Tuesday, April 17, 2012

Open Forum

Here's a riddle. What do Smeagol, Ragnarok, Bruce Dickinson and Samuel Taylor Coleridge all have in common?

The Rhyme of the Ancient Gold-Mariner

Written in 2004 by Smeagol (who now goes by the name Ragnarok, reads this blog, but won't participate in the comments here for the superstitious reason that every site where he comments seems to go the way of the albatross, which he then hangs around his own neck. ;)

Around the World the story had been told,
About a Race that would in time unfold,
Which would intrigue all, lofty or lowly,
With stakes higher than any in history.

The outcome would turn out to affect
Even those who didn't participate or bet.
Irresistibly altering everyone's course
In subtle or brutal ways for better or worse.

Finally the season came for which many long had yearned.
And then dawned the day on which all eyes were turned
To such a spectacle as rare as one would ever see.
Quite possibly the only of its kind to ever be.

Long in preparation with no expenses spared,
While news reporters shouted and klaxons blared,
In the morning at precisely eight-twenty on the clock,
The largest vessel the World had ever seen slid from her dock.

Christened with only the finest of Champagne
In the midst of an extravagant ad campaign,
With a thunderous wave that drenched onlookers ashore,
The Derive was launched, greater than any before.

Financed by those who had no peers,
Built by teams of respected engineers,
Underwritten by triple-A rated papers,
Her decks and bridges rose like skyscrapers.

Stronger she looked than the fortress of a treasury.
Each of her engines could power a very large city.
Her itinerary was impeccable and the menu was endless;
She would make many a tidy sum, this new empress.

One could choose to have every affair managed and let their cares go,
Or experience the thrill of risking it all in the world's largest floating casino.
Thousands boarded and the staff their merchandise stowed.
The Derive was open for business and the profits flowed.

Since she commanded resources so vast,
Against this behemoth surely no other could last.
With every option, every benefit one could describe,
What could ever compete with the great Derive?

Yet in time a glorious ship on the horizon did appear.
Old yet majestic was the Standard, proud and without fear.
Wherever and whenever her tall silver sails unfurled
She was considered the greatest ocean-going craft in the World.

Glad cries went up as the renowned Standard dropped anchor.
Trusty and secure, "Good as gold" everyone ranked her.
A boast in typical good faith her Captain did make:
"Come, Derive, we challenge you to follow in our wake!"

Then the parties commenced and everyone celebrated.
In sleepless expectation the start they anticipated,
Only to be rudely stunned awake by the news at break of day;
The great Standard had sunk, right there in the bay!

Treachery! Skullduggery! Sabotage, Cloaks and Daggers!
Conspiracy! An inquiry! yelled headlines in the papers.
But as the days passed it soon became obvious
It was unlikely that any would soon be brought to justice.

Dejected, the daily crowds of spectators milled about.
Derive remained unchallenged and many began to doubt.
"Now what? We might as well go home;
With Standard gone the Derive surely stands alone."

For the great ship Standard had been damaged beyond repair.
Indeed never would her lofty sails again embrace the air.

Meanwhile, far out on the ocean a brilliant flash of sun
Glanced from golden hulls; from the middle one,
A golden mast with yellow sail canted at a jaunty angle.
From another the legs of some of her crew did dangle.

A sleek seaworthy time-tested trimaran was she,
Skimming the sun-dappled waves like golden dolphins three.
At first few noticed the elegant ship's approach;
After all the harbor a great many and much bigger did boast.

But nimbly she wove, through and between, eventually to arrive
Right under the bow of the humongous Derive.
Her crew and captain were rugged, strong and lean as wires.
In some other tale perhaps, they might pass as miners.

"Many a thousand mile we've come to see this big pile o' ship.
I'm Captain Goldheart. Excuse me, *BAU-URR-I-I-P-P*!
But your claim to be the best we most emphatically doubt.
We're throwing down the gauntlet. Calling you out.

We've seen a few rough times, but no race we've ever lost.
I don't care how huge, how powerful or how much you cost.
Goldwing here's a four-nine ship with a mighty fine crew,
And we're just itching to trounce the likes of you!"

The multitude was bemused by Goldheart's rash bravado.
Something about the depth of passion in his voice was odd, though.
Perplexed, confused, they wondered at some hoax;
"Maybe it's someone's strange idea of a joke?"

Now Goldwing wasn't a small ship compared to some,
But when nearby the tremendous Derive did she come,
Most obvious to all was the great difference in size.
Her mast not halfway to Derive's first railing did rise.

The scene certainly didn't suggest any possibility of a race.
By now some were thinking the whole thing a disgrace.
"Give us a break!" "A trimaran?" "That design's a relic."
"Pretty, yes, but... isn't it kind of barbaric?"

Then, to the utter astonishment of all,
The Captain of Derive answered the call!

"We're going abroad no matter who you are or what you say.
You may tag along if you want, only stay out of our way!
Frankly we stand to gain whether or not a race is run.
But we like good times and speculation as much as anyone.

I bring word the Board of Directors will hand to you Derive,
Should you circle the World before us, and here return alive.
Otherwise, you must give up your antiquated ship of gold,
As our trophy to display in our Ancient Exhibits hold."

Every eye went to and fro the two ships, worlds apart.
"What say you to these terms, Captain Goldheart?"
Goldheart said nothing, carefully weighing the words.
All grew hushed, expectant; only seagulls could be heard.

Then,"You've nothing we can't get, even if we wanted it, you see.
We live life to it's fullest and make our own prosperity.
I wouldn't give anything for that, much less bet," he said.
"But if that's what you think you need then that I'll accept."

A mighty cheer went up and around the World the message ran,
And one day at noon as cannon boomed the great Race began.
All kinds of boats, from skiffs to freighters of many thousand ton,
Took to sea to see them off, even to the setting sun.

Liesurely it seemed, but never forgetting the true intent,
Around the World in fair weather and foul Derive and Goldwing went.
Occasionally lesser ships to and from Derive would ply,
Changing crew and passengers, bringing fuel and supplies.

Only rarely would anyone draw alongside Goldwing,
Save to bring news, encouragment, or perhaps trade them something.
For they were resourceful, independent and industrious.
Long ago they learned what to stow for any journey perilous.

Far too long was the Race to relate here every detail
Of the contrasts and the struggles of brute force versus sail
As each sought to divine the other's strategies,
Weaknesses, strong points, capabilities.

Making the most of breeze or calm, Goldwing expressed competence,
While Derive plowed on relentlessly, heedless of wind or currents.
Neither could gain for long a truly decisive lead;
Who the victor would eventually be was impossible to read.

Thus had they come to the most dangerous part,
The last but not the least leg of many since the start.
Ahead lay the treacherous Horn which they must round,
Then they would be homeward bound.

It had been noticed with not a little concern,
A severe storm unpredicted was brewing astern.
On all ships barometers were falling rapidly;
Dangerous weather would be upon them presently.

The wind came up hard and Goldwing made time,
Leaping easily past Derive, leaving her far behind.
For the first time some aboard Derive felt a bit seasick,
While those on Goldwing exulted in adrenaline's kick.

But like Derive the storm itself was unlike any other before.
Therefore no one really knew what it held in store.
And as the winds rose fiercer in its darkening gloom,
Goldwing's crew must trim sail and therein lay her doom.

Helpful wind had become a threat and the current only mocked -
From behind in driving rain came Derive like a juggernaut!

"Captain, it's a big storm, looks like a bad one too.
It's different than any I've ever seen before, have you?"
With easy confidence Derive's Captain reassured,
"Yes, but it matters not; by highest-rated paper we're insured."

"She's a big storm, Cap'n, an' a real blower, too.
Different, colder than any I've ever felt before, have you?"
"That's 'cause she's a perfect one." Goldheart said. "Let 'er come!"
Secure every kilogram of ballast. Pass 'round this rum."

And so it was in shrieking gale in the worst possible strait
That they went neck and neck round the Horn, there to meet their fate.
For there instead of open water an icy wall towered high;
Massive storm-carved battlements raked the ragged sky.

On Derive the sirens wailed
As her watchmen loudly hailed,


On Derive a passenger uneasily said,
"It sounds a bit worrisome, this Debt".
"Au contraire," said the waiter, "There is no need to be alarmed.
It happens all the time. Would you like your coffee warmed?"

For indeed Derive in ponderous majesty
Always rode the sea in aloof supremacy.
Aside from her impervious hull small bergs were haughtily cast,
While titanic ones with a shuddering boom were spectacularly smashed.

Indeed it had become tradition to save a souvenir
To float in a drink or ice down some beer.
In fair weather the spectacle was a popular hit;
In conditions like this none would be bothered to see it.

On Goldwing an uneasy crewman said,
"It could be the end of us, this Debt.
We're berg-side of Derive and toward it the current's driving us.
We might avoid her but not that colossus!"

Captain Goldheart considered, then wryly shook his head.
"Looks like we'll have to one-up them both instead.
The wind's across the current seventy-nine degrees."
And he charted a course for all of them to see.

Low murmurs of "That's insane!","It's suicide!".
"I'M the Captain and I'LL decide!"
bellowed Goldheart, eyes flashing under his brow.
"Trust me nevermore but trust me now!

We've all been through many a nasty blow together.
This one's a doozy but that don't mean we can't win 'er.
Just do as I say, lash you down, raise spinnaker and bide,
And get yourselves ready for one HELLUVA ride!"

In failing light and lashing rain the orders were obeyed,
While Goldwing's crew (and her captain) silently prayed.
Wet lines snapped taut singing, slipped in white-knuckled hands;
Overstressed canvas nearly ripped from its bands.

Like a golden stone from some legendary giant's sling,
Across the spindrift-blowing breakers Goldwing shot skipping.
Right into the harrowing rapidly narrowing slot she was swept,
Between imperious Derive and importunate Debt!

Through roaring twilight's last fading
Thundered the crunching shrieking grinding
Of many dreams and hopes, of life's fortunes imagined and real,
Shredding on ice that would not yield.

Over the howl of the wind, to the soaked and shaking crew,
Goldheart shouted "We're past them, we're through!"
Sail was hurriedly gathered and all was made fast;
No one spoke and finally Goldheart said at last,

"Though it mighta looked impossible back there,
I'd've never put you through that if it wasn't clear
She's a four-nine ship with a mighty fine crew;
It was a hard test and I'm very proud of you"

But upon the wind was borne many a terrible sound;
Somewhere out there the great Derive was going down.
There was nothing else those on Goldwing could do,
Except batten down for the night as heavy rain blew.

After setting a watch they slept fitfully
In their little golden boat on the vast heaving sea.
Yet the storm did abate some time in the night,
And they began a search by morning's dreary light.

"We can make room for a few, but no more",
Thought Goldheart, looking on the grey swell in horror.
"I wish that we could've saved them all,
Goldwing my love, but that's not our shot to call."

But no flag nor flare nor smoke was to be seen
Amid the endless rafts of flotsam drifting.
In the near distance the giant berg slowly rolled over,
Mindlessly drowning the scars of the deadly encounter.

"I see no lifeboats, and that's the worst.
How could they have been so-" and he cursed.
But he knew truly wherein the tragic blame did lie:
On belief, not knowledge, did the lost rely.

Out of the thousands lost in the wreck of the Derive,
Only two dozen were found, cold, exhausted and barely alive.
With gilded life-rings attached to sturdy lines
They were drawn to safety, one or two at a time.

Over the next several days the weather gradually cleared,
And towards home still far away they steered.
As those who had been rescued regained their strength,
They talked among themselves at length.

And as they discussed the events of recent days
They discovered that each of them, to lasting amaze,
In some pocket or other for luck or so they thought,
Along on the fateful trip a coin of gold had brought.

These they decided to give to Goldheart in gratitude,
For the selfless deeds of he and Goldwing's crew.
But he said, "Don't think we don't appreciate such a gesture fair.
Someday you may need them again; it's an uncertain world out there.

"Because you had that gold your fortune was such
That you were able to escape the worst of ruin's clutch.
Keep it, save it, and remember how it proved true
As things you thought secure slipped from under you."

In the weeks ahead they busied themselves learning sailing;
Life this close to the sea they found very different, yet satisfying.
"On this ship, like it or not, you're part of the crew,"
Goldheart grinned, "but you'll find it kinda grows on you."

