Monday, July 23, 2012

Jeff & Blondie's Open Forum

That picture is not really Jeff and Blondie. It is Jeff and Jordan from Big Brother, and yes, I am a BB fan!

Blondie petitioned me for this open forum after one of Jeff's comments quoting me. I agreed, so here you go.


AdvocatusDiaboli wrote: "Blah blah blah the crazy GATA/FG assumption is somehow blah blah blah."

Jeff responded: "Only a fool would lump GATA and the hard money crowd with FOFOA:

FOFOA (from Unambiguous Wealth 2): One of the biggest struggles I observe in newish visitors to my blog is that they instinctively try to reconcile everything they learned from the hard money camp—ZH and GATA being two bright stars there—with what they read here. Their effort inevitably leads to contradictions that cannot be resolved. And because ZH, GATA and the rest of the hard money camp is so much more ubiquitous than my little blog, they win by default in minds that are unable to think for themselves.

Here are a couple of the irreconcilable concepts found on this blog that noobs must either reject or ignore in order to hang on to their ZH/GATA CB thesis.

1. Remember when Aristotle wrote this? "In working on this project, I was personally shocked when I discovered that we absolutely NEEDED paper currency in order to set Gold free. In the perfect world you lapse into in your comments, everything you say is well and good. We don't live in that world, however. My biggest challenge in piecing together my proffered solution was to accept what this real world had to offer and avoid foisting my own preferences onto the world like a square peg in a round hole."

Have you ever seen anyone in the hard money camp write anything like this? Or can you imagine them ever doing so? Yet this is one of the core fundamentals necessary to understanding Freegold.

2. And FOA wrote this: "Several years ago, many gold bugs and gold advocates missed the path as the trail turned." "Yes, the war now is between the Euro and the dollar! The Washington Agreement [a Central Bank agreement] placed gold 'on the road to high prices'." "The war between gold and the dollar has been over for a while now… Leaving gold bugs with a lot of questions that ask why this: both systems will strive for a higher currency price for gold; one doing it because they have to; the other doing it because they want to! The casualty on this battlefield will be the world gold market as we know it. A market caught between how Western perception thinks gold's price should be "discovered" and at what price level trading in physical gold craters the entire paper structure… This paper gold market will be cashed out at prices far below real bullion trading so as to inflate further the books of the Bullion Banks,,,,,, not destroy them. At least this is how the US side will proceed."

Again, have you ever seen anyone at GATA or ZH write anything like this? Or can you imagine them ever doing so?

First let me state that Zero Hedge and GATA both provide a great service and they both do fantastic work, ZH comments section notwithstanding. It is their underlying thesis about fiat currencies and central banks in general that I have a problem with. And this is not a problem with only ZH and GATA, it is a problem with the entire hard money camp.

Their foundational thesis is that fiat currencies and the CBs that manage them are the most fundamental flaw in today's system from which all other problems flow. This directly conflicts with my thesis that using the same medium in both the primary and secondary monetary roles is the fundamental flaw from which all other problems flow. My thesis applies to both hard and easy money systems. Their thesis points to the CBs as the bad guys. My thesis holds up a mirror and says, "We have met the enemy, and it is us."

Blondie petitioned: "Good one Jeff,

That FOFOA quote should be a stand-alone post on this blog, just so it can be linked to regularly. The difference in thesis really is as simple as that comment states: all our monetary problems (and the problems that those problems then cause) all stem from the single act of using the medium of exchange as a store of value. Period."



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Piripi said...

This particular issue of the monetary functions of both MoE and SoV being performed by the same medium is the root problem, regardless of the medium. It was not always this way. When MoE and SoV became the same medium nobody thought about how it would play out, it was just expediency.

Hindsight is 20/20.

Michael dV said... well as solving both Triffin's and FOFOA'a dilemmae (forgive the fake latin pluralization)

Anonymous said...

Did anyone see the spot on "60 Minutes" Sunday night about India and it's "love affair" with gold? It was a repeat, I believe.

Let me see if I've got this right. Indians sell their labor (wager-earners) or their goods (farmers) for currency and immediately turn around and exchange the currency for gold.

Once in their possession, the purchased gold is not lent out at interest. It's not deposited in a bank to be used by a banker as reserves or collateral for loans. Instead, IT JUST SITS THERE -- around millions of necks as necklaces, around wrists as a bracelet, etc.

Furthermore, comments of some the interviewees suggest that nobody ever intends to sell their gold, at least not willingly but only in an emergency.

Two notions popped into my head as I was watching. (1) "Wow, that's not how we do things here in America" and (2) "That sure sounds like what that fella FOFAO calls 'free gold'."

(First post by a big fan.)

FOFOA said...

Hello Pacmacsafe,

That 60 Minute piece on India originally aired on Feb. 12 and I made a post about it the next day: India's Gold

Lots of comments and discussion under the post, so enjoy!


burningfiat said...

FOFOA: and yes, I am a BB fan!

Damn, just read BB as our normal abbreviation Bullion Bank. Haha. That would have been a real chock!

Could you imagine all the people commenting in these pages locked in a big house together? Who would be the first to be evicted? Hmm...

Nickelsaver said...

Tuco like this Blondie ;-)

Piripi said...

”Let me see if I've got this right. Indians sell their labor (wager-earners) or their goods (farmers) for currency and immediately turn around and exchange the currency for gold.

Once in their possession, the purchased gold is not lent out at interest. It's not deposited in a bank to be used by a banker as reserves or collateral for loans. Instead, IT JUST SITS THERE…

Furthermore, comments of some the interviewees suggest that nobody ever intends to sell their gold, at least not willingly but only in an emergency.“

You’ve got that right, neglecting only a couple of important details; A) they are only buying gold with the currency they do not require for general expenses, so the gold in very real terms is only their surplus; and B) when these gold owners suggest their gold will only be sold in an emergency they are simply describing the obvious that gold is their savings aren’t they, and does this not make their actions perfectly rational by any responsible adult’s reckoning?

This is a perfect example of a producer(s) of surplus value freely choosing a media other than their legal tender official medium of exchange in which to save. Note in particular that they cannot be forced to save in their MoE, not as long as it is exchangeable for anything else. We have met the enemy, and he is...

These Indian surplus producers when viewed in aggregate could be considered one of the world’s super-producers. Why do they act this way? Could it have anything to do with responsibility, as in if they are not responsible for their own well-being no-one else will be? How comprehensive is the welfare state in India?

If our problems stem from using a single media as both MoE and SoV, and yet we are free to choose the media we employ as SoV, are we not the root of the problem ourselves?

AdvocatusDiaboli said...

too bad that you cut out the rest of the argument:
It was about those crazy assumptions of the supposingly suppressing paper market. At that point you have lots in common with some of the GATA folks.
Yes, call me fool if it makes you feel better. Besides that, the rest of the world is just laughing regarding "but paper suppresses". The biggest best laugh I had, was the discussion between Bill Murphy&Jeff Christian at Kitco. Best presentation on how to make a real idiot out of yourself in public.
Greets, AD

Pat said...

Ad, you are a fool, and yes I do feel better.

"Best presentation on how to make a real idiot out of yourself in public.
Greets, AD "
I think your ad nauseum posts are a far more effective presentation of how to demonstrate idiocy in public, albeit merely a public forum where you do get to hide your mug ( than god for small favors ).

You obviously relish your role as the local village idiot, out-posting everyone including our black belt grad students like JR, costata, et al, but you are all quantity and no quality.

Texan said...


Following your last comment previous thread - where you say westerners won't rush out to buy 50k gold, why not?

They buy Apple, which is up over 40 times from its low in early 2000s. They buy US stocks in general, which are up 10x in the last 20-odd years. And they bought gold up 30 times from 1971 to its high in 1980/1. Relative prices/values change. Westerners know that. What they are not accustomed to is their currency suddenly free falling in Purchasing Power. But some countries may be learning soon (Argentina now looking at maybe another massive deval, Greece, etc). People- even Westerners do learn.

In the last 10 years, gold is up 5-6 times it's low price. So another 25 times from here? Well if your only choice for "savings" is junk bonds or paying supposed AA issuers to take your money (negative NOMINAL interest rates!), that's hardly a stretch.

Really, when German rates go fully negative, and your bank manager explains to you that you need to pay 1-2-3% per annum to leave your money in the bank, what are you going to do? More importantly, what is "everyone" going to do? Hold cash? Euros? Dollars? By the trillions?

AdvocatusDiaboli said...

regarding your comparision to other dumb decissions, I explicitely said "savers" not speculators that see more wealth forthcoming.
And can we agree that with that attidute of speculation everything that goes up, must come down (in terms of purchasing power)?
About your question what to do on the negative interest rates? Depends on your own preferences. After they lowered the €yield again, I went to the bank and took out a 6digit €-number and put it into a bank deposit box. Thats my personal contribution to the great €, specially since now €-governments want to seizure their citizens under the cover of "eat the rich". If thats how the central planers want to play it against the free markets, okay fine with me, lets see how this goes down in flames.
And basically buy any kind of other hard asset which is for sale close to production/book value. My personal crack up boom. And you know who will be the suffering? Jep, the retards that fall for the €-stability BS.
Greets, AD

Anonymous said...


JoyOfLearning said...

Just thought i'd share this with the community: I was just listening to the july 23rd Peter Schiff Show and there was a phone caller who mentioned stuff that I had only heard before around here about an option where gold could go up as opposed to other resources that people need. I'm curious if it might be somebody from around here, or if the superorganism is independently reaching the same conclusions in different corners. It's a shame he was cut off really quickly and though I think Stefan Molyneux is a very smart guy and I'm thankful for him fighting against state adn for liberty in many ways he didn't seem to get at all what the caller was trying to say/ask. He could only see gold going high in case of hyperinflation and didn't seem to have any idea of how one could expect it to happen independently. When he was cut off the caller was just about to mention something about Europe...

Which brings me to a question i'd like to ask to the many smart people here: is that possible? How would the targeted devaluation into just one asset work? Could it? Would it not be a trigger of a general devaluation, or would it be possible in the future for a currency to devaluate just into Gold without inflating relative to food too? Aren't things linked or isn't there some feedback loop? Weather directly or through some kind of confidence weakening when people see the gold rising? For example, making a physics/engine type parallel: isn't a currency trying to devaluate just into gold something like an engine: it will have some losses in friction/heat? And if so, what would be the efficiency level? How much of the devaluation targeted into gold do you think would slip into other assests? 20% ? 40% ... 60%? My gut would tell me less then 20% losses might be nearly impossible... though I'd hope to be wrong, with 30-50% more likely.

Again, thank you to all the great people talking here! Of course biggest thanks to our inspiring host, and huge thanks to the knowledgeable veterans who share older knowledge without tiring. Still, since I mentioned this I also want to mention the other side of the coin: I also have a lot of respect for people like AD and others who dare post opposing views and persevere in bringing out contrary arguments even when they get personal attacks and offenses. I have a lot of respect for all the people bringing arguments on both sides. That being said I generally adhere to the mainstream views around here, however I do find very helpful contrarian opinions and the explanations that sometimes come out of them (which are sometimes more helpful than the too repeated quotes which i've heard often but fail to open my eyes further). There are so many very smart people here, it's a shame when pages and pages of discussions are wasted with personal offenses and "he's a troll, why don't you just ignore him" or even worse witty rude talk against the minorities. I think this blog and the comments section is at it's best when arguments are responded to with arguments, and I'm thankful that that happens very often, I just had to mention this since too often the arguments and facts are replaced by offensive replies which as we know are way too cheap and just a waste of everybody's time and good will.

However, all in all I and my family owe all you guys here a ton for educating us little fish about the bigger goings on of society, and presenting such a different and interesting view of the world. Thank you so much for all your time, work, thoughts, research... and for sharing it! You guys are just amazing! all of you! thank you! Can't wait for the next Fofoa article! (strongly hoping it will be another that integrates the big decades long picture with the here and now events that buzz all over the news).

Always happy to learn from my elders,

Jeff said...

Of course FOFOA never claimed there was "€-stability", but that euro depreciation would be targeted.

FOFOA: All the benefits and architectural innovations of the ECB stand in place now as a kind of safety net for the Eurozone for whenever the $IMFS collapses under its own weight. And the signs of this happening sometime soon are ominous and many.

It is easy and convenient for the financial press to blame the Eurozone problems on the euro itself. But I am here to show you that they are actually caused by the dollar system, counterintuitive as that may seem...

Unsustainable Deficits

The pressure on the $IMFS is building EVERYWHERE! From Greece to California, from the ECB to DC. And what exactly is all this pressure? It is unsustainable deficit spending... DEBT!

And what is the ONLY solution to this? What is the pressure release valve? It is different depending on whether you are a sovereign net creditor/saver or if you are a sovereign debtor. For the creditor/savers the ONLY solution is CUT OFF THE CREDIT and thereby FORCE AUSTERITY. If you are a debtor, the ONLY solution is DEVALUE THE CURRENCY, or more precisely, ALLOW the currency to hyper-depreciate. Yes, default is an option, but not for a sovereign that prints its own money, and not for any too-big-to-fail entities under the umbrella of such a sovereign...

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."

AdvocatusDiaboli said...

thanks for another C&P.
But what to do, when theory does not fit with reality? Ignore reality, because theory is the holy golden cow?
Or what if the original conditions of that € theory have been changed in between? Because they have, but those changes have never ever been covered here at the blog by the €FG advocates. Why?
Greets, AD

tEON said...

...they win by default in minds that are unable to think for themselves.
How humble of you. Yes only those incapable of individual thought would deviate from the hyper-intelligent philosophy of FoFoA. Those mindless drones who desecrate their grey cells with the drivel of ZH and GATA (lumping those entities together is another pawn forward in your strive for elitist-assholery status). All Hail FoFoa!!
I occasional surf here for amusing positions like $55K AU or $5 AG...
Like a true teapot despot I suggest you disallow this post in your true propoganda/censorship stride....

Anonymous said...


Heyyyy look who's back!

Like a true teapot despot I suggest you disallow this post in your true propoganda/censorship stride....

Huh? I am aware of few bloggers who are more tolerant of shit-posters than FOFOA. He even tolerates those who outright insult him without making any contribution whatsoever to the discussion... like your post just now! :D

costata said...

Parse the language of AD:

Or what if the original conditions of that € theory have been changed in between? Because they have, but those changes have never ever been covered here at the blog by the €FG advocates. Why?

"Because they have" says this fellow.

No explanation of the "have". No justification of his claim that this unexplained "have" has occured.

Jeff said...


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?

AdvocatusDiaboli said...

just to mention the obvious "haves":
- breaking the masstricht treaty
- direct government bond purchase of the ECB

Just those two are essential to name, plenty of other cheating besides that.

Anonymous said...


the question of whether the gold revaluation will 'leak' into the general price level.

Imagine the ECB backs all existing debt with the creation of new base money and at the same time bids E20000/ounce for gold with new base money, breaking the London gold market and keeping the Euro price of gold around E20000/ounce for a while.

In this case, every creditor would still have the paper wealth they think they own, plus everyone who holds gold would suddenly be nominally rich as well. So all gold owners could now afford to spend some of their new wealth. This way, you almost certainly get a lot of inflation (consumer prices and non-gold asset prices).

How do you make sure you don't get consumer price inflation? (remember the just-below-2% inflation target of the ECB) The answer is quite obvious, I think: There must be writedowns of a good part of the existing credit. Yes, the ECB can afford to print quite a lot of money in order to life-support the financial system. But if they want to avoid runaway consumer price inflation, there will need to be considerable writedowns as well.

So there will probably be a transfer of wealth from holders of credit instruments to the holders of gold. I don't think you can protect paper bugs by printing and have a gold revaluation at the same time without damaging the purchasing power of your currency.


Texan said...


