
I'm pretty sure Costata is familiar with Keen's work.
I like Keen as the person he is and the work he does in society, but he is a deflationist all the same.
Nothing Keen has ever said makes me think that Deflation is more likely than HyperInflation.
...
"It just means that the global monetary system of Freegold will not last very long, before individual regions, nations and communities start defecting to protect their own financial and resource interests"
I think you might not understand Freegold very well. Consider it the same as the current system, except that money (medium of exchange) is now backed by something other than empty promises (store of value - gold).
What reason would a country have to want to stop trading with the rest of the world that uses this system?
It seems that if you were right in this regard, many countries would stop using the USD to trade long ago. But generally, they didn't. They will ditch it in the future, as the USD is becoming too volatile and doesn't act as a good reference point for which to trade with.
If everyone uses the same reference point for trade, why would it be to any countries benefit to stop using that?
Fofoa said:
"...But Gary, you have misjudged the purpose of this blog.
I am not here to debate Freegold versus whatever.
I am here to explore as many different angles from which to view Freegold as I can find..."
[Mrt: It would be great to establish grounds and proper point of view for all who want to participate in the discussion]
**************************************************************
. THE FORUM HALL OF FAME .
. A Special Gold and Monetary Discussion .
**************************************************************
http://www.usagold.com/halldiscussion.html
http://www.usagold.com/hall/halldiscussion2.html
http://www.usagold.com/hall/halldiscussion3.html
[Mrt: Gold in monetary systems. Educate yourself! Thank you]
[cont1...]
Aristotle (2/7/2000; 7:15:24MDT - Msg ID:24589)
It begins!
-----* Executive Summary -- an Outline of Observations *-----
*** Any monetary system that attempts to coin Gold, or otherwise use Gold as currency will naturally give rise to banks -- for security and quality assurance if for no other reason.
*** History reveals time and time again that this seemingly "perfect" Gold-only system naturally evolves into fractional-reserve lending because it is what the people want.
*** While lending depositors' deposits, the efficiency of banking to reallocate fungible funds allows many people to behave as though they all are "owners" of (i.e., have access to) the same original quantity of deposits.
*** Through lending (coupled with the phenomenon described above,) the artificial (i.e., man-made) increase in the money supply erodes its per-unit purchasing power.
*** A growing economy (complete with rising prices from a "softer" currency) raises the customers' demands upon the banker's art of money creation, widening the gulf between here and reality...between the vast amount of banking credit and the small original amount of real wealth-deposits upon which it was all built.
*** Because Coin and bank-credit circulate as equivalent, interchangeable currency and means of payment, the value the currency-unit, regardless of form (Gold coin or paper,) falls in accord with the growing supply of bank-credit.
*** Thus, when the value of the coin comes in time to be viewed as merely a representation of the abundant supply of credit-money and thereby fails to reflect the value of its metal, from a practical standpoint it might as well be made out of anything at that stage.
*** In this progession, the developing concept of "money" gradually loses its originally-perceived meaning along with ties to real wealth; it comes to be built upon the thin ice of confidence and good loan/counterparty performance through the banking system.
*** Fixed Gold Convertibility as a currency of the credit on account looms large as a threat to the banking system.
*** What then is the role for Gold? Gold qualifies as MORE TRUE than money. Among the many national currencies, only Gold in physical form fills the three standard monetary criteria (store of value; medium of exchange; and unit of account) without *WITHOUT* the associated risk of default. Gold, therefore, remains the ultimate, sovereign king of them all and subject to none... as long as it isn't attached in any official capacity to the fate or fortune of any one of them. Therefore, the monetary system architecture must be such that Governments find no temptation -- that they are unable to derive any benefit to their own situation through any efforts to "keep a lid" on Gold.
*** Gold must be set free to float, seeking its proper value among the world of circulating currencies/monies; preserved as a unique "international currency of wealth" that may NOT be lent (because lending effectively causes a perceived increase in its supply and corresponding decrease in its purchasing power, as outlined above.) Gold must only be bought and sold outright, and must remain free of the attachments of any and all financial derivatives.
*** All people, regardless of nationality, must be free to exchange their national currency for Gold at prices established by an open physical Gold market...
[cont2...]
How will this work, you ask?
*** An extention of Gresham's law predicts that the world's supreme currency, Gold, will not actually circulate in the conventional sense. Gold will be saved (and will appreciate in value absent the lending/leasing of it for interest,) while national fiat currencies will circulate under the needs of the economy. It is these national fiat currencies that will continue to satisfy the demand of borrowers for loans. National fiat currencies will also serve as the means to satisfy the various governments' unrestrainable inclinations to "manage" their economies to the extent that they are able. They, too, will hold Gold in savings (reserves) for the same reason we do.
The supporting chapters are to follow in this commentary -- "Building the Perfect System by Capitalizing on Gresham's Law"
Thanks Mortymer!
That is one of the most useful comments i've read in weeks :)
[Mrt @Pete: Please go through the archives, explore, they are deep and wide, there is not much dust on those "Thoughts", on the contrary, they are more actual -- connected to present world monetary events then one admits.]
"...The Stage Has Been Set; Let the Play Begin...
Those familiar with the popular discussions of monetary thought will recognize the common plea of the idealistic Gold advocate: calling for a return to a 100% fully "backed" and convertible Gold standard currency system. (As if that were somehow the magic pill to cure all that ails us.) The solution is not so simple, and to believe so is tragically naive black-and-white thought. For confirmation of this, look to our past where you will surely see a familiar world, populated with people that were motivated by the same thoughts that motivate us today. In "their" world (fundamentally the same as ours) we have already had a convertible Gold Standard, but, in fact, history reveals that it did not work. Or maybe more correctly stated, modern times reveal that it did not SURVIVE. To be sure, any conceivable system might be seen to work well for a limited span of time--and indeed, history paints a vivid landscape populated by many currency creatures of various lifespans--but true success is determined by who remains to answer the daily roll call. HOWEVER, from where we sit we can gain important wisdom in the observation that, despite the overthrow of the Gold Standard regime, Gold remains an unparalleled reserve asset; carefully weighed, numbered, cataloged, and stacked, resting well-guarded within central bank vaults throughout the world--unmatched in financial staying power even as all else fails.
Having acknowledged this history, there is no point in rashly calling for us to repeat the mistakes of our past. The problems that killed a fully-convertible Gold Standard back then are still with us today. But take heart. The problem was not with the Gold itself. The problem was with the Gold Standard's fit with the prevailing banking/financial "System." If we objectively face the cold hard reality, we realize that we can't very well live with the lack of either one. But paradoxically, history shows us that the two cannot sustainably coexist--at least not under the various system-designs tried in the past. In my usage here, the "System" refers simply to the dynamic interaction between a currency and its users within the context of evolving economic demands for development, commerce, and banking. (Even to the extent of self-destruction, the System is notoriously good at giving the people what they want.) It is the subtle changes to that system that I hope to spell out, revealing not only how Gold can survive society's preference for the current self-serving System, but also how the System can tolerate/survive the discipline of Gold. In fact, the diametrically-opposed System will not only survive in the face of Gold, but will actually be made more functionally viable by Gold.
Now that you see what we are in for, it seems appropriate to launch my endeavor with this quote from John Kenneth Galbraith: "Most things in life--automobiles, mistresses, cancer--are important only to those who have them. Money, in contrast, is equally important to those who have it and those who don't. Both, accordingly, have a concern for understanding it. Both should proceed in the full confidence that they can." It is in the spirit of that assurance that the playing field has been made level for a such a Little Leaguer like myself that I shall embark on this attempt at passing along my own view of the monetary system. We are told above that everyone should share a common concern for understanding it. ACTUAL EXPERIENCE reveals that FEW PEOPLE CAN MUSTER A BASIC TOLERANCE FOR ANY MEANINGFUL DIALOG ON THE SUBJECT (MONEY.) To be sure, they can be seen to talk at great length on the various schemes for making more of it, but not a word is to be had on the design of it..."
Freegold is a lens, a world view.
If I were to understand your world view, and I don’t mean the worldview of the ‘camp’ in which you sit (I’m sure you don’t even put yourself in one), ie deflationist, peak oil, environmentalist, capitalist, Marxist etc etc, but your own specific one – and I mean really understand, not just know about –then I would require, for one, a deep knowledge of your history, also a nuanced understanding of how your experiences had influenced your thinking, your economic and political place in the world and to see this from many angles to get the proper context. To make predictions about how you might behave, or interpret an action of yours and do this precisely and correctly, I would need a great deal of study and understanding.
It is the same with Freegold. When someone comments, “you don’t understand Freegold”, well, that isn’t very surprising, unless you have put in the requisite time to be able to fully integrate all these highly nuanced facets. If I read a few articles written about you, personally, do you think that I would be able to interpret all of your actions in the future based on this simplistic information? Don’t take it personally if someone says this. Understand that it is an indication that you simply have a lot to learn if your goal is to understand Freegold. Of course, if your goal is not to understand Freegold, but to discuss competing monetary systems, then I don’t think you are going to get much joy here.
Freegold is not a monetary system. It is an evolving history and to understand it requires the time and effort that should be put into understanding any highly complex human process.
I will say that I don’t fully understand Freegold; not even close. I am consistently surprised by the interpretation of events given by those further along the trail than I. I thought I was getting somewhere and then I realised I had been meandering aimlessly. I have been a little curt and rude of late, for which I apologise, but it is because I am frustrated that the conversation has moved away from the more intricate Freegold discussions of the past. I miss them.
Gold and Economic Freedom
by Alan Greenspan [written in 1966]
"...In the absence of the gold standard, there is no way to protect savings from confiscation through inflation There is no safe store of value..."
This was written long time ago and was valid back then. The time has changed, gold is now an official wealth reserve asset. The moment when Euro was born made the pregnant waiting worth for few. Now it is time for this baby to grow. It does learn from and on mistakes; they are meaningful part of any development. Make it official for yourself, like CBs do.
Freegold is just about that, a safe privately owned harbor for LONG TERM savings inside or along the fiat currency system, a compromise between the two if you wish or a pseudo-gold_standard with a floating currency twist?
I would be very interested to see a list of fundamental concepts that a person would have to be able to fully expound and integrate to be labelled as someone who "got it". A list of the names of tributaries and defining landmarks as seen from high up the valley, so that newer travellers can get a rough guage of their relative position in the river and, perhaps, from there, get an idea of where they need to start paddling.
Anyone care to step up with a brief list?
I know that what I am about to say is not popular, but I feel it must be said. The following information is probably known by as many people as follow this blog. 400,000 years ago, beings from another planet in this solar system, unknown, as yet to modern science, but recorded on clay tablets by the Sumerians, came here to extract gold from our planet. Sumerian tablets from the 3000bc era, indicate that the last Annunaki on Earth disappeared around 600bc, but there is ample speculation that the Anunnaki are still having humans mine and accumulate gold for them. My point is that if you consider the actions of the banking and political elite, the process of extracting our gold from our race, appears to be a continuing process. Whatever their plan to corner the gold, their objectives seem to be on track. The evidence of their presence is evident on every continent, and in every major museum on Earth. Zachariah Sitchin dedicated his life to creating the historical account of their expeditions to this planet, and has recorded his knowledge on several books, the first of which was "The 12th Planet". But the thrust of their plundering of our gold is just coming to light, by such authors as Laurence Gardner, author of "Lost Secrets of the Sacred Ark" an excellent history of gold. There are many more books on this topic that every one must pursue as their own interest dictates. I have a long history of acquiring as much knowledge about gold as I can find, and this blog, though mostly economic theory, shows that there is a racial awareness of the value of gold. One of the oldest mummies ever recovered, Nin Puabi, was dug up at the ancient site of Ur, one of the oldest cities on the planet. In her grave was found a dagger made of electrum. Her grave is dated somewhere at about 5000bc.(as best my failing memory can recall). Just be aware that gold is not an ancient and useless relic. It could be more valuable than is known by the general public.
As I see it, Freegold is a good compromise between the hard and soft money camps.
WTF Terry
Is this monoatomic gold again?
"I would be very interested to see a list of fundamental concepts that a person would have to be able to fully expound and integrate to be labelled as someone who "got it"."
Bwaaaaaaaaaaaaa.
I guess you haven't been hanging out around here long enough Radix. If you "get" it, then you know that you "get" it. Just follow Costata. It is binary. And once you "get" it you can just make rude and condescending comments and claim that whoever you are ridiculing doesn't "get" it. No need do put together cogent and articulate rebuttals, just claim that whoever you are criticizing doesn't "get" it.
That's the beauty of freegold. No need to prove that it is inevitable with cold hard facts and logic, just use vague "principles" and "objective reasoning". If anybody contradicts your principles with arguments and facts, just ignore their arguments and belittle them and claim that they don't "get" it.
But Radix, I think you do "get" freegold anyway. That is at least judging from your accusations that my logic was a "non sequitur" (my statement that Costata's concession that freegold is just a "probability" is tantamount to admitting that a multi-metal strategy is reasonable), followed by your failure to reply to my earlier comment requesting clarification from you. Isn't freegold wonderful?
@Radix46: One of the best exchanges and one I like a lot is this one, it is worth to read it full but here is the highlight suitable for the present discussion which walked IMO to said trail:
ORO (02/11/00; 13:59:00MDT - Msg ID:25019)
Aristotle and Trail Guide
What is to stop the gold markets to regroup and form a new gold banking system?
"...Many have proposed that there is some need in trade and business for the flexible money that fiat allows. I contend that there is no such flexible money, as its cost in trade and to business far outweighs the benefits of flexion..."
"...Wherefore is the justification, economic or otherwise, for national currencies? for fiat money at all? for the existence of a central bank? for the charters of banks? for the regulatory body that forces all banks to collude?..."
Aristotle (02/11/00; 17:46:56MDT - Msg ID:25059)
ORO and Elwood, and Trail Guide & Journeyman
"...A friendly exchange of ideas is good for everyone and makes for entertaining reading; agreement has the distinct look of a blank page or a silent room...."
"...Remember, my goal was to lay out the "perfect" system for an IMPERFECT (real) world. I took on the project with no preconceived notions one way or another. Going in, I was a charter member of the Goldhearts club, and I emerged even more excited about the prospects of Gold than before. The future for Gold is bright, and it is rapidly approaching in the manner I laid out, if I'm reading the signs correctly.
In working on this project, I was personally shocked when I discovered that we absolutely NEEDED paper currency in order to set Gold free. In the perfect world you lapse into in your comments, everything you say is well and good. We don't live in that world, however. My biggest challenge in piecing together my proffered solution was to accept what this real world had to offer and avoid foisting MY OWN PREFERENCES onto the world like a square peg in a round hole..."
cont1...
"...Looking back at the finished text, I see that I could have opted for another method of presentation that would likely have been offered up immediately for canonization, rather than the form I chose that was met largely with...nothing. This was done for a purpose. I wanted the commentary to have a decidedly real world brutality to it to establish its credibility among those (not here) who don't understand Gold. Had I written it for the pure pleasure of those gathered here, I would have written it from back to front. In short, it would have looked like this:
** Gold is the only real money there is--fiat currency is not money--so only Gold should be used as currency.
** Fractional reserve lending destroys a currency's value in trade, and therefore must not be allowed.
[time for concessions to the real world]
** People will always want to borrow for the things they want to have beyond their current financial means.
** Spending Gold into the marketplace, whether by the owner or by a borrower, would tend to result in prices for goods that weigh more--costs more Gold, that is.
** As ever more Gold is borrowed out of other people's savings to be spent into the economy, the Gold's purchasing power is lessened from what it otherwise would be...hurting those who have elected to hold their Gold instead of risking it by lending it out as a source of income.
[notice in the above that we have all the bad devaluation effects without a single bank entering the equation!]...
cont2...
** For Gold to find its truest value, all savers must retain their Gold for their own use. Its properly retained value will more than make up for the foregone interest income. Gold must not be lent! [Gresham's law alone is adequate to achieve this.]
** With Gold as the only money, people will not be able to get loans. [In the real world, this is hard to imagine!] As an alternative, they will work up complicated contracts for the item they desire (new home or car?) in which they promise to deliver a certain level of their future productivity against a pledge of real wealth collateral.
** These contracts for the delivery of future man-hours would eventually be organized into their own market, and quantified into standardized units (called something like "manos" [generic form for the modern dollar]) functioning as a currency. Everyone would know what the price for a loaf of bread would be in "manos," and they would all revel at the high price of Gold as quoted in "manos".
** As more future productivity is brought forward into today's market, we would see this "manos" currency-supply inflate, and each pledge of future manhours would be seen as less and less valuable when compared to real goods.
** Someone holding Gold in savings who needed to get some work done or to buy goods could purchase it directly with Gold. They could also sell a quantity of their Gold on the free market to buy the Man-hours they needed to get the job done. There will always be people with an excess of "manos" that will want to move them into this supreme monetary asset--Gold.
** Such a system is not prone to shocks (bank runs and currency crises, etc. are like earthquakes where pressure builds and then is suddenly released) because at all points the assets may freely come into balance against each other in the free markets of the world.