Forever it seemed had passed when finally they returned
To the port whence they had started, and a long rest truly earned.
They were welcomed with fireworks, celebration and laughter,
Tempered somewhat by sobering tales of the incredible Derive disaster.

Everyone wanted to know and would hardly let them rest
Until they told them all about how they survived such a grueling test.
And finally after several days when the hubbub had died down,
Captain Goldheart boarded Goldwing and took a look around.

"Well, what's the damage, or dare I ask?",
Goldheart queried a crewman as he uncapped his flask.
"She's done us more than well, Cap'n, considering what we ask of her.
None the worse for a little wear and tear; a worthy credit to her Maker.

Some nicks here and there, a few good buffs and a scratch,
But we've lost the ball from the top of the mast."
"No surprise, that," Goldheart said as he took a swig and laughed.
"'Twas her last ten-thousandth, and it was made of brass!"



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tintin said...

About that EUR-USD peg from Mundell, it won't work, it does not change a thing: it means the US can continue to export inflation, and whoever needs to defend an exchange rate at a particular level just import that inflation. As JR pointed out, the key is US government's structural deficit, the get-something-for-nothing/green back paper situation that will lead to RPG-FG. They can peg whatever they want to to the USD, but the USG will always need its fix: the free physical stuff.

Phat Repat said...

Hasn't been my experience and I have followed them for several years. I didn't say they were perfect, and neither do they (in fact, they reassess their predictions on a regular basis and are running at better than 75% as I recall). Not going to find that with too many subs (wonder if Celente does that).

However, you think the wild swings in the currency between then and now is normal? The currency is crashing, and recovering (DCB), and crashing on a regular basis. What part of the world are you from? It seems locale bias might be at play (and is extreme from the Euro contingent; apparently longing for the good ole days, never to come again [at least not all the freebies], sorry).

costata said...


Thank you for the suggestion. I shall mention it to Mrs. costata (who loves good chocolate).

Hi Wendy,

Commitments over here and to be honest a lack of enthusiasm about packing so much into a short trip. I'm planning to go next time when we can stay longer. The opportunity to travel with the companions she has with her on this trip persuaded her to go.

In regard to Mrs. costata's canine. Uncle costata is a rather incompetent cook. There was a slight misunderstanding one evening involving the contents of his food bowl and the selfish, evil spirited hound isn't forgetting it in a hurry. Or so it would appear.

FOFOA said...

Good vid on my Twitter feed!

And thanks Gregor! I will get back to you.

Also, thank you Gary for the hyper timing bet from MMT. Great odds if anyone wants to take it. I'll provide the reasoning and content.

FOFOA said...

Well, I guess this/this wasn't a big bad PTB anti-gold conspiracy after all. Dutch regulator told off by court over forced gold sale

DP said...

Math For Stragglers

SPVG, a Dutch pension scheme with just over 1100 members

the 13% is about 1400 kilo's

1400kg / 1100 members = 1.27kg/member — at Freegold prices… nice!

So the 3% must be ~323kg. Which is ~0.29kg/member. Booooooooo! Hisssssssss!

Woland said...

For those of you of the von Mises, Hayek persuasion, there is
a wonderful piece over at, ta da, Zero Hedge, entitled, "Robert
Wenzel addresses the New York Fed, lots of head scratching
ensues". Satisfaction guaranteed or double your money back.

DP said...


Recently you said to me it may be beneficial to refer to the Freegold concept by some other name, because that name carries some potential negative baggage for people, especially when they first encounter it. Ideally a name that: didn't mention 'gold' since this word automatically raises barriers to many people; didn't imply anyone might get something for 'free'.

I just had an epiphany while I was making coffee. How about: LDO economics? :)

How do you propose to solve the global debt problem?

How can people protect the purchasing power of their life savings from the ravages of inflation through fractional reserve lending?

This wonderful, meritocratic world you envisage and have described to me... it sounds too good to be true. I don't see how we can get there?

Should we 'End The Fed', or do we actually need Central Banking for modern society to function?

I can hear you now asking yourself what LDO stands for. But I ask you, what doesn't it stand for? It stands for liberté, égalité, fraternité. It stands for justice. It stands for fundamental human rights. It stands for free beer. No, wait...

Oh, you meant what do the actual letters L,D and O stand for! Like, DUH! Obvious! I think they stand for Leave Debt Out.

Whaddaya think?

ElaisaKasan said...

Astroid mining? Not likely. With regards to increased gold supply I would be more concerned with the 2.4 MM tons referenced in the Keenan Complaint.

Mike said...

Hmmm, gold-for-oil deals. Where have I heard that before? :)


DP said...

And of course, once you've spent some time on the trail chewing your boots and gnawing on the rope, it is LDO.

Beer Holiday said...
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Beer Holiday said...
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Beer Holiday said...
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RJPadavona said...

Hello Friends,

Sorry to post off-topic, but I know some of the followers of this blog live in Europe so I thought this might be of interest.

My cousin is in a band called Antiseen. They've been around since the 80's and have quite a cult following in the States. Apparently they have a following in Europe too because they go on tour there every few years. Anyway, their European tour is starting in a couple weeks. Here are the tour dates if anyone is interested:

May 17th – Berlin, Germany

May 18th – Rostock, Germany
Mau Club

May 19th – Venlo, Netherlands

May 20th – Antwerpen, Belgium

May 21st – Ulm, Germany

May 22 – Milan, Italy
LoFi Club

May 23 – Montpellier, France
Secret Palace

May 24 – Luzern, Switzerland

May 25 – Toging, Germany

May 26 – Hunxe, Germany

Here are a couple of samples. Open these links at your own risk. NSFW:

Spare Change

Destructo Finale (Live)

.....and now back to your regularly scheduled Freegold program.


LadyGerbil said...

Can we scare up $200 dollars for Fofoa to take the bet with the MMR champion?

I'll pledge $20 dollars to get things started, do we have 9 other supporters? (not sure if Fofoa would want to do it in his own name though....hmmm...maybe he could do it as Mr F. Ofoa!

Be good to stick it it to MMR idiocy. I inadvertently posted a link to Moneyness on PragCap yest, I was chuckling as I did so.

Here's the link again:


Motley Fool said...


Amusing, though I'm not quite sure it will catch on. :)


Biju said...

Gary : I 'll give $50 if FOFOA wants to take up the challenge in his name.

LadyGerbil said...

Nice one Biju. OK, to make it easy, I'll up my pledge to $50 as well, so we only need another $100 fiats.

I go away on holiday for 2 weeks tomorrow, so won't be able to track the pledges. Perhaps you could, or Fofoa himself? I might have online access in Morocco, but only on a phone.

Hey Fofoa, if you need me to do it in my name I will, you keep the $200 (actually,it would be $150 as I'll use my $50 towards the bet), I'll pay, and will allow for it in my next few months subscriptions ;).

burningfiat said...


Thanks a lot for the update on the Dutch pension fund gold investment case.
Nice outcome indeed, and good for the Dutch people that there is some sanity left in their justice system.

Still amazed that the Dutch national bank pursue(d/s) this case so rigorously. Your link even says they are looking into appealing this decision.

One would have thunk that DNB was more pro-gold as they are an important member of the ECB-system.
See for instance:


At the end of 2010, DNB held reserves totalling EUR 46.9 billion, including external reserves, a euro-denominated portfolio and a portfolio of other financial assets (OFA). The external reserves break down into gold (EUR 20.8 billion), a US dollar portfolio (EUR 6.9 billion) and an SDR portfolio (SDR claims on the IMF worth EUR 1.9 billion). See below for summary notes to each of these portfolios.

In times of financial crisis, DNB's physical stock of gold serves as an ultimate reserve asset and as an anchor of trust. Gold is also held in view of the need to diversify investments.

So gold @ DNB is GOOOOD. Gold for pensioners BAAAAAD.

Is the pension fund regulation department at DNB separate from the currency management department? Who knows...
Luckily I don't have to understand central planning regulators to know that gold for me and my family is GOOOOD :-)


Anonymous said...


Is it true that Santa has a lab at the north pole that transmutates baby seals into gold? I heard it on the interwebz, so it must be true...

If there has been 2.4 million tons of gold mined on this earth, then someone is gonna have to show me some PROOF. I want to see the huge holes left behind. I want to see the the massive tailings piles. I want the people who believe this shit to find me a geologist that agrees it is even possible.

I've argued this point with a few people and not one has shown me any proof that this 2.4 M tons is even scientifically possible. I have a friend with a Ph.D in Geology, I'm a gold miner and I have friends with lots of experience in mining, we will all laugh at the idea of these kind of numbers. If you understand gold mining, ancient technology(or lack of) and geology, you will see that this number is ridiculous.

I have said it before, and I'll say it again... It is likely that there has been more than the reported 160 000 tons mined, possibly 200 000 tons? Due to lack of detailed records in antiquity and under-reporting during the early gold rush days. I don't know for sure, but even that number is quite generous when you fully understand the topic.

2.4 million tons of "paper" gold? Now that is MUCH more believable.... and entirely possible.

LadyGerbil said...

For those who are new-ish, still reading the archives:

In my archive reading I have just got to the Gold Is Money series, and one quote of Fofoa's that sums it all up for me (this blog I mean, as well as why you should have some gold):

'I know from my own experience that a little peace of mind is a priceless asset. It is one worth sharing, and one worth growing. Sharing and growing this asset together with you is my goal. Onward...'

and on a lighter note, this one made me chuckle:

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

Archive reading, do you some! (and still Another/FOA to look forward to).

Biju said...
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Biju said...


I just made my part contribution $50 for FOFOA to take up the challenge.

Any others willing to share ?

Biju said...

If we get 20 people, we can make this a respectable $1000 Bet.

Motley Fool said...

I honestly don't understand the point of this bet.

If you are wrong you lose your money.

If you are right you are repaid in hyperinflated fiat. Even a million to one odds won't make up for the hyperinflation, hell a billion to one wont help either.

So you lose your money in real terms.

Lose, lose? :/


Tommy2Tone said...


"Reuters’ McGeever acknowledges how the “gold market is tiny” compared to “trillions and trillions of dollars worth of cash and assets sloshing around the world financial system.” He asks how can countries back “all of that” against such a “tiny and finite amount of gold?”

Butler responds by saying that “the amount of gold is finite by weight or volume, it is not finite by price.”"


Alien said...

Save some commentators (make your choice)there has never been a worse collection of the greedy stupid vulgar.

mr pinnion said...

Partially agree DP, but to get the masses interested in FG, your better of calling it FB.

About this bet.If this other guy wins, he gets $200 and goes out and buyes 200 loafs of bread.
If Mr F Ofoa wins, he gets $200 and goes out and buys 200 slices of bread?
Should nt the prize be awarded in Mannoes?

mr pinnion said...

Damn you MF!
Beat me to it

Tommy2Tone said...

it was actually more interesting to read the comments on that article.

I realize how much i have learned in the last few years from so much reading here.

Of all the comments so far, i found only this IMO, nugget:

Stuck on Zero

I'm assuming we'd have to default on all debt obligations to go to a gold standard. Or near default (50:1). As the British learned, you can't trade with mercantilists. They will always desire the gold over anything else. Perhaps a gold standard but with a "trade currency" that couldn't be hoarded for gold.

Jeff said...

Some krugerrands are a bit light:


Motley Fool said...


A quote would have been nicer than giving some a heart attack. :P

It seems to be some proof coins from the April - to May 2011 casting period. Not bullion, not other times.


Ps. @ Ozzy - Ha! :D

Biju said...

MF : It is not about the money as much as telling to the world that certain people were able to forecast HI and make a bet on that.

Biju said...

or to add value of "value" in addition to "name". How about 1 oz of Gold, provided everyone here can contribute.

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

You guys are missing it. The bet should be in Euro's.

Edwardo said...

I'm happy to chip in if the prize for winning is an approved gold coin or bullion held in escrow. Otherwise TF's sussed it out, spot on, so to speak.

mr pinnion said...

NS, naaa , Euros would also be devalued.
Interesting Biju.Will payments of gold bets be enforcable in law after Freegold?

Tommy2Tone said...

fyi, the bets at that site are all donated to charity, otherwise they would be a gambling site.
No one takes anything home.

enough said...

todays NYT...........


The internal investigation also found current radiation levels of 72.0 sieverts inside the drywell, enough to kill a person in a matter of minutes, as well as for electronic equipment to malfunction. The high readings could be a reflection of the low water level, since the water acts as a shield against radiation.

enough said...

sorry, not today's NYT but recent enough....