What Victor said, though I expect it to be extremely chaotic for months if not even a year or more. Prices finding equilibrium vs a new SoV reserve is, IMHO, going to be a total cluster......but, ultimately people have to sell their production. But yes, there may be extreme inflation in some items (necessities), and deflation in prices of others (discretionary). Sort of a "highly exaggerated" version of what we are seeing now as gold appreciates through time.


You are so close - you obviously think gold makes sense on some level. Why? Are your vies really so different than FG? If you see the euro start to melt, what hard asset will you convert into? Will you do it via futures, or buy the real stuff? Why one or the other? And finally - what hard assets can you buy close to cost? That anyone wants I mean. I am curious as I too want to buy hard assets, but I can't find anything anywhere even remotely close to production/lift cost.

Unknown said...

They look so beautiful together!

Victory said...

FOFOA to AD: Greets

AdvocatusDiaboli said...

again, I love gold. But I guess we both agree that it is just a token made out of a commodity, nothing more nothing less, but at least the ultimate token which will still stand in good times but also in bad times, when everything else is questionable (remember option 1,2,3...). IMHO todays price is not that cheap but fair and still a must buy if you dont have any yet at all.
What else to buy? Boy, if I only knew, but just exclusively stacking on some supposingly FG tokens? If somebody does so, IMHO he is either financially uneducated or a greedy gambler.
Let's put it like that: If gold goes to ten times production costs, and silver is maybe twice production costs, I rather switch to buying silver (in case of additional new purchases).
On the other hand, not having gold together with some white metalls today appears a little risky to me. Also having no stocks looks risky to me, because todays markets are a complete fraud on life support, who knows how far TPTB kick it down the road and in the meantime I dont want to be that waiting-for-godot idiot. What I like are the suppliers.
Also some side cash might be a good idea to be sure to always pay your bills and to maybe catch some white metalls when this starts to fall. And as a personal lifestyle decission, I wouldnt get in debt or do anything to get out.

So the only consequence I personally come back to, any time I think of: Have fun and buy the stuff you always wanted and will need anyway, as long as you can! Dont make the mistake of "more wealth forthcoming".
If somebody finds anything about this not reasonable, advise is welcome.
Greets, AD

AdvocatusDiaboli said...

One question to the experts of the EuroFG-trail and the archives:

Since A & FOA are supposingly such "insiders", can you please show me their take on Greece entry into the Euro?
That would be awesome to read a take from an insider on that issue. I havent found anything, help appreciated, thanks.
Greets, AD

Anonymous said...

First, many thanks to everyone on this blog who continues to contribute original ideas on this very complex subject. I have been scouring the writings of Another/FOA/FOFOA over the past six months and it has been extremely enlightening to say the least.

I notice there is quite a bit of strife between AD and others, and honestly I think it boils down to one's goals: to discuss theory in an intellectual setting, or to decide how to actually apply these concepts to protect your net worth? That is, practical vs. theoretical. I also think everyone on this blog can agree that physical ownership is preferred, so this is not about paper vs. physical. I don't see how you could follow FOFOA and still own a significant paper position.

AD does raise an important question even if he phrases it in a confrontational manner. "Okay, so this is the theory, how do I actually apply it in my life?" However you look at it, allocating 100% of your available funds to a single asset class is probably speculation. So it does make sense to at least hedge your bets or diversify in some way.

I view three possibilities for gold:

1. Gold roughly matches inflation, perfectly preserving purchasing power and nothing more.
2. Gold continues it's 17-19% a year trendline of the last decade.
3. Gold revalues to somewhere around $20-50k/oz as written here.

This is the second area of conflict: what are your investment goals? To retain purchasing power, to earn a decent return, or get rich quick? None of these outcomes are impossible, only more or less probable given the current economic and monetary climate. I for one utilize Gold in a role that is agnostic to any of these three outcomes -- so I see no conflict. If Gold maintains purchasing power, great, if it revalues to $50,000/oz, even better.

Given the timing component for a change of this magnitude (sitting on 13 years so far) I do believe it is smart to hedge any Gold holdings with stocks or other assets. I think this is where AD is at and I don't see why it should cause strife/conflict -- from either side -- as long as the name calling/aggression/etc. are dropped.


enough said...

Midnight Hour

Victory said... interview with Stephanie Pomboy:

Indenture said...

If you enjoy this forum and the contributions it has made to your personal financial comfort level please consider donating to FOFOA. Thank You.

Motley Fool said...


That is a very good question.

Here are two things to keep in mind.

The first is the concept of linkage in a economy. Gold has so little industrial use that it can be said to be disconnected from the economy. (The higher the price, the more true this becomes.) Hence a rising of falling price in the currency should not affect anything else directly.

The second idea is that even if the euro were to effect a rise in the price of physical gold today to reach a free-floating fair value, this does not mean they have to buy a single additional ounce in aggregate. So no deluge of paper money in order to raise the price of gold is needed.

With a free-floating price established they can simply sell as much as they buy to others who also value the function of gold, as store of value. There is a great need for something reliable to fill that role today.

The flow of hot money into other speculative plays in order to try to preserve purchasing power is something I expect to see during the chaos, before say the ECB steps in and reprices gold. Thereafter such speculative plays will lose appeal, and gold will be able to absorb all need for value storage, simply by rising in price.


Aquilus said...


I for one, never looked at this blog as an invitation to go 100% into physical gold. At least that's not the message I get from FOFOA.

I believe there's a post that specifically deals with how much you should have percentage wise, but I don't have the link to it right now.

To paraphrase it from memory, probably 3-5% of your assets in physical gold should protect the purchasing power of your savings.

Another point is that you should only buy gold with LONG-TERM-SAVINGS, so it's 3-5% of THAT for physical ownership as a recommendation.

Are other things good to have? Of course. Even FOFOA tells us that he holds a little silver to prevent forced gold sales in a pinch.

Of course stocks, land, art, etc. are good to have. Are they optimal to carry you through this crisis? Probably not if you follow the reasoning on this blog.

But do you really have to optimize your ENTIRE savings? No. It's your choice.

This site is not about investment and financial advice. It's about the likely scenario for the future monetary system, and how different assets would likely fare. The choice on HOW to allocate your savings is yours and yours alone, and I don't think anyone has laughed at AD for not putting all his money into gold.I personally debunk his comments because of his false premises.


AdvocatusDiaboli said...

"With a free-floating price established they can simply sell as much as they buy to others who also value the function of gold, as store of value. There is a great need for something reliable to fill that role today."

yep, so far the FO(FO(A)) theory. Now lets look at the real life (you know, that stuff that happens to you, when you switch of your computer with "the archives"): Bundesbank sold last year gold, and the greek national bank bought gold. I wonder how you interpretate that one?
Sounds like a good deal to me: german workers ship their goods to greek, lend their money so the not working greeks can pay for the goods and with the newly printed bail out money handed over to greece, they buy gold on the market, which germany (has?) to sell.
That sounds like a real good deal of currency union to me. BTW: have you found any "insider information" about Greece in the archives :D
Greets, AD

Motley Fool said...


Germany sold what 20,000 commemorative coins to its citizens, and Greece bought what the same about with money they got for free, whilst having pressing debt issues. Yeah. Feel free to guess how I interpret that.

Oh, and congrats on the new pet peeve.


Anonymous said...


I think the phrase FOFOA used was "only buy as much Gold as you understand" of which I strongly agree with. He also mentions that something between 5-10% is conservative, mainstream advice and probably enough to roughly maintain your purchasing power if the rest of your assets were hyper-inflated away.

I agree with you this blog has never said to go "all in." That wasn't what I was trying to challenge. I was just pointing out what I see is the fundamental source of friction between AD and others (perhaps in the hope it might inspire some mutual respect?)

FOFOA is not giving out investment advice directly, but it is important to keep in mind what this information implies. It can be fun and challenging to build and develop complex theories which accurately explain the world as it exists; but I think some people also want to take those theories one step further by actually applying them in real life -- in order to safely store or move their wealth "through" the coming crisis.


AdvocatusDiaboli said...


What I missed in you post: Falling gold prices. Although unlikely, kind of scary you didnt mention.

Maybe a nice exercise to figure out, under which circumstances gold will fall (in terms of price or in terms of purchasing power, that's two different issues), I mean figuring it out on your own, without some conspiratist BS argument, like "paper suppresses" or the "oil/china/aristocrat giants" or the "yellow MTM button of the ECB".
And one hint, it does not necessarily have to do with the amount of money expansion.
Greets, AD

Aquilus said...

More AD debunking for newcomers (although I start to tire of this):

In the above comment AD asks the participants of this forum to explain what has been clear for a while: why is it that in an ever-expanding credit system, with nothing counterbalancing the expansion of said credit; why then will debtors choose to go into debt all the way until they cannot mathematically even repay the interest on the loan?

And why would the producers stack those credits and consider themselves paid?

As this blog shows, it is because the cycle can and has gone on for a long time, and the only solution to this cycle is either a voluntary transition from credit as UoV to a separate asset as UoV, or a catastrophic transition to one.

So why have German companies considered credit as payment? Well, honestly, most companies, only need MoE - money turns quickly either to expansion, payroll or shareholders.

Plus one has to work INSIDE the current system. Could you imagine the shareholder lawsuits if Apple bought physical gold with it's stash of cash?

As for people, some sense there's something wrong, some don't. Why would they not keep their savings in credit? That's the accepted practice. Most people, I think, do not want to be bothered challenging the status quo, they just follow the "smart investment guys". Can you blame them? They have better, productive work to do, families to raise, etc..

Anonymous said...

athrone said:

I view three possibilities for gold:

1. Gold roughly matches inflation, perfectly preserving purchasing power and nothing more.
2. Gold continues it's 17-19% a year trendline of the last decade.
3. Gold revalues to somewhere around $20-50k/oz as written here. I see no conflict. If Gold maintains purchasing power, great, if it revalues to $50,000/oz, even better.

The above lends me to believe that you are a saver. 1.) returns your capital with no risk 2.) returns your capital plus a capital gain in the amount gold appreciates beyond the inflation rate and 3.) returns your capital plus a huge windfall for being in the right place at the right time. What is the common denominator? Your capital is preserved in all three instances, and if you think these are the only possibilities, then there is zero risk of losing any of your capital.

You claim to be agnostic to the 3 possibilities that you list. Are you really? It would seem to me that if you participate in this blog and possess physical gold then you believe case 1.) is in the bag, the base line scenario if you will.

Then you say this:

Given the timing component for a change of this magnitude (sitting on 13 years so far) I do believe it is smart to hedge any Gold holdings with stocks or other assets. I think this is where AD is at and I don't see why it should cause strife/conflict -- from either side -- as long as the name calling/aggression/etc. are dropped.

Are you really a saver or are you a speculator? If you are a saver, why would you purposefully take on risk to attain some sort of return on your capital? As a saver, to hedge physical gold means you believe there is possibly a better store of value somewhere else, in this case stocks or other assets. Do you really think this is the case? If you in fact do believe that then I suggest you take FOFOA's advice and acquire as much physical gold as your understanding allows.

If you are a speculator and wish to expose your capital to risk, there are plenty of opportunities in stocks or other paper assets that can give you growth right now. Diversifying into non-physical gold securities would be prudent for that path. It is the premise of this blog that you might do quite well on this side of Freegold if your are talented and lucky enough. However, your paper will be rendered worth less through the transition to the other side of Freegold and will pale in comparison to phys. gold as means to preserve your accumulated wealth.

So I guess my question is why would you see wisdom in anything AD says here, he is quite an ass and is pursuing a personal agenda that has nothing to do with this blog or Freegold. A better question really is why you would believe people such as myself, JR, VTC, Blondie, Aquilus, etc. would consider anything AD says, or you for that matter, to be "smart" enough to alter our view on physical gold as the saver's premier store of value? You must realize that this blog is 4 years old and many of us have been here since the beginning. We have crossed that bridge and won't be returning. It is our position that we would like others to follow if they choose and we will help show the way as best as we can. You won't find us telling newbies that we are sort of sure regarding physical gold.

Anonymous said...


Additionally, why would you think the readers of this blog would care to "diversify" and simply nullify the very reason they come to this blog in the first place? There are plenty of blogs that espouse physical gold as hedge against your paper assets, but only one that I know of that champions physical gold as the premier store of value and reserve asset.

If you are here long enough you will realize that core participants are savers and not speculators. Timing for Freegold is irrelevant because we do not believe there is a superior store of value anywhere, period. Our mission is return OF capital, not return on capital. Also, the probability that we will see diversification into anything other than physical gold as "smart" is very low, exactly zero for me and and many of the regulars here.

Aquilus said...


1. Respect is earned. Look at the comments above for your answer.

2. Again I say, it is my belief that people should not come to this blog to be told what to do with their money. That should be an EFFECT of thinking through the information on this blog.

I am personally against a formulaic "I think you should do this with your savings". Do with them what you understand. No more, no less.

AdvocatusDiaboli said...

"A better question really is why you would believe people such as myself, JR, VTC, Blondie, Aquilus,
You must realize that this blog is 4 years old and many of us have been here since the beginning. We have crossed that bridge and won't be returning."

you said it yourself, perfect example on why not to listen to people like you, not even for a millisecond: completely trapped in confirmation bias, due to waiting for godot.
Oh boy, you really crossed to bridge to lala-land.

Motley Fool said...

Only those who live in a constant state of uncertainty would view reasoned conviction as a bad thing.


The world isn't always so black and white. I think one can be a saver and a speculator. We each posses many drives.

AD, I think, is a speculator. The world fills him with fear due to his constant lack of understanding, and he needs to speculate on how to protect his inherited wealth.

Understanding why diversification is a good strategy in general leaves me to consider it a bad strategy at present.

Fun living here in lala land...the world does not fill me with fear.


Aquilus said...


Need to see more comments for "respect"? LOL

Let me summarize the comment above: "I AdvocatusDiaboli proclaim that all of FOFOA's thoughtful posts for the past 4 years are null and void. Because I said so. No I have to thoughtful counterarguments, just lalala Germans are stupid, lalala the state is oppressing us, lalalala Euro socialism".

Perhaps I should make it clear: I do not want to tell newcomers what to do. I encourage them to learn for themselves, and to put time into being able to draw their own conclusions. I have nothing to sell newcomers, nothing they do or don't do will affect my well-being and/or savings decisions in the least.

But I do take satisfaction in seeing others actually GET, really GET the contents of this blog. Of THAT I am guilty.

Aquilus said...

Spelling above: "No I have to thoughtful" should be "No, I have no thoughtful".

AdvocatusDiaboli said...

in a certain way your right, preserving the wealth, on the other "inherited" you are dead wrong.
Guess why? Becaused I kissed the current system goodbye. As a german I figured out, our people being MFed one time too much. So if other german sheeple what to stay the retard pool boy of the club mediterrain or the german industry slaves, fine, but I can&want retire with the "purchasing power" I have today, so to make sure that it stays that way.
And retirement system of germany is one of the key points: The € promises made to germans for retirement in 10-20yrs. It does not matter how hard you press the yellow ECB button, under those promises it is IMPOSSIBLE to fullfill the promises at stability of the euro. At least I am happy not to have paid into the system, therefore I will not be disappointed like others will be royally screwed, either by public or private retirement fonds.
So probably most comment readers already noticed that I only get really upset, when I hear the €FG-BS from people that have no freaking idea about Europe, never lived here, dont know any political context and dont speak any € language but have the arrogancy to talk such BS.
Greets, AD

Motley Fool said...


I honestly don't know why you think those problems in the euro are different or somehow worse from everywhere else in the western world.

Some of us may not speak of it, since we don't live in the eurozone, whilst having the exact same problems(only worse) here. What's up with that?

Essentially no-one in the western world will be getting those retirement benefits promised. That is a endemic problem of the current system.

What your myopic world view misses, is that even though this is true everywhere, the structure of the Euro at least allows this not to be the case for those who come after us.

I don't know why I bother. You have shown time and time again your aversion to actually thinking about these things, and absolute refusal to consider other world views.

Guess it's true what they say about old dogs and new tricks.


Aquilus said...