There is little difference between a manos in Bangladesh and a manos in Canada where one manos is taken at a moment in time as the work equivalent to a healthy man shovelling sand with a spoon into a soda bottle. Who cares if one manos is actually called one, ten, or 27.34 rupees in one dialect while in another language it is called one, two, or 6.45 dollars? Its really just a mathematical exercise. Who's to stop the real world from pursuing such a system? It's basically what we have now, except the evolution took another route!
The key is that Gold must be assisted towards its own final and perfect destiny through the straightforward mandate (whether social, governmental or religious) that Gold shall not be lent as it has been, or otherwise attached to various financial derivatives. You can work for it, mine it, buy it, and sell it. You can't borrow it. Monetary perfection for an imperfect planet."
I had forgotten about this (from Freefold in the proper perspective):
"But it is to say that in order to understand Freegold you must at least understand the significance of these conditions:
1. The end of the dollar standard (the end of its timeline as the main global reserve currency)
2. The end of parity between paper gold price discovery and physical gold price discovery
3. The Euro-Freegold concept/project, (at least) 31 years in the making
4. The flow of oil"
Anything to add to that?
Perhaps more abstract concepts which help to define a vantage point?
Desperado,
I'm done. You win.
I won't be nit picking anymore, I'm only here to learn more about Freegold.
Desperado,
What is your interest in Freegold/FOFOA's site?
I truly would like to understand why you come here.
The reason that I ask, is that I come here to learn about the evolution of a specific paradigm, which is the stated subject of this blog. I am not trying to win anyone over. I am here to learn about this specific topic.
This does not seem to be your goal. Indeed you seem to be positively against Freegold and I am not sure why you would come here if you so vehemently oppose it, given that it is not something that is being lobbied or voted for, but an evolving story which is being described. It is not something which can be affected in any way by your opposition, unless you head up a syndicate of central banks and giants.
If a view of history and a perspective on the extrapolation of events as seen through this lens causes you so much distaste, you don't have to engage with it, certainly fighting it the way you do seems to be so futile.
I expect that I am comitting some great sin of lacking perspective in some way, perhaps you can tell me what is and what is your motive for being here?
That is not a rhetorical question. I really am interested in understanding your answer.
Thanks for that Mortymer.
@Desperado, have you ever read this "A Special Gold and Monetary Discussion" 3 pages fully? (no offense please) A lot of things are actually answered there, and on other pages. That is most probably the reason why some neglect to answer some re-appearing questions again and again. Other issue is that we are not professionals here, e.g. my explanation skills are poor and this area is not my profession to give you 100% qualified bullet proof answer you will be satisfied with. Like in life, please do not feel discouraged if somebody does not listen to you, just patiently repeat, you might of been overheard which is pity. I myself overlook often good stuff because of the time constraints or shallow thinking, mind tired after daily work.
You are right that there are many possible scenarios with different probabilities. How do we measure them against each other with blackbox test other than by observation? People don´t each time choose the best available option, true, but here we speak about very competitive nations, alliances, enemies. So what could we take as a hard fact? Like when old gold standard broke down, those who stayed longer had bigger problems. Return there is not an option (judging from CBs homepages, quotes of VIPs and prevailing banking system) point of view. Look BdeF has even on its main page this clear for all to see:
http://www.banque-france.fr/gb/publications/telechar/focus/gold-standard.pdf ...and so I search for clues where we are going. It is not binary for me, at least for now. I am opened to try to understand all those systems which could help me to understand the present one and see if conclusions are correct, if not let them be shred and start again building new understanding.
...it describes some problems with gold standard. Similarly there are issues with bi-metalism.
My take is that this "black-box monetary system we live in" (decided about behind closed doors, as about a future design or as a push to officially change settings when markets dictate) is changing before our own eyes and freegold offers so far best complex extrapolation/explanation of events and shows where we could end up in. Do I like it or not? Well, do I like present system? Who am I to ask this question?
Sorry if this perhaps does not answer to your comment directly. Just a moment of writing instead of re-posting.
perhaps just this one:
The Traveler (02/16/00; 01:22:22MDT - Msg ID:25439)
The Perfect Monetary System - Installment One
http://www.usagold.com/hall/halldiscussion3.html
On GLD:
John Paulson reports that his fund has 31.55 million shares in GLD, or 315 'baskets'.
Soros is reported to have sold his GLD holdings, though I have not found a source that confirms that he sold, rather than redeemed GLD shares.
PIMCO says gold is it's top holding, but does not specify but doesn't specify physical or paper.
Are the giants circling?
Jeff,
You posed this question:
"Are the giants circling?"
The people you mention are extraordinarily rich by shrimp standards.
Do you mean that they are "circling" the wagons?
If so, I agree FWIW. Big fish eat the little fish, bigger fish eat the big fish, even bigger fish eat the 'bigger' fish and so on.
Costata,
I didn't understand what you meant by:
"If so, I agree FWIW. Big fish eat the little fish, bigger fish eat the big fish, even bigger fish eat the 'bigger' fish and so on. "
Do you mean Soros is gonna get eaten?
Who is circling whose wagons?
radix: Well said. Someone has probably asked Desperado in the past but I don't remember the answer. I'm curious also.
jeff: Soros Sells Gold ETPs as Paulson Keeps Bet on Bullion Extending Record Run
radix46: I am biting my tongue so hard that I am drawing blood.
Perhaps it's a stress-related thing? Maybe you should try ingesting a little white powder gold daily? It seems to work for Terry, so why not give it a try?
On to the business end of my reply to you though, I think it might help for you to break out "3. The Euro-Freegold concept/project" into some sub-topics, perhaps starting with:
3.1: Reserve composition (and game plan to achieve goal)
3.2: Open-book accounting policy (monetary actions reported online including details of how and when they will be sterlised, monthly balance sheet reports, quarterly MTM of primary reserve asset in balance sheet report)
3.3: Single mandate ~2% zone-wide consumer goods price inflation (AKA "economic shock absorber")
3.4: Disregard to exchange value of the currency (except with respect to achieving goal of 3.3)
3.5: Firewall between monetary policy and national politics (see also: 3.3)
I think you'll agree, this adds up to a recipe of stable inflation expectations for consumers, plus enforced fiscal restraint on politicians (but with an escape valve for coping with the inevitable serious disaster, unlike an old-school gold standard).
Of course, discussion of the Freegold subject could be pretty much infinite though, as I know you appreciate. Even just sticking inside the sandbox of this topic area 3, there's plenty to chomp on isn't there?
Some people like to explore the possibilities that could unfold in "Act 3" of the unfolding drama, taking all that has happened to date in "Act 1" as their basis to work from. It feels to me like they are choosing to totally skip right over Act 2. That is a very interesting conversation IMO, but as should be clear to all -- between now and then, there are a LOT of things that we can't know for sure, but all of them are going to adjust the course towards "Act 3". It is totally impossible and futile to focus effort predominantly on discussing the later scenes of Act 3, IMO. How can we spend the majority of our time postulating about ideas that far into the future? It's a waste of time, surely? My view is that this site is *all* about "Act 2". At this site the conversation is primarily about trying to determine the most likely path through this "Act 2" period. As part of that conversation it is interesting at times to pontificate on the possible sketchy outline of "life as Act 3 begins to unfold". It is a beacon of hope that there is a light on at the end of Act 2's dark tunnel. If you don't make it through Act 2, what good was it to have considered what might happen sometime late in Act 3? You'll already be dead by then, no?
Thanks Indenture. From the link: Some “ETF liquidation in the quarter was not actually outright gold selling,” UBS’s Tully said. “In some cases, investors switched their gold exposure from ETP-based to allocated. This somewhat distorts the ETP ownership picture.”
So unless Soros gives us a peek in his vault, it's hard to know exactly what he did.
@The Engineer
Just the fact that here and many other blogs we see this discussion over and over, means you should have some silver.
Will it be used to do transaction or not ? I don't know ?
What I know is that it will preserve your wealth better than fiat.
Will it better than gold, I don't know. Nobody knows, even the ppl who bet on gld 100%.
I know the premise of this blog is to hold only gold until the whole mess unwind and because it is store of value par excellence.
But, me thinking it is not unwise to put some money in silver, some money in long term purchases of whatever non-fiat thing you can find.
Hey even apartment/house will be better, probably.
We know that the banks don't hold silver any more, but there is 6 billion people out there compared to the last time when only Western Europe and USA participated.
And the fiat devaluation is rampant all over the world, pick a country you have it.
Wendy,
"We don't have to worry about HI in canada, also our banking system is sound and so far well regulated. "
And your housing market is not in a bubble, and none of your politicians are corrupt.
You were being sarcastic, right?
I have a couple of questions for Costata. I'm still on the fence of the gold or silver debate and think it is good to have some of both, just to diversify and since both have a long history as money. When I come read FOFOA, I think I should sell gold for silver, and when I go read Jason Hommel, Chris Duane, David Morgan, James Turk, Eric Sport, etc I think I should sell gold for silver.
Some points that Costata did not address:
- China (and BRICs to some extent) buying heavily in gold AND silver, not just gold, as well as encouraging its populace to do the same
- The basis, silver is in backwardation, gold close. Backwardation indicates shortage.
- Is that shortage due to a corner on FLOW or lack of STOCKS? If there is a shortage in total STOCKS, doesn't that mean there is shortage in FLOW as well, so could you be misdiagnosing? I see arguments for both.
My view on Freegold is that it allows the Giants to have their cake and then eat it too. Restore confidence via gold backing and continue using fiat as exchange.
The other scenario is that those in power lose control and there is major upheaval/collapse and new dark ages, barter.
To silver or not to silver depends on which of these scenarios happens. My view is that Freegold is not enough of a correction of the existing built up imbalances. Maybe it works for a while, maybe it doesn't.
If you go back to Rome, the West collapsed completely, while East (Byzantine) continued to thrive on gold money. Perhaps Freegold works for BRICS (the East) and the bankrupt West sees the dark ages?
Either way, holding both diversifies risk, but being overweight one or the other I'm still open. Convince me.
Ash:"It just means that the global monetary system of Freegold will not last very long, before individual regions, nations and communities start defecting to protect their own financial and resource interests"
Pete:"I think you might not understand Freegold very well. Consider it the same as the current system, except that money (medium of exchange) is now backed by something other than empty promises (store of value - gold)."
No, I understand it fine. It ultimately serves as a limitation on printing money if it works properly (without significant constraints on the flow of gold within or between countries), which ultimately serves as a limitation on aggressive fiscal/monetary policy, and countries don't like that when their environment (economic/sociopolitical) is rapidly deteriorating around them.
Perhaps more importantly, the financial and political elites wouldn't like that. Now, of course, you would say that a) it's not really about what people like and b) Freegold would stabilize the economic and sociopolitical environment. I would say that I agree with (a), noting that elite decision-makers do have a distinct influence within the financial system, and that (b) is based on false premises about how human society has evolved, and so neither (a) nor (b) support the inevitability or even likelihood of Freegold.
@Radix46,
I am here to discover and discuss the coming HI and its aftermath.
Not long after I started posting I discovered that certain parties here were, shall we say, rather intolerant of other viewpoints. Check out this comment from Costata:
Desperado,
Serious question, do you ever think before you post?
You wrote:
"As FOFOA wrote, gold price is also dependent on the network effect. If price discovery is "everywhere and nowhere" then by implication the network effect will have broken down and gold will be used as just another item to barter, with its value to the acquiring party uncertain."
In that one paragraph you disclose:
You don't understand FOFOA.
You don't read the A/FOA archives.
You don't understand network effects.
You don't understand barter.
You don't understand value.
What do you "understand" aside from your own beliefs and firmly held convictions?
So you can see how touchy certain people get if you try to discuss how gold price discovery would function after the HI. I guess people who "get" it just know these things.
I got a similar reaction from Costata when I suggested a balanced Gold/Silver investment strategy. Now in this thread he has started back-pedaling, stating that perhaps having a little silver is not so stupid and that perhaps freegold wasn't a done deal yet (probabilities he called it).
Meanwhile we have the playground bullies DP and JR who more often than not have nothing to contribute but love to act like they are elite card carrying members of the "get" it crowd.
So you see Radix, I am still hung up on those messy details of the phase between HI and freegold that people who "get" it refuse to discuss with anyone who "doesn't".
The semi-religious neo-classical propaganda that we can always substitute resources for similar ones when the price gets too high is simply ridiculous.
+1
Good thing that isn't Julian Simon's argument.
Can't wait to see a similarly framed argument as (just like Mish) Steve Keen's ideas are used refute a position that isn't in discussion, aka a strawman.
One would probably have to be a raging narcissist to think people aren't aware of the roving cavaliers of credit. I can't wait to post links from last year.
J.R.
:) Sorry costata, I jumped the gun.
Meanwhile we have the playground bullies DP and JR who more often than not have nothing to contribute but love to act like they are elite card carrying members of the "get" it crowd.
+1
Well said, if you aren't willing to consider other ideas or read other stuff (which is obviously the case), why do these clowns keep posting links and expounding on ideas?
Its like they don't get you are ignoring the content of their posts. That seems LDO enough, so they must have a serous case of the stupids.
Don't they get that when their "intended audience" won't read what they post, they have "nothing to contribute?"
Sheesh, you'd think they stop trying. Oh well, efficacy must not be their strong suit.
@mortymer,
I have read most of your "A Special Gold and Monetary Discussion" and the banque-france gold standard piece.
My primary concern is much less what form of monetary system comes after the HI, but how can we make sure that the same elites don't end up holding the reigns in a new system designed to continue the exploitation of the masses. The two are closely related but not the same. Neither of these documents start to go there and neither discuss the role silver could play in this, which is currently of great interest to me.
Desperado,
The elites will continue to exploit the masses, as long as civilization exists. Maybe it will be the same elites as now, or maybe it will be a different group.
1/2
Hi Costata, I've outlined a few of your and FOFOA's points below and attached my counterpoints to them.
1. Point: Gold has a better stock/flow ratio, which makes it a better “store of value” and therefore better value overall. Counterpoint: It’s a better “store” of the value it already has, but that doesn’t make it a better “value.” The overall value is determined by 1) how well it maintains the value it has and 2) how much value others will place on it for its uses. By goldbug logic, if hypothetically people needed to eat a tiny amount of gold each year to live (let’s call this an “industrial use” of gold), it would be less valuable than it would have been as a pure store of value. This fails the common sense test – nothing has to be a “pure” store of value to HAVE value.
2. Point: The rich and the governments/central banks only own gold, and they set the price, so gold must be that much more valuable. Counterpoint: Depends on how you see it – sort of. For example: two shoe salesmen visit a distant land in ancient times. One returns and says, “It’s horrible…nobody there wears shoes!” The other says “What an opportunity…nobody there wears shoes!” Pure goldbugs assume that demand for silver from central banks is nonexistent and will always stay that way.
Over the course of human history there has always been some ratio of gold to silver – I believe the 20th century decision of governments to get rid of their silver is just another stupid decision like “Brown’s Bottom” and is an aberration that will correct. In fact, China’s already buying – proving my point. Eventually, governments will buy it again to maintain strategic stockpiles for usage in: military applications, currency, and reserves. Does that sound like silver shouldn’t have much value compared to gold? Or is the opportunity that much greater?
2/2
3. Point: Silver’s not as rare as gold, and even if it is more scarce, scarcity doesn’t mean much – many things are more scarce. Gold's monetary value means that the gold/silver ratio (GSR) should be over 1000 to 1. Counterpoint: Yes, technically scarcity doesn’t matter. What matters is how scarcity is relative to importance. For example, I’ve got a unique rock, the Galt’s Gulch Special rock. Would you like to buy it for 100 gold coins? No? So there’s a tight supply (1 rock), but NO demand.
On the other hand, if we’re 1 mile underwater, and I’ve got the only 2 oxygen tanks – I’d like 100 gold coins for a tank of something that usually is free. Scarcity does mean value if the item is undersupplied. Furthermore, on a GSR of over 1000, with a few tons of gold, one rich person could control global silver supplies (which many different groups actually NEED), compared to gold (which just stores value). How likely is it that the world would just let 1 person control the global silver supply? I believe Rui brought this point up and it was never refuted.
4. Final Point: The gold/silver ratio reached over 1:100 during past crises. Clearly, gold is always a better investment. Counterpoint: Exactly, during crises (non-normal periods) some people sold silver to hold a “more portable” savings (silver’s volume is much greater than that of gold) in case they needed to run. Viewed another way, people went crazy and provided a fire sale on silver. Using this time to determine the proper GSR is like measuring food inflation during a hurricane – prices are not rational at that time. If that was really what silver was worth, it would have STAYED at 1:100. If pure goldbugs were right, this would mean that the GSR of 1:16 in the earth’s crust is too low. This point also fails the common sense test.
HOWEVER – if people go crazy for gold and sell silver – why, then, you’d better have gold to sell to them. It probably makes sense to buy gold so that you can sell to the “gold-crazy” at a GSR of 100, wait for the GSR to return to 16 or lower, and then swap for 5X your original amount of gold. The risk here is that silver has been so suppressed that a GSR of 50 is never reached again, never mind 100 – and the GSR will eventually decline to the single digits in my opinion, just to clear the market.
So I think you may be right for a few weeks (3) before the GSR crashes back down to reality.
I'd be glad to know what you think.
Biting Silverbug,
"I believe the 20th century decision of governments to get rid of their silver is just another stupid decision like “Brown’s Bottom” and is an aberration that will correct."