LadyGerbil said...

Re the bet.

The $200 goes to charity anyway, half to the long now charity, the winner gets to choose on the other half.

I suspect Fofoa relishes the opoortunity to go head to head with an MMT/R champion, and spread the word, spread some peace of mind, do some sharing.

It's certainly not about the size of the bet at all, or what happens to the winnings. So, we just need another $100 pledged to Fofoa and it's game on. If nothing else it will be a huge amount of fun, as Fofoa has Cullen Roche et al beat by a few trillion miles in terms of actually understanding what is happening in the world.

Oh well, as I said, I'm on holiday from tomorrow, so I'll have to leave it to the board to decide collectively.

Robert LeRoy Parker said...

If China simply buys a otc market breaking amount of gold with their dollars instead of other goods and services which result in US inflation, is that equivalent to the US revaluing gold on its own accord?

Nickelsaver said...


What was the point of MTM sir, that the Euro should suffer the same fate as the dollar?

Au Contraire.

And what would be the point in suggesting that one's local commissioner "would do well to build up a reserve of euros as a kind of rainy day "In Case of Fire, Break Glass" credit clearing fund."

tristramboris said...

count me in for $50!

mr pinnion said...

I didnt say the Euro would share the same fate as the dollar.
The Euro will loose 'some'value after Freegold.I dont know how much.
The dollar IMHO will loose most or all of its value.

mr pinnion said...

And ,about this bet.
I dont think betting dollars sends the right message when arguing that dollars will soon be worthless.
The looser of the bet should pledge X amount of hours working for the winners charity of choice.

Anonymous said...

Nice video FOFOA.

There's more too:

Funding Government by the Minute

Dangers of too much debt.

Interesting presentation from Swedish Finance Ministry.

Lessons from successful consolidation:

Expenditure cuts preferable to tax hikes

Broaden tax bases rather than raising tax rates

Rules are important but will only work if backed by political commitment .

wanderer2go said...


I'm having trouble wrapping my shrimp brain around this from your earlier post...

"Buy gold (instead of Treasuries) with your excess dollars received from selling to products or oil to the US. As long as you buy on the open market ... this drives up the price of gold and causes a physical inflow into your country. You no longer have to print equal amounts of your own currency so you have stopped your internal monetary inflation and, instead, channeled it into the price of gold (inflation only against gold, not life’s necessities)."

I understand it all, except for the logical step from the driving up the price of gold to "You no longer have to print equal amounts of your own currency ..."

Can you re-carve this groove, stating the concept as if you were talking to a four year old?


Phat Repat said...

Yeah, timing HI isn't exactly going to be easy (it's been pending for how long now?). And even though I would like to believe that late 2012 or 2013 is it (as LEAP 2020 points out), I remain cautious. So, aside from potentially losing some (worth-less) FRN's, you lose that most important of all currencies: credibility. And for a site such as this, on the cusp of a significant sea change, I wouldn't want to see that kind of loss. But, the inmates appear to be running the asylum, for the moment. I hope the bet isn't made. IMHO.

FOFOA said...

Hi Expat,

You are right, a timing bet is a bad bet. The other side always wants to make it about timing. That way they win right up until the moment they don't. Here was my email to Gary and Biju earlier:

I don’t want to take the bet myself. That's not what I wrote last night. It goes against one of my principles, that I don’t do timing anymore. Obviously 5 years is a wide berth and that’s why I said the odds are great. But any kind of timing sends the wrong message IMO. Hyperinflation is not about timing. It is about how it all ends. It's better (for a saver) to be a decade too early than a minute too late. And it would be a silly bet to make in dollars as MF pointed out. I hadn’t read the rules when I posted last night, but I still think it would be worthwhile for someone to take the bet anyway. Just not me. I’ll write something and, if it’s good, someone (like you or Gary) could take the bet, summarize my post, link to it and get some publicity.


FOFOA said...

Here is FOA on timing:


We, and I, as physical gold advocates, don't need timing for this position! Timing is for poor, paper traders. We are neither and our solid, long term, one call over several years to hold physical gold will confirm our reasoning. There is no stress for me to own this ancient asset as it is in a good proportion to all my other wealth.

There is no trading an economic system whose currency is ending its timeline. Smart, quick talking players will joke at our expense until fast markets and locked down paper gold positions block their "trading even" move into physical at any relative cheap price. Mine owners will see any near term profits evaporate into a government induced pricing contango that constrains stock equity with forced selling at paper gold prices.

My personal view

They will, one day in the future, helplessly watch their investments fall far behind a world free market price for physical gold. Further into the future, one day, mines will make money on the last thousand per ounce price for gold; only the first $XX,000.00 of price will not be available to them."

Yup, that was back in October of 2001, and from a post in which he specifically predicted "hyper price inflation". Bad timing? How have your mining stocks done lately? I know of one FOA reader who went "all in" with gold coins back then to the tune of about $400K. For that, his life's savings, he got about 1,500 ounces. He had just retired from his previous life as a stock trader. Today his golden nest egg is worth more than $2 million, and he has been living off of it for the last decade! So much for bad timing, eh?

And from my post :

"The whole point of the [hyperinflation] debate is about the denouement, the final outcome of this 100-year dollar experiment. It is about the ultimate end, and the debate has been going on ever since the 70s when the dollar was separated from gold and it became clear that there would be an end. The debate is about determining the best stance someone should take who has plenty of net worth. And I do mean PLENTY. People of modest net worth, like me, can of course participate in the debate. But then it can become confusing at times when we think about shortages or supply disruptions of necessities like food. Of course you need to look out for life's necessities first and foremost. But beyond that, there is real value to be gained by truly understanding this debate."

Phat Repat said...

You are indeed a wise man; just one of the many reasons I am here. Thanks for the reply.

Wendy said...


The expectation for the Euro during a transition was always inflation right from the inception. I don't have the hours to find Another's comments regarding this, but I'm sure JR has it at his finger tips. If I had jR's mind, I wouldn't bother looking for the one I lost. :D

Wendy said...

BTW, that doesn't mean he doesn't piss me off from time to time!!

Wendy said...


I hear you about the cooking. I am a lousy cook myself, i therefore invest in "pre-cooked/pre-packaged dog food.

(and people food as well mostly) ;)

Robert LeRoy Parker said...

I should rephrase my question. How does the US's nuclear option work and why would/could they not implement it as they saw the paper gold market breaking rather than acting preemptively?

JR said...

Hi Nickelsaver,

The point about the euro example is to establish a stable currency in which to conduct credit transactions. Not a store of value. A "credit clearing fund" because Bartertown sucks.

Remember from Moneyness that the people's money throughout history has been credit denominated in something. The majority of exchanges up until the invention of paper money were largely on the basis of credit and trust, with accounts later cleared and imbalances settled in metal. In this way, a relatively small and stable monetary base serves a much larger economy.

Here's the example FOFOA gave:

In a currency collapse, the credit system seizes up and the entire money supply becomes base money. What you are looking for is something of a stable, known value in order to jump-start your local credit and get things moving again without facing the intractable double coincidence of wants. But whatever base you use, you'll want a few of them for clearing purposes. So perhaps you could suggest to your County Commissioner Chairman, the next time you're feathering his mullet, that the county would do well to build up a reserve of euros as a kind of rainy day "In Case of Fire, Break Glass" credit clearing fund.


The point is, all the market wants is a stable currency, not too hot, not too cold. It is like a sleeping giant. Give it a stable currency and it will keep sleeping.

JR said...

So the euro could be a stable currency to issue credit in while the $ is in real bad shape. But that's doesn't mean the Euro won't devalue. Its more the Euro will devalue and stabilize (gogo MTM) while the dollar enters more a running HI.

You've got it Nickelsaver:

What was the point of MTM sir, that the Euro should suffer the same fate as the dollar?

Yeah, well said. To help it stablize and keep it from suffering a running HI like the dollar.

Here's some FOFOA:

Here is an important question: Is it theoretically possible for a fiat currency to devalue, or more precisely, to hyper-depreciate against only one single asset without affecting the price of a can of peas?

Of course it is! Just look at any number of investments that have appreciated quickly by an order of magnitude or two. Look at GOOG! Or how about AAPL? When an asset appreciates against a currency can we not also view it as the currency depreciating against that one asset? Or more precisely, can we not say that the asset was awaiting massive revaluation based on market recognition of its value?

Now, what if the revalued asset is gold, a monetary asset held by Central Banks? What could such a revaluation do to today's dynamics of national debt?


The US dollar MUST devalue (one way or another) against the entire physical world. Think about this. The euro, on the other hand, might just hyper-depreciate against only one specific asset. An asset that happens to also be a MONETARY asset held by its member debtors.


The hyperinflation of the dollar is already a done deal. It has been since the 90's at least. Massive quantities of perceived dollars already exist stored in debt held globally and inside the US. Europe knows this. They have known this was inevitable since at least the mid-90's when they changed plans and went with higher gold reserves for the new ECB. They have always been willing to wait for it to happen naturally, unless the EU itself faces an existential threat from debt brought on by the $IMFS. And in this case, I believe their only option is a targeted hyper-depreciation of the euro.

By "targeted", I mean that the euro devaluation would be targeted to go only into gold. Gold can absorb a devaluation if you do it carefully, and in turn devalue the debt without causing inflationary havoc.

Of course this would cause the hyper-depreciation of the dollar as well. Only the dollar's collapse would be against all of creation, not just one asset.


The euro architects knew the difference between the monetary functions. They knew that the infinite growth, store of value function was the dollar's Achilles' heel. So they designed the euro to be a stable transactional and accounting currency even if the world chose non-euro physical assets as a store of value. The dollar does not have this design.

This is not to say that the euro will not devalue against gold right along with the dollar. All infinite, symbolic, transactional currencies will, which is to say all currencies will. And to a lesser extent, all currencies will have to devalue against the rest of the finite real world as well. But they will not all hyperinflate to infinity in the aftermath as the dollar will be forced to. Some will. Others will not. The euro probably will not.


JR said...

Debt is what the $IMFs system is all about - everybody has debt issue. But as FOFOA explained in Synthesis, the Euro was built to attempt to deal with this issue of debt by being built to be hopefully be able to be devalued *WITHOUT* a concurrent hyperinflationary hell:

I don't know how much of my blog you have read, but I don't find the euro's present troubles overly alarming or existentially threatening because I understand why it is the way it is. Some European politicians and political appointees today are doing it great harm, but not existential harm, yet. The currency exchange numbers today are meaningless because all mediums must devalue against the debt paradigm. "It's the debt, stupid" is more than just the title of one of my posts."

"As you all know, I don't expect the euro to fail. The euro is designed for transition. It is designed for Freegold. And the specific value of a currency doesn't matter in its primary role as a medium of exchange. Only stability matters, and the euro could handle a big one-time devaluation to a more stable level. It will have to devalue at one point or another. Devaluation is inevitable for all fiat currencies today. The European politicians apparently understand less about this than the central bankers do.

JR said...

Hi Wendy,

You might be surprised to find its not all its cracked up to be ;)

Its not better/worse, but different - that's the beauty of the superorgansim (could you imagine me working as a editor or a stenographer?) - we all have different talents and skills, and we bring them together through social cooperation.

There is no superorganim of one.

Old school Mises:

The liberal critique of the argument in favor of war is fundamentally different from that of the humanitarians. It starts from the premise that not war, but peace, is the father of all things. What alone enables mankind to advance and distinguishes man from the animals is social cooperation. It is labor alone that is productive: it creates wealth and therewith lays the outward foundations for the inward flowering of man. War only destroys; it cannot create. War, carnage, destruction, and devastation we have in common with the predatory beasts of the jungle; constructive labor is our distinctively human characteristic. The liberal abhors war, not, like the humanitarian, in spite of the fact that it has beneficial consequences, but because it has only harmful ones.

The law of association makes us comprehend the tendencies which resulted in the progressive intensification of human cooperation. We conceive what incentive induced people not to consider themselves simply as rivals in a struggle for the appropriation of the limited supply of means of subsistence made available by nature. We realize what has impelled them and permanently impels them to consort with one another for the sake of cooperation. Every step forward on the way to a more developed mode of the division of labor serves the interests of all participants. In order to comprehend why man did not remain solitary, searching like the animals for food and shelter for himself only and at most also for his consort and his helpless infants, we do not need to have recourse to a miraculous interference of the Deity or to the empty hypostasis of an innate urge toward association. Neither are we forced to assume that the isolated individuals or primitive hordes one day pledged themselves by a contract to establish social bonds. The factor that brought about primitive society and daily works toward its progressive intensification is human action that is animated by the insight into the higher productivity of labor achieved under the division of labor.