Aristotle sent this classic to Carl a few months back. I think it applies:

"The insufferable bane of the internet near and wide -- infiltrating every arena of thought and discussion -- is an indomitable cadre of hapless pedants, each wielding a false notion.
__________ ______________ __________

Woe upon us that they, so ill-equiped, deign to commit themselves to our informational salvation. With thick and stubborn skull they hammer restlessly, yearning to replace the various masonry of solid foundations and structures with the particular cancerous notion occupying (singularly, with only personal reverence) the void between their own individual ears.

The sickening thuds of these thumping heads, wasting themselves against well-established bedrock, is an unsettling and unwelcome distraction from a forum of discussants intent upon an intelligent advance of inquiry, hypothesis, assessment, and a general improvement in understanding the ruling physics and working architectures of the real world.

___________ is Golden (for some much more than others.) Carl, get you some. --- Aristotle"

Anonymous said...

@Motley Fool

You said it better than I could. I too believe that you can be a saver and a speculator at the same time. There is a time and a season for all things and the time to speculate is not now as far as I am concerned. That ship has sailed.

My profession is risk management. It is not a mistake that I find myself in the profession that I am in, it matches my natural disposition. I have concluded that physical gold offers me the least amount of risk in accomplishing my goal, capital preservation. Until I find another thesis that lowers my perception of risk, I will continue to stack.

The troll calls this confirmation bias. I guess that would presume that I no longer question or look for a hole in the Freegold thesis. Fact is I read everything I can get my hands on from competitor camps, both inflation hard money and deflation camps. I study the MMT crowd and the Fed. I also have eyes to see and study human behavior. I have been doing this daily for the last 10 years and have evolved in my understanding of many things, changing my position when a better thesis came along. Since 2009 I have met an evolutionary dead end.

Does that mean I have managed to identify the central truth and there is nothing more to learn? Not likely, but I am close enough that competing theses have not been successful in altering my path for the last 3 years. Certainly AD and his lack of thesis is summarily shit canned as a complete waste of my time. This requires mere nanoseconds to compute.

Here's a few questions for those who see value in AD: what is AD's objective here? Is it to alter the premise of the blog to something he deems to be more reasonable? Could he ever accomplish that goal? Is it to save the poor uninformed and impressionable soul who stumbles onto the blog from a fate worse than death, allocating savings into physical gold? Does he play the Devil's Advocate in an attempt to stimulate discussion and a better understanding of Freegold?

How about this question: if you vehemently disagreed with the premise of a blog, would you continue to haunt it? For what purpose?

The troll is here because it makes him feel good to do what he does. That is the truth, plain and simple. He derives pleasure from playing the participants of this blog. When he no longer experiences sufficient pleasure, he will leave for other blogs that better entertain him.

AdvocatusDiaboli said...

you just simply dont get it.
RPG, fine, works perfectly for an economical entity nation with each of its fiat currencies floating against gold, that is the beauty in the FG concept.

But you just simply dont get it, because you dont know europe. RPG in a currency union with the most contrarian cultures, unions, lifestyle, tax laws, immigration laws, languages, life habbits, work habbits, individual historys...(the list can go on forever, those are the things that you call national identity, maybe something that you dont have)....
that is just plain madness. okay, MADNESS!!!!111

When do you finally get the parable of the scorpion riding on the frog over the river....

or maybe you are just in favor of totalitarian statism, forcing the people to live like their masters decide, well maybe after all, thats why you are in favor of the €.

and maybe you can call me an old dog, but sometimes that goes along with life experience.

julian said...



This is my exact feeling these days.

It's all boiling down to FOFOA's Dilemma.

Debtors vs. Savers

Easy Money vs. Hard Money dichotomy --> only 2 options? what would mr. market have to say?

Freegold Pendulum Position neutralizes FOFOA's Dilemma

Many people don't/can't/won't/shan't think for themselves. They blah blah a lot though. Way too much.


Great post, thanks :) Excellent snipe.

Motley Fool said...


I have stated, on more than one occasion that I think it would probably be better if the euro were to break up post FG, due to the cultural differences. Don't presume to tell me my positions.

You need to understand that the euro was never meant to function this way. I think the euro architects were also caught by surprise by China stepping up to the plate. They also thought change was imminent.

Post FG however, most currencies will be managed with the goal of price stability in mind. I'm not sure there will be an absolute need to split.

I also have some doubts that a shared currency amongst different culture is a fundamental problem. If true, it would have interesting implications when the argument is taken further. It would imply that the USA could not use a single currency, or that different towns could not, or different individuals.

This is patently absurd. Yet, unless the argument breaks down on some level, that is the implication.

This implies the flaw lies elsewhere.

A thesis of this blog is that the flaw lies in using debt of others as a store of value. Remove this flaw, and a shared currency doesn't matter as much (building up the system from individual desires and actions).

These matters however are difficult to contemplate if one is unwilling to let go of your baggage, and we All bring baggage to the table.


Indenture said...

"Cut out all these exclamation points. An exclamation point is like laughing at your own joke." (attributed to F. Scott Fitzgerald)

Motley Fool said...

Here is a nice comment from Doug Casey in the latest Things that make you go Hmmm

“Well, it’s true: “inevitable” is not the same thing as “imminent.” When people see that something is inevitable — and I’m guilty of this mistake myself — they tend to believe those things are also imminent, even when that’s not so. But the inevitable is inevitable, and that means it must happen. We usually can’t predict exactly when — and such things often take far longer to arrive than we imagine they possibly can — but once things start to unravel, they tend to accelerate quickly.”

-Doug Casey


Anonymous said...


I acknowledge the possibility of falling Gold prices, but I would consider the failure of Gold to retain purchasing power a "Black Swan" event -- especially in a world drowning in debt. Again, this is one reason to hedge a Gold position with stocks, real estate, or other assets.


I think we are in a very unique time in history. In the last decade, the best medium of savings (Gold) has also offered the best "return" on capital. This will not be true after a re-evaluation to $50,000/oz as Gold will be strictly preserving purchasing power and not gaining in real terms (if I understand FOFOA correctly).

What do you do then?

To earn a real return, as you say, you have to place some of your capital at risk. I am a saver first, but do find it prudent to invest at least some portion of my capital in order to grow my wealth in both nominal/real terms.

I look at it this way: if things continue as is, a blend of say 50% Physical Gold Bullion and 50% Stocks/Real Estate currently returns about 10-12% a year. If a re-evaluation occurs, great, half of my assets just jumped in value 20-30x. Net I am up 10-15x assuming the other half goes to zero. If they somehow manage to kick the can down the road for another 50 years, well okay, I’m not in any hurry because I’m still earning a solid return.

The ratios are just an example but they highlight the benefit of being “economically and monetarily agnostic.” If nothing else, AD seems to be mentioning something along these lines so at least to me there is some value there -- even if it is hard to see through the confrontational attitude.

AdvocatusDiaboli said...

"I think the euro architects"

...were jerks, okay. Nothing else, plain and simple idiots. BTW can you name any? Mundell? LOL one of the biggest. I remember the discussion we had here the other day, that due to the Eu(ro) he thought that he gets less burocracy for his shit shink in his italian villa. OMG how retarded is that, how far from reality do you need to be, to have such assumptions.

But at least when he now talks you can tell that he thinks that this was not such a good idea, at least different from others brainwashed that repeat the same empty phrases over 13yrs.

Aquilus said...

There is no indictment like self-indictment. Just look at the previous comment.

Motley Fool said...


I think they were brilliant. This notion of freegold is incredibly insightful. Don't mock what you cannot equal in creation. It reveals your character.

Baggage. Leave it at the door.

And contemplate those words Aquilas shared with us.


AdvocatusDiaboli said...

to illustrate a maybe exaggerate picture, but to get to the point, why gold is no gurantee for purchasing power:
In the UdSSR your 60oz still didnt get you your Corvette.

Or to stay in the FOFOA posts if you prefer, read the "Savers Island" and my post about "No Sushi mean no Sushi".
Greets, AD

AdvocatusDiaboli said...

"Don't mock what you cannot equal in creation."
comme on, not that hard to pull the trigger on FG if you really want, but the fact is obviously nobody wants it.
Just look at Switzerland, stacking those worthless €. By now a total of 300billions in less than one year, just to keep 1.20. That is money stolen from their very own people. Just exchange that into physical, mission accomplished, own compatriots paid.
Or how about that, stop any kind of gold leases and report exclusively public the physical gold amounts, rather than receivables, end of unallocated and probably end of paper in general like we know it.
Nope, that is not desired, thats against the IMF rules and those rules will not be changed. Start to get used to it. FG is easy if you want to, you dont need that weird 13yrs. € conspiratist storry for that.

And no matter if FG evolves or not, the € is doomed and the people suffering and not getting paid are the lab rats for these € "economist" jerks. Because one thing is for sure: FG/RPG will not save the €, not at all. It is the opposite, the PIGS will be fried over night in case of FG.
Greets, AD

JR said...

Hi athrone,

I wanted to back track a sec and get with you on this:

I view three possibilities for gold:

1. Gold roughly matches inflation, perfectly preserving purchasing power and nothing more.
2. Gold continues it's 17-19% a year trendline of the last decade.
3. Gold revalues to somewhere around $20-50k/oz as written here.

Two questions:

1] Do you quantify the likelihood of these possibilities?

2] What do you foresee would cause each of these three possibilities to arise?

Thanks, J.R.

tintin said...

Yuan supplanting USD in Africa:

Until recently, few people in Africa would have been able to name China's currency. This has changed with stunning speed over the past few years, boosted by the 2008 global crisis when the ability to borrow dollars by importers and exporters was substantially reduced.

For China too, dependent on exports, the US and Eurozone liquidity crunch was an alarming event. As a result, it also quietly encouraged trading partners to settle more of their bills in yuan. Few regions embraced this approach more enthusiastically than Africa.

So when Li Dongrong, the assistant governor of the People's Bank of China, said a couple of weeks ago that Beijing would now actively promote its currency for settling trade and investment with Africa, he was merely confirming what has already become a reality in many African countries.

George said...

Devil's Advocate, you can not continue to ignore the giants in the room and 5000 years of yellow metal roundup, then continue to stare into the flame.

AdvocatusDiaboli said...

since I can not sleep and the bottle is not empty ;)...
about what "giants" are you talking? Name them and you're my hero or STFU.
Greets, AD

JR said...

Hi Tintin,

Cool article. Just wait until the Western puppet faction they pushed though South Sudan finally goes pop (matter on months perhaps?). The final barrier to China's takeover will not last long. xD

Anonymous said...


I think we are in a very unique time in history. In the last decade, the best medium of savings (Gold) has also offered the best "return" on capital. This will not be true after a re-evaluation to $50,000/oz as Gold will be strictly preserving purchasing power and not gaining in real terms (if I understand FOFOA correctly).

What do you do then?

That question is the point isn't it? What do I do then? Then is not now would you not agree? My problem and the focus of my mind is in the now. Then assumes a time before, now. In the now it makes no sense for me to hedge an event that must happen.

When we transition to "then" I will have the capital to do with what I desire. In all likelihood there will be real opportunities for capital appreciation with manageable risk. I will then assess that risk just as I do now and act accordingly. There is a season for all things and and the there is wisdom in knowing what the season is. We are in winter.

Spring is the time of birth and time to plant. Summer is the time to grow. Fall is the time of maturity and time to reap. Winter is the time of death and time to hole up, retrench, and endure scarcity. Hedging winter with exposure to Summer or Fall is not conducive to wealth preservation in my way of thinking.

Tommy2Tone said...

Remember a few months ago when you said you were leaving, never to come back?
What's up with that?
You fail at everything huh?

Anonymous said...


I am not enough of an expert to assign a reliable probability to these, but I think it probably depends on the timeline you consider. That said, here are my thoughts based on my current level of understanding.

1. Gold merely pacing inflation: I have a hard time seeing how this could happen with the current balance of debt and worldwide over-consumption. I am really only including it as a “worst case” and to underline the idea that Gold falling in real terms seems very unlikely. Perhaps the successful creation of a non-gold, universally accepted savings medium such as a commodity basket would do it?

2. Gold continuing its linear rise: This I think is probably the most likely in the short term, at least the next few years. It is hard to predict just what can and will be done in order to delay the inevitable austerity. Perhaps in the most extreme case of kicking the can down the road, the status quo could continue indefinitely until the 17% a year gains in Gold plateau at Free Gold levels through a more "subtle" multi-decade inflationary resolution of debt? From my reading, it seems most here would argue this is not likely vs. a sudden, dramatic re-evaluation.

3. Overnight re-evaluation of Gold: when I was initially transitioning into a physical position, I was anxious the re-evaluation would occur within the month. Now that I am more content with my level of holdings, I am not so much concerned about the timing. Such a worldwide change would easily be the most significant event of the preceding centuries and perhaps the ultimate “Black Swan” event in American history (at least to those who haven’t read Another/FOA/FOFOA). Over a longer time frame, say 5-10+ years, I would say it is reasonably likely unless something fundamental changes in the world.


Indenture said...

AD: Seriously dude, you can't just tell people to do something and then cuss at them using acronyms.

Not cool.

Jeff said...

It's the year of the surprise.

FOFOA: We are all looking for "information leakage" as to the criticality of the systemic pressure we just know must be building. We look to the contango, the curve, the spread, stock and flow to leak us a hint about what kind of scramble might be happening on the other side of the curtain. But when I look back on other big Ponzi-like collapses, there never was much if any "leakage" before the event.

I think there are a couple of reasons why this is the case. In the last days before a Ponzi-like collapse, redemptions, conversions and exchanges are usually settled in an outwardly normal fashion. In fact, it is often those closest to the collapsing structure, like clients and counterparties, who are most in denial in the final days because they are directly privy to the superficial normalcy of transactions taking place.

It is at the precise point that the immediacy of collapse becomes unequivocally apparent to the inside operator that the plug is pulled and the music stopped. Operators pull the plug on redemptions all at once in order to either make off with the remaining assets, distribute them to favored associates, or in some cases, to preserve as large a pool of assets as possible. So any true "leakage" would have to be something of which the operator himself wasn't aware.

That first reason why collapses happen by surprise relates to the uncontrolled or unplanned collapse of a Ponzi-like structure. The second reason covers planned and controlled collapses. Planned or controlled collapses also happen by surprise, because that's how you get the maximum "bang for your buck" so to speak. I wrote this back in July '09:

The central banks of the world are well aware of this. It is why they have slowly, inconspicuously changed from net sellers into net buyers. This gradual shift is extremely significant, because as net sellers they were supporting their own fiat regime. But now as net buyers, they, as a group, are stressing it. Why would they do this unless they knew it was about to reset?

This fractional gold reserve imbalance is the one imbalance the media and governments do not want you to know about. This is the one that will RESET the entire system. This imbalance, once corrected, will make central bank fiat currencies sustainable once again. This is why they are net buyers! Here at FOFOA, we like to call it FREEGOLD!

Do I think this magnitude of a reset could happen overnight? Yes, I do. Why? Because that is the way you get the most "bang for your buck". Surprise is the order of the day! "Devaluations always happen by complete surprise as to exert maximum leverage effect."

Nickelsaver said...


That would be my fault. I drew first blood on that acronym. But I'm a child, as is AD.

holdinmyown said...

Hello JoL, VTC, MF and all ... yes even AD ;)

I agree with VTC's reply to JoL. However I doubt that the ECB would set an arbitrary figure like EUR 20k to start buying gold with newly printed money. This would have the effect of painting the ECB as the bad guy ... the one that brought down the whole system. So how about this instead:

The ECB states that the Target2 imbalances have grown to unsustainable levels and in order to help relieve these imbalances the ECB announces that it will hold an auction to buy 5T of gold (physical only, deliverable in Frankfurt within 7 days of closing). The auction period is to remain open for 1 month from the date of the announcement. The gold purchased will be distributed to the surplus nations in proportion to their claims and will serve to cancel that portion of their Target2 surplus balances (as well as the debtor nations' balances of course). The process will continue until all imbalances are cleared. How many iterations do you think that it will take to clear the Target2 accounts? The best part is that it is not the ECB that will cause the rise in the EUR price of gold ... it will be the market's doing.