What if 'Brown's bottom' was *not* a stupid decision or an aberration?
Thanks for the explanation Desperado.
I think that the hostility develops not because of the content of your viewpoint though. You may think so, but I don't think you are looking at the situation objectively.
If you are not interested in Freegold, but only HI, then I can definitely see how conflict can arise here.
It's like two people trying to discuss physics but with two different (unstated) understandings of the laws of physics. Frustrations and conflict are bound to surface.
If fundamental premises, even axioms, cannot be agreed upon, or even civilly talked about and expounded, then I think that there isn't much point in the exercise and nothing will be gained.
I think that the onus is on you to make the effort to understand the context of debate here and to clarify your premises and axioms and make an effort to understand those of people here. I don't think it acceptable to go to a forum and ignore the purpose and opinions of the people that are there and have gone there specifically to discuss the subject that the blog owner has chosen, transplanting in your own.
If you want to discuss other ideas, go to where people want to discuss them. I don't go to a forum on Javascript coding and begin discussing PHP.
Can you at least acknowldge any responsibility for the kinds of responses you get here?
FOFOA: hopefully, we can get back to the purpose of this blog.
I agree, and I'm aware that I am someone who's had too much to say lately and it wasn't exactly 'moving the conversation up a level'. So apologies to all for my part in that. I look forward to reading and learning some more again.
For example, Jeff made a comment a couple of posts back that illustrated how much further along the trail he is than me. I was disappointed that didn't go anywhere.
Ash said...
..."I understand it fine. [Freegold] ultimately serves as a limitation on printing money if it works properly"
You've got it backwards Ash. Freegold does not serve to limit the printing of money (I assume you mean currency). In fact, Freegold allows for MUCH MORE printing of currency.
--Aaron
Aaron,
If I had to guess what Ash was getting at, I might say he meant that freegold ultimately serves as a limitation (on the amount of value that can be appropriated via) printing money, if it works properly.
Is that what you meant, Ash?
Hey Guys: I have a new explanation for monoatomic gold. The promotion of mono atomic gold is an Illuminati deception. (bottom of page)
Briefly put: the promotion of mono atomic gold by the 'Powers' is so we use it and without knowing we destroy our ability to 'exist in the physical form in the forth dimension' which is what the 'Powers' want. These 'Dark Powers' want humans trapped with them in this three dimensional plane which they can not escape.
I like this one. It has mischief written all over it;)
Apparently my posts didn't post.
2/2
3. Point: Silver’s not as rare as gold, and even if it is more scarce, scarcity doesn’t mean much – many things are more scarce. Gold's monetary value means that the gold/silver ratio (GSR) should be over 1000 to 1. Counterpoint: Yes, technically scarcity doesn’t matter. What matters is how scarcity is relative to importance. For example, I’ve got a unique rock, the Galt’s Gulch Special rock. Would you like to buy it for 100 gold coins? No? So there’s a tight supply (1 rock), but NO demand.
On the other hand, if we’re 1 mile underwater, and I’ve got the only 2 oxygen tanks – I’d like 100 gold coins for a tank of something that usually is free. Scarcity does mean value if the item is undersupplied. Furthermore, on a GSR of over 1000, with a few tons of gold, one rich person could control global silver supplies (which many different groups actually NEED), compared to gold (which just stores value). How likely is it that the world would just let 1 person control the global silver supply? This point was raised by Rui and was never addressed anywhere that I can see.
4. Final Point: The gold/silver ratio reached over 1:100 during past crises. Clearly, gold is always a better investment. Counterpoint: Exactly, during crises (non-normal periods) some people sold silver to hold a “more portable” savings (silver’s volume is much greater than that of gold) in case they needed to run. Viewed another way, people went crazy and provided a fire sale on silver. Using this time to determine the proper GSR is like measuring food inflation during a hurricane – prices are not rational at that time. If that was really what silver was worth, it would have STAYED at 1:100. If pure goldbugs were right, this would mean that the GSR of 1:16 in the earth’s crust is too low. This point also fails the common sense test - Michael H, this point is my response to you.
The spam above is the reason that Art has been banned. I've lost count how many times I've seen that post now.
radix46,
"The SPAM above is the REASON that ART has been BANNED. I've LOST count HOW many times I've seen that post NOW."
There. Fixed it for you.
@Radix46,
I was and am interested in freegold, however I have concerns about where it leads.
"the hostility develops not because of the content of your viewpoint though"
I disagree, the freegold purists brook no criticism or even doubt. Try it for yourself and see.
"civilly talked about and expounded"
Read some of Costatas broadsides at me and then come back and we can talk about civility.
"I think that the onus is on you to make the effort to understand the context of debate here and to clarify your premises and axioms and make an effort to understand those of people here. I don't think it acceptable to go to a forum and ignore the purpose and opinions of the people that are there and have gone there specifically to discuss the subject that the blog owner has chosen, transplanting in your own. "
This is that same condescension again. Did it ever occur to you that I do understand but I just don't agree? Did it ever occur to you that instead of discussing the disagreements certain parties merely smear with the same old "you don't understand freegold" storyline?
Desperado,
The fact that you say that you understand it and then say that you have concerns about where it leads, as though there is some choice in this, shows that you don't understand it. At the very least, it shows me why you think that it is your views that are attacked, when in fact it is the fundamental fact that you are engaging in what is seen by the people here as futile yearning.
Can you see how someone might be frustrated with you when you talk about what you wish for, when they are talking about predictions of what will be?
There is a very important distinction here. I don't know if I have made me point clear, I'm not feeling particularly lucid today. This is the very essence of what I am saying, so can you confirm that you have understood my point?
And if so, can you see how a person who only talks about what they want to happen may cause some ire for those who are commenting on what has been and what appears will be as a result?
I don't believe there is an evil conspiracy of the planners to control the world. Some people will gain and some won't. Nothing new there. A lot of people have done very well with this "phony" system we have now.
What freegold will bring though is less government spending because a lot of entitlements will go away. Austerity anyone? You will be on your own but you will have a vehicle in gold to preserve your wealth. This will also encourage investment with savings instead of debt.
The planners are well aware of the currency collapse and will try to manage it as best they can.
Gold is flowing where is needs to go now based on GDP of countries or whatever model they use. Once it gets where it needs to go and gets "locked up" , the paper price will crumble . It will only take a small spark where the paper players know that physical gold will no longer be available through paper means and the rush to the exits will commence. HI will ensue and many unprepared gold and silver bugs will sell their metal for food at low paper price but no one will be able to buy at that price.
The conspiracy part that I entertain is that the current regime changes going on around the world are due to some people not willing to go with the plan and would come out from the transition with too much power than is desired for a more balanced world economy.
It is absolutely absurd to have a system where you gain by having the weakest currency in your tiered economic group. A lot of derivatives will be cashed out and a more sound monetary system will prevail.
Unfortunately I don't communicate as well as others here but this is how I see it.
I don't believe there is an evil conspiracy of the planners to control the world. Some people will gain and some won't. Nothing new there. A lot of people have done very well with this "phony" system we have now.
What freegold will bring though is less government spending because a lot of entitlements will go away. Austerity anyone? You will be on your own but you will have a vehicle in gold to preserve your wealth. This will also encourage investment with savings instead of debt.
The planners are well aware of the currency collapse and will try to manage it as best they can.
Gold is flowing where is needs to go now based on GDP of countries or whatever model they use. Once it gets where it needs to go and gets "locked up" , the paper price will crumble . It will only take a small spark where the paper players know that physical gold will no longer be available through paper means and the rush to the exits will commence. HI will ensue and many unprepared gold and silver bugs will sell their metal for food at low paper price but no one will be able to buy at that price.
The conspiracy part that I entertain is that the current regime changes going on around the world are due to some people not willing to go with the plan and would come out from the transition with too much power than is desired for a more balanced world economy.
It is absolutely absurd to have a system where you gain by having the weakest currency in your tiered economic group. A lot of derivatives will be cashed out and a more sound monetary system will prevail.
Unfortunately I don't communicate as well as others here but this is how I see it.
Tom said:
"I'm still on the fence of the gold or silver debate and think it is good to have some of both, just to diversify and since both have a long history as money. When I come read FOFOA, I think I should sell gold for silver, and when I go read Jason Hommel, Chris Duane, David Morgan, James Turk, Eric Sport, etc I think I should sell gold for silver."
When I read FOFOA, I feel a sense of urgency about buying gold. When I read Hommel, Morgan, Sprott etc I don't feel anything like that at all. For a little while now I've used that as a personal barometer, a way of getting hold of what my brain is making of all of the stuff I'm firing at it :)
On another point:
It would be good if people explained what they mean when they talk about 'gold backing' for fiat currencies. The way it's sometimes used in sentences sounds like a gold standard, which doesn't gel with my limited understanding of the Freegold thesis.
Tom again:
"To silver or not to silver depends on which of these scenarios happens. My view is that Freegold is not enough of a correction of the existing built up imbalances. Maybe it works for a while, maybe it doesn't. "
This sounds a bit like Ash's point of view. Why isn't it enough of a correction, and what will happen as a consequence?
Ash:
"[Freegold] ultimately serves as a limitation on printing money if it works properly (without significant constraints on the flow of gold within or between countries), which ultimately serves as a limitation on aggressive fiscal/monetary policy, and countries don't like that when their environment (economic/sociopolitical) is rapidly deteriorating around them.
Perhaps more importantly, the financial and political elites wouldn't like that."
So what might they do, do you think?
To the two people posting a series of 'counterpoints' to the Freegold thesis - that stuff is reposted from SeekingAlpha at http://seekingalpha.com/article/269717-why-gold-s-worse-than-silver-but-still-worth-buying (and is on other sites)... Just wondering why you haven't mentioned that, unless you're the original author. The author shows in the first point that he does't understand what Freegold is based on. If you don't understand why he doesn't 'get' what Freegold is saying (which IS different from agreeing with it) then it would be a great idea to read some of the more introductory articles here. To be clear - I'm saying that it's necessary to understand Freegold before accepting or rejecting it.
J The Newer
Art, I've said it before, I didn't want to say it again, but I'm gunna:
YoU aRE a MoROn
@Radix,
"The fact that you say that you understand it and then say that you have concerns about where it leads, as though there is some choice in this, shows that you don't understand it."
I am so sick of this bullshit, every one dancing around the issue. It's like trying to stick a pin into an amoeba on a petri dish. It simply squishes away.
Haven't you figured it out yet? You like so many like to pretend that you "get" it, but when push comes to shove you are afraid to back up your insults with arguments because someone else who thinks that they "get" it will rebuke you.
Put your money where your mouth is. If you think you understand freegold better, then EXPLAIN IT!!! The problem is that you don't "get" it either. It's like some stupid star trek episode where all the gnomes pretend to "get" it but none of them really have a clue.
So let me make myself perfectly clear: I am sick and tired of being told that I don't "get" it by people who cannot "explain" it themselves.
So go ahead, please explain why freegold is so certain that no one should hedge their gold bet with a little silver. Costata certainly can't even after 2 entire posts, even though he is so certain that he "gets" it.
You also say "the fundamental fact that you are engaging in what is seen by the people here as futile yearning." How many other people have expressed skepticism in the silver bashing by freegolders in this thread? I would say that it is at least 50%. Costata could really perform a service by tallying the stats between freegold purists and silver hedgers.
Correct me if I'm wrong here.
I see a gold backed currency having the same problems as we face today. A company will move to where they can get cheaper labor with a country that doesn't use a metal backed currency. At the same time they will still sell to gold backed currency zone and eventually drain that zone of it's metal even with it's reduced purchasing power. The bigger problem of course would still be the lack of jobs in the stronger currency zone. Pretty much what we have now except the gold not being drained.
Hey SpAM MaN,
"Mystical fanatics", that's gold!
Spam MaN, the super hero who turns fiction into SpaM and fact into SpaM fiction.
Freegold - an objective system view becomes mystical.
Observers of trends become fanatical, whilst I assume SpaM MaN and his ilk are... what, balanced and reasonable?
Do you have a cape and hood with eye holes SpaM MaN?
Is it a bird? Is it a plane? Is it a waste of my frickin time? It's SpaM Man!!!!
JR said "One would probably have to be a raging narcissist to think people aren't aware of the roving cavaliers of credit..."
Well, the roving cavaliers of credit has nothing to do with any of the arguments I was making re: dialectics, financial capitalism and economic value... and I clearly have not been making any arguments for deflation over HI either. I'm even stipulating that dollar HI will happen, and I believe it will, but perhaps over a significantly longer time frame than those here would advocate.
re: Julian Simon - his arguments are very similar to those of neo-classical economists in so far as he apparently has no understanding of the laws of physics and thermodynamics, and believes that market signals can "solve" problems of resource scarcity. EROEI does not depend on market prices or imaginary "wealth" creation, and there is no evidence to suggest that technological gains in efficient energy use or alt energy fields will be able to offset the net energy loss from terminal declines in oil production.
So, in essence, there is presently no substitute for oil, it can't be recycled (except over millions of years via intense warming) and it most likely can never be made to give us the energy return that it once did or even what it is giving us right now. The extraction, production and transportation of almost all other resources and goods (including technological goods) depends on access to increasing net energy, which in turn depends on fossil fuels.
Don't hang up said:
Correct me if I'm wrong here.
I see a gold backed currency having the same problems as we face today. A company will move to where they can get cheaper labor with a country that doesn't use a metal backed currency. At the same time they will still sell to gold backed currency zone and eventually drain that zone of it's metal even with it's reduced purchasing power. The bigger problem of course would still be the lack of jobs in the stronger currency zone. Pretty much what we have now except the gold not being drained."
What do you mean by "gold-backed"? In the system that's predicted by people who think that Freegold will occur at some point, each of the currencies you mention in your example will be measured against gold, and so neither will be able to exploit the other.
J The Newer
Desperado,
You want it explained, read the archives. Hahaaaa. LOL.
You think you "get it"? You explain it.
I don't care whether you are sick of being told you don't "get it". I predict it will keep happening, coz, guess what.... you don't get it.
I have not been saying what I have said to help you, or to rebut you. I have been saying it because I want these pointless conversations to end. I see that I am proliferating it and my aim is impossible to accomplish, so I'll stop.
Maybe I get it, maybe I don't. My aim is to understand and that is all. That is why I'm here.
@Radix, another Amoeba.
J the newer
I was talking about the gold backed currency that a lot of people seem to see merit in. What I stated is the problem I see with it and was hoping some one would show me where my thinking is flawed.
Personally, I am in the freegold camp and see that as the most likely outcome in the monetary evolution because it solves a lot of problems that are present in the current system. I also see that as having a timeline also but a much longer one that I won't be around to see.
perhaps..
http://www.nyteknik.se/nyheter/energi_miljo/energi/article3179019.ece
Desperado,
"@Radix, another Amoeba. "
I don't get it. Please explain.
Aaron and Michael H,
"If I had to guess what Ash was getting at, I might say he meant that freegold ultimately serves as a limitation (on the amount of value that can be appropriated via) printing money, if it works properly.
Is that what you meant, Ash?"
Yeah, basically. More specifically, it limits the amount of speculative finance in the private economy, since that is how most credit money is "printed" anyway (not via the Fed/government). For example, the value of loans actually given out to subprime borrowers was dwarfed by the value of leveraged derivatives based on those subprime loans.
By the way, Desperado, my last comment was a joke, in case you didn't get it.
I'm not actually interested.
To Jthenewer: First, I am the original author, and I did not want to be accused of spamming links to drive traffic :)
Second, other than stating that I have no idea what I'm talking about, I don't see any specific argument there that says what's wrong with my points.
Third, only half of my points posted..gah I've tried 3X to get it to post.
3. Point: Silver’s not as rare as gold, and even if it is more scarce, scarcity doesn’t mean much – many things are more scarce. Gold's monetary value means that the gold/silver ratio (GSR) should be over 1000 to 1. Counterpoint: Yes, technically scarcity doesn’t matter. What matters is how scarcity is relative to importance. For example, I’ve got a unique rock, the Galt’s Gulch Special rock. Would you like to buy it for 100 gold coins? No? So there’s a tight supply (1 rock), but NO demand.
On the other hand, if we’re 1 mile underwater, and I’ve got the only 2 oxygen tanks – I’d like 100 gold coins for a tank of something that usually is free. Scarcity does mean value if the item is undersupplied. Furthermore, on a GSR of over 1000, with a few tons of gold, one rich person could control global silver supplies (which many different groups actually NEED), compared to gold (which just stores value). How likely is it that the world would just let 1 person control the global silver supply? If you think that's not possible, then a GSR ratio of 1000 is also not possible.
4. Final Point: The gold/silver ratio reached over 1:100 during past crises. Clearly, gold is always a better investment. Counterpoint: Exactly, during crises (non-normal periods) some people sold silver to hold a “more portable” savings (silver’s volume is much greater than that of gold) in case they needed to run. Viewed another way, people went crazy and provided a fire sale on silver. Using this time to determine the proper GSR is like measuring food inflation during a hurricane – prices are not rational at that time. If that was really what silver was worth, it would have STAYED at 1:100. If pure goldbugs were right, this would mean that the GSR of 1:16 in the earth’s crust is too low. This point also fails the common sense test.