Beer Holiday said...

Hi everyone,

Just a heads up that I tried registering with longbets 12 hours ago, and since then their cite has not been working properly for me.

In addition, they require your credit card info, and I just found out from my bank that they test your card with a small transaction, (presumably to verify it?).

I haven't enjoyed the process. Perhaps it's my browser (Chrome), and I should have used more of a dummy card.

So if you're thinking of signing, make sure the cite works for you first, I wish I had.

Although I think the terms of this bet are ridiculous I'd like to see someone try it. I'll donate to FOFOA if he ends up writing the argument.

Beer Holiday said...

Seems to work much better with IE 9

JR said...


Here's some fun quotes to shed some FOFOA perspective on this issue:

That's the choice. You can collapse your currency against the non-economic good gold, killing the paper gold market and driving up the price of physical in advance of hyperinflation by buying it up. This gives you some hope of avoiding the worst of hyperinflation by providing a real outlet for unwanted surplus dollars.

Or you can wait until your currency collapses against economic goods and then you will have to buy back your own currency with your gold, also at Freegold prices. Even if you start a new currency you will still have to make a market for it because your credibility will be shot by that point.


JR said...

So if the biggest debtor in all of history suddenly acknowledges that he still has an asset of real value, that asset might explode in price to heights that would almost cover his debt just from the act of publicly acknowledging it? Hmm.

Let us think of analogies. I know someone who is buried in debt. A large mortgage and HELOC, two car loans, lingering student loans and a baker's dozen of credit cards. A prime candidate for bankruptcy. But let's say he also has a hidden asset that, even though it is not collateral to his debt, is still valuable enough to almost cover it. He hasn't filed for bankruptcy or stopped paying on his debt yet, so even if he reveals the secret asset, his creditors won't have a claim to it. Yet if he reveals it, they may actually extend him more credit that he will then use to keep rolling over his debt, because his books will no longer look so underwater.

Or how about this? I know two people, each with a million dollar debt hole. One guy has no assets and can't get any more credit, so he'll probably have to declare bankruptcy. The other guy has two million in assets and he has no trouble getting more credit.

Now I'm not saying that rolling over debt is a good way to manage one's finances. I'm just saying this is an interesting concept that you've brought to the table. That if Congress were to publicly reveal this U.S. asset, that it would suddenly skyrocket in value. So how would that translate into a repudiation of the U.S. dollar worldwide? Or hyperinflation? Actually, I think the U.S. proactively ushering in Freegold (even if they didn't know what they were doing) could potentially be the ONLY way to possibly avoid the worst of those things.

A dramatically fast and public rise in the price of gold, the kind you say they will never allow, would absorb a lot of the monetary pressure and keep it away from essentials like food and gas. That's the best and highest function of gold. To absorb. To consolidate. To sequester monetary pressure. To bottle it up and put it on display for all to see. For all to not only marvel at, but to partake in as well. And to do so in a way that doesn't affect vital economic commerce. This is the elegance of the ECB/MTM party concept. This is the elegance of Freegold!


JR said...

part of the $'s issue is credibility:

You see, the European gold reserves are far better, far more credible than the US gold reserve, simply because they engage in a two-way gold market, and have for decades. The US gold has been hoarded and locked away for more than 30 years, never deployed in case of emergency. The European CB's took a lot of flak for selling gold over the past two decades, but that action is precisely what makes them so much more credible (and valuable!) than the US gold hoard. Any trading partner knows full well that if all else fails, gold will be paid.

JR said...

Hi holdinmyown,

you wrote:

They need to reduce the relative value of the dollar domestically but internationally they need to support the value of the UST (international collateral). These are conflicting objectives. Is this not the true meaning of the Triffen paradox?

Sounds like a good idea :) here's some similar sounding FOFOA:

Triffin's dilemma highlights two flaws in the dollar and its use as the global reserve currency. Flaw #1 is the dollar being a national currency and also a supra-national global reserve currency. Flaw #2 is the dollar trying to be as good as gold in the store of value role via US Treasuries. What I mean in flaw #2 is that the dollar's credibility is hurt by a rising price of gold and, therefore, it must systemically manage that threat by backing the fractionally reserved bullion banking system which eases the natural supply constraint of gold.

The euro has eliminated both of these flaws in its fundamental architecture. It is not a national currency and it does not oppose a rising (in the present case) or a free floating (in the future case) price for non-fractional physical gold reserves. I have written extensively on this topic, and the bottom line is that gold is not yet free floating, even today, because its market is encumbered by many forms of gold IOUs that trade at par with the physical stuff through the support of the dollar system.

You can obviously resolve Triffin's dilemma by removing both flaws. But removing #1 alone is not enough, while #2 alone is enough.

Triffin's dilemma observes that when a national currency also serves as an international reserve currency (as the US dollar does today), there are fundamental conflicts of interest between short-term domestic and long-term international economic objectives. But this is only the case if that currency does not embrace a "secondary media of exchange" that is allowed to float in value in a quantity not managed by the currency manager (i.e. physical only), and can be purchased and stored in lieu of retaining debt denominated in the primary medium.


JR said...

hi wanderer2go,

You said:

"I understand it all, except for the logical step from the driving up the price of gold to "You no longer have to print equal amounts of your own currency ...""

The alternative involves inflating your currency along, so to take the golden option is to free oneself of that Hobson's choice. http://en.wikipedia.org/wiki/Hobson's_choice


The problem is with the perpetual US trade deficit. In order to stay pegged to the dollar, there are only two things these countries can do. And most economists are only aware of one of them. The way everyone thinks it is done is by recycling those dollars into US assets, primarily Treasuries. The Chinese (or Saudi) exporter receives dollars and exchanges them for local currency at the bank. That bank then sells them to the central bank for freshly printed currency, and the CB then buys US assets with the dollars.

Robert LeRoy Parker said...

Hi JR,

Thanks for the references. I like this quote from Aristotle:

So when I'm in the process of giving away my very best bits, I purposely fold in an element of challenge for whomever is getting the keys to the kingdom.

Simply put, that's the small price I believe must be paid, otherwise it's almost as if no exchange took place at all. If they had to work/suffer for it, maybe they'll hold the info a little dearer than so much litter that can be quite freely had.

In all the time from Another until now, is it conceivable that some top men have put in a contingency plan? Can credibility be re-established behind the curtain of central banking, such that when 'day X' arrives, the brunt of the shock is not so bad for the masses?

Nickelsaver said...


Of course the Euro will devalue against gold. That wasn't the point I was trying to make.

Lets review what I think I know (even though JR has already laid it all out there).

It helps me to reference FOFOA wonder visual aids like the inverted waterfall; which tells us that gold will plateau in price/value relative to everything else; and particularly the Euro, since the ECB will most likely make the market going into the new normal.

As for Gold, it is at the far right of the fulcrum on the devaluation/revaluation seesaw. Conversely, the $IMFS/dollar is at the far left of the fulcrum.

Everything else that is not specifically fiat dollars or tied directly to fiat dollars, and is not also physical gold, falls somewhere between the two.

The fulcrum is nominally goods and services. As such, there will be some things slightly to the right and to the left.

RE will fall to the left. As has been pointed out earlier in the thread. The more government intervention on it (fiat), the more left it will slide.

Commodities will be scattered across the middle according to utility at any given moment in time during the transition. Where they fall after will largely depend upon how bad or good the transition is in both locally and globally.

Silver, and this is just my own opinion, will be near the fulcrum. Why? Because I believe it will operate as money (particularly in America and Asia) during the transition. Where it goes once Freegold is in place, frankly I won't care at that point. I plan on making the most of it.

The Euro, I see slightly left of the fulcrum, but not much. And only because there are still dollar assets tied to it.

All in all. If anyone where to make a bet that represented FOFOA's view, it should be made in Euros, because of the message more than anything else; that gold is too valuable to use as currency; and that the Euro is going to be the new WRC.

Perhaps a Eurozone follower should place the bet.

JR said...

I own silver and barter goods and I know FOFOA does too, they will store wealth a whole lot better than the euro.

The value of a currency doesn't matter in its primary role as MoE. Only stability matters.

"As you all know, I don't expect the euro to fail. The euro is designed for transition. It is designed for Freegold. And the specific value of a currency doesn't matter in its primary role as a medium of exchange. Only stability matters, and the euro could handle a big one-time devaluation to a more stable level. It will have to devalue at one point or another. Devaluation is inevitable for all fiat currencies today. The European politicians apparently understand less about this than the central bankers do.

The euro will devalue against the physical plane, but it ill find a bed at the bottom of the waterfall (unlike the dollar cascading futher down).

Don't take your wealth over the waterfall.

The euro's value is as a credit reference. Batertown blows. The value of a currency doesn't matter in its primary role as MoE. Only stability matters. Stability at the bottom of a (small) waterfall.

This is not to say that the euro will not devalue against gold right along with the dollar. All infinite, symbolic, transactional currencies will, which is to say all currencies will. And to a lesser extent, all currencies will have to devalue against the rest of the finite real world as well. But they will not all hyperinflate to infinity in the aftermath as the dollar will be forced to. Some will. Others will not. The euro probably will not.

Nickelsaver said...

Thanks JR,

I was going to put silver to the right of the fulcrum, but was trying to avoid criticism. Guess that makes me a yes man. Peter, that's your cue!

All I know is that Gold is the one thing you don't want to deploy until after all the dust has settled.

LadyGerbil said...

Re the bet...it wasn't really about timing anyway, just an opportunity for a head to head debate with MMTers, which could have been interesting I thought.

Also re timing:

'When will we get “there”? In my view it could be as soon as a year from now or as long as four years from now.'

That takes us to August 2012.

Anand Srivastava said...

Nicklesaver, we are coming to the same argument again. No Gold will not plateau against anything. It will be going up against everything at maybe a small rate per annum over a properly calculated CPI. Since Euro will strive for a stable price it will be inflating in base currency to keep the price stable, ie 0% change in price. So it will be devaluing against the gold at that small rate.

What I mean is post freegold gold will not be stable against Euro, it will appreciate. The ECB will have a stable amount of gold, but the number of Euros issued will increase every year to keep the price stable. It is not a gold standard. The currency can be stable visavis gold only in a gold standard. Gold Standard is anathema to FreeGold.

J said...

Not sure how old this is as I haven't visited the website in some time but GBI now has a physical dividend program http://www.bullioninternational.com/solutions/physical-dividend-program/physical_dividend_program

Jeff said...


I don't understand your question about contingency plans. Besides the euro and CB gold stocks in many countries, what plan would there be? If you mean for the US, well there is that gold pile, which will be revalued when there is no other choice.

FOFOA: "America has an untapped asset. You can use it without selling it for gosh sake! And just like the old gold certificates, the new ones will NOT be redeemable by the Fed or any other banks in physical gold. They will simply be an accounting entry on the Fed balance sheet. In the future, that gold can be mobilized, if necessary, in defense of the U.S. dollar. But only with the approval of Congress. The physical gold remains the property of the United States. It will simply be monetized by properly revaluing it as the monetary reserve asset that it is, and placing it—at its proper valuation, updated quarterly—on the asset side of the central bank's balance sheet, just like the ECB."

For the shrimps who save in dollars, well, too bad so sad.

FOFOA: "When push comes to shove, the system will protect itself and force losses onto the savers. Ultimately, inevitably, today's dollar will lose so much real value that it will save the banks nominally while putting all systemic losses onto everyone holding dollars, regardless of the default of debtors"

They should have heeded the warnings:

FOFOA: "Final Warning And in case you didn't figure it out yet, this third and final warning was only for the savers who are still saving in dollars. It's way too late to fix the $IMFS...

A small-minded ant's only interaction with Giants may be getting stepped on or sprayed with deadly poison. So from the ant's limited perspective, this activity of killing ants is what Giants live for, what motivates them, and what they spend their time scheming and planning for. Don't limit yourself to the ant's perspective. If you want to find the tasty morsels left by Giants, you've got to start thinking like a Giant."

Nickelsaver said...