I doubt that this would in fact happen the way I have suggested but I also doubt that it will happen as VTC proposes. The point being that you don't want to pull the trigger on a pistol that shoots backward.

M said...


Hi. That was me on the Peter Schiff show again. Thanks for bringing it up. The main reason I called was because there was some unsophisticated doomer guest on the show that was going on and on about gold confiscation, windfall taxes ect...

As you rightly understood, I was trying to tell Stephan that during the coming collapse, there would be a softer landing for all, including the "Powers that be" if the majority of the paper wealth in the world was consolidated into physical gold. Because as we know, unlike anything else, golds wealth storing ability is not reduced as the price goes up.

I was surprised that Stephan didn't catch on to anything I was saying and I was even more surprised when he cut me off. He seems like a polite guy with an open mind. Before he cut me off, I was going to point out to him that contrary to what his guest was saying (about the US at least), the "The Powers that be" in the Eurozone have no sales tax on gold. I was just going to leave it at that and let him chew on that for awhile but I guess he has less of an open mind then I thought. His answer also indicates that he doesn't realize yet that hyperinflation is not inflation on steroids.

I really have to wonder if some of these scholar type Austrians just don't want to touch freegold.

AdvocatusDiaboli said...

"The ECB states that the Target2 imbalances have grown to unsustainable levels and in order to help relieve these imbalances the ECB announces that it will hold an auction to buy 5T of gold (physical only, deliverable in Frankfurt within 7 days of closing)."

...and the world will be laughing, because in order to settle those, the ECB does not need to openly buy gold or set the price higher by open bids, but rather the PIGS gold need to flow to the nothern CB, but there is no mechanism for that anyway. Think the PIGS will accept such mechanism? No, would you, if you have the nothern countries at gun point and they have to pay anyway?
But for theory, let's have a look at T2, what price would be needed (for this one time shot only and not other PIGS bills paid/considered yet):
In billions: Germany +728, Netherlands +142,Luxemburg +124, Finnland 72 => a rough trillion. Now the PIGS gold: Italy 2451, Portugal 382, Greece 111 Spain 281 => 3225t
=> ~10,000€/oz just to settle the T2 for a very short moment in time and afterwards all PIGS are naked and T2 will start building again. But that would be the external €price of gold, in order to settly the internal T2 imbalance.
I guess by now everybody can see how stupid the €FG design is, in fact the € is the AntiRPG.

M said...

^AD "blah blah blah..." ZZzzz Done yet ?

It worked before the Genoa conference...

AdvocatusDiaboli said...

It worked before the Genoa conference...

what work before Genoa? The € or the Latin Monetary Union?

Anonymous said...

Jim Rickards said on twitter:

#Fed said it would keep rates low to "late 2014" on 01.25.12. That was 6 mos ago. Things are worse now. So they'll extend to 2015 on Aug 1st

#Fed to do #QE3 possibly in open-ended nominal GDP target form Sept 13. Will extend low rates to 2015 on Aug 1. Jackson Hole for explaining

Reasons for #Fed low rate extension (Aug 1) & #QE3 (Sept 13) not based on employment data. It's based on deflation fears & need for cheap $


my comment to JoL was to explain in which cases you would get consumer and asset price inflation - I don't think the ECB will move first. The more I think about it, the more likely I find the scenario in which the USG gets to choose the timing and execution of the revaluation.


Michael dV said...

I read Porter Stansberry. A year ago i realized that he was giving some good advice when he suggested being in gold and cash. Every other asset available for investment had become a pure game of chance betting on the actions of the Fed. In holding cash one keeps one's options open. With gold you have the central banks of the whole planet suggesting that it will be an important asset in the future.
It appears that some on this site view a sudden transition to high priced gold to be something like a prediction by a prophet. For those folks I can only imagine the torture that the occasional loss of faith in the prophet must bring.
Most on the sire however have followed fofoa's writing as the development of a thesis using historic information but combined with other components like logic and probability theory and math. When they go to sleep they may worry that they do not understand a Nash equilibrium as well as they should or that they wish they had more information about actual central bank gold holdings or the components of the derivative markets. They do not loose sleep worrying about whether they are believing the right guy.
This is really just another way of saying 'buy only as much as your understanding allows' but it does help understand why most folks here get more secure over time but some never quite settle down. Tomorrow they could wake with a sudden loss of faith and with no real understanding they will be lost souls.

costata said...


You wrote:
The more I think about it, the more likely I find the scenario in which the USG gets to choose the timing and execution of the revaluation.

This is the thesis I am working on these days.

costata said...

My thoughts keep returning to this issue of counter-party risk.

Handy rule of thumb from one of Jim Sinclair's European readers (and my emphasis regarding risk):

For a preview of what is coming here (USA), you might wish to see what is going on in Europe, as the same problems are here as well. With the bonds of Italy, Spain, and others now trading with a plus 7% yield, that means that nations that must borrow money and cannot pay the interest at 3% will now be forced to borrow at 7%. Those owning European bonds with yields of now 7% have lost 40% of their principal.

Every 1% increase in interest rates leads to about a 10% decrease in the value of a bond. At some point, the idea of safety in bonds will be considered absurd.

costata said...

Risk Transfer

The banks continue to transfer risk. IMHO stepping out of the way of the consequences of HI. You can cross US commercial RE off the list of their exposures (my emphasis).

July 17 – Bloomberg (Sarah Mulholland): “Landlords are piling the most debt onto commercial properties in five years as Wall Street banks bundle the loans into bonds to meet rising demand from investors seeking high yields amid record-low interest rates.

The size of mortgages bundled into bonds will surpass 100% of building values for the first time since 2007, before the market shut down amid the worst financial crisis in seven decades, according to Moody’s…

That measure of leverage on loans tied to everything from skyscrapers to strip malls is poised to climb 4.3 percentage points this quarter… Lenders are offering larger loans to win business as borrowers look to pay off a wave of debt taken out during the real estate bubble and as yield-starved investors are pushed toward riskier assets.

More generous mortgages, a boon for landlords who need to refinance debt, may fuel concern that banks are reverting to practices that led to record defaults as late payments rise above 10%.”

costata said...


Something I'd like to toss on the table for discussion. How about going forward we differentiate between bank executive management and the banks themselves. Treat them as two separate actors as opposed to discussing them as one.

This might take some of the heat out of discussions about the analysis of their role, actions and so on. Where, for example, control fraud is taking place (or has occurred in the past) we can isolate this type of action from the institution and practice of banking.


Aiionwatha's Nation said...

I see some merit in that but until debt assets = price of goods and services plus the price of gold over a matching time frame the system is nothing but control fraud attempting to enforce a false equilibrium. But there are many that have no hand in that game while allowing things to function.

M said...


"what work before Genoa? The € or the Latin Monetary Union?"

Using gold to settle trade differences (freegold)

The Euro itself is just a reference point to keep score.

JR said...

Yes M,

It is gold in its wealth reserve par excellence and final settlement role along with whatever MoE/currency system develops, likely the Euro but the Latin Monetary Union sounds kinda hot too.

The term FREEgold seems to be hopelessly confusing a great many of you, especially the ones suffering a myopic obsession with the "elite." So I would like to suggest a new name for this system, which is not really a system at all. It is more like the lack of a system: the dollar reserve system and the paper gold system. Without them, Freegold is what we have, along with whatever "system" develops. It is not something the debtors or the elite can fight. It's just a shift in the perception of savers. Can't change that.



Trade settlement is a function of reserves, and Genoa obstructed the adjustment mechanism of real gold settlement by also allowing paper settlement. This set the world up for such fun times as periodic busts, economically destructive punctuations and regular currency devaluations.

What the 1922 Genoa Conference did was to institutionalize the "sterilization" of gold for the rest of the world through the reserve structure of the international banking system. And this bit of genius was decided by a "committee of experts" from 34 different countries. They did this by introducing paper gold—or paper promises of gold—into the international banking system as reserves equal to the gold itself. This wasn't the first paper gold, but it was the first time that specific paper gold (that from New York and London) was used as an equal reserve upon which credit can be expanded. What is acceptable as international reserves is critical because trade settlement is a function of the reserves. This conference was the birth of the $IMFS.

In 1922, they officially changed the old gold standard into the new "gold exchange standard", which Rueff said was "a conception so peculiarly Anglo-Saxon that there still is no French expression for it." The stated purpose was "the stabilization of the general price level" which you can feel free to read as code for sterilizing the price mechanism and its elegant governance of an extremely delicate and complex balance. This, of course, gave birth to the arrogance of the managed economy and its attendant science, Keynesian Economics (est. 1936) and its step-daughter Monetarism (est.~1956).

With the gold mostly staying put in London and New York, and paper promises of gold flowing as equal base money elsewhere, the monetary base was effectively duplicated. Credit could now expand without ever having to contract, at least not because of the unwanted flow of gold. But of course that's not how it actually works in practice. The "unwanted" flow of gold is not the cause, but the effect of real imbalances (physical, not monetary ones) between international production and consumption. So, obstructing the adjustment mechanism of real gold settlement set the world up for periodic busts, economically destructive punctuations and regular currency devaluations.


JR said...


Gold will return to its pre-1922 function, but that does not mean we will return to a pre-1922 gold standard. This post is not about the merits of the gold standard. It is not about praising the hard money camp’s decision in 1445 over the easy money camp’s decision in 1922. It is about the choice of the Superorganism over the management of men. The pre-22 gold standard, although it allowed gold to function, still carried the same flaw I point to so often; that using the same medium for exchange and savings leads to regular recurring conflicts between the two camps.

This is an important distinction to understand. Gold's true function is relative to the real, physical balance of trade, not man's flawed, political-overvaluation of debt and other monetary schemes. In 1971, the entire planet switched to using a pure token money as its medium of exchange. These symbolic tokens do fail miserably and regularly as a store of value, but they work remarkably well as a medium of exchange. They are not going away.

The whole ECB/Euro architecture was built to turn Genoa 1922 on its head, to reverse the damage done and to restore the function of gold which Jacques Rueff knew all too well.

Once Upon a Time

AdvocatusDiaboli said...

"Using gold to settle trade differences (freegold)

jep, sounds pretty cool and fair, so how are the trade differences in the €-zone settled (e.g. to get the PIGS out of the worst superstagflation mankind will ever see)?

Anonymous said...

Costata, Victor -

Interesting point about USG choosing the timing and execution of revaluation.

What FOFOA said:

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.

I am guessing both of you are alluding to the first scenario, whereby USG tries to avoid the worst of hyperinflation.

Jim Rickards is also of the similar view, revaluation of the gold reserves. He has also stated several times that he's sure the physical gold is there in Fort Knox and West point.

Eric Janszen also stated the same in a Financial Sense interview with Erik Townsend, about using the gold reserves to re-establish currency credibility.

JR said...

Here's a thought, what do you think would happen to Greece's reputation (and balance sheet) if its gold were revalued to the physical price at the BIS?

Open Letter to EMU Heads of State


The Nuclear Option

The ECB and the BIS have a secret weapon. They don't want to have to use it because they don't want to be seen as the instigators of the dollar's collapse. They would prefer the market to take care of it for them. But don't doubt for a second that they won't use it before sitting back and watching permanent damage come to the euro system.

Just imagine how Greece could deal with its problems if its gold were valued at $55,000 usd per ounce. In terms of current exchange rates that would raise Greece's liquid assets to 50% of its public debt. In other words, instead of being a "sub-prime" borrower, Greece would instantly become a PRIME borrower.


This nuclear option is A) for the BIS to begin operation of a public "physical only" market for gold to be used by the really giant participants, primarily sovereign entities and billionaires, and B) for the ECB to use the price discovered by the BIS in its quarterly reserve asset "marked to market" adjustments.

Such a move would put Greece, and all the PIIGS for that matter, in a much better position almost overnight.

Greece Is The Word


So if Greece can't devalue, can't just quit the euro, the ECB can't just bail everyone out like the Fed, and Germany is not willing to float the Greeks, what options are left? Where is the give?

It's simple really. Adrian doesn't mention the ECB's Marked to Market policy for gold bullion reserves, but that is exactly where I am looking. When your finances are insolvent you must part with some of your REAL treasure in order to keep the bare necessity wheels turning while you restructure your productive efforts and economy. This is how Freegold works. And this is what the EU now faces.


JR said...


In my last post, Greece is the Word, I wrote that the euro has a secret "nuclear" weapon. This is what I was talking about. What Another said at the top:
As in war, the larger and better equipped army in "reserve" does rule over the lesser force. Perhaps we should think in this way: in a "cold war" of modern exchange rates, "digital currencies from reserves are used", however, when a "hot war" of major default does begin, "nuclear weapons of GOLD" are deployed!

And yes, the euro is the better equipped army in this regard. The main point I made in Your Own, Personal, Freegold and Freegold was that the Eurosystem's gold is very much in play!
The Eurosystem holds 10,800 metric tons of gold, roughly one third of world gold reserves.

And in Confiscation Anatomy - A Different View, I argued that whatever gold the US Treasury and the Fed still own is most definitely not in play:
The US gold hoard is now off the table. Think of a poker cheat who pockets his winnings yet still wants to play. When he loses he writes paper IOU's to the other players. Can he ever pull his money back out of his pocket without having it taken away? Think of an individual who declares his own insolvency and defaults on his obligations to pay, only to resurface later with a windfall inheritance. What problems will he face?

This is not about Greece paying off its debt in high priced gold. It is a systemic shift to meritocracy where if you don't earn it, then you must part with some REAL treasure. Sure, Greece could theoretically sell the Parthenon.

Of Currency Wars

JR said...

Now imagine you have one country with debts denominated in goods and services. Let's call it Greece. Greece owes Germany X goods and services. Meanwhile Germany is still exporting goods and services while Greece is still importing. This leaves Germany with a structural surplus in its Balance of Payments and Greece with a deficit. But gold can reverse this flow in an instant on the BOP at a high enough price. And once it does, it will begin to exert the brake and spur forces on the two countries until the flow of actual goods and services finally corrects and reverses. Once that flow corrects, the gold flow (which is opposite the flow of goods and services) will reverse and subsequently the brake and spur forces will also reverse.

Gold flows in the opposite direction of goods and services. Remember when ANOTHER said, "gold and oil can never flow in the same direction"? Well it's the same thing with other goods and services. Germany and Greece may both be exporting and importing, but Germany is exporting more, which shows up on the BOP as a Trade Surplus and a Capital Account Deficit. At a high enough price, a small amount of gold can (and will) flow in the other direction, from Greece into Germany, and if its value exceeds the (net) trade difference between Germany and Greece, it will turn Germany's Trade Surplus into a Trade Deficit and a Capital Account Surplus.


Once sterilized, gold flowed uncontrolled into the US right up until the whole system collapsed and beyond. This would be similar to Greece selling gold at today’s prices to pay off its debt. The gold would quickly be gone and then the economy would collapse. The sterilization of gold may be at least partly responsible for the roaring 20s, the Great Depression, the rise of Hitler and the Second World War.

You can't squeeze blood from a turnip. That's an old saying. It means that you cannot get something from someone that they don't have. In order to pay its debt in real terms, Greece needs to ultimately get back to producing more than it consumes. And as counterintuitive as this may sound, they will first need to run a BOP surplus in order to get there. You do that by exporting more value than you import.

I realize how backward this sounds, but that’s only because we haven’t seen gold function properly in more than 90 years—beyond living memory. And this is why the limited stock of physical gold is far more valuable than the paper gold promises of New York and London would have you believe. This is why Greece will never part with its gold at today's prices. It is far more valuable. Greece ultimately needs to get back to importing gold which is what happens when you produce more than you consume. But you can't get back to that place by spewing your real capital at imaginary capital prices.