HOWEVER – if people go crazy for gold and sell silver – why, then, you’d better have gold to sell to them. It probably makes sense to buy gold so that you can sell to the “gold-crazy” at a GSR of 100, wait for the GSR to return to 16 or lower, and then swap for 5X your original amount of gold. The risk here is that silver has been so suppressed that a GSR of 50 is never reached again, never mind 100 – and the GSR will eventually decline to the single digits in my opinion, just to clear the market.
Spam MaN,
You'Re Like THat CRazY oLD MaN wanDErinG aROuNd in PuBliC wEaRiNg juST A PaIr OF Y-fronts YeLliNg aT SmaLL cHiLDrEn.
Jthenewer,
I try not to get too specific about what the elites will choose to do in the age of peak oil, but I suspect it will involve resource wars that could get very nasty (actually, I suspect that's already happening).
If we are assuming away energy/resource scarcity (which I am doing for these articles), and we are assuming that a Freegold system has already established itself in Europe and parts of Asia (very unlikely IMO), then I suspect that the elites would soon start exerting political pressure on respective governments to implement capital controls, confiscation via legislation and fiscal/monetary polcies (i.e. upward wealth transfer), and perhaps financial/trade sanctions on those countries which refuse to cooperate.
Biting Silverbug,
I wasn't saying that you have no idea what you're talking about - I just said that your discussion of the first point suggests that you're looking at the role of gold in a way that differs from what's put forward by those who think that Freegold will emerge at some point. I think this article might be relevant:
http://fofoa.blogspot.com/2010/06/how-can-we-possibly-calculate-future.html
Not sure if *I* can put it in a nutshell, but I'll have a go - the role of gold in a Freegold-environment is strengthened by its lack of other uses i.e. it is so perfect as a store of value because it's not used for other things.
Others have discussed this far better than I can.
J The Newer
@Desperado: IF FG one day - would we see centralization or de-centralization of wealth/power?
Would´t FG give more reward to the producers of wealth?
Theoretically no monetary transition is symmetrical or asymmetrical the moral way we wish.
Desperado you are not the only one who has heard all the spiel but doesn't agree.
I am pretty sure the sky high (FOFOA) price for gold will never materialize. That's not to say it won't return to historical precedents. Why wouldn't it when fiat burns?
I've asked questions before of FOFOA that were never answered to my satisfaction so I am sitting on the fence. I believe the first half of the story will play out: debt extinguishment and the resultant return of gold to its place as money and a consequent increase in the price of gold relative to highly leveraged assets, though (in my humble opinion) NOT in terms of other commodities.
But the Freegold premium has no historical precedent, and it's doubtful that gold's value will be equal to or greater than all other assets for the simple reason that there are many assets to store your money in. Yes, one of them is silver, but there is also oil, preservable food, housing, diamonds, art, collectibles, cars, equities and so on. All these mediums of storage will be used as a safe haven from fiat.
I don't "get it" but I am ok with that. I have my gold and I watch and wait to see which theory will be proven right.
you're a bad boy fofoa.
Hi Desperado,
I've been following your posts for a past few days trying to get a clear picture of your disagreement with "FreeGold" and other posters.
I came to the conclusion that your reasoning for the disagreement is based on a few points. I'm going to try addressing (sharing my opinion and my understanding) them but I'm also aware that I may be wrong in my conclusions so my answers won't help much.
a) what happens between HI and Freegold?
IMO there is no "between", there's only a transition from $IMF system to FreeGold. As one is failing the other is simultaneously rising.
b) gold/silver investment strategy
Like that excellent post you linked to a few days ago (HI scenario) suggested many hard assets are most probably going to rise in nominal terms just to be exchanged for gold which would of course be the ultimate store of value. I agree with you that people may try protecting their wealth with other assets like silver but only to find out that gold can do that much better.
And here is why and c) the elites/CB's and their gold holdings
I'm sure you understand that life isn't fair and people are born with different starting points that may or may not determine their life in a decisive way. I'm afraid not much can be done here and I believe we'll get FreeGold because in a transition from one system to the other gold will serve as a extinguisher of debt generated by deficits in international trade.
It's the flow of value (commodities, goods, ...) that people will demand from the elites/CB's and they will provide/guarantee that flow with a portion of their gold in order to retain their status.
When you ask, "how will one understand what an ounce of gold is worth if there is no pricing anywhere", I answer that you'll see it's value in the amount of goods it delivers. I understand that silver or anything else might do this just as well but that's not what CB's are holding.
I believe this to be one of the most crucial points in the transition - the fact that the issuer of a currency can/will provide gold for value. As people are made aware of it's value as a ultimate extinguisher of debt/a payment in full if you like, it's transition to the store of value will be complete.
I understand that some things may need further explanation but it would take a long time to write, nevertheless I now invite you too question the validity of my opinion.
Casper
Don't hang up: (like the handle) "Once it gets where it needs to go and gets "locked up" , the paper price will crumble." It does appear there would be a final movement of 'the last available chunk at the paper price' and then the moment after that... the curtain rises.
FREEGOLDERS = PAPER PUSHERS
YOU'RE BAD.
@ Ash
"which ultimately serves as a limitation on aggressive fiscal/monetary policy, and countries don't like that when their environment (economic/sociopolitical) is rapidly deteriorating around them."
Why do countries use currency?
I would think it is for two purposes - internal trade and external trade.
For internal trade, who cares what they use. They can print money to their heart's content.
For external trade, traders from other countries are only going to agree to trade in a currency that they can then use to trade again for goods or services of equal value to the original trade. So in a post-Freegold environment if a currency is volatile and backed only by false promises, it will not be used for international trade, because no-one will accept it.
I am not saying that there will not be rogue countries that will want to do their own thing. North Korea maybe? Who knows. But if they want to play with everyone else, they will have to play by the same fundamental rules.
And since when has aggressive fiscal/monetary policy actually assisted a country when their environment is deteriorating around them? Zimbabwe is no utopia right now, it is forced to use the currencies that other countries do trade in, because it's own currency is considered worthless and no-one would take it.
Silver vs. Gold is easy. Take a HUGE funnel and pour in all the 'worth' of the world. Hold it over Gold and Silver and ask yourself into which vessel shall I release it? Oh that's right. It's not my choice. The Giants chose Gold. Done.
Oh yea... some wealth will slosh out into other vessel such as silver, real estate, and other tangibles but the Giants aim is well established.
@ Indenture
FOFOA has previously stated that other assets will also be used as a store of wealth. In this regard it is okay to use any asset to store wealth, providing it works for the individual.
However FOFOA is clear to say that only physical gold will undergo a one-off revaluation (valuation!) that makes it the most beneficial asset with which to store value for this transition.
And this is because of the giants you mention.
I have a question this time about what the logical outlook would be for gold after the revaluation.
I remember this topic being brushed upon but I do not recall a definitive answer...
As I understand it, the idea would be that all fractional reserve gold banking will stop after the reval. Can someone point me to how that is maintained?
Because in my mind without some kind of law against it, I can see the Wall Street types setting up "storage" for people's physical, and unless there's a law against it, playing the old fractional reserve game, even though they're supposed to produce the fully reserved physical upon demand. And of course, without an ever-vigilant public/gold-store auditing agency, that game could go on until there's a run on the storage place.
Of course at that point, unlike the FDIC today, there will be no way for anyone to conjure up gold, unless we have insurance policies that pay up in physical.
Can someone help clarify all this for me please?
@ Aquilus
Firstly I'd like to say I enjoy your posts on here.
"Because in my mind without some kind of law against it, I can see the Wall Street types setting up "storage" for people's physical, and unless there's a law against it, playing the old fractional reserve game, even though they're supposed to produce the fully reserved physical upon demand. And of course, without an ever-vigilant public/gold-store auditing agency, that game could go on until there's a run on the storage place."
I have thought about this too, but I think the transition to Freegold will make this somewhat irrelevant for a few reasons. The same reasons I think derivatives and huge leverage will not be such a concern.
If gold is revalued to say $50Koz, then storage in size becomes less of an issue for most people, even the fairly rich, because gold will be spread across more people, and not necessarily stored in a few places like Fort Knox and a couple of bullion banks.
Regarding fractional lending, I think auditing will be strictly mandated. I am fairly sure that the paper gold collapse that awaits us in this decade will cause a change in people's feeling towards fractional lending of bullion, such that it won't be permitted, or will be greatly restricted.
I don't necessarily believe that there some banker types won't break those rules, but I think the penalties would be quite harsh.
And it is worth considering that fractional lending of bullion would potentially destabilise a currency, as the fixed store of value quantity is then quite variable, so the currency would be floating against a very volatile quantity.
...
Some questions that arise for me about how gold will be assayed in the future. At $50Koz value, it would make a lot of sense for counterfeiters to make gold plated tungsten Krugerrands and bars and all sorts. Will people have the means to assay their own gold? The technology exists already, but who will have access to it?
Will assaying even matter if coins can be taken to a bullion bank for cheap/free assay? Why would banks provide this service, what is the benefit to them?
Pete: Yes. Anything can be used as a store of wealth if it suits the individual. When the moment of transition arrives and Reference Point Gold is born (the Giant finger is removed from the bottom of the funnel) then gold is the vessel you want to be holding because of the Giants aim. After the moment has passed your silver vessel should be just fine but your gold vessel will be overflowing.
But you only have a single moment to be holding your gold vessel so the size of 'cup' has consequences.
Has the silver market been cornered... AGAIN?
Congrats!
Hi Aquilus,
Here are some ideas. Because the big gold holders won’t support the paper market, the paper market will collapse. People will lose lent gold and even more will realize their paper claims aren’t real gold, but just paper. There is an element of “fool me once, shame on you, fool me twice, shame on me.”
FOFOA from The View: A Classic Bank Run
"But then the FOFOA view is that the system itself is, and always has been, the culprit. And that the bullion banking system must and will revert to a non-fractional, non-lending, 100% reserve banking system. Not the fiat banks. Just the Bullion Banks. The CBs demand this, as Another told us a long time ago, because physical gold is cornered by real wealth at these prices, and they (the CBs) will not give up any more of theirs.
I'm sure there are still "tonnes" of those "CB certificates" in the reserve accounts of the Bullion Banks, as all their paper gold liabilities must be backed by either assets or reserves on their balance sheets. But those certificates will never be cashed, except by a very few "important clients" of the type you do not default on because they have something you need.
ANOTHER: "Banks do lend gold with a reason to control price. If gold rises above its commodity price it loses value in discount trade. They admit now to lending much where they would admit nothing before! They do this now because of the trouble ahead. Does a CB [receive] collateral to lend its gold? Understand, they only lend their good name on paper, not the gold itself. The gold that is put on the market in these deals belongs to someone else! The question is not "Are the CBs worried for the return of gold?" but, "Has our paper been lent to the wrong people?" The BIS will not allow the distribution of all gold to settle claims.""
1/5
FOFOA from Reply to Bron
"[Aristotle]** People will always want to borrow for the things they want to have beyond their current financial means.
** Spending Gold into the marketplace, whether by the owner or by a borrower, would tend to result in prices "that weigh more"--cost more Gold, that is.
** As ever more Gold is borrowed out of other people's savings to be spent into the economy, the Gold's purchasing power is lessened from what it otherwise would be...hurting those who have elected to hold their Gold instead of risking it by lending it out as a source of income."
…
"[FOA] Keeping gold out of the fiat arena would be more simple than many hard school advocates envision. The key to that is found in the implementation of international law. The leading economic countries (EuroZone in the future) would have but to establish a protocol that forbid the enforcement of collateral attachment anytime physical gold is traded, lent or involved in a trade. In this context, no banker would lend you gold to buy a house if, in a default, he could not claim your house in a court of law. Even private parties would never lend gold if the asset behind the loan could not be claimed for nonpayment. It's that simple. With a stroke of written law, the trading of gold as wealth would become a final payment with no possible credit implications. Our official fiats and wealth without a country would never again function as one.
[FOFOA]Bron, think of this as more of a natural law, a little like Gresham's law. You save the good money while you lend, or circulate, the bad money. And sometimes you codify natural (good) laws simply to protect the morons from the sharks.
As Atticus wrote, it can be as simple as non-enforcement of gold lending contracts in the courts. The intent of the law would be not so much to prevent you from lending your gold as it would be to protect you from unscrupulous borrowers who would take it and spend it without the ability to get it back.
Why would a rational person want to lend gold? How about two friends; why would you want to lend gold to your friend? So he could spend it into the marketplace? That act alone puts downward pressure on the value of your gold savings, which could have instead been lying very still under your bed.
And then there is the issue that you cannot squeeze blood from a turnip. You cannot force the repayment of something real that someone no longer has. This issue can become especially problematic internationally if you really think about it. Countries have gone to war for less. Which is another good reason for an internationally codified (natural) law to protect the morons from the sharks, as well as the sharks from armed and dangerous morons."
2/5
Side note:
The blood from a turnip idea is already a key point of existing law pretty much everywhere – specific performance is a limited remedy as it is, and traditionally wasn’t available for fungible chattels (like bullion gold). Even in civil law countries (where SP is a more available remedy) it was historically rarely used, as you have to find and go repossess the subject chattels. Which is why it is often land transactions where specific performance was traditionally ordered.
In the US, the UCC expanded this common law notion somewhat to allow for specific performance (in this context replevin of a collateral) where the goods are specifically identified in the contract and are in the possession of the other party. But its still real hard to get specific performance in lieu of monetary damages (aka cash settlement in the context of a gold loan gone bad).
While this idea isn’t the same as a lender taking possession of the collateral offered by a borrower of gold, the broader idea I hope to convey is that the concept of not enforcing gold contracts is not completely alien to contract law in may countries.
3/5
FOFOA comment from The View: A Classic Bank Run
"There is a disease in our system today that has many visible symptoms. Most everyone (including you) is obsessively focused on eliminating the various symptoms. But as any good doctor knows, removing symptoms will not cure the disease.
The disease is gold used as a currency, one that can be lent (which always leads to fractional reserves and a synthetic, unstable supply), rather than merely being a tradable physical asset. All the problems (symptoms) that you are referring to flow from this disease.
The disease allows for the growth of debt beyond economically sustainable levels. It is the choice that savers make that enables the unhealthy growth of debt. They choose to save in debt because there is no floating monetary alternative.
If you use gold as a currency it will be lent, and through that process it will be automatically expanded in volume suppressing the value of physical gold held by the savers. You cannot get around this problem. Gold systems have been tried time and time again, and man always borrows money, which expands its supply.
You must have a savings medium in relatively fixed supply, separate from the currency, so that borrowing dilutes only the transactional currency and not also the savings medium. When savers lend to debtors through saving in debt they are diluting their own savings automatically. Remove this one disease and all the other symptoms will disappear.
Freegold does not make borrowing easy, nor does it make it hard. If it is easy in one country then the currency will self-dilute and fall in value relative to other currencies, and gold will rise priced in that currency. Simple as that. But if you have gold lending, you automatically eliminate this counterbalance and reintroduce the disease. The disease that removes stability from the gold market by creating a synthetic supply and sending savers back into debt financing.
So this one little tweak, removing the synthetic supply of gold so that gold becomes a stable alternative to bonds for the savers, will set us back on a course away from debt-driven consumerism and living beyond our means. Not by creating a change in the minds of the debtors -- they will always live beyond their means if you (the saver) make it cheap enough for them. But by creating a change in the minds of the savers, on all scales from the individual on up to Sovereign Wealth Funds and Central Banks."
4/5
FOA from the GoldTrail 4
[Goldfan]------ "I do not understand FOA's statement that because the ECB decrees it, gold will not be anywhere, lent or borrowed. Seems to me that what I do with my gold is outside any jurisdiction of the ECB, and the same is true of many others" ---------------
…
[FOA] No one is going to tell anyone they cannot enter into gold contracts. Sure, we will be able to borrow, lend, option or sell gold all we want. But, unlike those overt alcohol laws during prohibition, today's gold party people be able to drink all they want. (smile) That is deal in all the gold collateral you want. But, if any of those deals go bad because the other side wants to walk, instead of deliver, you will have to settle in cash. In a Euro court of law, no one could bind you to physical settlement if the deal was in Euro Legal Tender. Even if it was in the contract. You would have to accept cash, if contested.
Now, some say this will simply drive all gold deals outside Europe. That's thinking in the present context. But in the future the dollar reserve and it's credit gold market will be in a shambles with people running all over the globe just looking for a place to deal gold at all. Credit gold will be a joke by then as trillions of losses will be outstanding.
The effect of all this would be to drive most every portion of physical gold dealings into "on the spot" buying and selling. Mostly in Euros. A mine could still borrow, using the value of gold as collateral, but it would only be the "cash value" of that gold that could be used in settlement (if the deal went to court). OR physical settlement if both sides had no problem (and stayed out of court).
This kind of legal protocol change, not unlike changing comex rules of trade, only affects the financial side of gold and in no way restricts investors from cash spot dealing in physical gold. Again, it would force the world gold markets to adjust away from copying the old dollar markets that so manipulated the physical gold price in the first place. Of course, no one would be trying to deal gold in dollars then anyway.