What I mean is post freegold gold will not be stable against Euro, it will appreciate. The ECB will have a stable amount of gold, but the number of Euros issued will increase every year to keep the price stable. It is not a gold standard. The currency can be stable visavis gold only in a gold standard.

Seems to me that you have described only half of the Spur AND Brake here. Won't the ECB manage the currency to keep in balance with floating gold?

Nickelsaver said...

The Spur and Brake...

I'll let JR roll out the quotes. My understanding is that Gold will flow from zone to zone in order to manage trade imbalance between currency issuers. At the same time, the currency will float up AND down, a sort of stable modulation. So the ECB, in or to have a "stable amount of gold" where the word stable implies an amount necessary to keep its currency at the necessary price relative to other currencies, will need to buy gold when the currency is too weak and sell gold when the currency is too strong, so that they can both export and imports goods.

So, while the "value" of Gold will not remain constant, neither can the quantity of Gold in any CB's possession remain constant. The CB's will have to manage either the amount of gold or the amount of currency in order to keep in stride with other countries.

Therefore, the Euro will not simply depreciate slowly against Gold. It will also appreciate, depending on what phase of the Spur and Brake it is in.

Edwardo said...

Would anyone care to comment on the strain in Spain which is now being proffered as the straw that breaks the Euro camel's back?

mr pinnion said...

Regarding the spur and break.

The way i understand it is.
The price of the Euro post Freegold will go up and down like you mentioned.But in the long run it will steadily go down.Otherwise it would be good as gold now wouldnt it?
Its like the $ gold price now.It goes up and down, but in the long run it goes up.
Of course i could be wrong.


Motley Fool said...

The price of gold post FG is a quite complicated matter.

The ECB mandate is 2% or less inflation per year, thus far they have held to it. Assuming they do so post FG, gold will gain at most 2% per year. Ito investment almost anything will do better.

My 2 cents.

mr pinnion said...

Also... Post Freegold, what does it matter if the Euro steadily looses value against gold?
As long as your wages go up at the same rate year after year you ll be happy.
Its only the people who SAVE in Euros(for some bizzare reason)who will be pissed off.Spend your Euroes during the week .If you ve got any left over ,buy a gram or grain of gold.

Nickelsaver said...


The price of the Euro post Freegold will go up and down like you mentioned. But in the long run it will steadily go down.Otherwise it would be good as gold now wouldnt it?

No. Euro's will always be claims on gold. Price/Value of gold being relative means it's relative. To say in the long run Euro's will go down is to say that there is something other than Spur and Break at work. And perhaps that is true, I'm not smart enough quantify it.

Anand Srivastava said...


My understanding is different. Gold will move in and out of the currency zone, when the currency becomes strong or weak. The CB itself need not buy or sell.

Also the mandate of any CB like MF pointed out is to keep it stable (around 2% inflation to promote commerce) with the price of normal commodities. Gold will not be part of those commodities in FreeGold. So while the Currency will devalue at a rate of around 2%, gold might appreciate at a higher rate than 2%, as the currency is not supposed to track it in anyway.

Tommy2Tone said...

NS said:

"All I know is that Gold is the one thing you don't want to deploy until after all the dust has settled."

I mostly almost agree with that but hasn't it been said that just prior to settling in, it will overshoot first and if so, I would think you'd want to deploy some of your savings at that time for Max Value, no?

Tommy2Tone said...
This comment has been removed by the author.
Robert LeRoy Parker said...

After a couple days of bad inflation why won't the US impose a bank holiday and distribute gold to all the banks in form of coin before they reopen? The fed could make the freegold market themselves so the treasury can satisfy foreign claims and still hold a lot of gold. The wheel barrel stage seems avoidable.

Tommy2Tone said...

what good would giving the banks gold coin do?
I also doubt the idea they could bring on FG themselves like that. These are my fofoa instincts telling me this- I couldn't necessarily explain this so hopefully someone up ahead will do so and clear us up.

Jeff said...


Right you are, post-FG, gold isn't an investment. It's savings.

FOFOA: The difference between a saver and an investor is that saving is the passive activity of most people while investing requires a tolerance for the risk of loss and active, specialized knowledge and focus...

A saver is different from an investor or a trader/speculator. A saver is one who earns his capital doing whatever it is he does, and then aims to preserve that purchasing power until he needs it later. Investors and traders aim to earn more capital by putting their already-earned capital at risk in one way or another. This takes a certain amount of specialization and focus.


The US could initiate freegold, but it would end the exorbitant privilege. So basically the G would crash its' own lifestyle. No more trade deficit, which is why they aren't in a hurry to pull the trigger. But backing the dollar with gold coin? Defend a fixed price or let it float? Fixed price means gold flows out. Floating price, you have to compete with the euro, which is already there, and if you do it right, people will be comfortable with the dollar anyway so won't run on your gold coins, right?

Robert LeRoy Parker said...

No fixed pricing.

I see your point about the G though, which is why I asked about contingency planning. Would the fed and treasury be capable of going against the rest of the machine? They pretty much seem to do whatever they want already when it comes to gold.

Jeff said...

No, it takes an act of Congress:

FOFOA: Here is something you need to understand about the US gold. The Fed does not own it. The US Treasury does....
So you see, the Fed cannot mark the US gold to market. It cannot even revalue the US gold. Only Congress can. And even if Congress DID revalue the gold, it would not change the Fed balance sheet by one penny. The Fed only holds dollar-denominated certificates worth $11 billion, payable in gold, but not really.

Robert LeRoy Parker said...

An act of congress but Ron Paul can't even take a tour of Fort Knox...

Maybe the fed doesn't need the treasury's gold to make a market. They could buy london gold perhaps.

JR said...

Fixed amount of gold + economic growth = more stuff/gold over time. Gold is always going up as long as there is economic growth.

This is savings tho, not investment.

AS MF noted, stable for the euro means like 2% inflation. The credit system needs to inflate/devalue. That's what the ECB does: keep the system going and announcing the value of the scrip. Remember the fair analogy:

Our fair, however, is a little different than Fekete's fair above. What we've seen over time at our fair is that some of the smaller booth operators like Greece took home more goods and services than they brought to market. And they did so on credit. Large operators like Germany, it turns out, gave Greece some extra goods in return for promises to pay later, and those promises were denominated in units of scrip money from the fair.

After some time, it became apparent that Greece could never pay back the debt at full value. This realization actually threatened the system, I mean the fair. So what the fair operator decided to do was to buy those promises to pay from Germany at face value, with newly printed scrip. This kept Germany in the game although it did devalue the scrip since now there was more of it than there were goods at the fair. But this was fine because the fair operator published a ConFinStat in which he told all the fair participants that the fair's scrip money was now worth less.

Those, like Germany, that had actually saved some income in promises to pay denominated in scrip, and then found those promises severely devalued by the recognition they would never be paid back at full value, received a nominal gift of the same number loaned to Greece, even though it was now devalued. Those that had not saved in scrip, but instead had cleared with gold at the end of each fair, simply carried on trading at the new, lower value of the scrip. You see, the fair operator, we'll call him the ECB, did not participate in the fair itself, primarily because he had severed his link to any specific booth operator. His only job was providing scrip, announcing its value, and maintaining the system, I mean the fair, even if it came at the cost of debasing the scrip money.


JR said...

John Embry: "…if the Americans had the 8,161 tonnes that they say they have, they would be delighted to submit to an outside audit and shut their detractors up."

AN: "Now that is logic I can understand."

Here's some different logic. If the easy money camp in fact does have the 8,161 tonnes that they say they have, but they simply ignore requests to see, count or audit it, they render the opposition (hard money) camp a bunch of infernal misanthropes in the public eye.

Reminds me of the love I got from the silverbug camp after Focal Point: Gold and Kicking the Hornets' Nest. There were even accusations that I was a paid JPM shill "using logic as a weapon" against silver. Should I have been delighted to submit to some sort of proof that I was, in fact, NOT a paid JPM shill to shut my detractors up? Or was it more logical for me to simply let them carry on as they were?



JR said...

Maybe the fed doesn't need the treasury's gold to make a market. They could buy london gold perhaps.

The FED won't be buying gold, but rather shipping it to defend the dollar and our exorbitant privilege. Even if they revalued gold to try to front run freegold, it won't really matter until the gold starts flowing. FOA:

At the right time the Euro Zone will withdraw from the IMF, leaving the US and its factions as the only support for dollar credit assets held overseas. Then the evolution of SDR use our guide knows so well will be complete. This will leave the SDR interpretation open to only one avenue to finding support: its basket currency function dissolved, gold will have to flow from American based [gold stockpiles]. With most of the present official credit gold leverage built upon IMF protocols, the US will find itself shipping ever higher priced gold to defend an ever lower valuation of dollar exchange rates.

With the world credit gold markets paralyzed in default and dollar credibility placed in question along with American economic stamina; physical gold will return to official hands in Europe in exchange for Euros. A paradox observed as high gold places more demands upon Euros and sends the dollar ever lower.


Robert LeRoy Parker said...

How does the US nuclear option work again? An act of congress? Maybe that isn't out of the question seeing how quickly tarp/etc were passed.


Did the US see the writing on the wall in 1999 or not?

Woland said...

With every passing day, Jim Sinclair is sounding more and more
like James "Fofoa" Sinclair. From an 8 page interview in Futures
FM: What do you mean by changing our currency status?"
JS: Well, government moving more into the system than away
from the system; more into central banks than out of central
banks. We are not making a voluntary change, but circumstances
are bringing about a change. There was a meeting of the BRICS,
recently, that discussed setting up their own (international
monetary fund) and also their own currency bloc. The Euro is
INEXPLICABLE RIGHT NOW above $1.30, if you heard all of the
bearishness on it. The Euro is probably going to be with us for
a VERY LONG TIME and will come through change solidly. The
dollar was the reserve currency of choice and became the reserve currency by default, meaning you just had it and it has recently
begun to be replaced by other currencies as an INTERNATIONAL
SETTLEMENT mechanism.
FM: Our last profile suggested that it would take at least 20 years
to replace the dollar as the reserve currency.
JS: I think that is wrong. The dollar isn't going to be replaced, it will
always be there, but as far as a SETTLEMENT currency, weekly,
almost daily, you see the dollar mechanism for settlement being
replaced by other currencies. ..... Nothing is going to replace the
dollar, but it is the utilization and value that factor into markets.
FM: Will it be replaced as a global reserve currency?
(Unfortunately, JS still sees the world breaking up into 3 currency
blocs. US$, Euro and Yuan/asia bloc. But hey, he's moving closer.)

Jeff said...

The only nuclear option the US has is nuking itself, IMO. The dollar is on an 'end time run', remember. IMO yes the $IMF saw the writing on the wall years ago, but when all you can do is play for time, that's what you do.

Here's what JR posted upthread:

Indeed, what was left off at the end of last post was discussion of the **deliberate choice** made by the BIS/Euro group to support the dollar after it died less than ten years after it was floated/delinked from gold in 1971.

re: the end of the previous post

One of the big points in the post above is that exorbitant privilege is something that is given, not something that is taken.


[ANOTHER] was talking about the European's fear, and the BIS. How could USG fear keep the price rise intact? Obviously he was talking about everyone else. You can't take exorbitant privilege, it must be voluntarily given.

"To hold a dollar backed oil system, the governments agreed to create a liquid "free" gold market."

Ah, the governments (plural) agreed. See that?

Yes I do, thanks FOFOA. Deliberate choice by the BIS folks to "give" the US the exorbitant privilege.

So who has their finger on the button? Maybe not the US.

Jeff said...

I dunno, Woland. Here's Sinclair with the usual 'shorts are trapped!!!" nonsense. And he keeps his wealth in mining stock.


Robert LeRoy Parker said...

I'm not questioning that the US has an exorbitant privilege. I'd like to know if there is a feasible dynamic of them blowing it up on their own in order to avoid hyperinflation and if so, how late can it be implemented?

Aristotle said...

Anand Srivastava...


--- Ari

Edwardo said...

Jeff wrote:

"No, it takes an act of Congress"

Appeals to, as it were, due process of the law, may, in these times, be shaky. Congress is a rather limp body. Perhaps they will, at some appointed time, demonstrate sufficient spine to ensure their Constitutionally protected authority with respect to The Fed, but experience lends to skepticism.