At the true value of physical gold set by the Superorganism, Greece will automatically start running a Trade Surplus on its BOP and Germany will automatically run a Deficit with Greece. The high price of gold is the only factor that can achieve this goal. At that point Greece will be paying its debt in real terms and gold will be flowing. This will spur the Greek economy until that flow of gold is reversed and it starts flowing back into Greece. At that point Greece will have a vibrant economy. And then, as the gold flows in, it will start to act as an incremental brake, a natural governor that prevents the overheating of the new Greek economy. This will occur naturally. This is the future in real terms, regardless of all the monetary floundering. And this future cannot be managed by a committee of experts no matter what economic school of thought they practice. This is Freegold.

Once Upon a Time

AdvocatusDiaboli said...

"This is not about Greece paying off its debt in high priced gold. It is a systemic shift to meritocracy where if you don't earn it, then you must part with some REAL treasure."

looks like the author of such la-la should start reading some greek newpaper of maybe even start with some greek history, instead of watching BigBrother.
The success is obvious, we see it since two years. What improvements have been made in Greece? What was the economical success so far?
I'd rater bet that peace noble prize Obama balances the next budget (LOL), than Greece changes even one cent on their deficit (not even talking about their overall debt).
The funny part: Countries like Slowakia are really starting to loose it, working their butt of to gain prosperity and the benefit from their attempt is to pay for the national identity of Greece. Okay we are now watching this running joke show since two years, it get funnier every time the Troika makes the next visit in Athen. And you know something? Real news are much funnier than BigBrother.
BTW, never wondered why "Greece" wanted to get into the Euro? Too bad that those "insider information" 13yrs ago didnt mention anything about the background. How an austrian economics approach: Because they saw a benefit and face it they got their easy money. Simple austrian school, now what will they do? "Shift to meritocracy" instead of their very best tradition of corruption in order to become an A-grade student? LOL

Spain will be the next fun to watch, sometimes sequels are even better than the original, what were the words? something like "shift to Meritocracy..." in terms of what? Spanish government or spanish banks or the spanish housing bubble, that everybody from the €-fascists will be defending from popping, even with those Slovenian pensioneers will be having their pension cut.

Jeff said...

Why hasn't freegold fixed everything already, asked for the nth time? Because we are are still under the $IMF. Repeat, rewind, repeat, rewind.

FOFOA: Spur and Brake

Once gold is flowing at a high enough price to balance international trade, it will start accumulating in countries that run a trade surplus excluding gold (including gold, trade will balance). Likewise, it will start disappearing from those countries running a trade deficit ex-gold (excluding gold). This is how the spur and brake forces work on an economy in Freegold.

As the gold supply within a "deficit ex-gold" nation dwindles (think: USA), each piece remaining will become more and more dear in terms of other goods and services within that zone. In other words, the purchasing power of gold will rise in the "deficit ex-gold" zone vis-à-vis goods and services in that zone. Likewise, the purchasing power of gold will begin to fall in the "surplus ex-gold" zone (think Germany or China) versus goods and services in that zone because of the large and growing accumulation of gold.

At this point the large quantity of gold in the "surplus zone" will have a lower purchasing power against goods in its own zone, but a higher purchasing power abroad in the "deficit zone" and demand for imported goods will grow while exports will start to fall. This growing demand from abroad will be felt in the "deficit zone" and will be met with new supply. Likewise, the falling demand for imports from the zone with a declining volume of gold will be felt in the "surplus zone" and be met with decreasing supply. Incrementally, the "surplus zone" will slow production and increase consumption while the "deficit zone" experiences the opposite effect. Excluding gold, the balance of trade will shift back and gold will start to flow in the other direction.

Nickelsaver said...

Logical fallacies:

* If this, then because of this. Or, correlation does not imply causation.

* If this, then always this. Or, predominance does not imply permanence.

Anonymous said...

Victor -

Regarding the tweets you mentioned from Jim Rickards,

Here's Fed's mouthpiece talking about the next round of asset purchases:

Amid the recent wave of disappointing economic news, conversation inside the Fed has turned more intensely toward the questions of how and when to move.

Don't you ever, be sad
Lean on me, when times get bad
When the day come, and you know your down
In a river of trouble, your bout to drown

Hold on, cause I'm coming
Hold on, I'm coming

enough said...

GLD lost another 2+ tonnes today. That's just shy of 30 tonnes (2.5%) from 6/28 with zero inflow days in the period.

Anonymous said...

A couple questions about a potential re-evaluation:

1. If Freegold occurs by trading screeching to a halt and the market re-opening at a new higher price, who exactly will be the one who sets the first bid/ask and how will they know where to set it?

Will the bid simply increase essentially from $1600 to $XX,XXX until it finally hits an ask and physical Gold actually flows -- or will it be some well thought out deal between governments and central banks? If the latter, will the calculations they use be as thought out as those given here? Basically, are they smart enough to really arrive at the "right" price or will it be horribly volatile for a some time as the "superorganism" obtains enough information.

2. With so many governments, central banks, and "giants" it seems that coming up with a single, widely accepted number would be quite difficult. This is especially true if nobody is familiar enough with Free Gold to truly be a "front runner."

The next question would be who, if anyone, is currently "front running" Freegold? It is true that several countries are buying "as much as they can" but are they really doing so with an already-calculated number of $XX,XXX in mind?

Nickelsaver said...


For freegold to occur, it would follow that a paper-market for gold would not re-open. It has been suggested that initial bid/ask would come from the ECB. Which should also answer your "front-runner" question.

Piripi said...

”the bid simply increase essentially from $1600 to $XX,XXX until it finally hits an ask and physical Gold actually flows“

Is there another way to establish a market price? Would anything else actually be a “market” price?

[are governments and central banks as smart as the superorganism]?


”who, if anyone, is currently "front running" Freegold?“

I am. I consider anyone in possession of any physical gold is also, although doubtless many of those are not intentionally frontrunning Freegold.

disclosure: I would be in gold at this time based upon my own understanding even with no prospect of profiting from the transition, but rather as the best means to withdraw my personal capital from enabling the continuation of an inequitable system. This is how I can cast a vote that actually counts. By keeping a quantity of gold from flowing in support of a system I don't endorse. Hell, I'd be in gold now if it meant taking a loss. We need to change the way we operate.

I do concede that it was protection of my capital that initially motivated my personal quest to develop a more thorough understanding of 'money', but it has been this understanding that has both shown me how to protect it and then further to understand that it really doesn't matter anyway.

Buy and hold real gold to cripple a system that prevents people from seeing and feeling what they really are, from being able to see and feel their own value. To grasp your own value is to grasp your freedom. Gold is just the catalyst to this.

If it was not gold it would just be something else.

Anonymous said...


I understand the paper market would crater/close for good. Presumably a physical only market would still have some kind of bid/ask in order to match a buyer with a seller would it not?

Is the ECB the only front runner? That is, will Obama/Bernanke for example be:

1. Completely surprised that gold re-evaluates overnight to $50,000/oz.

2. Maybe be off on their calculations by say $10-20,000/oz.


3. Precisely predicting/expecting/driving the final price?

JR said...

ANOTHER: The BIS is the gold broker for all interbank sales

This nuclear option is A) for the BIS to begin operation of a public "physical only" market for gold to be used by the really giant participants, primarily sovereign entities and billionaires, and B) for the ECB to use the price discovered by the BIS in its quarterly reserve asset "marked to market" adjustments.

So here's what's going on: The regular gold market suffices for the general public, some of the "big money" like the ETFs and hedge funds, and the hedging needs of the commercial banks. The majority of this demand for gold is for hedging against a currency crisis like... uh... this one! And the banks are perfectly happy with their contracts to show on paper that they are hedged. Fine. Whatever. But what the regular market CANNOT handle is the really big physical gold transactions. That's where the BIS comes in.


So here's a big point in the logical proof: This market does exist. If it didn't we would have to accept some very unlikely assumptions about large interests like the Saudis, the Chinese and the Russians. For one thing, that they are benevolent to the outside world when it comes to protecting their wealth. What I'm saying is that a market for very large transactions (buy and sell) of physical gold does exist separate from the LBMA and the COMEX, because they cannot handle the size. The BIS is the market-maker in this market and in that role, it must be discovering a price that would rock the financial world if published!

JR said...

"Where do you find the price of gold today? CNBC? In all those places the price of gold will eventually fall. To what? I don't know. Maybe $500. Maybe $200. There are reasons why I think trading may be halted at around $500, simply to make sure that certain contractual gold deliveries are completed to certain privileged parties in the near future. But those will have nothing to do with you. For you, the price of gold that you find everywhere will be $500, but you won't be able to take delivery of any physical. Kitco will probably still sell you $500 shares of its pooled account. But they won't let you take possession. You'll still be able to buy and sell GLD for $50, but no physical. This is why I tell people to only buy physical gold and take possession of it! Today! Don't wait for the price to fall!

This is what will happen to the paper gold market (the only gold price discovery market there is today) when its futures all go into permanent backwardation at the same time. When infinite demand meets zero physical supply. When all COMEX registered physical is withdrawn from delivery. When all the holders of physical gold -->IN SIZE<-- stop bidding for dollars with their physical gold. This will be concurrent with the loss of confidence in the dollar, because it's gold bidding for dollars that matters, not dollars bidding for gold, although causation between the concurrent collapses may be unclear at the time.

Another and FOA wrote about this. They called it "physical gold going into hiding for a while." They also said that the BIS would soon after fill the "gold price discovery void" with a new physical-only gold market for the Giants, because the euro needs an accurate gold price each quarter to mark its reserves by. And they will not use that $500 price if no physical can be had at that price. "

ANOTHER: The BIS is the gold broker for all interbank sales / purchases. Bullion Banks are for sales to other entities.


[FOFOA]Physical gold is different than modern currency. At the CB level, it rarely gets moved. This was a big reason for the creation of the BIS in the first place. If you think about the purpose of the BIS as a clearing system or gold broker for interbank sales, it makes perfect sense that most of the gold deposited with the BIS would be sight or unallocated.

The purpose is so that CBs can transfer gold around the world without having to physically ship it. Avoiding the cost and risk of physically shipping a heavy metal is an important service provided by the BIS. And it does this mostly in unallocated form. When the BIS physically moves gold, the risk is shared, i.e. the risk is on the BIS.

The BIS is owned by its customers, the CBs. They set it up and subscribed to it (bought in) so it could provide services like this. The BIS's own gold is still owned by the CBs because they own a proportional share of the BIS.

Say you want to give me a hundred dollars. You go into your bank and deposit a hundred dollar bill. Then you fund your Paypal account and send me $100. Then I send that $100 from my Paypal to my bank and I can walk in and take out that $100 bill. You’ve just sent me a $100 bill but no one actually physically shipped it across the ocean. It was an unallocated deposit in one location and an unallocated withdrawal in another. This is what the BIS does with gold.

Anonymous said...


Is there another way to establish a market price? Would anything else actually be a “market” price?

I guess I am trying to delineate between some kind of unilateral or "in the know" setting of the price vs. everyone just scrambling to make sense of what is happening.

I am. I consider anyone in possession of any physical gold is also, although doubtless many of those are not intentionally frontrunning Freegold.

Agreed that anyone holding physical is currently "front running" Freegold. I am too, but not of any size that matters enough to be able to set a price after trading stops.

The superorganism (be it giants, banks, governments, or the sum of individuals on the planet) must have the right information in order to set the right price.

The thrust of my question is really that, for those with large enough holdings to impact the "flow" of physical, will they understand Freegold as FOFOA does and be able to set the price accurately enough so that it is not having wild swings between $20,000 to $50,000/oz?

Someone who is intentionally front running would already have this information, but someone who is only holding physical for other reasons would have a whole lot to figure out in only a short timeframe.

JR said...

So who bids? The BIS. Or maybe the ECB itself. Victor says:

Firstly, in absence of a liquid market for physical gold in Euros, the ECB can act as a market maker and, say, bid for a fixed weight of gold at € 8745 per ounce and offer to sell a fixed weight at € 8755. If they bid for and offer more than 10 tonnes each at any time, they are able to make a liquid market for physical gold in Euros, a market in which other central banks can trade the quantities that typically arise in the settlement of international trade balances. As soon as it turns out that there is more weight of gold sold than it is bought (or vice versa), the ECB adjusts the bid and offer prices accordingly. This amounts to assisting the price discovery for large quantities of physical gold while the reserve of the Eurosystem remains essentially unchanged.

Let us stress that as of February 2012, there exists no liquid private market for physical gold in € in which bid and offer would be quoted for tranches of 10 tonnes or more at any time. In fact, this is apparently not even possible in the London market in which gold is traded in US$:

James G. Rickards, Currency Wars, page 26:
In ordinary gold trading, a large bloc trade of as little as ten tons would have to be arranged in utmost secrecy in order not to send the market price through the roof [...]

Michael dV said...

I would not be surprised if a last gasp attempt to set a fixed value of gold vs the dollar happened if there was a big natural (perhaps Euro driven) reset. It would be cumbersome the way our gold is sequestered and maybe the threat of a BIS or some other party injured (in 1971) claim might make the USA hesitate. But a fixed value IS what they know and what most goldbugs say they want...
As Fofoa has pointed out, the defense of such a position is not possible in the long term but in a panic I'll bet it is at least given serious high level consideration. This could even prove beneficial to CWGers as we have a reset price range in mind. If the USG announced a price too high, one could sell some and take a chance. My guess is that they would set too low though. That is the way of politicians.

Anonymous said...


I have read that post and I think I agree/understand with the paper price dropping and physical not being available (going into hiding). This is what I meant by "trading stops." Eventually though, physical has to flow and to do that you need a bid to hit an ask.

From your quote:

for the BIS to begin operation of a public "physical only" market for gold to be used by the really giant participants, primarily sovereign entities and billionaires

This describes who/what will provide the physical only market but it does not say what information will be used in the price discovery, or by whom.

In the sequence of events

1. Gold is at $1600
2. Trading stops / Physical goes into hiding
3. Gold re-emerges at a much higher price

Between 2 and 3, do actors already exist who are waiting for this to happen (entities of large size intentionally front running it). If so, will everyone else who is not "in the know" agree with their higher prices/rationale?

If not, will everyone be hurriedly reading up on Freegold while physical is in hiding, with Gold only re-emerging once both the buyers and sellers understand why the price should be $50,000/oz?

Or will it just be some chaotic period with gold swinging anywhere from $500 to $50,000 as the market figures out in real-time why paper diverged and what level is required to wipe out the global debt?

Piripi said...


I suggest a read of Life in the Ant Farm, particularly the sections discussing distributed intelligence with regards to the ‘super-organism’, and this video on the relative intelligence of government. The video is directly applicable to Michael dV’s comment too.

”Between 2 and 3, do actors already exist who are waiting for this to happen (entities of large size intentionally front running it).“

Yes. Oil for one.

”If so, will everyone else who is not "in the know" agree with their higher prices/rationale?“

If they value the continuing flow of oil, then yes.

Nickelsaver said...


The bigger question is, what fiat would you let your gold bid for, dollars? Would you take $55,000 in dollars if those dollars were devalued say to 1/10th?

For me, I doubt I would be in a hurry to unload into dollars, especially if the USG were to attempt a peg (which they would not be able to defend).

More likely, I would be looking for opportunities to bid for gold from with my dollars.

Jeff said...

FOFOA: "…when the dollar market is destroyed, noone will know the currency value of gold thru an official market." – Another

The key to his statement was "thru an official market."

Why are you worried about how long gold will "lay quiet?" Are you worried you won't be able to sell your gold to cover your expenses? Au contraire! You will be able to sell your gold! You just won't be able to buy. FOA wrote, "dealers would mostly be making a market on the buy side only."

You won't be able to buy any more gold, unless you are willing to outbid (pay more than) all the other bidders for the scarce scraps that are being liquidated by a few shrimps like you to meet personal expenses.