In reality, very little physical gold would be borrowed, either ahead of production or from world stores to sell into the spot market. If one owned gold and wanted to liquidate to buy something, you would sell it, pay taxes and use your dollars ,,,, errrr Euros! Gold would, over time, rise to reflect it's real reserve value to both central banks and private owners the world over.
OIL, governments, corporations and families would once again all be buying real gold for the historic wealth value such a metal imparted to a portion of their total asset savings. The demand for gold would once again be generated for it's main "historic utility"; "a wealth no social group could inflate thru monetary credit use"
Cheers, J.R.
5/5
1 Kilo Gold Futures Start Trading On Hong Kong Merc
More Paper Gold!
Pete,
I would think it is for two purposes - internal trade and external trade.
For internal trade, who cares what they use. They can print money to their heart's content.
That is not my understanding of Freegold. But let's be clear, by "printing" we mean making loans, right? Almost all fiat currency is generated through private loans, and public loans to a much lesser extent, so that is what I mean by printing.
So, if financial institutions start making excessive loans for certain assets and that process is allowed to continue, that is a misallocation of capital and it is obviously devastating for the domestic economy over time. Why even save money when leveraged assets (such as RE) are providing you huge returns on investment?
Freegold must prevent this by maintaining a system of money independent of financial markets (physical gold), so savers can lock in present-day purchasing power whenever they do not feel like taking investment risks with their fiat. That necessarily drains capital from financial currency markets, and prevents speculative finance from getting out of hand. Ideally, it shouldn't matter if we are talking about public finance or private finance, or financed internal transactions rather than financed international transactions.
Is that correct, or am I missing something?
Ooops, forgot to include the link to Epsteins 1983 article in Harpers about the Bank for International Settlements. It gives a little depth to FOA's quip about if we didn't like the present system we surely won't like the next one ...
http://www.edwardjayepstein.com/archived/moneyclub2.htm
@JR Many thanks for the extensive excerpts.
So the answer seems to be one part self-interest, one part "gentle" prodding by the legal system, all under the loving, self-interested eyes of the CBs.
@Pete Interesting thoughts, thanks. For now I have a hard enough time divining the legal aspects of the re-val, so the counterfeiting part (although valid) is way beyond my narrow focus.
@ Ash
I wouldn't necessarily agree about money printing equaling expansion of credit, but it doesn't really matter what it is. I just took a guess at what you meant by "aggressive fiscal/monetary policy". So either works I guess.
Also, I was not talking about a post-Freegold environment, except for the sentence that I mentioned it. I'm talking about now. The example I gave is different under Freegold.
"Why even save money when leveraged assets (such as RE) are providing you huge returns on investment?"
I assume this is in a non-Freegold context, because this wouldn't make much sense.
"Freegold must prevent this by maintaining a system of money independent of financial markets (physical gold), so savers can lock in present-day purchasing power whenever they do not feel like taking investment risks with their fiat."
Yes, you seem to mostly get it. Although you might want to change your use of the term 'money'. Freegold is not really two parallel systems of 'money'. It is a medium of exchange backed by a floating store of value. Those are two components of what we currently consider 'money', in a system that doesn't really work, as the store of value function is abused by volatility in quantity (abuse by the Fed, etc).
Consider that (IMO) in a post-Freegold environment, we would not need to have assets that continually grow. We wouldn't need to speculate. We wouldn't need to make financial based profits. Financial risk management would completely change.
Why? Because of inflation. Generally, inflation would no longer be a threat to our savings and our livelihoods. Therefore we wouldn't need to beat inflation with investments that grow over time, if we didn't choose to. That doesn't mean investments wouldn't exist, but it does mean that the way we assess the risks of such investments might be a bit more conservative.
Hi Tom,
I am addressing some of the points you raised in a series of longer responses to questions and arguments put forward in the last thread. Some of the things you have raised have been raised by others.
I pprovided a couple of scenarios on China in response to a comment by 'CD'. I obviously don't know what China's attitude to silver is at a state level but they have given no indication that they intend to use silver as a reserve asset in their CB.
From the reply to CD:
A huge, poor, rural population and a relatively under-developed banking network like India:
http://www.caseyresearch.com/editorial.php?page=articles/when-gold-necklace-isnt-jewelry&ppref=CRX228ED0511A
Jeff: Is there much interest in buying silver?
Shanta: The key is gold. The rich and middle class normally buy gold, not silver. Silver is very common among the poor class, so if you are not rich, then you will buy silver. The poor people buy silver for the same reason the middle class buy gold.
There may be another reason why the Chinese are stockpiling metal. To get around lending restrictions imposed on their banks by Beijing. This piece discusses Michael Pettis' observations about copper stockpiling in China.
http://macrobusiness.com.au/2011/05/pettis-warns-canberra/
Regarding your question about the stock and flow, I think the crucial pieces of the puzzle are SLV and the BB's unallocated silver pools. While most of the silver stock is immobile it is the annual flow of silver that counts. Depending on demand at any given time SLV/BBs can feed into a temporary over-supply to depress the price or subtract silver from the market to accentuate a rising price.
The games in paper silver are a different matter. It should be obvious from the post that the BBs have enormous scope for hiding their true positions from other players.
You ended with: Convince me.
Sorry Tom, not part of my job description. You will have to make up your own mind.
Desperado,
You have been here long enough to know that I have never allowed the conversation to pivot in certain uncontrollable directions. Shame on you. Stop behaving like a dastardly Troll.
FOFOA
BitingSilverBug,
Thanks for continuing to post counter-arguments. I took a copy of your two part comment above and the later comment you posted. As I work through the longer responses I am preparing I will check to make sure I have addressed the points you raise.
If you have scored a new point or two I will address them separately.
Cheers
FREEGOLD = FIAT
FREEGOLD = LIES
Hiya Desperado
Not sure why I am bothering, since you have ignored the last five or so posts by me directed at you, but anyways.
I do think you have a pretty good idea of what Freegold is about. I also have a fairly good idea why you are disagreeing. I do however think you are missing some nuances, and that that makes all the difference. So let us explore one.
I would like to give you my foolish opinion.
There are good giants and bad giants. Simply put, the good giants are producers and the bad giants are thieves.
CrackWhoreGold will reward the good giants and starve the bad giants. The bad giants are only able to stay ahead by continued thieving. Under CrackWhoreGold they will lose this option and soon enough squander what they have stolen and be unable to replenish their stock. Unless they mend their ways and become good giants, they will die from starvation.
I share your despisal for the bad giants.
They will get what is coming to them, under CrackWhoreGold. It will not be as quick and easy as hanging them, which I think you approve of. Myself, I don't think two wrongs make a right.
Would you at least be willing to agree that not all giants are bad? I know it seems they are all bad, because the majority in the present system are. Nevertheless I think this distinction proves valuable.
If you can concede that not all giants are bad, and are able to put them into two groups conceptually, I would like you to extrapolate what effects CrackWhoreGold will have on each group.
I will go further and say that some present day good midgets are actually supposed to be giants, but due to the bad giants they stay midgets(it's hard to become a good giant if you are constantly being plundered). Under CrackWhoreGold they will be able to come into their own, which will benefit all of us.
Peace
The Fool
Ps. My suggestion on those two books still stand. I truly believe you will thank me after you have read them.
Pps. This is my last try. If you continue ignoring me then I won't bother you anymore with my foolish ideas.
[The case of the Swiss Dinar is really interesting, civilization came from Mesopotamia, will it be this time again?]
"...Here is the story Mr. King told:
After the gulf war of 1991, Iraq was divided in two: the south ruled by Saddam Hussein, the north governed by the local Kurds. Mr. Hussein needed money to finance government spending, and in the time-honored tradition of dictators, created it himself.
The government could not import more of the bank notes then in use, because of United Nations sanctions, so Mr. Hussein ordered the local printing of a new currency. In May 1993, the Central Bank of Iraq announced that citizens had three weeks to exchange their old 25-dinar notes for the new "Saddam dinars," which bore his portrait.
During the next few years, so many Saddam dinars were printed in southern Iraq that they became virtually worthless. The face value of cash in circulation rose from 22 billion dinars in 1991 to 584 billion in four years, and inflation averaged about 250 percent a year over that period.
Residents of northern Iraq could not exchange their notes. The 25-dinar notes continued to circulate and became known as the "Swiss dinars," because they were printed with plates made in Switzerland.
The fact that the Swiss dinars continued to be used at all speaks to the power of social conventions*. The Kurds in the north despised the Baghdad government, and would have much preferred to have their own currency. But there was no government in place powerful enough to mandate a currency change, so they kept using the old Swiss dinars by default.
The Swiss dinar was in fixed supply, while the Saddam dinar was flying off the printing presses, so it is not surprising that the Swiss dinar quickly became more valuable. By spring 2003, it took 300 Saddam dinars to buy one Swiss dinar.
The more interesting economic effect was the behavior of the Swiss dinar against the dollar. In fall 2002, as it became more and more likely that the United States would invade, the Swiss dinar became more and more valuable.
This appreciation was driven by expectations. If the Kurds had expected that they would once again fall under Saddam's sway, the Swiss dinar would have quickly become worthless. As this became less likely, and the belief that future governments would accept the Swiss dinar became more widespread, the local currency became more valuable. Of course, every exchange rate movement can be interpreted in two* ways: in the north, the Kurdish regional government initially interpreted the rise in the Swiss dinar against the dollar as a fall in the value of the dollar.
The government soon realized, however, that since the dollar was stable against other currencies, the correct explanation was that recounted above: the increasing belief that the Swiss dinars would, in fact, be honored by future governments.
The government was right. On July 7, 2003, the American occupation administrator, L. Paul Bremer III, announced the creation of a new Iraqi dinar that would be exchanged for the two existing currencies at a rate that implied that one Swiss dinar would be worth 150 Saddam dinars.
Interestingly, the currency markets valued the Swiss dinars somewhat higher than the official 150 exchange rate, primarily because many counterfeit 10,000-dinar Saddam notes were in circulation.
This story illustrates that paper currency can take on a life of its own, even in the absence of government backing. At the same time, it is clear that government backing makes a significant contribution to the value of paper currency: the more likely it became that the Swiss dinars would be valued by a subsequent government, the more valuable they became...."
http://people.ischool.berkeley.edu/~hal/people/hal/NYTimes/2004-01-15.html
[Mrt: *1/ ...power of social convention. Interesting. *2/ Could there be a 3rd way how to interpret it? Could that exchange rate change mean that the Swiss Dollar went off the IMFs or CBs-banking or some other way defined system???]
"...The monetary situation was further complicated by an essentially separate currency in northern Iraq. The Kurdish area continued to use the banknotes that Iraq had used before the Gulf War, which were nicknamed “Swiss dinars.”3 Becausethe Kurdish governorates did not have access to the printing plates for the Swiss dinars—and because they refused to follow Saddam’s example and print low-quality notes of their own—the supply of Swiss dinars in the north had remained essentially fixed for 13 years. The separate northern currency allowed the region to escape Iraq’s ruinous inflation rates of the early 1990s. Yet by 2003, many of the Swiss dinars were falling apart from overuse, held together with tape and staples..."
"...Once the decision to create a new, unified currency had been made, economists needed to come up with an acceptable conversion rate between the Swiss dinar in the north and the Saddam dinar in the center and south. The price of a Swiss dinar in terms of the Saddam dinar hovered at about 100:1 from July 1998 to January 2002. But the Swiss dinar appreciated steadily throughout 2002, and the Saddam dinar depreciated in the run-up to the war. By January 2003, the exchange rate was about 300:1, falling to about 250:1 by mid-2003. A comparison of prices in the two regions of the country indicated that a 250:1 rate would be far out of line with purchasing power parity. The PPP rate appeared much closer to the 100:1 exchange rate that had prevailed from 1998 to 2002. After extensive discussions that included Iraqi leaders in both parts of the country, the Coalition Provisional Authority decided to set the conversion rate at one Swiss dinar to 150 Saddam dinars—essentially a compromise between the PPP rate and the market rate...."
http://pubs.aeaweb.org/doi/pdfplus/10.1257/0895330042162395
[Mrt: there could be more, just posting it, will recheck more deeper later]
"...During this period the Swiss dinar was endorsed by no central authority or government (in fact it was a disendorsed currency) and was not redeemable by any issuing agent, or backed by any commodity. Its persistent and sustained market value derived purely from its utility as a culturally accepted medium of exchange. As such it is often cited in economic discussions about money and the origin of money's value..."
http://articles.gourt.com/en/Swiss%20Dinar
@Fofoa,
I did not try to start a debate on that subject, I was merely pointing out that depending on how one perceives it has far ranging repercussions on how one interprets what followed. This applies just as well to belief in the illuminati.
@Miked, thanks for the comment. I agree with everything you wrote.
@Casper, I wrote a long reply that Fofoa has censored.
@Motley Fool, I have read Atlas Shrugged and am tired of other contributors treating me like I a "Motley Fool so that is why I did not reply.
You wrote: "CrackWhoreGold will reward the good giants and starve the bad giants."
I do agree that not all giants are bad, but sorry, I just don't see CrackWhoreGold overcoming human nature. Perhaps it will make it a little more difficult to cheat, but there will always be evil people willing to lie, cheat and murder to get ahead or to stay ahead.
Desperado,
You can call it censorship if you like. But people like you ran Another and FOA out of town, and ultimately frustrated MK enough that he closed the forum to public comments entirely. That's not free speech as far as I'm concerned, and I won't let it happen here. Free speech means my blog gets to have the conversation I and my friends want it to have, Trolls be damned. This is my blog, and it is valuable to me and to many others. I will not allow it to be infected and derailed by delusion. This is not a topical free-for-all, and adding your comments to the permanent record here is a privilege, not a right.
Sincerely,
FOFOA
Thank you costata. Appreciate your great effort and had a good read :)
I'm a tiny shrimp of simple mind and simple worth. I thus think simply along ANOTHER's Thoughts...
Date: Tue Dec 16 1997 07:07
ANOTHER (THOUGHTS!) ID#60253:
Reply to Mr. Allen ( USA ) :
Thank you for your thinking thru of my posts. I am told that you are "on target". Understand that using oil to back gold instead of the US$ is but one of several outcomes affecting the gold market at this time.
This will be the final move as the currencies are destroyed. Gold at a much higher dollar price, as a result of oil/backing, will allow most paper economies to continue in operation. Gold will, in fact, become a "world oil currency" and be of national importance to all countries.
In the same way that all oil in the middle east ( and most other major producing countries ) is nationally owned for the good of all, gold in the ground will be deemed a "currency reserve" for the good of all. During this time all other
metals ( and paper investments ) will fail to hold value. Access to oil and gold will be next in line of importance behind food.
Tiny shrimp's simple thought:
• World runs on OIL
• OIL only wants GOLD
• OIL so far never want other metals (i.e. silver, platinum, etc)
• Giants know OIL only wants GOLD
• Giants hold GOLD
• Tiny shrimp just follow Giants and hold GOLD
GOLD has OIL as greatest Ally but Silver don't have OIL as Ally. Thank you for reading tiny shrimp's simple thoughts :)
Hey Desperado
Atlas shrugged is a cute piece of fiction. It does serve the purpose of creating the context in which to read the philosophical work Capitalism : the unknown ideal.
The latter is much more profound and important.
We do have a disagreement of fundamentals though.
You seem to think human beings are evil by nature, I believe they are good.
Why do you think it is human nature to steal, but not human nature to produce?
Human nature to cheat, but not to be honest?
Why do you consider humans evil?
Personally i think humans are intrinsically good. They do however adapt to their environment. Place a man in a jail and in order to survive he will soon steal and murder. Place a man on a desert island and to survive he will produce.
Our current system is immoral and corupt. I believe that forces humans to do evil things. If you do not lie and cheat as well as your neighbour you lose out. Being honest in such a system comes at a tremendous cost to oneself, in my experience.
Freegold is a different system, and as blondie has mentioned we will rearange around that system.
Freegold is not inherently a evil system ( not like the present). Under freegold being good will bring the most reward, under our current system being evil brings the most reward.
I will reitterate. Do yourself the favour and read that book. I only added Atlas Shrugged as a afterthougt in my initial recommendation, because I thought the context would be helpfull.
Peace
The Fool
Hi Desperado,
I've read your response before FOFOA intervened. I was rather busy this morning so I thought I would post a reply later when I would read it again, only to find out that FOFOA deleted it.
I'm not going to discuss reasons for FOFOA's action but will say that I understand that he wants to protect the credibility of this forum and since it's his that gives him the right to that as he sees fit.
Nevertheless, I have read some of the post you linked in your response - I'm always interested in history especially looking through a lense of the monetary/financial system of the era in question.
I don't dispute the end result but I don't think that bankers of Florence and Venice collapsed the economy for profits on purpose. That said, I can agree that the economy collapsed due to their actions (and their borrowers) that were legitimed in a system where debt had been allowed to accumulate to enormous size with no valves to release the pressure.
I hope that you and FOFOA come to somekind of agreement so that the discussion can continue.
Casper
@JR and @costata
I am in no way an expert in economics or monetary theory, but, trying hard to understand Freegold. I think I must have had a "click" moment just now (the idea was brewing in my head for sometime), after reading the long 5 part post by JR:
Gold should be something (under Freegold?) that you never, ever part with after hoarding it for life, even as loan collateral, and nobody should have the right (by law) to take it from you, not even the lender, he should be repaid in fiat or hard forced labor if can't come up with the fiat. Gold should never, ever be spent and always passed to future generations so they "grow it", and define a family's worth (dinasty?, is this how the Giants become Giants?).