In the meantime, I'm absolutely overwhelmed by the flood of comments on the state of play in Spain and what it may portend. It seems to me that
one of the cornerstones of the thesis of this blog's proprietor, namely that The Euro is sufficiently robust to withstand the slings and arrows of outrageous financial and fiscal misfortune and fulfill its freegold destiny, is about to be tested what with Spain speeding toward the proverbial locomotive light at the end the tunnel.

Jeff said...

RLP, I suppose the US could implement freegold at any time but there is a huge risk. What if enough gold doesn't flow?

FOFOA: So if the gold in private hands in the US doesn't flow in sufficient amounts, given that US debt has been discredited through the Freegold phase transition, the government will have no choice but to continue printing money in its vain attempt to support the US trade deficit and its own status quo as Uncle Sugar to the people. And in a last-ditch effort to support its own failing currency, it will have to ship Fort Knox gold overseas. FOA mentioned something about this: "…the US will find itself shipping ever higher priced gold to defend an ever lower valuation of dollar exchange rates."

Hi Edwardo. I don't have any insight into Spain, but isn't that what they said about Greece, Italy, Ireland, Portugal, etc? Things will work out or not? Is freegold our destination with or without the euro?

Edwardo said...

Spain is a much bigger and badder state of affairs than Greece, Ireland and/or Portugal. Italy isn't on the block presently, but France, come the elections, may present yet another challenge to maintaining the present system. Unless I'm mistaken, according to Another, Freegold without the Euro means that oil will bid directly for gold.

Anand Srivastava said...


I will take that to mean that you agree with my understanding.


Phat Repat said...

Here's Sinclair with the usual 'shorts are trapped!!!" nonsense. And he keeps his wealth in mining stock.

Well, the paper playas just might be. Where he keeps his wealth is very likely unknown by you.

However, I personally avoid allocating any 'new' capital to the mining shares since the risk of nationalization on a global scale is very real. I'm not sure we will see the internet mania in gold shares that many portend (much to my portfolio's chagrin).

Nickelsaver said...

Nixon closing the gold window, was that also an act of congress?

costata said...

Re: Gold post-transition

The price of gold will be influenced by other factors as well as the rate of inflation. Interest rates for example. If real after-inflation rates are negative it would be logical to expect this to push the price of gold up.

Even though gold will be pricing currencies overall it won't be a one-sided relationship. Much will depend on the policies adopted by the currency issuers.

Aiionwatha's Nation said...


Now you've called me out, but I am OK with that. The reality is, to follow the bouncing ball, there is no free lunch.

I had some trouble with this class in college staying out too late, but the quote has stayed with me in my dreams:

"It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of dispair, we had everything before us, we were all going direct to heaven, we were all going direct the other way- in short, the period was so far like the present period, that some of its noisiest authorities, insissted on its being received, for good or for evil, in the superlative degree of comparison only."

We had everything before us...

Anonymous said...

Doesn't the work of Barsky and Summers yield a well-tested, empirically established correlation?

Costata:If real after-inflation rates are negative it would be logical to expect this to push the price of gold up.

Exactly. Wouldn't the anti-correlation between currency price of gold and real interest rates still continue to hold true in a post-Freegold time?

After all, such anti-correlation means that gold is performing its function of 'Store of Value' at its fullest.

Wendy said...

fyi, I apologize if i sound a bit nuts this week, my son,shayne died on apr28,2006!

costata said...


That's my expectation. In fact I think the correlation will be even stronger with paper gold out of the picture.

This points to at least three levers a currency issuer/manager will have at their disposal:

1. Rate of inflation
2. Volume of currency emission
3. Interest rates

Assuming, of course, that interference in markets will still be en vogue among policy makers after the transition.

US Dollar

Some interesting graphs and tables in this piece from Chris Puplava. Broad based moves in almost all currencies versus the US$. Likewise strength from gold versus the rest (currencies, PMs).

CP sniffs a move downward for the dollar in the wind.


Robert LeRoy Parker said...

Sorry for you loss Wendy. That is a tragedy.

costata said...


That is terrible. Worst nightmare. My heart goes out to you.

Jeff said...

Phat expat, maybe you see with western eyes.

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

Aaron said...


That is horrible. Take care of yourself.

DP said...

Does anyone not expect those three currency zones?

Anonymous said...


So sorry for your loss.

RJPadavona said...

Hello Wendy,

As a father of two girls, I can't imagine how horrible it must be to lose a child. I'm so sorry for your loss.

A Tribute


Crack said...

I've been trying, but I can't think of anything worse. My sympathies, Wendy.

RJPadavona said...


Good question about the three currency blocs. My guess is the magic number of 3 comes from Orwell's prediction of 3 superstates.

Orwell forecasted many things that have come to pass, so I suppose people think this will come to pass as well. And eventually, maybe it will. But in my opinion, not any time soon.

I could possibly see 6 or 7 currency blocs some time down the road after the big RPG reset, but there is still too much mistrust among the different races and cultures of the world to expect people to agree enough for there to only be 3 blocs.

For example, the Japanese are a very inclusive and ethnocentric tribe. I just can't see them entering into a common currency agreement with China or anyone else. At least not until a few generations die off.

Maybe there will be a BRICS currency union one day, who knows?. They seem to be moving in that direction. But if I had to bet, I could see a Central and South American currency bloc with Brazil at the helm before I could see a BRICS currency.

And who would want to join a currency union with the US after HI? My guess is the same amount that wanted to join the "ruble-zone" after the collapse of the Soviet Union. When all the people and governments of the world who held US paper are left holding a steaming hot bag of kyarn, it will be a long time before anyone will trust the US and their money changers again.

But time heals all wounds, and to be fair to Sinclair, I don't know what kind of timeline he's talking about with his prediction of 3 currency blocs. So, maybe he'll be correct somewhere down the line, but I seriously doubt it will happen in his lifetime. But, taking Moore's Law into consideration and the ever increasing transparency brought on by the advent of the Internet, there's a possibility these currency blocs may happen in our lifetime.

In the meantime, I hope you'll still accept my Bitcoins for services rendered :-)


Edwardo said...

Wendy, of course I don't know you, and I don't think we've conversed very much, but I was very sorry to hear of your loss.

Phat Repat said...

In my mind, there is NOTHING worse than losing a child; my condolences.

Wendy said...

Thank you everyone for your kind words, tomorrow is a new year ..........

Nickelsaver said...


I lost my first wife a few years back. As hard as that was, I can't imagine loosing a child.

I pray that the memory of your son will comfort you as you forge ahead.

Phat Repat said...


Not a Western Mind. Not an Eastern Mind. But a Mind to the Future.

However, we might deploy our gold at some point, and it WILL be exchanged for something. That something could be fiat currency, it could be real estate, it could be chickens, it could be goats... Whatever the other entity wants to use to satisfy that transfer. Or, do you think you will be dictating the terms of exchange? What mind is that?

Tommy2Tone said...

Do currency blocks matter that much in freegold?
Everything floats against gold so I thought the number of currencies used for everyday would not matter.

Nickelsaver said...


They might, if you consider the fact that fewer currency blocks mean less for the currency managers to factor in as far as trade balance between the other blocks. Freegold doesn't ensure health of a currency, it just puts pressure on currency managers, keeps them honest (oxymoron).

Also, it seems logical that the fewer the blocks, the more critical private gold flow within the blocks would factor into the health of a currency.

My gut feeling is that the world is still a little to big to be narrowed down to three. That being said, there is something intriguing about the number three, triangulation and all that.

Wendy said...

NS, I'm very sorry for your loss.

All, I think it's important to remember as we type on our keyboards (in our pajamas ;) we often forget that the receivers of our commments are real people with real lives, doing the best they can.

raptor said...


While the national debt has been the concern du jour of many economists, commentators and politicians, little attention is ever paid to the historical significance of debt.

Anonymous said...

Izabella Kaminska writes about the global shortage of safe assets:

Collateralisation equals the location and identification of real-world assets against which existing financial claims can be satisfied. If there’s a lack of acceptable assets in the system versus outstanding claims — the stakes in the financial version of musical chairs rise significantly.

Good collateral is hard to find in an ocean of debt.

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


re: Kaminski link... Alasdair Macleod made similar observations about the Lew Spellman post.

Spellman calls it "The New Calculus of Gold", but it is hardly new to anyone familiar with this blog or it's progenitors. It is interesting to observe other thinkers on these matters slowly but surely converge upon the perspectives intrinsic here from the first. Not that any of them acknowledge this, of course, but you can rest assured they're all students one way or ANOTHER.

One thing that Spellman's angle suggested to me was that, if he's correct, bank demand for allocated gold as collateral would further add to physical demand, and/or higher prices (being in the self interests of said banks... a higher currency price for gold makes physical gold (including that already held) proportionately stronger collateral, does it not?) At the appropriate rate of exchange, a little gold can go a long way ===> in fact as far as one needs!

Simplicity has real beauty, doesn't it?

As debt diminishes in popularity, so unambiguous ownership fills the void.

costata said...


In regard to this issue of gold as collateral I note talk that the BIS is considering allowing gold to be included in Tier 1 capital.

At first I thought that this might be a negative for gold and the Freegold-RPG project because if gold is included it will be fractionalized.

On reflection I don't think there is any problem. The fractionalization would be in the form of bank credit money as opposed to paper gold.

If the BIS does permit this I think the most important aspect of the inclusion of gold in Tier 1 capital is that it gives any bank that buys gold a compelling reason to support the new regime.

Piripi said...


It would give banks a compelling reason to both buy physical and see it priced highly (preferably one before the other), no?

So, who ends up with all that phys held by GLD that doesn't get redeemed via baskets? The banks would still bid for shares belonging to those without enough to be eligible for physical redemption, in order to create their own baskets and claim the remainder. In fact they could feasibly become quite sought after as a last avenue to secure phys in size?

Piripi said...

So all this power is in the hands of... the BIS?

Who knew? Oh yeah.

Piripi said...

Speaking both of GLD and the continuing change in awareness regarding gold and it's function, I found this post pertinent to both.

costata said...


Since you mention GLD this piece from ZH is apposite. The writer is comparing the market share of ETFs to physical gold. Apparently the ETFs are down from a peak of around 75 per cent in 2009 to 10 per cent in 2011.


Piripi said...

Commercial and/or investment banks holding the same reserves as central banks (physical gold) makes them the same as CBs in many respects, does it not? With enough credibility, they could even issue their own "currencies".

costata said...

Now that's amusing Blondie. Our own private A/NZ superorganism.

costata said...


If gold is included in Tier 1 capital there is a driver for gold buying by commercial banks that has been discussed here. The declining asset quality of sovereign bonds makes it difficult for a bank to acquire "risk free" (LOL) assets.

One of the things that the Australian banks are bitching about in relation to Basel III is that the Federal government bond market is very small. Gold might be a useful alternative to raising more capital from the share market or paying high interest in the wholesale market.

Someone should send Bron a note. Perhaps that 5 m/t the Perth Mint is sending into the wholesale market each week could find some fresh buying interest from the banks at some point.

Piripi said...

Well, seems like perhaps we have spotted the BIS' nuclear option.

Aziz worded it quite well (though he wasn't talking about the Basel proposal including gold as Tier 1 collateral), and illustrates why the BIS pushing the button is inevitable:

"Counter-party risk is the external risk investments face. The counter-party risk to fiat currency is that the counter-party — in this case the government — will fail to deliver a system where that fiat money will be acceptable as payment for goods and services. The counter-party risk to a bond or a derivative or a swap is that the counter-party will default on their obligations.

Gold — at least the physical form — has negligible counter-party risk. It’s been recognised as valuable for thousands of years.

Counter-party risk is a symptom of dependency. And the global financial system is a paradigm of interdependency: inter-connected leverage, soaring gross derivatives exposure, abstract securitisations.

When everyone in the system owes shedloads of money to everyone else the failure of one can often snowball into the failure of the many.

Or as Zhang Jianhua of the People’s Bank of China put it:

No asset is safe now. The only choice to hedge risks is to hold hard currency — gold."

Counter-party risk is a symptom of dependency, which means anyone/thing exposed cannot be regarded as sovereign and vice versa.

Also found it interesting that Macleod suggested that "The London Bullion Market has been lobbying for this for the last six months".

Regarding gold vs the Federal govt bond market, once again an increasing gold price suits everyone. Not many parties left whose interests are served by a low gold price anymore.

Winston Churchill:
"Once they have exhausted all other options, the Americans can always be counted on to do the right thing..."
... perhaps we should substitute "people" for "the Americans"?

Woland said...