APMEX will report "out of stock" on everything. There will be no known price to advertise, even if they had inventory. You will call several dealers when you are ready to sell and ask for their bids on your Maple Leaf. They will either spit out a bid that will take your breath away, or they will say they'll call you back after they get bids from their buyers. You will sell to the highest bidding dealer, but you won't buy any gold unless you, yourself are the highest bidder.

An official market transmits an official price because somewhere on the supply chain a dealer won't pay more because he can get it from the official market maker at a known price. Or, he won't sell for less because he can sell to the official market maker. Dealers won't be selling their own inventory while gold is in hiding. They'll only be bringing buyers and sellers together through the "auction process" and they'll be earning a spread. The dealer will pit his buyers against each other just like you will pit the dealers against each other.

Through this process will emerge the "dealer network" that I have written about that will last until Another "official market" emerges. When this official (physical only) market finally emerges there will once again be physical gold available to purchase at a known price because it will be at a price established at equilibrium between gold and fiat, each valued at a sustainable price relative to long term capital deployment risks and opportunities. This is what will bring gold back into the market in quantities large enough to make the established price global once again.

And this can only be driven by the giants that do not need to sell scraps to cover their expenses, like us shrimps. This official market will probably be run through the BIS. And given that things didn't fall apart in 1997, it will probably emerge relatively quickly, like a few months. The "many, many years" quote you posted was pre-euro. It was the outcome if the market failed before the euro. This was the threat at that time, "…gold will never trade on an open exchange again, in our lifetime!"

But today, the BIS could launch a physical-only official market in a matter of days I would guess. Here are some of Another's words about the BIS as the market maker:

"One day gold will start up and BIS will deal with it… the BIS knows gold in the many thousands. The future "reset value" of gold is the key… the governments will form some kind of real gold market. Perhaps, the BIS will make the market for the world, in much the same way as the LBMA. …the BIS transactions do create a gold market that is "not as before"! We watch this new gold market together, yes?

Jeff said...

FOFOA: You can read my comments as "ranging from a few days to a few months."

"And gold? You will never know its price. It will stop all trading as it slices thru $10,000+." –Another Oct., 1997 (Gold was $324/oz. at the time)

"…in terms of today's currencies, gold will be "upvalued" to perhaps $10,000 to $30,000 an ounce." -Another March, 1998 (Gold had dropped to $295)

During this time, after the paper market has failed, that GIANT sucking sound you hear when you call your dealer and mention that you have some gold for sale will be the CBs and Giants somewhere at the other end of the dealer network with their unlimited currency, their insatiable demand for gold, and their standing over-bid acting like a giant concubine sucking a golden golf ball down a tiny hose. Let's call these Giants and CBs "the buyers of last resort" for gold. Another said they stand ready to buy any and all physical gold offered for sale.

Here is "today" described:

FOA: "I don't think the BIS wants to be seen as a currency destroyer so they are doing the buying quietly."

ANOTHER: "…real gold would bankrupt them in a minute. You see, a country can buy all the paper gold they want as that gold remains on deposit at the BIS controlled CBs. But, if they try to buy real gold outside the LBMA system the price would explode and the BIS would not come to rescue their currency."

"You will not see 80% or more of gold deals. If it was done with all to see the discount value would be lost as the world price would explode. This is not the realm of any public "wall street". At one time it belonged mostly to the Barron. Now it is large with the BIS and super rich."

And here is the transition to "the future" described:

ANOTHER: "In our present system, all currencies are backed by the US$. As long as the US$ is on an "oil standard" of backing, no other country can change. The BIS would destroy their economy in a second of storm. Many think that a country may sell or cut its CB/US debt backing at will! They cannot, they will not! Oil will not accept another system as long as the oil/gold bond works and the world currency system is somewhat in order. [Here comes the change part…] If a crisis erupts and gold breaks the bond with oil, then a change must take place!"

[Here comes the "at any price" part…] "We will no doubt see a mass run of CBs into gold at ANY price! This I know! As for now, each person must protect worth, as the nation/state is locked from change." [The giants are locked from change until the "crisis erupts"]

True giants can never convert the percent of their savings into physical gold at today's prices as we shrimps can. If they even tried, the price would explode and they would only get a small fraction converted, and they would become the pariah of the global monetary system. So their options are a) play the paper gold game and take a little physical at a time, or b) large off market transactions at a much higher price:

ANOTHER: "Think that I a fool, because I trade gold for thousands US an oz.? You will think much on this in the future."

"Make no mistake, the BIS knows gold in the many thousands."

Jeff said...

FOA: "If we look back thru the writings of Another, we find an old post that says something to this effect, "You think I am a fool because I trade gold for thousands US$ an ounce". It was a strange statement, but stranger still that no one asked about this… It is a real shocker for lesser eyes… "

ANOTHER: "But, how can this be, you ask? It is done, "right before your eyes" and we see it not! … You see, "physical gold is of much greater value than public traders can move it for"! In your world, this cannot be, but it is, and will show for all to see in your time."

"It is known, that a switch to trading of gold to "physical terms" of the same volume as today, would not only bring a huge revaluation in price, it would also destroy the market. The large dealers of today, could not raise the reserves needed to trade a physical market of many thousands an ounce! It is this "possible switch" to "physical trading" that would drastically devalue all currencies, including oil, that much worries the CBs."

"In this way, " the true value of the purchase of real money" is hidden from view! Persons will say in the future, "how could gold be $500 one day and $5,000 the next"? I tell you now, it is already past that level, as in "present reserve currency dealings" it is not seen!"

JR said...


who is the BIS?

ANOTHER: The BIS is the gold broker for all interbank sales / purchases. Bullion Banks are for sales to other entities.

how will they know where to set it?

So here's what's going on: The regular gold market suffices for the general public, some of the "big money" like the ETFs and hedge funds, and the hedging needs of the commercial banks. The majority of this demand for gold is for hedging against a currency crisis like... uh... this one! And the banks are perfectly happy with their contracts to show on paper that they are hedged. Fine. Whatever. But what the regular market CANNOT handle is the really big physical gold transactions. That's where the BIS comes in.

More importantly, they open a two way market and let it float , so where it ends up is what matters, and that is up to the market.

And they know its coming:


The last small gold war ended in the early 1980s, as the choice was to use the US$ or go to a gold based economy. No other reserve currency existed, and gold lost the war as all continued to buy dollar reserves.

But by 1980, Europe was working with the BIS to implement a new "reserve currency".

The European plan was to support the $IMFS at least until a new fiat "reserve" currency could be established, one large enough to absorb the shock of a failing reserve currency, to avoid being forced back 100 years into a physical gold-based economy which would have been very traumatic. This effort took 20 years from 1980.

FOA: Truly, the evolution of this story will be how that war ended then and now the dollar's war with the Euro began! A very large part of that war strategy, employed by the ECB/BIS, was to let the dollar/IMF faction hang themselves by expanding and supporting the whole arena of this dollar paper gold market. Inflating the gold marketplace with so much "paper gold" that we would eventually have to bankrupt ourselves just to keep the dollar in the war game against the Euro.

Michael dV said...

It is astounding that if Another is/was correct that the politicians (not just the US but the entire planet are (or appear to be) completely unaware. Even those one would expect to be in the know, don't breathe a word to suggest such a reevaluation could occur. I believe that Another is/was correct. I therefore have to recognize that a massive conspiracy is occurring. There is a plan, developed over decades by great thinkers and an entire currency built to be put into play and yet not one prime minister or president or treasury secretary acts like this plan could exist...that is remarkable.

Piripi said...

Who decides the exchange rate of FG?

The value of gold is established by the bid-ask between the net-producer and the net-consumer.

Piripi said...

Michael dV,

Where is this "plan" referenced in the documents and articles from which the euro arose? The aspect you refer to as the "plan" is simply beyond the frame of reference of the politicians. It's beyond the frame of reference of most people who have even read Another. It is simply prudence exercised by persons with a longer-term perspective than your typical politician, and it will be simply 'good fortune' and 'the way of things' when it cuts the Gordian Knot of an otherwise intractable situation.

The world would fall back to gold anyway. Is it not good fortune that this change be cushioned?

Nickelsaver said...

I don't think conspiracy is the right word. There is definitely a long running currency war. The $IMFS placed its bets on infinitely expandable credit, but there was always another side of that bet. Perhaps denial is a better word. If there is a conspiracy, it was to deny the relevancy of gold within the western mind. But it was/is the west believing its own BS.

IMHO, Freegold would not seem so strange a concept if it immediately followed the gold exchange standard. But one would have to be an elder at this stage (and also have understood the evolution of money) to even be aware the significance.

Personally, I am grateful for FOFOA for the enlightenment, but am also somewhat amazed that it took less than a generation for the masses to forget what the value of gold really is.

Piripi said...

It's a conspiracy in much the same way that the sun coming up in the morning is a conspiracy... is it a crime to make sure the larder has something in it for breakfast?

Wouldn't you be pissed off if it were empty?

Piripi said...

"Gold has always been the most political metal our world has ever known; political because it offers so much power to those that hold it in their hand. Many of the downtrodden look at government policies and say:

-----"they dictate our wealth and put us in debt so as to control us"! -------

Conversely; A simple person can control his controllers by staying out of debt and owning a wealth no government can dictate the value of: Gold Bullion!


-- value it with official contracts and currencies and your wealth is their power ,,,,,,,,,, keep it as your savings of ages,,, and your wealth becomes their master!"


FOFOA said...

I think that Michael dV raised an interesting conundrum! It seems to us, from our ant-like perspective, that if ANOTHER was correct *and* he was telling the truth about certain details, then there must be a big conspiracy to keep it quiet. The details in question were in Jeff's recent comments:

ANOTHER: "You see, a country can buy all the paper gold they want as that gold remains on deposit at the BIS controlled CBs. But, if they try to buy real gold outside the LBMA system the price would explode and the BIS would not come to rescue their currency."

"You will not see 80% or more of gold deals. If it was done with all to see, then the discount value would be lost as the world price would explode. This is not the realm of any public "wall street". At one time it belonged mostly to the Barron. Now it is large with the BIS and super rich."

ANOTHER: "Think that I a fool, because I trade gold for thousands US an oz.? You will think much on this in the future."

"Make no mistake, the BIS knows gold in the many thousands."

ANOTHER: "But, how can this be, you ask? It is done, "right before your eyes" and we see it not! … You see, "physical gold is of much greater value than public traders can move it for"! In your world, this cannot be, but it is, and will show for all to see in your time."

"It is known, that a switch to trading of gold to "physical terms" of the same volume as today, would not only bring a huge revaluation in price, it would also destroy the market. The large dealers of today, could not raise the reserves needed to trade a physical market of many thousands an ounce! It is this "possible switch" to "physical trading" that would drastically devalue all currencies, including oil,that much worries the CBs."

"In this way, " the true value of the purchase of real money" is hidden from view! Persons will say in the future, "how could gold be $500 one day and $5,000 the next"? I tell you now, it is already past that level, as in "present reserve currency dealings" it is not seen!"

The conundrum is that a big conspiracy of silence is highly unlikely, yet everything else ANOTHER says adds up. So how can these statements about a gold market hidden from our view—"But, how can this be, you ask? It is done, "right before your eyes" and we see it not!"—be true if there's no conspiracy of silence?

I think the answer is simple enough even for Father d'Okham. It boils down to perspective. None of us here on this blog, even the Giants among us like AD, are anywhere near the level where we would have encountered even a glimpse—or overheard a muffled whisper through a closed door—of the kinds of transactions that take place. And even if some on that level are here reading my little blog, they don't have the whole picture.


FOFOA said...


It's like what Blondie recommended to Athrone: "I suggest a read of Life in the Ant Farm, particularly the sections discussing distributed intelligence with regards to the ‘super-organism’." The level that would be exposed to these dealings comprises its own sort of "sub-superorganism" with its own Giant-level distributed intelligence (AD notwithstanding).

What kind of money could seek to buy 200 metric tons of gold, a system-busting amount? Back at the turn of the century that would have been around $2B. Today it's about $10B. In 1974 it was around $1B. And in 1974 "oil's" revenue had just jumped to around $1B every three or four days, or about $8B/month. How much of that windfall from a finite resource do you think they wanted to preserve for future generations versus wasting it today on indoor skiing in the middle of the desert? And how much did they trust gold's 5,000 year record of preserving value over modern Western alternatives? Can you imagine that the person shopping with "savings" (excess currency) on that scale has (perhaps) a different perspective on things than you?

But it's not just about perspective. It's about the roadblocks he will encounter trying to preserve those savings. He can't just buy into the markets that you and I use. He'd distort the price too much and lose most of his savings. He wants to preserve those amounts as much as possible at their real value, not rock the boat. And the math is pretty simple when it comes to gold. I can imagine this big "conspiratorial secret" being explained on the back of a cocktail napkin in London not less than a few times over the last 40 years.

So we have all these Giant-sized entities pursuing their own self-interests making up the distributed intelligence of a "sub-superorganism" comprised of super-producers converging on London to preserve their wealth—and all roads lead to the BIS once you head down this gold trail with a few dozen "bil".

"You can buy paper gold to your heart's content. The bullion banks will take great care of you while you're in London! Drinks on the house! But if you go for the physical outside of official channels and blow up the price, the math is simple, you won't get your gold and, furthermore, you will be more than frowned upon by some of the most powerful people in the world. But if you've got, say, $200B you want to preserve for posterity in 1994, we, the BIS, can make it happen for you!

"You won't get the big revaluation windfall when the current system blows up, but your present purchasing power will be preserved. So let's see, $200B in 1994 would buy you 16,000 metric tons, twice the US stockpile—impossible! But we, the BIS, can give you 1,000 tonnes in physical which works out to a price of around $6,000/oz. Here's a spread sheet that'll show you that's actually a FANTASTIC deal in terms of future currency probabilities. By the way, you can't take that spreadsheet with you. Just look at it and decide—paper at $390/oz or physical at $6,000/oz?"

Only a very wise man at the center of all this could have put it all together the way ANOTHER did for us. No big conspiracy. No large number of people keeping a secret. Just simple math and the distributed intelligence of global Giants seeking their own self-interest (AD notwithstanding).


costata said...


I think that eventually the US government (and friends) will want hyper-inflation and need the revaluation of gold.

IMO that combination gives the US PTB a winning hand for the new economic "game" that will emerge after the transition to the new monetary/financial/economic architecture.

As I remarked in some comments on an earlier thread I think the USA will be the biggest winner in this new system. It doesn't need to be the result of planning and careful execution. Just by accepting the inevitable and following the lead offered by others they can come out on top (meaning first among equals).


costata said...

The Trolls

I want to make some observations about this teutonic fellow. Firstly note his comments and responses to replies from others here. He repeatedly raises the same objections, claims and assertions. The standard he is demanding of us is convince me.

And the standard he offers us in return is no engagement from me until I'm convinced. The problem is that he already has deeply held convictions about the Euro, gold, markets and perhaps riesling as well for all we know. He is the only one who can even minutely modify any of his own convictions let alone abandon any of them entirely.

Absent any genuine sign of willingness from him to even question those convictions no real debate is even possible. The situation is akin to presenting your case before a judge whose mind is already made up in front of a rigged jury.

I suggest we continue our dialogue by talking around him and if he persists and seeks to be disruptive our favourite Yeti might consider adding both of these idiots (the dipshit fake-another as well) to the select group of dis-invitees to this forum. Three or four, thus far, if memory serves me.

If a grand total of half a dozen trolls banned at a blog on the air for nearly four years constitutes "censorship" then I think the standard of free speech demanded of this forum is unrealistic. I think we should demand some quality thinking to support that speech as well.


AdvocatusDiaboli said...

regarding your giant talk. Your regular assumption about people that have absolute everything one can think of for their personal physical surrounding (and more) and are drowning in fiat..... WHY do you assume that all they are looking for all day is to get more physical gold (in terms of flow!).
I mean, I really wanna understand, how do you get to that crazy assumption?
And what amazes me is especially such demanding thesis by somebody that did not reach the marginal utility of wealth, because otherwise you wouldnt have the donate button, asking before christmas when your checkbook runs down.
Sorry, I dont mean to pick on your financial situation. I just wanna know and understand why you come to such assumption?
Greets, AD

AdvocatusDiaboli said...