This, and maybe Freegold would require 100% pure and fair justice system. Some say human nature cannot avoid corruption, but what about a future world where breaching the law would bring terrible and totally desorbitant punishment?
Thinking here about the Arab tradition of cutting off a hand for stealing...
Just wondering, where is this idea flawed?
Thanks.
But people like you ran Another and FOA out of town
I sincerely doubt that it was people defending themselves from abuse by freegolders who drove them out. In fact, like me, I would bet that they were presenting ideas not accepted by the "heavy weights" on the blog.
All I have done is defend myself from rude comments like the one from Costata that I posted earlier on this thread. I never responded in kind to Costata on that thread, but after repeated rude and demeaning attacks I started to push back.
If you want to improve the tone of your comments section I would suggest that you call off the freegold attack dogs, I doubt that Another or Foa would appreciate them. In fact, it was the meanness of their attacks that got me to thinking that perhaps freegold isn't as lillywhite as you like to portray it. This is really a core issue, as I have stated before. If the freegolders have to murder silver in order to get what they want, then I doubt Another and Foa would even have started posting about it.
Desperado,
"I do agree that not all giants are bad, but sorry, I just don't see CrackWhoreGold overcoming human nature. Perhaps it will make it a little more difficult to cheat, but there will always be evil people willing to lie, cheat and murder to get ahead or to stay ahead. "
Let's say you are correct. How does this argue for or against the emergence of freegold?
Aquilus, Pete,
"...I can see the Wall Street types setting up "storage" for people's physical, and unless there's a law against it, playing the old fractional reserve game, even though they're supposed to produce the fully reserved physical upon demand. And of course, without an ever-vigilant public/gold-store auditing agency, that game could go on until there's a run on the storage place. "
Since freegold is an 'evolutionary' step, I can picture it happening just as you describe. Perhaps a 'partial' transition to freegold that lasts for a few years, until the next financial crisis, when it becomes evident that we are not quite there yet.
Rome was not built in a day, and the total restructuring of the world's financial system might take a few decades, to give time to work out the inevitable 'kinks'.
So perhaps after the dollar hyperinflation, gold becomes valued highly again -- but the checks required for unencumbered physical ownership have not been fully established.
I welcome suggestions as to why the transition to freehold cannot happen gradually.
"Will assaying even matter if coins can be taken to a bullion bank for cheap/free assay? Why would banks provide this service, what is the benefit to them?"
I've read in FOFOA's posts that he expects banks to become like public utilities. Perhaps this would simply be a service they provide.
Further, banks would be expected to buy and sell gold for currency. One would expect them to take a keen interest in the purity and quantity of the assets they are purchasing, akin to the current loan underwriting departments.
Indenture,
Thank you for pointing out where costata's article has been picked up.
To be honest, I expected it to be discussed or mentioned in more places. I've seen some mention of it at Turd's blog, mostly to brush it aside, but besides that only silence.
JR,
That will teach me to post replies before finishing reading all the comments.
From FOFOA's quote you cite:
"And that the bullion banking system must and will revert to a non-fractional, non-lending, 100% reserve banking system. ... The CBs demand this, as Another told us a long time ago, because physical gold is cornered by real wealth at these prices, and they (the CBs) will not give up any more of theirs." (empahsis mine)
What I am picturing is an 'orderly retreat' of steadily rising gold prices. In other words, paper gold being peeled away, layer by layer like an onion, over many years, until only ownership of the physical is left.
Maybe, when gold derivatives go bad at, say, $12k gold price, the CBs will mobilize some gold to keep the collapse from spreading too far into the gold market, too fast.
Ash,
"Freegold must prevent this by maintaining a system of money independent of financial markets (physical gold), so savers can lock in present-day purchasing power whenever they do not feel like taking investment risks with their fiat. That necessarily drains capital from financial currency markets,"
Does it, really? Honest question. If I buy gold with my savings, what I am actually doing is
1. sell my excess production for currency
2. give that currency to a gold holder in exchange for his gold
So the former gold holder in step 2 now has currency that he can use. He could be liquidating his savings to consume them in retirement, or he could be mobilizing them to invest in a new productive venture.
Does this fit in with your view?
Motley Fool,
Interesting thoughts regarding 'good giants' and 'bad giants'. My opinions on the subject run along similar lines.
Instead of 'good giants' I might use the term 'productive giants'. There are the people who own productive assets in the economy: farmland, factory, intellectual property, housing, etc. I don't think they are necessarily morally superior, and they don't necessarily produce anything of value themselves. They may not be on the factory floor or on a tractor, they simply own the assets.
What you term 'bad giants' I would call 'financial giants'. These are the financiers whose wealth is built on ownership of paper; every profit of their (zero-sum) trades comes at a cost to the productive elements of society. Not only do they themselves not produce anything, but the assets from which their wealth flows are a net drag on society.
So I see the freegold transition as the 'productive giants' wresting away power and control from the 'financial giants'.
Freegolder = gold hater
Costata-You said, "2. There is enough silver in the world for it to become the pre-eminent monetary metal because, as Michael Maloney pointed out in the video I linked, we can divide it to the level of atoms if necessary. We have the technology to do so for gold or silver or any other metal designated."
Sorry, but you are very mistaken. If you cannot pay a worker a week's pay, much less a day's pay, with an agreed upon weight of physical silver or gold, then it is merely a concept to the worker, not tangible money. Theoretically, you could credit his debit account with a specific weight of silver (or gold), and then he could use that debit card to pay bills or make purchases. But it is still just intangible exchanges.
This is why consumer spending is so high. It isn't really money, not even fiat money, such a paper bills leaving a person's wallet. It is pseudo money, that may or may not get paid back. Therefore, it is so much easier to spend it. And of course a lot of it doesn't get paid back.
There is nothing supporting the several hundred trillion dollars of sovereign (and other) credit market debt, and even less supporting a quadrillion in OTC derivative notional value.
To say that gold or silver can back it is absurd. Those folks are never gonna get their money back. Maybe they can pull some clever ruse and make off with the Western Nations' sovereign gold as well as the IMF's gold and the BIS's gold. More power to 'em.
But the underlying problem will still be there. The world's economy is going to contract, in real terms, over the next several years, and all this debt will be defaulted upon.
In the process, I think we get the inflation case, as dollars are created to fund massive budget deficits, and the dollar price of gold and silver will rise, perhaps by triple of more. But they won't go up all that much in buying power. Maybe double, but certainly not orders of magnitude.
Pete,
Re: aggressive fiscal/monetary policies, I don't think they actually help long-term, as we are finding out right now. Right now, however, they are one of the few major tools that elite policymakers have to try and stave off outright economic collapse and suck more people into the ponzi scheme before it implodes.
"Freegold is not really two parallel systems of 'money'. It is a medium of exchange backed by a floating store of value."
I just think of it as a system of money (physical gold) running parallel to a system of currency (fiat), with the latter serving as MOE and floating against the former's value. I make the money/currency distinction because I believe the monetary system encompasses more economic activity than the currency system (the latter is contained within the former). They are both contained within the broader financial system.
FREEGOLD = THE BERNANK
Here's one more point that I'd like to see included in Costata's next post when he gets around to talking about China.
http://goldbasics.blogspot.com/2011/05/hong-kong-mercantile-exchange-begins.html
China just opened their gold exchange today. They are also planning to start a silver exchange in June.
Why Gold first followed by silver? Why not gold first followed by copper? iron? molybdenum? Or an exchange for all commodity metals? Maybe there is a larger portion of the market clinging to silver as money than originally thought?
Freegolders are liars.
(Gotta WORK for that propaganda, boy.) FREEGOLD = LIES
Redhill,
Thank you. My thoughts on reading your comment. As a shrimp trying to follow in the footsteps of Giants.
A man discovers he has a flat tyre. He pulls up the car next to a fence that happens to be the fence of a lunatic asylum. He gets out of his car to change the tyre. He takes the nuts off the wheel of the flat tyre and places them in the hub cap.
As he is removing the spare tyre from the boot of his car he notices this weird looking guy watching him from the other side of the fence. As he is carrying the spare around the car he steps on the hub cap and it flips. The nuts roll down the gutter and into a drain.
He drops the spare and starts swearing and kicking the flat tyre. The lunatic on the other side of the fence calmly says: "Take one nut off each of the other tyres and use them to fix the spare onto the wheel."
The guy with the flat tyre looks at the guy in the loony bin and says: "Wow. I would never have thought of that. How come they locked you up?"
The lunatic starts walking away and he says over his shoulder: "I may be crazy, but I'm not stupid."
;)
JR, huge thanks for posting that compilation on how gold leasing can be prevented. It’s something I had been wondering .
Great comment from Redhill too. New readers would might not be aware of the importance Another placed on Oil as the (future) backer of Gold. "gold and oil can never flow in the same direction". See http://fofoa.blogspot.com/2010/10/its-flow-stupid.html
To my small mind this seems to define what the value of gold must become: it must be sufficient for the flow of gold to equal the flow of oil.
FOFOA,
You know, for a thread about silver, decorum here is actually pretty good :)
The silver bugs can be a sensitive bunch.
As always, looking forward to the next post!
"Does it, really? Honest question. If I buy gold with my savings, what I am actually doing is
1. sell my excess production for currency
2. give that currency to a gold holder in exchange for his gold
So the former gold holder in step 2 now has currency that he can use. He could be liquidating his savings to consume them in retirement, or he could be mobilizing them to invest in a new productive venture."
Michael,
There is a big difference between productive finance and speculative finance. The latter would be reflected by you taking out loans to buy someone else's gold and turn it for a profit... obviously that would have to limited by Freegold (as I believe people have mentioned in terms of laws prohibiting physical gold to be held as collateral). That speculative aspect has become a huge part of financial markets over the last few decades, esp with respect to RE, and ideally Freegold would prevent such asset bubbles from occurring.
On top of that, I don't think it's fair to say that the currency value of productive financial markets is maintained when you are paid currency and swap it for someone's gold. The point of productive financial markets in this system is to constantly roll over monetary capital to fuel production, right? The initial transaction may have a de minimus effect on currency capital, but the fact that your purchased gold is appreciating along with inflation from productive activity over time (thus locking in purchasing power) means that when you sell it back, people have to give up more currency capital to get the same level of consumption/investment that you are providing.
After all, that has been the "beauty" of speculative finance... it artificially creates investment demand that would not otherwise exist by devaluing the currency which is used to conduct the transactions, but also providing returns that initially outpace the rate of devaluation. A very short-sighted process for most investors, but I don't believe the elite had any other choice.
What I could do with, after all this bickering, is a good LONG FOFOA Freegold special. A mammoth magnum opus to bathe and soothe my tortured mind.
It will be interesting to see the true value of things when the monetary plane vanishes and we are left with an objective reference point.
When societies reorganise after having repriced value and risk, what sort of a world will we see?
Speaking of risk, what will the financial services look like?
Will the actuarial profession get a boost, or be decimated?
Silverbearcafe’s recent analysis of silver market swings key to understand why David Rosenberg is a “traitor.”
"Silverbearcafe- Costada has written extensively about the silver bashing ‘traitors’ and market riggers that the SLA fights against every day for 8 years now (since $9 silver). My point is that silver traitors like Rosenberg are radicalizing millions more silver buyers in the world so they are filling an important role. Ultimately, they’ll just ride the wave – after having done none of the work – and buy, buy, buy. Typical and necessary given the way markets are set up currently."
pipe: "Sorry, but you are very mistaken. If you cannot pay a worker a week's pay, much less a day's pay, with an agreed upon weight of physical silver or gold, then it is merely a concept to the worker, not tangible money."
Did you not read what Mortymer linked to about the 'Swiss Dinar'? "Merely a concept to the worker"? Humans were passing around old, nearly worn out pieces of paper and gladly accepted them in exchange for their labor. Am I missing something?
Costada,
You and FOFOA say that you're just observing as things unfold and freegold is what you see ahead. I can see the signs for gold too. But I see other signs as well that include silver. Here's what I see that is not being addressed:
US states are working on laws to make Au AND Ag recognized as money. Does this help pave the way for freegold? If it does, then what about the AND silver part? Also, the USG is a pretty big giant. And when the USG doesn't get its way, it lashes out. If a state passes a law that the USG doesn't like, they'll put the smack down on that state. They'll tie it up in court, they'll withhold federal money, they'll bribe, they'll do anything to put roadblocks in their way. Have you seen the USG try to stop this Ag/Ag movement at all? Utah was the first to sign their bill into law and nobody is trying to stop it. If Ag were not included in our financial plan B, then why would this be allowed? Also, there is a movement to move back to the Constitution and that movement will grow louder during HI. That document defines the dollar in terms of silver, not gold.
Thanks for the link Indenture. Let the posts by the raving silverbugs there (and on ZH) be an example of what can happen without blog 'censorship'. Max Keiser is becoming Jim Jones to his increasingly deranged followers.
Desperado has many outlets for whatever conspiracy theory NWO UFO foolishness he wishes to write. Honestly, Desperado, stop whining about being attacked. You can dish it out, so learn to take it or move on.
Now about freegold...
Indenture-"Humans [swiss dinar users?] were passing around old, nearly worn out pieces of paper and gladly accepted them in exchange for their labor. Am I missing something?"
I don't know about the Swiss, but Americans readily accept pieces of paper for their labor or goods they wish to sell. A piece of paper is a tangible object. In the case of a federal reserve note, it is inscribed with "legal tender for all debts, public and private". Read it yourself on a bill in your wallet right now. If someone has goods for sale, they cannot refuse my dollar, under penalty of the law.
If I am entitled to $5000, I will accept a check, knowing that I can go to a bank and deposit the check and remove from the bank $5000 in currency at my leisure. The check for $5000 is getting a bit into the 'intangible' realm, but most people can wrap their minds around that.
But what if the govt. outlawed currency, and said that all transactions, even for one penny, had to be by debit or credit card? In this case, what is a dollar? It is not a bill, nor a stack of quarters or dimes. It is a theoretical construct. This is where money starts breaking down, and why credit card spending is so disconnected from reality (ability to pay it back).
Likewise the federal budget. They know they will never pay it back, so it is not really money, just a theory about money.
So if a man works 8 hours, and the amount of gold or silver is so tiny you cannot possibly pay him in physical gold/silver, you have already skipped to the 'credit card' stage in the example above. This is not tangible money.
If the gold/silver never leaves the vault, and nobody ever sees it, how do we know it is actually there? And does it even matter if it's there anyway? Clever politicians will find a way to borrow against it or draw multiple claims on it.
This is all a moot point. As the trillions in credit market debt are defaulted out of existance, the OTC derivative house of cards will collapse as well, and there will be several orders of magnitude LESS money to convert into gold/silver than the Freegolders are counting on. But I still think we get hyperinflation, because the USA federal deficit will explode higher and destroy the dollar as money first. A race to the bottom, they say.
One thing that is always on my mind is timing - and it is obviously something avoided on most Forums with more grounded thinkers.
On KWN is an audio interview with Hugo Salinas Price - one of the points he brings up is - regarding this latest 100 tonne Mexican Gold purchase - where is the Gold? His experience tries to infer to the CB - 'be sure you don't just have a paper promise'. Later he says he may find out when WE know how much Gold is in Fort Knox. I've responded a couple of times that I think Fort Knox is virtually empty and I urge someone to prove me wrong. The Texas Uni purchase of Gold is supposedly held in storage in NY. As Central bankers buy and 'trade' Gold without audit can't we be fooled with the paper promises for another few decades? They can manipulate prices unless, as is happening with Silver, there is an actual physical shortage (because of Industrial use - simply water purification and Solar Cells, if nothing else - forget a million SilverBugs).
Backwardation means a shortage - I haven't been able to buy the top 2 selling Silver coins from Kitco (Eagles or Maples) for almost 2 weeks.
I suspect that Silver will go up significantly because of this shortage. Gold may require the dollar collapse to do likewise and I can get no timeframe on this - maybe tomorrow - maybe they can string it out another 10 years (it was 97' when Another started talking FreeGold). Gold is the dollar's greatest competitor and I think the masses will be fooled with paper promises for a long time yet. I lean to the Silver shorting to break the Comex. FreeGold (60K/oz) may transpire, but in any of our lifetimes?
@ Ash
"Re: aggressive fiscal/monetary policies, I don't think they actually help long-term, as we are finding out right now. Right now, however, they are one of the few major tools that elite policymakers have to try and stave off outright economic collapse and suck more people into the ponzi scheme before it implodes."
I would expect then that Freegold would make that last destructive step more or less pointless. Because if the policymakers choose to leave a Freegold framework, they'll step right into economic collapse (through trade), foregoing the aggressive policy part.
Then deficits will matter! (take that Cheney)
"I just think of it as a system of money (physical gold) running parallel to a system of currency (fiat)"
I think it will really help your thinking to stop using the term 'money'. It gets confusing, because money as we know it today is both a medium of exchange and store of value.
From my understanding, in a post-Freegold environment, gold will not be used as a medium of exchange, merely as a store of value and a reference point for paper/electronic currency.