Interesting to hear some of our best thinkers here at
FOFOA, from the A/NZ area, talk about counter party
risk. How far are you guys from Lake Taupo?? I hear
there was QUITE A PARTY there about 1800 years ago.
The mind boggles at the thought of "cubic kilometers
per minute". Sorry, couldn't help myself. Cheers.

Piripi said...

Mother Nature is everyone's counter-party.

Beer Holiday said...
This comment has been removed by the author.
Woland said...

Since we're in a festive mode, "YOU take explosion, and I'll take
erosion, lets call the whole thing off".

Edwardo said...

Regarding the proposal to implement (physical) gold as a Tier 1 asset, I say this with tongue somewhat in cheek, but, just perhaps, it has occurred to concerned parties that they need not run out and acquire massive quantities of gold, but rather revalue what they already possess.

Also, regarding the LBMA, I seem to recall seeing a paper that was presented at one of their conferences, confabs, whatever it was- I think it was well over a year ago- that suggested that either they, or some one other intrepid party make a two way market in gold at a price in the region of $20,000 dollars an ounce. Like the punch line to the joke, "What do you call a hundred thousand lawyers at the bottom of the ocean" I'd say 20 grand is a good start.

costata said...


You have given Uncle costata a dictum.

Mother Nature is everyone's counter-party.

Thank you.

J said...


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

The spellman link Blondie provided is a good read.


enough said...


M 5.8 off Honshu 3 hrs ago.

Edwardo said...

Thanks, J. FWIW, I feel another FOFOA post is coming shortly.

Tommy2Tone said...

thanks NS.

Anonymous said...


Simplicity has real beauty, doesn't it?

As debt diminishes in popularity, so unambiguous ownership fills the void.

Indeed. Banks potentially recapitalized with the safest collateral mankind has ever known.

Spellman calls it "The New Calculus of Gold", but it is hardly new to anyone familiar with this blog or it's progenitors.

Of course. But I think Spellman was writing for an American audience, who in FOA's own words: Boy! Do we have some hard financial learning to do.

Nice post by Aziz. More and more people demanding the real deal. After all, value comes from mankind's consciousness.

JR said...

A note: Gold could sop up most of the hyperinflation presently stored in the savers balloon without destroying the real economy (see my old post Freegold is like a Giant Sponge). But it is the US Govt. that will make sure this becomes a real Weimar-style hyperinflation when it forces the Fed to monetize any and all US debt. And as dollar confidence continues to fall, that's when the debt must go exponential just to purchase the same amount of real goods for the government. One month the debt will be a trillion, the next month it will be a quadrillion just to buy the same stuff as the previous month. How long will this last? Less than 6 months is my guess.

Jeff said...

blast from the future:


raptor said...

Interesting ideas

DEBT: The First 5000 Years : David Graeber : Keiser Report

RJPadavona said...

Hello JoJo,

You wrote:
"Do currency blocks matter that much in freegold?
Everything floats against gold so I thought the number of currencies used for everyday would not matter."

You're right. The number of currencies doesn't matter in freegold. But the way I figure it is if currencies become the equivalent of poker chips or credits in a video game as a result of freegold, then over time, people won't put up much of a fight when currency blocs are formed. Just like they don't put up much of a fight when AT&T buys out the local telephone service provider. As long as you pick up the phone and can make a call, who cares who's providing the service? As long as the currency is managed well enough and value can flow through it, then who cares where the currency comes from? If people aren't saving in the MoE, then they'll be more accepting of currency blocs when their centralizing politicians are colluding with trading partners.

In the modern world where currencies are becoming more digitized, it's kinda inefficient to have to deal with all those exchange rates. Since technology makes us more efficient, I think it's inevitable that more currency blocs will eventually be formed post-freegold. Add to that what NS said, "It seems logical that the fewer the blocks, the more critical private gold flow within the blocks would factor into the health of a currency."

One of the most fascinating things about freegold to me is that it's emerging at the same point in time when the smartphone is replacing the wallet. IMO, it's a match made in heaven. The monetary evolution that is bringing us freegold is in sync with the technological evolution that is bringing digital currency to the forefront.

And when I say this may very well happen in our lifetime, that can have a very broad meaning ;)

I hope this helped to explain how freegold will affect the future of currency blocs.


Tommy2Tone said...

Yes. Thankyou RJP.

Anand Srivastava said...

RJP don't read too much into those claims of immortality. I wouldn't believe anything regarding health coming from magazines or newspapers. These days I don't even believe anything from doctors or health researchers. Its a big scam played for grants, insurance money, etc.

Wake me up when they find out how to CURE diabetes, heart disease, etc. They only kick the can for as long as they can while making shit loads of money, letting the patients health go down the drain.

costata said...

Fascinating read about the memoirs of a former President of the Dutch CB and President of the BIS named Jelle Zijlstra who died in December 2001.

The writer describes Dr. Zijlstra's 1992 book "The Final Settlement" as being the work of:

.. a very candid man, even contrarian. He gives a very precise description of how central bankers conduct their business and maintain their independence from government interference.

The piece lays out the Euro Freegold-RPG architecture along the same lines as many here do. (h/t Dollar Collapse for the link)


db said...

Hi Costata, doesn't speech, dates and background sound familiar? ...

We walk this new Gold Market together, yes?

tintin said...

hi costata & db,
also this: Zijlstra ... died in 2001.

Now we know why Another stopped in 2001 after four years of posting.

Bjorn said...


That was awesome! I have to get that book now...

RJPadavona said...

Hello Anand,

Yes, I take these things with a grain of salt. Hence the wink at the end of that link. Predictions are a lot like opinions: Everyone has them.

That being said, I never underestimate technology or medical advancements. If someone told me 20 years ago that Magic Johnson would be alive today, fatter than ever, and part owner of the L.A. Dodgers, I would have said they were full of shit.

So, who knows? Maybe one day the Superorganism will need Superhumans ;)


Motley Fool said...


Thank you for that link. That video was very amusing, and interesting. :)


Tommy2Tone said...

That was interesting. Could oil be an asset on equal footing?

Regarding the guilder devalue- if you lived in that country you'd save in gold and spend in guilder and avoid losing value because you saved in gold. This is a mini freegold?

Can someone expand on this?:

"....revaluing is "'putting a bit more gold in your currency' so it becomes more valuable than other currencies. Summarizing: it is about the choice between 'adjustment' inflation or revaluation. Germany decided to revalue the German deutschemark on March 3, 1961, with 5 percent; we decided ... to follow. To my regret, then and still, Germany did not revalue more; I would have defended a revaluation of 10 percent zealously if Germany would have done so. ... A devaluation was more or less seen as a defeat, a testimonium paupertatis for a country." (p. 220.)

Now that's a really honest way of explaining currency devaluation."

revalue = shrinking the money supply =deflation?

Gold System (solar system)

Woland said...

It is interesting, in retrospect, to realize that the Archives let
readers in on several Very Private "conversations". The first
is Zjilistra's, "After gold we could go to the dollar, but after
the dollar, where could we go? To the moon?" The second
is his conversation with Volker when he was dispatched to
try to stop the Netherlands from converting $ assets to gold:
the "rocking the boat" exchange. Lastly, Another's : "I have
had the privilege to know some Central Bankers, they are not
bad, ..... and "Do not think of them (harshly?) they are buying
you time". I guess I'd better order my copy of "A Central
Banker's View" before the market shuts down, as there are
only 13 copies showing, both new and used, available. As
Aristotle said, the best degree is the B Th, Being There.

JR said...

Gold. Heading to the moon at a world near you. ---Aristotle

Aristotle's GOLD & MONEY: More Than Meets the Eye (also in Flow Addendum)

Jelle Zijlstra, who became head of the Bank for International Settlements, said while with the Bank of the Netherlands in regard to the 1971 severing of Gold from the dollar, "When we left the pound, we could go to the dollar. But where could we go from the dollar? To the moon?"


Remember Jelle Zijlstra with the "moon" comment earlier? As head of the BIS in 1980, he confidently predicted that the Second Oil Crisis could be worked through, slowly, but that the System (international financial system) could not survive a Third Oil Crisis--the inflation would make it impossible to recycle the petrodollars to the oil importing countries with any hope of repayment, trade would crumble, and the System would be brought to its knees. On that grim note, we need to take a quick look at how the world reacted to the Second Oil Crisis. It opens the door to everything that follows...

Tommy2Tone said...

Can someone try explaining this differently to me?:

"Not all oil producers can take advantage of this deal as it is done "where noone can see". And, they know not what has happened for gold does not change in price! But I tell you, gold has been moved and it's price has changed in terms of oil! For the monthly amount to be taken off the market has changed from $10 in gold ( valued at $1,000 ) /per barrel to the current $30 in gold /per barrel still valued at $1,000! Much of this gold was in the form of deals in London to launder it's movement. Because of some Asians, these deals are no longer being rolled over as paper!"

Jeff said...


The bit about 'not all producers' refers to the swing producer at the time, the saudis. Not all the oil states were in on the deal.


"There is only one oil state that counts! Only one! They have made it very clear how important gold is to them. If they had started buying outright, gold would have gone to $5,000+ in days. And only a very few million ozs. would have been purchased! The message has been for some years, "we will accumulate thru the back door, using paper deals if you keep the price at or below the cost of production". Do this and oil will remain THE driving force of the world economy!


The saudis can force performance of paper gold contracts; no one else can.

It's fascinating watching the Thoughts unspool in real life. Who could imagine things would take so long? Certainly not Another, who was sometimes a composite character, and probably a bit Dutch, eh? Not me either, but the Giants will get where they are going.

RJP, Immortal Robots Mining Asteroids would be a great band name.

Clyde Frog said...

From the ECB confinstat 12 April 2012 (€millions):
Total liabilities: 2,967,109
Gold and gold receivables: 432,706

So: liabilities/gold = ~15%

If all else fails, gold will be paid.

If everything else on the asset side of the ECB balance sheet turned to a smoking pile of dust today, leaving only the gold reserves with any residual value, the euro would have to be devalued so that the gold went up to cover not just 15%, but 100% of the liabilities. (i.e.: euro devalued by 6.67 times from present value of, say, €1200/oz gold). Which would mean devaluing the euro price of gold to around €8000. For the euro, that should be worst case scenario. Meaning everything on their balance sheet asset column but gold immediately became worthless.

How about the Fed? Anybody feel like running the numbers on their balance sheet? Of course, it's moot since they don't have any gold to physically mobilize in defense of their dollar anyway. But I do have a hunch that it might be a little more than $1650 * 6.67 = ~$11000/oz.

Jeff said...


A little more:

ANOTHER: It is a far better use of a public asset when they use a small anount of it over time to ensure a reasonable price for OIL! If all gold was sold quickly, there would be no trading medium for deals! How far do you think an IOU would go if it didn't have gold in the background worth perhaps a 1,000 times it's current commodity price?...

the BIS set up a plan where gold would be slowly brought down to production price. To do this required some oil states to take the long side of much leased/forward gold deals even as they "bid for physical under a falling market". Using a small amount of in ground oil as backing they could hold huge positions without being visible. For a long time they were the only ones holding much of this paper. Then, the Asians began to compete on the physical side.

JR said...

Party Like It's MTM Time

The ECB is simply the core of the Eurosystem. Actually, there are two systems. The ESCB or the 'European System of Central Banks' which is comprised of all the CBs in the EU, even those not using the euro as their currency. And then there's the Eurosystem which is comprised of all the CBs using the euro, with the ECB at its operational core.

The ConFinStat, put out weekly with quarterly MTM revaluation, is the balance sheet of the whole Eurosystem which includes all of the NCBs using the euro. It is not the balance sheet of the ECB. If you'd like to see the ECB's balance sheet, you can find it in the Annual Report for the ESCB and the Eurosystem which is published every year at the end of the first quarter to be presented to the European Council, Parliament and Commission. In last year's report, which can be found here, the ECB's balance sheet appears on page 214.

The actual ECB balance sheet includes 16,122,143 ounces, or 501.5 tonnes of gold which was valued at €17B as of December 31, 2010. That gold comes from the "foreign reserve asset" capital subscription to the Eurosystem by the NCB's of which at least 15% of the subscription fee had to be in gold. And the amount of each member country's fee is based on a “capital subscription key” which reflects the respective country’s share in the total population and GDP of the EU. These two determinants (population and GDP share) have equal weighting. The ECB adjusts the shares every five years and whenever a new country joins the EU.