The problem is that he already has deeply held convictions about the Euro

No, it is not a conviction. It is my contribution to the blog, from somebody sitting in this mess, seeing it with his very own eyes, every morning what is going on.
Dont you think, that it such be you to adjust ones in a while a little bit to reality, instead of insisting on some internet writings 13yrs. ago? Especially when youself are sitting one the other side of the planet?
Greets, AD

Robert said...

Costata, I agree with you. I will add that I welcome healthy skepticism, but only when the focus remains on the ideas. A skeptic becomes a Troll when his purpose is his own entertainment rather than advancing the dicussion. It becomes a distraction and detracts from the quality of the blog. Maybe there is a middle ground for our gracious host to consider, such as limiting him to one post per day?

JC said...

I wish to humbly add my vote that AdvocatusDiaboli be restricted in some way. I may have only posted a few times here but I will put my credibility up against AdvocatusDiaboli's collective words any day and will if necessary post more to see that process through.

Jeff said...

I am thankful that there are not a dozen ADs present. If you follow the PGA tweeters, you will find them battling a staggering array of ignorant, arrogant 'experts' who understand absolutely nothing. I couldn't possibly be bothered trying to inform these people, but some of our friends have the patience of Job. My only hope is that those arguments stay away from comments here, so I can easily avoid them.


It seems someone noticed the continuing GLD inventory drain, and the price is rising again. How high will it have to go to restock the shelves, if indeed they can be restocked?

AdvocatusDiaboli said...

In case FOFOA considers himself far too superior to answer to that question. I guess anybody else that believe in this particular FG assumption, is welcome to explain, instead screaming "HANG THAT DISBELIEVER".

ChrisF said...


What I am trying in vain to understand is why the giants didn't simply buy controlling stakes in a few gold mining companies during the late 1990's in order to obtain physical @ (say) London fix + 5% instead of doing deals with BIS @ huge premia.

Surely, a controlling stake in some mining outfits could ensure 100 mt/yr. of physical direct into a hole in the desert, in near perpetuity, at reasonable (very low) pricing?

I haven't heard of these sort of deals and am wondering why not. Has any one else?

Anand Srivastava said...

Costata: There used to be killfiles on newsgroups for this purpose. Then people could self sensor. No need for a moderator to do so. Unfortunately Blogger doesn't provide that :-(.

I still get something, sometimes from the responses to his comments, as I am new to the forum/freegold. I can understand how difficult it is to repeat the same thing over and over again.

Jeff said...


What would happen if big money started buying gold mines? Why would those who care more about their privacy and the flow of gold than the price, expose their business to the public? What if 100 tons isn't a lot to them? Don't think like an ant if you want to understand a Giant.

ANOTHER: "You see, a country can buy all the paper gold they want as that gold remains on deposit at the BIS controlled CBs. But, if they try to buy real gold outside the LBMA system the price would explode and the BIS would not come to rescue their currency."

"You will not see 80% or more of gold deals. If it was done with all to see, then the discount value would be lost as the world price would explode. This is not the realm of any public "wall street". At one time it belonged mostly to the Barron. Now it is large with the BIS and super rich."

ANOTHER: "Think that I a fool, because I trade gold for thousands US an oz.? You will think much on this in the future."

"Make no mistake, the BIS knows gold in the many thousands."

ANOTHER: "But, how can this be, you ask? It is done, "right before your eyes" and we see it not! … You see, "physical gold is of much greater value than public traders can move it for"! In your world, this cannot be, but it is, and will show for all to see in your time."

Piripi said...

Just some raw data for those who are interested. I have an inbox with all comments to this blog for the last nine months, and it's pretty easy to extract some statistics from that.

So far in 2012 there have been 10092 comments posted, and these are the totals of some of the more prolific (and notorious) commenters in those 199 days:

JR 955
costata 685
AdvocatusDiaboli 649
victorthecleaner 432
Nickelsaver 425
Motley Fool 381
DP/ClydeFrog/Crack 324
Edwardo 312
Jeff 287
Gary/90days/60253(FakeAnother) 270
e_r 221
Michael H 215
Aquilus 180
jojo 174
Blondie 147
Wendy 135
Beer Holiday 132
burningfiat 126
enough 117
Texan 115
Aaron 114
Carl 114
Michael 89
Robert Leroy Parker 87
Victory 85
Matt 84
Biju 82
Alien 72
Anand Srivastava 64
Max De Niro 60
Aiionwatha’s Nation 56
ampmfix 49
Bjorn 49
/sleepingvillage/ 48
matrixsentry 46
Desperado 42
Indenture 38
d2thdr 36
ChrisF 34
zenscreamer 28
holdinmyown 23
Aristotle 22
50s Quiff 18
Bron Suchecki 15
78Rubies 15
Julian 11
Boefke 9
Borjesson 9
Ender 6
The Dork of Cork 1

This was amusing for a while, and then I got tired of it, so I think that’s the most prolific as well as a few other names that caught my eye before I had enough. I did notice that many of my personal favourites hardly post at all, so a number of them aren't listed.

costata said...


This is stunning data:

DP is ClydeFrog AND Crack.

sean said...

Regarding giants buying gold, it's interesting that large gold acquisitions in the papers tend to be reported in tonnes, with a conversion to local currency value at the current rate apparently added by the writer. As far as I'm aware the actual price paid isn't ever indicated. But rather than proving a conspiracy, this probably just demonstrates how we tend to fall into the trap of making assumptions. And also the simplistic nature of news analysis!

I'd also point out that the necessity to invoke a conspiracy to advance freegold is no greater than the necessity to invoke a divine creator to account for the existence of humans. That is to say, the superorganism evolves, as do we. Some were wise enough to foresee the evolving financial landscape, and some are wise enough to listen to those who foresaw it!

Indenture said...

What kind of ducking fickhead tells you to convince him of something because you're so smart while saying he can't believe you are so poor!!!!!!

Sir, please don't insult your host.
Talking about your own or others money is low class, in my opinion.

Jeff said...

Two trolls in the top 10 means the signal/noise ratio is falling.


costata said...


I second this idea as an alternative to a ban:

..such as limiting him to one post per day..

If you are on a limit of one comment per day it might introduce a healthy discipline into the formulation of that comment.

Aquilus said...


Read: Aristotle story of oil, gold and value

Simple answer: they did not buy the mines. They financed their capital needs in exchange for future repayment of those loans in bullion.

And unlike the 70s panic, one paper gold market available, they finance future bullion by taking a loan against future gold. Asset for asset matched in time. No price pressure directly.

As for all the extra moneyin the 70s and 80s? What did not finance the explosion in gold mining? Some of it did go in LBMA, some in futures as price was dropping since demand on paper market was down with main bullion buyers acquiring mine output away from the market.

But read the post above; Aristotle does the explaining 100 times better than I could.


Thanks for those stats. Very interesting indeed...

Aaron said...

Very interesting Blondie. It seems that I'm neck and neck with Carl. How depressing.

ChrisF said...


Many thanks for the Aristotle link. The article and
comments section were excellent. I had not seen these before.

ChrisF said...


Thanks for taking the trouble to answer. I will now revert to my ant-hole.

Anonymous said...


I found this comment by FOFOA as a very relevant answer to your question:

Buying the mines would have been a riskier strategy than the one proposed above. When the paper gold market finally malfunctions, the mines will either be nationalized or heavily taxed, something like a 95% tax, since they are essentially producing money that belongs to the nation (in-ground wealth reserves).

Another way to look at it is that when you buy mine shares, you are only buying stock in a corporate entity, not in the underlying assets it has state permission to invade. The state controls the land on which the mines operate. The corporate entities are there by permit only.

Rather, why not leverage your future oil production for some future real money? Especially if you realize like the other Giants that this dollar system only had a limited life span once it left gold. It's quite a brilliant design when you consider the importance of their oil to... well, just about everything.

I'm sure you read it, I'm posting it in case others following your line of thought missed reading the comments from the post linked by Aquilus.

DP said...


DP is ClydeFrog AND Crack.



Only 2? %<]:)

enough said...

Misery loves company

Silver and the Miners, the so called "leveraged plays on gold" are going to be hitting the bottle hard this evening.

Risk on fire and these two sorry sorts cant get off they're asses.

I call a break above 60 in the GSR wthin a week.

Jeff said...

Think big, Chris. It makes understanding a lot easier. I'm just an ant too.


I think you broke twitter arguing with that nitwit.

Yields still falling.

NEW YORK (MarketWatch) -- The Treasury Department sold $29 billion in 7-year notes [: 7_year] on Thursday at a yield of 0.954%.

Anonymous said...


To understand where the (invisible) red line lies, we need to consider the one area where Krugman is correct: There is simply no way the US economy can grow from here without expanding the money supply and adding debt. Either the Fed keeps printing and the government keeps spending, or the economy will contract. That is the sober, unpleasant reality of the current starting point. And with the debt burden so enormously large, if the economy contracts, debt servicing costs will become prohibitive and eventually there will be a general, economy-wide debt default, public and private.

Now there is minimal support in Washington for a general default, so it is rather obvious that the other road is going to be taken. The Fed will continue to print and the government will run deficits. However, while the economy will continue to grow in nominal terms, if only weakly, there is little in these policies to make it grow much if at all in real terms. Indeed, if the federal government’s share of the economy continues to grow at the expense of the private sector, then beyond a certain point, real growth will become impossible, as the public sector must tax the private in order to grow. But if the US economy cannot grow organically, then it is going to have to find this growth somewhere else.

How is that going to work? Well, Krugman points out in the debate how Great Britain managed to pay down its colossal debts in the decades following WWII. But he neglected to mention how this was done: First, Britain devalued the pound by 30% in 1949. But even that wasn’t enough. In 1967, the UK devalued the pound by another 14%. In the early 1970s, the pound declined further. In 1975, the IMF (read: US, Germany, Japan) provided the UK with emergency lending assistance. So yes, Great Britain managed to reduce its debts as a share of GDP, but this was done overwhelmingly through resort to currency devaluation, with a bit of foreign generosity and even capital controls thrown in to boot. Is this what Krugman is advocating for today? That the US, the issuer of the world’s pre-eminent reserve currency, should just devalue and, if necessary, seek a bailout from its foreign creditors, including such friends as China and Russia?

The idea is too absurd to contemplate. There is just no way that a reserve currency can remain so when the issuer resorts to devaluation and seeks bail outs from its creditors. The dollar’s loss of reserve status is simply inevitable at this point.

When financial markets begin to understand that something is inevitable, what was regarded as a long-term risk is apt to become a short-term risk in short order, with obvious implications for interest and exchange rates and asset valuations generally. Krugman’s red line already has been crossed. The question now is how long it takes for financial markets to notice. Naturally, those investors that notice sooner, rather than later, and take appropriate action, stand a chance to protect their wealth through the turbulent times ahead.

Full article by John Butler here.

Anonymous said...

More from Butler in Caught in a debt trap

That said, the US is not in the same debt trap as much of the euro-area because its debts can be systematically devalued through monetisation by the national central bank. In the euro-area, this requires some degree of consensus, and the interests of all members are not congruent. Hence the constant back-and-forth between those who want to be bailed out of their debt traps, and those who are being called upon to do the bailing.

The US has no such monetary straightjacket, or any fiscal straightjacket for that matter. President v Congress, Republicans v Democrats, left v right: If there is anything the post-WWII history of US monetary and fiscal policy should teach us, it should be that when it comes to growing the money supply and the federal debt, Washington DC is run by a single branch of government, a single party and a single point on the left-right spectrum. And this branch, the party that controls it and its political orientation is not something that changes with elections. It is a national political pathology.

But remember, the US debt is denominated in dollars. The Fed can assume a growing portion of the debt with incremental monetisation (QE3, 4 … X) and, Vóila! the debt can be devalued to whatever level that branch, that party, deems desirable. While this might imply that government salaries are also being devalued along with the debt, no matter, they can just vote themselves more of those periodic salary increases and all will be well in DC and also some rather nice Virginia and Maryland suburbs.

Those not in a position to vote themselves pay rises should consider buying some gold instead. Diluting dollars are not a store of value. Gold is.

ChrisF said...


Yes, saw that v. good FOFOA answer in the comments section. Financing 'new' production, I assume, could not be classified as 'rocking the boat' that buying out existing production would possibly have been? Very clever.

Aquilus said...


First off, back to a regular keyboard - sorry for the typos above (on mobile device).

The key for me in the Aristotle story above were:

1. When conversion of $ to physical was uncertain, prices of oil spiked as assets (oil) could not be replaced with assets (gold), and only paper was stacking up. So much paper, that they could not spend it on the stuff that the economy produced at that time. And paper would not keep its purchasing power in time, so more paper was needed to make up for that flaw...

But as the gold market re-formed in the current incarnation they still had the issue of what to do with those dollars that had accumulated ($100 billion a year in the 70s!). So they moved to financing deals for mines (among others).

2. Even more interesting is the fact that with gold available to them in limited quantities (not 100 billion worth for sure) after the 2nd oil crisis, they would pump only enough oil for their budgetary and lavish lifestyle needs, but would keep most of their oil in the ground otherwise unless this asset was replaced by another asset that would keep it's long time purchasing power.

They are not stacking dollars in huge quantities. Rather, they moved to "take a loan against future oil to finance future bullion delivery by the mine that needed the loan."

Smacks of a lot of common sense to me..

Aquilus said...

Typo above: "..keep its long time..." not "..keep it's long time.." .

burningfiat said...

Jeff said to DP: I think you broke twitter arguing with that nitwit.

Haha, yup. Amazingly long dialogue for twitter. Not quite sure twitter was designed for that!

Also, not sure I agree with the term nitwit though. I kind of enjoyed to see a passionate, but yet eyes-wide open opposing view of the PGA view prevalent here.
I mean, it is hard to find people not into gold around here. Even our resident troll is into physical gold.
Given that presumably only 5-10% of the western population are gold owners, it is amazing how rarely this is seen in these corners of the Intarweb. Non-PGA's also use the Internet, right?

Here was someone just not buying into the Freegold material (of course tragic for her wealth preservation), but it seemed a conscious decision to only invest in businesses, based on moral views.
Exemplified by this message for instance:
"EVERYTHING needs to be productive. Inactive SoVs are simple selfishness writ large"

Naturally, nothing could be more wrong seen from here. But it is anyway enlightening to get a picture of the kind of views anti-PGA people holds.

Thanks for the entertainment, DP! :-)

Aaron said...

Hi Burning-

I missed the Twitter excitement, but assuming I understood your comment I have to disagree on AD's participation. While it is enlightening to occasionally have folks show up and debate the thesis of Freegold, the majority of AD's comments were intended to focus attention towards himself and create confusion for new comers (case in point where he accused the participants of this blog of conflating HI with high-priced gold). And have you noticed AD's most recent comments turn towards getting a rise out of our gracious host with trash like this:

"And what amazes me is especially such demanding thesis by somebody that did not reach the marginal utility of wealth, because otherwise you wouldnt have the donate button, asking before christmas when your checkbook runs down. Sorry, I dont mean to pick on your financial situation."

I would have no problem seeing AD join the likes of Shelby.

burningfiat said...

Hi Aaron,
The twitter exchange was with @Frances Coppola, not AD!
My comment was just highlighting the fact that AD owns physical gold even though he disagrees with Freegold in a troll-like way.

Frances (from twitter) was OTOH morally against gold-hoarding. A different view altogether!

I agree with you on the increasing lameness of AD's contribution here at blogger!

Anonymous said...


I missed the Twitter excitement

The excitement stems from Blondie's axiom:

you don't own your baggage. your baggage owns you .