For individuals this means they can put their savings in gold, where the value of their labours will be stored. For international traders, they can transact in the currency with absolute faith that the exchange rate will be stable, and the currency they traded for can be traded again for the same relative worth. Or they can choose to exchange that currency for a specified amount of gold (based on that currencies floating gold rate).
One example that shows that international trading requirements for stable and 'backed' currency are more important than the local requirements, is the US gold confiscation in the 1930's. Locals weren't allowed to redeem their cash for gold, yet the international traders could. They waited until many years later to stop the international traders. That to me says a lot.
@ Gary
Did you read Costata's silver article?
The symptoms/evidence you see of a physical shortage - unable to buy coins, backwardation - do not necessarily mean that there is a physical shortage.
They are symptoms of several potential causes. If I have a runny nose, do I have a cold or allergies? We have to look at these things in the right context.
I don't know what the cause is. But it has been previously stated that the coin supply is a bottleneck. Extra immediate demand for coins = immediate shortage. This does not mean that the mint doesn't have a huge stack of silver rounds sitting in a room ready to mint. They might simply lack the capacity to meet demand immediately.
A panic by silver stackers would exacerbate this immediate shortage somewhat.
Another aspect of physical shortage is where is the silver going? Costata pointed out that the bullion banks have access to a lot of physical bullion through other markets and might be vaccuuming it up into their vaults in order to corner the market. Yes, this means that there is a shortage of retail and possibly industrial silver for everyone else. But it does not mean that there is a shortage of physical silver in the world. Bullion banks would want to make a profit. At some point they would want to release some of their holdings in order to realise those profits. If the paper market goes AWOL then that's not really going to help them play the paper game much, which is what they are doing.
I'd look to the bullion banks for the cause, as per Costata's article.
@Pete
I don't know what the cause is
How about Occam's razor?
They might simply lack the capacity to meet demand immediately.
So... at what point do you admit a shortage? Sales go up in a straight line for 6 months and now it's okay for suppliers to just say - 'Gee, we weren't expecting/prepared for such demand!'
A panic by silver stackers would exacerbate this immediate shortage somewhat.
Do you mean a demand? Yeah, well a high demand can cause shortages...
Another aspect of physical shortage is where is the silver going?
China Imports 245 Tonnes Of Silver
Silver investment demand in China soars
(Wall Street Journal) Silver Is Down, but China Is Still Buying
(just Google China Silver)
I'd look to the bullion banks for the cause, as per Costata's article
So the JPM shorting is a silly Keiser conspiracy (agreed by Sprott et al) but the Bullion banks cornering the market is... more realistic?!? Really?
I'm just not finding much I agree with in Costata's points and I think only time will prove any of us correct. I predict Silver will escalate and shortages will become very apparent.
FREEGOLDERS are using GOLD to argue AGAINST gold as money.
FREEGOLDERS = BANKERS IN DISGUISE
Freegolders = bankers
@ Gary
A few commenters here have stated that increasing minting capacity is not particularly easy. And I think it doesn't necessarily fit into their business model. Why would a mint, particularly one run by the Government, increase capacity when they cannot back it up with significant empirical data?
They'd need to be able to show that the demand is not fleeting or volatile, and that their 'investment' in extra capacity equipment will be put to continual use. IMO they're not likely to speculate on these things.
I think there was a basic argument that the market for retail silver was quite small compared to the sizable bullion markets that are not transparent. Are the China imports retail?
I am not trying to tell you that you're wrong, I am just trying to offer that alternate explanation for these things. It seems that so many are coming to the same silver shortage conclusions, but I think they may be based on evidence that does not necessarily prove their point.
I agree that time will prove who is ultimately correct. However IMO it is worth keeping in mind that any paper market could be wildly divergent from reality, but whilst our reality is tied to it, we will still have to play by the market makers rules.
Who are the market makers? Are they retail investors or something different altogether?
FOFOA, I am missing your regular insightful articles.
FREEGOLDERS = THE BERNANK
worm.
worm
worm
worm
Samix, are you not able to bring up the blog where you are located?
test
I see!
Sigo Plapal,
Good point about the US states. They are after all, each and every one, a Republic in their own right on one reading of the law from a Constitutional law expert I read some time ago.
This gels with one of the 'longer responses' I am working on. I have more time available in the next few days so I should be able to get a few more finished. If FOFOA posts in the meantime I will still push out these responses and drop a short note on the latest thread to alert anyone who is interested in reading it and discussing the topic.
In regard to the adoption of silver and gold as "money" in the Constitution, I think you should read my first longer response here. It gives an account of why metals were adopted. Hint: it was part of a scam by bankers.
Cheers
Note that the idea: selling gold has arisen.
http://www.prisonplanet.com/selling-gold-at-fort-knox-emerges-as-next-big-question-in-debate-on-federal-debt-limit.html
Hi Michael H
Our positions are similar then, but different.
I could agree that the financial giants fall into the bad giants group. However given your definition of productive giants, I would class some of them as bad giants and some of them as good giants.
Seeing as you are the one who brought up Rand in this discussion, I will assume you have also read Atlas Shrugged. So to give a concrete example then, I will pick two characters from that book : Henry Rearden and Orren Boyle.
By your definition they are both productive giants. By my view Rearden is a good giant and Boyle is a bad giant.
I hope that clarifies.
Peace
The Fool
@MF, Spoiler Alert! :->
Interview with L’Agefi Hebdo
Interview with Jean-Claude Trichet, President of the European Central Bank, conducted by Philippe Mudry, 18 May 2011
http://www.ecb.int/press/key/date/2011/html/sp110518_2.en.html
"What importance do you ascribe to the debate on the international monetary system?
- I think that the points identified by the G20, from a long-term standpoint, particularly the issue of capital flows, special drawing rights and other topics associated with the international monetary system, are interesting. It is good to discuss them. Ultimately, though, we have two questions for the short to medium term. One of these involves the relationships between the major convertible currencies: the dollar, the euro, the yen, the pound Sterling, the Canadian dollar. For over 30 years we have had a system in which these important relationships have been monitored by the G7. From that viewpoint, these relationships have not been destabilised in the course of the crisis. We should congratulate ourselves on this, even though it calls for constant vigilance of course. Then there is a topic on which it seems to me that the international community also agrees, i.e. the ties between the currencies of the major emerging countries, which themselves have very large surpluses, and all the other currencies, including the major convertible currencies. The currencies of these major emerging countries with large surpluses must progressively become more flexible, i.e. appreciate in an orderly and progressive manner. "
While we seem to be just pretty much enjoying some down-time together ahead of the next lesson ...
@radix46/Ore em': I can't run to an island, unfortunately. Maybe a brick in a plastic bucket with some water in the bottom. But, perhaps I have found a viable candidate for the reunion theme song? Every little helps.
Is that Sharon on drums? She's pretty cool. I hope she can come with me.
Ash,
My understanding of what you are saying is this:
Under freegold, the currency would not be able to be used for speculative finance. Since there will be no speculative finance, freegold will get to the point in its lifetime where speculative finance is necessary, and then burn itself out.
I agree that the rise of speculative finance was necessary to keep the dollar going, but I don't think it will be needed under freegold.
The dollar needed speculative finance to convince people to hold dollars instead of goods: if you hold dollars today and 'invest' them, you can buy more goods tomorrow!
Under freegold, this won't be necessary because people won't be holding the currency, and they won't be holding goods. They'll be holding gold.
pipe,
"Sorry, but you are very mistaken. If you cannot pay a worker a week's pay, much less a day's pay, with an agreed upon weight of physical silver or gold, then it is merely a concept to the worker, not tangible money."
How does this contradict your quote of costata,
"as Michael Maloney pointed out in the video I linked, we can divide it to the level of atoms if necessary. We have the technology to do so for gold or silver or any other metal designated."
The point is that the agreed-upon weight of silver can be an atom. What's the issue? He's not saying to divide the silver in principle, he is saying to make coins with tiny amounts of silver in them, that would then be able to be handed out to workers.
"I don't know about the Swiss, ..."
You didn't see the posts that Indenture was referencing, then. They are here:
http://fofoa.blogspot.com/2011/05/costatas-silver-open-forum-part-2.html?showComment=1305707341550#c3031205219995222665
http://fofoa.blogspot.com/2011/05/costatas-silver-open-forum-part-2.html?showComment=1305707405136#c2808467966582864849
http://fofoa.blogspot.com/2011/05/costatas-silver-open-forum-part-2.html?showComment=1305709085403#c7844339092587514224
Pete,
"I think it will really help your thinking to stop using the term 'money'. It gets confusing, because money as we know it today is both a medium of exchange and store of value.
From my understanding, in a post-Freegold environment, gold will not be used as a medium of exchange, merely as a store of value and a reference point for paper/electronic currency."
You realize that I don't actually agree with Freegold, right? I am trying to convince others of my thinking, or at least explain it to them so they can consider it. I think it's very important to make the money/currency distinction, and the fact that money must be a MOE, because that begins to highlight the (un)likelihood that Freegold will actually happen. For me, it's important to understand that the role of money has been fundamentally limited through the evolution of financial capitalism.
If you owned massive quantities of a non-perishable that has a floating perception of value, how could you use it to extract the most profit from the marketplace?
The obvious would be to corner the market and scoop huge profits as prices rise. But the trouble with that is that it only works ONCE. Not best use. So that's out.
You could, however, allow the price to escalate over time (as ALL prices do) and short it, flood it (one to another) and drop the price in significantly large chunks. This panics the 'consistent' investor (seeking stable profits) - who exists his position unlikely to return. As the public memory of this volatility subsides - time allows the process to repeat (price rise, short, raid/flood, price drop).
Who benefits from this particular activity?
Those with large amounts = Bullion Banks and
those who require the price suppressed = Central Banks
Why? - The Central Banker doesn't want competition with his fiat money, where he has much more control - where printing more and more paper at times deemed most beneficial. He has almost no limits as long as his paper is perceived as having value.
Things were much simpler when one of the Rothchilds sat in an office at the LBMA and determined the price.
But...
1) Profits are cut short by re-buying at the depressed levels. More could, obviously, be made by not having to buy back.
2) CBs can't simply print money indefinitely - for obvious reasons (paper value drops, confidence is lost, HI ensues)
Cont...
Part 2
What has changed?
RE: Number 1 - the BB's feel that they don't always need to buy back as the price fluctuation dissuades most from taking delivery and no one really know how much they have regardless (this can be attributed to simple greed). So they stop public disclosure in 2010 - as their stacks are sliding. Using the bankers #1 tool; fractional scheming - they can continue the process, basically, unencumbered for decades? Or can they?
The rich didn't get that way by being dumb. Global Billionaires who are not part of the Anglo BB (Arabs, Chinese, maybe Russians, at least one Canuck and one Spaniard) see through this shorting profit/suppression. They anticipate the monetary tide shifting, as it does with specific monetary events about every 40 years = FDR confiscates Gold = Nixon removes Gold backing discipline from reserve currency = August 2011 - or thereabouts). So the GBs (for short - you can call them Giants if you want) are heroes (as Jim Willie describes them) in this story. They have already drained the LBMA and Comex of physical. Why isn't this public knowledge? The GBs don't want a default (buying contracts and announcing 'they won't give us delivery' - yeah ZERO deliveries for a number of months - Z-E-R-O!)... YET. They want to get as much from the rest of the world as they can before the rocket takes off. This means the defaulting EU and what is left in UK (after Brown's Bottom) and what is now being discussed - a Fort Knox rummage sale. I think the latter is BS because I truly believe there is almost no Gold the heavily guarded Kentucky vaults - but it doesn't matter. They want it all. Another small bugaboo on the journey? - The only way GBs will reap the rewards they seek is if PMs are perceived as having value (remember the Tinker Bell effect) and slowly Joe Public is buying with the prudent Chinese savers leading the way. The current price means almost nothing compare to where it will be going....
Up until about 3/4 the way through this - the 'non-perishable' could have easily have been Silver (replace Bullion Banks with JPM/HSBC and a few other subtle changes etc.) - and it is - also - Silver. In fact looking at the numbers - Silver's more visible scarcity will transpire first and Gold will follow. When? - a guess? in the next 5 years. The charade will be allowed to continue for quite a while (compromised Comex regulators). FreeGold may eventually follow - but may not happen for 50 years. Who can know? P.S. I know, I know - 'I don't understand FreeGold'...
Silver Shield rebuts Silverbearcafe/Costata
Michael-"He's not saying to divide the silver in principle, he is saying to make coins with tiny amounts of silver in them, that would then be able to be handed out to workers."
You gotta be kiddin' me, right? It is one thing to add a bit of base metal for strength, like 90% silver coins (pre 1965, USA). But you're talking about some hocus pocus, that would be ripe for counterfeiting.
The whole idea that microscopic bits of gold or silver would be worth a week's pay is absurd. Everybody and their uncle would out panning in known gold/silver basins.
Also, at those kind of valuations, a major think tank would figure out a way to extract gold from seawater, which contains a significant amount of gold.
You guys just keep grasping at straws. The problem is that there isn't near enough wealth on Earth to service all the vehicles whose owners think are stores of wealth, hundreds of trillions in bonds and a quadrillion in OTC derivative notional value. The wealth just isn't there. All this pseudo store of wealth is fraudulent, borrowed into existance and backed by air. It is going away, not into gold/silver.
Yes, gold and silver will retain their purchasing power, but they cannot purchase wealth that doesn't exist.
Michael,
You probably know I am a fan of Marx's ideas re: capitalism by now. Speculative finance, IMO, was not necessary to merely maintain the dollar, but to maintain the entire system. Without increasing rates of realized profits, economic growth stagnates and things start to get very ugly in the highly inter-dependent global economy. Productive finance brings forward demand, but as someone said earlier, you can't squeeze blood from a turnip (eventually debt levels off as there isn't enough productive capacity to support more). So then we turn to speculating on asset prices with debt, and creating imaginary claims on "wealth". When that ponzi scheme reaches its limit, you begin forcibly taking what workers/consumers/savers/investors would not voluntarily give you anymore.
@ Gary
I was with you until part 2 - at some point you appeared to stop talking about silver and started talking about gold?
Anyhow I think I follow anyway. I don't really disagree with you up until your last paragraph, which I suspect that you expected anyway.
A question: If the world no longer wants to use the USD as a global reserve, what changes do you foresee? Because IMO the world will want to press this position within this decade.
If you think silver will take off globally at this time, I'd like to know why you think this. IMO the paper markets won't really work after the US falls from grace - all of that 'free money' will want to find a more valuable home, as per Exter's Pyramid.
pipe: How about an hours pay? You said, "The whole idea that microscopic bits of gold or silver would be worth a week's pay is absurd. So, how would you pay someone for one hours worth of labor? What physical item would you hand them?
@ Indenture and Pipe
Why do we have to divide gold (or silver?) into microscopic amounts?
Why not just have a certain amount being redeemable in cash?
This is a Freegold website after all, not a hard currency website.
Think of it this way: You could be paid in cash and redeem a minimum of 1/20oz (even 1/50oz maybe) if you get enough cash together. (If you don't have enough cash, then you don't have any real need for savings in gold!). 1/50oz might be in the range of $500-$2000 (in today's dollars) anyway. Who needs gold for transactions smaller than that?
In Freegold, gold is a store of value... not a medium of exchange...
Bob Chapman : "The IMF and EU members and euro zone participants were arguing along with bankers how they were going to split up Greece’s assets, as Greece’s economy was about to blow sky high. The one interest rate fits all turned lower tier euro zone members into gamblers. The banks, of course, were the biggest shooters applying monstrous leverage. As we said, at Maastricht, and again at the euro zone formation, the euro zone and the EU were unnatural associations. The euro zone should have never begun and as six members skate on thin ice it should be abandoned. This was nothing less than an attempt to create a one-world currency, which has failed. Greece has received $156 billion over this last year. Greeks have lived a Draconian lifestyle of austerity that has produced little success. As a result Greece has had daily demonstrations to protest their deep economic crisis. The demand for collateral by lenders is ludicrous. It only pushes Greece further toward default. Bankers always consumed with greed could care less about that. Even with an additional bailout package Greece simply cannot make it. Greece is in an impossible position, especially next year when they have to raise an additional $60 billion in the bond market. The requirements are even bigger the following year. They are already paying more than 25% to raise 2-year money. Even if Greece gets another bailout this year, what do they do next year, default? Greece needs the best possible deal just to stay alive. It should not be surprising that lenders don’t know what to do and the Greeks are in despair. Sooner or later in order to prevent the complete collapse of Europe, the bureaucrats and one-worlders will have to break up the failed euro zone and return to sovereign currencies."
Part 1/4
gary,
A few people chided ‘costata’ for bias, for lumping all silver investors into a single “group” and the unflattering light I shone on some of the people in my narrative. A few of the comments from ‘gary’ covered these points as well as making the accusation that I was “hiding behind the name Costata”(Here, here and here.) Some of the other issues gary raised will be addressed in other ‘longer responses.
In one of the comments gary expressed the view that I was guilty of ”bias” against silver and “PM bigotry”. I’m not sure that the word ‘bias’ conveys the exact nature of the criticism leveled by gary and quite a few others. I get the sense that people actually meant “unfair” or “unbalanced” or deliberately critical of silver. To me that seems to be the flavour of a term like “PM bigotry”.