The ECB marks its 501.5 tonnes of gold to the market price each year, but the unrealized gain from the revaluation goes into a special "Revaluation Account" which is credited to the NCB's according to the subscription key. In other words, the NCB's own the ECB, use it as their system's operational core, and benefit directly from the revaluation of their share of the ECB's assets including its gold.

Clyde Frog said...

From the Fed's December 31st, 2011, confinstat ($millions):
Total liabilities: 2,865,072
Gold certificates: 11,037

Liabilities/gold 'reserve' = ~0.385%

If all else fails, a knowing wink will be paid.

If everything else on the asset side of the Fed's balance sheet turned to a smoking pile of dust today, leaving only the gold certificates with any residual value, the dollar would have to be devalued so that the gold went up to cover not just 0.385%, but 100% of the liabilities. (i.e.: dollar devalued by ~259 times from present value of, say, $1650/oz gold). Which would mean devaluing the dollar price of gold to around $428350. For the dollar that should be worst case scenario. Meaning everything else on their balance sheet asset column but gold immediately became worthless.

Tommy2Tone said...

Thanks Jeff.

I should have been more specific- "For the monthly amount to be taken off the market has changed from $10 in gold ( valued at $1,000 ) /per barrel to the current $30 in gold /per barrel still valued at $1,000!"

I 'm unable to wrap my head around that right now.

Tommy2Tone said...

is that just saying that while the "price" remained the same (1000) the behind the scenes was that instead of 1000 plus 1 percent in phyz it was now 1000 plus 3 percent phyz due to them upon receipt of oil??

JR said...

Hi jojo,

Yeah, the fiat price remains the same as long as enough gold flowed to the swing producer as well.

Like he said, all oil producers don't get gold, just the swing producer, Saudi Arabia. They control the flow of oil from all the other producers. If gold stops flowing and the Saudi's turn down the oil taps the price will rise. As long as gold is flowing, Saudi oil is flowing at $19/bbl and the rest of the producers must sell their oil for just the $19 cash.

KindofBlue said...

Raptor, et al

I finished the book "Debt: The First 5000 Years" this last week and highly recommend it. For those like myself that finally got a handle on the money concept by plowing through FOFOA's musings I think they'll find it to be an important step in rounding out their understanding. At first glance it may seem counter-intuitive, but Graeber's thesis is a compliment to the 'wealth reserve' function of gold and not a threat.

In my view this book is destined to be a classic.

Tommy2Tone said...

Thanks JR.

Piripi said...

jojo said:

"is that just saying that while the "price" remained the same (1000) the behind the scenes was that instead of 1000 plus 1 percent in phyz it was now 1000 plus 3 percent phyz due to them upon receipt of oil?? "

What that is saying is that while the dollar price of a barrel of oil rose, the value of that barrel of oil when measured in gold did not. But the dollar value of gold could not be (publicly) seen to reflect this!! "The Deal" involves private high-level acknowledgement of the true value of gold, and of the true value of oil, allowing Oil (and Oil (Saudi Arabia) only) access to gold in exchange for part of their oil (we call that part their "profits" or "savings").

The Deal actually overpays gold for oil, but it does ensure the continuous flow of oil at cheap (in dollar terms) prices.

A series of simple diagrams illustrating via triangulation the value relationship between the three would be useful, but I don't have the time. Let's just say that there are different values in reality to those commonly accepted. One day the true values will be revealed, and it will be clear to all that this was done to smooth the transition needed to correct the gigantic error made in 1922. Hindsight is 20/20 etc etc.

The Deal was supported by (in fact brokered by) the BIS, and lasts as long as a continuous flow of physical gold is available at this rate to Oil. The WAG (1999) signaled the end of the support of this flow by the european bloc because their backup system, the euro, was operational. Gold for oil was the price for stability in the meantime. Gold has risen in price constantly since, and will continue to do so until the flow of gold to Oil dries up. The price of oil will rise accordingly in tandem. One way or another the value of the dollar must return to its fundamentals, which is massively lower.

Looks to me like there is widespread co-operation to make this as soft a landing as possible - the descent has been much gentler than our Trail Guides imagined so far - but we haven't actually touched the ground for the first time yet. You may feel a bump.

Oil is IMO "the other asset", like gold indispensable today to our systems, but clearly not timeless like gold. Technology will ensure that, if nature does not first (or more likely tech is waiting in the wings, eh? All that oil wealth buys a lot of tech too).

costata said...

db, tintin, Bjorn et al,

Glad you liked the piece on Jelle Zijlstra. These days I don't expend effort trying to figure out who Another might have been and I don't have an opinion about Dr. Zijlstra's potential as a candidate.

I find it interesting that we continue to find references to discussions of elements of the Euro Freegold-RPG architecture from a widening circle of important people. There's an organic (evolutionary?) quality to this story of the design, development and launch of an alternative to the $IMFS.

A big problem (the $IMFS) that was simply looking for a solution rather than some kind of supranational grand conspiracy to unseat the US dollar by a cabal.


Piripi said...

"There's an organic (evolutionary?) quality to this story of the design, development and launch of an alternative to the $IMFS."

There sure is. I think emergent is perhaps the most fitting term?

I was thinking earlier about how in the early 70s most of the ME nationalised their oil reserves. This was obviously in response to recent events. The tension that built throughout the 60s as the end of the dollar strode into view, the futility of the London Gold Pool, the Nixon Shock and the non-convertibility of the dollar, all these caused a review of the true nature and value of their oil reserves. This was more than just a commodity. It is not hard to imagine that process repeated the world over with gold reserves when gold's true value becomes apparent.

Bjorn said...

@ Costata

Anonymous said...

Well.. the RBA just bid down the value of the AUD. I'm saddened in some ways. Too many here don't have any other reference point.

Australia is an interesting case in that we have no experience as a nation of currency failure. Which is both good and bad; good in the sense that it means we've managed our affairs pretty well for the last 100 years, bad in the sense that we have no idea how to prepare or even that there is something to prepare for.

Today is just the final signal that yes, we do have something to prepare for.

Woland said...

Jeff: re: A little more

I think you have clarified (for me) something I never fully
understood. It appears that when "Big Trader" (perhaps
China's central bank?) began buying in massive quantities
in Hong Kong in 1997, the danger was that the physical
which was needed for delivery against Saudi held paper
might not be able to be fulfilled from PRIVATE and MINING
sources alone. Thus China had to be "let in" on the deal,
as no one could stop them from buying, and the deal HAD
to be maintained. Is this pretty much right?
FOFOA laid out perfectly the smashing of the asian tigers
(but not China) by the BIS, with Greenspan having no choice
but to go along. They stopped buying and were forced into
selling ( S. Korea 250 Tons) etc. Perhaps Blondie or JR could
help explain how LTCM's 400 or 800 ton paper gold short
position figured in this calculus?

Jeff said...

Hi Woland,

I don't think China was let in on the deal; they found out about it and started competing with Oil by buying up low priced paper, putting pressure on the LBMA, forcing CBs to sell.

ANOTHER: Well a funny thing happened right after the Gulf war ended. What looked like big money before turned out to be little money as some HK people, I'll call them "Big Trader" for short, moved in and started buying all the notes and physical the market offered. The rub was that they only bought low, and lower and cheaper. They never ran the price and they never ran out of money. Seeing this, some people ( middle east ) started to exchange their existing paper gold for the real stuff. From that time, early 1997 LBMA was running full speed just to stay in one spot! In other words paper volume had to increase to the physical volume on a worldwide scale, and that was going to be one hell of a jump. It could not be hidden from the news any longer."

LTCM was a problem because they were leveraging huge paper gold positions.

Friend of Another (10/11/98;) You know, LTCM was a well connected group that many others emulated for the very reason that they were, well connected. Now, it first appeared that these gentlemen were reprimanded with lower US rates because they acted so boldly. In some quiet circles it is still seen this way. But the speed of the event makes me think that the Hedge funds positions were correct as was the information they acted on. Was some leverage applied to Mr. Greenspan and Mr.Yen to
force a quick resolution of their problem? Perhaps a problem of larger scope and importance was seen over the horizon?

This I do know. To cover the open gold positions will require far more than simple option strategies as loss hedges! We may enter a pricing storm for gold that will see it's value literally all over the map! The possibility of the large up and down moves may wreck many portfolios that have strayed from the simple action of buying plain physical bullion, without leverage...

As seen in the LTCM debacle, a little money in the right hands can be
multiplied into billions of new found liquidity. Now consider that some have stated that the gold loan contracts amount to 8,000 tonnes or more! Another has said that they, if actually closed out as gold deliveries would amount to over 14,000 tonnes! Suddenly we see where the money has come from to gun the world asset markets. A market of trillions!

With the leasing market expanding, along with stock, bond, derivatives and
currencies markets, financial operators jumped into the game (LTCM) mostly because
they read it wrong. These people (Andy Smith??) are the ones that helped send the gold
market much lower than it's original simple purpose intended. No entity was ever
dumping enough gold onto the market to drive it that low (below $320??). The leverage
paper boys had figured out the game and were exploiting it.

Jeff said...

The longer the paper deal went on, the harder it was to manage as more people figured it out. Inevitably it had to end, with the Washington Gold Agreement. It was a race to create the euro before 'the deal' became unworkable, blew up, and Oil bid for gold. Mission accomplished.

Tommy2Tone said...

But Jeff, that implies a lack of a conspiracy. That makes it seems as if *shit happens*.

Tommy2Tone said...

Blondie- thanks very much for that. I have to re read your post throughout the day and let it sink further. I know I know so little so thank to all for putting up with what must be simple questions from yet another newbie.

Woland said...

Thanks, Jeff. That was really helpful. Another does say "notes
AND physical", though, in your quote. One other question: I just
looked up the WAG on wikipedia. 1999, 400T per year, 2000 max
until 2004. In 2004, agreement renewed, 500T per year, 2500 T
max until 2009. In 2009, agreement renewed, (is this a TYPO??)
400 MILLION!! ounces over the next 5 years. That is 12,000 tons!!
Can that be right? It seems impossible to me. Thoughts?

JR said...

Date: Mon Feb 16 1998 14:40

The BIS and other various governments that developed this trade ( notice I didn't use conspiracy as it was good business, as the world gained a lot ), thought that the paper gold forward market would have allowed the gold industry to expand production some five times over! Don't ask where they got this, as they are the same people that bring us government finance and such.

Date: Sun Oct 05 1997 21:29

Westerners should not be too upset with the CBs actions, they are buying you time!

JR said...

I always thought this was interesting in light of "What looked like big money before turned out to be little money as some HK people, I'll call them "Big Trader" for short," was this quote about "Know that this amount covers not CB gold moved by big trader!":

Look to LBMA, for currency looking for gold! Compare the Comex average open interest with it's average daily trading volume. Now use average daily trading volume at LBMA and convert to open interest in London, using comex ratio. Here you will find "real currency" in "paid for" gold derivatives ( not futures ) ! This money is now looking to convert to physical! It is caught in this paper with no way out! Know that this amount covers not CB gold moved by big trader! That wealth is safe, as it is for the good of all in those countries!

Clyde Frog said...

Maybe they're expecting a lot of demand for their gold between 2009 and 2014.

How much are they allowed to buy?

JR said...

2009 CB agreement on gold

The gold sales already decided and to be decided by the undersigned institutions will be achieved through a concerted programme of sales over a period of five years, starting on
27 September 2009, immediately after the end of the previous agreement. Annual sales will not exceed 400 tonnes and total sales over this period will not exceed 2,000 tonnes.


2004 CB agreement on gold

2. The gold sales already decided and to be decided by the undersigned institutions will be achieved through a concerted programme of sales over a period of five years, starting on 27 September 2004, just after the end of the previous agreement. Annual sales will not exceed 500 tons and total sales over this period will not exceed 2,500 tons.

1999 CB agreement on gold (wag)

The gold sales already decided will be achieved through a concerted programme of sales over the next five years. Annual sales will not exceed approximately 400 tons and total sales over this period will not exceed 2,000 tons.


Clyde Frog said...

Better get Wikipedia on the phone and demand a refund.

Woland said...

They cited a Bloomberg story, which had the facts RIGHT, and
then put up those insane numbers in complete contradiction
of their own source. Sorry for that.

Jeff said...

Remember when FOFOA mentioned oil might be 'settling up' their contracts?


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