We all carry our baggage, but setting aside and entertaining a thought that is completely against what we fundamentally believe is not easy.

But one has to at least be willing to entertain the ideas presented here. When they are unwilling, that is when their responses turn into the sickening thuds of these thumping heads, wasting themselves against well-established bedrock.

Aaron said...

Ah yes, burning. Now I see what you mean. I just found the tweet exchange between Coppola & Co on Coppola's page. *phew*

AdvocatusDiaboli said...

due to popular demand, lets kick some further ass on the FG fallacies:
"Gold will flow? (at crazy purchasing powers, so some lazy suckers can finally feel rich?)"
okay okay now some shrimps are hoarding to cash out on some stupid giants.... although completely strange assumption that has not yet been answered, but lets assume that one for a moment. But actually that is not the idea of FG, that is only one of the assumption, so some of the folks feel warm. The assumption is, that the gold will flow.
The problem of todays setup is: Remember Ben&Chen? okay, so since we have all the nice cash4gold shops, Ben already lost most of his treasure in the family, sure he still has some left over when the final day of reckoning comes, but basically if Chen has already 155,000t, and Ben is proud to present his >=?8000t, guess what will Chen say?
"Oh that is really great Ben, I will still supply you with free fish, since I really really wanna have those very last 8000t of useless yellow stones?" And the answer is NO!!!111 Since all family memembers of Chen dont even know where to stack all those useless yellow stones beside the fish they catch each day on the endless beaches of lines drawn in the sand.
On the other hand the family members of Ben that have those few little nuggets left are the champs of their beach camp? How do we call that camp? Somalia? Will they be even able to buy back a fishing rod with those 8000t, while Chen's family is having problems to count those 155,000t since they are busy people settleing their debt day in and day out with real work and goods? Who says that there will be even a fishing rod for that, but rather only an ugly worm as bait?
But lets even assume that "the gold will flow" for now plenty of fish. Looking at the left Ben folks, they would not even try to buy a fishing rod. That's what they even admit in public while waiting for godot, they just want to have more fish at a better ratio than before. So the yellow stones will continue to flow in one direction.....
Greets, AD

Indenture said...

Does anyone speak LALALA because I don't understand the point of the latest diatribe.

FOFOA said...

Alright AD, you're done here. While you have crossed several lines of decency, I am banning you more so because of quantity than the poor quality of your arguments. This has literally become the AD show with 23 comments on this post alone, and some of my long-time favorite commenters have petitioned me to ban you. I have watched the quality of this comments section fall since you have been increasing your presence here. I realize you do have your fans and so, just like Art and Shelby, they can follow your objections to Freegold at your own Anti-Freegold blog which is linked in the post. You have really made your case well there, not so well here.

Frankly I don't have a problem with the poor logic and weak arguments you present. I generally just ignore them. But your proliferation refuses to be ignored so you will be banned. Feel free to post your last few rants about how I censor opposing views. They will simply be deleted, just like I did with Art and Shelby's final comments. If you would like some ideas, here are Art's and Shelby's final comments:

Art said…

So now Mr. Freegold is censoring ALL critical comments. Pathetic.

By Art on The Return to Honest Money on 5/28/11

Shelby said…

FOFOA, I see you removed all my posts. But I have a copy of all my posts at my forum and at several other blogs. I will soon reveal you as the fraud you are. Hahaha, you think you can censor me! No chance dude.

By Shelby on The Old Hyperinflation Question on 6/15/10

Congratulations AD! You made it into a very exclusive club!


Aquilus said...


After running the above through the "Retard to English" translator I get:

This person says:
"All physical went to cash4gold. At the same time all physical did not go to cash4gold and is still in their possession. Fish will continue to be sold and not sold at higher and lower prices for and not for gold under or without any coercion."

At this point the following message appeared:

Translator program error. Error is: "Ah, f..k it, even I give up. Why bother?"

Aquilus said...

Oops, I was a minute too late. AD already banned...

Tony said...

Thanks FOFOA. Your decision to ban AD came none too soon for me.

Anonymous said...


Thank you. You are a distinguished gentleman and true humanitarian.

Anonymous said...

And thenceforth, the comments section at the FOFOA blog induced thousands fewer face-palms.

Nickelsaver said...


a little parting music for the banned one

Victory said...

poopyjim & nickel,

ren & stimpy would also like to contribute one final song and face-palm for the dearly departed


Michael dV said...

I'm sure you do not need to be reassured but AD was long over due for the boot. I tried to read his rants again but could not understand what ever it was he was trying to say. Fortunately (for me) I gave up reading him weeks ago and only took a quick peek over the past few days. My ophthalmologist says there was no retinal damage.

Anonymous said...

When most of us start skipping over someone's prolific comments, it's time for that someone to hit the Highway

M said...

@ e_r said...


Please don't write that here. It seems like Austrians, ZH and whoever pump Krugmans tires once and awhile. I know Mainly on compassionate grounds for the mentally retarded but still..

I think new visitors to the Austrian school or freegold might actually get confused into thinking that Krugman knows anything about anything with these comments. He is a smug little elitist lowlife. Even when we pump his tires, he never says anything positive about us and he never will.

M said...

Indonesia had forex reserves of 20 billion dollars in 1997. At the 1997 gold price of $300 an oz, that is equal to 1890 tonnes of gold. The USA has around 50 billion in forex reserves (excluding gold) in 2011. At today's price that's 810 tons of gold.

The US has about $100 per person in forex reserves. Switzerland today has $40,000 per person in forex reserves.

Anonymous said...


yeah, but that's because the US gold is booked at $42.22/ounce. Once they get over it (probably after the dollar has lost real value substantially), it is quite a lot. Today at the London market price, it is $422bn or $1340 per capita.

Once gold is valued higher relative to both $ and Euro, the gap between Switzerland and the U.S. will close.


Anonymous said...

How did music like this ever get written? Has anyone else ever seen the "Yacht Rock" online short series by Hollywood Steve? Pretty funny.

enough said...

Hi Ho Silver, Away !!

Get up silver, it's time to go....

Oh my god, Silver's not breathing....

Silver's DEAD !!

Peter said...


Silver is "leveraged to gold". So gold must be going down too.

Anonymous said...

Money market mutual funds that invest in foreign currencies with compounding interest --

aaaand it's gone.

Full FRB paper discussing Minimum Balance at Risk.

M said...


I think calling the end of silver and gold stocks for freegold reasons is a little early. Gold stocks out perform gold on this puke indicator rallies like last summer. I m waiting for one to unload some stocks. I think its gonna come

M said...


I think the 50 billion is just cash forex. Not including gold at any price

Indenture said...

The list of the ECB marking their gold to market over the years and the steady climb in the price of gold has been published in the comments section before.

If memory serves doesn't gold have to jump like $200 soon to continue the upward trend? I believe we have slipped backwards. At some point the trend must stop and slide down if gold is going into hiding.

(since the proliferation of angry German questions has ceased I thought I would throw in a calm East Coast of the US question)

enough said...

Hi M,

you write,

"I think calling the end of silver and gold stocks for freegold reasons is a little early. Gold stocks out perform gold on this puke indicator rallies like last summer. I m waiting for one to unload some stocks. I think its gonna come"

I have enough words in my mouth that I dont need anyone put any more in there :-)

I'm just saying that the silverbug/minerbug mantra that it's ALL and ALWAYS manipulation is being put to test here.

Paper gold is rallying and leaving the levered derivatives in it's wake.

All I am pointing out is that the market (pseudo mkt if you like)is and has been saying for some time that gold is the place to be.

I do think the GSR will get to one !! when both paper gold and silver are at zero ( or would that ratio be zero? :-)

best and great weekend to all, E.

enough said...

M, BTW and FWIW,

I do have a few "special play" juniors.

keep an eye on V.GWY

put Eikke batista and AUX in the google search as well.

If this is not allowed, sorry in advance :-)

Ryan said...


Denominated in €, gold has increased from 260 just before the turn of the century to, most recently, 1,246.624. Today it hangs a little above 1,300.

Denominated in $, the rise has been just as dramatic, though I'm not sure where your $200 comment comes from, or if it even carries significance since the Federal Reserve/U.S. Treasury do not engage in a practice similar to that of the E.C.B.

enough said...


If you were a Giant and you had riff raff four wheelin right smack dab in the MIDDLE of your Estate (cause the riff raff own it)

What would you do?

Tony said...


While I'm no silverbug, I hold no venom for silver or those who hail it. As of right now, silver isn't on the ground needing's outperforming gold at the moment. I believe this will certainly change in the future, but cyclical patterns suggest a strong liklihood of a closing GSR gap in the more near term. Of course, if freegold steps in, you can stomp a mudhole in the heart of silver, as the GSR won't even be a relevant dataset at that point.

Tony said...

Holy Treasury yields, Batman!

M said...

@ enough

u said "All I am pointing out is that the market (pseudo mkt if you like)is and has been saying for some time that gold is the place to be."

Sorta kinda true... The ya-hoos are not buying mining stocks because they don't believe in or understand the underlying business which is selling physical gold.

enough said...

GLD drops another 4 tonnes

This is getting chronic

Michael dV said...

its really quiet here today

Michael dV said...

Has anyone here (American citizen) ever stored gold in a foreign country? Where you comfortable doing so? Are you willing to share that info?

FOFOA said...

Michael dV:

Indenture said...

Ryan: I don't know why I used Dollars instead of Euro when I was asking about the price of gold for the ECB. Duh.....

The chart I'm talking about is the one JR puts up every now and then. The one that shows the steady increase in price over the years. I was just wondering when the next 'gold price' would be listed and if it will be larger than the last based on the trend.

Tony said...

For all the Eurozone worry we've been hearing about in MSM, this presents an interesting change of pace with the IMF focusing on the US:

costata said...

I've been looking for something along these lines to emerge:

"By imposing criminal sanctions for serious market abuse throughout the EU we send a clear message to deter potential offenders -- if you commit insider dealing or market manipulation you face jail and a criminal record," the EU commissioner for the internal market, Michel Barnier, said.

The "bond vigilantes" are but one of the worries for the scallewags and scamps. At some point the people who need to produce real stuff for the real economy are going to stand up and say "enough is enough" of this market manipulation.

It's hard enough to do business without the added distraction of jokers turning the markets for essential commodities into casinos.

h/t JSmineset

costata said...

Wouldn't this be an interesting kick of the can:

We can also argue about another sneaky idea. If the central banks are able to buy fistfuls of bonds right now without a ripple effect on inflation – and investors are still rushing into the safe havens, Bunds, Gilts, Treasuries, JGBs, etc – why not just quietly write off those central bank holdings and seize the moment to slash public debt by non-inflationary fiat?

Food for thought.

M said...


Also consider how many days the gold price stayed in the 200's. And the only reason it went that low was because of Britains announced non profit physical gold sales. The unmolested bottom in gold would have been higher.

costata said...

This should interest folks from South Africa and others interesting in gold mining technology:

Previously the idea of drilling from one sub level to another had not properly been explored or appreciated. The method is being tested by AngloGold whose executive VP Mike Macfarlane is excited by the technical advancement and can see its potential to drill further still.

h/t Screwtape Files

costata said...

Another nice find by our friends over at Screwtape Files.

Nolan Watson’s phone is ringing off the hook these days. On the other end of the line are increasingly desperate mining executives trying to entice him to part with some of his precious cash.

As the chief executive of gold-streaming firm Sandstorm Gold Ltd., Mr. Watson, a youthful 32, represents one of the few options for miners to turn to as they struggle to raise a penny of new capital.

It’s much worse for raising equity capital now than it was even in 2008 and 2009

“The pendulum has swung from anyone being able to get any amount of capital on just about any terms, to nobody being able to get any amount of capital on any terms,” says the Vancouver-based executive.

I think the mining stocks may still be in the grip of the gravitational field of the too hard basket.

costata said...

FWIW I think this is the number one problem for mining stocks (from the article linked above):

“We’re having very active discussions with companies about doing high-yield placements right now. It’s still a very active area,” Mr. Neal says, adding that fund flows into high-yield funds have been strong of late. That has obviously not been the case for resource funds that buy equities.

If you buy the stock you rank behind the secured creditors in the event that the company goes belly up. If an institution chasing yield wants exposure to gold why not pick up a fat coupon and have the security as well rather than the risk of holding common stock that's paying zero dividends?

This looks like a no brainer for institutional money to poor old costata'a tired eyes. Thoughts?

M said...

Schiff just said that the dollar losses incurred in Facebook are equal to all the gold mining market cap combined.

Edwardo said...

Hello folks.

Tony, since you mentioned Treasury yields, I think today's interest rate spike, in tandem with shares doing a moonshot-the action in stocks from approximately 1:24 to 1:30 was particularly frothy (as if there had been an announcement from some formidable monetary authority) was, indeed, interesting.

Now, one could view the action over the last few days as front running the inevitable monetary largesse from you know who. However, if that's what the last little while amounts to, my bias is that liquidity isn't going solve the share market's problems as another U.S. (and global) contraction is, see The Richmond Fed data as just one piece of evidence, on tap. In other words, the recent front running, if that's what it is, euphemistically referred to as the market acting as a "discounting" mechanism, appears, at least to this participant, to have a high likelihood of winding up being just another pump and dump by Wall Street thimble riggers. We've had several Hindenburg Omens over the last week, and while they are not foolproof, they are pretty reliable forecasters of the market looking out several months. Buyer's beware.

In the meantime I find it interesting that no one on here has commented on Signor Draghi's rather bold comments about what the ECB is capable of engineering. There seem to be varying opinions on the significance of his statement which included such cast iron sounding rhetoric as "whatever it takes" and "it will be enough". Of course there was the big fat qualifier, of "within our mandate." All in all, such a statement might be said to amount to something along the lines of, "If you cross that line, we'll fight you tooth and nail" according to Marquis of Queensbury rules, and that will do the job.

In any case, one would like to know exactly what Mr. Draghi has in mind, but, true to form, the MSM didn't even attempt to pin down the acting ECB head on any details. Rest assured, the market will, in due course, not only ask the question, but coax out an answer. Then and only then will be know if the response from Super Mario will (in fact) be enough.

Costata, it sounds like a no-brainer. It's kind of a law of bear markets that stocks that pay a yield attract more interest, so to speak, than their non yielding brethren. And the paper PM stocks, King World gold and silver touts and their ilk notwithstanding, are certainly in a bear market.

As for AEP, What precisely is he suggesting? I see him throwing around the word Weimar, so I probably don't need to ask.

M said...

Another thing Peter Schiff said today. He is on board with freegold in a round about way.

"For people who say we cant have a gold standard,gold standard doesn't work. It is easier to have a gold standard today. They didn't have debit cards, they didn't have computers.It was much harder to be on a gold standard 100 or 200 years ago, today it is even easier because of the technology that we have, the gold standard will work better now.

And you don't have to wait for the government to go back on a gold standard. You can put yourself on a gold standard. You can save gold,you can transact in gold and nobody even has to know that you are doing it."

Aaron said...

Hi M-

To me it seems Peter Schiff is not at all on board with Freegold. From within the quote you referenced:

"It is easier to have a gold standard today. They didn't have debit cards, they didn't have computers.It was much harder to be on a gold standard 100 or 200 years ago, today it is even easier because of the technology that we have, the gold standard will work better now."

HMS if I ever saw one.


costata said...


I think that AEP is canvassing the possibility of simply cancelling the USG paper the Fed is holding. I imagine there's a few ways that could be done through some dodgy bookkeeping with the US Treasury's co-operation. It could be a credible scenario for another kick of the can.

He seems to be automatically assuming that other CBs would/could do the same thing. I can't see any other CBs apart from the US and, possibly, the UK being able to get away with doing what AEP appears to be suggesting. But AEP's remarks were light on detail.

I think Andy Xie's scenario makes more sense for Japan. A lightning devaluation of the Yen and then deal with the other problems internally. It would also be interesting to know how much gold Japan Inc actually has in addition to the official figures.

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