So let me set the record straight and make something crystal clear. I categorically reject silver as an alternative to gold, as a means to carry anyone through the transition to a new monetary system with their wealth intact, or greatly enlarged as many of us at this blog envisage gold doing. Silver may or may not carry you through US$ hyper-inflation but that is an issue for another of these long responses. Of course I acknowledge that silver, as a trade, has been used to arbitrage the GSR to increase a gold holding in the past. It may do so for some time to come but at some point it will not be possible to perform this arbitrage because the GSR will be enormously higher than it is today and it will stay there indefinitely. That’s my position.
My journey from silver bug to my present position on silver occurred took several years. When we first got into “PMs”, after listening to people like Ted Butler, I persuaded my partner that we should start out with a position in silver that was over 80:1 (silver versus gold) by weight and 60:40 in terms of currency. We also started out with 100 per cent paper on the initial purchase. Of course that decision had nothing to do with Ted Butler’s advice. Over the years I tried to do as much research and learning as I could about silver and the other matters that we discuss here.
Over time we reduced the weighting of silver in our long term savings and we are now holding Zero per cent silver and 100 per cent physical gold. That is a reflection of my expectations for the future.
I don’t anticipate a ‘Mad Max’ outcome in our neck of the woods. And if I thought barter was in our future it would be tobacco, single malt scotch and other luxuries in our trading stockpile – not silver. I don’t expect Australia to experience hyper-inflation and in the extremely unlikely event that it did I don’t expect that it would affect us to any significant degree. If I did expect hyper-inflation I would lay in some emergency supplies for convenience. If I lived in America I would definitely be preparing for the worst. That would include holding a very small quantity of physical silver.
Continued/
\Continued
Part 2/4
Yukon Cornelius made the very first comment at the silver open forum. When that comment appeared I had no idea we would see around 600 more over the next four days.
Many people have had similar experiences to Yukon’s in trying to discuss any doubts or reservations about silver. He talks about them at his blog. Trying to have this discussion with someone who is into “paper” investments is a complete waste of time. And have you ever tried talking to the silver bugs about it? I invite you to drop into one of the hardcore silver bug haunts and announce that you are planning to roll your silver for gold or merely that you are having doubts about holding silver. If you get out alive please come back here and recount your adventure.
You can find the YES case for silver in countless places but where do you go for the NO case? I felt this debate needed a Devil’s Advocate for those who like to explore both sides of issues. The unfortunate birthmark I have resembling three sixes made me think I might be a candidate for this job. I’m not trying to be the moderator in a balanced debate here. I’m appearing for the prosecution, and silver is in the dock in this ‘courtroom’. The readers are the judge and jury. Those who choose to defend silver are welcome to present arguments and try to make their case in the comments.
So in addition to doing a post about a market (one of many) I see as being thoroughly rigged I decided that someone who has some knowledge about silver had to risk the silver bug’s “best shot” and present the NO case on silver as an alternative to gold. FOFOA kindly agreed to provide the forum and I hope this forum becomes a safe haven for silver ‘junkies’ who want to reduce or quit the habit. As radix46 once requested, this may also become a place on this blog we can direct some of our visitors to where they can discuss silver without enduring the wrath of “seniors” who find the silver discussions repetitious and tiresome.
Now let’s talk about anonymity. There are sound reasons for all of us here to attempt to protect our privacy by remaining anonymous. As advocates for physical gold held in your own possession we have to think of the wellbeing and safety of our families. In my shrimp case that text highlighted in bold should read “held under your own control”. Our physical gold isn’t in our home, or buried in the garden, but it is highly secure and accessible.
There is also another dimension to this issue of anonymity. If memory serves me, it was Aleksander who participated in the exchange that I am about to relate to you. On one of the earlier threads I responded to a jibe about FOFOA “hiding behind” an acronym. I commented that many scientists felt that the peer review system was deeply flawed and that “blind” reviews would be a better approach. Aleksander commented that it would “revolutionize science” if peer reviews were blind.
In a blind review the name of the author of a scientific paper is withheld and the reviewers are selected randomly from a pool of qualified reviewers. This overcomes two potential problems with the existing system, the prestige of the author can intimidate a reviewer and personal or power relationships among authors and reviewers could influence a review. The participants in this system generally occupy both roles at one time or another. Thus compounding the potential for conflicts of interest.
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Part 3/4
I would add today that the academic journals and the processes of research funding bodies suffer from similar flaws. The merit of our anonymity in this new medium is that the reader is forced to judge our writing on the merits of the arguments rather than prestige, personal relationships or power relationships. Having said that, these cyber-selves we create can tend to develop a degree of authority in blogs that they frequent. I’m not sure if this is a good thing or a bad thing but it may be the least worst alternative to the blatant use of handpicked experts in the mainstream media. Take not of how the talking heads at CNBC ‘wrap up’ the discussions. They generally favour one side or the other. Blatant spin in my humble opinion.
I admit that calling Robert Kiyosaki’s book “Rich Dad, Thanks To Your Dad” was a cheap shot, a low blow and a canard. It was, however, irresistible to me after the line came into my head. These are zero sum games. Gary seems to think I have disparaged Kiyosaki or that he deserves to be disparaged. It was gary who described Kiyosaki as a “cheap-suit salesman”, not me. I let Kiyosaki speak in his own words in my post. The same is true for Bix Weir.
I actually respect Kiyosaki for being honest. He intends to do what every good trader seeks to do – buy low and sell high. For every winner in these games there must be a loser. Michael Maloney’s company proudly asserts that their market experts will advise clients when the top is in, or near, so that they can sell their gold and silver at the best time to maximize their profits.
As to the charge gary made that I “conveniently lay-off the heavyweights” I have to say that the other parties I named, and whose credibility I questioned, are hardly lightweights in the silver world. In the thought experiment I also broadened the scope of this ‘war of words’ to embrace everyone in the “and silver” camp. That should cover anyone I neglected to mention who deserved a mention.
Making the SLA a central ‘character’ in my thought experiment was intended to prompt the open minded and serious investors who hold silver to take a long hard look at the company they are keeping. I was also hoping that readers might connect the dots between Kiyosaki’s ‘suckers’ and the SLA and the BTFD crowd.
If you recall I wasn’t entirely negative about the advice and analysis in the silver market. The people I mentioned in the section on trading have impressive track records. I excluded guys like Jim Willie intentionally. Personally I don’t think he is in the same league as those I named. If you recall I also invited readers to nominate anyone in the comments that they thought should have been in that ‘all-star’ line up. As always, the rule for anyone tempted to accept a recommendation is: ‘do your homework’.
I think a book called “Markets Leveraged 100:1 That Survived Into Old Age” could be a winner in the contest for the world’s shortest book. In the final paragraph of this comment gary wrote this:
“I wouldn't sell my Silver but I’d trade it for Gold - when I think the time is right.”
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Part 4/4
As I explained in the post there is a risk assessment issue in this game of GSR musical chairs. I think this is such an important issue that I am going to reproduce the observations I made in the post again. I’m preparing a longer response to the comments about paper gold and paper silver. It will include some thoughts on the likely triggers for, and outcomes from, the collapse of some of these paper markets and the factors that will ensure that there is no gold to roll into when the paper gold market collapses.
From the post:
“Let's walk through the risk assessment together. These days the GSR is generally calculated based on the Comex spot price of paper silver and paper gold.
To the unthinking, the GSR seems to imply some kind of direct exchange. As in 34 ounces of silver for 1 ounce of gold. Obviously this can happen by way of direct barter. But in most cases it is an indirect exchange. You have to transition through currency, selling one metal for an amount of currency and exchanging that currency for the other metal. The fact that you have been able to do this simultaneously and reliably in the past does not guarantee that you will be able to do so in the future.
Many here anticipate the eventual failure of the paper gold market. The paper GSR could be 1:1 if there is a systemic failure in the paper gold markets but that would be a currency ratio not a metal exchange ratio.
In a recent essay Eric Sprott made many interesting observations this one:
’Now, it’s true that another potential source of supply is the very silver that investors already own.......’
I agree, Eric, some of that stock could mobilize. In fact I know that some of it has already joined the flow and more of that stock intends to flow at some point. As Robert Kiyosaki told us in that video I linked earlier, that is his plan.
For those who have physical gold as our ultimate destination, the key risks are obvious. You have to weigh the risk that no dealer will want our physical silver because many other silver holders are trying to exit at the same time. Secondly, you have to weigh the risk that when you want to exchange silver for physical gold there are no sellers of gold at the paper GSR price, or even worse, no sellers at all.”
I would like to conclude this comment with a question that we have not been able to answer with a high degree of certainty* despite a huge, collective effort by many people here:
When does the ‘music’ stop?
*However, many of us here are convinced that we have made some huge strides in identifying what stops the ‘music’ and why it will stop by building on the A/FOA legacy.
Indenture-" So, how would you pay someone for one hours worth of labor? What physical item would you hand them?"
Humans used barter for millenia, and then advanced to various mediums of exchange. We know from trial and error, that gold and silver work better than fiat currencies. But you're saying we should use a coin that is 99.99999% base metal and 0.00001% silver. I don't think that will work. Better to use fiat script.
BTW, you keep ducking the question as to where is all this wealth that you guys insist needs to be shoe horned into gold or silver. Where exactly is it? We know that zero percent of it is in Europe, or they would scrape a little off their boots and pay off Greece's debts and make that nightmare go away. Ditto the rest of PIGGS. Ditto the USA and Japan.
If the USA has any extra wealth, beyond meeting immediate needs, we wouldn't be borrowing from the rest of the world, now would we?
China is running a trade surplus, so one might decide to look there for wealth. Uh, they got USA Treasury Bonds, which we all know are worthless. So no wealth there, beyond meeting their immediate needs.
So please tell me, where is the extra wealth?
An interesting series of interviews with Peter Grandich.
http://resourceclips.com/2011/05/17/peter-grandich-on-manipulation/
This passage caught my eye, in the second part of this three part series:
"It’s important to know that since we still depend on physical demand, May, June and July are when a lot of jewellery fabricators worldwide slow down or even close down, and there can be a seasonal impact. But even seasonal factors may not influence the gold and silver market as they have done in years past." (My emphasis)
Given the reduced demand for gold fashion jewellery (as opposed to bullion jewellery) this may not trouble gold but any seasonal demand slump could be quite helpful to the 'spiders' in taking the price of silver down to whatever target they are aiming for.
Hey Costata!
Thanks for your honesty and I hope you didn't feel attacked by any of my comments.
"...If you get out alive please come back here and recount your adventure."
"...safe haven for silver ‘junkies’ who want to reduce or quit the habit."
You openly admit your criticism of Silver but comments like the above lead me to use the word 'bias'. I doubt you would talk about Gold horders with the same veiled references as you regard Silver Bugs as less able to reason or addicts. I'm sure you are aware that, even in a Silver Forum, you can only be verbally assaulted and 'getting out alive' is a slanted reference - ditto for direct comparisons to those with serious uncontrollable compulsions. It just doesn't make your arguments sound... objective to me - which weakness any pursuasive qualities that might embody. I'll admit that someSilver Bugs may be as volatile as their metal. Anyway, lets drop that...
You hit on the only real argument we may have. Timing.
When does the ‘music’ stop
You expect the GSR to expand to massive proportions. Fair enough.
And I think, before that happens, it will shrink, quite significantly, from its present ratio.
I am of the belief that our whole lives are a risk. Everytime you drive on the highway you are trusting your life with other motorists. We gamble daily.
What do you think about, over the medium term, my belief that Silver's shortage exposure and ascension can help me buy two to three times as much Gold as I could presently?
A gamble? sure.
Aren't you gambling?
Ron Paul was worried about the collapse of the US dollar after Nixon took them off Gold - 40 years ago.
'Another' was talking Freegold in 1997.
It always sounds like it is right around the corner but FreeGold may not traspire till we get to FoFoFoFoFoA.
If you can give me a date/year - I will take that into strong consideration of my position. Can you?
@Pete
If you think silver will take off globally at this time, I'd like to know why you think this.
These three statements (there are plenty more but without repeating them from elsewhere in these threads) have a great effect on my opinion.
China is the third largest producer of mined silver in the world.
China is a net importer of silver and hit a record high of 400% in 2010 to 3,500 tonnes.
Silver demand in China and India is set to rise 30 percent in 2011.
So China is the 3rd largest Silver producer IN THE WORLD and they still IMPORT!
I'm sure you are aware of how many people are in China - how fast their middle class and economy is growing. China is the world’s largest producer of solar power and electronics. I don't expect that to change over the rest of this decade.
Even if you throw out all these North American Silver Bugs (less than 1% btw) and the potential suppression and you want to believe there is no shortage. okay. China's role alone convinces me Silver will rise dramatically in the next few years. Hopefully I'll be smart enough to cash it in for Gold somewhere between 20:1 and 10:1 and long before Gold is 'unavailable'. This 'gamble' would dramatically increase my Gold holdings. I own Gold and am willing to risk to own more.
P.S. Always nice to leave one next factoid:
"Many Chinese consumers are said to prefer the white color of silver jewelry to the yellow color of gold."
P.P.S. Admission - my wife is Chinese.
...any seasonal demand slump could be quite helpful to the 'spiders' in taking the price of silver down to whatever target they are aiming for.
Let's hope Costata! - sounds like a great buying opportunity. Rick Rule was right - keep some powder dry!
P.S. Grandich also used the term 'Bubble' to describe Gold. Hmmmm...
Try this again
Hey Costata!
Thanks for your honesty and I hope you didn't feel attacked by any of my comments.
"...If you get out alive please come back here and recount your adventure."
"...safe haven for silver ‘junkies’ who want to reduce or quit the habit."
You openly admit your criticism of Silver but comments like the above lead me to use the word 'bias'. I doubt you would talk about Gold horders with the same veiled references as you regard Silver Bugs as less able to reason or addicts. I'm sure you are aware that, even in a Silver Forum, you can only be verbally assaulted and 'getting out alive' is a slanted reference - ditto for direct comparisons to those with serious uncontrollable compulsions. It just doesn't make your arguments sound... objective to me - which weakness any pursuasive qualities that might embody. I'll admit that someSilver Bugs may be as volatile as their metal. Anyway, lets drop that...
You hit on the only real argument we may have. Timing.
When does the ‘music’ stop
You expect the GSR to expand to massive proportions. Fair enough.
And I think, before that happens, it will shrink, quite significantly, from its present ratio.
I am of the belief that our whole lives are a risk. Everytime you drive on the highway you are trusting your life with other motorists. We gamble daily.
What do you think about, over the medium term, my belief that Silver's shortage exposure and ascension can help me buy two to three times as much Gold as I could presently?
A gamble? sure.
Aren't you gambling?
Ron Paul was worried about the collapse of the US dollar after Nixon took them off Gold - 40 years ago.
'Another' was talking Freegold in 1997.
It always sounds like it is right around the corner but FreeGold may not traspire till we get to FoFoFoFoFoA.
If you can give me a date/year - I will take that into strong consideration of my position. Can you?
@Pete
If you think silver will take off globally at this time, I'd like to know why you think this.
These three statements (there are plenty more but without repeating them from elsewhere in these threads) have a great effect on my opinion.
China is the third largest producer of mined silver in the world.
China is a net importer of silver and hit a record high of 400% in 2010 to 3,500 tonnes.
Silver demand in China and India is set to rise 30 percent in 2011.
So China is the 3rd largest Silver producer IN THE WORLD and they still IMPORT!
I'm sure you are aware of how many people are in China - how fast their middle class and economy is growing. China is the world’s largest producer of solar power and electronics. I don't expect that to change over the rest of this decade.
Even if you throw out all these North American Silver Bugs (less than 1% btw) and the potential suppression and you want to believe there is no shortage. okay. China's role alone convinces me Silver will rise dramatically in the next few years. Hopefully I'll be smart enough to cash it in for Gold somewhere between 20:1 and 10:1 and long before Gold is 'unavailable'. This 'gamble' would dramatically increase my Gold holdings. I own Gold and am willing to risk to own more.
P.S. Always nice to leave one next factoid:
"Many Chinese consumers are said to prefer the white color of silver jewelry to the yellow color of gold."
P.P.S. Admission - my wife is Chinese.
Speaking of Rick Rule, from KWN
"Some forecasts by the World Gold Council have to do with increasing prosperity in India, particularly in rural India and the potential impact that would have on gold and silver consumption.
I think that’s right and I also think by the way that the demand for silver in India has always been there, it’s been very difficult to quantify so Americans haven’t paid much attention to it. If I might be cynical, which you’ve allowed me to do in the past, it’s generally difficult for Americans to comprehend. It doesn’t sell newsletters, so American speculators haven’t been inundated with information about it, but the Indians have traditionally been the most important swing player in the physical silver market forever.”
@ Gary
So China is the 3rd largest silver miner, and is a net importer of silver.
China is the largest miner of gold in the world, and in Dec 2010 gold imports surged five-fold.
What does this tell us?
China likes commodities? China has inflation concerns? China would buy anything tangible it could find with it's paper money?
@Fofoa et al,
If some country were to institute a gold standard and then there gold was subsequently drained, could this act as the catalyst to launch HI?
Or would the country simply close their gold window, go back to fiat, and we would need something else to set off HI?
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